Luxury fashion brands such as Burberry Group PLC (LSE:BRBY) and Kering SA (EPA:KER) strutted higher on news that China is set to increase financial support for key consumption areas, even though analysts warned that concerns are mounting about the sustainability of the sector's growth.
Chinese authorities over the weekend called for coordination between the commerce and financial sectors to step up support for domestic consumption.
Measures were outlined in a document jointly released by the Ministry of Commerce and the People's Bank of China to guide financial institutions in focusing support on key consumption areas and facilitating the expansion of domestic demand. Local governments were also encouraged to use policy tools such as guarantees and loan subsidies to help "critical consumption sectors".
Meanwhile, analysts at Berenberg and UBS said the global luxury sector has shown resilience of late, particularly in the US.
UBS, following an annual US luxury field trip, highlighted ongoing strength at the high end of the market, driven by wealth effects and intergenerational transfers.
The US is expected to be the leading growth driver in 2026, with 7% sales growth at constant currency rates, versus a sector average of 5%.
Jewellery and watches remain standout performers, with continued strong demand for brands such as Cartier and Buccellati.
The trip revealed "an increasing level of concern about the continuation of this multi-year luxury boom for much longer, given the past cycles".
Analysts said that "many fear that a cyclical slow-down is inevitable following the multi-year boom in luxury demand".
However, there is "no slow-down in trends visible at this stage", with supportive factors for the luxury sector's Q4 earnings season, with a broad agreement about the ongoing long-term potential of the US luxury goods market, "which many consider to be still in its infancy given the population size and its level of wealth".
Berenberg provided a cautious view too, saying it believes the next luxury cycle will likely be weaker, with medium-term growth slowing to 3-4%, down from historic levels of 6-7%.
"There remains broad support and limited pushback on our core view that growth in the next cycle will be more modest versus history, driven primarily by weak Chinese growth.
"The weakness of Gen Z consumption was a surprise, and concern, to many."
Hermès is a top pick, Kering is a 'sell', and Richemont and LVMH are both 'hold'.
"We remain long absolute luxury, short aspirational."
UBS maintained 'buy' ratings on LVMH and Richemont, supported by their strong US exposure and positioning in hard luxury.