Luxury Stocks Soar as US-China Trade Thaw Brings Relief to Markets
A significant thaw in trade relations between the US and China has sent luxury stocks surging on European markets, with many companies experiencing double-digit gains. According to analysts, this development is expected to benefit the fashion and luxury sectors, which have been struggling with a decline in Chinese buyers since the pandemic.
The news of a 90-day suspension of part of the customs tariffs between the two countries has brought relief to Chinese consumers, who will now be able to make purchases more peacefully. As reported by First Online, the luxury and fashion sector has been suffering from a decline in Chinese buyers since the pandemic, and the trade war between the US and China had further slowed down purchases, triggering strong concerns about domestic demand.
The Chinese government had tried on several occasions to provide support to private consumers, but yesterday’s outcome of the Geneva negotiations gave consumers a much-needed boost. Stocks in the sector immediately reacted with a rise that continued today. As First Online reports, the biggest increase is seen on the French luxury stocks, with Kering, the parent company of Gucci, exceeding +10% yesterday and adding another +3% this morning to 192.88 euros.
LVMH, which controls Louis Vuitton and Dior, gained over +7% yesterday and added another +1.5% this morning, while Hermès gained another 1% this morning, adding to yesterday’s +4.5%. At Piazza Affari, Salvatore Ferragamo is leading the way, with a +7% gain yesterday and another +1% this morning, followed by Moncler (yesterday +5% and this morning +0.90%) and Brunello Cucinelli (yesterday +4%, this morning +2%).
In London, Burberry’s share price gains over 3% this morning after yesterday’s +5.6%, while in Zurich, the stock Richemont adds a +1.5% this morning to yesterday’s gain of 6.8%. According to an analyst quoted by First Online, "The thaw in trade between the US and China has created greater relaxation in the markets, increasing the risk appetite in general. The luxury sector benefits indirectly in the wake of a greater propensity to consume."
To revive low consumer confidence and deflationary pressures in the world’s second-largest economy, the Chinese government had announced a plan to boost domestic demand, including increasing purchasing power and reducing financial charges. The escalation of the trade war that began in February had frozen any propensity to spend, but now things could change, according to analysts. As First Online notes, this development is expected to have a positive impact on the luxury sector, with many companies poised to benefit from the renewed consumer confidence.
The US-China trade thaw is a significant development that is expected to have far-reaching implications for the global economy. As the luxury sector continues to recover from the pandemic, this news is likely to provide a welcome boost to companies that have been struggling with declining sales. With many luxury stocks experiencing significant gains, it remains to be seen how this trend will continue in the coming days and weeks.
This article is based on reporting by First Online.
