Gold Rises, Buoyed by Likely Safe-Haven Demand Amid Global Trade Uncertainty
2339 GMT — Gold rises in the early Asian session, buoyed by likely safe-haven demand amid global trade uncertainty. The lack of a clear timeline for U.S.-China trade negotiations continues to maintain investors' cautiousness, GivTrade's Hassan Fawaz says in an email. Also, the ECB's recent rate cut could enhance the precious metal's allure in a low-yield environment, the chairman and founder says. Focus for this will likely to be on U.S. macroeconomic data and any new developments on the trade front, Fawaz adds. Spot gold is 0.6% higher at $3,347.33/oz. (ronnie.harui@wsj.com)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Bloomberg
34 minutes ago
- Bloomberg
ECB's Kazaks Says Some Fine-Tuning Rate Cuts ‘Quite Likely'
European Central Bank Governing Council member Martins Kazaks said further interest-rate cuts may be needed, according to Econostream Media. 'We've done a lot in terms of rate cuts, and monetary policy will need to remain vigilant to ensure that inflation stays around 2%,' he was cited as saying in an interview conducted June 6. 'Will it require some further cuts for fine tuning? Quite likely.'
Bloomberg
44 minutes ago
- Bloomberg
ECB's Wage Tracker Signals Pay Growth Will Plunge This Year
Wage growth in the euro zone will slow sharply in 2025, according to the European Central Bank's main gauge of future pay increases – bolstering arguments that inflation is under control. The ECB's wage tracker, published Wednesday, predicts salaries will rise by an annual 1.7% in the fourth quarter. That's just above the 1.6% projection seen in April, and far below last year's 5.4% peak.
Business Insider
an hour ago
- Business Insider
Lululemon Athletica Stock (LULU) Plunges 23% as Tariff Pressures Eclipse Earnings Beat
Lululemon Athletica (LULU) shares have declined more than 20% following the release of its quarterly earnings report last week, as investors react to tariff-driven margin concerns and slowing revenue growth. The Canadian athletic apparel brand is beginning to feel the weight of reality in the Trump era following the introduction of sweeping tariffs, while also facing headwinds in its core U.S. market due to tightening discretionary spending and intensifying competition. Confident Investing Starts Here: Several analysts have since lowered their price targets on the stock. Upon closer examination, several underlying trends raise concerns, prompting a cautiously neutral stance. Strong Performance Overshadowed by Margin Concerns in Q1 Despite posting a solid earnings beat for Q1 FY2025, Lululemon (LULU) experienced its steepest single-day drop in years after trimming its full-year EPS guidance by $0.37 per share. While gross margins improved to 58.3% thanks to lower production costs, operating margins slipped 110 basis points to 18.5%, highlighting mounting pressure on profitability. Additionally, comparable store sales grew just 1%, with a 2% decline in the Americas—a concerning trend for the brand's largest market. Notably, it's not just the top-line numbers that tell the story. Lululemon's inventory levels increased 23% versus planned high-teens growth. More and more of its products are collecting dust on its shelves. This could signal demand softness. Lululemon has struggled in the past with its women's apparel aligning with ever-changing trends. How Tariffs Impact the Canadian Apparel Company Though based in Vancouver, Canada, Lululemon is still exposed to the impact of President Trump's tariffs. Like many apparel retailers, the company relies on Asian manufacturing partners in countries such as Vietnam and Indonesia, importing finished goods into key markets, particularly the U.S., which remains its largest. As a result, the renewed import levies are a significant factor behind the company's downward revision to its earnings guidance. Regardless of the troubles the company faces on a macro level, its store count continues to rise as expansion beckons. LULU's Pricing Strategy Faces Risks Amid Consumer Budget Sensitivity Lululemon plans to implement targeted price increases on a select group of products. While this strategy can help support margins, it also carries the risk of dampening demand. After all, Lululemon isn't selling necessities—it's offering premium athletic apparel. In tougher financial climates, price-sensitive consumers may opt to delay purchases or explore more affordable alternatives. A recent Intuit survey found that over 80% of young adults would reduce non-essential spending if economic conditions deteriorate. That puts Lululemon in a position where it must balance profitability with consumer sensitivity. Indeed, other retailers are facing similar challenges, but it's not all negative news for Lululemon. While domestic growth has slowed, the company is seeing strong international momentum. Comparable sales outside the U.S. increased by 6%, with particularly auspicious results in China, where Lululemon ranks as the third-largest foreign sports apparel brand, following Nike and Adidas. Building on this success, Lululemon plans to expand its presence by opening additional stores in China and Europe. In the meantime, other companies competing directly with LULU are shown below. Valuation Still Commands Premium Despite Selloff Perhaps the most significant factor in LULU's volatile stock reaction was the fact that it was priced for perfection. Even after the selloff, Lululemon trades at a Price to Earnings (P/E) ratio of 22.7, which is still a premium relative to its peers in retail. Financially, Lululemon remains in great shape. It generated over $1.5 billion in free cash flow in 2024 and maintains a balance sheet of $1.3 billion in cash and zero debt. Is LULU a Good Stock to Own? On Wall Street, LULU sports a Moderate Buy consensus rating based on 16 Buy, 12 Hold, and two Sell ratings in the past three months. LULU's average stock price target of $313.75 implies ~21% upside potential over the next twelve months. Following its first quarter earnings report, analyst Tom Nikic of Needham lowered his price target on LUL from $366 to $317. Although he believes the selloff was overdone due to the guidance cut being predominantly tariff-driven, he expressed caution over the company's lackluster domestic growth. Moreover, he noted that Lululemon's international comparable growth decelerated, 'raising questions about the growth algo from here.' Randal Konik from Jefferies has a Sell rating on LULU due to slowing growth and increasing competition. On the last point, he notes that the company's attempts to diversify its core offerings have 'not been well-received, leading to lower customer conversion rates.' Lululemon Faces Headwinds Beyond Tariffs Lululemon's challenges can't be attributed solely to President Trump's tariffs. Beyond the impact of import levies on profitability, the company's growth is showing signs of slowing, especially in mature domestic markets. Coupled with a premium valuation and a lowered guidance, these factors contributed to a staggering $8 billion loss in market value. Looking forward, Lululemon must navigate the ongoing tariff pressures alongside intense competition and an American economy marked by consumer uncertainty and inflation. Fortunately, the company has the financial strength to weather these headwinds, and its brand remains strong, especially among younger consumers. That said, the difficulty of protecting profit margins while sustaining high growth in an increasingly competitive athleisure market suggests that investors should approach with caution.
