WSJ : Apple Looks to Boost Production Outside China

Apple Looks to Boost Production Outside China
iPhone maker tells suppliers it wants to manufacture more in India and Southeast Asia

TOKYO— Apple Inc. AAPL 0.17% has told some of its contract manufacturers that it wants to boost production outside China, citing Beijing’s strict anti-Covid policy among other reasons, people involved in the discussions said.

India and Vietnam, already sites for a small portion of Apple’s global production, are among the countries getting a closer look from the company as alternatives to China, the people said.

More than 90% of Apple products such as iPhones, iPads and MacBook laptops are manufactured in China by outside contractors, according to analysts. Apple’s heavy dependence on the country is a potential risk because of Beijing’s authoritarian Communist government and its clashes with the U.S., analysts have said.

Any move by Apple, the largest U.S. company by market capitalization, to emphasize production outside China could influence the thinking of other Western companies that have been considering how to reduce dependence on China for manufacturing or key materials. Such consideration has stepped up this year after Beijing refrained from criticizing Russia for its invasion of Ukraine and carried out lockdowns in some cities to fight Covid-19.

An Apple spokesman declined to comment. Asked generally about Apple’s supply chain in April, Chief Executive Officer Tim Cook said, “Our supply chain is truly global, and so the products are made everywhere.” He also said, “We continue to look at optimizing.”

Apple was seeking to diversify away from China before Covid-19 spread around the globe in early 2020, but those plans were complicated by the pandemic. Now the Cupertino, Calif., company is pushing again and telling contractors where they should be looking to build new manufacturing capacity, the people involved in the discussions said.

Lockdowns in Shanghai and other cities as part of China’s anti-Covid policy have caused supply-chain bottlenecks for many Western companies. Apple cautioned in April that the resurgence of Covid-19 threatens to hinder sales by as much as $8 billion in the current quarter.

China’s travel restrictions have meant that Apple has curtailed sending executives and engineers into the country over the past two years, making it hard to check production sites in person. Power outages last year also dented China’s reputation for reliability.

While many Western companies face similar issues in China, Apple’s size gives it bargaining power with contractors, said Ming-chi Kuo, a supply-chain analyst at TF International Securities. “Only a company like Apple can press for such supply-chain shifts,” Mr. Kuo said.

Still, people in the industry said many of the reasons Apple has long kept China as its manufacturing hub remain in place: a well-trained workforce, low costs relative to the U.S. and a deep network of parts suppliers that is hard to recreate elsewhere without years of effort.

With the exception of India, the pool of qualified workers in China exceeds the entire population of many alternative countries in Asia. Local governments in China have worked closely with Apple to ensure its contractors have adequate land, labor and supplies to assemble iPhones and other electronics in giant factories.

Chinese Premier Li Keqiang said Thursday that Beijing wants to be a hot spot for foreign investment and will work closely with foreign companies to make sure its rules are predictable.

Another advantage is that Apple can sell many of its made-in-China phones and computers in the same country, with China often accounting for about one-fifth of Apple’s global sales. Apple’s Mr. Cook said in January that the company had the top four bestselling phones in urban China.

“Given the size of the domestic market and the well-established ecosystem for manufacturing, China would stay at the head of the pack and handle more value-added work for companies like Apple,” an industry executive involved in the Apple supply chain said.

People who have spoken with Apple about its manufacturing plans said the company sees India as the closest thing to the next China, owing to its large population and low costs.

Taiwan-based assemblers Foxconn Technology Group 2317 -0.47% and Wistron Corp. 3231 -0.89% have already set up factories in India to produce iPhones mainly for that country’s domestic market, where Apple sales are growing rapidly. In April, Apple said it has begun producing the latest generation of iPhones, the iPhone 13 series, in India.

Apple is now speaking to some existing suppliers about expanding in India, including potentially production for export, the people said.

One problem with India is the difficulty China-based assemblers have setting up shop there because of chilly relations between New Delhi and Beijing, analysts and suppliers said. The two countries’ militaries fought a deadly clash along their disputed border in 2020, and recently have had a diplomatic dispute over Indian regulators’ treatment of Chinese smartphone maker Xiaomi Corp.

