>>> What to look at today - 21st of March 2024

Shares in Asia rallied after Wall Street set new highs as the Federal Reserve signaled it remains on track for three interest-rate cuts this year despite an uptick in inflation. A gauge of regional stocks was poised for its best day in four months, powered by gains in tech firms listed in Hong Kong and South Korea following Micron Technology Inc.’s strong revenue forecast reflecting artificial intelligence-induced demand.  Broader benchmarks also rose from Australia to Japan, with the Nikkei 225 on pace for a fresh closing high after the nation’s exports grew for a third consecutive month. Mainland Chinese stocks fluctuated following early gains. Treasuries edged higher in Asian trading after Wednesday’s advance on growing expectations for the Fed to cut rates as early as June. The dollar extended losses, with the yen strengthening for the first time in eight days. US equity futures gained in Asian trading, after the S&P 500 climbed 0.9% to a fresh high. The tech-heavy Nasdaq 100 index, which is more sensitive to policy, rose 1.2% amid a rally in the Magnificent Seven group of mega-caps. US small-caps, which typically do well when the economy is expanding, also notched the best session in a month. Fed policymakers kept their outlook for three cuts in 2024 and moved toward slowing the pace of reducing their bond holdings, suggesting they aren’t alarmed by a recent rebound in price pressures. While Jerome Powell continued to highlight officials would like to see more evidence that prices are coming down, he also said it will be appropriate to start easing “at some point this year.” ustralian bonds erased early gains to inch lower following the release of robust jobs data. The economy added 116,500 roles in February, almost three times the 40,000 forecast. The data supported the Australian dollar, which strengthened against the greenback. The New Zealand dollar reversed earlier losses as gross domestic product data showed the country unexpectedly fell into a recession in the second half of 2023. Output in the fourth quarter contracted 0.1% to mark its second quarter of negative growth. Gold rallied to trade over $2,200 an ounce for the first time following the Fed comments, while oil also rose. Bitcoin resumed a decline. US After Hours MU +14.3%, GES +10.5% higher on earnings; FIVE -12.7%, SCS -8.6%, CHWY -3.1% lower on earnings; INDI +7.2% as it invests in AI processor company.

Nikkei +2.03% Hang Seng +2.23% CSI +0.03% Shanghai +0.05% Shenzen +0.03%

Eur$ 1.0933 CNH 7.2122 CNY 7.1986 JPY 150.80 GBP 1.2790 CHF 0.8853 RUB 92.5126 TRY 32.4121 WTI$ 81.81 Gold 2,203 BTC 66,722 ETH ",490

S&P +0.43% Nasdaq +0.78% EuroStoxx +1.15% FTSE +0.75% Dax +0.95% SMI +0.51%

Macro :
- Europe Car Sales Jump 10% in February With EV Share Gain on Hold
- German Cannabis Legalization Uncertainty Is Spooking Investors
- Fed Brings Back ‘Everything Rally’ With Benign Outlook
- Brussels To Propose New, More Gradual Accession Process for New Members
- KKR, EIG to Invest $1 Billion in Solar Developer and Projects
- Tech Fund Beating 99% of Peers Says AI Rally Is Just Starting

