WWD : Vacheron Constantin Debuts Multisensory VR Experience at Harrods

Vacheron Constantin Debuts Multisensory VR Experience at Harrods
It will be the first project to be revealed at the brand-new 4D Immersive Cinema at Harrods, powered by London’s Xydrobe.

LONDON — Swiss watchmaker Vacheron Constantin will be the first brand to unveil a multisensory virtual reality experience at the brand-new 4D cinema, powered by Xydrobe, at Harrods this month, as part of a wider year-long partnership with the luxury department store celebrating its 175th anniversary.

Opening to the public on June 19, the experience titled “The Exceptional Voyage” — available for booking via Xydrobe’s website — will take the viewers into a dream-like adventure, exploring the rich history of Harrods through the lens of the Richemont-owned fine watchmaker.

Iona Judd, creative director for the Vacheron Constantin experience, teased that the narrative begins in a black cab on a predictably wet summer’s evening.

“Driven by an emotive, pacy score, our protagonists are invited to discover a series of increasingly surreal landscapes from the unchartered depths of the Harrods Vaults to limitless Dali-esque desert plains. Each mesmerizing scene is matched with real-world scents and sensations to create an unforgettable experience that is not only visual but highly sensory,” added Judd.


To commemorate the anniversary, the brand is also offering a single-piece edition Les Cabinotiers — Armillary Tourbillon platinum timepiece exclusive to Harrods, alongside 14 Hans Crescent window displays with its range of watch collections, and an exhibition highlighting key historical timepieces inside Harrods.

Located on the fifth floor of the Knightsbridge store, the “xydrobe VR Cinema” concept was first unveiled by WWD in April.

Billed as “the next frontier of media” by Xydrobe, it aims to create deeper, more meaningful connections between brands and customers in addition to driving sales.

The cinema can seat up to 20 guests at a time and plans to use the highest-grade VR headsets to conjure tactile sensations of wind, temperature, immersive surround sound and a variety of scents, the company said.

The cinema space was designed by Sybarite, the London architectural firm and a longtime partner of Xydrobe.

Sybarite cofounder Simon Mitchell called the project “a unique and masterful opportunity in creativity and retail strategy terms.”

“Xydrobe presented an opportunity to change the course of immersive experience in terms of luxury storytelling in a very personalized manner which was attractive and played to our strengths. We then worked together to think of how this could manifest itself within the context of a department store — a space we are very familiar with. To bring a greater audience. To utilize certain areas within the department itself. Our interest lay in how the Xydrobe experience could be scaled and co-exist within the department store world ecosystem successfully,” he added.

Isabella Gallucci, chief of brand at Xydrobe, said following the Vacheron Constantin debut at the “xydrobe VR Cinema,” more brands in the lineup will be revealed in due course.

“Each virtual world is meticulously crafted, allowing brands to weave captivating stories. These must-see experiences offer unparalleled journeys into the heart of innovation and creativity,” added Gallucci.

As reported, Xydrobe has produced visual effects content and immersive virtual reality experiences for brands including JW Anderson, Manolo Blahnik, Givenchy and, most recently, Dr. Barbara Sturm.

The Harrods project follows the opening of the Xydrobe Mayfair flagship on Carlos Place last October.

The Mayfair site offers luxury brands the chance to take over and activate VR experiences using one-person “xydrobe Pods.”

Eventually, Xydrobe wants to build a platform that will provide brands access to its 4D cinema network in various regions.

FT : High-Flyer Capital Management: the Chinese quant fund-turned-AI pioneer

High-Flyer Capital Management: the Chinese quant fund-turned-AI pioneer
Group’s DeepSeek-V2 ranks among China’s top large language models

One of the pack of Chinese AI hopefuls trying to take on the likes of OpenAI comes from an unusual source: a quant fund dominating the country’s financial sector.

High-Flyer Capital Management, a Chinese quantitative hedge fund, has grown into a roughly Rmb60bn ($8bn) asset manager since its launch in 2015, partly using AI and algorithms to identify patterns or variables that could affect stock prices.

Now it has parlayed that knowledge and infrastructure into a powerful AI model that has been released and that experts say is on a par with leading western efforts. DeepSeek-V2 can answer questions, write code and reason.