For that reason, China-based manufacturing contractors that do business with Apple are looking more to Vietnam and other Southeast Asian nations, according to people familiar with the matter.

Vietnam borders China and is already a smartphone manufacturing hub for Apple’s leading global rival, Samsung Electronics Co. South Korea-based Samsung has generally limited its exposure to China manufacturing.

India made 3.1% of the world’s iPhones last year, and the proportion is forecast to increase to 6% to 7% this year, according to research firm Counterpoint. China accounts for almost all of the rest.

One China-based manufacturing contractor, Luxshare Precision Industry Co. , has been making AirPods earbuds for Apple in Vietnam.

On recent calls with investors, Luxshare executives said some clients were worried about problems with power supply and pandemic restrictions–a reference to China’s challenges. The executives didn’t name the clients.

Luxshare said these clients were asking manufacturing partners to look outside China when they carry out key preliminary work for mass production, a stage known as new product introduction, or NPI. In this stage, contractors translate a brand’s product blueprints and prototypes into a detailed manufacturing plan.

Apple has told its manufacturing partners that it wants them to do more NPI outside of China, people familiar with the discussions said. If that happens, the non-Chinese sites would be more likely to develop into full-scale production hubs rather than simply copying plans developed in China.

Such steps require considerable investment by suppliers, analysts and suppliers said, which makes them uneasy at a time when the global economic outlook is clouded by high commodity prices, the war in Ukraine and stock-market gyrations.

Cash is important in uncertain times, a contractor executive said, but suppliers need to go where Apple goes if they want to keep the business.

FT : Airbus to amass €10bn as protection against future crises

Airbus to amass €10bn as protection against future crises
European jet maker wants to be ‘rock solid’ against emergencies such as Covid-19

Airbus is amassing €10bn as protection against future crises and to prepare for investment when needed in new generation aircraft, according to its chief financial officer.

Dominik Asam said the European champion wanted to be “rock solid” against emergencies such as the Covid-19 pandemic.

The manufacturer also wants to maintain the flexibility to invest in fresh programmes, particularly in the event of US rival Boeing developing a new jet, or consider acquisitions.

“I would call it a kind of an insurance policy,” Asam told the Financial Times in an interview.

Airbus has enjoyed a dramatic revival of its balance sheet since the height of the Covid-19 crisis, which caused a severe cash outflow.

Most airlines stopped ordering new jets and tried in many cases to cancel or defer orders. Airbus suffered a negative cash outflow of €4.4bn in the second quarter of 2020.

Full-year results in February revealed positive free cash flow of €3.6bn and net cash of €7.6bn, up from €4.3bn at the end of 2020. The company declared a dividend of €1.5 a share, its first for two years.

Asam said that despite the evident recovery it was “premature” to discuss whether investors might want Airbus to hand back more cash. The company still has a pension deficit to fund and will consider what to do once it has exceeded the net cash target.

The company also needed to be “prepared in case our competitor launches a new programme. We would have to consider how we would respond. That could cost a lot of money”.

However, Asam added: “We think currently there is quite a challenging environment for new programmes on the single-aisle side” as both the A320 family and Boeing’s 737 range of jets were already equipped with “super efficient engines”.

“We don’t see any major quantum leap in energy efficiency on the engine this decade.”

The European company’s robust financial health stands in stark contrast with that of Boeing, which had planned a new midsized jet to counter Airbus’ dominance before the two fatal crashes of its 737 Max jets, but now faces questions over its ability to fund a new aircraft programme.

The US company’s net debt spiralled since the start of the pandemic and is still at $45bn. Boeing’s previous management has come under fire for spending more than $40bn on share buybacks between 2013 and 2019.

“Covid brought a really unpleasant shock that you can see €12bn of cash flow out in just three quarters when things go wrong and that is precisely the time when you cannot raise equity,” said Sash Tusa, analyst at Agency Partners. Airbus, he added, has historically held high levels of cash that has “stood them in good stead, so why change it”. 

Asam declined to comment on Boeing’s strategy but said that Airbus had spent significantly more on research and development and capital expenditure last year than its rival.

