Author: Fiona Craig

Gold traded modestly higher on Wednesday as a weaker U.S. dollar supported bullion ahead of the Federal Reserve’s policy announcement, although rising oil prices and renewed geopolitical tensions continued to fuel inflation worries.

Spot gold (XAU/USD) added 0.3% to $4,038.71 an ounce by 04:52 ET (08:52 GMT), while U.S. gold futures eased 0.03% to $4,037.65 an ounce.

The metal had retreated by more than 1% on Tuesday after a stronger dollar reduced its appeal.

Fed Meeting Dominates Market Attention

The U.S. Dollar Index slipped 0.1% but remained close to a one-month high.

Investors overwhelmingly expect the Federal Reserve to keep interest rates unchanged at the conclusion of its meeting later on Wednesday.

CME Group’s FedWatch Tool indicates a 68% probability that rates will remain unchanged, compared with a 32% chance of a 25-basis-point increase. Markets also continue to price in a strong possibility of a September rate hike.

Higher borrowing costs typically reduce demand for gold because it offers no yield.

Geopolitical Risks Support Safe-Haven Demand

Fresh military developments in the Middle East remained a key focus after the U.S. military intercepted Iranian ballistic missiles aimed at American forces.

Iran later said it had targeted U.S. military facilities in Jordan, while Iraq’s Popular Mobilization Forces accused U.S. and Saudi forces of launching airstrikes against its positions.

Saudi Arabia also reported intercepting drones targeting oil facilities and blamed Iran-backed militias.

The renewed confrontation helped lift crude oil prices by more than 4%, increasing concerns over future inflation.

ING analysts said: “Higher oil prices amid a re-escalation in the Middle East will weigh on gold in early morning trading, reigniting inflation concerns.”

Economic Data Also in Focus

Investors are now awaiting the U.S. PCE inflation report and July employment figures for additional clues on the direction of Federal Reserve policy.

Silver rose 1.4%, platinum slipped 0.5%, while copper prices weakened modestly.

Oil prices climbed more than 3% on Wednesday after renewed military action involving the United States, Saudi Arabia and Iran heightened concerns over global crude supplies, while declining U.S. oil inventories added further support to the market.

By 08:24 GMT, Brent crude futures had risen $3.04, or 3.6%, to $87.13 a barrel. U.S. West Texas Intermediate (WTI) crude advanced $2.80, or 3.5%, to $82.06 a barrel.

According to UBS analyst Giovanni Staunovo, “Renewed military strikes in the Middle East and Iranian officials reiterating that they want to control shipping activity through the Strait of Hormuz amid depressed oil flows through the Strait are lifting oil prices again.”

Fresh Military Action Raises Supply Risks

Oil markets reacted after the United States and Saudi Arabia carried out strikes against Iran-backed groups in Iraq, blaming them for recent drone attacks on Saudi energy infrastructure.

The military operation followed the interception of Iranian ballistic missiles aimed at U.S. forces stationed in the region, adding to fears that the conflict could expand further.

Diplomatic progress also stalled after an Iranian official told Reuters that Tehran had rejected Oman’s proposal for joint regional oversight of the Strait of Hormuz, dimming hopes for an agreement that could restore normal shipping through one of the world’s most important energy routes.

Shipping Through Hormuz Remains Limited

Only a handful of commodity vessels crossed the Strait of Hormuz during the week, highlighting the continued disruption to Gulf trade.

Meanwhile, shipping through the Bab el-Mandeb Strait increased, with five vessels passing through on Wednesday after 39 made the journey on Tuesday, the busiest day since July 19, before Yemen’s Iran-backed Houthi movement announced a blockade targeting Saudi Arabia.

DBS Bank expects oil markets to remain highly volatile.

Suvro Sarkar, Head of Energy Research at DBS Bank, said: “We believe Brent oil prices will continue to whipsaw in the $80-$100 per barrel range in the near term as the conflict ebbs and flows in the Middle East.”

He added that geopolitical tensions have worsened despite earlier indications from U.S. President Donald Trump that diplomatic efforts could resume.

“This series of stop-start negotiations means a complete removal of the Strait of Hormuz blockade is not achieved, and oil prices could see higher floor of around $80 per barrel even under a de-escalation scenario.”

Lower U.S. Stockpiles Support the Rally

Crude prices also found support after market sources, citing American Petroleum Institute data, reported that U.S. oil inventories declined by around 3.3 million barrels during the week ended July 24.

Traders are now awaiting official inventory figures from the U.S. Energy Information Administration later on Wednesday.

Further bullish sentiment came from expectations that OPEC+ may suspend planned production increases for three months beginning in October after completing the scheduled return of previously withheld output.