DeepSeek costs significantly less than rivals, about Rmb2 for every million output tokens — or words returned per query — sparking a price war among Chinese artificial intelligence providers.

A week after its launch in May, technology giant ByteDance cut prices to as low as Rmb0.60 per million output tokens. Rival Alibaba then cut usage prices for some of its models by as much as 97 per cent and Baidu made two of its Ernie models free.

The rollout of the new model, which has quickly attracted thousands of Chinese developers, highlights how even with early leads in generative AI, tech giants such as Baidu and Alibaba face fierce competition from more nimble upstarts. It has also put the spotlight on China’s highly competitive generative AI race.

“The gap between the US and China isn’t as big as everyone thinks,” Liu Qingfeng, founder of Chinese AI group iFlytek, told a recent tech gathering in Macau. “In a lot of verticals our [models] are better than theirs.”

DeepSeek’s development is fuelled with funding from its sister hedge fund High-Flyer. Its funds have returned 151 per cent, or 13 per cent annualised, since 2017, and were achieved in China’s battered domestic stock market. The country’s benchmark CSI 300 index, which tracks China’s top 300 stocks, has risen 8 per cent over the same time period, according to research provider Simu Paipai.


In February, Beijing cracked down on quant funds, blaming a stock market sell-off at the start of the year on their high-speed algorithmic trading. Since then, High-Flyer’s funds have trailed the CSI 300 by four percentage points.

High-Flyer and DeepSeek did not respond to requests for comment.

The quant fund got its start in a Chengdu apartment, where founder Liang Wenfeng, a computer science graduate of Zhejiang University, experimented with automated stock trading, according to local media reports. His profile in China’s asset management association registry says he was a freelancer until 2013, when he incorporated his first investment firm.

By 2021, all of High-Flyer’s strategies were using AI, according to manager Cai Liyu, employing strategies similar to those pioneered by hugely profitable hedge fund Renaissance Technologies. “AI helps to extract valuable data from massive data sets which can be useful for predicting stock prices and making investment decisions,” he said during a roadshow that streamed online that year.

Cai said the company’s first computing cluster had cost nearly Rmb200mn and that High Flyer was investing about Rmb1bn to build a second supercomputing cluster, which would stretch across a roughly football pitch-sized area. Most of their profits went back into their AI infrastructure, he added.

The second cluster, now complete, connects more than 10,000 of Nvidia’s cutting-edge processors with servers and storage, giving DeepSeek the computing power to train a large model, according to archived versions of the company’s website. The group acquired the Nvidia A100 chips before Washington restricted their delivery to China in mid-2022.

“We always wanted to carry out larger-scale experiments, so we’ve always aimed to deploy as much computational power as possible,” founder Liang told Chinese tech site 36Kr last year. “We wanted to find a paradigm that can fully describe the entire financial market.”

The company is one of six Chinese groups with more than 10,000 A100 processors, commonly believed to be a computational threshold for self-training large models, according to Guosheng Securities. The other five are all Chinese tech giants, though their collective computing power pales in comparison to US companies. Meta has said it will have computing power equal to nearly 600,000 of Nvidia’s more advanced H100 chips by the end of the year.

Tests run by research groups rank DeepSeek-V2 among the top LLMs in the world. Researchers at the University of Waterloo in Canada scored it among the top 10 models behind OpenAI’s GPT-4, Anthropic’s Claude and Chinese rival 01.AI. 


DeepSeek’s model is also open source, allowing AI researchers to inspect its structure and copy it.

“The model’s architecture is very unique,” said Andrew Carr, chief scientist at Cartwheel, an AI animation start-up based in the US. “DeepSeek has taken this idea called mixture of experts, where you split up a model into smaller chunks, to the extreme, with hundreds of small experts.”

Carr said the model came close to matching Meta’s latest Llama 3 model but with lower pricing. Its price is about 100th the cost of OpenAI’s GPT-4 and a fifth of Anthropic’s Claude 3 Haiku.

Tiezhen Wang, an engineer at New York-based AI research hub Hugging Face, said DeepSeek’s team had reduced what the model needed to remember while allowing it to “handle more tasks at the same time without slowing down”.

