Investing.com - European luxury stocks surged Friday, rebounding after sharp losses earlier this week as investors begin to gain confidence that more stimulus will boost the Chinese economy, a major market for these companies.
Data released earlier Friday showed that the second-largest economy in the world grew at the slowest pace since early 2023 in the third quarter, although this was in line with expectations, and forecast-topping retail sales potentially gave some cause for optimism.
Additionally, China's central bank announced funding schemes that will initially pump as much as 800 billion yuan (over $110 billion) into the stock market through newly-created monetary policy tools.
This helped buyers return to the European luxury market, which relies heavily on Chinese buyers for growth.
At 05:20 ET (09:20 GMT), Burberry (LON:BRBY) stock rose 3.7%, Kering (LON:0IIH) (EPA:PRTP) gained 5%, Moncler (BIT:MONC) climbed 4.2% and LVMH Moet Hennessy Louis Vuitton (EPA:LVMH) rose 3%.
Investors should consider buying Chinese consumer stocks, Bank of America (NYSE:BAC) told its clients in a note dated Oct. 18, as the world’s second-biggest economy continues to roll out stimulus measures targeting households.
The US bank noted that unlike in the last two decades, the ongoing stimulus is directly aimed at households. China's consumption represents just 39% of its GDP, far lower than in other emerging markets, with Mexico at 70%, Brazil at 63%, and India at 60%.
The European luxury sector had faltered earlier in the week as France's LVMH reported weak third-quarter sales, prompting the stock's biggest one-day drop in over one month.
LVMH, whose brands include Moet & Chandon champagne, Louis Vuitton fashions, and Tiffany jewellery, posted its first decline in quarterly sales since the pandemic as demand in China, primarily, weakened.