Keep an eye on :
- 1U1 GY : 1&1 Sees 2024 Ebitda About EU720M, Est. EU722.3M
- ADS GY : Flagging Nike Could Learn From Adidas Efforts: Felsted & Miranda
- ADP FP : France to Name ADP CEO Successor to de Romanet After Olympics
- AIR FP : Japan Airlines to Buy 42 New Planes From Airbus and Boeing
- AAPL US : DOJ to Sue Apple for Antitrust Violations as Soon as Thursday
- ALAB US : Astera Soars 72% on AI-Fueled Demand After $713 Million IPO
- AUPH US : Aurinia Pharma Holder Iljin SNT Calls for Management Revamp
- BX US : Blackstone-Backed Encore Group May Sell Stakes to Raise Cash
- BMW GY : BMW Sees Premium EVs Driving Growth Even as Demand Cools
- BNP FP : BNP Paribas Aims to Triple Thai Assets Under Management to $3b
- BRAV SS : Bravida Gets Installation Order Worth About SEK500m
- CAI AV : CA Immo FY Dividend per Share Misses Estimates
- CEZ CP : CEZ Agrees to Buy 55% Stake in GasNet for €846.5m
- Cohere : Cohere Seeks $5B Valuation in Latest Fundraising: Reuters
- DOCM SW : DocMorris AG FY Ebitda Loss CHF38.4M, Est. Loss CHF40.4M
- ENAV IM : Enav FY Net Income Beats Estimates
- ENR GY : Iraq Signs Deal With Siemens for Power Plant and Gas Capturing
- RACE IM : Ferrari is full speed ahead on its first electric car—and the CEO promises it’s going to roar just as loud as a combustion
- GALD SW : Galderma Prices IPO at CHF53 a Share, Top End of Range
- GKP LN : Gulf Keystone FY Adjusted Ebitda Beats Estimates
- HHFA GY: Hamburger Hafen 2024 Ebit Forecast Misses Estimates
- HEI GY : Heidelberg Materials to Increase Dividend, Extends CEO Contract
- ISP IM : Intesa CEO Set to Reshuffle Some Top Managers, MF Reports
- INTRUM SS : BlackRock, Arini Among Intrum Creditors Set to Appoint Advisers
- IBAB BB : Ion Beam FY Revenue Beats Estimates
- IOS GY : Ionos Sees 2024 Adjusted Ebitda Margin About 28.5%, Est. 28.5%
- LHA GY : Brussels Airlines Pilots to Strike March 27-30: Tijd
- NEM GY : Nemetschek Sees 2024 Ebitda Margin 30% to 31%, Est. 31.2%
- NEXI IM : Nexi Holder Offers About 28.8m Shares via Morgan Stanley: Terms
- NSISB DC : Novonesis Sees 2024 Adjusted Ebitda Margin of About 35% (1)
- ONWD BB : Onward Medical Offers EU15 Million Shares at EU4.50/Share
- PAH3 GY : Porsche SE Sees 2024 Profit After Tax EU3.8B to EU5.8B
- P911 GY : Porsche SE reduces debt and intends to take advantage of investment opportunities 03/21/2024
- RDDT US : Reddit IPO Said to Price at Top of Range to Raise $748 Million
- REP SM : Repsol Proposes Distributing Dividend of €0.45/Shr in Jan. 2025
- SEQUA BB : Sequana Medical Offering of 7.67m Shares Prices at EU1.50/Share
- SHEL LN : Shell Sells Stake in Southcoast Wind to JV Partner Ocean Winds
- SIGN SW : SIG Chair Andreas Umbach Won’t Stand for Reelection at 2025 AGM
- STR AV : Strabag Says Deripaska Now Deleted as Beneficial Owner
- TLX GY : Talanx FY Ebit Misses Estimates
- TCELL TI : Turkcell FY Net Income 12.6B Liras Vs. 6.88B Liras Y/y
- VEI NO : Veidekke Sees Scandinavian Construction Production Down 16% 2024
- VEON US : Veon 4Q Ebitda $364M Vs. $458M Y/y
- VOS GY : Vossloh Sees 2024 Ebit EU100M to EU115M, Est. EU103M (2 Est.)
- WAGA FP : Waga Energy Offers EU45 Million Shares, Waga Energy Offering of 3.94m Shares Prices at EU13.20/Share

FT : The Fed (thinks it) has time on its side

The Fed
US inflation has been going sideways for several months, at a level that is above the Federal Reserve’s target and the country’s comfort zone. In response, the central bank announced yesterday that it would do nothing.

The Federal Open Market Committee’s plan of action — as expressed in the near-term rate projections of its members and in the tone of its chair’s press conference — is exactly as it was in December. Back then, the FOMC had enjoyed an almost uninterrupted six month run of good inflation news, and thought that its policy rate would be 4.6 per cent at the end of this year. It still thinks this, despite notably disappointing inflation reports in January and February. More importantly, Jay Powell’s language has retained its decidedly optimistic flavour:

As labour market tightness has eased and progress on inflation has continued . . . we believe that our policy rate is likely at its peak for this tightening cycle, and that if the economy evolves broadly as expected, it will probably be appropriate to begin dialling back policy restraint at some point this year . . . 