Inside China, the pricing strategy has helped sign up developers. Wang Zixu, a programmer based in northern China, said he had switched from using OpenAI’s GPT-4 for coding help to DeepSeek because of the lower prices.

Even with the cost advantage, some industry experts said DeepSeek could be losing money at its low price point. Its computing power may also fall further behind rivals as Nvidia releases new chips banned from export to China.

Still, High-Flyer’s AI offshoot is aiming to be the first to achieve artificial general intelligence, the point at which machines have greater cognitive capabilities than humans.

“We believe AGI is the violent beauty of model x data x computing power,” said one job recruitment advertisement for DeepSeek. “Embark on a ‘deep quest’ with us on the journey towards AGI!”

FT : The graphite fight: US tariffs trigger race to build non-Chinese supply cha

The graphite fight: US tariffs trigger race to build non-Chinese supply chain
Key material for electric vehicle batteries has been neglected by industry to date, giving China almost 100% of market

Graphite has become the latest resource to cause trade tensions between the US and China, with Washington putting pressure on EV and battery makers to build a new non-Chinese supply chain for graphite anodes, a crucial component in electric vehicle batteries.

The United States Trade Representative has announced that 25 per cent tariffs on natural and synthetic graphite anodes from China will be applied from this month, despite Chinese production accounting for 97 per cent of global anode output after years of under-investment in the material by the west.

The move follows the announcement in May of US tariffs of 25 per cent, due to kick in from 2026, on natural graphite — a form of carbon — processed in China.

That came soon after US officials granted a two-year waiver from January 2025 allowing vehicles with batteries containing Chinese graphite to continue to qualify for generous federal subsidies under the Inflation Reduction Act (IRA), President Joe Biden’s flagship climate legislation, following warnings that the subsidy regime could collapse without an exemption.

“Graphite has emerged as Washington’s ‘Achilles heel’ in its trade confrontation with Beijing,” said Georgi Georgiev, battery raw materials analyst at consultancy Fastmarkets.

“The US government was forced to acknowledge that battery makers need Chinese graphite in the short term if any vehicles are to qualify for the IRA tax credits,” he added. “But it is firmly determined to close that loophole as soon as possible, giving companies just a few years to construct a brand new supply chain almost from scratch.”

Powdered anodes, which store the charge in lithium-ion batteries, are most commonly made from a blend of mined natural graphite and synthetic graphite, which is produced by heating needle coke, a petroleum product, to temperatures of up to 3,000°C.


While natural graphite — a form of carbon — is relatively abundant, almost all natural graphite processing and 98 per cent of synthetic graphite production for battery-grade anodes is presently conducted in China.


Ross Gregory, a Seoul-based partner of consultancy New Electric Partners, noted that anodes made up approximately 50 per cent of a battery cell’s volume but only 10 per cent of the cost, meaning that companies seeking to build an IRA-compliant battery supply chain have focused instead on procuring higher-value minerals such as lithium, nickel and cobalt used in battery cathodes.

“Graphite anodes are a necessary component for all lithium-ion batteries, but there has been a perception that they are too cheap, too dirty, and too easy to secure from China to justify making the necessary investments,” said Gregory.

“As a result, the job of securing alternative sources was almost completely neglected by non-Chinese EV manufacturers, battery makers and battery material producers even after the IRA was passed in 2022,” he added. “Now Washington is trying to force their hand with the tariffs and the threat of the graphite waiver expiring in a couple of years.”

Analysts note the US is a net exporter to China of the needle coke used to make synthetic graphite and its industry should be able to convert existing facilities to produce battery-grade anode powders within three to four years. Optimists also note that natural graphite can be found across the world, with large deposits in Canada and Mozambique.

But very few analysts believe non-Chinese companies will come close to replicating China’s graphite anode capacity by the time the US government’s IRA graphite waiver is due to expire at the end of 2027, meaning that either the waiver will have to be extended or few vehicles will qualify for the credits, further hampering the country’s EV transition.


Fastmarkets projects that even by 2030, just 40 per cent of US anode demand will be met by IRA-compliant projects.

“Two years is not enough,” said Sam Adham, a battery supply chain expert at analysis firm CRU Group.

