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StockBeat: Vodafone Goes Ker-Ching; Kering Goes Gooey Over Gucci

By Geoffrey Smith -- It’s official: Vodafone (LON:VOD) is cooler than Gucci.

Well, ok, not really, but the thing that leaps out from the stock market boards in Europe on Friday is that the debt-laden telecoms group is up over 7%, and Kering (PA:PRTP), the holding company for one of the world’s most famous fashion brands, is down by a similar amount amid concerns over a weakening outlook.

Vodafone’s (relatively) new chief executive Nick Read has finally unveiled measures to cut the group’s debt burden substantially, by spinning off its forest of mobile masts around Europe into a separate company.

At the same time, the company also reported an improved operating performance, with last year’s decision to bulk up in Germany starting to pay off and market conditions in Italy improving, after repeated disappointments in recent years.

"We are now at a turning point in our service revenue following the low point in Q4 of last fiscal year,” Reuters reported Read as saying on a conference call. "We are confident that this improvement in service revenue will continue as the year progresses."

Vodafone’s shares have now regained the level they were at two months ago, when Read took the painful but inevitable decision to cut the company’s dividend for the first time ever.

By contrast, Kering (PA:PRTP), which has been a market darling for most of recent history due to its exposure to fast-growing demand in China and the U.S., fell as much as 8% before recovering slightly. Its second-quarter earnings, released after the close on Thursday, showed that sales of Gucci actually fell in the U.S. by 2%, from a 5% rise three months earlier.

It’s the second quarter in a row that Gucci sales have triggered a sell-off in the shares (which are now down 12% from the all-time high that they hit in March).

At least Kering (PA:PRTP) still has the comfort of knowing that the European Central Bank is trying to keep the euro competitive, for all of President Mario Draghi’s protestations that the bank doesn’t target the exchange rate. After initially rising Thursday on disappointment about the lack of policy easing from the ECB, the euro has now reversed against the dollar and is heading lower again.

That was supporting markets across the euro zone Friday, pushing the benchmark Stoxx 600 up 0.2% to 390.28 by 5:25 AM ET (0925 ET). Spain’s IBEX 35 lagged, falling 0.7% on weak earnings from the banking sector and the prospect of yet another election after Socialist leader Pedro Sanchez failed to form a majority in parliament. The U.K. FTSE 100 was the biggest gainer among the major indexes, rising 0.3% - largely thanks to Vodafone.

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