Wait wait wait, one wants to interrupt, progress on inflation has not continued. Here is the chart Unhedged used to make this point a week ago, after the February CPI numbers landed:


Here’s what Powell had to say about this:

. . . the January CPI and PCE numbers were quite high. There is reason to think there may be seasonal effects there, but nonetheless we don’t want to be completely dismissive of it. The February number was high, higher than our expectations, but we currently [expect] well below 30 basis points (0.3 per cent month-over-month) core PCE, which is not terribly high. So it’s not like the January number. I take the two of them together, and I think they haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road towards 2 per cent.

The FOMC thinks that two months of bad data, even accompanied by remarkably resilient economic growth and some extra accommodation provided by exuberant markets, is not enough for it to change its stance. It may be right. It could be that seasonal factors, and the fact that falling market rents refuse to appear in housing services prices, mitigate the badness of the numbers. And maybe two months just isn’t all that much time. But make no mistake: the Fed has decided that the disinflation story is fully intact and their policy posture, solidly tilted towards rate cuts in the near future, is unchanged.

This plain fact might be obscured by changes in the committee’s longer-term economic projections. Since December, it has made non-trivial increases in its view of the appropriate policy rate for 2025 (3.6 per cent to 3.9 per cent) and 2026 (2.9 per cent to 3.1 per cent), and even nudged its view of the long-term neutral rate a tiny bit (2.5 per cent to 2.6 per cent). Estimates for economic growth in the out years were nudged up, too. The “dot plot” of individual members’ rate policy views showed a decided migration upwards.

This is hawkishness, surely? No, it is not. Remember that the committee members’ ability to forecast the behaviour of the economy more than a quarter or two in the future is no better than yours or mine. We can’t do it, and neither can they. They have decisions to make about what to do this year, and they have been clear where they stand on those decisions. They plan to cut. Their longer-term projections, by contrast, are not plans — they are expressions of an attitude, a commitment to professional seriousness. Yes, the projections say, we see the bad data. But it does not change our mind.

WSJ : Apple Faces Legal Protest From Meta, Microsoft, X, Spotify and Match

Apple Faces Legal Protest From Meta, Microsoft, X, Spotify and Match
Five tech companies object to Apple’s new app store policies related to payment for services

Meta Platforms META 1.87%increase; green up pointing triangle, Microsoft MSFT 0.91%increase; green up pointing triangle, X, Spotify and Match Group MTCH 0.84%increase; green up pointing triangle filed legal petitions protesting Apple’s AAPL 1.47%increase; green up pointing triangle app store policies, objecting to how the tech giant has complied with a federal court ruling that ordered Apple to allow alternative payment methods.

The five companies, which have some of the most popular apps on the app store, join “Fortnite”-maker Epic Games in protesting Apple’s plan to charge a commission for payments made outside the app store.

The briefing underscores the extent to which Apple’s rivals and other technology players intend to continue fighting to force the iPhone maker to loosen its tight controls over third-party software. Apple charges up to a 30% commission for purchases in the app store for services or one-time fees, a rate that developers say is too high. Apple has defended its right to charge the fees and said it invests in privacy and security measures that protect users.

Apple in January announced plans to allow developers to process purchases outside of its app store, but the company drew sharp criticism from software-makers when it said it would charge a 27% commission in such cases. The new policy came after the U.S. Supreme Court declined to hear appeals of a 2021 ruling that ordered Apple to allow software makers to direct users to alternate ways to pay for services or apps outside the app store. Some of those alternatives are cheaper for consumers.

Earlier this month, Epic filed a petition in the Northern California District Court asking U.S. District Judge Yvonne Gonzalez Rogers, who oversaw the 2021 case, to enforce her decision. Rogers has previously said she would be watching how Apple complies with her order and could decide at some point to amend her ruling.

In a joint amicus briefing filed Wednesday, Meta, Microsoft, X and Match Group argue that Apple’s response essentially leaves in place the existing rule governing how software makers steer users to alternative options. It also says that it places new restrictions on app developers.

“The Apple Plan comports with neither the letter nor the spirit of this Court’s mandate,” the filing says. In a separate filing, Spotify wrote that “Apple’s conduct shows that it has no intention of complying with this Court’s directive.”

The ruling said Apple couldn’t prevent developers from including buttons or links to alternate payment methods. The amicus briefing says Apple only allows them one option for an external link that is still tightly controlled. “The provision of even the most basic information about alternatives remains forbidden under the Apple plan,” the briefing says.

