TheChek News Flow

AI boom drives global stock markets to best first quarter in five years

MSCI index of world stocks rises 7.7% as optimism about US economy offsets expectations of slower interest rate cuts

Global stock markets have recorded their best first-quarter performance in five years, buoyed by hopes of a soft economic landing in the US and enthusiasm about artificial intelligence.

An MSCI index of worldwide stocks has gained 7.7 per cent this year, the most since 2019, with stocks outperforming bonds by the biggest margin in any quarter since 2020, even as traders scale back their expectations for rapid interest rate cuts.

The charge has been helped by the S&P 500, which has closed at a record high on 22 separate occasions during the quarter.

The AI boom has fuelled the market’s gains, with chip designer Nvidia adding more than $1tn in market value during the first three months of the year, equivalent to about one-fifth of the total gain for global stock markets over that period.

In the US, signs of resilient domestic growth have boosted stocks despite unexpected increases in inflation in January and February, which led investors to dial back expectations of as many as six interest rate cuts this year.

The markets now agree with the US Federal Reserve’s projection of three 0.25 percentage point cuts from the benchmark rate’s current 23-year high.

“This has been a pretty optimistic period in time,” said Kristina Hooper, chief global market strategist at Invesco.

“We’ve also had some artificial intelligence excitement that has helped along the way, but this is a story about first and foremost monetary policy easing, and [second] a very resilient global economy.”

What began as a tech-driven rally on Wall Street gradually broadened out across the quarter, with equities in Europe and Japan beginning to outpace the US.

The UK’s FTSE 100, Germany’s Dax, France’s CAC 40, and Spain’s Ibex 35 all outperformed the S&P 500 in March, as the breakneck pace of Wall Street’s rally began to ease while global indices — and sectors beyond technology — caught up with earlier AI-driven gains in the US.

“The equity market is getting very enthusiastic and embracing an all-out rally,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers.

Leading the pack among major markets is Japan, where growing confidence in the economy and rising prices for domestic chip-related stocks have driven a 16.2 per cent rally in the Topix in 2024, putting the index within touching distance of the all-time high it hit in 1989.

“All in all, we have achieved good disinflation without recession fears,” said Amelie Derambure, a portfolio manager at asset manager Amundi, which has increased its equity holdings, particularly in Japan and Europe but also in the US, since the beginning of the year. “Weakness in the economy will probably not happen rapidly, so we still have some time to ride the current wave.”

The stock index gains have come even as government bond yields have risen, reflecting falling prices.

About two-thirds of those polled for Bank of America’s latest global fund manager survey do not expect a US recession over the next 12 months — up from just over 10 per cent at the start of 2023. For the first time in more than two years, the bulk of investors also expect global corporate profits to grow over the medium-term.

Surging asset prices also reflect investors’ growing appetite for risk. In a single day in January, Nvidia’s market capitalisation rose by about $277bn — roughly equivalent to the market value of every listed company in the Philippines, according to HSBC. A 60 per cent rally over the past three months, meanwhile, has pushed the total value of existing bitcoin above the gross domestic product of about 150 countries.

Similarly substantive gains for other risky assets have prompted some market watchers to compare the current rally with the dotcom bubble that burst dramatically in 2000.

But BofA strategist Stephen Suttmeier suggested that given the duration of previous stock market rallies beginning in 1950 and 1980 that lasted 16 years and 20 years, respectively, the current bull market, which began in 2013 “is middle-aged and can extend until 2029 to 2033”.

A sudden increase in US unemployment or a recession could yet blow the rally off course.

Kevin Gordon, senior investment strategist at Charles Schwab, said: “The Fed could find itself in a pickle if it starts lowering rates off the back of labour market weakness but higher inflation in January and February turn out not to be a blip.”

Why hedge fund Elliott is locked in a bitter legal fight over AC Milan

US firm is battling former Italian partners, prosecutors and police over €1.2bn sale of football club in 2022

AC Milan’s record-breaking sale by Elliott Management in 2022 was proof the football club had completed a remarkable turnaround under the US hedge fund’s stewardship.

The Italian team was sold to private equity group RedBird Capital Partners for €1.2bn, the highest price paid for a club outside the English Premier League. It was once again winning Serie A titles and competing in the lucrative European Champions League. Last year, it made its first profits in more than two decades.

But police raids earlier this month have dragged AC Milan back into a messy battle of wills pitting Elliott, the notoriously combative $65bn fund manager, against Blue Skye, a investment firm run by two longtime former partners of the hedge fund and which owned a small stake in the club before the sale.

“Corporate chaos rocks the upper echelons of AC Milan,” ran the headlines in the local press the day after the raids.

The two Italian financiers behind Blue Skye have claimed the hedge fund violated their minority shareholder rights by signing the RedBird deal, and have raised questions over whether Elliott still controls the club.

Elliott is a creditor to AC Milan but has rejected suggestions of operational involvement. It sees the fight as a brazen attempt by a disgruntled shareholder to get a bigger payout from the sale. Blue Skye has pursued the asset manager through courts in Italy and Luxembourg, although some of its claims have been dismissed.

For Elliott, which waged and won a 15-year campaign against the Argentine state over unpaid debts, the row is not just about money — the sums in dispute are in the tens of millions of euros, according to people familiar with the matter.

At stake is also the reputation of the US hedge fund founded by Paul Singer, whose son Gordon has spearheaded the AC Milan investment. It would not be pushed around “by two unknown guys”, said one person close to the firm, referring to Blue Skye’s founders Salvatore Cerchione and Gianluca D’Avanzo.

