TheChek News Flow

Stocks in Asia struggled to gain traction and US equity futures fluctuated as negative sentiment persisted in markets amid fear that global central banks will keep hiking rates until inflation is tamed, raising the risk of a recession. 

Equities made small gains in Japan and dropped in Hong Kong and Australia. Trading in Asia was muted by a holiday in Sydney and South Korea on Monday and the week-long closure of Chinese markets for Golden Week.  Oil surged to trade near $82 a barrel on indications the OPEC+ alliance is considering slashing production by more than 1 million barrels a day to revive plunging prices when it meets this week. Commodity currencies gained. Those moves increase the risk of more inflation that may prompt central banks to take further aggressive policy action. The pound fell for the first time in five days and European stock contracts lost more than 2% on Monday amid thin volumes, with political and economic turmoil in the UK and challenges facing Credit Suisse Group weighing on sentiment. Prime Minister Liz Truss put the blame for the controversial decision to remove the highest rate of UK income tax on Chancellor of the Exchequer Kwasi Kwarteng, but the government intends to follow through with the plan despite the market chaos. Confidence among Japan’s large manufacturers unexpectedly worsened for three straight quarters following the yen’s rapid depreciation and deterioration in the global economic outlook, adding another headwind for local equities. The yen weakened past 145 per dollar, nearing the level where Japanese authorities intervened last month to support the currency. Brazil-linked global assets will be in focus on Monday as the country’s presidential election is headed to a run-off vote on Oct. 30. 

Nikkei +0.50% Hang Seng -1.78% CSI -0.58% Shanghai -0.55% Shenzen -1.30%

Eur$ 0.9809 CNH 7.1417 CNY 7.1159 JPY 144.80 GBP 1.1185 CHF 0.9848 RUB 59.8951 TRY 18.5539 WTI$ 81.70+2.77% Gold 1,664.20 +0.22% BTC 19,165 -0.36% ETH 1,289.97 -0.97%

S&P +0.18% Nasdaq -0.12% EuroStoxx -1.02% FTSE -0.91% Dax -1.10% SMI

Macro :

- Get Ready for Another Bear-Market Rally, Strategist Emanuel Says

- London Gold Dealer Runs Out of Bars as Truss Budget Shocks

- UK Government Expected to Reverse Scrapping of 45% Tax Rate: BBC

- S&P Cuts Turkey’s Debt Rating Further into Junk on Loose Policy

- KKR Plans Infrastructure Strategy for High-Net-Worth Clients

- Biotech Stocks Head to First Quarterly Gain in More Than a Year

- World Economy Roiled by Simultaneous Shocks Echoing 2007 Anxiety

Keep an eye on :

- 1U1 GY : 1&1 Sees FY Ebitda About EU690.0M, Est. EU680.8M

- ADP FP : Aéroports de Paris 2022, 2023 Traffic Outlook Confirmed

- ARYN SW : Aryzta FY Revenue Beats Estimates

- BAVA DC : Bavarian Nordic Enters Deal on Supply of Monkeypox Vaccines

- CCL LN : Carnival Drops to Lowest Level in Decades on Slow Travel Rebound - 23%

- CSGN SW : Credit Suisse Postpones Planned Real Estate Fund Capital Raise

- DIS US : Disney Appoints New Board Member in Standstill Deal With Loeb

- EDV LN : Endeavour’s Burkina Faso Ops Unaffected by ‘Political Situation’