Boeing, he said, has “cut much deeper than we have” through the crisis. “That is important. Normally progress in innovation and capacity comes at a cost.”

“Our investment . . . gives us the ability I hope to be on the front foot in this competitive environment to drive the next generation of aircraft and to finance initiatives like the [A350] freighter and the [long-range version of the] A321.”

Airbus’s biggest current challenge is its own plan to speed up production of its medium-sized A320 family of aircraft, which competes with Boeing’s 737.

It wants to make 75 of the planes a month from 2025 — up from a current monthly build-rate of about 50. The company has previously outlined plans to boost production to 65 a month by the summer of 2023.

Asam said the company has so much demand for its A321 jets that it has no delivery slots available for the next five years.

“For us, the rate 75 is required in the timeframe to 2025/26/27 to deliver to the customer demand we already have on the books, even assuming some attrition in the demand. We are sold out through 2027 on the A321.”

He conceded, however, that external risks remained, including current lockdowns in China and the cost of inflation in the supply chain.

“The path to deliver 720 aircraft this year is not a given. It is a target we have. The challenge around the guidance has increased.”

FT : How Elon Musk and Jack Dorsey aligned behind Twitter deal

How Elon Musk and Jack Dorsey aligned behind Twitter deal
Tech entrepreneurs’ close relationship has shaken up the social media company’s future

At a Twitter staff retreat in early 2020, Jack Dorsey, the company’s co-founder and then chief executive, invited a star guest to speak to his employees: Elon Musk.

The Tesla chief executive complained to the audience via video about the proliferation of spam bots on the platform — the same issue that he is now wielding to stall his $44bn offer for the social media company.

Beyond Musk’s continued obsession with the fake accounts, the appearance was also testimony to the close relationship between Dorsey and Musk, a billionaire “bromance” that has already dramatically shaken up the future of Twitter.

The pair’s alliance has fuelled speculation about whether Dorsey might play a key role in the company if a deal closes. But it has also angered many Twitter staffers who regard it as a betrayal of the social network, which is facing upheaval in the form of hiring freezes, cost-cutting measures and low morale and whose employees have been repeatedly mocked by Musk.

Regulatory filings earlier this week revealed that after Musk was first invited to join Twitter’s board in early April as a major shareholder, Dorsey “shared his personal view that Twitter would be better able to focus on execution as a private company”. Dorsey quit as Twitter’s chief executive last November but still remains on the board, whose members also include Salesforce chief executive Bret Taylor, tech entrepreneur Martha Lane Fox, and former Google chief financial officer Patrick Pichette.

According to people close to the situation, the advice stemmed in part from growing tensions between Dorsey and fellow Twitter board members over how the company should be run and issues including content moderation.

In the past, he had clashed in particular with activist fund Elliott Management, which previously held a seat on Twitter’s board. Dorsey saw the fund as too commercial and focused on the short term, according to several people. Some board members, meanwhile, grew increasingly frustrated by what they perceived as Dorsey’s lack of engagement.

Just a week after Dorsey said Twitter would be better off if taken private, Musk announced his plans to do just that. Upon the board agreeing to the takeover, Dorsey tweeted: “Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.”


“Jack’s philosophy was to negotiate a peace settlement with Elliott and then to build up to taking the company private, so those people would never be able to have their incentives impact a product as important to society again,” said a person close to him.

Dorsey maintained a professional relationship with board members but felt personally challenged by Elliott, which took a board seat at Twitter after investing in the company in early 2020, according to several people familiar with the meetings.

Elliott was concerned at the time that Dorsey was distracted by his second chief executive role at payments company Square and demanded a faster pace of product innovation. Dorsey was embracing notions such as decentralisation and blockchain technology and rejected Elliott as too capitalistic.

Throughout the deal process, Musk has taken public swipes at the board over some of its content moderation decisions, as well as the number of fake accounts on the site. Dorsey has joined him in criticising Twitter’s board and tweeted in April that it had “consistently been the dysfunction of the company”.

These comments can be attributed to Dorsey’s growing disdain for Wall Street and US politics, which dates back several years, according to people close to him.

Dorsey became disenchanted following multiple congressional hearings in which he was called to testify about content moderation issues and began to feel the company was being used as a political pawn, one person said.

