European defence equities fell sharply on Friday after Kyrylo Budanov, a senior aide to President Volodymyr Zelenskiy, signalled a possible peace breakthrough. A Goldman Sachs defence basket lost as much as 5.1%, with German arms maker Rheinmetall and peers Hensoldt and Leonardo each dropping over 7%. Traders described the move as sentiment‑driven, questioning whether governments will sustain elevated spend levels.

The sector has surged roughly 500% since Russia’s February 2022 invasion, fuelled by a wave of EU procurement and re‑armament programmes. MWB Research’s Jens‑Peter Rieck warned the rally may be overheating, while Mediobanca’s Alessandro Pozzi noted that even a cease‑fire would not erase long‑term defence budgets, as Europe braces for any future Russian aggression and keeps demand for advanced systems high.

Builder stocks rose on hopes of a post‑war reconstruction surge. An UBS basket of equities climbed up to 3.4%, led by double‑digit gains in Wizz Air and Ukrainian iron‑ore exporter Ferrexpo. Cement giants Buzzi, Heidelberg Materials and Holcim each jumped more than 5%, while Coca‑Cola HBC, which still derives 14% of sales from Russia, added 4.4% today.