CDI Christian Dior SE

By Anna Isaac 

Luxury retailers, airlines and casino stocks fell Tuesday after a potentially deadly virus spread between humans in China, spurring concerns that an outbreak may crimp tourism and shopping during the crucial Lunar New Year holiday period.

Christian Dior SE slipped 2.3% in Paris while Kering SA, owner of the Gucci and Yves Saint Laurent brands, dropped 2.1%. International Consolidated Airlines Group SA, the parent of British Airways, retreated 3% in London, part of a broad decline in global airline stocks.

The number of confirmed cases of coronavirus, which is pneumonialike, tripled Monday, reprising memories of the 2002-03 outbreak of severe acute respiratory syndrome, or SARS. That outbreak led to more than 700 people dying and crimped economic growth in the region.

The latest outbreak has spread to neighboring countries, prompting speculation that measures aimed at preventing further proliferation might affect businesses at a critical time in China's leisure and tourism calendar.

Chinese consumers have become more important for the global economy and luxury sector in the last two decades as economic growth has bolstered wealth in the country, analysts said. They accounted for 33% of global spending on luxury goods in 2018, according to a study published by consulting firm Bain & Co. in 2019.

"Wealthier Chinese people often go overseas to shop for luxury brands or to Macau for gambling during the Lunar New Year break," said Jasper Lawler, head of research at London & Capital Group Ltd. "Luxury brands are now very sensitive to Chinese demand."

The SARS outbreak curbed both travel and luxury spending, said Paola Carboni, an analyst at Equita Group. While the authorities have learned some lessons in containment since then, the timing of the coronavirus -- ahead of the Lunar New Year holiday -- has made investors especially nervous.

Shares in Wynn Resorts Ltd., which operates hotels globally including in Macau, dropped 6.1% in New York. Bigger rival Las Vegas Sands shed 5.4%, while stock in the company's Hong Kong-listed division also suffered declines. Casino operator MGM China Holdings dropped over 6.2% in Hong Kong.

Meanwhile, some Chinese drugmakers and face mask manufacturers benefited from investors' expectations that there may be an increased need for medication and containment in response to the outbreak, Mr. Lawler said. Among them: Shandong Lukang Pharmaceutical Co. Ltd. and face mask manufacturer Shanghai Dragon Corp., both of which rose roughly 10%.

Such stocks could see their gains erased rapidly if the virus was quickly contained, Mr. Lawler said.

Over in Europe, LVMH Moët Hennessy Louis Vuitton SE fell 1.1% in Paris and Switzerland's Cie. Financière Richemont SA declined 1.9%. Burberry Group PLC pared back earlier declines and traded down 0.6% in London.

Among airline operators, Air France-KLM SA shed 2.6%, United Airlines Holdings dropped 4.4% and American Airlines Group dropped 4.2%.

"The fear of getting infected might affect the propensity of Chinese buyers to travel and spend," said Ms. Carboni. "You never know how long it will last."

Write to Anna Isaac at anna.isaac@wsj.com

(END) Dow Jones Newswires

January 21, 2020 17:28 ET (22:28 GMT)

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