FT : Trade rift between EU and US grows over green industry and jobs

Trade rift between EU and US grows over green industry and jobs
France says it will lose €8bn as businesses are given incentives to ‘Buy American’

The threat of a trade war between the EU and the US over the Biden administration’s $370bn climate legislation has stepped up, as France estimated it would lose €8bn as businesses were given incentives to shift to the US.

Brussels is demanding that products made in the EU bloc should have access to the same subsidies as the US is offering to a range of industries to spur green technologies and tackle carbon emissions under its Inflation Reduction Act.

The IRA measures include tax rebates for buyers of US-made electric cars, as well as a series of other significant industry credits for domestic clean energy initiatives, such as solar, wind, nuclear and carbon capture technologies.

Paris has claimed it would lose €8bn in investment as operations are relocated to the US to take advantage of subsidies for local production, diplomats say.

While most EU member states are still calculating the potential damage, the bloc countries agreed on the need for Brussels to push for “tangible and concrete” measures, at a meeting of ambassadors last week, they added.

French president Emmanuel Macron and German chancellor Olaf Scholz at a meeting on Friday reportedly also found agreement about a European response to the US action that encourages its citizens to “Buy American”

The trade tensions have developed despite the Biden administration’s attempts to improve its relationship with Europe after four years of rancour under former president Donald Trump. 

France, in particular, has been sounding the alarm in recent weeks that the IRA is unfairly protectionist. French buyers of electric cars are eligible for a subsidy of up to €7,000 regardless of where the car is manufactured. In the US, an income-tested rebate of up to $7,500 will apply to new cars made locally.

Two big European carmakers, Stellantis, which has a sizeable US business selling Chrysler and Fiat models, and the smaller Renault, have invested heavily in electric vehicle manufacture ahead of a 2035 deadline for the EU to phase out cars with traditional fuel engines, with many of their production facilities located in Europe.

Another example of investment that could be affected is in wind energy, GE last year expanded its renewable energy business in Europe with wind turbine blade production at a factory in Cherbourg, France.

France has urged the European Commission to respond to the IRA and was working on options itself, said a finance ministry source.

Potential responses include filing a complaint to the World Trade Organization, retaliatory tariffs, or for an exemption to allow products made in the EU to be part of the US rebate scheme.

An exemption would allow European companies to keep their operations in the bloc, preventing a loss of revenues and green jobs, said a person with direct knowledge of the discussions. “We want Washington to apply the rules in a generous way. This is our best case scenario.”

But US trade experts are divided on what steps the Biden administration can take to address the concerns of Europe, as well as Japan and South Korea, about the impact on their industries, without returning to Congress to alter the text of the legislation.

The US Treasury’s consultation with industry on how to implement the law could provide loopholes for trading partners. For example, the definition of “final assembly” could mean cars could be imported to be completed in the US and thereby qualify for tax breaks.

US Treasury secretary Janet Yellen told the FT earlier this month that her officials were meeting with “different parties” as they worked to draft the regulations that would specify how companies qualified for tax credits.

The US and EU last week agreed to set up a working group on IRA, which the White House said would in part discuss “opportunities and concerns for EU producers”.

Macron argued during a primetime television interview last week that Europe was naive in sticking with its free trade policies.

“We need a ‘Buy European Act’ like the Americans, we need to reserve [state subsidies] for our European manufacturers,” he said. “You have China that is protecting its industry, the US that is protecting its industry, and Europe that is an open house.”

But German finance minister Christian Lindner told the FT that Europe’s response to the IRA should not be to create its own subsidy regime. He called for further talks between the EU and US to discuss its effects, however.

“It’s without question a challenge for us,” he said. “But we need to strengthen our own competitiveness in response. We won’t prevent European companies disinvesting and moving to the US with harsh words, and by entering into a competition for subsidies, but by creating really excellent conditions for investment in Europe.”

WSJ : The Real Star of ‘The White Lotus’: The Fake Hotel

The Real Star of ‘The White Lotus’: The Fake Hotel
Where better to weave a story of money, machismo and desire than in a five-star resort in Sicily

In “The White Lotus,” beautiful actors play rich people trapped in a lair of lies, lust and sexual politics at a luxury resort. One of the show’s most glamorous stars? The fictional hotel itself.

The faux White Lotus resort chain goes for realism at every turn in this social satire from HBO, which begins its second season on Sunday. Everything from the bar menu to the bed linens is emblazoned with the White Lotus logo, creating a bespoke bubble of wealth and privilege whose authenticity makes skewering the guests that much more believable. Even details the camera may never capture are executed to precision, down to the keycards for the guests’ rooms and the tiny marzipan fruit candies waiting for them there.

“Charming, comfortable, but something a little bit upsetting,” production designer Cristina Onori said of the hotel décor, which includes the crisp blues and greens of the seaside locale with hot reds to evoke the volcanic emotions at the resort in the shadow of Mount Etna. Outside, the show’s crew built a fountain on the hotel grounds just so they could float lotus flowers in it.

Series creator Mike White uses his White Lotus resorts as the fictional connective tissue between the first two seasons of the critically acclaimed series. Last year’s season was set in Maui, Hawaii, and followed a modern story arc about wokeness, identity and class. This year, it’s a story of relationship battles as old as time, set on the Sicilian coast.

Both times, the White Lotus resort was staged on top of an existing Four Seasons hotel. This year, it’s the five-star chain’s San Domenico Palace, a converted 14th-century convent perched atop a ridge of rock in the town of Taormina.

The show had a complete buyout of the property, where it filmed from February to April, according to a Four Seasons spokeswoman. The resort closes for the winter, but under normal circumstances it would have fully reopened in mid-March. Guests slowly began to return toward the end of production.

