Luxury suffers as Burberry revise outlook on weak Chinese demand
- Burberry leads Luxury declines, with UK and French indices underperforming
- Markets calm down after recent boom around falling rate hike expectations
- US government shutdown fears abate amid vote to extend funding into January
A mixed start in Europe has seen the German DAX outperform amid weakness for French and UK stocks. Burberry has been a particular drag on sentiment in the Luxury sector, with LVMH and Kering following the fashion name lower on concerns around Chinese demand. Coming just days after the impressive 7.6% retail sales figure, CEO Akeroyd has been quick to note that their decision to downgrade their revenue outlook comes as a result of macro factors rather than any particular weakness in the product itself. Unfortunately for shareholders, the month of September saw a particularly notable drop-off in Chinese demand, signalling the potential for a tough year-end. The retail theme continues throughout the day, with Walmart expected to report another set of bumper earnings in the US.
Market optimism appears to be cooling off after a bumper period of gains for equity markets, built on growing expectations that the Fed are finished with their historic tightening process. With markets now pricing a mere 1% chance of another hike, markets are now more concerned with the timing of the first rate cut and the pace of easing. As things stand, markets are expecting 100 basis points worth of rate cuts next year, with precious metals and cryptocurrencies the early movers on the premise of a more advantageous macro environment.
Fears of a US government shutdown have receded on the news that the House of Representatives have passed a bill to fund the government through to January 18. Once again it is a case of kicking the can down the road, although this does help provide a short-term shot in the arm for markets. Unfortunately, talks between Joe Biden and Xi Jinping have been undermined by the US President once again calling his Chinese counterpart a dictator. Nonetheless, there is a hope that the four-hour meeting between the two leaders will help improve relations between the world’s two largest countries.
Disclaimer: This material is a marketing communication and shall not in any case be construed as an investment advice, investment recommendation or presentation of an investment strategy. The marketing communication is prepared without taking into consideration the individual investors personal circumstances, investment experience or current financial situation. Any information contained therein in regardsto past performance or future forecasts does not constitute a reliable indicator of future performance, as circumstances may change over time. Scope Markets shall not accept any responsibility for any losses of investors due to the use and the content of the abovementioned information. Please note that forex trading and trading in other leveraged products involves a significant level of risk and is not suitable for all investors.