At the same time, the board put Dorsey under more pressure to discuss and address big content moderation issues — such as the banning of former US president Donald Trump — which he was reluctant to do, people familiar with the matter said.

After the board called on Dorsey to devote his efforts full-time to leading Twitter in the wake of the January 6 assault on the US Capitol last year, he declined and eventually resigned from his position as chief executive, two people said.

These tensions did not manifest into rows or raised voices. According to those with knowledge of the situation, Dorsey remained unemotional and passive during board meetings, which irritated the more aggressive, highly engaged personalities in the room — although he has grown more brusque with the board in recent negotiations over the deal.

Twitter declined to comment. Square, which is now known as Block, and Elliott Management did not immediately respond to requests for comment.

While Dorsey recently said he would never return to the company as chief executive, he has discussed with Musk whether he may continue to “hold equity of the surviving corporation or one or more of its affiliates following the merger”, according to Twitter’s regulatory filings.

Outside of their shared interest in Twitter, the two entrepreneurs have found common ground on topics such as cryptocurrencies, open source technology and free speech. Both have achieved success as Silicon Valley founders who have run multiple companies at the same time.

“Jack was obviously ‘team Elon’ from day one,” said Stefano Bonini, a corporate governance expert at Stevens Institute of Technology.

The developments have unsettled many staff inside Twitter, according to three employees and former executives. The filings revealed that the pair were closer than employees had originally realised, one person said.

Some staffers feel that Dorsey, once a guru-like figure revered internally, is rewriting the history of the company by publicly criticising decisions on content moderation that happened while he was chief executive, and not backing the new chief executive, Parag Agrawal, who he played a large role in hiring.

Many are upset that he did not defend Twitter’s policy and legal chief Vijaya Gadde when, just days after the deal was agreed, Musk started to post criticism publicly of her moderation decisions, including blocking a news article about US president Joe Biden’s son Hunter. This prompted Gadde to receive a barrage of harassment and racist insults.

Nevertheless, some question the sincerity of the relationship. “Jack genuinely believes that taking the company private is the right thing. And if there’s an avenue to do it, and quick, that it’s worth it,” said one person close to him. “[But] these relationships are tentative. They’re built on men protecting their legacies.”

FT : German finance minister urges EU to rein in public spending

German finance minister urges EU to rein in public spending
Christian Lindner calls for ‘path towards reducing state debt’ despite economic turmoil

The EU’s decision to suspend its deficit and debt rules for an extra year is not an excuse for member states to persist with loose spending policies, Germany’s finance minister Christian Lindner has said, in a call for more fiscal discipline.

“The fact that member states are now able to deviate from the Stability and Growth pact doesn’t mean they actually should do that,” Lindner told the Financial Times.

The Stability and Growth Pact, which enshrines the EU’s fiscal rules, was put on hold early in the Covid-19 pandemic as economic output in Europe crashed.

The European Commission was expecting to reimpose the rules at the beginning of next year as a post-pandemic economic recovery took hold. But the war in Ukraine and the consequent surge in energy prices has led Brussels to extend the suspension for another year.

Speaking on the sidelines of a meeting of G7 finance ministers in the Rhine town of Königswinter this week, he implied fellow EU countries should take a leaf from Germany’s book.

“We will not be taking advantage of the general escape clause [but] will return to our national debt brake, which is anchored in our constitution,” he said, referring to Germany’s strict ceiling on deficits.

The pact, which aims to keep member states’ borrowing under control, stipulates that public debt should not exceed 60 per cent of gross domestic product and budget deficits should not top 3 per cent.

Some member states have been advocating for reform, saying certain kinds of strategic government spending — such as investment in defence or mitigating climate change — should get preferential treatment.

But Lindner made it clear he opposed that, and warned against treating the suspension as an opportunity to rethink the whole EU rule book. “The decision to extend the escape clause shouldn’t be seen as a precedent or a prelude to reform of the fiscal rules,” he said.

He acknowledged that there was scope for “more flexibility” in the way they are applied, but insisted the EU needed a “long-term reliable path towards reducing state debt . . . In terms of our ultimate goal we should become tougher, not softer”.

