Europe: LVMH knocks shares lower after six-day winning streak; US Fed decision eyed
EUROPEAN shares snapped a six-day winning run on Wednesday (Jul 26), hurt by underwhelming results from French luxury goods giant LVMH as well as nerves ahead of the Federal Reserve’s interest rate decision later in the day.
THE pan-European Stoxx 600 index shed 0.5 per cent after recording its longest winning streak since January on Tuesday.
Shares of LVMH fell 5.2 per cent in its biggest one-day percentage loss in nearly 17 months, as an in-line increase in sales at the world’s top luxury firm indicated the overall sector was moving towards a less impressive path of growth.
Rivals Kering and Hermes dropped 1.8 per cent and 2.4 per cent, respectively, dragging France’s luxury-heavy CAC 40 down 1.4 per cent.
Christian Dior also lost 4.0 per cent.
“What we are seeing is shares such as LVMH very much confirming fears that the strength of consumer demand is waning,” said Stuart Cole, chief macroeconomist at Equiti Capital.
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“This waning consumption and the associated weakening in economic growth that is expected to accompany it, is coming at time when the ECB (European Central Bank ) – alongside the Fed and BOE – are still expected to hike interest rates further,” Cole added.
Investors will now focus on the Fed, which is widely expected to raise interest rates by a quarter of a percentage point at 1800 GMT, possibly its last move in its current aggressive monetary tightening cycle.
The ECB is seen hiking rates by 25 basis points to the 3.5-3.75 per cent range on Thursday, with recent weak economic data dampening expectations of another hike in September.
Meanwhile, Microsoft’s results signalling how the high-stakes battle for AI supremacy will cost the tech giants dampened investor sentiment further.
Earnings for Stoxx 600 companies are expected to have contracted 8.1 per cent in the second quarter, as per Refintiv estimates.
German sportswear brand Puma gained 5.5 per cent after second-quarter sales beat estimates, while British lender NatWest slid 3.7 per cent after CEO Alison Rose stepped down with immediate effect.
Rolls-Royce shot up 21.2 per cent after the British aero-engineer raised its full-year operating profit forecast by around 45 per cent.
Novo Nordisk fell 2.9 per cent after a Reuters report said Britain is reviewing a class of drugs used in a diabetes medicine and a weight-loss treatment sold by the company.
Portugal’s PSI 20 rose 1.3 per cent and hit an 11-month high, boosted by a 4.0 per cent rise in utility company EDP Renovaveis after it beat first-half earnings estimates. REUTERS
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