Another said that Elliott, which is also a lender to French football club Lille, cannot afford to be held hostage by former partners as it could complicate its relationships with others who source investments for them.

The dispute took a dramatic turn on March 12 when Italian police searched the AC Milan’s offices. During the raids, which also took place at the home of the club’s chief executive Giorgio Furlani, Italy’s financial police looked for documents to substantiate claims that somehow RedBird did not truly buy the club. “The suspicion is that Elliott currently maintains effective control of the company”, the search warrant said.

The suspected crime is “obstruction to the exercise of the functions of supervisory authorities”, in this case, Italy’s football federation, according to the public prosecutor.

AC Milan could also be docked points in the next season if the federation’s rules were breached, according to Enrico Lubrano, sports law professor at Luiss University in Rome. The federation said it had yet to receive any information beyond the search warrant, “from which you can’t understand much”.

Following the raids, Elliott said: “AC Milan was sold to RedBird on August 31 2022. As of that date, the Elliott funds have had no equity interest in, or control over, AC Milan.”

The probe, expected to last at least a year, risks frustrating RedBird’s efforts to consolidate AC Milan’s recovery. It comes as the New York firm founded by former Goldman Sachs banker Gerry Cardinale faces pushback over plans to move the club to a new stadium south of Milan. Local authorities hope to convince AC Milan to redevelop the ageing San Siro Stadium it shares with rival Inter Milan.

RedBird said any suggestion it did not own the club was “just false and contradicts all the evidence and facts”, describing it as a “distraction” from its goal of returning AC Milan to “the top of Serie A and European football”.

At the heart of the dispute is a €550mn vendor financing that Elliott provided to help RedBird meet the €1.2bn acquisition price. Carrying an 8 per cent interest rate and due to be repaid in August 2025, it is a large and uncommon arrangement in European sporting deals.

Much of the current leadership team at AC Milan have also ties to the club that predate the 2022 transaction: Furlani and Stefano Cocirio, chief financial officer, worked at Elliott where they oversaw the AC Milan investment. Paolo Scaroni, the influential former chief executive of oil major Eni, has stayed on as club chair. Gordon Singer has kept his seat on the board.

AC Milan, Blue Skye and Furlani declined to comment for this story.

Blue Skye became a shareholder in AC Milan after brokering a financing deal between Elliott and Li Yonghong, the previously unknown Chinese investor who bought the club in 2017 from former prime minister Silvio Berlusconi.

It was the second time Elliott concluded a deal brought by Blue Skye, which had been instrumental in their joint acquisition of Hotel Bauer in Venice. Blue Skye’s Cerchione and D’Avanzo had been in the spotlight previously for helping revive Harry’s Bar in the Adriatic city.

To finance the AC Milan acquisition, Li borrowed €300mn from Elliott. Blue Skye secured a stake of just over 4 per cent, a management fee and a share of the potential profits from a future sale.

Elliott took control of the club a year later when Li defaulted on the loan, embarking on a turnaround that culminated in AC Milan’s first Serie A title in more than a decade. RedBird bought the club a few weeks later.

People close to Elliott — which has described the suits as “frivolous and vexatious” and struck back against Blue Skye with its own last year — point out that some of the claims contradict the prosecutor’s lines of inquiry: If RedBird did not in effect buy AC Milan, Blue Skye should not be entitled to receive any proceeds. With the matter still in dispute, Blue Skye has not yet taken any payment from the deal.

Italian prosecutors find suspicious that AC Milan’s parent holding company is “based at the same address” as Elliott’s previous controlling company. But Elliott insiders note that the address in question — 1209 North Orange Street in the US state of Delaware — is home to the Corporation Trust Center, where more than 250,000 companies are registered.

The Milan probe also threatens to spiral out of Italy: the search warrant includes claims that Elliott “appears to have a dominating influence” over French club Lille. Prosecutors say this would be in breach of rules set by Europe’s football oversight body Uefa. Elliott is also a lender to Merlyn Partners, which controls the French team. AC Milan and Lille competed in the Champions League in the 2021/22 season.

Uefa bars one entity from exerting “control or influence” at two clubs competing in the same European tournament. A breach would prevent the lower-ranked club from joining the competition.

But Uefa does not address the case of creditors and has been lenient on creative shareholder arrangements. Owning more than one club is increasingly common in European football and has faced little regulatory pushback. According to a Uefa report, 28 Italian clubs are part of a broader ownership structure. RedBird for instance also owns French club Toulouse and holds an indirect stake in Liverpool FC.

Jonathan Brown, consultant at Ankura, said the European rules needed to adapt to keep up, as investors and owners resort to “previously unforeseen financial structures”.

UK offers hope of a softer landing for real estate sector than in the US or Europe

The UK property sector has a proud tradition of being the gloomiest corner of the European market in every crash. Not this time.

Global real estate, squeezed by rising interest rates, is in the midst of the worst slump since the financial crisis. Office occupancy and valuations have plummeted, especially in the US. Europe is faring better, helped in part by more accommodating lenders. But it is the UK that offers hope of a softer landing — testament to hard-learned lessons of the past.

Property groups used the free money era for debt-funded growth that has quickly become unsustainable at higher rates. It is no coincidence that the worst of the turmoil comes where the greatest excesses were seen in recent years. In Germany, say, where residential landlord Vonovia paid €18bn for rival Deutsche Wohnen. Or in Sweden, where SBB pursued an aggressive roll-up of health and education property. Both are selling assets fast to fix overstretched balance sheets.  