If a developer wanted to say, for example, that a customer “can buy this feature at a 30% discount on our website,” it cannot do so, the briefing says.

In the joint filing, Meta argues that it should be able to steer users to alternate methods to pay for “boosted posts,” a kind of advertising in which users on Facebook or Instagram can amplify the reach of their content. Apple began requiring a 30% commission for such posts purchased on Apple devices in 2022, and Meta has also sought to steer users to alternate options.

Microsoft said it is limited in its ability to offer subscriptions and discounts under Apple’s new policy. X called Apple’s 27% commission a “tax” on purchases and said it eliminates any incentive to include an external link. Match Group said in the filing that Apple’s plan will impact thousands of developers and millions of users and will impede the court’s effort to improve price competition in digital transactions.

Apple has said it fully complied with the court order and has implemented a system that gives developers the option to inform customers—inside and outside of apps—of alternate purchasing methods. The initial ruling suggests that Apple allow external payment options but could still take steps to protect users. Apple has said that its new requirements related to external links are necessary to protect user privacy and security.

Legal experts have suggested that Apple’s changes appear to satisfy the requirements set out in the order, although Rogers could find that they don’t comport with the intent of her ruling.

Apple is facing an investigation by the Justice Department, which could soon file an antitrust complaint about its business practices. The probe began in 2019 and deals in part with Apple’s policies governing mobile third-party software on its devices, which has been the focus of criticism, The Wall Street Journal has reported.

Apple has drawn similar criticism from developers regarding its compliance with a new European law, called the Digital Markets Act. The law is intended to force Apple and other tech platforms European officials deem gatekeepers to open their closed software ecosystems. Apple’s compliance plan it rolled out this month was a complex web of new fees and restrictions for any app developer opting to choose the new policy. Most developers criticized Apple’s European policies as not practical.

Business Of Fashion : Hermès Faces Class Action Suit Over Birkin Sales Practices

Hermès Faces Class Action Suit Over Birkin Sales Practices
The brand is being accused of unlawful ‘tying’ for allegedly requiring shoppers to buy ancillary items from other product categories before they were allowed to purchase the brand’s sought-after Birkin bags.

Hermès is being accused of unlawful “tying” in a class action lawsuit in the US.

Two California shoppers allege they were required to buy ancillary products from other categories (such as the brand’s apparel, scarves and homeware) before being allowed to purchase the Paris-based brand’s sought-after Birkin handbags.

Counsel for the plaintiffs claim that Hermès is in violation of US antitrust regulations, which define certain practices of bundling goods or tying them to other purchases as an abuse of market power.

“The tying product, the Birkin Handbags, is separate and distinct from the tied products, the ancillary products required to be purchased by consumers,” the complaint reads. “Plaintiffs have alternative options for the ancillary products and would prefer to choose among them independently from their decision to purchase Birkin handbags.”

The complaint points to the company’s commission structure for sales associates as evidence of the alleged scheme: store staff do not receive a commission on Birkin handbags, and as such are compensated based on how effectively they push other styles or categories, according to the complaint.

On handbag blogs and social media, Hermès buyers have reported for years that as the company (and demand for its iconic bags) has grown, sales associates have become increasingly strict about only offering Birkins and Kellys to clients who buy heavily across other categories.Hermès denies the practice: “Hermès strictly prohibits any sales of certain products as a condition to the purchase of others,” the brand told BoF last year. CEO Axel Dumas has acknowledged, however, that stores are encouraged to vet buyers and attribute the sold-out bags only to “real” clients as the company seeks to thwart an explosion of resale activity for its products.

Hermès isn’t the only brand that has been linked to such practices. Dealers of watchmaker Rolex have been accused of requiring shoppers to buy from sister brand Tudor before being allowed to buy Rolex products.

WSJ : Russian Threat Forces Europe to Choose: Bolster Defense or Protect Social

Russian Threat Forces Europe to Choose: Bolster Defense or Protect Social Spending
With U.S. commitment to NATO uncertain, Europe faces a security rebuild that threatens budgets for other programs

BRUSSELS—European countries are waking up to Russia’s danger, but the cost of building robust defenses able to withstand a potential U.S. pullback is so great that it threatens Europe’s post-Cold War social model.