Mr. White had originally considered making season 2 about mogul billionaires descending on a resort for a Davos-style conference, an idea he toyed with during location scouting as he toured luxury hotels and villas in France and Italy. But his plans changed once he found Taormina.

“The hotel itself had the luxury but also this kind of moodiness that was so unique,” Mr. White said. “It felt like a place where I could get inspired to come up with something juicy.”

Tasked with writing the new season in about eight weeks, Mr. White relocated to Taormina. While there, he noticed painted ceramic heads peeking from balconies and local shops. The figures, based on an ancient story of love, jealousy and murder, were too dramatic to ignore.

“If we’re going to be in Sicily, we have to embrace some of the mythology of the place,” he said. “And so it became all about sex and adultery and monogamy.”

The cast is almost entirely new, an ensemble that includes Aubrey Plaza, Will Sharpe and F. Murray Abraham. Fan favorite Jennifer Coolidge returns as the operatically tragicomic Tanya, now married but coming to Italy with a great yearning for her own dolce vita.

The hotel that awaits her is impeccable.

“You guys just really pull out all the stops, you really do,” Tanya says as she arrives at the resort. “Whenever I stay at a White Lotus, I always have a memorable time. Always.”

When greeting guests arriving by boat to the resort on the cliffs of the Ionian Sea, white-gloved bellhops wave in unison with their right hands. Valentina, the hotel manager played by Sabrina Impacciatore, fumes at an employee who brings a tray that’s too small for Champagne flutes. “You think that’s normal?” she says before flashing a fake smile for her American guests. “We’ll talk later.”

The expensive surroundings awash in Aperol spritzes become suffocating for characters like Ms. Plaza’s Harper, an employment lawyer who has stumbled into newfound riches following her husband’s business success. The pair are vacationing with a couple who are well accustomed to life in an upper-class playground.

“Are these the kind of people we’re going to be hanging out with now?” Harper asks. “People who can only talk about what five-star hotels they’ve stayed at?”

The show’s distinctive opening credits and music return with a classical Italian twist. That eerie OOooOOooOOooOOoo melody—actually the digitally manipulated voice of a Colombian singer patting her hand over her mouth while holding a note for a couple of seconds—emerges partway into the sequence. Harps and acoustic guitars help set the old-world mood.

As the opening credits roll, increasingly risqué images reflect each character’s story arc. The credit for Theo James, who plays the egotistic Cameron, appears over an image of a dog peeing on a statue. (Viewers are meant to wonder if Cameron is the dog, the statue, or both, according to credits directors Katrina Crawford and Mark Bashore.)

Production designer Ms. Onori matched the ceramic heads in the hotel rooms to reflect the various personalities. Her team covered the hotel walls with re-created classical paintings from the area, some of which appear in close up to comment on the action. The sets include unnerving elements, like an odd flower arrangement or a creepy-eyed child in a painting.

The White Lotus hotel is an amalgam of pools and beach resorts from the area, though it’s largely the San Domenico Palace. The show, which also re-created hotel rooms on sound stages, nods at “The Godfather,” which featured similar Sicilian locales.

The costumes contribute to the ambience.

“Nothing is too much for the White Lotus,” Alex Bovaird, the show’s costume designer, told actors while dressing them in sumptuous costumes from Italian labels such as Gucci, Prada, Valentino, Dolce & Gabbana and Versace.

Valentina encapsulates the narrative use of the fashions, Ms. Bovaird said. In the first episode, the hotel manager’s Casablanca silk blouse features ping-pong paddles, a nod to the relationship games about to begin. Later, she wears a Moschino blazer with ropes, bound by her own sexual repression.

Flower prints abound as passions bloom and wilt. Guests go from pool to massage in bathrobes custom designed by Cynthia Rowley featuring white lotus flowers dotted with little eyeballs. “It’s Fellini-esque,” Ms. Bovaird said. “The hotel is always watching you.”

Miss Tweed : Artisan spirit lives on at Mykita: could it be the Hermès of eyewea

Artisan spirit lives on at Mykita: could it be the Hermès of eyewear ?

BERLIN - In the world of European high-end eyewear, there is giant EssilorLuxottica, smaller players such as Italy’s Marcolin and luxury groups LVMH and Kering that started investing in the sector a few years ago. And then there’s Germany’s Mykita – the last independent fully integrated spectacle manufacturer after Kering acquired Denmark’s Lindberg last year.

From the nose bridge to Mykita’s trademark spiral hinge that connects the temple to the frame without screws, every production step is handled by a human being - a luxury in our machine-dominated 21st century. And it takes place in Kreuzberg, the bohemian heart of the German capital, known for its art galleries and trendy restaurants.

But what could be the bigger game plan of Mykita at a time when haute eyewear is becoming one of the fastest growing segments of European luxury? Arguably, it shares the same artisanal spirit as Hermes. Both seek to stand out from the crowd with their handmade products, and the creative freedom given to their designers. Hermes is the last major luxury brand that does not have an eyewear line and keeps mum as to when it will launch one. It’s tempting to consider: could Mykita be a good fit? Or could the German brand replicate the success of Hermes as independent in the emerging eyewear industry?

Hermès, which is several hundred times bigger than Mykita and some 166 years older, could also just get some ideas from Mykita. The German company is into craftsmanship, technological innovation and is a pioneer in developing sustainable materials and building a circular economy around its eyewear.

Mykita’s factory downtown Berlin bears comparison to Hermès 40 years ago when production and many other activities took place on the top floors of the French luxury brand’s flagship rue du Faubourg Saint Honoré in Paris. The atmosphere was that of a giant beehive.

If Mykita is to make the step change to become a leading haute spectacle maker in the evolving fashion eyewear industry, there are obstacles, as well as opportunities. For one, it’s competing with a rush among luxury brands to claim this coveted position in a global market estimated to be worth more than $20 billion in 2022.

