EUROPEAN shares were flat on Wednesday, pressured by a sell-off in luxury stocks and in the absence of big bets by investors ahead of a crucial Federal Reserve meeting later in the day.
The pan-European Stoxx 600 index ended largely unchanged at 505.34 points, with the personal and household goods index housing luxury stocks, down 1.3 per cent and leading declines.
Kering shares tumbled 11.9 per cent to the bottom of the Stoxx 600 after the French luxury goods group warned its first-quarter sales are likely to drop by around 10 per cent, weighed down by star label Gucci due to weakness in Asia.
Combined with a profit warning from Burberry in January, the high-end sector is grappling with a worsening slowdown in demand for luxury goods.
In a sector-wide reaction, other luxury stocks such as LVMH, Burberry, Richemont and Christian Dior dropped between 1.6 per cent and 3.2 per cent.
“The Kering slump is a warning that the slowdown being seen in China is having a real impact around the globe. The post-Covid Chinese recovery has not really happened and clearly Chinese consumers are now cutting back on luxury items as they tighten their belts,” said Stuart Cole, chief economist at Equiti Capital.
On the data front, German producer prices fell year-over-year in February, while highly-anticipated British inflation cooled slightly more than expected last month.
The UK’s FTSE 100 index ended flat.
Investor focus remains on the Fed’s monetary policy meeting later on Wednesday, at the end of which the central bank is considered certain to keep interest rates on hold, while all eyes will be on its “dot plot” for more clues on the future path for rates.
“Nobody is expecting any change in interest rates, but the big question is whether (Fed Chair) Powell disappoints the market by suggesting the outlook for rate cuts is still not that strong going forward,” Cole said.
Meanwhile, some top European Central Bank officials, including President Christine Lagarde, tried to dampen speculation about a streak of interest rate cuts on Wednesday.
A series of deals from the region also contributed to market action.
Shares in Lonza rose 5.7 per cent after the Swiss contract drug manufacturer agreed to buy Roche’s Genentech manufacturing facility in California for US$1.2 billion in cash.
Johnson Matthey climbed 7.8 per cent to the top of Stoxx 600 after announcing the sale of its medical device components business to Montagu Private Equity for US$700 million. REUTERS
