(Sharecast News) - European shares opened sharply lower after US Federal Reserve chair Jerome Powell said equities were overvalued, while traders also assessed President Donald Trump's u-turn on the Ukraine war, which boosted defence stocks.


The pan-regional Stoxx 600 index was down 0.45% in early deals with all major bourses following suit.

Powell said that "equity prices are fairly highly valued" in a speech on Tuesday.

Meanwhile, Trump appeared to completely u-turn and throw US support behind Ukraine in its war against Russia, saying he believed the country could regain all the territory it has lost since the unprovoked 2022 Russian invasion.

The US president also claimed on social media that Russia was in big economic after meeting the Ukrainian president Volodymyr Zelenskyy in New York.

"After getting to know and fully understand the Ukraine/Russia Military and Economic situation and, after seeing the economic trouble it is causing Russia, I think Ukraine, with the support of the European Union, is in a position to fight and WIN all of Ukraine back in its original form.

"With time, patience, and the financial support of Europe and, in particular, Nato, the original borders from where this war started, is very much an option. Why not?" Trump also added that Nato nations should shoot down any Russian planes that violate their airspace.

XTB research director Kathleen Brooks said Trump's comments could be seen as a signal that the US is not going to abandon Nato.

"Europe could only escalate the conflict with Russia if the US was there for support. Thus, we could also see European bonds rally at the open, especially German debt, as it may ease the need for rapid defense spending on the continent," she said.

In equity news, the US leader's remarks provided a lift for defence stocks, with BAE Systems, Thales, Leonardo, Saab, Qinetiq, Hensoldt and Renk all higher.

Reporting by Frank Prenesti for Sharecast.com

• News Channel