LVMH, the world’s largest luxury group, is aggressively chasing that title with its Thelios eyewear manufacturing hub in Italy’s Dolomites mountains, where it makes eyewear for many of its brands including Celine and Dior. Kering too has its own factory in northern Italy, near Padua. Meanwhile, the world’s eyewear leader, EssilorLuxottica, boasts Oliver Peoples, its high-end Los Angeles-founded brand manufactured in Italy and Japan.

PRICE TRANSPARENCY
Challenging the luxury market for eyewear, there’s also the disruptive desire for greater price transparency among consumers about eyewear costing $1,000 or more, driven by Internet juggernaut Amazon.com, innovators such as Warby Parker, and Gen Z consumers demanding greater supply chain transparency.

Still, rich pickings are on offer for the winners. Luxury eyewear, together with jewelry has been the fastest-growing segments of the luxury goods industry in recent years, or more than 10 percent annually, analysts say. The beauty with eyewear is that you do not have several sizes, which reduces the risk to build up excess stock.

Meanwhile, the twin drivers of inflation and energy crisis putting a squeeze on disposable incomes may also provide a boost to the luxury eyewear market as buying a pair of pricey sunglasses or spectacles becomes more accessible. A pair of designer spectacles is also more visible than a pair of expensive shoes on work calls over Zoom.

Hence that segment is likely to represent an increasingly bigger slice of total luxury market estimated to be worth as much as 380 billion euros by 2025, according to consultancy Bain & co.

Mykita is well placed to take advantage of these trends. For one, it’s got a striking birth story to tell, a key pull in the age of brand authenticity.

Its name is derived from its founding office located in a children’s daycare, known as a kita in German. The brand started in 2003, founded by a group of young entrepreneurs who included Moritz Krueger, then 24 years old. Krueger has been overseeing the brand’s designs ever since. In 2013, Bernd Beetz, former CEO of Coty and Christian Dior Parfums, invested in the company and bought a controlling stake. In recent years, Beetz has hired managers with experience managing fashion and luxury brands to help him grow the business.

NOT FOR SALE
Mykita is not for sale, according to Krueger and Beetz. Their ambition is to double turnover, which is now around €40 million, and catch up with Lindberg in terms of size. Last year, Lindberg, a Danish brand which specializes in titanium frames, is estimated to have made sales of around €80 million. In its near 20-year history, Mykita made losses only three years, in 2017 and then in 2020 and 2021 due to the pandemic, Krueger said. This year, he says it is on track to break even.

“Mykita is about craftsmanship,” says Beetz. “We want to grow it but keep the company artisanal.” Hermès has been dealing with the same challenge in the past 20 years: expanding production while keeping quality and creativity high. Mykita works with a large number of specialist opticians and runs 16 directly operated stores in North America and Europe, in cities such as New York and Barcelona. It plans to double that number in the next five years. It is also working on a new retail concept to modernize its image and move on from its trademark “Mykita Wall”, a white metallic display wall lined with its spectacles that’s been part of its store brand image for many years.

Like at Hermès’ Pantin workshop north of Paris, Mykita’s workers form a group of colorful characters. They ooze that cool artsy vibe for which Berlin is known. Artisans, many boasting tattoos and piercings, AirPods in their ears, execute stage by stage many of the different steps involved in making a pair of spectacles. At Mykita, a worker accomplishes several steps and moves around different posts. That is different from Hermès, where usually artisans make their own bag or accessory from beginning to end.

For Mykita’s stainless-steel spectacles, the starting point is a flat metal sheet that comes from Sweden. The frames etched into it are detached one by one. Afterwards, each part, from the temple to the nose section, is bent, twisted, turned and thumped to form a pair of spectacles. These stainless-steel spectacles require more than 80 steps equal to several days of work.

Most of the raw material Mykita uses comes from recycled sources, whether it is stainless steel or acetate. Some 99 percent of the production’s scrap, prototypes and other metals are recycled. Germany takes very seriously the preservation of the environment and fight against climate change. It has been at the forefront of global efforts to find solutions and take action. Earlier this year, it said it aimed to fulfill all its electricity needs with supplies from renewable sources by 2035.

At a time when many luxury brands are being accused of greenwashing, Mykita’s small scale, and artisanal focus lends itself to today’s luxury goods quest for sustainability and production in balance with the environment - qualities increasingly sought after by young consumers. It also helps that it is in line with its quintessential German identity and outspoken commitment to protect nature.

One of the many strengths of Mykita – like that of Hermès – is that it fully controls the production and creative process. It is constantly working on testing and trialling new ideas. The advantage of having production, design, research and development under one roof is that “it creates bridges between every department,” and “it makes the whole process much more fluid and saves you a lot of time,” explains Luis Dourado, design studio assistant. “You can go down a few floors to try something out, you don’t need to wait for days or weeks for somebody else to do something for you.”

The company has developed a new material called Mylon for which it owns the patents and won prizes. It is made with polyamide power and produced in-house using 3D printing. The technology behind it comes from the car industry and was adapted by the company’s engineers. Mykita, however, does not produce lenses. It relies on high-end supplier Zeiss, Germany’s leading manufacturer, and Japan’s Tajima, specialized in polarized lenses.

Today, Mykita’s workforce is 350 people strong worldwide, and some 270 work at the Berlin manufacture. Lindberg by comparison has around twice that number of employees. The Mykita Haus is airy and bright with long rows of large windows. It is a modern-style turn-of-the 20th century-building which was once a manufacturer of metallic products, a tapestry plant and a cigarette factory. In the 1930s, it was where Pelikan pens and ink were made. Mykita moved into the premises in 2014 and now occupies the whole building. Internet fashion retailer and media company Highsnobiety used to rent a floor there but left a few years ago.

