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Luxury stocks soar in Europe as Milan hits 43,000 points; Wall Street remains mixed amid Fed uncertainty
European markets ended on a high note this week as optimism surrounding possible peace talks between Ukraine and Russia lifted investor sentiment. Milan’s FTSE MIB rose nearly 0.9%, closing at 43,000 points — its highest level since June 2007. Across Europe, luxury stocks led the rally, with Paris’s CAC 40 posting the strongest performance, up 1.2%.
The mood was fuelled by signs of progress in diplomacy. After a meeting with Ukrainian President Volodymyr Zelensky, U.S. President Donald Trump announced he was working to arrange direct talks between Zelensky and Russian President Vladimir Putin. Importantly, Trump stated he would not participate personally, signalling a hands-off approach to negotiations. The prospect of easing geopolitical tensions has reassured investors, particularly in sectors sensitive to global trade and consumer confidence.
European Markets: Banks and Luxury in the Spotlight
In Milan, financial stocks regained strength after a short pause earlier in the week. Banca Monte dei Paschi di Siena gained 1.34%, while Mediobanca rose 1.51%, ahead of a crucial shareholder meeting on a proposed merger with Banca Generali. The luxury sector also outperformed, supported by hopes of improved global conditions. Moncler surged nearly 5%, becoming the best performer on the Italian index.
However, not all sectors benefited. Defence companies, which had rallied in recent months, faced profit-taking. Leonardo, a major aerospace and defence group, dropped sharply by over 10%, dragging the European defence sector lower.
Beyond the blue-chip index, construction firm Webuild saw modest gains after announcing a €1.6 billion contract for a new tunnel along Italy’s Salerno–Reggio Calabria route.
Wall Street: Retail Earnings and Fed in Focus
Across the Atlantic, U.S. markets were more cautious. Major indices traded mixed following record highs last week. With geopolitical concerns slightly easing, investors shifted their attention to corporate earnings and Federal Reserve policy.
Retail was in the spotlight. Home Depot shares slipped despite reporting quarterly revenue of $45.28 billion and earnings of $4.68 per share, narrowly missing expectations. Still, the company maintained its outlook for the year, reassuring long-term investors. Later this week, quarterly results from Lowe’s, Target, and Walmart are expected, which will largely complete a stronger-than-anticipated earnings season for U.S. retailers.
The Federal Reserve remains another key driver. Minutes from the central bank’s last meeting are due Wednesday, shedding light on divisions within the committee. Two members recently opposed maintaining current interest rates, signalling potential shifts ahead. Markets are also anticipating the annual Jackson Hole symposium, where Fed Chair Jerome Powell is scheduled to speak Friday. Investors will be watching closely for signals on whether a September rate cut — currently priced as an 84% probability by futures markets — will materialize.
Currencies and Commodities: Euro, Bitcoin, and Oil Slide
On currency markets, the euro struggled to break past $1.17 against the dollar, with analysts citing technical resistance levels. The Japanese yen strengthened over the past week, benefiting from its safe-haven status. Meanwhile, Bitcoin retreated below $114,000 after hitting highs the previous week, reflecting volatility in the cryptocurrency market.
Energy markets also shifted downward. Oil prices fell to their lowest levels in two months, weighed down by speculation that a peace agreement could reduce sanctions on Russian energy exports, thereby increasing global supply. Natural gas prices in Amsterdam also declined.
Outlook: Optimism Tempered by Uncertainty
While European investors welcomed the prospect of peace in Ukraine, the broader global outlook remains mixed. Luxury and banking stocks may continue to benefit from rising consumer confidence and reduced geopolitical risk, but sectors such as defence and energy face new headwinds.
In the U.S., attention remains firmly on the Federal Reserve. If policymakers signal a firm commitment to cutting rates, Wall Street could regain momentum. Conversely, any hesitation could keep markets choppy in the near term.
For now, Milan’s historic climb above 43,000 points and Paris’s luxury-led rally underscore the resilience of European markets when supported by improving sentiment. Yet, as always, optimism is fragile, resting heavily on the uncertain outcomes of diplomacy and central bank decisions.
Alessandro Fiorentino