European luxury equities dip 30%

An all-out trade conflict could provoke a 30% dip in equities of EU makers of luxury products, as UBS informed.

Such a sag would occur in a worst-case scenario, which would include a 1% sink in gross domestic product surge worldwide, and a double-digit reduction in per-share profits in the sector. Apparently, the outlook showed up as luxury equities are currently trading at a premium, dropping a hint that market participants haven’t mostly priced in trade-related hazards.

China and America are still locked in a trade conflict. Donald Trump recently threatened to slap duties on all products imported from China that could amount to about $500 billion. China and America appear to be major markets for luxury products because they account for approximately 55% of sales.

There’s a 10% ascend in organic sales of luxury products now, with 35% of transactions in China. Some market experts are assured that in a worst-case trade conflict scenario, surge in organic sales would speed down to nearly 2% next year and per-share profits would sink about 12%. Additionally, global GDP surge would be cut from 4% to 3%, while global equity markets would sink by more than 20%.

The equities of European luxury companies generally dived nearly 24% in 2018.

The equities of Swiss watch maker Swatch Group AG UHR headed south 0.62%. As for UK clothing and accessories maker Burberry Group PLC BRBY, it rallied up to 0.57%, while Italian shoes and handbags and designer Salvatore Ferragamo SpA SFER lost 0.98%.

Meanwhile, Swatch boasts 70% of sales in the wholesale market. The given fact provokes greater volatility from restocking/destocking cycles.

In addition to this, forecasts as for such brands as Ferragamo and Burberry are high because market participants foresee further sales surge as well as margin expansion.