With inflation on the rise across the G7 group of leading economies, Lindner argued that swift action was needed to return to macroeconomic stability and what he described as a “neutral fiscal stance”.

“There is a real danger of stagflation,” he said. “That’s why we have to act urgently.”

Lindner, leader of the liberal and pro-business Free Democrats, has the reputation of a fiscal hawk, though one with strong pro-European sympathies. He is an ardent proponent of returning to the debt brake as quickly as possible.

He has often warned that some countries in Europe had accumulated too much debt in the course of the Covid-19 crisis and must now make efforts to repair their public finances, especially against the backdrop of rising inflation in the eurozone.

“If you take a look at the data, you see that we need to stop our expansive fiscal policies and stop intervening in the market economy with these big state spending programmes,” he said. “We have to reduce our budget deficits and . . . send supply side signals for more growth.” 

Lindner also said he was opposed to the EU raising new debt to cover Ukraine’s financing needs, along the lines of the €800bn EU Next Generation Fund, which was designed to help member states rebuild from the economic crisis brought on by the pandemic.

“That was a one-time decision,” he said. “Germany does not support the idea of repeating the joint issuance of debt.”

He drew a distinction between calls for a new round of joint borrowing and the €9bn of financial aid the EU is discussing for Ukraine, describing the latter as “a different tool we’ve used in the past, based on national guarantees that are then used to jointly support third countries”.

Lindner also touched on a proposal that EU capitals should consider seizing Russia’s frozen foreign exchange reserves to cover the costs of rebuilding Ukraine after the war, which was floated earlier this month by Josep Borrell, the EU’s high representative for foreign policy.

He said Germany was “open” to the idea, but “we still need to figure out the legal issues and the consequences for the international rules-based order”. 

Lindner said he was against seizing the private assets of Russian oligarchs, however. “Countries based on the rule of law guarantee private property,” he said. “The hurdles for confiscating it are very high.”

He proposed that private actors such as oligarchs should be persuaded to “contribute towards reparations for Ukraine, on a voluntary basis”. “There should be a political discussion about that . . . which I would like to be part of,” he said.

FT : Big Pharma lobbies for slice of G20 fund to prepare for next pandemic

Big Pharma lobbies for slice of G20 fund to prepare for next pandemic
Industry says it will reserve production capacity for low- income nations for a fee if border bans are ended

Big Pharma is offering to reserve vaccines, medicines and tests for low-income nations in preparation for the next pandemic in exchange for a fee and a commitment that governments not impose restrictions on trade.

Ahead of talks on pandemic preparedness at the World Health Organization next week, the industry is lobbying to win a slice of a multibillion-dollar pandemic preparedness fund proposed by the G20 to cover the cost of reserving manufacturing capacity at existing plants.

The International Federation of Pharmaceutical Manufacturers and Associations argues the mechanism would enable the rapid distribution of supplies to low- and middle-income nations in the event of a new Covid-19 variant or the next pandemic.

But the initiative faces resistance from critics of Big Pharma, who argue that waiving intellectual property rights on medicines and localising manufacturing in Africa is a better way to ensure equality of access to vaccines, treatments and diagnostics in the developing world.

Some civil society groups have criticised Moderna, Pfizer and BioNTech, which made the effective Covid vaccines based on messenger RNA technology, for rushing to sign supply deals with rich nations ahead of Covax — a body set up to supply low income countries.

Public Citizen said the Ifpma proposal would provide a “corporate subsidy” to the established industry and act against efforts to democratise vaccine manufacturing by basing more production in Africa and sharing intellectual property.

The Ifpma proposal, which is contained in a policy document seen by the Financial Times, says the scheme would only work if rich nations commit to allow trade in a future crisis and eschew the type of “vaccine nationalism” and export bans that blighted the world’s initial response to Covid.

India halted exports of vaccines for five months in 2021 when it suffered a wave of Covid infections. The US invoked wartime powers that compelled private companies to fulfil domestic contracts ahead of other orders, and the EU imposed export controls at the height of the pandemic.

