Inflation Woes, Travel Stocks Drag Europe Shares Lower

The pan-European STOXX 600 index fell 0.3% after hitting a record high in the previous session.

Travel & leisure slid 0.8%, with TUI shedding 2.9% on reports that the world’s largest holiday company had cancelled more holidays until August.

UK’s FTSE 100 dropped 0.4% on a stronger pound after data showed British inflation jumped to 2.5% in June, further above the Bank of England’s target and hitting its highest since August 2018.

“The creeping UK headline inflation rate is likely to add to the sense of unease pervading the financial markets about the impact higher prices will have on economies around the world,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.

“Although much of the increases are related to the unusually low level of prices last year due to the pandemic effect, it appears genuine price inflation is also occurring.”

Investors were already nervous after data on Tuesday showed U.S. inflation ran hotter than expected in June, leading many traders to price in faster interest rate hikes.

All eyes now will be on Federal Reserve Chairman Jerome Powell’s congressional testimony starting later in the day.

European Central Bank policymakers have stressed in recent weeks that they will not remove support measures prematurely as the economic recovery is still underway.

Along with euro zone bond yields, the bloc’s banks rallied after sharp falls in the previous session.

Swedish telecoms operator Tele2 gained 4% after it reported an 8% rise in quarterly core earnings, helped by cost savings and lesser pandemic-related headwinds.

German fashion house Hugo Boss jumped 5.1% after it forecast its revenue to grow by 30% to 35% this year.

Italian luxury group Brunello Cucinelli underperformed despite raising its 2021 sales guidance for the second time this year.

German airline Lufthansa slipped 0.6% after it said passenger numbers were currently around 40% of pre-pandemic levels and it was aiming to reach 60%-70% by the end of the year.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sruthi Shankar in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)

 

Hugo Boss Sees China Booming Despite Boycott Call

The company known for its smart men’s suits saw first-quarter sales almost double in mainland China and it expects that momentum to continue unchanged despite the boycott calls, acting Chief Executive Yves Mueller told journalists.

At least three Chinese celebrities said in March they were dropping Hugo Boss, and some internet users vowed to boycott the brand for good after it made contradictory comments over its purchase of goods and cotton from the Xinjiang region.

Compared with the first quarter of 2019, a year before the coronavirus pandemic hit the region, currency-adjusted sales rose by 29% in mainland China in the first quarter and Mueller said this trend continued at the start of the second quarter.

German sportswear company Puma said last month it expected a hit to sales from the China consumer backlash.

Overall, group sales fell 10% to 497 million euros ($597 million), while Hugo Boss just managed to turn an operating profit of 1 million euros. The average of forecasts by analysts were for 442 million euros in sales and a 28 million euro loss.

Hugo Boss shares were up 4.2% at 0742 GMT.

Mueller declined to comment on reports last month of possible interest in the company, including from French luxury group LVMH, which had boosted the stock.

The company said it was confident sales in the second quarter would almost double, and it hoped to generate a positive operating profit in the period. But it said it could not give a precise outlook.

Mueller, who will hand over to former Tommy Hilfiger boss Daniel Grieder next month, said about 20% of its sales space was still closed at the start of the second quarter, but he was optimistic for a rebound in demand as lockdowns ease.

“The desire to consume is coming back,” he said, adding that he saw pent-up demand for smart clothes as people start meeting friends again and planning weddings and parties.

($1 = 0.8323 euros)

(Reporting by Emma Thomasson; Editing by Riham Alkousaa, Maria Sheahan and Edmund Blair)