With presumptive Republican presidential nominee Donald Trump questioning America’s future in the North Atlantic Treaty Organization and Russian forces on the offensive in Ukraine, European leaders are warning of an existential threat to the continent’s security.

War nearby and disputes with the U.S. have exposed gaps in Europe’s military capabilities that would take years to plug even if governments make military spending a political priority, which they haven’t done for decades.

European Union leaders meeting Thursday plan to address the bloc’s defense vulnerabilities and its ambition to expand its defense industry. Painful decisions lie ahead.

Boosting Europe’s security would require increasing defense outlays just as many European countries are cutting budgets to cope with high debt levels and weak economic growth. Achieving the military spending that some politicians and experts say is needed would force European members of NATO to start reversing big post-Cold War increases in social spending.

“You have to rearrange the social contract,” said Lithuanian Foreign Minister Gabrielius Landsbergis, who has warned that Russia will eventually attack NATO countries if it isn’t defeated in Ukraine.

Europe would need at least 20 years to build a European force capable of reversing a Russian invasion of Lithuania and nearby parts of Poland without the U.S., according to an analysis by the International Institute for Strategic Studies, a think tank, in 2019.

The cost, IISS said, would be $357 billion, equivalent to more than $420 billion in today’s prices. Europe’s NATO allies are projected to spend $380 billion on defense this year.

While vast amounts of Russian equipment have been destroyed in Ukraine, many European officials say Moscow could rebuild its military within a few years of the war’s end. NATO has meanwhile depleted its own stocks of weapons to keep Ukraine armed.

“It comes down to the political will in combination with an ability to explain to the public what it is we really have to do,” said Anna Wieslander, director for Northern Europe at the Atlantic Council, a think tank in Washington. “The closer to Russia you get, the easier it seems to be.”

Europe in recent years has started reversing military cuts made after the Soviet Union collapsed in 1991. During the Cold War, many NATO members spent roughly 3% of gross domestic product on defense. Those outlays plunged in subsequent years.

After Russia seized the Crimean Peninsula from Ukraine in 2014, NATO members agreed to lift their spending to 2% of GDP by this year. Many experts believe European defense expenditures must reach 3% of GDP if the U.S. starts to disengage.

The swing would be enormous for some countries.

For Belgium to buy merely enough ammunition to fight an invasion for a few weeks, it would cost more than $5 billion, said retired army Lt. Gen. Marc Thys. The kingdom is one of NATO’s lowest military spenders, at less than 1.2% of GDP last year.

When Thys joined the military in the 1970s, Belgium could deploy 50,000 men to Germany. After Russia’s invasion of Ukraine two years ago, Belgium agreed to send 300 troops to Romania. “We had to pull out all the stops,” he said.

Thys said most Western European governments will face the “growing pains” of learning to synchronize “equipment coming in, people coming in, building infrastructure and training them.”

Most European countries can hit 2% military spending by squeezing other government outlays by less than 1 percentage point, according to a recent study by Germany’s Ifo Institute for economic research.

But to reach 3% would mean shifting several percentage points of government spending to defense, Ifo said.

Britain has long spent 2% of GDP on defense but has a target of 2.5%, contingent on economic conditions.

To reach 3% of GDP, Britain would need to boost military spending by more than $40 billion, said Ben Zaranko, senior research economist at the U.K.’s Institute for Fiscal Studies. That is twice what Britain spends on its justice system.

“I think generally, if we want to spend much more on defense and we don’t want a bigger state, the government has to start removing state responsibilities,” Zaranko said.

Europe’s defense cuts since the Cold War generated a peace dividend of around $2 trillion, according to Ifo.

Ifo calculates that although European NATO countries’ military spending has returned to 1991 levels based on 2023 prices, social spending has more than doubled in that period, to consume half of government spending. That includes entitlement plans such as rising pension costs in an aging continent, which are politically hard to adjust.

That fiscal pressure has left Europe dependent on Washington for vital military capabilities. Among those are air defense, midair refueling, combat engineering, artillery and ammunition, experts say. Europe struggles to move its forces across borders without U.S. help.

Washington also provides sophisticated intelligence, surveillance and reconnaissance assets needed for fast reaction to threats. It dominates the digitization of militaries that allow forces to connect and communicate securely during conflicts.

“We have armed forces that look good and shiny, and platforms you can present for export…but aren’t prepared for war,” said Gustav Gressel, a senior policy fellow working on defense at the European Council on Foreign Relations.

