Morning Note: Market News and an Update from LVMH.

Market News

President Donald Trump floated a potential pause in auto tariffs, providing further relief to the market after suspending levies on some consumer electronics. However, Trump pushed ahead with plans to impose tariffs on semiconductor and pharmaceutical imports by initiating trade probes. At the same time, inconsistent messages are coming out of the Federal Reserve. Governor Christopher Waller said interest rates may need to be cut soon if Trump's large-sized tariffs remain in place. Meanwhile, Atlanta Fed Bank President Raphael Bostic suggested the central bank should stay on hold until there is more clarity. Currently, traders are pricing in around 85bps worth of easing by year-end, with most expecting the Fed to hold rates next month. Gold trades at $3,220 an ounce, close to an all-time high.

The latest New York Fed Survey of Consumer Expectations showed an increase in short-term inflation expectations coupled with a labour market deterioration. The 10-year Treasury yield drifted back below 4.4%. Scott Bessent rejected speculation that nations were dumping US debt, while noting the Treasury has tools to address dislocation if needed, including a buyback of older securities. However, we note German Bund yields have continued to drift lower, currently 2.50%.

US equities rose last night – S&P 500 (+0.8%); Nasdaq (+0.6%) – with Apple providing the biggest boost. Goldman Sachs rose after results. In Asia this morning, shares gained, led by Japan (Nikkei 225, +0.8%), with companies such as Toyota Motor and Honda Motor jumping. The Hang Seng (+0.1%) and both Shanghai Composite (+0.2%) ended the session slightly higher. The FTSE 100 is currently 0.6% higher at 8,084.

UK consumer spending rose in March, defying an imminent rise in household bills, according to reports from the BRC and Barclays. December-February wages excluding bonuses rose by 5.9%, a touch below the market forecast. Sterling trades at $1.3210 and €1.1635.

Source: Bloomberg

Company News

Last night, luxury goods bellwether LVMH released a weak Q1 revenue update, which highlighted sales below market expectations. In a challenging economic and geopolitical environment, the company confirmed a sector slowdown as shoppers held back on purchases of designer fashion. In response, the shares have been marked down by 7%.

LVHM is the world’s leading luxury products group, which owns around 75 prestigious brands and a global retail network of over 5,500 stores. In Fashion & Leather goods (48% of revenue), iconic brands include Loewe, Louis Vuitton, and Christian Dior. In Perfumes & Cosmetics (10%), the group owns Givenchy and Guerlain, while in Watches & Jewellery (12%), brands include Tag Heuer, Bulgari, and Tiffany & Co. In Wine & Spirits (7%), the group owns Moët & Chandon, Krug, Veuve Clicquot, Hennessy, Château Cheval Blanc, and Château d’Yquem. In Selective Retailing (22%), the group operates in two spheres: retail designed for the international traveller and selective retailing concepts such as Sephora and Le Bon Marche.

The company is a family-run group that seeks to build on the heritage of its ‘Houses’. A vertically integrated operating model controls every link in the value chain, from sourcing and production facilities to selective retailing. In 2024, the company generated revenue of almost €85bn. Gross margins are high, in the mid-60s, while the operating margin is in the mid-20s.

In the first quarter of 2025, revenue fell by 2% to €20.3bn, and by 3% on an organic basis, falling well short of the 2% growth expected by the market.

By geography, Europe (+2%) was the stand-out region, with declines experienced elsewhere: the US (-3%); Japan (-1%); and the rest of Asia (-11%).

By division, the largest division, Fashion & Leather Goods, fell by 5%, well below expectations for a flat result. The decline was due in part to a tough comparison with the previous year which had been boosted by strong growth in purchases in Japan. The company has seen a good response to its product innovations.

The largest decline was in Wine & Spirits (-9% in organic terms), with Cognac held back by weaker demand in China and the US driven by the uncertainty created by tariff policies. Elsewhere, Perfumes & Cosmetics fell 1%, Watches & Jewellery were flat, while Selective Retailing declined by 1%.

The group hasn’t provided specific guidance but highlights that in a disrupted geopolitical and macroeconomic environment, it “remains both vigilant and confident at the start of the year”. The company remains focused on the development of its brands, driven by a sustained policy of innovation and investment. The objective once again is to reinforce its global leadership position in luxury goods in 2025.

Source: Bloomberg