European Luxury Firms See Gains After China Unveils New Stimulus Measures

Shares in European luxury firms saw an increase on Thursday, supported by optimism that new stimulus measures in China will help rejuvenate activity in a vital market for the sector.

Burberry Group experienced a rise of 7.4% in early London trading, while LVMH Moet Hennessy Louis Vuitton and Kering in France climbed by 6.5% and 7.5%, respectively. The fashion house Hermès, which has recently outperformed competitors due to strong demand from its affluent clientele, also gained 5.3%.

Earlier this week, Beijing announced various new policies aimed at supporting China’s struggling economy and uncertain housing sector, including interest rate cuts and reductions in existing mortgage costs.

The People’s Bank of China introduced a swap program initially valued at 500 billion yuan to facilitate easier funding access for funds, insurers, and brokers involved in stock purchases. Additionally, the PBOC stated it would provide up to 300 billion yuan in affordable loans to commercial banks to assist with funding share purchases and buybacks by publicly listed companies.

While some analysts are calling for more measures to bolster the economy, luxury firms—heavily affected by the sluggish Chinese market—found encouragement in the recent news.

Analysts have pointed out that weak consumer demand in China, reduced spending by travelers, and an uncertain economic outlook in the U.S. represent significant challenges for the luxury sector in the latter half of the year.

In a correspondence to clients last week, Jefferies analysts indicated that they now expect “no noticeable improvement” in sales for companies offering high-end goods during the last six months of 2024, highlighting that demand was “flattish” in the first half.