LVMH knocks European shares lower after six-day winning run

European shares are set to snap a six-day winning run on Wednesday, hurt by underwhelming results from French luxury goods giant LVMH (EPA:LVMH) as well as nerves ahead of the Federal Reserve’s interest rate decision later in the day.

The pan-European STOXX 600 index shed 0.5% after recording its longest winning streak since January on Tuesday.

Shares of LVMH fell 4.4% to a more than two week low as analysts said that an in-line increase in sales at the world’s top luxury firm indicated the overall sector was moving towards a less impressive path of growth.

Rivals Kering (LON:0IIH) and Christian Dior dropped 2.7% and 4.3%, respectively, while France’s blue-chip CAC 40, home to several luxury names, fell 1.4%.

“The area of disappointment was within Wines & Spirits (notably cognac) impacted by weakness in the U.S.,” Goldman Sachs (NYSE:GS) said in a note but retained a “buy” rating on LMVH, citing better momentum in the second half of the year.

Italian drinks group Campari slid 4.7% after its first-half revenue fell short of analysts’ estimates.

Meanwhile, Wall Street also looked set for a weak opening as Microsoft (NASDAQ:MSFT) shares dropped 4.1% premarket after it laid out an aggressive spending plan to meet demand for its new artificial intelligence services.

Investors will now focus on the Fed, which is widely expected to raise interest rates by a quarter of a percentage point, possibly its last move in its aggressive monetary tightening cycle.

The European Central Bank is seen hiking rates by 25 basis points to the 3.5%-3.75% range on Thursday, with weak economic data recently dampening expectations of another hike in September.

“We expect the Governing Council to adopt neutral language for September meeting, signalling that a further rate hike is a possibility but not a done deal, and will depend on incoming data,” according to a note published by Vanguard Asset Management.

Deutsche Bank (ETR:DBKGn) slipped 1.0% after the German lender posted a 27% fall in second-quarter profit, while Italy’s UniCredit (LON:0RLS) rose 1.3% after the banking group raised its net profit and shareholder reward targets for the year.

Rolls-Royce (LON:RR) shot up about 20% after the British aero-engineer raised its full-year operating profit forecast by around 45%.

Overall, earnings at STOXX 600 companies are expected to have contracted 8.1% in the second quarter, as per Refintiv IBES estimates, a slight improvement from the 9.2% drop forecast at the start of the earnings season.