LIVE MARKETS-European luxury in a U.S. slowdown

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EUROPEAN LUXURY IN A U.S. SLOWDOWN

Remember when European luxury brands used to worry about China? Now there's a new fear in the mix, an economic slowdown in the United States.

UBS have a note out Wednesday reminding investors that European luxury stocks' stronger-than-expected Q4 results were all about U.S. demand.

Now, with a U.S. recession at least being talked about - or notably not talked about in the case of President Donald Trump at the weekend - UBS warn concerns about the U.S. consumer could be a "near term downside risk to estimates."

EssilorLuxottica ESLX.PA has the most exposure to U.S. consumers among the luxury stocks UBS track, at around 46%, while Moncler MONC.MI is just at 15%.

The picture is slightly different when it comes to who has benefited the most from improving U.S. demand, there it's Burberry BRBY.L that has gained the most, and Hugo Boss BOSSn.DE the least.

UBS make one final interesting point, noting that in the last few weeks, luxury's relative valuation versus the European market as a whole has come down by around 20 percentage points, and is now broadly in line with the historical average.

This "seems more reasonable given that luxury demand is unlikely to benefit from the planned European fiscal stimulus aimed at defence spending."

(Alun John)

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