European Luxury Stocks Rise After Chinese Economic Data Fuels Recovery Hopes

By Andrea Figueras

European luxury stocks traded higher after new data showed the Chinese economy didn't slow as much as expected in the third quarter, prompting hopes of a recovery in a country that for years fueled the industry's growth.

Shares in luxury behemoth LVMH and Gucci owner Kering rose 3.3% and 5.2%, respectively, in European morning trading. Burberry and Salvatore Ferragamo jumped more than 4%, but the biggest riser was Hong Kong-listed Prada, which closed 5.8% higher. Meanwhile, Italian luxury fashion firm Brunello Cucinelli climbed 4%, after it reported third-quarter sales that defied an industry slowdown.

"There is significant investor appetite to move into the sector, as there is a sense that we may have seen a trough in performance," Bernstein analyst Luca Solca said.

Many luxury companies are highly exposed to China, a country that is currently going through a challenging economic juncture, marked by a faltering real-estate sector, high youth unemployment and subdued consumer spending. As a result, consumer sentiment remains weak, leading Chinese shoppers to tighten their belts rather than indulge themselves with luxuries.

Concerns about the Chinese economy have been a key focus for investors in luxury stocks. The Chinese government's stimulus measures sparked some hope for recovery in the country, but investors' enthusiasm waned as key details about the plans remain unclear.

Earlier this week, Louis Vuitton owner LVMH posted lower third-quarter revenue below market estimates and said it saw deteriorating trends among Chinese consumers.

The update from the French luxury giant--considered a bellwether for the sector--renewed concerns about the Chinese market and triggered a stock plunge that spread to most of its peers.

"The LVMH miss had produced a dip that investors are making the most of," Bernstein's Solca said.

Luxury stocks regained some of the ground lost earlier in the week after official data released Friday showed that China's gross domestic product increased 4.6% in the July-to-September period. This was ahead of the 4.5% growth rate expected by economists in a Wall Street Journal survey, even if growth slowed compared with the second quarter and remained below the government's annual target of 5%.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

October 18, 2024 07:04 ET (11:04 GMT)

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