“Non-Chinese producers have a high barrier to entry: issues around financing, long lead times, the need to secure environmental permits, energy costs, and a lack of specialist knowhow when compared with their Chinese competitors,” he added, noting that they will be expected to supply customers in Europe, South Korea and Japan as well as the US.

Tim Bush, a Seoul-based battery analyst for UBS, noted that non-Chinese EV manufacturers, battery makers and materials producers now faced the prospect of being forced to make huge investments in a new graphite anode supply chain just when they were trying to cut costs due to the lower than expected take-up of electric vehicles in the US and Europe.

“US automakers are making losses on EVs, while Korean battery companies and materials companies are cutting or considering cutting capacity,” said Bush, noting that Posco Future M, the only Korean anode producer, received all of its processed graphite from China and recently halved its natural graphite expansion plan.

Eduardo Gonzalez, chief financial officer at Urbix, a US graphite refiner, said the reluctance of companies to invest in non-Chinese graphite had been “difficult to understand”, but that “market dynamics will lead to an eventual scramble for these products”.

Gregory added that in the meantime, Beijing had the ability to restrict graphite or anode exports in retaliation for US measures, or conversely to increase supply to bring down prices further, threatening the viability of non-Chinese projects. China fired a warning shot in October last year by introducing a requirement for special export permits for three grades of graphite.

“Building a non-China, IRA-compliant anode supply chain needs to be done, and it will be done eventually,” said Gregory. “But it will be done slowly and at a tremendous cost.”

FT : Energy boss calls for urgent reforms to hit UK green targets

Energy boss calls for urgent reforms to hit UK green targets
Scottish Power chief executive warns planning delays and skills shortages are holding back green transition

The boss of one of Britain’s biggest energy companies has urged whoever wins the general election to “tackle head-on” the practical and bureaucratic problems holding back the UK’s green transition. 

Keith Anderson, chief executive of Scottish Power, said ministers needed to get to grips with issues ranging from skills shortages to lengthy planning and procurement processes that are slowing down the development of projects such as hydrogen plants and electricity cables. 

“We’ve had lots of reviews . . . lots of conversations,” he said in an interview with the Financial Times. “In reality what has changed? Nothing.  

“We are still using the same processes, we’re still having all the same conversations. Nothing has changed. Nothing’s got faster and nothing is any different.”

Scottish Power, part of Spanish energy giant Iberdrola, owns and invests in wind turbines, electricity grids and solar panels around the country, and also supplies energy to about 4.6mn households.

Anderson, who is a member of Prime Minister Rishi Sunak’s council of business advisers, said the UK had a “colossal” opportunity in clean energy but needed to “get on the front foot”. 

“My frustration is, there are easy answers out there which do not cost money,” he added, highlighting reforms such as to the planning system as one area that could make a big difference. 

“Fundamentally the process doesn’t work properly — you’re looking at these huge, big infrastructure projects; we need to move faster [ . . .] short circuit the process and get everybody in the room.” 

Skills shortages were another area of concern, he said. “We need to get moving on it before it becomes a massive constraint.”

His comments reflect wider concern in the energy sector that the UK is not set up to deliver its ambitious decarbonisation goals. 

The UK is legally committed to cutting its emissions to net zero by 2050, with Sunak’s government setting an interim goal of decarbonising the electricity system by 2035. 

The opposition Labour party, which is ahead in the polls ahead of the general election on July 4, wants to do so by 2030. Both require a rapid increase in renewable power generation, with Labour aiming to quadruple offshore wind, triple solar power, and double onshore wind capacity.

Aurora Energy Research said in a report published in March that the UK was “well off course” for both the 2030 and 2035 targets, and power system decarbonisation would not be achieved until 2051 without a “major change of policy and market interventions”. 

The 2035 target required “significant new interventions”, the consultancy added, while doing so sooner was “likely to be infeasible”. 

If elected, Labour has pledged to set up a new state-owned energy company, Great British Energy, to help boost renewables by co-investing alongside the private sector. 

Anderson urged it to focus on less mature technologies and areas where “the government can have the biggest difference”, adding: “If all you are is another bank, I don’t need another bank. It’s not going to change the planning process.”

He stressed that parent company Iberdrola was “incredibly supportive” of the UK, but noted the country faces competition from around the world. 