BOTTLENECKS
To increase output, Mykita will have to invest in new premises. “Our biggest problem is production bottlenecks,” says Beetz. “We are currently working on how to increase production.” Mykita will have to sort this out quickly if it wants to meet its target of doubling sales and doing collaborations with other brands. In the past, the German eyewear manufacturer has collaborated with fashion house Maison Margiela and camera maker Leica among others. The brand is in talks to agree on a new collaboration but it needs to sort out its production capacity issues first before it can go ahead and sign.

Mykita’s design team meet several times a week to discuss new shapes, materials and colors. The company produces 800 prototypes a year and puts into production only 60 of them. Thanks to this creative process, collections are constantly renewed – inciting customers to visit its shops and website to check out what’s new. Demand is tested for each pair before producing large quantities. If a model is popular, there can be waiting lists. It recently happened with the Just Lite collection of vintage-style navigator and aviator shapes in gold metallic tones that featured in the TV series “And just like that” - a revival of the popular “Sex and the City.”

The pandemic together with a painful switch to SAP, a computer-based enterprise planning system, has held back Mykita’s growth. But the future is looking good. “We have plans to communicate more and talk about what we do and what makes us so unique,” Christina Ahlers, the company’s COO told Miss Tweed. Before joining Mykita, Ahlers used to run Courrèges, a French fashion brand which belongs to Artemis, the investment company held by the Pinault family that controls Gucci owner Kering. Before that Ahlers worked for Swedish brand Acne Studios and Maison Margiela.

In the courtyard of the Mykita manufacturing headquarters, there are around a dozen gardening plots, a project launched in partnership witha collective called “Prinzessinnengarten” from the neighborhood.Every Mykita team grows its own tomatoes, chilis, basil, lavender, sage or other herbs which they eat at lunch or take home. “It allows people to connect,” says Julia Mehlhorn, Mykita global brand director.

Like the plants they water every day, the brand’s workers say they feel they each play an important role in the company’s growth – not everyone can say this in the ruthless and ultra-competitive jungle that is the fashion and luxury world. It’s a great selling point for consumers and luxury groups on the hunt for acquisitions.

FT : German industrial workers fire warning shot with strikes over pay

German industrial workers fire warning shot with strikes over pay
Thousands down tools as unions seek highest wage rise in more than a decade

Thousands of German industrial workers walked out for several hours over the weekend in an escalating pay dispute as leaders of Germany’s powerful IG Metall union warned of more strikes to come if employers failed to improve their offer.

Europe’s largest industrial union is demanding an 8 per cent wage increase for 3.9mn employees in Germany’s automotive, metal and electrical industries to compensate for surging inflation. The pay demand is the highest since 2008.

The sector is the backbone of Germany’s wider economy and a bellwether for wage agreements in other sectors.

Employer representatives have offered a one-off payment of €3,000 spread over 30 months, arguing that companies themselves were being squeezed by surging energy costs and a potential recession.

On Saturday night, employees of more than a dozen companies across Germany, including steelmaker ThyssenKrupp and automotive suppliers Bosch and ZF, began a rolling programme of what the union called temporary warning strikes. The stoppages each lasted for several hours and are set to continue into early November at different companies across Germany.

The impact on production was limited, but the stoppages were an important symbol of workers’ determination, a union official said.

“The employers’ refusal to enter proper wage negotiations triggered this escalation,” the union said in a statement over the weekend, adding that it would step up its walkouts over the coming days.

IG Metall leader Jörg Hofmann has previously warned the union would escalate strikes if employers failed to table a better offer by November 9, when talks are set to resume.

Wages in the eurozone have this year lagged well behind inflation, which is expected to have risen above 10 per cent for the first time in the history of the region when October price data is announced on Monday. This has left many workers considerably worse-off in real terms.

Peer-Michael Dick, chief executive of Baden-Württemberg’s metal employers’ association, described the strikes as “completely unnecessary” and warned they created an additional burden for companies that were already stretched.

Economists say persistent high inflation could increase the likelihood of a 1970s-style wage-price spiral and prompt the European Central Bank to raise interest rates.

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ECB warns of potential for ‘self-reinforcing’ inflation

“Against the backdrop of high inflation, which results in considerable losses in purchasing power, the trade unions are likely to push through higher wages,” said Marco Wagner, a senior economist at German lender Commerzbank.

Eurozone wages rose 4 per cent in the second quarter, slower than in the US or UK. But unemployment in the 19-country bloc has fallen to a low of 6.6 per cent and labour shortages are growing in some countries, such as Germany, the Netherlands and Poland, according to Eurostat data from August, the most recent figures available. This puts many workers in a stronger negotiating position.

Some employers have given workers lump sum payments rather than lifting annual pay. The German government has encouraged this by treating lump sum payments as tax free. Workers in the German chemicals industry were this month given annual lump sum payments of €1,500 each over the next two years on top of a 3.25 per cent pay rise.

The ECB is keeping a close eye on eurozone wage growth after forecasting last month that it would increase from 4 per cent this year to 4.8 per cent next year. ECB president Christine Lagarde told a press conference last week that this was likely to accelerate faster, saying: “Incoming wage data and recent wage agreements indicate that the growth of wages may be picking up.”

FT : Can Formula 1 achieve Premier League riches in the US?

Formula 1, the global car racing series controlled by Liberty Media, has long struggled to crack the US.

That was until the pandemic struck, nobody knew what to watch, and we all tuned into Drive to Survive, Netflix’s fly-on-the-wall documentary on the sport. No longer hidden behind their helmets, the drivers shone through like never before.

F1 now races in Miami. More than 440,000 people showed up at the US grand prix in Austin, Texas last weekend, the highest turnout at an F1 race this season. The inaugural Las Vegas event is set for next year.

