- Positive sentiment hangs around amid hopes for interest rate cuts.
- Brent Crude prices rise following fresh attacks on Yemen.
- Europe’s top luxury houses have faced a tough January, with €50 billion wiped off their value.
- Housebuilder Crest Nicholson full-year profits fall but new buyer enquiries rise.
- Bargain hunters target Primark amid cost-of-living constraints.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’Positive sentiment appears to be clinging on, following continued optimism emanating from Wall Street about the prospects for a softer landing for the US economy as interest rate cuts are eyed up in the Spring. Although hopes for super-early rate cuts have dissipated there are still expectations that with inflation heading in the right direction in the US, policymakers will go easier. The S&P 500 crept even higher to fresh new levels, and the expectations are that this will support a slightly higher open again in Europe. The fresh wave of military action involving UK and US forces in Yemen, has sent oil prices higher, amid concerns of the potential of tensions escalating in the Middle East, disrupting supply.
Tough January for Europe’s luxury houses
Year to date it’s been a much tougher slog for European indices. They are the wallflowers at the power dance of US-based big tech. Instead, Europe’s luxury stars have faced a turbulent few weeks. The top 5 listed luxury brands, LVMH, Richemont, Hermes, Kering and Montcler have lost ground since the end of last year, with LVMH with the steepest fall. The losses have wiped around €50 billion (£43 bn) off their combined value since the end of 2023 (29 Dec). The ultra-wealthy are insulated from cost-of-living pressures but as inflation has run riot over the past couple of years it appears that growing numbers of middle-class aspirational shoppers are tightening their belts. Gone are the days of the post pandemic sales boom when consumers indulged in revenge retail therapy, helped by piles of lockdown savings.
The luxury market is now navigating some tricky tides and brands face the challenge of maintaining their high prices, while a global slowdown swirls, amid tense geopolitical scenes. China had been the powerhouse for global luxury brand sales but with the property market so fragile, it’s been affecting wealth perceptions and a willingness to spend big among the middle classes in particular.
Brent crude rises amid geopolitical tensions
Oil prices have ticked up amid fresh attacks on purported Houthi rebel bases in Yemen. Brent Crude edged above $80 a barrel, the highest level since late December. Geopolitical alert levels are high, with concerns about the Middle East conflict spreading and the war in Ukraine entrenched, with attacks by Ukrainian drones on Russian targets on the Baltic coast. The International Energy Agency has also released fresh forecasts about global demand, expecting it to be higher this year with a requirement for an extra 180,000 barrels per day, as some economic clouds have lifted.
Crest Nicholson profits fall but new buyer enquiries rise
British housebuilder Crest Nicholson has set its sights on an improved outlook in the UK, hoping to leave a disappointing 2023 behind it. Adjusted pre-tax profits came in sharply lower, at £41.4 million ($52.8 million), compared with £137.8 million a year earlier. Investors had been warned though, with the company having issued three profit warnings in just six months. However, with other housebuilders making progress as hopes have risen that interest rate cuts could be in sight there had been hopes of a slightly better final number. But there was little concrete to smooth over the cracks that have appeared for Crest Nicholson. There is still concern about margins at the housebuilders and continued worry about costs at some of its legacy sites, such as Brightwells Yard in Farnham. It won the contract to regenerate the site back 2003 but it’s been beset with problems, ranging from planning and legal delays to funding hurdles. However, with better mortgage deals appearing on the market, buyers are slowly becoming more confident and that’s led to an uptick in new buyer enquiries, so there is room for a little more positivity if this stream of potential new business continues and can be turned into solid sales.’’
Primark benefits from a wave of bargain hunting shoppers
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“The key Primark business benefitted from the festive frenzy as sales jumped 7.9%, which is no small achievement at a time when consumers are feeling the pinch. The demise of Debenhams and Topshop in recent years has been a tailwind for the group, pushing more customers towards its stores, including more middle-class shoppers. Primark’s strong value proposition and successful collaborations with the likes of Rita Ora, have helped them keep hold of these additional customers and ringing more cash through its tills. While many other large physical retailers are closing their doors, Primark opened eight new stores, with plans to open many more by the end of 2026. That’s ultimately helped Primark steal customers away from competitors as its market share reached record heights. And despite all the troubles in the Red Sea impacting global supply chains, Primark’s not expecting it to have a significant impact on its operations. However, there is room for caution. Growth in like-for-like sales, in stores open for more than a year, has eased off, so Primark will have to keep pedalling hard if it’s to keep squeezing more from shoppers.”
