LVMH Slips, Deutsche Bank Under the Spotlight—Europe Weakens
European stocks closed lower on Wednesday (January 28) after LVMH's disappointing earnings report dashed market hopes for a revival in the luxury goods sector. Risk sentiment was also dragged down, following US President Donald Trump's latest warning to Iran, which re-escalated geopolitical tensions. The Stoxx Europe 600 Index closed trading down 0.8%.
The biggest pressure came from the luxury sector. LVMH plunged 7.9% after reporting a worse-than-expected decline in sales in its fashion and leather goods division. LVMH's decline immediately spread to similar stocks, making the luxury goods sector one of the main drags on the stock market.
The banking sector also came under pressure. Deutsche Bank fell 2% after German authorities raided the bank's offices in connection with a money laundering investigation involving staff. Amid the decline, the energy sector emerged as one of the strongest performers, helped by rising oil prices due to ongoing US-Iran tensions.
In individual stocks, ASML erased gains after a management conference call raised analyst questions about the company's ability to expand capacity quickly enough to meet growing demand for equipment. For the luxury sector, JPMorgan analyst Chiara Battistini believes the path back to growth will remain "winding" in the coming quarters—and LVMH is the clearest reflection of that challenge.
European markets remain "shaky" after sentiment was shaken last week by escalating trade tensions with the US. Focus now shifts to earnings season, with Citigroup's index showing analysts have significantly lowered expectations ahead of the reporting period. On the allocation strategy side, Pictet Wealth Management advises investors to reduce their holdings in US stocks, as the weakening dollar makes stocks in Europe and other regions more attractive. "Look for fewer US stocks, and more stocks in other regions," said Geraldine Sundstrom, adding that a surge in defense and infrastructure investment in Europe presents significant profit opportunities.
Source: Newsmaker.id