But it wasn’t always so easy. Burke Magnus, president of programming and original content at Disney’s ESPN, recalled the early days of the broadcaster’s relationship with F1.

“It was so big globally yet so obscure in the US market we knew there had to be an opportunity there,” he said.

From screening races in the US for pennies to renewing the rights for around $85mn a year, Magnus says the sport is “red hot right now”.

But the sport has a long way to go to cut through like English football. The Premier League scored around $450mn a year when it renewed its US broadcast rights with Comcast’s NBC, as TV companies scrap for the rights to showcase elite live sport.

So what would help F1 catch up? “If ever a top-notch US driver gets involved at a team level that’s unrealised upside for them,” says Magnus.

FT : Adidas ditches Ye, but not all its problems

Adidas ditches Ye, but not all its problems

One of the biggest global business stories this week was the decision by Adidas to drop its affiliation with the rapper and designer Kanye West after his recent spew of anti-Semitic remarks, ending a professional relationship and collaboration that lasted more than eight years.

First things first: hate speech of any type is abhorrent, and West’s rhetoric against Jews deserves neither indulgence nor more oxygen in public discourse. The dignity of any group of humans is more important than the interests of a company.

Which is precisely the predicament in which Adidas found itself in in recent days, dragging its feet on a “review” of its relationship with West, who now goes simply by Ye, it instituted on 6 October.

Ye’s recent screed began on that day with an initial interview with Fox’s Tucker Carlson, and continued with a series of posts on social media. Other brands and agencies, including Balenciaga, Gap, and CAA, moved to end ties with him more swiftly.

For Adidas, the second-largest athletic brand globally by sales, cutting Ye meant cutting a significant driver of business: analysts estimate his Yeezy sportswear line accounts for about 8 per cent of annual revenues.

Ye’s impact at the German company can hardly be overstated. In 2015, after years of declining sales in the US market — the lion’s share of the sporting goods industry at the time — Adidas said it wouldn’t renew its outfitting contract with the National Basketball Association, the ultimate symbol of how far its brand had faltered. That same year, the first Yeezy shoe was released under the three stripes, giving Adidas an instant credibility boost with tastemakers and making the brand relevant again in America.

In its second quarter 2016 earnings report, Adidas called their collaboration “the most significant partnership ever created between a non-athlete and an athletic brand”.

Fast forward to today. More than two years into the global reset brought by the pandemic, Adidas has issued two profit warnings in less than three months — most recently eight days ago — due to piles of excess inventory amid slower demand. The company previously announced it is searching for a successor to chief executive Kasper Rørsted, who is expected to depart next year, three years earlier than his existing contract.

Can Adidas’ initial shortsightedness on Ye — it was berated by the Central Council of Jews in Germany and the Anti-Defamation League — be attributed to financial difficulties or a power vacuum? It’s hard to say definitively. But Adidas has had other stumbles on social issues in recent years: during the reckoning on race in the US after the murder of George Floyd in 2020, the company initially opted to retweet a statement by rival Nike before deciding to speak out on racism in its own voice.

The departure of Rørsted, meanwhile, is the second such transition of a non “shoe dog”, or industry veteran, after a short tenure leading sports brands. Rørsted, who worked at Henkel, Hewlett-Packard, and Oracle before joining Adidas, follows former Aldo and North Face executive Patrik Frisk who left his post as chief executive of Under Armour in June.

The Ye controversy is unquestionably problematic for Adidas. With shares down 66 per cent so far this year, it’s also not the least of the company’s troubles.

FT : Russia pulls plug on UN deal to allow exports of Ukrainian grain

Russia pulls plug on UN deal to allow exports of Ukrainian grain
Moscow links decision to attack on ships in the Crimean port of Sevastopol

Moscow has suspended its participation in a UN-backed deal with Kyiv that unblocked the movement of Ukrainian grain out of its southern ports, threatening to deepen the global food crisis.

Russia linked its decision to pull out of the deal to an attack on Saturday on ships in the port of Sevastopol in the Crimean peninsula, which Russia annexed from Ukraine in 2014.

It blamed the attack on Ukrainian armed forces, claiming air defences shot down Ukrainian drones but autonomous explosive boats had caused damage to navy vessels and energy facilities.

“In connection with the actions of the Ukrainian armed forces . . . the Russian side cannot guarantee the safety of civilian dry cargo ships participating in the Black Sea Initiative, and suspends its implementation from today for an indefinite period,” the foreign ministry said.

It also claimed without evidence that British specialists were involved in the attack and said it had instructed its representatives at the Joint Coordination Center in Istanbul, which manages the deal, to suspend activities.

Russia has been hinting at its desire to pull out of the deal for some time. Vladimir Putin has repeatedly expressed dissatisfaction with the deal in recent weeks, claiming it was not sending grain to “the poorest countries”. UN data shows that Turkey is the country that has received the most shipments.

The UN has not billed the agreement as intended to send grain directly to poorer countries, saying instead that it was supposed to make grain purchases more accessible for poor countries. The deal was supposed to lower market prices that were sent soaring by Russia’s invasion of Ukraine.

Ukraine said Russia was using a false pretext for pulling out of the deal.

“We have warned of Russia’s plans to ruin the Black Sea Grain Initiative,” Ukraine foreign minister Dmytro Kuleba said on Twitter.

“Now Moscow uses a false pretext to block the grain corridor which ensures food security for millions of people. I call on all states to demand Russia to stop its hunger games and recommit to its obligations.”

In a statement the ministry said that Russia’s actions call into question “the feasibility of [the corridor’s] further functioning”. Saturday’s announcement was “the embodiment of Moscow’s course to destabilise global food security under the pretext of recent events in Sevastopol”, it said.