The UK’s biggest landlords, British Land and Land Securities, were in a similar position after the financial crisis. A more conservative approach to leverage since is helping to contain the damage in this downturn. Loan-to-value ratios for the two today hover in the mid-30s compared with almost 60 per cent in March 2009.

Continental office owners such as Fabege and Colonial both have LTVs closer to 40 per cent. Aroundtown, which invests in German offices, has an LTV close to 60 per cent. 

Even the UK industrial and logistics sector, one of the frothiest areas of recent years, has also managed to keep leverage levels contained. Consolidation is under way. But deals such as LondonMetric’s offer for LXi Reit or Tritax Big Box move on UKCM are using shares (rather than cash) to preserve balance sheets. Post combination, loan-to-value ratios will be about 30 per cent for both. 

Rental growth in European residential and industrial sectors has remained pretty strong. But falling office values have generally been exacerbated by a rental slump as tenants shun older, lower quality office buildings.

The UK market tends to be quicker to write down valuations, meaning a quicker adjustment to the new normal. British Land and Landsec cut portfolio valuations by 25 per cent and 15 per cent respectively in 2023, compared with 10 per cent for Aroundtown and Fabege.

The UK’s boom and bust sector went into this downturn hampered by the drag of Brexit. But it looks set to come out of it in relatively rude health.

As bidders circle undervalued London-listed companies, are there really bargains for private investors?

Imagine, for a moment, that the chancellor’s plans to create the UK Isa have been fast tracked. With little over a week until the end of the tax year, you’ve been granted an additional £5,000 allowance to invest in UK stocks. Would you seize the opportunity and, if so, where might you be tempted to deploy your cash?

The malaise in the UK equities market must be serious when the government is considering the carrot of tax incentives for retail investors, as well as the stick of forcing institutional investors to “buy British”.

Yet as US stock market valuations break record after record, many argue that British companies are looking more bargain basement by the day.

Not so, says Robert Armstrong, author of the FT’s Unhedged newsletter. In an article this week he argues that UK stocks are cheap for a reason.

However, he also laid down a challenge to FT readers. If the UK stock indices are so staggeringly cheap, where are the staggeringly cheap UK companies? Are there really bargains to be had for the shrewd and patient stock picker and, if so, where should they be looking — and what could prove the catalyst for any re-rating?

With UK stocks trading at about half the forward earnings ratios of US companies, “potential takeover target” was a frequently cited theme in FT Money’s annual stock picking competition. Just under half of readers who entered this year were long on at least one UK-listed stock (see below) believing low valuations will continue to attract predators.

Certainly, the number of live takeover deals at substantial share price premiums would suggest the UK market rout is overdone — at an individual stock level at least.

So far in 2024, the nine takeover deals that have been struck or are in progress were at an average 49 per cent premium to the pre-bid price, calculates Russ Mould, investment director at AJ Bell, a brokerage platform.

“The target companies are from different sectors, are as much domestic as international, have different types of suitors, and some deals are for stock, not cash. But the one thing they all have in common is a downtrodden share price and a very big premium,” he says.

UK paper and packaging group DS Smith entered a bidding war this week, with an approach from International Paper valuing its shares at a 48 per cent premium to the level it was trading at in February before rival Mondi made an approach.

While bids for Direct Line and Currys have fallen away, interest in UK companies from international investors, private equity and trade buyers is expected to continue, offering a short-term fillip for investors holding targeted stocks.

Aside from predatory buyers, the other group who believe UK shares are dramatically undervalued are company boards. Investors point to the huge volumes of share buybacks that companies are undertaking, using their excess cash to buy up and cancel their own shares, which should help to shore up UK equity valuations. Some of the biggest have come from the banks, such as Barclays’ £10bn capital return plan, but this week’s £1bn announcement from Scottish Mortgage shows investment trusts also hope to close the valuation gap.

In the medium term, other supportive factors include falling inflation, the expected turn in the interest rate cycle and the hope that the UK’s economic performance will improve. Fund managers are not fazed by the prospect of a change of government; some even believe Labour’s pro-growth agenda could boost the housing and infrastructure sectors.

Data from the Investment Association shows that UK equities have suffered £14bn worth of outflows since 2016, yet fund managers believe these factors, combined with share buybacks and M&A activity, mean the turning point is getting closer.

“Any change in sentiment towards the UK could have quite a dramatic effect, and share prices could move very quickly,” predicts Simon Gergel, chief investment officer of UK equities at Allianz, and lead manager of the UK-focused Merchants Trust.

Although the UK market is geared towards lower-growth sectors, plenty of FT readers who responded to the Unhedged newsletter believe companies in the FTSE 250 index offer better long-term growth prospects than the FTSE 100 — though they require a bit more searching out.

“The more you go into the mid-cap and smaller-sized companies — the more idiosyncratic areas of the UK market — the more value emerges,” says Gergel. “It’s a great market for stock pickers.”

Georgina Brittain, manager of the JPMorgan UK Small Cap Growth & Income trust, notes that in the past, mid-caps have traded at a premium to the FTSE 100 as they are considered more nimble and faster growing. “That premium now is minimal,” she notes, adding that historically, interest rate cuts have proved more positive for the FTSE 250.

She says that valuations on some of the 80 holdings in her fund are getting “close to distress levels — and believe me, that is not what we own”.

Although plenty of internationally facing companies are listed on the FTSE, some believe a London listing is weighing unfairly on share prices.

“People definitely mistake the UK market for the UK economy,” says Alex Wright, manager of the £3bn Fidelity Special Situations fund.