Europe’s shortfalls have shown up repeatedly in smaller conflicts since the Cold War. Britain and France ran out of precision bombs fighting in Libya in 2011.

Some European countries are already shifting. Poland is spending 4.2% of GDP on defense, it is building up its forces and has embarked on a huge procurement drive for cutting-edge tanks, helicopters, rocket launchers and jet fighters.

Sweden and Finland, which spend heavily on defense, have joined NATO, strengthening its grip in the Baltic region near Russia. NATO accelerated its buildup of troops and equipment on its eastern flank after Russia attacked Ukraine and Europe has started narrowing some shortfalls of critical U.S.-provided military equipment.

But faced with elections, most governments struggle to address military funding. Germany’s shaky coalition government, which holds elections next year, hasn’t said how it would lift spending back to 2% or above once its special defense fund of $109 billion runs out in 2027.

In Britain earlier this month, when the government’s pre-election budget barely lifted military spending in real terms, a couple of ministers went public with calls to raise spending now.

European military planners struggle to even start addressing how NATO might operate without a high level of U.S. support, said Edward Arnold, a research fellow for European security at the Royal United Services Institute in Britain.

“In the official planning sessions, there’ll be no change,” he said. “But when they go for coffee in the breaks, they’ll probably all say ‘God, if we were doing this without the Americans, what would it actually look like?’ ”

FT : Shari Redstone prefers rival deal to $11bn Apollo bid for Paramount studio

Shari Redstone prefers rival deal to $11bn Apollo bid for Paramount studio
David Ellison’s Skydance is negotiating for a stake in holding company National

Shari Redstone, Paramount’s controlling shareholder, is unconvinced by an $11bn offer from Apollo for its Hollywood studio, people briefed on the matter said, and is instead negotiating a rival deal with billionaire David Ellison to secure the future of her family’s media empire. 

Ellison’s Skydance, which is backed by private equity investor KKR, RedBird Capital and Tencent, has been in talks with Redstone for several months to acquire a majority stake in National Amusements (NAI), the holding company through which she controls Paramount. 

That deal would result in Ellison running the combined Paramount and Skydance, which already produce movies together including Top Gun and Mission: Impossible, according to those briefed on the plan.

Ellison’s bid would also add a deep bench of media operators including former NBCUniversal chief Jeff Shell, who would run broadcaster CBS as well as Paramount’s cable networks, which include MTV and Nickelodeon, two people said. Another person said that former CNN boss Jeff Zucker could help run the CBS news broadcasting unit. A representative for Zucker did not have an immediate comment.

Skydance is conducting due diligence and has yet to submit a final offer. The two sides hope to reach an agreement in the coming months but people with direct knowledge of the matter warned that there was still a good chance the talks would fall apart. 

Apollo has also been circling Paramount for several months and had made an offer to buy the group’s Hollywood studio for $11bn, two people briefed on the matter said.

That would be well above the $7.7bn stock market valuation for the entire company as of Wednesday morning and shares in Paramount jumped nearly 12 per cent after The Wall Street Journal reported on Apollo’s offer.

However, Redstone, who is president of NAI and non-executive chair of Paramount, is convinced that a deal with Ellison would make more strategic sense than selling to a financial buyer, according to several people familiar with the matter.

If Paramount sold just the studio unit it would be left with its lower-performing cable, broadcast and streaming businesses, without the more valuable content arm. Such a scenario could make what is left of Paramount worth very little, people close to NAI said. 

The competing bids are the latest twist in a long-running saga for Redstone, the media scion who in 2020 inherited control of the entertainment conglomerate that her late father Sumner Redstone built from his own father’s chain of drive-in cinemas.

Paramount is behind some of the most storied properties in entertainment, such as The Godfather, Star Trek, Titanic and Mission: Impossible. 

But Paramount’s stock has dropped by more than 70 per cent in the past two years. Investors are sceptical that the group can compete in a cut-throat streaming business in which it is battling against much larger groups such as Disney, Netflix and Amazon.

“Accepting a studio-only offer would mean divorcing the rest of the company from one of the key engines that drives it,” said MoffettNathanson analyst Robert Fishman. “Remove one of its unique content creators from the equation and the rest of the company may appear hollow,” he said.