- ENI IM :*GAZPROM WON'T DELIVER ANY RUSSIAN GAS TO ITALY ON SATURDAY: ENI

- FC Bayern : CVC, KKR Held Early Talks for German Football Investment: FT

- G IM : Generali Says It Assesses M&A Opportunities on Continuous Basis

- IDIA SW : Idorsia Gets Positive Results From Phase 3 Daridorexant Study

- INTC US : Intel’s Self-Driving Technology Mobileye Unit Files for IPO

- LAZ US : Lazard Hires Nina Weiden to Boost Telecom Investment Banking

- MYOV US : Sumitomo Offers to Buy All of Myovant in Deal Worth $2.5 Billion

- NG/ LN : National Grid’s Tender for Extra Gas Closes on Monday

- NOM NO : Nordic Mining Conditionally Agrees $55m Investment From Fund

- ORK NO : Orkla Latvija Sells Convenience Business; Won’t Disclose Price

- RNO FP : Renault CEO Says EV Prices Won’t Come Down Soon: Welt am Sonntag

- RNO FP : French Car Sales Pursue Rebound to Pick Up 5.5% in September

- RWE GY : RWE to Buy Con Edison Unit for $6.8 Billion With Qatar Backing

- SAA LN : AdvancedAdvt Says Offer to Buy M&C Saatchi Lapsed

- SAS SS : SAS Sets Out Plan to Raise Equity, Wiping Out Shareholders

- SHL GY : Siemens Healthineers Plans Change of Auditor to PwC

- STLA IM : Stellantis’s Tavares Sees Microchip Shortage Lasting to End-2023

- TE FP : Technip Energies Gets Contract for Ineos’ Ethane Cracker

- TEF SM : Caixabank to Cut Stake in Telefonica to 3.5%

- TSLA US : Tesla Shows Latest Optimus Robot Prototype With Opposable Thumbs

- TSLA US : Tesla 3Q Deliveries Misses Estimates: Snapshot

- UTDI GY : United Internet FY Ebitda Forecast Matches Estimates

- VSAT US : Defense Contractor L3Harris Near Deal to Buy Part of Viasat's Government-Systems Unit, Sources Say -- WSJ

- VOD LN : Vodafone Portugal Agrees to Buy Telecom Operator Nowo

The industry’s gravity-defying post-pandemic run faces its greatest challenge yet as bad economic news mounts. That, plus what else to watch for this week.

When Mitsuru Nishizaki sends his last model down the runway at the Ujoh show in Paris on Tuesday, it could mark the end of a charmed era for luxury — and the fashion industry as a whole. A growing chorus of industry executives and experts are warning that the post-pandemic shopping boom is coming to a close.

Luxury brands in particular have had an incredible run almost from the moment the lockdowns lifted in 2020, a gravity-defying streak that has surprised even seasoned industry watchers. Of 15 publicly traded luxury companies, 13 beat analysts’ consensus forecasts for revenue and profits in the second quarter, according to Bernstein. By many indications, the third quarter is shaping up even better.

“People have embraced an attitude of you only live once and are spending money in the process,” Bernstein analyst Luca Solca said in a video sent to the bank’s research customers earlier this month.

We are now in the fourth quarter, and signs of trouble are getting harder to brush off. Inflation is largely to blame. While some wealthy shoppers are happy to pay higher prices for handbags, and consumer spending in the US continues to exceed expectations, it’s inevitable that people will spend less on clothing as more of their disposable income goes to food and energy costs. The US Federal Reserve, the Bank of England and other central banks have vowed to bring inflation down. Their primary mechanism to do so is to reduce consumption by raising interest rates, a painful solution for retailers.

Mid-tier and mass-market brands are bearing the brunt of it so far. Last week, VF Corp., which owns Vans, The North Face and Supreme, was the latest retail giant to lower its short-term outlook. Nike reported strong sales but said inventories jumped 44 percent, and margins are getting tighter due to higher markdowns and rising freight costs, among other factors. This week, Levi Strauss, as good a bellwether for global fashion demand as any, reports quarterly results on Thursday.

Luxury brands are better insulated but not immune to the downshift in the broader economy.

The gloomy mood is one way to interpret the fashion week chatter about how the luxury market feels increasingly oversaturated and in need of new ideas. Insiders love to grouse about too many logos, unnecessary collaborations and the triumph of merchandising over creativity. But those critiques carry more weight when there’s less certainty that consumers are actually going to buy all this stuff. The uncertain outlook for consumer spending, even among the one percent, is going to be on the minds of buyers as they descend on showrooms in Paris.

There are plenty of variables that will determine whether this is a short, shallow dip or a prolonged downturn. As consumer confidence falls, which retailers will turn to markdowns to draw reluctant shoppers to stores? How bad will the energy supply crunch get in Europe this winter? Will China’s economy continue to slow down?

“It’s on a knife edge at the moment,” said Neil Saunders, managing director at GlobalData. “It’s just unrealistic to expect demand to continue to hold up.”

What Else to Watch This Week

Paris Fashion Week Day 7: Balenciaga, Valentino, Givenchy, GmbH

Brazil holds the first round of its presidential election

The Duty Free & Travel Retail Global Summit begins in Cannes

Paris Fashion Week Day 8: Stella McCartney, Sacai, Thom Browne, Zimmermann, Lanvin, AZ Factory

Paris Fashion Week Day 9: Chanel, Miu Miu, Louis Vuitton, Ujoh

Levi Strauss results

Euro Area retail sales for August

Thebe Magugu fashion show at V&A on Oct. 7

Golden Week (China) ends

US unemployment data for September

The rapper-designer is working with designers including Hood by Air’s Shayne Oliver to stage a last-minute show set for Monday afternoon, according to sources.