Kyiv called on the UN and Turkey as guarantors of the grain deal to “send Russia a clear signal about the unacceptable hold [on] hundreds of millions of people around the world, including Africa, Asia and Latin America”.

Mykhailo Podolyak, an adviser to Ukrainian president Volodymyr Zelenskyy, tweeted that Russia was guilty of “nuclear blackmail, energy terror, grain blockade”.

“Putin turned food, cold and prices to weapons against the world. Putin’s Russia is waging a hybrid war against Europe, taking Africa and Middle East hostage,” he said.

Earlier this month the Financial Times reported that the UN-backed deal, which had enabled Ukraine to export millions of tonnes of wheat, was under strain as a surge in the number of cargo ships aiming to cross the Black Sea had caused a backlog.

The UN said it was in touch with Russian authorities on the matter.

“It is vital that all parties refrain from any action that would imperil the Black Sea Grain Initiative which is a critical humanitarian effort that is clearly having a positive impact on access to food for millions of people around the world,” said Stéphane Dujarric, spokesman for the UN secretary-general.

“Russia in entering this agreement recognised its responsibility to ensure that the ongoing conflict does not jeopardise global food security,” said John WH Denton, head of the International Chamber of Commerce, which was involved in the development of the deal.

“There will no doubt be claims and counterclaims about today’s incident in the Black Sea. But both governments must recognise that there is a greater — and global — humanitarian imperative to restore the agricultural shipping corridor without delay,” Denton said.

“Letting this deal fail is not an option for the millions counting on it for their daily existence across the developing world,” he said.

>>> Weekend Papers Summary

Weekend Papers Summary

NEW YORK TIMES
-Paul Pelosi, 82, underwent surgery to repair a skull fracture after an intruder searching for Speaker Pelosi entered the couple’s home and assaulted him. The police said the man would be charged with attempted homicide and are investigating a motive. The attack heightened fears of violence ahead of the midterms.
-Elon Musk starts putting his imprint on Twitter. The billionaire began his tenure as Twitter’s new owner by announcing a content moderation council and meeting employees.
-An antisemitic campaign tries to capitalize on Elon Musk’s Twitter takeover. The campaign appeared to start after Mr. Musk had officially taken control of the company.
-Scarred by War, Ukraine’s children face years of trauma. Countless Ukrainian children who have suffered serious physical harm or the loss of a parent now face a challenging path forward.
-Fall rains have turned the earth in Ukraine to sludge, slowing, but not stopping, military advances.
-Russia ended the military draft that brought the war closer to ordinary citizens.
-Activists can stake out ballot boxes in Arizona, US judge rules. The judge said the activists’ actions did not constitute a “true threat” and that their right to assemble in public spaces is constitutionally protected.
-Obama to Georgia Democrats: ‘Resist the Temptation to Give Up:’Former President Obama is hitting the campaign trail to try to help Democrats energize voters and regain momentum in key Senate races.
-Senator Michael Bennet and Joe O’Dea battled over abortion and guns in a Colorado Senate debate.
-Ex-Capitol police officer found guilty of obstruction in Jan. 6 case. A jury found that the man had deleted Facebook messages in which he offered advice to a Jan. 6 rioter about how to avoid getting caught, prosecutors said.
-After years of ‘hell’ in ISIS detention camp, 17 Australians return home.
Dozens more Australians, many of them children, are still being held in Syria, but there is hope that the government will soon sponsor more releases.
-In retrial, man who helped run border wall charity is convicted. Timothy Shea was the only one of four defendants in the federal case to face a jury. Steve Bannon faces similar charges in state court.
-Kanye West faces costly fallout: a timeline: The entertainer, who now goes by Ye, has been widely condemned for a series of antisemitic comments. The fallout across industries has been swift.

THE FINANCIAL TIMES
-Elon Musk’s drawn-out acquisition of Twitter, which he launched in April but attempted to abort in July, has closed just as a decade-long boom in the digital advertising that fuels social media grinds to a halt, bringing share prices crashing down across Silicon Valley.
-The change in ownership at Twitter has been welcomed by those who view the billionaire entrepreneur as the man to overhaul a struggling business they believe never reached its full potential. Already, the self-declared “Chief Twit” has outlined grand plans to inspire a faster pace of product innovation and shift into new revenue streams, while transforming to a leaner operation. On Thursday, he began cleaning house, firing top executives including chief executive Parag Agrawal and head of safety, Vijaya Gadde.
-A decade-long era of breakneck growth in social media advertising has come to an abrupt halt. Who killed the boom? As the blame game began in Silicon Valley, Meta founder Mark Zuckerberg and Alphabet chief executive Sundar Pichai used earnings calls this week to point to the unmistakable storm clouds gathering over the global economy.
-Former Citigroup executive Michael Klein is set to combine his boutique advisory firm with Credit Suisse’s investment bank and is hunting for investors, after the Swiss lender entrusted the business to its former board member as part of a radical restructuring.
-After a spectacular crash earlier this year, the crypto industry’s most popular tokens have gone to sleep, suggesting amateur investors have fallen out of love with the once thrilling asset class and big funds have decided to keep their distance.
-Once Asia’s biggest manufacturer of aluminum extrusions, Zhongwang Holdings thrived in the 2000s as China’s booming property sector created strong demand for its products in construction. Then, as the economy cooled, its business started to collapse, a victim of its own overexpansion and leveraged asset buying.
-Financial market regulators in Europe’s main fund hubs have stepped up surveillance of derivative-linked funds used by UK pension schemes in an effort to prevent a repeat of the turmoil that roiled the gilt market last month. The Central Bank of Ireland has begun asking asset managers running so-called liability-driven investment (LDI) strategies for UK pension schemes to tell regulators before they do anything that would increase the leverage in those funds.
-ExxonMobil’s chief executive dismissed calls for a windfall tax on the oil industry and criticized European efforts to cap energy prices as the US supermajor reported a record quarterly profit of nearly $20B on Friday. The largest US oil company’s results were echoed at rival Chevron, whose bumper third-quarter profit of $11.2B was just shy of record earnings reported in its previous quarter, continuing a run of strong industry earnings on elevated oil and gas prices.
-Norway’s Equinor and Italy’s Eni have become the latest energy companies to report bumper earnings as the oil and gas industry heads towards its most profitable year ever. State-controlled Equinor said it would raise its special dividend by $0.20 to $0.70 a share for the third quarter after it achieved record adjusted pre-tax earnings of $24.3B for the three months to September, up from $9.8B a year earlier.
-Russia’s central bank has warned that the country’s large-scale military draft could lead to higher inflation, as it opted to keep its key interest rate unchanged for the first time after months of successive cuts.
-There must be no peace with Russia as long as Russian troops remain within Ukraine’s borders, Germany’s president said on Friday, in an impassioned state of the nation speech about Berlin’s foreign policy.
“In the face of evil, goodwill is not enough,” Frank-Walter Steinmeier, Germany’s ceremonial head of state, said in a public address outlining his country’s place in the world.
-Rishi Sunak pushed for a deal on Friday to counter small boat crossings of the English Channel by migrants in his first call with Emmanuel Macron, president of France. The new UK prime minister adopted a conciliatory tone, describing France as “our neighbor and ally” in contrast to his predecessor Liz Truss who at one point during her successful bid for the leadership of the Conservative party declined to answer whether Macron was a “friend or foe”.