“If Spain or America moves faster, then money will flow there faster,” he said. “That doesn’t mean we’re not going to spend the money in the UK. 

“But I would rather spend this year, next year and the year after, than have to wait five years to get something through the planning system.”

A Conservative party spokesman said the Conservatives had taken “bold action to deliver a 500 per cent increase in renewables connected to the grid since 2010” and are “backing £100bn of investment into the energy industry”.

Labour said it was confident its plan to decarbonise the electricity grid by 2030 could be delivered, pointing to the target’s endorsement by Sir Patrick Vallance, former chief scientific adviser. Its plans would “cut bills and make our country energy independent” a spokesman added.

FT : Giorgia Meloni puts brakes on Italy’s solar energy rollout

Giorgia Meloni puts brakes on Italy’s solar energy rollout
Prime minister says photovoltaics are threatening nation’s ‘food security’, but farmers disagree

Italian Prime Minister Giorgia Meloni has always insisted she is not a climate change denier and that her rightwing government is committed to greener sources of energy.

But her coalition is putting the brakes on the rollout of solar panels on farmland, which Meloni has described as a “threat to our food sovereignty” — a claim refuted by some farmers and solar energy experts.

The government last month issued an emergency decree banning ground-mounted solar panels from land zoned for agriculture. Instead, Rome will require more costly installations of at least 2.1 metres above ground, to allow cultivation underneath.

Meloni described the decree as a “pragmatic measure that corrects . . . the ideological eco-follies of which Italy and its farmers have been victims”.

But green power advocates say the restrictions, which must still be approved by parliament, raise serious doubts about Rome’s ability to fulfil its international commitment to reach 80GW of solar capacity by 2030. 

“It’s a paradox: the cheapest energy source right now is solar,” said Paolo Rocco Viscontini, president of Italia Solare, an industry group. “Rather than being happy to say ‘hey, we have the solution. Let’s work together to spread this energy source over the country,’ new problems are created.”

Renewable energy experts point out that the elevated “agri-voltaic” panels will be 20 to 40 per cent more expensive to install than traditional ones, undermining the sector’s competitiveness. The decree also bars farmers from leasing their land to solar developers and instead requires them to invest directly in the renewable energy projects on their properties.

Patrizio Donati, co-founder and managing director of Rome-based solar power start-up Terrawatt, said: “If we create these conditions that make investment unappealing, we’re not going to be able to do this energy transition in time.”

The latest initiative was championed by agriculture minister Francesco Lollobrigida, Meloni’s brother-in-law, over objections from Italy’s energy minister. It follows a national frenzy whipped up by rightwing television commentators claiming that iconic Italian products — from Prosecco to speciality tomatoes — were threatened by rapacious photovoltaic companies.

Many farmers scoff at such claims, pointing out that not all land zoned for agriculture is viable for crops, particularly in places where there is no irrigation.

In the southern region of Basilicata, 61-year old Emanuele Bocchicchio said that at present he left about half of his land fallow because of increasingly hot weather, drought and rising cultivation costs.

Last year, Bocchicchio agreed to lease out 44 hectares of his unused land to Terrawatt, which plans to build two 10MW solar plants for which he would receive annual rental income of €3,000 per hectare once the project is approved.

“Photovoltaics are a salvation for us — a gift from the heavens,” Bocchicchio said. “We should ask [Lollobrigida] why he has this hatred for solar panels. What obscure mechanism is behind this? It’s inexplicable.”

He also said farmers should be given more leeway to figure out how to use unirrigated land. “No one is obliged to give their land for solar panels — it’s a free choice,” he said. “In marginal areas like this, it’s vital. But there is no freedom here.”    

Though Italy has 16mn hectares of designated farmland, almost a quarter is lying fallow because of poor quality soil, lack of irrigation, fragmented land holdings, labour shortages or lack of interest by urban landowners in investing in agriculture.

“This government has to look at the reality of the farmers: every year the climate conditions are a little bit worse,” said Camillo Rossi, a lawyer who has leased about half of his family’s 200 hectares of unirrigated farmland to a company now generating 50MW of solar power on the site.

An usually hot, dry spring destroyed most of his fledgling crops this year, he said. Renting his land for solar panels was helping to offset these losses. 