Hermès International (EU:RMS) reported first-half 2026 results broadly in line with market expectations, with resilient demand across key international markets helping offset the impact of unfavourable exchange rates.

The French luxury group generated first-half revenue of €8.16 billion, matching the consensus estimate compiled by S&P Global Visible Alpha. Sales increased 6% at constant exchange rates and 2% on a reported basis compared with the same period last year, supported by solid growth in the Americas, Japan and Europe excluding France.

All geographic regions recorded revenue growth with the exception of the Middle East, which the company said “showed good resilience in a challenging environment.”

Second-quarter revenue reached €4.1 billion, representing constant currency growth of 7%. Hermès described this as “slight acceleration” compared with the first quarter, driven in particular by stronger trading in France, Japan and the Middle East.

Jefferies, which maintains a “buy” rating on the stock with a €2,000 price target, described the improvement as “modest.” The broker noted that second-quarter sales grew 6.7% excluding currency effects, compared with its sell-side consensus of 6.8% and a buyside expectation of around 7%, following 5.6% growth in the opening quarter of the year.

Recurring operating income rose to €3.35 billion, exceeding the S&P Global Visible Alpha consensus estimate of €3.29 billion. Operating margin reached 41.0%, only marginally below the 41.4% reported a year earlier despite the negative impact of foreign exchange movements.

Using its own consensus estimates, Jefferies calculated an operating margin of 41.1%, ahead of its forecast of 40.6%, adding that gross margin expanded by 46 basis points year over year “despite fx headwinds.” The broker also noted that the company did not identify any impact from tariffs during the reporting period.

Net profit attributable to shareholders totaled €2.24 billion, broadly in line with market expectations. Hermès said the figure included, as in the first half of 2025, an exceptional levy imposed on the profits of large companies in France. Excluding this charge, net profit reached €2.5 billion, equivalent to 30.7% of sales.

Diluted earnings per share came in at €21.32, slightly below both the S&P Global Visible Alpha consensus estimate of €21.37 and the €21.56 forecast cited by Jefferies.

Cash generation remained a highlight, with adjusted free cash flow increasing 18% to €2.18 billion, comfortably exceeding the consensus estimate of €1.95 billion. According to Jefferies, net cash rose by €2.2 billion year over year to €12.9 billion.

Across product categories, Jefferies said Leather Goods revenue increased 10.2% during the second quarter, slightly below its 11% forecast but ahead of the 9.4% growth recorded in the first quarter. The performance gap between the Leather Goods division and the rest of the business also narrowed compared with the previous quarter.

Regionally, Japan delivered one of the strongest performances, with sales rising 12.3%, comfortably exceeding Jefferies’ 10.3% forecast. Asia-Pacific excluding Japan recorded growth of 2.5%, below the broker’s 4% estimate, while revenue in the Americas increased 13.7%, matching expectations after growing 17.2% in the first quarter.

Looking ahead, Hermès said it “confirms an ambitious goal for revenue growth at constant exchange rates” during the second half of the year despite “economic, geopolitical and monetary uncertainties around the world.”

Jefferies said its forecasts assume second-half revenue growth of 8.3% alongside a 63-basis-point decline in EBIT margin. The broker added that investors will be watching closely to see whether management still expects sales momentum to strengthen during the second half and “the extent to which the ongoing lack of growth in China may also reflect the group restricting the supply of some products in that market.”

The company also disclosed that adverse currency movements reduced first-half revenue by more than €360 million.

Remy Cointreau (EU:RCO) reported first-quarter sales ahead of market expectations, supported by stronger-than-anticipated demand for its cognac portfolio and solid performance across Asian markets outside China. Despite the earnings beat, the company’s shares slipped in early trading.

Organic sales increased 1.3% to €223.2 million during the quarter, outperforming the company-compiled analyst consensus, which had forecast growth of 0.2% and revenue of €218.8 million.

Commenting on the outlook, Jefferies analysts said: “Whilst the external environment is tough, there are some earlier signs of improvement.” They added, “Investors need proof that earnings have hit a floor and that current challenges are temporary. Strong inventory and cost discipline, combined with a focus on demand, create the foundation for stability.”

Despite the stronger-than-expected sales performance, Remy Cointreau shares were down around 1.7% in early trading in Paris at 07:37 GMT, suggesting investors remain cautious about the broader outlook for the premium spirits sector.

The French drinks group also reaffirmed its guidance for the full financial year, maintaining its existing targets despite ongoing macroeconomic uncertainty.

EssilorLuxottica (EU:EL) shares rose 2.1% by 07:43 GMT after the eyewear group reaffirmed confidence in its growth outlook, despite reporting second-quarter revenue that came in slightly below analyst expectations.

The company generated first-half revenue of €14.82 billion, narrowly missing the consensus estimate of €14.91 billion. Second-quarter revenue increased 8.7% at constant exchange rates, below analysts’ expectations for 10.1% growth.