Financials account for 27 per cent of his fund’s weighting (“it’s the best value part of the UK index”) but he stresses that businesses listed in the UK have varying degrees of exposure to the domestic economy. While he holds Barclays and NatWest, he also holds Standard Chartered. The latter trades on a price/earnings (p/e) ratio of 5.8 times, which he argues compares very favourably to US banks such as Citibank, which trade at more than 10 times.

The fund also holds Cairn Homes, the Irish housebuilder with a London listing, which trades on a p/e of 8.7 times, compared with US housebuilders such as Lennar, trading at nearly 11 times. “We believe growth at Cairn will be better as the Irish market is so undersupplied,” he adds. He has recently built a stake in Crest Nicholson, the cheapest UK housebuilder when valued on a price to book basis, predicting that volumes will come back faster than the market expects.

Housing is also a core theme for the Merchants Trust, which owns housebuilders Bellway and Redrow as well as Marshalls, the paving and tiling specialist, and Tyman, the UK-listed international supplier of door and window components. “Tyman has a huge market share in the US, but because it is listed in the UK it trades at a significant discount,” Gergel says.

The trust also has high exposure to the UK’s unloved reinsurance market, via holdings in Lancashire Group and Conduit Reinsurance, which Gergel argues trade on a modest rating compared with their European peers, even though they have been able to push up pricing aggressively as climate change fears increase.

It’s true that the growth prospects in these sectors don’t have the slick appeal of tech. But as Wright points out: “The bigger question for investors is whether the increasing degree of tech outperformance is going to continue.”

Dividends are a major attraction of UK shares. As one FT reader comments: “The key is to find the companies that are trading cheaply and handing back their excess capital to shareholders. In some cases you’re going to get nearly the whole investment back in the relatively near future and still own the business.”

This desire is well evidenced in lists of the most popular shares traded on UK investment platforms. “It’s almost a roll call of the old economy,” says Jason Hollands, managing director of wealth manager Evelyn Partners, noting the popularity of banks, financials and oil majors — in stark contrast with the most popular funds, which tend to be passives focused on tech and US markets.

FT columnist Lord Lee, who wrote the playbook on holding a portfolio of dividend payers with takeover potential, has been on the receiving end of more than 60 bids in his investing lifetime. However, he would be loath to lose some of his current crop such as Aviva, M&G and Taylor Wimpey, as they are “such marvellous tax-free income generators within my Isa”.

The ability to generate tax-free income from an Isa portfolio is a huge added attraction for British retirees. However, dividend-paying stocks can also have a growth story attached. One FT reader points out that British American Tobacco looks cheap on a like-for-like basis, compared with Altria in the US, and offers a dividend touching 10 per cent.

Other UK opportunities don’t have a direct US comparator. Fidelity’s Special Situations fund has targeted UK life insurers, seeing growth potential in the bulk annuities market as companies buy out defined benefit pension schemes. Fund manager Wright says Just Retirement has the strongest growth potential but the weakest dividend, whereas Phoenix Life and Aviva yield 11 and 7 per cent respectively.

While the FTSE 100 index has a slightly better yield advantage, Tom Stevenson, investment director at Fidelity, says the FTSE 250 has performed much better over time.

He calculates that when the Isa was first launched in 1999, an investor who placed £100 in the FTSE 100 and reinvested their dividends for 25 years would now be sitting on £288. However, someone who did the same with the FTSE 250 would now have just over £700.

“Smaller companies have more capacity to grow, but this is a reminder of how in the UK market in particular, reinvesting that dividend yield is a major contributor to total returns,” he says, adding that this is important for investors of all ages to grasp.

Possibly the most unloved part of the unloved UK market? Smaller companies. As someone who has spent 25 years searching out good value companies, Brittain’s past successes include buying Arm when it was a small-cap stock (the UK chipmaker abandoned the London market last year to relist on Nasdaq).

She advises armchair stock pickers running the rule over UK companies to pay particular attention to three things, starting with levels of free cash flow.

“This metric demonstrates the health of the company. It could use that cash to make an acquisition, buy back its own shares or pay out as a dividend — but crucially, it has that choice,” she says.

To gauge quality, scour company reports to find the company’s return on equity (sometimes called return on invested capital). “The higher the number, the better, although what is considered to be a good number will depend on the industry sector,” she says.

Finally, investors’ antennas should be twitching for indicators of momentum — the chances of a company beating market expectations. “When we meet management teams, we always ask them ‘What is going better than you thought?’ and then it’s our job to work out whether that’s going to be a lever in the long term or the short term,” she adds.

Concluding that UK small-caps are “a fascinating pool to go fishing in”, she cautions that private investors need the time for in-depth research, adding that current levels of liquidity are a serious problem.

Nevertheless, Rosie Carr, editor of Investors’ Chronicle, argues this is the perfect time for buy and hold investors to look at the UK market.

“The best time to buy shares is when they are unloved,” she says, noting that while the broader index may continue to lag behind the Nasdaq, individual shares can still deliver record returns. “Shares in Rolls-Royce delivered a return on a par with those from AI darling Nvidia in 2023, for example. Plus, it’s so important for every portfolio to have diversification across geographies and sectors.”

There are plenty of opportunities outside the US. “London is stuffed full of quality companies offering a real mix to investors, from solidly performing household names such as AstraZeneca, well-run businesses such as Relx, smaller innovators such as hVivo and downtrodden sectors such as consumer discretionary, where popular stocks like Games Workshop are now on reasonable valuations.”

Retail investors can afford to take a longer-term view on the UK’s prospects, and unlike professional managers, don’t have to worry about short-term performance figures.

