Defense Stocks Fall After Trump-Kim North Korea Summit

Gillian Rich
Investors Business Daily

Defense stocks fell Tuesday after President Donald Trump announced at his meeting with North Korean leader Kim Jong Un in Singapore that he would end military drills with South Korea and eventually would like to withdraw U.S. troops from the South.

North Korea historically has objected to the drills as an act of aggression. But leading up to the Trump-Kim summit, Pygonyang signaled it wouldn’t make the drills a sticking point.

South Korea was reportedly surprised by the concession and said it needed “to find out the precise meaning or intentions” of Trump’s announcement. Seoul and the U.S. had scheduled their drills to start in August.

Kim pledged to denuclearize North Korea, but the agreement signed in Singapore lacked key details likes timelines and a verification process.

Trump said halting the joint military exercises would save money. He previously has complained about the amount of money the U.S. spends stationing troops in South Korea and Japan.

Meanwhile, South Korea and Japan have deployed missile defense systems from defense stocks Raytheon (RTN) and Lockheed Martin (LMT) to counter the North Korean threat.

After reporting Q1 earnings in April, Raytheon said it expects missile defense demand to remain strong, in the Asia region specifically, regardless of what happens in expected U.S.-North Korea talks.

Still, Raytheon led defense stocks lower, tumbling 2.8% to 206.64 on the stock market today. Lockheed shares fell 1.3% to 315.13. Northrop Grumman (NOC) was down 1.5% to 339.36. Boeing (BA) edged 0.1% lower to 370.61, still in buy range after breaking out of a cup-with-handle-base with a 365.10 buy point. General Dynamics (GD) lost 1.6%.

Defense Stocks May See Trouble In Europe

A top European defense official also warned that Europe should rely less on U.S. weapons technology.

Trump has also been vocal about NATO depending too much on the U.S. for security without paying for the protection. Jorge Domecq, chief of the European Defense Agency, said Europe needs to ease its reliance on military hardware deals with the U.S. to achieve “strategic autonomy,” Defense News reported.

Lockheed, which makes the F-35 for the U.S. military as well as for export, wants to have 30% of its revenue come from international customers. The U.K., Denmark, Italy, the Netherlands, and Norway have bought the F-35, and Belgium is considering buying the fifth-generation jet.

Poland and Sweden have recently bought Raytheon’s Patriot missile defense systems as tensions rise with Russia.

READ MORE NORTH KOREA NEWS AT: 21st Century Wire North Korea Files

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