NY POST
-Paul Pelosi managed to call 911 and alert the dispatcher to his dire situation without his eventual attacker even knowing. Pelosi, the husband of House Speaker Nancy Pelosi, discreetly called the emergency line when a hammer-wielding maniac broke into his San Francisco home at 2AM Friday.
The alleged attacker, David DePape, didn’t realize Pelosi had dialed his phone or understand that Pelosi was speaking in code.
-Donald Trump said Friday he’s glad Twitter is now in Elon Musk’s “sane hands” — but didn’t mention any prospect of returning to the platform as he touted his own social networking app Truth Social. “I am very happy that Twitter is now in sane hands, and will no longer be run by Radical Left Lunatics and Maniacs that truly hate our country,” the 45th president wrote in his Truth Social post. Trump was permanently banned from Twitter after the rioting at the US Capitol on Jan. 6, 2021, but Musk has previously vowed to reinstate the account.
-A robust, broad-based rally sent Wall Street stocks surging on Friday, as encouraging economic data and a rosier earnings outlook buoyed investor risk appetite ahead of next week’s much-anticipated two-day policy meeting of the Federal Reserve.
The Dow Jones Industrial Average rose by more than 800 points while the NASDAQ rallied more than 300 points. The S&P 500 ended the day up more than 2%. The rally led to a fourth straight week of gains, pushing the Dow to nearly 33,000, up 14% for the month. The index closed out its best month in more than 30 years.
-A substantial plunge in US home prices is likely “just beginning” as decades-high mortgage rates cause a downturn in the housing market, a prominent economist cautioned Friday. The warning from Pantheon Macroeconomics chief economist Ian Shepherdson followed more dismal data that showed a slowdown in housing activity. Pending home sales — a measure based on signed contracts — plunged 10.2% in September, according to the National Association of Realtors.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: With the economy softening and financial anxieties on the rise, the stakes are unusually high for a US midterm election


Cover Story:
-With the economy softening and financial anxieties on the rise, the stakes are unusually high for a US midterm election. Control of the White House will remain with President Joe Biden, a Democrat. But lawmakers control the country’s purse strings, and the next Congress will call the shots on a range of critical issues, from whether to send more aid to Ukraine as it battles Russia to how to steer the economy through a potential recession. “The policy and market implications really couldn’t be more dramatic,” says Chris Krueger, managing director of the Cowen Washington Research Group.

Interview:
-Barron’s interviews Nicholas F. Galluccio about the outlook for small-caps and where he is finding value, from a regional bank in Dallas to a refurbisher of aircraft parts. Longtime investor Galluccio has seen his fair share of market turmoil, but one thing has remained constant over nearly four decades: a focus on finding small stocks with big prospects. Galluccio is a portfolio manager at Teton Advisors, a $1.6B asset manager that specializes in small- and microcap stocks. He joined the firm, majority-owned by Mario Gabelli, a member of the Barron’s Roundtable, in 2008. A year later, he helped lead the spinoff of Teton from Gabelli’s Gamco Investors (GAMI), and served as CEO until 2021. Galluccio got his start in small-cap land in 1984 at Trust Company of the West, and hasn’t looked back since. “I found that I could add tremendous value by understanding smaller companies, since Wall Street research on that sector was scant, to say the least, and it has gotten even less so,” he says.

Tech Trader:
-Mark Zuckerberg is destroying shareholder value and his own reputation. Investors have had enough, but Zuckerberg maintains voting control of the company he started. There’s no way to stop him. On Wednesday afternoon, Meta disclosed a stunning third-quarter earnings report. Everyone knew that conditions were difficult—Meta, the parent of Facebook, Instagram, and WhatsApp, faces growing competition from TikTok, impaired ad targeting capability due to Apple ’s privacy restrictions, and a softening advertising market.

