LONDONPARIS, Oct 9 Reuters Europe39;s luxury brands may have sparkled at Paris Fashion Week, but investors are questioning their taste for the shares in the face of a Chinese slowdown and interest rate uncertainty.

After starting 2023 in vogue, on hopes of a rapid boost in Chinese sales after three years of lockdowns and the postpandemic U.S. spending boom showing few signs of letting up, the STOXX Europe Luxury 10 index has just posted its biggest quarterly slide since 2020.

Some 175 billion has been knocked off the value of those 10 stocks since the end of March as China39;s recovery has been rocky and growth is slowing, while high inflation and rising interest rates are forcing U.S. shoppers to tighten their purse strings.

The sector has derated sharply in the last 23 months, due to a combination of rising interest rates, investor positioning and in anticipation of earnings cuts, said Bernard Ahkong, coCIO at UBS O39;Connor Global MultiStrategy Alpha.

Although luxury39;s Big 10 index is still up 20 year on year, the third quarter saw its worst quarterly performance on record relative to the STOXX 600, which fell 2.5.

Ahkong pointed to rising concern over the outlook for luxury consumption across the U.S., Europe and China, a view echoed by Peter Garnry, head of equity strategy at Saxo Bank.

The recent decline in European luxury stocks reflects the uncertainty over the European economy and also the uneven growth outlook for the Chinese economy, Garnry said….