PARIS – Ye, the musician and designer formerly known as Kanye West, is set to unveil a new collection during Paris Fashion Week on Monday afternoon, BoF has learned.

The Yeezy founder, who publicly feuded with his label’s partners Gap and Adidas in recent weeks, prepared the surprise show with designers including Hood by Air’s Shayne Oliver, according to industry sources. The new work will be presented at an intimate venue in Paris’ 8th arrondissement for as few as 50 invitees.

Since late August, Ye has used his Instagram platform to blast executives from Gap, which signed a multi-year partnership with his Yeezy line in 2020, as well as Adidas, the German sportswear giant whose longstanding Yeezy x Adidas venture accounted for over 5 percent of revenues last year.

Ye criticised Gap for taking too long to roll out his products in retail stores and for not allowing him to stage a fashion show for the collection. The rapper and retailer announced they would terminate the partnership in mid-September.

Sources could not confirm how Kanye’s new collection would be branded. The ongoing dispute with Adidas, whom Ye claims had been releasing products without his involvement or sign-off, could limit his use of the Yeezy name. Ye has claimed Adidas offered him a $1 billion buyout for his shares in the venture.

Group considers reducing output by 1 million barrels a day, as economic slowdown hurts demand

OPEC+ is set to consider Wednesday its sharpest production cut since the start of the pandemic to help prop up falling oil prices, a move that could put pressure on global economic growth.

The Organization of the Petroleum Exporting Countries and its Moscow-led allies, collectively known as OPEC+, are weighing a reduction of more than 1 million barrels a day, delegates in the group said.

Concerns about a slowing global economy have dragged oil prices down at their fastest pace since the Covid-19 pandemic began in early 2020, prompting OPEC+ to consider ways to prop up the price of oil. Any move by OPEC+ to raise oil prices could put further pressure on Western consumers already hurting from high energy costs while also helping Russia—one of the biggest energy producers in the world—fill its state coffers as it wages war against Ukraine.

Falling oil prices are often a pressure-release valve for the global economy, reducing costs as demand falls in a cycle that repeats itself. OPEC+ often holds itself out as a regulator of the oil market, aiming to keep supply and demand balanced, but a production cut would support prices at the same time they are at historically high levels.

Because the ultimate decision will be hotly debated, the group decided to meet in person in Vienna on Wednesday for the first time since the start of the pandemic, the delegates said. Other options being considered include a smaller reduction of 500,000 barrels a day or as much as 1.5 million barrels a day, the delegates said.

Russia and Saudi energy ministries didn’t immediately respond to requests for comment.

The option to cut more than 1 million barrels a day is backed by Russia, the group’s biggest non-OPEC partner. But the cartel’s biggest exporter, Saudi Arabia, has some reservations on the size of the cut, the delegates said.

The U.S. has asked OPEC+ to pump more oil to help bring down the price of gasoline. OPEC+ accelerated some production cuts over the summer ahead of President Biden’s visit to Saudi Arabia and made a small increase in August but has since worked to reverse those moves.

OPEC+ agreed last month to reduce oil production for the first time in more than a year, saying it would cut about 100,000 barrels a day amid fears of a global recession.

The move ended an 18-month era of production increases for OPEC+. The group slowly brought crude back onto the market after a sharp cut during the pandemic, when demand plunged.

The price of Brent crude, the global oil benchmark, is down 23% this quarter, falling to $87.96 a barrel last week amid its swiftest decline since 2020.

The Saudis have pursued a more aggressive oil policy this year as oil prices rose during the war in Ukraine. Higher oil prices have helped Saudi Arabia become one of the world’s fastest-growing economies this year, providing a cash infusion to an economic overhaul launched by Crown Prince Mohammed bin Salman, the kingdom’s de facto ruler.

In one way, an OPEC+ cut won’t make much meaningful difference in the day-to-day oil market. The group has been undershooting its targets by more than 3 million barrels a day for much of the year, with Russian production falling and large producers such as Nigeria and Angola struggling to invest enough to raise output.

Labour chair demands list of attendees for event on day of chancellor’s controversial ‘mini’ Budget

The chair of the Labour party has written to her Conservative counterpart calling on him provide a full list of attendees at a private champagne reception attended by Kwasi Kwarteng just hours after his controversial “mini” Budget.

Jake Berry, Tory chair, has defended the chancellor’s meeting with financiers at the home of a wealthy hedge fund manager although City traders were shorting the pound following his announcement of unfunded tax cuts. Berry insisted on Sunday that City investors and other donors should be “lauded” by the general public.

