LONDON — Europe’s stock markets cooled in midmorning trading on Thursday following a bounce earlier in the week that brought the FTSE 100 in London back to pre-Brexit levels.
The FTSE MIB in Milan, which has seen the biggest peaks and troughs since Britons cast their votes to leave the European Union last week, was down 1 percent to 15,781.27, followed by the FTSE 100 in London, which declined 0.3 percent to 6,340.24. The DAX in Frankfurt was broadly flat at 9,614.06, while the CAC 40 in Paris climbed 0.2 percent to 4,202.97.
The euro traded at $1.11, the pound fetched $1.35 and the Swiss franc equaled $1.02 at 10:40 a.m. CET.
Retail and luxury stocks were uneven, with the morning’s biggest risers including Italia Independent Group, 9.5 percent to 7.66 euros; Asos.com, 4 percent to 39.24 pounds; Beiersdorf, 2.1 percent to 83.88 euros, and Unilever, 1.6 percent to 41.50 euros.
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Among the stocks that lost the most ground were J. Sainsbury, 2.2 percent to 2.24 pounds; Ted Baker, 2.6 percent to 24.25 pounds; Mulberry Group, 7 percent to 9.76 pounds, and Luxottica Group, 2.4 percent to 44.55 euros.
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In a report published early Thursday, Luca Solca, managing director at Exane BNP Paribas, revised his projections for luxury goods companies’ performance downward in light of the macroeconomic uncertainty and foreign exchange swings following the Brexit vote.
He said his team has trimmed its organic growth expectations by about 1 percent for most companies to reflect a weaker macro-economic environment. “This seems to dovetail with GDP growth downgrades as suggested by the European Central Bank in the region of 0.5 percent for the euro area. We factor in a weaker euro and pound, and a stronger U.S. dollar and Swiss franc.”
He added that, in Exane’s latest scenario, luxury players are penalized because “macro deterioration is stronger than foreign exchange tailwinds,” and hedging is likely to delay possible foreign exchange benefits further into the future.
The report added that second-half earnings projections were looking more robust before the Brexit vote, despite a variety of factors that are sure to weigh on growth, including tough year-on-year comparisons; poor tourist flows to Europe in the wake of terror attacks in Europe; tighter border controls in China that are discouraging purchases abroad, and de-stocking in watches.
He said most of these negatives should fade in the second half and luxury companies should reap the benefits of moving their product mix closer to middle-class consumers and closing their price gaps globally, but some problems will persist.
“Uncertainty in the heart of Europe — and its reverberations worldwide — are likely to dampen what was shaping up to be a mild recovery in the second half,” said Solca.