What’s more, those tempted to start hunting for keenly priced UK shares don’t have to wait another year for the launch of the UK Isa — they can set aside some of their £20,000 allowance to seize the choicest opportunities.

The designer pledged to pay tribute to the identity and history of the couture house and the "references that have always been an indisputable source of inspiration," while "rereading them through my creative vision.”

MILAN — One would expect nothing but poetry from Alessandro Michele on his new role as creative director at Valentino.

Addressing his new appointment, the designer celebrated “the beginning of spring, the life that is regenerating and the promise on new blossoms” as he expressed his “joy, to pay tribute to it: the smiles kicking in the chest, the sense of deep gratitude that lights up the eyes, that precious moment when need and beauty reach out to one another. Joy is such a living thing that I’m afraid to hurt it, by saying the word.”

Not your usual statement from a designer taking on his post as creative director of a brand, but entirely in line with Michele’s renowned inner musings and meditative disposition.

On Thursday, Valentino confirmed Michele would succeed Pierpaolo Piccioli, starting at the Rome-based couture house on Tuesday and unveiling his first collection for spring 2025 in Paris.

This comes almost a week after WWD was the first to report last Friday that Piccioli was exiting Valentino after 25 years based on information from market sources, who also believed that Michele was negotiating a contract to join Valentino. Piccioli’s last fall 2024 all-black collection shown during Paris Fashion Week earlier this month was his swansong for the brand. On Monday, Valentino said it was sitting out menswear and couture weeks in June, generally shown in Paris.

On his Instagram handle, Michele on Thursday wrote that he felt “enormous responsibility” in taking on the role at a couture house “that has engraved the word ‘beauty’ in a collective story made of research and extreme grace. My first thought goes to this story: to the richness of its cultural and symbolic heritage, to the sense of wonder that it has been able to constantly generate, to the very precious identity that its founding fathers, Valentino Garavani and Giancarlo Giammetti, gave it with unbridled love. These are references that have always been an indisputable source of inspiration for me and to which I intend to pay tribute by re-reading them through my creative vision.”

Michele thanked Rachid Mohamed Rachid, chairman of Valentino and chief executive officer of parent Mayhoola, for this “lifetime opportunity,” and expressed “immense and boundless thanks to Jacopo Venturini,” CEO of Valentino.

“Going back to work with him is a wonderful dream come true for me. Jacopo is not only an extraordinary professional, able to combine pragmatism with strategic ability, skills and sensitivity. He is above all a man capable of celebrating the daily falling in love with life, with his passions and his ability to care.”

The designer and Venturini, who was named CEO of Valentino in 2020, worked together when the latter was executive vice president, merchandising and global markets at Gucci.

Michele will be based in Rome, where Valentino was founded in 1960. Sources say that remaining in the Italian capital was a firm prerequisite for the designer’s decision to accept the job.

“For the last 12 years, as a team, we dedicated our time and resources to develop the Maison Valentino brand and business to become a world class couture house built on the unique heritage and creativity of Mr. Valentino Garavani, representing the best world of elegance and beauty,” Rachid said in a statement. “We have been able to grow it in reputation and size over five folds, while gaining the loyalty and appreciation of our clients.”

He praised Michele as “an exceptional talent and his appointment underlines our great ambitions for Maison Valentino. I strongly believe that with his unique creativity and sensibility, he will continue the elevation of the brand’s everlasting heritage and unique Italian Maison de Couture identity. With Alessandro Michele a new page of excellence and endless beauty is ready to be written in the history of Valentino.”

There is a bit of irony in Michele taking the top design job at Valentino since it partially returns him into the orbit of Kering, which dismissed him as creative director of Gucci in November 2022. Last July, Kering revealed it had acquired a 30 percent stake in Valentino for 1.7 billion euros in cash as part of a broader strategic partnership with Qatari investment fund Mayhoola.

Kering has an option to buy 100 percent of Valentino’s capital by 2028, while Mayhoola could become a shareholder in Kering. The new luxury partners are expected to jointly explore further opportunities aligned with their respective strategies, including potential investments beyond fashion.

But on Thursday, François-Henri Pinault, chairman and CEO of Kering, was filled with nothing but praise for Michele, saying that he was “certain that with [Michele’s] creativity, culture and versatile talent, he will be able to interpret masterfully the unique heritage of this magnificent house and make it flourish. I can’t wait to see his passion, imagination and dedication at play in this new chapter for Valentino.”

Michele had joined the Gucci design studio in 2002 following a stint as senior accessories designer at Fendi. He was appointed “associate” to then-creative director Frida Giannini in 2011, and in 2014 took on the additional responsibility of creative director of Richard Ginori, the porcelain brand acquired by Gucci in 2013. Michele was officially appointed to Gucci’s top creative role in January 2015, two days after he first took a bow at the end of the brand’s men’s fall 2015 show, promoted by then-chairman and CEO Marco Bizzarri. With that seminal show he reinvented Gucci with a completely new, quirky and androgynous aesthetic.

Michele is said to be quickly revolutionizing the Valentino team as sources on Thursday said he was creating new communication and style teams, planning to let go of several staff members close to Piccioli.

As per the latest figures available, Valentino’s sales in 2022 reached 1.42 billion euros, up 15 percent from 2021. A financial source believes Rachid spearheaded Michele’s arrival at Valentino, expecting the designer “to bring buzz back to the brand, boost company sales and bottom line and lift its enterprise value if Kering does end buying the remaining stake of the brand.”

