Market Wrap: Luxury Under Pressure, AI Drives Market Divergence

European equities remain among the main underperformers following the Iran war and the associated energy shock. However, there are increasing signs that selling pressure in the region may be approaching a short-term exhaustion point.

Nevertheless, regardless of whether the conflict ends in a ceasefire now or at a later stage, its consequences are likely to leave a lasting imprint on the European economy. Higher energy prices may weigh on corporate earnings growth expectations while keeping inflation elevated, prompting central banks to maintain a more cautious monetary stance. As a result, global growth forecasts continue to deteriorate.

Today’s performance of major European indices reflects this mixed backdrop. The UK’s FTSE 100 is up around 0.1%, France’s CAC 40 is down 0.6%, Germany’s DAX is trading broadly flat compared to yesterday’s close, while Spain’s IBEX 35 is also losing around 0.6%.

Today’s corporate earnings highlight a clear divergence between sectors. Parts of the market—particularly luxury goods—are facing significant pressure and downward revisions to expectations, while technology and semiconductors continue to benefit from the strong AI-driven trend. As a result, market conditions remain highly selective, with sector rotation continuing to play a key role in shaping investor sentiment.

• Kering: the company and the broader luxury sector are under significant pressure following weaker Q1 results, triggering a broad sell-off across the industry (including LVMH and Hermès). The key concern remains weakening demand for premium brands, particularly Gucci, raising questions about the sustainability of the sector’s recovery.

• Hermès: despite being viewed as one of the strongest players in the luxury space, the stock is also declining sharply as investors react to disappointing results and a broader sector-wide re-rating. The market is increasingly treating even top-tier names as part of a wider sentiment correction in luxury goods.

• ASML: results support the narrative of a continued semiconductor boom driven by artificial intelligence, contrasting with weakness in other sectors. The company signals sustained strong demand for chip infrastructure, reinforcing the relative strength of the technology sector versus the broader market.

We also received macroeconomic data on inflation in France and industrial production in the euro area, both of which point to signs of relative stabilization.

• In France, March inflation came in slightly above expectations on a monthly basis, while the annual HICP rate rose to 2.0% versus 1.9% forecast. Despite this, inflation remains broadly stable and close to the European Central Bank’s target, which—given earlier concerns about energy-driven price pressures—reduces the likelihood of a more hawkish policy stance.

• In the euro area, industrial production surprised to the upside, rising 0.4% m/m versus 0.2% expected, while the annual decline eased to -0.6% compared to -1.4% forecast. This suggests that manufacturing activity remains weak but is no longer deteriorating at the pace previously expected, pointing more to stabilization at low levels rather than further deepening weakness. In a broader sense, this supports the view of Europe as a defensive market, but not one entering a new phase of recessionary deterioration.

On the commodities market, Brent crude remains above USD 95 per barrel, reflecting persistent geopolitical risk and ongoing supply-side tensions. Elevated oil prices continue to act as a meaningful inflationary factor, potentially influencing monetary policy expectations and global growth dynamics.

In precious metals, we are seeing some profit-taking after recent gains, indicating a short-term cooling of safe-haven demand.