LONDON (Reuters) - Leading auction houses are confident that financial market turmoil will not derail their largest ever European sales next month, despite early signs that wealthy buyers are losing confidence in the booming sector.
Christie's and Sotheby's hold major auctions in February of Impressionist/Modern and Post-War/Contemporary work, offering early clues as to whether stock market sell-offs, a weak dollar and fears of a U.S. recession will hit demand.
So far the spectacular rise in the value of paintings in recent years, particularly post-war and contemporary art, has defied doomsayers who predicted long ago the bubble would burst.
"It's naive to say that volatility in the stock markets is bad news for the art market," said Simon Shaw, senior director of impressionist and modern art at Sotheby's, recalling that earlier equities falls did not always lead to lower art prices.
"Historically when stock markets are in trouble it is good news for the art market," he told Reuters at a preview of works going under the hammer in London next month, including a Francis Bacon estimated at over 18 million pounds ($36 million).
Others agree. Art collector and investor Jeffrey Gundlach recently noted that record prices for Mark Rothko and Andy Warhol were not down to "some guy on Wall Street that happened to get a good bonus."
But Shaw conceded buyers would be affected by an increasingly cloudy economic outlook.
"In certain cases, people whose revenue stream is weakened by stocks, or whose state of mind is affected, are less inclined to be active," he said.
Jussi Pylkkanen, president of Christie's Europe, also believed some collectors would stay away, but added that the resilience of the oil market was an important factor behind increasingly influential buying from Russia and the Middle East.
"Where there is a difference to other market softenings, the art market has grown phenomenally over the last two years. Collectors from Asia, the Middle East and Russia have emerged over that time," he told Reuters.
Christie's will offer art worth between 203 and 288 million pounds in its London February sales, a record that eclipses the 148-207 million pound range a year ago.
Its highlight is another Bacon, a triptych expected to fetch around 25 million pounds, the highest pre-sale estimate for a work offered in Europe.
Sotheby's is selling art estimated to be worth more than 240 million pounds in London next month. In February, 2007 the combined sales fetched 186 million pounds.
But the signs ahead of a crucial month are not all positive. Two recent indicators of the mood among art buyers suggest a downturn is looming.
A new sentiment indicator by French auction database group Artprice.com showed this week that replies to forward-looking questions were "strongly negative."
This month, ArtTactic said its art market confidence indicator slumped 40 percent between May and November, 2007.
"It is clear that the respondents no longer think that the art market can be detached from the economic realities," it added.
In the highly charged auction rooms, the surprise failure by Sotheby's to sell a Vincent Van Gogh landscape in November helped wipe more than a third off the company's value amid concerns that the art market boom was over.
Officials for the auctioneer blamed its own "aggressive" estimates rather than the market, and in a contemporary/postwar auction a week later Sotheby's recovered with a record $316 million sale.
Art houses say it is not in their interests to inflate prices for the sake of profits, particularly because they often guarantee sellers a minimum price.
"Where there are guarantees involved ... it is important to understand the realities of the market," said Pylkkanen. "There's no room for make-believe."