“This land is beautiful to see, but it’s poor and, unfortunately, we don't have the potential to irrigate,” he said. “That’s what determined the choice of solar panels.”

Italia Solare estimates that the country needs just 1 per cent of fallow farmland to fulfil its 2030 solar commitments — but warns the new rules will impede the rollout. “We have such a nice solar power potential but the political class has never been capable of managing it,” said Viscontini.

Italy’s influential agribusiness lobby Coldiretti has hailed the ban and says the government must invest in irrigation rather than allow private developers to use marginal drylands for solar parks.

“We cannot accept the shortcut of photovoltaics,” said Luigi Pio Scordamaglia, Coldiretti’s director of international policies. “We don't want to accept the inertia of an administration that decided not to invest and improve irrigation. We want to again realise the full productive potential of that land.” 

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Wall Street has become increasingly involved in the world of sports

Cover:
-Wall Street has become increasingly involved in the world of sports, with private-equity executives becoming go-to buyers of marquee sports teams. Investment firms are acquiring stakes in teams, leagues, and global competitions, including women's soccer, professional bull riding, lacrosse, and sailing. Professional investors are also creating tertiary sports businesses, leveraging broadcast, digital, and scripted series rights, as well as bespoke stadium concessions. The influx of Wall Street money into sports is becoming more global, with wealthy individuals controlling or owning significant slices of half of Britain's 20 Premier League teams, including those with ties to investment firms. The influx of money is easy to see, as private-equity firms and their honchos have mountains of money, which teams in newer leagues or women's sports covet.

Interview:
-Evan Greenberg, the CEO of Chubb, has a strong connection to Warren Buffett, the CEO of Berkshire Hathaway. Berkshire Hathaway recently disclosed that it had acquired a 6% stake in Chubb, one of the world's largest insurance companies, at the end of 2023. Chubb's stock has returned about 40% in the past year, besting the S&P 500's 25% total return and earning the company a market capitalization of $110B. The insurer's superior financial performance is attributed to its sober underwriting practices and conservative management of its $140B investment portfolio. Greenberg, the son of former AIG CEO Maurice "Hank" Greenberg, served on various nonprofit boards focused on international affairs and Asia. Chubb is the No. 1 provider of commercial lines in the U.S. and is known for its high-end Masterpiece homeowners insurance. Greenberg serves on various nonprofit boards focused on international affairs and Asia.

Tech Trader:
-Nvidia recently surpassed Apple as the world's second-most valuable company, with Nvidia's shares rallying 144% this year and its revenue growing 262% year over year in its most recent quarter. Apple's latest quarterly revenue was down 4%, and sales nearly quadrupled over five quarters. This highlights the importance of CEO Tim Cook's keynote address at Apple's 2024 Worldwide Developers Conference, which will focus on AI. Apple has been including neural processing capability in iPhone and Mac chips since 2017, using AI for facial recognition, fingerprint scanning on Macs, and improving iPhone photos. Apple has published papers on large language models and made vague promises of AI magic to come.
Apple seems unlikely to directly take on OpenAI, Microsoft, Meta Platforms, Alphabet's Google, or Anthropic in large language models. Instead, Apple is likely to partner with an LLM provider, similar to its longstanding search relationship with Google. The smart speculation is that Apple will join forces with OpenAI and its cloud computing partner Microsoft. However, the exact nature of this relationship remains murky.

The Trader:
-In 2023, the S&P 500 will be remembered as the year of the Magnificent Seven, consisting of Google parent Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. These stocks collectively powered the rally that carried the S&P 500 to a 24% gain. However, the worry about the Big Three has been overblown as these stocks rarely moved in lockstep, resulting in less concentration risk in the market. The performance of the Mag 7 has diverged, with Tesla deep in the red this year and Apple lagging behind the S&P 500. Instead, the top three stocks in the S&P 500—Microsoft, Nvidia, and Apple—have accounted for 20% of the index for six days in the past two weeks. This is the first time on record that the S&P 500's top three stocks were worth more than 20% since at least 2000. Bear Traps Report founder Larry McDonald argues that the index's largest three stocks have never accounted for a fifth of the S&P 500 before in its history, and in the past 40 years, the top 10 components' weight has tended to hover around the 20% mark.
-Energy demand has been weak in recent weeks, leading to concerns of a coming oversupply of crude oil. This has resulted in big losses for oil and energy stocks, which have lagged this year. Brent crude had its worst day since December, and the Energy Select Sector SPDR exchange-traded fund had its worst daily performance since April. However, oil's action is not indicative of a recession, as an economic slowdown is usually preceded by a big spike in oil prices. Falling oil prices have a twofold benefit by giving consumers more money to spend, taking pressure off inflation, and making a Federal Reserve interest-rate cut this year more likely. Despite the cold comfort for energy investors, it is possible for the sector to make a comeback, particularly since there might be more wiggle room than initially apparent in OPEC's announcement. RBC Capital Markets Head of Global Commodity Strategy Helima Croft believes that the only thing "set in stone" is the UAE's increase next year.