Skydance and Redbird declined to comment. Paramount and Apollo did not immediately reply to a request for comment.

FT : Gucci’s slump means the end of the luxury megatrend

Gucci’s slump means the end of the luxury megatrend
The dramatic sales collapse suggests it is time to consider each brand individually

Investing is not immune to passing fashions. In recent years, it has mainly been a macro game, with Fed tea-leaf readers, consumer-spending trackers and China analysts much in demand. Big shifts have sunk whole sectors and lifted others — think AI and defence. Luxury groups, too, rode a post-pandemic spending wave. No longer: it is time to bring back the untrendy art of stock picking. 

Look no further than Kering’s dramatic sales warning this week. The French giant, controlled by billionaire François-Henri Pinault, expects first-quarter sales down 10 per cent — compared to consensus expectations of a 3 per cent fall — driven by a near 20 per cent collapse at Gucci. Worse still, the group blamed the slump on the all-important Asia-Pacific consumer, the health of which keeps sector investors up at night. 

That’s given rise to a predictable slew of luxury concerns. Kering slumped 12 per cent on Wednesday. But shares in LVMH, Richemont and Dior were off too, on fears that the softening of China’s luxury growth might turn into a crash. 

It would be wise to avoid jumping to macro conclusions. As Lex has pointed out, Chinese consumer spending showed signs of resilience over the all-important New Year period. Rival Prada, earlier this month, pointed to an encouraging start to the year. At Kering, stripping out Gucci’s performance suggests that smaller brands such as Bottega Veneta and Saint Laurent are holding up better. There is ample evidence that Gucci’s stumble is of its own making.

The brand is in a tricky spot. It is attempting to reshape its aesthetics from loud fashion to new creative director Sabato de Sarno’s quieter luxury. But the new collection, which Kering has been promoting heavily, only accounts for a small proportion of the items in store.


Gucci still belongs to the select club of megabrands with $10bn or more of sales. But the combination of falling sales and margin compression could lop 20 to 25 per cent off forecasts for the brand’s full-year operating profit, think Citi. Worse, empty stores speak to waning desirability, an ephemeral asset that is hard to recover once it is lost.

There is one lesson that can be extrapolated from Gucci’s plight. Brand momentum matters, and luxury turnarounds are hard to pull off — especially in softening markets. Burberry and Ferragamo should take note. Investors, meanwhile, no longer have the luxury of buying into a megatrend. It is time to consider each brand’s prospects individually.

FT : Selling Mayfair: the elite agents bringing Dubai hustle to London’s prime p

Selling Mayfair: the elite agents bringing Dubai hustle to London’s prime properties
Sotheby’s real estate franchise has a new owner who plans to disrupt the business of selling multimillion-pound homes

The party to celebrate the relaunch of the Sotheby’s London real estate franchise did not cost £2.5mn. George Azar would like to be clear about that.

The world of luxury London estate agents has been awash with rumours about Azar, and his ambition to disrupt the business of selling multimillion pound homes to the global super-rich.

The actual cost of the party was just £400,000, Azar told the Financial Times.

Sotheby’s Real Estate was spun off from the auction house — the venue for Azar’s launch party — in 1976.

Unlike rivals Savills and Knight Frank, which operate as a single firm, Sotheby’s Real Estate runs on a franchise system. Azar, owner of the Dubai franchise since 2013, bought the London branch early last year with plans to shake up the established model, mainly by demanding higher fees from clients and giving his agents a much larger share of the revenue they earn.

“He is bringing the whole Dubai model to London,” said one London luxury agent. “He’s going to be ruthless on fees.”

Wild tales circulate about the terms the new-look Sotheby’s has offered to lure top performers. Azar, reclining in a blue suit on a beige-leather sofa in his office above the Mayfair Sotheby’s real estate storefront, says talk of multiyear contracts paying more than £800,000 per year are absurd.

“It’s not true . . . They were throwing figure after figure, thinking these guys come from the Middle East, they are funded by somebody, they are throwing money right, left and centre and they don’t know what they are doing,” he said.

But Azar appears to enjoy how much his arrival has set the tight-knit world of London’s top estate agents abuzz. “I am a very calculated guy. I’m a banker . . . We’re not stupid and we want to succeed.”