“Restrictions in place during Covid-19 undermined the ability to manufacture and deliver vaccines and treatments equitably,” said the paper, which calls on governments to support “predictable, increased demand” from underserved countries to support manufacturing capacity between pandemics.

“When we hit bumps and glitches with some vaccines — either because of export bans, delays in development, or challenges in scaling up [during this pandemic] — the companies with the most sought-after vaccines were oversubscribed by rich countries,” said Thomas Cueni, Ifpma director-general.

“A willingness from innovative pharma companies to put aside part of their production upfront for vulnerable populations (as determined by health authorities during pandemics) in lower-income countries would be a real game changer.”

The request from Ifpma comes as policymakers gather at the WHO World Health Assembly, which begins Sunday, to discuss how to strengthen pandemic prevention, preparedness and response and learn from the mistakes made in tackling Covid-19. This includes efforts at the G20 to establish a Pandemic Preparedness and Global Health Security Fund hosted at the World Bank, which would aim to disburse up to $10bn a year over the next five years to boost the capacity of health systems in low- and middle-income nations.

So far just $1bn has been pledged to the fund, which is prompting concerns in industry that “pandemic fatigue” and other geopolitical crises, such as the Ukraine war, could dent governments’ resolve to finance pandemic preparedness.

The Ifpma proposal has attracted support from the Coalition for Epidemic Preparedness and Innovations and Gavi, the Vaccine Alliance, which are co-leaders of Covax. Both are concerned that the world remains ill-prepared to tackle the next Covid variant or a new pandemic.

Dr Richard Hackett, Cepi chief executive, said reserving vaccines for low-income nations could potentially help to tackle a problem Covax faced in the early days of the pandemic when it was unable to sign advanced purchase agreements for vaccines with industry because it had no funds.

“With this type of financing mechanism in place then industry partners could then say we can reserve this portion or some reserve [manufacturing] capacity for procurement for global equity,” he said.

Dr Hackett said it would be better to have a more equitable distribution of pharmaceutical manufacturing across middle- and low-income nations, but that the proposal was a good interim solution until this is achieved.

>>> B arron’s Weekend Summary

Barron’s Weekend Summary: The S&P 500 dropped 3% and has now fallen 18.7% from its Jan. 3 all-time high. A slide of 20%, which it touched Friday before bouncing back, signifies a bear market.

Cover Story:
-The S&P 500 dropped 3% and has now fallen 18.7% from its Jan. 3 all-time high. A slide of 20%, which it touched Friday before bouncing back, signifies a bear market. The Dow Jones Industrial AverageDJIA +0.03% declined 2.9%, its eighth consecutive week of losses, matching its longest losing streak since 1932. The NASDAQ CompositeCOMP –0.30%, already in a bear market, slid another 3.8%, and is down 28.2% from its early January peak. With losses like that, we’d expect to find an end-of-the-world headline that drove the selloff, but good luck finding any single trigger for the week’s carnage. Instead, it was an accumulation of news that seemed to weigh on the markets.

Interview:
-Dan Ivascyn moved from the small town of Oxford, Mass., to the C-suite of Pimco, one of the world’s largest and most successful bond investors. His journey began with a love of talk radio. As a youngster, Ivascyn would tune in to hear nationally syndicated host Bruce Williams deliver advice on money and life: “I always had some general interest in investing,” says Ivascyn, Pimco’s group chief investment officer. “[Williams] used to do a financial-planning radio show that was quite popular when I was growing up, and I would listen to that as a young kid.”

Tech Trader:
-The sharp selloff in technology shares has already had a severe impact on investors’ portfolios, and now it’s also causing considerable ripples in the venture capital market. Start-up valuations are getting slashed and VC firms are slowing their commitments to new deals. Barring any quick reversal in the market’s mood, conditions on Sand Hill Road are likely to get even tougher from here.

