Luxury stocks pressure European equities ahead of Fed verdict

Credit: REUTERS/Staff

By Khushi Singh and Amruta Khandekar

March 20 (Reuters) - 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 .STOXX ended largely unchanged at 505.34 points, with the personal and household goods .SXQP index housing luxury stocks, down 1.3% and leading declines.

Kering PRTP.PA shares tumbled 11.9% 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%, 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 LVMH.PA, Burberry BRBY.L, Richemont CFR.S and Christian Dior DIOR.PA dropped between 1.6% and 3.2%.

"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 .FTSE 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 LONN.S rose 5.7% after the Swiss contract drug manufacturer agreed to buy Roche's ROG.S Genentech manufacturing facility in California for $1.2 billion in cash.

Johnson Matthey JMAT.L climbed 7.8% to the top of STOXX 600 after announcing the sale of its medical device components business to Montagu Private Equity for $700 million.

(Reporting by Khushi Singh and Amruta Khandekar in Bengaluru; Editing by Sherry Jacob-Phillips, Mrigank Dhaniwala, William Maclean)

((Khushi.Singh@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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