CFR

European shares steady after selloff as luxury sector shines

Credit: REUTERS/RALPH ORLOWSKI

European shares steadied on Wednesday after taking a beating in the previous session, as strong earnings updates from luxury majors Burberry and Richemont countered pressure from elevated U.S. and German bond yields.

By Anisha Sircar

Jan 19 (Reuters) - European shares steadied on Wednesday after taking a beating in the previous session, as strong earnings updates from luxury majors Burberry and Richemont countered pressure from elevated U.S. and German bond yields.

The pan-European STOXX 600 index .STOXX was flat after hitting a one-week low in the previous session.

The U.S. 10-year US10YT=RR Treasury yield US5YT=RR held near two-year highs, while the German 10-year yield rose above 0% for the first time since May 2019 as investors braced for tighter U.S. monetary policy. GVD/EURUS/

Investors are pricing in a much faster rate-hike cycle in the United States, while concerns persist over the pandemic's impact on supply chains, said Philipp Lisibach, chief global strategist at Credit Suisse.

Economists polled by Reuters also expect euro zone inflation to burn hotter throughout 2022 than expected a month ago, which could pressure the European Central Bank to tighten policy once the Omicron wave passes.

"Fourth-quarter earnings are going to be decent, but it'll be important to understand how companies cope with higher input prices, particularly energy prices and wages," Lisibach said.

STOXX 600 companies are expected to post a 48.6% year-on-year rise in fourth-quarter profit to 109 billion euros ($123.6 billion), a marginal uptick from a prior estimate of 48.5%, Refinitiv data showed.

Retail .SXRP stocks jumped 2.2% and personal and household stocks .SXQP added 1.9% on Wednesday, outperforming the benchmark, after a slew of encouraging earnings results.

British luxury brand Burberry BRBY.L gained 5.9%, topping London's blue-chip FTSE 100 .FTSE, after saying full-price sales accelerated in the third quarter thanks to outerwear and leather goods as well as material improvement in Asia and Europe.

Cartier owner Richemont CFR.S climbed 9.3% as the world's second-largest luxury group said robust demand for its jewellery and watches in the Americas and Europe helped quarterly sales rise by nearly a third.

Other luxury stocks including LVMH LVMH.PA, Kering PRTP.PA and Hermes HRMS.PA rose about 3% each, lifting France's blue-chip CAC 40 index .FCHI.

ASML Holding NV ASML.AS gained 0.6% after posting better-than-expected quarterly profit and saying it expects sales growth of 20% in 2022.

(Reporting by Anisha Sircar in Bengaluru; Editing by Subhranshu Sahu and Ramakrishnan M.)

((Anisha.Sircar@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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