Investors should sell European stocks that derive the bulk of their sales from China due to sluggish consumption and heightened trade tension, Goldman Sachs Group Inc. strategists said. The team, led by Lilia Peytavin, instead recommend buying companies with high exposure to the US — Novo Nordisk A/S and BP Plc are some of the leading names in that group.
The strategists warned of poor spending appetite in China, the country’s intention to tax luxury goods and the likelihood that Beijing would retaliate against the European Union’s tariff hike on electric vehicle imports . As such, Goldman’s basket is mostly comprised of stocks in luxury, automotive, basic resources and semiconductor sectors. “While a great deal of earnings downgrades have already occurred year-to-date for our luxury basket, we worry that more could take place,” Peytavin wrote in a Wednesday note.
“Also, the valuation premium of the basket has deflated, but remains on the high side of its history.” Some of Europe’s biggest firms count among those that Goldman is shorting. These include luxury firms LVMH and L’Oreal SA, which respectively derives 17% and 21% of their sales from China.
The cosmetics manufacturer warned last month that it was expecting slower growth for the beauty market in 2024 due to weakness in China after years of strong growth. Similarly, Mercedes-Benz Group AG has a 36% sales exposure to China, the highest among car European manufacturers. The US Meanwhile, better fortu.