Features:
-Saudi Aramco sold $11.2B worth of shares, providing the government with cash and broadening its investor base to include more European shareholders. However, recent oil market dynamics show that Saudi Arabia's role as the most powerful member of OPEC may conflict with its role as a maximizer of shareholder value. The Aramco offering was priced at 27.25 Saudi riyals (about $7.20), the lower end of the expected price range. The Saudi government owns the majority of Aramco shares. OPEC is struggling to take back control of the oil market from companies ramping up production. OPEC and its allies, including Saudi Arabia, plan to bring back some production this October, eventually adding 2.2M barrels over the coming year.
-Americans are becoming increasingly concerned about the economy, with retail sales in April remaining flat compared to March. This has led to a decline in consumer stocks, with the Consumer Staples Select Sector SPDR ETF up 9% this year but still trailing the broader market. However, Costco and Walmart have seen significant increases, up nearly 30% this year, beating the broader market and trading at record highs. These retail giants are classified as staples companies, selling everyday household goods and groceries. Concerns about high inflation may be impacting some big consumer goods firms, while concerns about the rising popularity of weight-loss drugs may not benefit food and beverage companies. However, consumers are still looking for bargains at Walmart and Costco, which fuels their sales and profits. Walmart Chief Financial Officer John David Rainey stated that many consumers are spending more of their paychecks on non-discretionary categories and less on general merchandise. Costco Chief Financial Officer Gary Millerchip added that the company is intentionally creating incremental value for its members by delivering lower prices wherever possible.

Europe:
-The European Central Bank (ECB) has announced its first cut since the Covid-19 pandemic, moving ahead of the Federal Reserve. The move, which had been anticipated for months, brings the ECB deposit rate to 3.75%. The move is not the first by a central bank, with Canada, Switzerland, and Sweden also making similar cuts earlier this year. The Federal Reserve has not yet lowered rates in this cycle due to stronger inflation in the US and stronger economic growth in Europe. However, ECB President Christine Lagarde stated that the ECB is not committing to any future interest rate path. The STOXX Europe 600 briefly touched an intraday high as the ECB announced the cut, but the euro rose against the dollar, reflecting shifting views on when the ECB might cut again. This leaves the question of where the ECB will go from here.

Emerging Markets:
-TJX, an off-price retailer, has announced plans to expand its global footprint through a joint venture in Mexico. The deal, which would own 51% and 49% of Grupo Axo, is expected to close later this year. TJX has taken a stake in Axo's bricks-and-mortar business, which includes over 200 stores under the Promoda, Reduced, and Urban Store banners. CEO and President Ernie Herrman said that TJX sees "excellent potential to grow in another region and deliver our value proposition to a growing population of fashion- and value-conscious consumers in Mexico." TJX shares are up 1.3% in Friday afternoon trading and have gained 5% this week, on pace for their best week since November 2022. The company's first-quarter earnings showed lower-than-expected same-store sales of a 3% gain year over year, beating Wall Street's 88 cents estimate. TJX believes the deal will not impact its current fiscal year and has over 4,900 stores across nine countries.

