What’s going on here? Kering’s stock hit its lowest level since 2017 on Monday, after China’s shoppers gave Gucci’s owner the silent treatment. What does this mean? Gucci was the crown jewel in Kering’s portfolio for years, attracting most of the luxury group’s sales and profit. But despite a new creative director at the helm, Gucci can’t seem to hit its stride like it used to. A lot of the blame can be pinned on China: shoppers in the world’s second-biggest economy are keeping their hands firmly in their pockets. Without being able to count on those luxury-loving spenders, big-name brands like Burberry and Kering are feeling the pinch. So analysts attached a big “sell” signal to Kering’s stock on Monday. Investors took note and duly sent it plummeting: now down 43% this year, the stock’s on track for its worst annual performance since the global financial crisis. Why should I care? For markets: Tech’s a step ahead. Once dubbed Europe’s equivalent to America’s “Magnificent Seven” tech giants, luxury stocks are losing their sparkle: Burberry, Hugo Boss, and LVMH are down 57%, 47%, and 17% respectively this year. Only the most aspirational brands – think Hermès – are keeping their losses in check. So unless more shoppers get, er, shopping again, Europe’s iconic fashion houses could be forced to cut production and trim workforces – not exactly what the economy needs. The bigger picture: Japan’s handed the deflation baton to China. China’s staring down the barrel right now. A broad measure of prices in the country has now fallen for five straight quarters – and that trend is set to stick into next year, which would mark the longest streak since 1993. It’s a dangerous spiral: households tend to see their paychecks shrink during periods of deflation, prompting folk to hold off on spending and wait for even lower prices. And as sales slow down, the country could see lower corporate revenue, stalled investments, job cuts, and bankruptcies. | 