Anneliese Dodds, Labour chair, has written to Berry urging him to produce a full list of attendees at the event and whether they paid a fee to be there or pledged donations. She also asked whether civil servants were present and minutes taken, “and if not, then why not” given that sensitive information may have been disclosed.

“Many people are sickened by the image of champagne-quaffing Conservative donors encouraging the chancellor to press ahead with further tax cuts for billionaires, at the same time as many members of the British public are unable to access a mortgage,” she wrote.

But Berry said on Sunday that nothing untowards should be read into the fact that Kwarteng socialised with financial figures soon after the tax cut announcement, which sent sterling into freefall and prompted a sharp rise in gilt yields.

The Tory chair insisted that no confidential information was discussed during the gathering, where he said Kwarteng consumed soft drinks rather than champagne.

“We often have champagne receptions for donors in the Conservative party and, in fact, these people should be lauded because we don’t have public funding of political parties and these are people who make money and donate to political parties in the same way as they do for the Labour party and the Liberal Democrats,” he told Sky News.

Berry said the event was not dominated by hedge funds but instead was attended by “some of Britain’s leading entrepreneurs”. Pressed on whether some hedge fund managers were at the event, Berry conceded this was the case: “There were, or there was I think one that I know of.”

That would appear to be a reference to Andrew Law, head of hedge fund Caxton Associates and a Tory donor, who hosted the private event.

One of the attendees said: “There were 20 or 30 people. It was a briefing by the chancellor after the budget so everything he said was in the public domain, nothing new. It was not a celebration, it was a post-Budget briefing to the people who are likely to be investing in the UK.”

According to The Sunday Times, the guest list included stockbroker Howard Shore, banker Sir Henry Angest, financier Lord Leigh of Hurley and William Salomon of Hansa Capital, along with other figures from industries including hospitality, healthcare and property.

Kwarteng used to work at Odey Asset Management, a hedge fund whose founder Crispin Odey has shorted sterling in recent weeks.

Scrutiny of Alex Mashinsky grows after crypto lender was left with hole in balance sheet

Celsius Network founder Alex Mashinsky withdrew $10mn from the crypto lender just weeks before the company froze customer accounts as it spiralled towards bankruptcy, according to people familiar with the matter.

The withdrawals of crypto by Mashinsky in May this year came as customers were pulling their assets from the company in large numbers, spooked by the wider turbulence in crypto markets and concerns about Celsius’s financial health.

Celsius froze withdrawals on June 12, leaving hundreds of thousands of retail investors unable to access their savings. The company filed for bankruptcy in July with a $1.2bn hole in its balance sheet.

The business had a peak last year of $25bn-worth of crypto assets deposited by customers attracted by the outsized interest rates Celsius offered, as high as 18 per cent on certain cryptocurrencies.

The withdrawal revelations will intensify scrutiny of Mashinsky, who resigned as chief executive on Tuesday, and raise questions about when he knew Celsius would be unable to give customers their assets back.

Details of Mashinsky’s transactions are set to be submitted in court by Celsius in the coming days as part of a broader disclosure by the company of its financial affairs.

A spokesperson for Mashinsky said he and his family still had $44mn of crypto assets frozen with Celsius even after the withdrawals, which he had voluntarily disclosed to the official unsecured creditors committee (UCC) in the bankruptcy proceedings.

“In mid to late May 2022, Mr Mashinsky withdrew a percentage of cryptocurrency in his account, much of which was used to pay state and federal taxes. In the nine months leading up to that withdrawal, he consistently deposited cryptocurrency in amounts that totalled what he withdrew in May,” the spokesperson said.

“He continues to be committed to working with and uniting the community around a recovery plan that will maximise coin and liquidity for all,” they added.

Mashinsky, 56, co-founded Celsius in 2017 and was the public face of the company, appearing in weekly video addresses on YouTube where he pushed his message of financial liberation from the banking establishment.

In late 2021, Celsius was valued at $3bn as it raised $600mn in equity investment from US investment firm WestCap and Canada’s second-largest pension fund Caisse de dépôt et placement du Québec.

Despite Mashinsky’s public bullishness, the company struggled behind the scenes with weak internal systems for managing its assets and at times it paid out more to customers in interest than it was generating from lending.

Celsius also suffered a series of investment losses in 2021 and 2022 that contributed to its downfall but were not disclosed to customers. Last month, the Vermont state financial regulator alleged that Celsius was insolvent as early as May 13 this year.

The company saw huge outflows of assets in May as crypto markets were rocked by the collapse of two interlinked cryptocurrencies, TerraUSD and Luna. Their demise began a series of company failures across the crypto industry.

