European luxury stocks rallied sharply this week as a wave of Chinese stimulus measures spurred hopes of more spending. Shares of Hermes, Cartier-parent Richemont, and LVMH soared more than 15% over the five-day period. In a rare press conference on Tuesday, three top Chinese officials announced a , including interest-rate cuts, liquidity support and lower bank-reserve requirements.
The move sent stocks surging across the board, and proved especially promising for the luxury sector, which has amid weak demand in China. China's consumers have been in recent months, even as their disposable incomes have grown. Retail sales grew just 2.
1% last month from a year before, coming in below economists' forecasts of 2.5%. European luxury brands cited that slowing demand in their most recent quarterly earnings reports.
Burberry said its sales in mainland China declined 21% from the year before, while Hugo Boss said the Chinese market has proved "particularly challenging." On Monday, the day before the stimulus measures were announced, Bank of America analysts cut their price objectives on luxury stocks by an average of around 20%. They also downgraded four luxury stocks to neutral, and another from neutral to underperform — leaving just three luxury stocks at buy ratings.
"Lower for longer revenue growth can be attributed to synchronised consumption weakness across US, EU and China (ie c.70% of revenues). There are green shoots in the US, whilst China weakness has just begun," the ana.
