LVMH -7.14%, Kering -9.62%, Hermès -5%. China slows down as commercial war affects luxury

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On the same day of the publication of a rather positive quarterly report (business expansion went beyond expectations actually), LVMH stock dropped, at the Stock Exchange, by 7.14%. For the records, the French giant was not the only one collapsing: in fact, at the same time Kering declined by 9.62%, Hermès by 5%, Burberry by 8.09%. Talking about an Italian luxury brand, Ferrari dropped by 8.14%, while Moncler decreased by 10.85%. It looks like kind of discrepancy, a weird financial combination: although fashion brands’ sales are currently enjoying a considerable boost, the stock markets hit them. Analysts say that’s normal though. Looking into the quarterly report, made public by LVMH, we can spot some reasons for this financial uncertainty: in the last quarter, sales in Asia, with different outcomes in China and Japan, have been still expanding, though considerably slowing down compared to the previous six-month period. Expectations, owing to the commercial war between China and the United States, alongside stricter customs controls carried out by Chinese authorities on international goods purchased by travellers, are about to let down the luxury industry. It is no coincidence that Morgan Stanley downgraded the luxury business recommendations to “neutral”. As reported by “Il Sole 24 Ore”, the agency points out that stocks are vulnerable because of a potential “underperformance of expansion compared to their Stock Exchange value”. Furthermore, they also stress the fact that “Chinese consumers’ trust is apparently at its peak”; on top of that, “the growth trend, regarding share of profits, is seemingly slowing down”. In other words, high end business is about to face a financial storm, which is just a part of a bigger risk, as global economy is going to decline: in fact, the International Monetary Fund reduced estimates of growth of worldwide GDP (Gross Domestic Product) in 2018 and 2019, from +3.9% to +3.7%, with different effects in each single country. Commercial war is still considered to be one of the reasons behind such predicted slowdown.

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