Sotheby’s high-profile hires include Claire Reynolds, an 18-year veteran of Savills, Marcus O’Brien, right-hand man to Gary Hersham at the luxury specialist Beauchamp Estates. Becky Fatemi, another leading agent, has merged her agency Rokstone with Sotheby’s.

“People are making up stories about how they were approached,” the London luxury agent said. Not having received an offer to be poached by Azar is now seen as a slight. 

Although London property commands some of the highest prices in the world, its luxury agents take some of the lowest fees.

Around £5.7bn of London properties worth more than £5mn changed hands last year, according to Savills. The most expensive public listings on Sotheby’s books currently include a £75mn 11-bedroom house in Portland Place, and a three-bedroom, 2,700 sq ft flat in Marylebone, listed for around £12mn. Sotheby’s said its agents have sold £500mn worth of properties so far this year, including sales exchanged and under offer.

Fees are opaque. But similar agents in New York commonly charge 6 per cent. In London, selling agents’ fees are typically quoted at 2 per cent, but are often bargained down closer to 1.5 per cent. Fees of 1 per cent are not unknown, and agencies may then have to give a cut of their fee to another agent to introduce a buyer.

Sotheby’s, which generally only deals with properties worth more than £2mn, has set a floor of 2 per cent on fees with ambitions to charge more.

“Since the market was so easy, people were pushing fees down,” said Azar. He emphasises that he does not want to talk any agency down, and acknowledges London prime property is a competitive market. But he adds: “They got it too easy, and they got too lazy. In the old days, you had the big fish eating the small fish. Today you have the fast fish eating the slow fish. We are the fast fish.” 

Key to the reinvention of Sotheby’s is the fees the agents can charge and how the money is split. Azar plans to pay people according to the business they bring in. The agents will be colleagues, but also in competition. 

“They have got a very good team. I hope there is cohesion among the team members,” said Hersham, adding that he’s “looking forward to working with Sotheby’s”.

The challenge to London’s historically dominant agencies is reminiscent of the disruption caused by US law firms that have poached talent from London’s magic circle because top-billing lawyers earn more under the American “eat what you kill” pay arrangements. 

Agencies like Savills and Knight Frank typically do not give their agents a direct cut of sales. Bonuses are discretionary, reflecting the logic that team members across the companies contribute. Tim Hyatt of Knight Frank said the model aims to encourage performance for clients and also a “fulfilling and rewarding career for all of our people”. 

At Sotheby’s, each agent has a bespoke deal. Some are fully employed and others are self-employed consultants. Employees keep 20-40 per cent of the fees they earn, while consultants’ percentage starts at 50 per cent.

Another senior agent likened the new model Sotheby’s to the ultra-competitive agents in hit Netflix show “Selling Orange County”.

“I think he is going to create probably the greatest hornets nest of all time, with all these very senior people competing with each other,” the senior agent said. 

Azar acknowledges the challenge. “It’s like putting sharks in a fish tank . . . I am making sure no one eats each other,” he jokes. 

Fatemi said early rivalry within the team has settled down. “The first month was like: ‘I need this and I need this,’” she said. “That’s where the rumour mill came from.”

Sotheby’s can pay its agents more, Azar said, in part because he has torn up the traditional system of neighbourhood offices, giving his agents geographic freedom and cutting layers of management.  

Fees at Sotheby’s are then split 50-50 between the agent who brings the buyer, and the one who won the listing. “The client gets the benefit of two power brokers working who are incentivised,” Fatemi said. “The majority of clients don’t mind paying.” 

But if the London property market has been booming for prime agents in recent years, it now faces new challenges. Savills data show sales of properties worth more than £5mn were down 13 per cent last year from the year before, as the post-Covid property boom came to an end.

Russian buyers have met intense scepticism and new restrictions in London since the invasion of Ukraine. Many wealthy Russians have turned elsewhere, including Dubai. 

“For me, as long as you’re not sanctioned, I’ll deal with you. I’m not here to tell you who is right and who is wrong,” said Azar, who cut his teeth in the discreet world of Swiss private banking. 

Rivals, naturally, are sceptical about the prospects of success for Sotheby’s new fees model in London.

Other agents are more optimistic about the potential benefits if Azar pulls off his Mayfair-based shake-up. “If Sotheby’s can manage to raise the fees, we’d all be happy. Good luck to them,” said Hersham.