Commodities:
-Cleveland-Cliffs, an American steel maker, experienced a rare double downgrade on Thursday, with analyst Gordon Johnson cutting his rating to Sell from Buy and slashing his price target to $10.13 from $27.20. Johnson is concerned about a slowing US economy, more steel capacity, and mismatched Wall Street expectations. The slowing economy could hurt steel demand, and Johnson sees US steel capacity expanding by about six million tons soon. The Wall Street consensus compiled by FactSet is $363 million. Cleveland-Cliffs shares were down about 20% over the past three months, leaving them down about 21% year to date. The average analyst price target for Cleveland-Cliffs stock is about $21 a share, while the Sell-rated analyst average price target is lower, averaging about $13. The stock is now up 0.7% at $16.23 in midday trading, while the S&P 500 and Dow Jones Industrial Average were flat and up 0.1%, respectively.

Streetwise:
-Nvidia has surpassed Apple's market value by over $3T, causing investor attention to shift to other chip stocks. Broadcom, a California-based company, has also risen to the No. 10 spot in the S&P 500 index by market value. Broadcom's growth is attributed to its growing free cash flow and dividend yield of over 4%. The company's 2018 purchase of Computer Associates was viewed as straying too far from its core expertise in chips. Broadcom has since bought Symantec in 2019 for cybersecurity and VMware last year for cloud computing. Broadcom is now up 900%, 700 points more than the S&P 500, and is now the No. 2 chip maker behind Nvidia. However, the stock-picking expert suggests forgetting Broadcom and selling everything but a toothbrush and change of clothes, and letting it ride on Nvidia, which has seen a 7,000% increase over the same stretch. Broadcom's recent gains have little to do with the attributes mentioned and much to do with artificial intelligence.

FT : Hedge funds raise bets against European government bonds to two-year high

Hedge funds raise bets against European government bonds to two-year high
Traders bet ECB will have limited room to cut rates this year with inflation above target

Hedge funds have amassed their biggest bets against Eurozone government bonds in more than two years, in expectation that the European Central Bank will have limited room to cut interest rates further this year.

The total value of bets against European government bonds hit $413bn this week, according to data from S&P Global Markets Intelligence, as measured by bonds out on loan. That was up 8 per cent since January and the highest level since April 2022.

The rise in bets came ahead of the ECB delivering a well signalled 0.25 percentage point interest rate cut from a historic high of 4 per cent on Thursday.

But it also raised its inflation and growth forecasts for the rest of the year and removed an explicit easing bias from its monetary policy statement.

“The big picture here is that inflation numbers had been coming down but had a nasty uptick,” said Robert Tipp, head of global bonds at PGIM Fixed Income. “In my opinion they made the mistake of signalling and boxing themselves into a cut even though the data was suggesting they should have held up.”

Eurozone inflation rose for the first time this year in May to 2.6 per cent, with services inflation rising to a seven-month high. Raising its predictions for this year and next, the ECB said on Thursday that inflation would average 2.5 per cent in 2024 and 2.2 per cent in 2025. However, its forecast for 2026 was unchanged at 1.9 per cent. Its target is 2 per cent.

On Thursday Christine Lagarde, president of the ECB, said policymakers had decided to cut because of their “confidence in the path ahead” but added that she “wouldn’t volunteer” the notion that the central bank has moved into a dialling back phase.

Markets have increasingly moved to price in a shallow easing cycle for the ECB, with a 76 per cent chance of the next cut by September. A month ago, another cut by then was fully priced in.


Short positions on German government bonds — the benchmark for the Eurozone — have risen by 10 per cent since January to $112bn. Yields on 10-year Bunds have risen from 2.1 per cent to 2.5 per cent, representing a fall in prices. 

The biggest rise in short positioning, according to S&P’s data, has come in Italian bonds, where the value borrowed by investors has risen 38 per cent since the start of the year. That suggests some investors are losing confidence in a rally in Italian debt that has narrowed the gap between Italy and Germany’s benchmark borrowing costs from 1.65 percentage points to 1.31 percentage points since the start of the year. 

Other measures of investor positioning paint a more optimistic view on the outlook for European bonds. Bank of America’s monthly fund manager survey showed asset managers were slightly overweight European bonds relative to their benchmark.

However, Alex Batten, a fixed income fund manager at Columbia Threadneedle Investments, said he preferred to own US government debt over European debt.

“Europe will not be immune to the US experience of inflation taking time to recalibrate back to target,” he said.

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THE NEW YORK TIMES
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THE NEW YORK POST
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