Another industry source also pointed to the financials involved. “With Gucci, Pinault took a chance with Michele when Marco Bizzarri promoted him. He must have thought it was time to take a leap [at Valentino], really boost revenues, which have grown but not significantly over the past few years, and bet once again on Alessandro, who quickly propelled sales at Gucci.”

Although Gucci’s business slowed down by 2022 and Michele was urged by investors and some retailers to switch gears before he finally was let go, the designer had returned Gucci to the fashion forefront, catering to a younger customer. With Bizzarri the brand posted growth exceeding 35 percent for five consecutive quarters by the first quarter of 2018.

“Kering will want to prove that the amount paid for 30 percent of Valentino was worth it and considering luxury multiples of around 15 times Valentino’s EBITDA, the brand could be valued at 5 billion euros,” the source said.

In 2022, Valentino’s earnings before interest, taxes, depreciation and amortization, including the IFRS 16 impact, amounted to 337 million euros.

The deal reunites Michele with Venturini and one industry source said they did work well together at Gucci, although he admitted they sometimes clashed “as is normal when creativity does not meet business demands.”

The source said Michele will have the opportunity “to leverage Valentino’s incredible structure and skilled seamstresses, so he can do anything with their help, but my concern is that Alessandro transformed Gucci, overturning the brand, but Gucci over the years had several different lives under Tom Ford or Frida Giannini, while Valentino has a precise image as Pierpaolo stayed true to Valentino Garavani’s original aesthetics.”

Garavani and Giammetti each welcomed Michele on Instagram. “Dear Alessandro. Welcome in the world of Valentino! It is an honor to welcome you, in our world, where creativity and elegance have always been the values that have inspired us. Valentino and I are sure that your vision, sensibility and talent will further enrich our universe of beauty and style,” Giammetti wrote.

With his background first at Fendi and then at Gucci, Michele is seen as a valuable asset to develop Valentino’s accessories, a category that has growth potential, especially compared to the brand’s competitors. As per the latest figures available, accessories were expected to represent 63 percent of sales in directly operated stores in 2023, compared with 68 percent in 2022. At Gucci, Michele launched several new bags including, for example, the Dionysus unveiled in 2015, over time embellished with his imaginative floral and fauna symbols, from bees to tigers and snakes.

Valentino’s menswear in 2022 represented 14 percent of sales. The year before, the category accounted for 18 percent of the total. There is potential in this segment, too, although Michele is said to be less interested in menswear compared to womenswear — after all, he is arguably the designer that put gender-fluid looks on the map, which were embraced by Jared Leto and Harry Styles, among others —hardly traditional examples.

Designing couture was likely a big draw for Michele to join Valentino, say sources, as this is a new category for him and very much in sync with his sensibility. He has dressed a string of A-listers on the red carpet in Gucci gowns, from Jessica Chastain and Lady Gaga to Salma Hayek and Dakota Johnson, but Gucci does not have an established couture business. Despite this, Michele hardly held back at Gucci, parading dreamy and couture-like gowns throughout his tenure. Case in point: His Gucci Cosmogonie cruise 2023 show in Apulia in 2022, staged at the site of the 13th-century Castel del Monte in Italy lit up with images of antique constellation maps and shooting stars and under a full moon as Michele sent out models in medieval gowns and cascades of sequins or velvet dresses with ornate floral embellishments.

Makeup, beauty and fragrances were also strong businesses for Gucci with Coty Inc. under Michele, so there is potential in that category for Valentino, whose beauty line is licensed to L’Oréal. Given Michele’s experience with Ginori, the designer could also explore the home category for Valentino, a new territory for the brand.

While several retailers were not reachable for comment or declined to provide one on Thursday, Joseph Tang, fashion director at Holt Renfrew, said Michele’s appointment “is a phenomenal fit, exemplifying what Valentino has stood for, in recent years. As Valentino embarks on the next chapter of their brand expression, we look forward to seeing the dynamic and expressive attitude that Michele brought to Gucci. Through accessories, Valentino has created a whole community around the rock stud detail. We are excited to see how he will innovate or create a new recognizable code for the house. Michele has an ability to reinterpret a signature code of a house and make it look desirable and fresh.”

Tang continued by saying that Michele “brings an authentic elegance to his work with a touch of rebellion, which proved to be successful in his previous role at Gucci. Valentino is a brand that is known best for its commitment to artisanal craft, inclusivity and timeless fashions — all of which align with Michele’s design and creative aesthetics. We look forward to seeing the whimsy and fantasy that he will bring to the brand as a total world of lifestyle. Michele has created a community of followers, which our customers will be thrilled to have back at our stores.”

Richard Johnson, chief commercial and sustainability officer of Mytheresa, said that “Valentino’s long history with Rome, as the designer’s founding city and the location of the atelier and archive, is an indispensable part of the brand’s DNA. As Alessandro Michele’s hometown, his deep understanding and dedication to the city will undoubtedly influence his interpretation of the house.”

Johnson pointed out that Valentino is very different from Gucci, “founded in couture rather than leather goods, and seeing how he evolves his aesthetic for a new audience will be fascinating. He’s a designer who knows how to bring vitality and warmth to a brand, embracing a very modern take not only on his designs but also on his social values.”

He joined the Italian brand in September 2022 and was promoted last year to senior vice president, global communications.

Benjamin Cercio, Gucci‘s senior vice president of global communications, is leaving the company, WWD has learned.

An internal announcement seen by WWD said the executive has decided to leave “to pursue other career opportunities.”

His next move could not immediately be learned.

