France’s stock market is showing its worst performance since the Eurozone crisis.

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French stocks are poised to deliver their weakest annual performance since the euro zone’s worst crisis, as investors worry about tariffs and political turmoil dampen demand for luxury goods.

Paris’ CAC 40 index has fallen 3 percent this year, compared with a 6 percent gain for the region’s broader Stoxx Europe 600, after a strong start to the year fueled by strong sales for companies such as LVMH faded.

Investors have been hit by political turmoil, sluggish demand from China’s key export market and a weakening domestic economy. The prospect of a trade war has added to the damage after US President-elect Donald Trump threatened tariffs on goods.

“At the same time, a lot of things are happening[that]people want to move away from French names,” said Roland Caloyan, head of European equity strategy at French bank Société Générale. “This fall was amazing.”

Analysts said the political turmoil has put a lot of pressure on the French market, and Francois Bairro became the country’s fourth prime minister this year.

That crisis has fueled debate over how the country should address its growing budget deficit. Investors’ uncertainty over the country’s fiscal situation has pushed their 10-year borrowing costs up more than 3 percent this year, and France’s premium over German debt is at its highest level since the euro zone’s debt crisis.

Earlier this month, Moody’s downgraded France’s credit rating after a vote of confidence in the government of outgoing Prime Minister Michel Barnier, citing a “materially weak” economic outlook.

France’s share price fell in contrast to neighboring Germany’s 18.7 percent fall. Access to the country’s stock market He has defied the gloom that has enveloped the domestic economy this year.

Luxury goods companies, the cornerstone of the CAC 40, are becoming increasingly clear that China’s economic recovery from the pandemic has stalled.

The rise of middle-class Chinese consumers this century has transformed revenue for luxury goods companies, with shoppers flocking to European and Asian capitals to buy designer handbags and other goods.

With bored shoppers stuck at home spending heavily on accessories and premium alcohol, Covid has paid off shopping. Profits at companies such as LVMH and beauty giant L’Oréal grew by double digits.

But Chinese consumers have reined in their spending amid fears of a sharp economic slowdown. Beijing has announced sweeping plans to boost confidence in the economy and markets.

Caroline Reil, head of premium brands at Pictet Asset Management, said: “The big pessimism in China has probably peaked, now that China is waiting for government stimulus to translate into consumer activity.” Exacerbating the situation.”

Still, more than a fifth of CAC’s 40 constituents are consumer goods companies with “heavy” exposure to China, including LVMH and Kering – down 12 and 40 percent respectively this year.

Barclays analyst Emmanuel Kaw said the market is “divided” on whether luxury goods companies will bounce back in 2025 or if earnings will weaken again. Next year, the sector’s growth is forecast to be just 3 percent, at constant exchange rates. “This has been a year of pain,” he added.

It’s a combination that puts the Cac 40 on track to become the only major stock market globally to end the year in negative territory.

French banks and insurers, about 10 percent of the benchmark, are now considered riskier by investors because of their exposure to slower economic growth and higher levels of government debt.

BNP Paribas, Europe’s biggest bank and often traded by investors as a proxy for the French economy, has fallen 8 percent this year.

Fierce competition from Chinese electric-vehicle manufacturers and political turmoil have hit automakers, including Stellantis. Shares in the company behind the Peugeot, Fiat and Jeep brands are down 41 percent in Paris this year.

As Cac 40 struggles, French companies are beginning to explore other capital markets. Pay TV operator Boy+. Listed. In London this month, though, shares are down nearly 30 percent since opening trades.

Total Energy said it was “seriously exploring” a US listing, while fast-growing asset manager Tikehow told the Financial Times last month it was considering moving its listing from Paris to the US.

But France’s struggles reflect the challenges the continent’s politicians now face, including boosting growth and the prospect of a global trade war with higher tariffs after Trump’s election win.

Barclays’ Cow added: “We need some kind of incentive for Europe to protect itself.” It was dependent on China but now the world is globalization and China is growing.

Additional reporting by Ian Smith