(Bloomberg) -- A blistering rally in luxury goods stocks this year powered by international demand particularly from China has taken a hit, wiping out more than $30 billion from the sector on Tuesday.

Shares in Hermes International slumped as much as 5.5%, while LVMH Moet Hennessy Louis Vuitton SE dropped around 4% and Gucci owner Kering SA saw its stock decline more than 2%. In the past year, the high-flying sector has become to the European stock market what Big Tech is to the US: a collection of dominant businesses whose growth has held up even as the economy waxes and wanes.

Confidence in that view has now been dented, however, with attendees at a luxury conference in Paris organized by Morgan Stanley flagging a “relatively more subdued” performance in the US, according to Edouard Aubin, an analyst at the investment bank. That reflects “weakness in the aspirational consumer in particular.”

That was counterbalanced by more buoyant demand elsewhere, according to Morgan Stanley. “Overall, we found corporate commentary resilient, pointing to an ongoing soft landing in the US largely offset by strength in other markets.”

Both Asia and the US are important markets for European luxury companies. Asia excluding Japan accounted for 30% of LVMH’s sales in 2022, while the US made up 27%, according to the company’s annual report. 

Deutsche Bank AG analysts have also said that a slowdown in the US is now a growing concern. While the rebound in Chinese demand has been among the key drivers of strong sales, investors are likely to be picky from here on, they added.

Still, luxury stocks have been outperforming by a large margin this year: LVMH is up 25% and Hermes has added 34%, both outperforming a 10% rise in the broader Stoxx Europe 600 Index. Neither LVMH nor Hermes were immediately available to comment on the conference in Paris.

“The luxury sector remains a crowded long for many investors, with the sector’s premium to the market at historically high levels,” Deutsche Bank analyst Matt Garland said in a note. The rally has seen LVMH balloon in size, with its market value breaching the $500 billion level last month, becoming the first European company to hit that milestone. 

Those gains have flown in the face of a broader economic slowdown, as investors have bet that Chinese shoppers will be keen to spend after emerging from one of the world’s strictest lockdowns. Last month, LVMH’s shares hit a record after reporting a surge in sales, while Hermes also saw quarterly sales jump as Chinese consumers snapped up its pricey scarves and Kelly handbags. 

However, early warning signs have emerged, with LVMH noting that it is seeing a slowdown in US growth, while British fashion brand Burberry Group Plc said that it is seeing demand for sneakers and entry-level products softening among younger Americans.

--With assistance from Michael Msika and Julien Ponthus.

(Updates shares in second and seventh paragraphs, adds context)

©2023 Bloomberg L.P.