Cercio joined Gucci in November 2022 as global communications director after a long career at Louis Vuitton, where he rose up the ladder to become its international director of press, influencer and entertainment.

According to the announcement, Cercio “quickly became an active contributor, lending valuable support to the company’s strategy.”

Indeed, when he was promoted in July 2023, his role was expanded to assume direct responsibility for the Gucci Archive and Gucci Garden, reinforcing the brand’s connection to arts and culture. He also assumed responsibility for the communications strategy for Gucci Osteria and Giardino 25, a café and cocktail bar in Florence.

“We thank Benjamin for his contribution, strong commitment, professionalism, and enthusiasm,” said the note, which was signed by Alessio Vannetti, executive vice president and chief brand officer at Gucci.

Gucci underwent momentous changes after Cercio’s arrival, headlined by the exits of president and chief executive officer Marco Bizzarri; Susan Chokachi, executive vice president, chief brand and client officer, and creative director Alessandro Michele, who on Thursday was appointed creative director at Valentino.

Cucinelli has acquired tailoring specialist Sartoria Eugubina, based in Gubbio, near Perugia and around 40 miles from his Solomeo headquarters, and will take on its 70 artisans.

MILAN — Brunello Cucinelli continues to bolster the production facilities of his namesake luxury company while protecting Italian know-how, increasingly becoming a point of reference in the country’s Umbria region.

Cucinelli on Thursday revealed he has acquired tailoring specialist Sartoria Eugubina, based in Gubbio, near Perugia and around 40 miles from his Solomeo headquarters, and will take on its 70 artisans.

“The small but important history of Sartoria Eugubina is a noble one of true craftsmanship that has earned well-deserved respect,” Cucinelli said. He characterized the acquisition as “an enrichment in terms of really special human resources. All of the world looks to Italy with deep regard and we believe that our products sincerely reflect in a special way how we work, the extreme attention we put into enhancing the skilled hands of our esteemed artisans.”

Details of the investment in the factory were not disclosed.

Cucinelli revealed he will erect a small factory in Gubbio “with a gorgeous view on the landscape of the medieval town. I am very confident in the value of beautiful garments made in Italy that can be left as an heirloom. Perhaps in the next years the issue will be not who we sell these special pieces to but rather whose skilled hands will create these small masterpieces.”

This is in line with Cucinelli’s long-term strategy, his belief in the strength of menswear tailoring and his views that the beauty of a factory contributes to give moral dignity to work and improve the quality of the products.

In 2013 Cucinelli acquired the production division of the prestigious Sartoria D’Avenza in Carrara, another example of Made in Italy excellence in the production of men’s suits.

In November, Cucinelli presented his project for his new menswear manufacturing site, his “bella fabbrica [beautiful factory],” in Penne, Italy. The plant will be located in the Ponte di Sant’Antonio area of Penne and will be unveiled in spring 2025, covering 48,600 square feet and employing between 300 and 350 people. Located in the central region of Abruzzo, the town is historically a production hub that specializes in sartorial menswear. It is home to the storied Brioni brand.

Cucinelli has been renting a restructured plant in Penne since mid-November while waiting for the new plant to be completed. There, in the 21,600-square-foot space, he employs 75 artisans, and aims to reach 100 by the end of the year.

Last year Cucinelli and Chanel signed a long-term agreement with Piergiorgio Cariaggi, president and chief executive officer of Cariaggi Lanificio SpA. Under the terms of the deal, the Cariaggi family retained control of the namesake company with 51 percent of the shares, while Brunello Cucinelli and Chanel each have a 24.5 percent stake.

The artist Mason Rothschild and Hermès have battled in court for more than a year.

The artist known as Mason Rothschild has filed a motion for reconsideration in an attempt to still have “MetaBirkins” NFTs featured in an exhibition at the Spiritmuseum in Stockholm this fall.

Wednesday’s legal action in a New York federal court was the latest development between the Los Angeles-based artist and the luxury house Hermès. Last week U.S. District Court judge Jed Rakoff barred Rothschild, whose given name is Sonny Estival, from showing the digital tokens on a computer screen in the upcoming show “Andy Warhol: A Portrait of Commerce,” which will open in October.

Representatives at Hermès had not responded to requests for comment Thursday afternoon. The company has until April 10 to file its opposition, and the court is expected to issue a ruling a few weeks after that.

Last year Hermès International won its trademark infringement case against him with a unanimous decision. Hermès had sued the artist for creating and selling 100 MetaBirkins — colorful faux-fur Birkin bag-inspired non-fungible tokens — in November 2021. The luxury brand had successfully contended the NFTs confused consumers, diluted the brand and impacted its in-the-works plans for NFTs.

Rothschild and his legal team had insisted that the two-dimensional digital tokens were a commentary on fashion’s fur-free initiative, an experiment in replicating the luxury handbag’s perceived value and an act of artistic expression that is protected under the First Amendment.

Located in Stockholm on Djurgården island, the Spritmuseum bills itself as being “dedicated to Swedish drinking culture” and as “the permanent home to the internationally renowned Absolut Art Collection. The museum offers a wide range of pop cultural, culinary and tasting experiences.”

In Wednesday’s filing, Rothschild’s attorneys said that it had not misrepresented facts regarding the museum’s intention to include discussion of this litigation in the planned MetaBirkins exhibit. In this week’s filing, the artist’s legal team said that no one could be defrauded into a purchase at the exhibition, which was referred to as the museum’s “MetaBirkins” exhibit and would not involve any sales. It said Rothschild would be referred to as the “MetaBirkins” creator, “expressly disclaiming any affiliation with Hermès.”

