Luxury goods stocks propel France’s Cac 40 to record high

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Luxury goods companies lifted European stocks to multiyear highs on Friday after LVMH reported resilient fourth-quarter sales, boosting investors’ hopes that the sector can weather an economic downturn.

France’s luxury-heavy Cac 40 rose 2.3 per cent to a fresh all-time high, while London’s FTSE 100 added 1.4 per cent. The region-wide Stoxx Europe 600 rose 1.1 per cent to its highest level since January 2022.

LVMH shares rose 12.8 per cent after it said turnover rose 10 per cent in the three months to December, exceeding analysts’ expectations and easing concerns it would be hit hard by an economic slowdown in China.

The upbeat results also sparked strong gains for its peers and rivals, including Kering and Hermes, which both gained 6.6 per cent. The Stoxx Luxury 10 index gained 6.7 per cent.

Further boosting sentiment, Barclays upgraded European luxury stocks to overweight. Emmanuel Cau, the bank’s head of European equity strategy, said luxury stocks had lagged behind the broad market rally of November and December. “That underperformance offers a good entry point,” he said.

The gains for European stock markets also came after comments from European Central Bank president Christine Lagarde on Thursday persuaded traders to up their bets on interest rate cuts in the eurozone in 2024.

Speaking after the ECB held rates steady, Lagarde said that wage growth was showing signs of slowing and “the disinflation process is at work”.

Some analysts were less optimistic that the sector would outperform without an economic rebound in China, whose consumers are leading buyers of European luxury goods.

“The key to performance this year and next year is really China,” said Jelena Sokolova, a senior equity analyst for Morningstar. “The Chinese do have the savings, [but] they still are not travelling to Europe to the same extent as they did before Covid. They could spend more if they felt a little more secure about their future.”

Across the Atlantic, Wall Street held steady near record highs as traders weighed inflation data and chipmaker Intel delivered a gloomy forecast.

The Federal Reserve’s preferred inflation gauge fell below a year-on-year rate of 3 per cent in December for the first time since 2021, strengthening the argument that the central bank could start cutting interest rates in the first half of this year. The dollar index, which tracks the greenback against a basket of six currencies, fell 0.2 per cent.

The S&P 500 was up 0.2 per cent by early afternoon in New York, putting it on track to narrowly extend its six-day winning streak, which has brought five consecutive closing highs. The tech-heavy Nasdaq Composite rose 0.1 per cent.