Another cut to luxury earnings
STOXX 600 up 0.7%
China stimulus drives rally
Miners, luxury lead gainers
German business morale falls
Wall St futures edge up
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ANOTHER CUT TO LUXURY EARNINGS
Luxury is on a tear on Tuesday as traders snap up beaten-down China-exposed stocks, excited by a set of easing measures announced by Beijing to prop up its economy.
However, any support will likely take its time to filter through to the economy, so while there is a clear relief over this short-term bounce, underlying concerns around earnings remain.
It's little surprise then that fresh from a trip in Asia, UBS has cut its 2025 earnings estimates across its luxury coverage, following similar adjustments by BofA this week.
"We came back feeling incrementally cautious about the potential recovery in the global luxury market in 2025, which poses risk to margins in the sector," said a team of UBS analysts after meeting companies across the luxury, sportswear and beauty sectors in Tokyo, Seoul and Hong Kong.
"The trip allowed us to get a sense of the trends in highly influential markets, which cater to almost ~50% of the luxury consumers globally (Japanese and Korean consumers are ~15% of the market and Chinese consumers ~30% spending offshore in those locations as well as at home in Mainland China)."
UBS now expects 2025 organic sales growth of 3% (ex Hermes and Ferrari), with average sector margins falling by another 30 basis points after a 260 bp drop this year.
The Swiss bank a neutral rating on LVMH LVMH.PA.
(Danilo Masoni)
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EARLIER ON LIVE MARKETS:
MORE LOVE FOR US SMALL CAPS CLICK HERE
CHINA POP FOR MINERS, LUXURY AND AUTOS CLICK HERE
DAX FUTURES HIT RECORD HIGH CLICK HERE
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