LVMH led luxury stocks higher in Europe on Thursday as China lifted a ban on group tours, boosting the case for travelers spending money on high-end watches and fashion.

The maker of Louis Vuitton bags rose as much as 2.6 percent in Paris, Hermès International gained 2.4 percent and L’Oréal SA advanced 1.8 percent, adding about €20 billion ($22 billion) in combined market value. Rolex retailer Watches of Switzerland Group Plc climbed as much as 5.9 percent after maintaining earnings guidance in a trading update.

China ended a group travel ban to countries including the US, UK, Australia, South Korea and Japan. Buyers from the country account for about 25 percent of European luxury-goods sales, including purchases made by tourists, according to estimates from Goldman Sachs Group Inc.

Group tours to Switzerland, Italy, Spain, France, Greece, Denmark, Iceland and Portugal had already been approved earlier this year.

“The ban on group travel opens ‘phase two’ of Chinese luxury spend” in Europe, Sanford C. Bernstein analyst Luca Solca said in an email. “We expect group travel to resume in 2H23E and support Chinese spend on luxury goods globally. The adverse price elasticity effects suffered by the industry in 2020,” when spending from Chinese tourists had dried up, “will unwind,” Solca said.

After a solid start to the year, luxury stocks have drifted lower in recent months in response to weak Chinese consumer and economic data. Bullish investors are pinning their hopes on a revival in anticipation that Beijing will soon implement more decisive stimulus measures to kick-start a flagging economy.

The relaxation, a significant boost to the global tourism market, also sent Europe’s travel and leisure subindex 1% higher, with Air-France KLM rising as much as 2.8 percent and TUI AG gaining 2.4 percent.

Sentiment on Thursday was also supported by signs of deal activity in the sector picking up. Capri Holdings Ltd soared in US premarket trading after the Wall Street Journal reported that the owner of the Michael Kors and Versace fashion brands was nearing a deal to be acquired by Tapestry Inc.

By Lisa Pham and Sagarika Jaisinghani

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