The Trader:
-The Dow has jumped 14.4% in October and is on pace for its best month since January 1976, when the blue-chip benchmark surged 14.41%. The other indexes have fallen short of those gains: The Russell 2000 has climbed 11%, the S&P 500 has gained 8.8%, and the Nasdaq Composite has risen a paltry 5%. That kind of outperformance by the Dow against the Nasdaq doesn’t happen very often. The Dow has outperformed the Nasdaq by more than nine percentage points this month, the most since February 2002, when it outperformed by 12.35 percentage points, and the seventh-largest monthly gap in 45 years. Blame the NASDAQ’s underperformance on its biggest stocks. This past week saw Meta Platforms shed 24% of its value, while Alphabet dropped 4.8%, Amazon.com fell 13%, and Microsoft slid 2.6%, all after reporting earnings. Only Apple, which rose 5.8% after reporting its results, finished the week higher.
-If President Xi Jinping’s consolidation of power in China demonstrates anything, it is that the old model of building products in Asia and shipping them back to America is no longer viable. While Xi places political gains over economic ones, the US appears ready to back a zero-China policy, says Gavekal Research’s Louis Vincent Gave. A zero-China world will have major repercussions. Gave notes that Chinese companies probably won’t want to buy US products—and not just chips. If the US can block chip sales, it can block sales of just about anything, which makes it unlikely that Chinese companies will want to buy a Boeing 737 Max or a Caterpillar truck when alternatives are available. “A zero-China world is a world in which US companies will struggle to sell more into China,” Gave writes. “It is a world characterized by weaker global trade and lower productivity.”

Features:
-Visa stock has been hit hard by the market selloff, but its earnings suggest that it has been hit too hard. For investors looking for quality at a reasonable price, Visa fits the bill. The 2022 pullback in the stock market has been almost indiscriminate, denting shares of companies both good and bad. Visa appears to be one of the former, a good stock that has slid 20% from its record high in July 2021, versus a 13% decline by the S&P 500 index in the same period. At a recent $203, shares are back near levels they hit in January 2020, before supercharged growth in digital payments drove shares during the Covid-19 pandemic.
-The Nov. 8 midterm election will decide whether Democrats retain control of both chambers of Congress, or Republicans win power in either—or both. Much is riding on that outcome, from tax policy to defense spending to the likelihood of a debt-ceiling fight. And much is at stake for the markets, as well. If the GOP takes either the House of Representatives or the Senate, expect no new taxes and no inflationary fiscal spending over the next two years. If Democrats retain control, the focus will be on passing social spending legislation and, potentially, raising taxes to pay for it.

European Trader:
-Dutch semiconductor-equipment maker ASML Holding has had a rough year as inflation sparked a consumer slowdown and a slump in demand that has weighed on the industry. ASML stock has lost 30.3% this year, to EUR 493.60 ($486.32). But some upbeat developments could drive the price higher. ASML is a leading manufacturer of lithography machines used by major semiconductor makers to print dense circuits used in everything from smartphones to autos. The company has pioneered extreme ultraviolet lithography, or EUV, which uses light with a shorter wavelength to etch smaller features, resulting in faster and more powerful chips. Taiwan Semiconductor, ASML’s biggest customer, warned in October of a cut to capital expenditure, noting weaker demand. Also, the US has new rules limiting the export of chips and related equipment to China. But the bulk of ASML’s revenue comes from machines making less sophisticated deep ultraviolet technology, or DUVs, which are unaffected by restrictions. And it doesn’t sell its EUV technology in China.

Emerging Markets:
-For many US companies, decoupling from China poses real difficulties. For their Japanese counterparts, it’s more like Mission Impossible. If Xi Jinping’s authoritarianism is shaking Tokyo’s post–World War II commitment to pacifism. It hasn’t affected economic ties much yet. Beijing is Tokyo’s top trading partner, with bilateral trade clocking in at $164B last year. For the US, China is dwarfed by Canada and Mexico. “Japan can’t survive economically without China’s business, even if it’s becoming more difficult to continue business as usual,” says Shigeto Nagai, head of Japan economics for Oxford Economics. Japan Inc. has tried to diversify. But investment has shifted only marginally to lower-cost Asian nations like Thailand and Vietnam. And Japan’s highly developed, if stagnant, economy remains a symbiotic fit for China’s dynamically developing one. Toyota Motor, for instance, is building an electric vehicle plant in China, joint venturing with internet giant Baidu on autonomous cars, and researching hydrogen fuel cells with Chinese partners.

Commodities:
-Exxon Mobil, the biggest US energy company, reported the highest profits in its 152-year history on Friday. The oil and gas giant said adjusted third-quarter earnings were $18.7B, or $4.45/share, on revenue of $112B. Analysts were expecting adjusted earnings per share of $3.86 and revenue of $105B. It was the second consecutive quarter of bumper profits for the firm, which has benefited from increases in energy prices this year. Shares climbed more than 2% in premarket trading but traded flat after the market opened. Exxon also announced a dividend hike to take effect in the fourth quarter. The company raised the quarterly dividend by 3 cents to 91 cents per share. After the hike, Exxon’s dividend yield is 3.4% at the current stock price, in the middle of the pack for large oil companies.

Streetwise:
-This week Jack Hough asks: Is China uninvestable? China has a billion people, one fellow explained. Its economy is small, but it’s embracing capitalism and freedom, so it’s bound to soar. Investing there now is like getting in early on US shares. Thirty years ago this past week, Eaton Vance launched a US mutual fund for investing in China. To its credit, Eaton Vance Greater China Growth has returned nearly 5% a year since inception, while the broad Chinese market has made next to nothing. But the US market has returned 10% a year. What went wrong? Not growth. China’s economy soared, just like the wholesaler said, even without capitalism. But studies over the years have blown holes in the assumption that gross domestic product and stock returns are closely linked. Today, US investors have their pick of world-class Chinese companies that trade on US exchanges, and a two-year rout has left many of them looking cheap. Alibaba Group Holding, has generated $89B in free cash over the past five years, versus $75B for Amazon. Its shares are lower than their debut price in 2014.