Luxury, mining stocks weigh on Europe ahead of U.S. inflation data

(Reuters) -European stocks slipped on Tuesday as caution ahead of U.S. inflation data and weakness in luxury and mining shares offset optimism around the region’s economic recovery.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 13, 2021. REUTERS/Staff

The region-wide STOXX 600 index was down 0.1% undoing some of Monday’s gains and cementing its losses for September, known to be a volatile month for equities.

Luxury stocks including LVMH, Kering, Richemont and Burberry fell between 2.4% and 3.4%, tracking their Asian peers lower on concerns about the spread of COVID-19 cases in China.

France’s CAC 40, home to many luxury names, took the biggest hit among regional indexes with a 0.7% drop.

China is seen as key for the luxury sector, with analysts estimating a third of the sector’s worldwide sales coming from the country.

“Ongoing China coronavirus concerns and lockdowns in several cities in Fujian are not helping sentiment,” Mark Taylor, sales trader at Mirabaud Securities, said, noting the declines in luxury stocks.

China-exposed mining stocks fell 1.3%, dragging UK’s commodity-heavy FTSE 100 lower, even as data showed British employers added a record 241,000 staff to their payrolls last month.

All eyes will be on U.S. inflation data later in the day, as investors seek hints on monetary policy outlook after recent signs of inflation fed into the view that the U.S. Federal Reserve will start withdrawing stimulus sooner than thought.

Despite these concerns, many strategists expect European equities to outperform this year due to relatively high rate of vaccinations and catch-up trade in cheaper segments of the market such as banks and energy.

JPMorgan analysts said they expect economy-sensitive cyclical sectors to lead markets into the year-end, adding that they remained “constructive on equity markets”.

The world’s largest jewellery maker Pandora rose 4.7% after it boosted its earnings target for the coming years and lifted its share buyback plan.

JD Sports Fashion jumped 7.3% after it reported a record first-half profit as lockdowns eased and people visited its shops in Britain.

Dutch specialty chemicals maker DSM hit a record high after it said it was weighing the sale of its materials division.

Danish brewer Carlsberg fell 2.6% after a double downgrade to “sell” by Berenberg.

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