His lawyers claimed that it would not be “factually correct” for the museum’s exhibit to say that Rothschild “was found by a jury to have committed fraud…”

The filing cited testimony by Mia Sundberg earlier this month that noted the museum would include a disclaimer in the “MetaBirkins” exhibit, making clear that it “has nothing to do with the brand of Hermès.”

Earlier this month Sundberg, the curator of the Absolut Art Collection, told WWD, “We do not wish to cause further legal difficulties for Mason Rothschild. However, I am not sure if the American judge or indeed Mason Rothschild himself can forbid us to place a computer in an exhibition in Stockholm and show the images on the net, where they already exist for everyone to see.”

This is the second legal action that Hermès has faced in recent weeks. In an unrelated matter, a civil complaint was filed on March 18 in a U.S. District Court in Northern California by two California residents who alleged that the company is a monopoly and the way it sells Birkins is a violation of antitrust law. Representatives from Hermès did not acknowledge multiple media requests seeking comment, nor did the luxury house’s outside counsel.

In their complaint, the plaintiffs, Tina Cavalleri and Mark Glinoga, allege antitrust and unfair business practices. An interview request was denied per one of their attorneys, Shaun Setareh of Setareh Law. The filing said the availability of Birkin bags is conditioned on customers purchasing ancillary products from Hermès. The multiple claims included that the French luxury house has “unlawfully tied their Birkin bags to their ancillary products through their sales associate incentive program.” Setareh declined to comment about the amount in damages that is being sought.

US prosecutors say trading house paid Brazilian officials to keep its business with state oil group

Trafigura has pleaded guilty to charges by US prosecutors of bribery in Brazil and has agreed to pay $127mn in fines and forfeited profits, in the latest in a series of corruption cases against the world’s largest commodity trading houses.

Under the plea agreement, Trafigura will pay $80.5mn in fines and $46.5mn in forfeited profits after paying approximately $19.7mn in “corrupt commissions” to the benefit of Brazilian officials in a bid to “secure improper advantages” on oil contracts between 2003 and 2014.

The company pleaded guilty to one count of conspiracy to violate the US Foreign Corrupt Practices Act, according to court documents. 

Trafigura made the bribes to retain its business with state-controlled oil company Petrobras, prosecutors said, earning Trafigura entities about $61mn in profits during the decade-long period from illicitly obtained business with the Brazilian group.

Under the scheme, Trafigura and its co-conspirators agreed to make illicit payments of up to 20 cents per barrel of oil products bought from or sold to Petrobras, and to conceal the bribes via shell companies, prosecutors said.

Nicole Argentieri, head of the US Department of Justice’s criminal division, said Trafigura had “bribed Brazilian officials to illegally obtain business” for more than a decade. “Today’s guilty plea underscores that when companies pay bribes and undermine the rule of law, they will face significant penalties,” she added in a statement.

“These historical incidents do not reflect Trafigura’s values nor the conduct we expect from every employee,” Jeremy Weir, Trafigura’s executive chair and chief executive, said in a statement, adding he was “pleased the DoJ recognised the steps we have taken to invest in our compliance function”.

Petrobras did not immediately respond to a request for comment. 

Trafigura in December revealed for the first time that it had made a provision of $127mn in its 2023 accounts to resolve a probe by the DoJ over past “improper payments” in Brazil. 

The payments related to Brazil’s biggest political corruption case known as Lava Jato, or Car Wash, a vast contracts-for-kickbacks scheme with Petrobras at its centre. Company executives were paid bribes for handing out contracts in a conspiracy that involved a construction cartel. Its revelation led to the imprisonment of dozens of politicians and businessmen.

Some of the payments were made in cash at Trafigura’s office in Rio de Janeiro, according to court documents. To generate that cash for the bribes — coded as “commissions” by those involved — a Trafigura executive used “illicit-market money exchangers” in Brazil known as “doleiros”, as well as making wire transfers. 

In order to facilitate delivery of the bribes, the co-conspirators sent an invoice from a Hong Kong company for purported consulting services related to buying floor and wall tiles from Brazil for $390,240. Trafigura paid that sum to one of the co-conspirators, who then paid the money into a Hong Kong account for the ultimate benefit of Petrobras officials.

The DoJ gave Trafigura credit for its co-operation and remedial measures, but not for voluntary disclosure.

Trafigura’s plea marks the first time that it has admitted to wrongdoing in the Car Wash scandal, following rivals Glencore and Vitol admitting to having made bribes in the country in order to settle broader corruption probes into them.

In 2018, Brazilian prosecutors charged two former Trafigura executives Mariano Marcondes Ferraz and Marcio Pinto de Magalhães for allegedly paying bribes of about $1.5mn.

The civil case into Trafigura in Brazil for the Car Wash scandal has been suspended but some of the $127mn set aside can also be used for settlements with the Brazilian authorities.

The case draws a line under the DoJ’s current public pursuits of Trafigura, although the group and its former chief operating officer Mike Wainwright still face charges in Switzerland about suspected bribery payments in Angola.

Other commodity trading houses have also been struck with penalties by the DoJ for bribery and corruption in recent years. In 2022, Glencore pleaded guilty to multiple counts of bribery in Africa and Latin America to access oil and received penalties of more than $1bn.

Rival oil trader Gunvor also pleaded guilty earlier this month over bribes in Ecuador to secure oil contracts, resulting in more than $660mn in fines and forfeited profits. Oil trader Vitol agreed to pay more than $160mn to authorities in the US and Brazil in 2020 for bribery in Brazil, Ecuador and Mexico.