The Trader:
In an otherwise brutal week for retail, TJ Maxx parent TJX reported an earnings beat, despite light sales. That was a welcome reversal from other big players, whose higher revenue failed to flow through to the bottom line due to margin-crunching supply-chain and freight costs. Ross Stores stock lost more than 20% on Friday—its worst day since 1993—as earnings, revenue, same-store sales, and guidance all came in well below expectations.
“TJX was the exception in that they’re protecting margins right now, even at the expense of sales,” says BMO Capital Markets analyst Simeon Siegel.
By contrast, Walmart and Target reported higher sales than expected, but lower profit and margins. The pair noted that consumers, especially at the lower end of the income scale, are pulling back from discretionary categories as the cost of essentials rises.
-Spirit Airlines is almost certainly going to get bought. That makes its stock a good bet in a roiling market.
To recap: In early February, Spirit agreed to be bought by Frontier Group Holdings in cash and stock, a bid now valued at $19.73/share. In April, JetBlue Airways made an unsolicited cash offer of $33/share for Spirit, attempting to steal it away from Frontier. Despite the better price, Spirit announced this past week that it would stick with Frontier, citing its belief that the JetBlue deal wouldn’t pass regulatory muster.

Features:
-European Central Bank President Christine Lagarde reiterated her concerns over cryptocurrencies and desire for regulation. “My very humble assessment is that it is worth nothing, it is based on nothing, there is no underlying asset to act as an anchor of safety,” Lagarde said in an interview on Dutch television, according to media reports. The ECB president said she is particularly worried about people who don’t understand the risks associated with the volatile digital currencies and “will lose it all.” That, she said, “is why I believe that that should be regulated.”
-Boeing investors have needed good news and this week they got some when the company’s Starliner spaceship successfully docked with the International Space Station late Friday. “Today’s successful docking of the Starliner is another important step in this rehearsal for sending astronauts into orbit safely and reliably,” said Boeing Defense, Space & Security President and CEO Ted Colbert on Friday.

European Trader:
-Eli Lilly and Incyte said Friday the European Medicines Agency’s Committee for Medicinal Products for Human Use issued a positive opinion for Olumiant to treat adults suffering from severe alopecia areata. Lilly said in a press release that the opinion marks the first step toward European regulatory approval of the oral JAK inhibitor, which is now referred to the European Commission for final action.
Eli Lilly stock rose 2.9% on Friday to $294.59. Incyte fell 1.8%. “This is a significant step for Olumiant on the path to becoming the first and only centrally authorized medicine in Europe for adults with severe alopecia areata,” said Eli Lily senior vice president and chief customer officer, Patrik Jonsson, in the release. “We eagerly anticipate additional regulatory decisions around the world this year.”
Emerging Markets:
-The EU could crush Russia’s global oil sales with: insurance. Underwriters in Germany and Scandinavia might be as effective as tanks and missiles in the struggle for Ukraine. As usual with the EU, however, deploying them is not simple. Three months into Russia’s invasion of Ukraine, Russian oil sales are substantially dodging the Western banking sanctions intended to constrict them. Moscow exported record crude volumes in April, says Jim Mitchell, head of Americas oil analysis at Refinitiv. “Divert is a better term than constrict for what’s happening,” he says. The EU set a de facto deadline for itself to do better: a continental summit slated for May 30-31. Attention has focused on the bloc itself stopping oil purchases from Russia. Putin could divert much of those flows to willing customers in India or China.
-Western unity over Russia’s invasion of Ukraine has been swift, solid, and backed by arms and funds. But there is rising unease in low- and middle-income countries about the geopolitical stakes in which they have been swept up. On March 2, 141 countries voted at the United Nations to condemn Russian aggression in Ukraine. On April 7, only 93 countries voted to remove Russia from the UN Human Rights Council as a result of its actions. Countries representing 59% of the world’s population, including nine out of 10 of the world’s most populous countries, voted against or abstained from that April vote. Decisive action is needed to shore up a cross-regional and global unity before it is too late.

Commodities:
-The scorching-hot wheat market looks set for a cool-down. A combination of drought, war, and a wheat export ban in India has sent prices for the grain sky high. But they might now be reaching the end of what has been an epic rally, experts say. “The market is so overbought right now,” says Jim Roemer, agricultural expert and author of the Weather Wealth newsletter. “The market squeeze should begin to end in June or July.”
-US gasoline prices are at record highs, averaging more than $4.50/gallon at the pump, and surpassing $4 in all 50 states for the first time. But, says Natasha Kaneva, J.P. Morgan’s head of global commodities research, prices could climb over $6 this summer; because, sanctions have cut Russian oil and refined-fuel exports. US refiners, motivated by rising European prices, are shipping more diesel and gasoline there; they’re also selling some 100,000 barrels a day more than usual to Mexico and other nations. In the past five years, the US has averaged 65M barrels of gasoline in storage in mid-May. This year, fewer than 55 million are available.