Just days before Celsius froze withdrawals, the crypto lender reassured customers it had adequate reserves and declared “full speed ahead”.

Mashinsky, a former telecoms entrepreneur, faces the prospect of being forced to return the $10mn he withdrew from Celsius. Under US law, payments by a company in the 90 days ahead of its bankruptcy can be clawed back for the benefit of all creditors.

Around $8mn of the assets Mashinsky withdrew was used to cover taxes that arose from income the assets had generated on Celsius, one of the people familiar with the matter said.

The remaining $2mn was units of Celsius’s native “CEL” token. The withdrawal had been pre-planned and was linked to Mashinsky’s estate planning, the person added.

Mashinsky was Celsius’s biggest shareholder and has said he is among its biggest creditors in bankruptcy. Earlier this week he apologised to customers in his resignation letter, saying he was “very sorry about the difficult financial circumstances members of our community are facing”.

Elon Musk’s auto maker requires another boost in quarterly deliveries to meet annual target

Tesla Inc. TSLA -1.10% vehicle deliveries rebounded strongly in the most recent quarter, though the record figure was short of Wall Street’s forecasts and leaves the company requiring a further increase in the final three months of 2022 to meet annual growth objectives.

Tesla on Sunday said it had delivered 343,830 vehicles to customers in the three-month period ended in September, up from about 255,000 in the prior quarter that was dented by a temporary shutdown of its factory in China.

Deliveries were up roughly 42% from last year’s third quarter, when Tesla handed over 241,000 vehicles. Analysts surveyed by FactSet forecast that Tesla would deliver around 371,000 vehicles in the third quarter.

Tesla on Sunday signaled the delivery shortfall reflected changes it is making to its processes which, it said, “led to an increase in cars in transit at the end of the quarter.”

The adjustment, the company said, was necessary because as production volumes grow, vehicle transportation capacity is “becoming increasingly challenging to secure” at a reasonable cost during the last few weeks of the quarter, when its shipments typically surge.

2020

'21

'22

0

50000

100000

150000

200000

250000

300000

350000

400000

Tesla has a long-term goal to increase output by an average of 50% annually and, in July, said that was still attainable despite production disruptions. To reach that level, Tesla would need to roughly deliver a record-setting 495,000 vehicles in the fourth quarter. Wall Street thinks the company will struggle to reach 1.4 million, per FactSet, and deliver 457,000 vehicles in the final three months of this year.

Tesla has been ramping up output to keep pace with surging demand and to recover from the idling of the Shanghai factory, its largest, because of local Covid-19 restrictions earlier this year. Tesla also had trouble getting its new factories in Germany and Texas up to speed.

“These factories don’t just magically work,” Tesla Chief Executive Elon Musk said at the company’s annual shareholder meeting in August. “So still a lot of work to do.”

To keep pace with customer orders, Tesla has boosted production capacity across its plants in the U.S., Europe and China. The company produced 365,923 vehicles in the third quarter, up from about 238,000 in the year-earlier period.

Tesla’s record deliveries are expected to help the company post its highest ever quarterly sales and a record profit of $3.34 billion when it reports third-quarter results, topping the $3.32 billion first quarter profit. Quarterly results are scheduled for Oct. 19, Tesla said.

Tesla delivered roughly 325,158 combined Model 3 sedans and Model Y compact sport-utility vehicles during the third quarter, up from about 232,000 from the year-earlier period. The company delivered 18,672 of its luxury Model S sedans and Model X SUVs, up from nearly 9,300 last year.

Tesla on Friday unveiled a prototype of its humanoid robot, called Optimus, that Mr. Musk says could be available for wider purchase in three to five years and cost less than $20,000. He also detailed plans for Tesla to further expand its advanced driver-assistance technology, among other initiatives, at the company’s second AI Day.

Shares of Tesla are down about 25% this year with inflation soaring and supply-chain disruptions weighing on wider investor sentiment. Mr. Musk’s bid for social-media company Twitter Inc. also has weighed on Tesla’s stock. Mr. Musk has sold some Tesla shares to pay for the transaction he is trying to abandon.

Mr. Musk previously expressed concern about the global economy but struck a more optimistic tone at the shareholder meeting in August.

“I think inflation is going to drop rapidly,” Mr. Musk said, noting that because Tesla has to buy supplies months out, it can see where prices are headed. “The interesting thing that we’re seeing now is that most of our commodities, most of the things that go into a Tesla—not all but more than half—the prices are trending down in six months.”