Morning Note: Market news and an update from Gucci owner Kering.
Market News
US equity markets moved slightly higher last night – S&P 500 (+0.6%), Nasdaq (+0.4%) – ahead of the Federal Reserve’s policy decision later today. The Fed is expected to hold, with markets focused on the updated dot plot and any guidance on when cuts will start. Some analysts think Jerome Powell will avoid signalling any imminent reduction, though Bloomberg Economics said he may offer a dovish surprise.
China’s holdings of US Treasuries have declines as Japan’s have increased. The 10-year Treasury currently yields 4.27%, while gold trades at $2,156 an ounce. Brent held steady at $86.25 a barrel.
This morning in Asia, markets were generally firm: Nikkei 225 (holiday); Hang Seng (+0.1%); Shanghai Composite (+0.6%). The yen extended its decline, hitting a 2008 low against the euro. Samsung jumped as much as 6% after Nikkei Asia reported Nvidia is looking to buy its high-bandwidth memory chips.
The FTSE 100 is currently trading slightly lower at 7,729. UK Shadow Chancellor Rachel Reeves said Labour would stick to current fiscal rules that require debt to fall as a percentage of GDP after five years.
UK CPI rose by 3.4% in February, a touch below the 3.5% estimate. The core measure (which strips out food and energy) was 4.5%, versus the 4.6% forecast and 5.1% the previous month. Sterling edged higher in response to $1.2715 and €1.1699. The data comes ahead of Thursday’s Bank of England policy meeting where the committee is expected to maintain interest rates at 5.25%.
Source: Bloomberg
Company News
Last night, Kering released some preliminary information regarding its first quarter. Trading is currently well below expectations, driven by weakness in Asia Pacific. In response, the shares are trading 14% lower and there has been a knock-on impact on other luxury goods players.
Kering is a global luxury group in fashion, leather goods, jewellery, watches, and eyewear. Its brands – which include Gucci (50% of revenue and two thirds of profit), Saint Laurent, and Alexander McQueen – are distributed in more than 120 countries. In 2023, the group generated revenue of almost €20bn, derived from Western Europe (28% of sales); North America (23%); Asia Pacific ex. Japan (35%); Japan (7%); and ROW (7%). The group generated a recurring operating margin of 24.3% and ended the year with net debt of €8.5bn, with gearing of 1.3x net debt to EBITDA.
In a first half that Kering expected to be challenging, current trends lead the group to estimate that its consolidated revenue in the first quarter of 2024 will decline by c. 10% on a comparable basis. This is well below the market forecast for a 3% drop.
This performance primarily reflects a steeper sales drop at Gucci, notably in the Asia-Pacific region. Gucci comparable revenues in the first quarter are expected to be down by nearly 20% year on year.
This all comes as the label is undergoing a design overhaul. Early products, primarily ready-to-wear, from the Ancora collection have been on offer in selected Gucci stores since mid-February. The new collection, whose availability will gradually be ramped up over the coming months, is meeting with highly favourable reception.
The group will release further details with its first quarter results on 23 April.
Source: Bloomberg