Streetwise:
-This week, Jack Hough wants to talk to a Target manager: “Is there a manager I can speak with about Target TGT +1.26% stock? I’m not one to complain, but last Wednesday’s performance didn’t live up to expectations. Target is supposed to do two things: take market share and beat the S&P 500. It outperformed by four points last year, 21 points in 2020, and 65 points in 2019. It was down heading into last week, sure, but not by as much as the market. Then blammo, a 25% drop in a day, the biggest since 1987.”

Barrons : Chocolate Maker Lindt Needs These Ingredients to Lift the Stock

Chocolate Maker Lindt Needs These Ingredients to Lift the Stock
Swiss chocolate maker Lindt & Sprüengli has left a bitter taste in investors’ mouths in the past few months.

The Zurich-based confectioner, famous for its bunnies wrapped in golden foil and Lindor truffle balls, said in January that labor and supply chain issues at its Russell Stover unit in the U.S. would hurt group sales growth in 2022.

This news hit the stock (ticker: LISN.Switzerland), which was at a peak of 123,433 Swiss francs ($126,827) in December. The shares have tumbled 15.74%, to a recent CHF 104,000. The slump came after Lindt’s strong performance in 2021, when consumers bought affordable treats for themselves and gave luxury chocolates to friends they could not meet during the pandemic.

But the shares could be nearing the bottom, and are worth a look for brave investors. In March, Lindt upgraded its midterm sales growth guidance to 6%-8% from the previous range of 5%-7%.

The renewed confidence in growth comes as the premium sector outperforms other parts of the overall chocolate market, which is forecast to expand an average 2.4% annually over the next three years, according to Stifel analyst Pascal Boll, extrapolating Euromonitor data. But Boll forecasts Lindt, with its focus on premium chocolate, will grow an average 7.4% annually over the same period.

Lindt can benefit from some inflationary headwinds. The company is a market leader in many regions and its upscale brands give it flexibility to raise prices.

“We believe moderate inflation (not the very strong price dynamic we currently see) can benefit Lindt in the next years, as the company should be able to raise prices slightly beyond the cost impact—supporting the margin,” Boll says.

In 2021, annual net income rose 53.2% to CHF 490.5 million, up from CHF 320 million francs in 2020. Sales in 2021 were CHF 4.6 billion, 15% above the prior year’s total.

Lindt—which opened its first shop in 1845 and has more than 500 around the world—operates 11 production sites and employs more than 14,000. The big confectioner has a market value of CHF 14.2 billion. It trades at an expensive multiple of 44.1 times this year’s expected earnings.

Adalbert Lechner will replace Chief Executive Officer Dieter Weisskopf, who is retiring by the end of the year after six years at the helm. Ernst Tanner, executive chairman of the board, said that, under Weisskopf, Lindt’s balance sheet and income statement “have been further strengthened, and regions with faster growth have been expanded.”

The business has gained market share in new markets such as Brazil, China, and Japan, as well as in its more traditional markets such as Germany. Another area of growth is North America, which accounted for about 37% of 2021 group sales. Lindt didn’t trim promotional spending during the pandemic, and that should help the company increase market share.

Research by analysts at Bernstein showed that Lindt’s growth momentum from the pandemic has continued, even as life returns to some normality. Analyst Bruno Monteyne said that Americans in 2017 consumed only 50% to 60% as much chocolate as Europeans, based on a kilograms-per-capita basis.

Data from Euromonitor and Stifel Research show that Lindt has increased its market share in the U.S. to 8% from just over 4% in 2011, compared with fairly flat growth over the same period for the general confectionery market.

That’s good news for investors.

“This seems a perfect moment to get exposure again to Lindt,” Monteyne said in a note about the stock.