European equities edged lower on Friday, pausing after a historic rally that has propelled the benchmark STOXX 600 index to four consecutive record closes. Despite the slight dip, the pan European index remained on track to notch its eighth straight week of gains
The spotlight fell on the luxury goods sector, which surged following stellar earnings from French icon Hermes International. Shares in the Birkin bag maker jumped 4.2% after the company reported an 18% year on year increase in fourth quarter sales, defying broader concerns about slowing demand for high end goods. The results underscored the enduring appetite among affluent consumers for Hermes’ exclusive leather goods and accessories, which have become symbols of wealth and status. Analysts highlighted the brand’s pricing power and disciplined supply strategy, particularly in Asia, where post pandemic demand has rebounded sharply.
“Hermes continues to operate in a league of its own, insulated from the cost of living pressures affecting mass market retailers,” said Marie Dubois, a luxury sector analyst at BNP Paribas. “Their ability to maintain waiting lists for iconic products like the Birkin bag, even in uncertain times, speaks to a deeply loyal clientele.”
The bullish sentiment rippled across the luxury sector. British heritage brand Burberry climbed 1.6%, while Swiss conglomerate Richemont, owner of Cartier and Van Cleef & Arpels, gained 1.4%. French luxury giants LVMH (up 1.7%) and Kering (1.4%) also advanced, lifting the European personal and household goods subindex by 1.1%—outperforming the broader market.
In contrast, healthcare stocks lagged, shedding 0.7% as Fresenius Medical Care plummeted 6%. The German dialysis provider was dragged lower after US rival DaVita projected 2024 profits below Wall Street estimates, citing labor cost pressures and regulatory challenges. DaVita’s shares tumbled 11% in after hours trading on Thursday, sparking concerns about margin pressures across the dialysis industry. Fresenius, which derives a significant portion of its revenue from the US market, faces similar headwinds, according to analysts.
“DaVita’s guidance suggests the sector is grappling with persistent inflation and staffing shortages,” noted Credit Suisse healthcare strategist Dr. Hans Weber. “Until there’s clarity on cost containment, investors may remain cautious.”
The STOXX 600’s modest 0.1% decline to 495.21 points by mid morning trading reflected a market in consolidation mode after a relentless ascent. The index has surged nearly 12% since late October, buoyed by falling inflation, expectations of central bank rate cuts, and a rebound in corporate earnings. Despite Friday’s pause, technical analysts pointed to strong support levels and healthy trading volumes as signs of underlying strength.
“This breather is natural after such a steep climb,” said Marco Rossi, chief strategist at UniCredit. “The key question is whether the rally can broaden beyond tech and luxury. Cyclical sectors like industrials and banks need to participate for the momentum to sustain.”
Meanwhile, investors monitored geopolitical developments after US President Donald Trump declined to immediately impose reciprocal tariffs on Thursday, leaving the door open for negotiations with trading partners. While the statement lacked specifics, market participants interpreted it as a temporary reprieve for sectors exposed to transatlantic trade, such as automotive and aerospace. The European Commission has previously warned of retaliatory measures if the US escalates tariffs, particularly on steel and aluminum.
As the earnings season progresses, focus will shift to updates from major European banks and energy firms, as well as key inflation data from the Eurozone and the US next week. For now, the STOXX 600’s record breaking run appears intact, supported by a combination of resilient earnings, dovish monetary policy expectations, and a cautiously optimistic global growth outlook.
“The market is betting on a ‘Goldilocks’ scenario—slowing inflation without a recession,” concluded Rossi. “If central banks deliver rate cuts as anticipated, European equities could see further upside, though valuations are becoming stretched in certain sectors.”
As trading drew to a close Friday, the STOXX 600’s fate hinged on whether the luxury sector’s exuberance could offset broader profit taking. With the index hovering near uncharted territory, investors remained poised for either a consolidation or a fresh leg higher in the weeks ahead.