While revenue disappointed, profitability exceeded forecasts. Adjusted operating profit reached €2.75 billion during the first half, comfortably ahead of the €2.44 billion consensus estimate and representing growth of 15% at constant exchange rates.

On a constant currency basis, first-half revenue increased 9.7% compared with the same period in 2025, rising to €14.82 billion from €14.02 billion. Reported second-quarter revenue totaled €7.69 billion, an increase of 7.2% year over year.

“We’re proud to report a successful first half, delivering nearly double-digit revenue growth while increasing adjusted operating profit by 15% at constant currency,” said Francesco Milleri, Chairman and CEO, and Paul du Saillant, Deputy CEO.

During the earnings call, management explained that first-half gross margins benefited by around 60 basis points from U.S. tariffs, with part of that positive impact expected to continue into the second half of the year.

The company also expects margins to strengthen further through ongoing supply chain improvements, greater operating scale and a more favourable product mix driven by increasing demand for wearable technologies.

Management struck an optimistic tone on sales, noting that trading in July had begun strongly and expressing confidence that revenue growth would continue through the remainder of 2026. Discussing recent performance, executives said they had experienced “a good month of July.”

EssilorLuxottica also expects stronger contributions from its Stellest myopia management lenses in the U.S. following the activation of its largest customer accounts. A broad innovation pipeline—including new Varilux lenses, AI-powered smart glasses, the September launch of Nuance Second Generation and further developments within its medical technology business—is also expected to support future growth.

The Direct-to-Consumer division continued to outperform the Professional Solutions business, with comparable-store sales accelerating to 8.0% growth in the second quarter from 7.0% in the first. Both optical and sunglasses brands contributed evenly across regions. North America, Europe, the Middle East and Africa (EMEA), and Latin America all recorded high-single-digit growth, while Asia-Pacific delivered double-digit expansion, supported by the consolidation of Top Charoen’s retail network in Thailand.

The company’s myopia management lens portfolio expanded 24% during the second quarter, while revenue from AI glasses almost doubled compared with the previous year. Adjusted operating margin increased to 18.6% in the first half, or 18.9% at constant exchange rates, representing an improvement of 80 basis points. Free cash flow also strengthened, rising to €1.07 billion from €960 million in the first half of 2025.

Commenting on the outlook, Bernstein analysts said: “The positive outlook across both top line and margins reinforced on the call could bring the name back on investor’s radars, even if today’s results seem priced in.”

Kering (EU:KER) reported second-quarter revenue that came in ahead of market expectations, helped by a marked improvement in Gucci’s performance and stronger momentum across several of its brands. The results prompted investors to push the luxury group’s shares more than 10% higher in early trading in Paris.

The company generated second-quarter revenue of €3.65 billion, representing comparable growth of 2% and narrowly exceeding the analyst consensus forecast of €3.63 billion. For the first half of 2026, revenue totalled €7.22 billion, broadly stable on a comparable basis, compared with €7.44 billion in the same period a year earlier.

Gucci, Kering’s largest brand, continued to show signs of recovery as its comparable sales decline slowed to 2% during the second quarter. That represented an improvement of seven percentage points from the first quarter and marked the label’s strongest sequential performance in several quarters.

“Kering delivered improved performance in the second quarter, with revenue returning to growth,” said Luca de Meo, CEO of Kering. “Across the Group, we are seeing early signs of progress in brand desirability, commercial momentum and operating performance.”

The group’s recurring operating profit margin improved to 12.8% during the first half, an increase of 40 basis points from a year earlier, while recurring operating income reached €921 million. Net income attributable to shareholders declined to €189 million from €474 million in the prior-year period. Sales through directly operated stores also improved, rising 2% on a comparable basis in the second quarter, a four-percentage-point improvement compared with the first quarter.

Management also reiterated that it expects the group’s EBIT margin in the second half of 2026 to exceed the level achieved during the first six months of the year. The positive outlook was reflected in upward revisions to 2026 earnings per share estimates, helping fuel the strong share price reaction.

Other businesses within the portfolio also performed well. Kering Eyewear increased second-quarter revenue by 8% to €476 million, while Kering Jewelry recorded comparable revenue growth of 18% to €252 million. The group also strengthened its balance sheet by reducing net debt by €4.7 billion since 31 December 2025 to €3.3 billion, supported by the €4.0 billion sale of Kering Beauté to L’Oréal.

During the earnings call, management said expectations for the third quarter are to be “flattish” at the group level.

Commenting on the results, Bernstein analysts said: “Kering’s turnaround seems to be moving in the right direction; current valuations, however, suggest that this is largely priced in. More yo-yo moves could be on the menu.”