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LUXURY BACK IN FASHION, WITH THREE FACTORS TO CONSIDER

"The luxury sector is back in vogue after spending a few months in the penalty box," Bernstein says, after European luxury stocks surged on Thursday last week following Cartier owner Richemont's third-quarter sales beat.

Bernstein sees three factors at play in Richemont's results, namely a sequential improvement in demand everywhere, a stronger momentum in jewellery compared to soft luxury, and a "huge" performance gap between brands at the top of their category and those behind.

It suggests looking at these criteria when considering stocks: hard vs soft luxury, perceived ‘value for money’, and brand momentum.

Richemont CFR.S is in a "sweet spot", Bernstein says, as it offers clean exposure to hard luxury, has been even-handed on price hikes, and holds the hottest hard luxury brands on the market currently.

Despite ongoing momentum at Miu Miu, the broker remains cautious on the weaker Prada 1913.HK brand, which has been more aggressive on pricing and is more exposed to China.

On the other hand, it deems Moncler's MONC.MI strengths during peak winter trading season "under-appreciated".

Bernstein notes Burberry's BRBY.L strategy shift is picking up steam in the West, although its performance in the East is "less clear."

In soft luxury, it still favours Hermes HRMS.PA, thanks to its "unassailable brand position" and greater price control.

At LVMH LVMH.PA, any rebound at Louis Vuitton may need to contend with weakness at Dior, the broker flags, while Gucci's turnaround at Kering PRTP.PA has yet to come about.

(Linda Pasquini)

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EARLIER ON LIVE MARKETS:

WELCOME TO TRUMP 2.0 - EUROPEAN AUTOS, RENEWABLES AND STEELMAKERS SLIDE CLICK HERE

BEFORE THE BELL: EUROPE HEADS SOUTH, WIND STOCKS EYED CLICK HERE

TRUMP'S BACK, SO IS VOLATILITY CLICK HERE