The European luxury goods sector fell back on the stock market on Monday, after BofA Global cut its outlook for the sector and lowered its recommendation on Kering, LVMH and Hugo Boss, citing weaker growth in the Chinese market.

BofA Global's analysts expect moderate growth in luxury goods sales through to 2025, pointing out that demand in China, once the sector's main driver, has recently deteriorated.

"We expect Chinese luxury spending to decline by 1% in H2 24 and remain flat in 2025, but the risk is still tilted to the downside given the gradual deterioration of late," the analysts said in a note.

BofA has lowered its recommendation to "neutral" from "buy" for Kering and LVMH, and to "underperform" from "buy" for Hugo Boss.

At 10:50 GMT, Hugo Boss was down 4.28% at 36.19 euros, Kering 2.40% at 219.80 euros and LVMH 0.71% at 587.70 euros, while the Stoxx 600 was up 0.25% at the same time.

In their wake, other luxury goods stocks, including Richemont, Hermes and Burberry, lost between 0.57% and 2.38%.

The luxury goods consumer has nothing left to buy, BofA Global points out in a note, adding that with the slowdown in China, US consumers will account for over 50% of the sector's growth by 2025.

"The rest (...) will probably come from international tourists and the Middle East", say the analysts, who forecast 5% growth in Japan in 2025.

"The slowdown in long-term revenue growth can be attributed to weak consumption in the United States, the European Union and China (accounting for 70% of revenues)", say the analysts, also warning that weak demand in China is only just beginning.

(Written by Mara Vîlcu, edited by Augustin Turpin)