The big bet on luxury stocks stumbles on inflation

Along with worries about Europe’s misfiring economy, where activity is fading while price pressures persist, and a seemingly endless stream of bad news out of China, the latest US earnings season has served up evidence of weakening consumer patterns.

LVMH CEO Bernard Arnault’s status as the world’s wealthiest person has been a high-profile casualty of the 15% slump in an MSCI index of luxury stocks since mid-July. Picture: Cindy Ord/Getty Images for Tiffany & Co.

Problems are stacking up for Europe’s hottest sector.

A warning from the chairman of Cartier-owner Richemont that stubborn inflation was starting to affect demand in Europe prompted a swoon in luxury stocks last week. That downbeat message added to a string of worrying economic signals from China and signs of softer trends in the US.