European stock markets experienced gains despite ongoing conflict in the Middle East, with various consumer companies such as Adidas and luxury goods giant Louis Vuitton LVMH reporting earnings that buoyed investor sentiment.
The continent-wide Stoxx 600 index edged higher following its largest single-day drop in over nine months in the preceding session. Adidas shares surged by 8.6% to reach a two-year high, leading Germany’s blue-chip index, as the sportswear company raised its outlook for 2024 based on better-than-expected preliminary results for the first quarter.
LVMH closed nearly 3% higher after the world’s largest luxury group reported first-quarter sales that provided some reassurance to investors concerned about the industry’s future prospects. Similarly, other luxury brands such as Hermes and Richemont also saw gains, contributing to the overall rise in the sector index. Joaquin Kritz Lara, chief economist at Numera Analytics, noted, “Resilient global growth and improving consumer and business confidence should allow for favorable first-quarter earnings.”
However, the gains were capped by a more than 3% decline in technology stocks, primarily driven by ASML’s downturn following weaker-than-expected first-quarter new bookings. Against the backdrop of record-high interest rates, investors are closely monitoring the performance of corporate Europe during this earnings season.
Technology stocks, which have been leading the Stoxx 600’s rally since late last year amid excitement surrounding artificial intelligence, faced scrutiny. Eurozone inflation data for March indicated a general slowdown, reinforcing expectations for a potential European Central Bank interest rate cut in June. This is occurring despite escalating energy costs and a weakened euro, which cloud the economic outlook.
ECB board member Piero Cipollone suggested that ample fresh data in June and July could strengthen the case for rate cuts, while Bundesbank president Joachim Nagel highlighted the possibility of continued price pressures in the eurozone for the foreseeable future.
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