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Europe close: Markets rebound from six-week low as luxury stocks gain

(Sharecast News) - European stocks rose on Thursday, bouncing off a six-week low, as strong gains in the luxury sector were able to offset concerns about rising geopolitical tensions in the Middle East. "Was yesterday's equity market sell-off the typical knee-jerk reaction by investors? It appears to be a case of panic at the first bad sign before stepping back and taking time to properly digest the information," says Danni Hewson, head of financial analysis at AJ Bell.

"The twin-pronged attack of UK inflation coming in higher than expected and disappointing economic growth figures from China certainly put stocks in a spin, but a day later it's almost as if that didn't happen."

The pan-European Stoxx 600 index rose 0.6% to 470.45, after falling to 467.71 on Wednesday - its lowest close since 5 December. France's Cac 40, which is heavily exposed to the luxury sector, saw gains of 1.1%, while Germany's DAX rose 0.8% and the UK's FTSE 100 edged just 0.2% higher.

"Ongoing missile attacks between US/UK warships and Houthis in Yemen have been joined by exchanges between Iran and Pakistan which led to and escalation in the region," said analyst Axel Rudolph from IG. "This pushed the oil price higher for a second straight day and also provoked a recovery in the gold price on flight to safety flows."

Brent crude rose 1.1% to $78.75 a barrel, while gold rose 0.5% to $2,016.40 an ounce.

In economic news on the continent, new car registrations across the EU totalled 867,052 last month, 3.3% below December 2022, which the European Automobile Manufacturers' Association put down to a strong baseline comparator the year before. This was the first year-on-year fall after 16 straight months of growth with new battery-electric car sales declining for the first time since the onset of the Covid pandemic.

Meanwhile, seasonally adjusted production in the eurozone construction sector decreased by 1.0% during the month of November, with the downturn accelerating from a revised 0.6% fall in October. Compared with the same month in 2022, output was down 2.2% - the biggest annual decline since February 2021.

Shares in Richemont and Flutter jump

Luxury giant Richemont surged 10% after the Cartier owner posted a jump in quarterly sales, driven by strong demand in China. The company, which also owns Van Cleef & Arpels, Piaget, IWC, Chloe and Montblanc, said sales in the three months to 31 December rose 8% to €5.6bn on a constant currency basis. Most analysts had forecast sales closer to €5.2bn.

Luxury peers EssilorLuxottica, LVMH, Hermes and Kering were all rising strongly in Paris.

In contrast, shares in Watches of Switzerland tanked by more than a third as the luxury timepiece seller slashed its annual revenue guidance on the back of slumping demand for its luxury products and forecast of volatile trading conditions for the rest of the fiscal year.

Paddy Power, FanDuel and Betfair owner Flutter Entertainment jumped by 15% despite fourth-quarter revenues coming in below guidance, with investors showing optimism about the company's planned listing on Wall Street later this month. Flutter paid out $343m due to "customer friendly sports results" in the fourth quarter, which limited US gross revenues to $1.42bn, some $225m below previous guidance provided at its third-quarter results in November.

"The hope will be the company, whose strategy is heavily oriented to capitalising on an emerging opportunity in the US, can attract a higher valuation off the back of its US listing," said AJ Bell investment director Russ Mould.

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Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

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