This week has been relatively quiet for financial markets, but there are signs of renewed momentum in Europe’s luxury goods sector which, after a period of sluggish performance, appears to be enjoying moderate revival. Hermès and Cartier, two of the biggest names in luxury retail, reported strong earnings this month, signalling a potential turnaround. Economists suggest that this means the worst may be behind us, with robust demand from US and European consumers driving recovery.
However, Chinese consumers—long the backbone of the luxury sector—remain a key uncertainty. While Western demand is fuelling growth, analysts are closely monitoring the impact of US tariffs and economic headwinds on Chinese spending. If higher costs trickle down to consumers, a full return to pre-pandemic spending levels could take longer—a challenge not just for China, but for shoppers worldwide.
Meanwhile, data on Tuesday revealed that Germany’s economy shrunk by 0.2% in Q4 2024, confirming earlier estimates, as exports plunged 2.2%—the steepest drop since mid-2020. While GDP saw a modest 0.1% rise in Q3, the full-year decline of 0.2% marks the second straight year of contraction. Rising energy costs, foreign competition, high interest rates, and mounting economic uncertainty continue to drag down Europe’s largest economy, raising concerns about its recovery path.
The data was published shortly off the back of the preliminary results of the snap election in Germany this month. The CDU is expected to win 208 seats in the German Parliament, based on provisional results from the German election held on February 23, 2025. Although this would make the CDU the biggest party, they would still have too few seats to form a government and would therefore have to enter into a coalition with one or more of the other parties. Both the Euro and German stock markets are likely to see positive momentum in the short term amid election optimism.
