The European luxury sector faced a decline in share prices at the end of Tuesday’s trading session. Several factors contributed to this drop, including profit-taking, rising bond yields, and signs of declining demand in the USA. The Stoxx Europe Luxury 10 index experienced its largest in-session drop since mid-December, falling by 4.18% at around 2.30 p.m. CET. In contrast, the pan-European Stoxx 600 index only lost 0.48% during the same period. This downward trend affected various luxury groups and labels, such as LVMH, Hermès, and Kering, which saw significant impacts in the CAC 40. Other European brands like Burberry, Tod’s, Moncler, and Richemont also suffered losses ranging from 1.4% to 4.76%.
While LVMH has witnessed a 20% increase in its stock market value since the beginning of the year, Deutsche Bank advises investors to be more cautious when it comes to luxury stocks. The bank highlights signs of slowing growth in the USA, while the European market remains resilient and continues to thrive in China. Additionally, the yield of the German 10-year Bund rose to 2.497%, and HSBC predicts that the European Central Bank’s deposit rate will rise to 4% by the end of the year, with two additional interest rate hikes expected following June. These factors have further impacted the share prices of luxury sector companies.
Overall, the luxury sector appears to be facing challenges after a period of strong performance. Investors are adopting a more cautious approach, focusing on markets with sustained growth potential while remaining wary of potential risks. While the European luxury market remains relatively stable, concerns arise regarding the deceleration of growth in the US and potential changes in interest rates. As the sector navigates these challenges, it will be intriguing to observe how luxury brands adapt and identify new opportunities for growth in an ever-changing market.
Useful Links:
1. FT – Luxury Sector Facing Challenges
2. BOF – Slowing Growth in US Luxury Market
