European luxury firms extend gains after China introduces new stimulus measures

Investing.com -- Shares in European luxury firms gained on Thursday, buoyed by hopes that new stimulus measures in China will help reinvigorate activity in a crucial market for the sector.

Trench coat maker Burberry Group (LON:BRBY ) rallied by 7.4% in early London trading, while Tiffany-parent LVMH Moet Hennessy Louis Vuitton (EPA:LVMH ) and Balenciaga-owner Kering (EPA:PRTP ) in France advanced by 6.5% and 7.5%, respectively.

Fashion house Hermès (EPA:HRMS ), which has recently outperformed its rivals thanks in part to resilient demand in its wealthy client base, also gained 5.3%.

Earlier this week, Beijing unveiled a raft of new policies aimed at providing support to China's sputtering economy and teetering housing sector, including a cut to interest rates and a reduction in existing mortgage costs.

The People's Bank of China also announced a swap program with an initial size of 500 billion yuan designed to give funds, insurers and brokers easier access to funding needed to purchase stocks. The PBOC also said it would provide up to 300 billion yuan in cheap loans to commercial banks in a bid to help them fund share purchases and buybacks by listed companies.

Although some analysts called for further measures to shore up the economy, luxury companies, which have been broadly hit hard by the sluggishness in a Chinese market that they have come to rely on heavily for sales, were bolstered by the news.

Analysts have flagged that weak consumer demand in China, slower spending by travellers, and an uncertain US economic outlook all present key headwinds to the luxury industry in the second half of the year.

In a note to clients last week, analysts at Jefferies said they now estimate "no appreciable improvement" in sales for companies offering high-end goods during the final six months of 2024. Demand was "flattish" in the first half, they added.

(Reuters contributed reporting.)

Source: Investing.com