Europe open: Stocks inch higher, but LVMH sinks

(Sharecast News) - European stocks were posting limited gains on Wednesday, as investors chose to play it safe following a recent strong rally - but French markets were feeling the brunt of weak earnings in the luxury sector. The STOXX Europe 600 Index was up just 0.1% early on, having risen by around 3% over the past four sessions.

Markets in London, Milan and Madrid were up around 0.2%, while Frankfurt was flat. However, the CAC 40 in Paris had dropped 0.5% early on, owing to heavy falls from LVMH and a host of luxury sector peers.

Stocks had put in a decent performance on Tuesday on the back of yet more dovish comments from the Federal Reserve, who indicated that higher government bond yields may prompt them to hold off from tightening monetary policy any further just yet.

Also helping sentiment were hopes for more stimulus from China, with the government looking at raising its budget deficit to kickstart a struggling economy.

In economic news on Wednesday, German inflation fell to its lowest level since the start of the war in Ukraine. The annual change in the consumer price index stood at +4.5% in September, down from +6.1% in August and +6.2% in July. Energy prices rose just 1% year-on-year, slowing from the 8.3% growth seen the previous month.

Inflation figures from the States will be closed watched, with the producer price index and consumer price index due out over the next two days, along with the minutes from the latest Federal Open Market Committee meeting later this evening.

LVMH leads luxury stocks lower

LVMH dropped 6% early on after the luxury group said organic revenue growth had eased to 9% in the third quarter, well below the 11.2% growth expected by analysts. Sales in the wines and spirits division, in particular, plunged 14%, causing shares in fellow drinks company Pernod Ricard to fall.

"While luxury has been a strong sector lately, given that customers with high disposable incomes are relatively sheltered from cost-of-living pressures, results from LVMH, the first in the sector, appears to suggest that the blockbuster period for luxury is starting to fade," said Victoria Scholar, head of investment at Interactive Investor.

Others in the sector, such as Kering and Hermes, were also taking a hit in Paris.