FT : Generali chief will not be ‘distracted’ by billionaire shareholders

Generali chief will not be ‘distracted’ by billionaire shareholders
Philippe Donnet says insurer is focused on all investors as it announces new 3-year strategy

The head of Italy’s biggest insurer Generali has insisted he will not be “distracted” by the criticism of billionaire shareholders, as the company announced its first share buyback in more than a decade and a new three-year strategy.

The 190-year-old insurer has been at the centre of a drama gripping corporate Italy since Leonardo Del Vecchio and Francesco Gaetano Caltagirone, Generali’s second and third-largest shareholders, in September launched a campaign to shake up the group’s management and improve its performance.

The move by Del Vecchio and Caltagirone has also put them at odds with Generali’s largest shareholder, Mediobanca. Their critique centres on a perceived lack of ambition in dealmaking at Generali over the past couple of decades, according to people familiar with the matter.

But as Generali on Wednesday laid out a strategy focused on investment and better cash generation, chief executive Philippe Donnet said the management team was “not focused on answering the concerns [and] criticism” levelled against the group, which is valued at €29bn.

“The management team is not distracted, the management team is fully focused on doing what we have to do for the best interest of all shareholders,” he told the Financial Times. Generali has an “independent management team” that is not pursuing the interest of any particular shareholder, he added.

The strategy announcement has been seen as key to whether Generali’s management can keep other investors onside ahead of a scheduled leadership vote at next year’s annual shareholder meeting.

Generali said in a statement that it was on track to meet or exceed the yardsticks set under its 2018-21 plan, paving the way for a €500m buyback — its first in a decade and a half.

The newly minted plan for 2022 to 2024 aims for net cash generation of more than €8.5bn over the period, and cumulative cash dividends of €5.2bn to €5.6bn, both an improvement on the previous period.

Generali also plans to pour €1.1bn into a digital transformation programme, which management hopes will enhance its interaction with customers and reduce its headcount through automation.

“This is part of where we can reduce cost and mitigate the impact of the salary inflation which might be significant in the next few years,” Donnet said.

The company will also create a €250m venture fund to invest in insurance start-ups. A person close to Delfin, Del Vecchio’s holding company, has previously criticised Generali as a “fintech laggard”.

Generali has jettisoned its return-on-equity target, which group chief financial officer Cristiano Borean said was because of volatility created by a change in accounting standards, whereas he expects the company’s earnings and cash generation to be smoother.

The insurer also aims to generate €2.5bn to €3bn of cumulative free cash flow that could be redeployed to fund mergers and acquisitions in insurance and asset management, a reduction from the €3bn to €4bn target in the last three-year plan. The earlier figure was boosted by disposals, whereas the current target did not include any planned divestitures, said Donnet.

The three-year plan was “not a response to an alternative plan that does not exist”, he said, but was the “most ambitious possible” strategy for the group. “It would be very dangerous for a company to have a plan relying only on M&A, which by definition is the only thing that you cannot plan,” he said.

Donnet added that the economic threat of the Omicron variant of coronavirus should not affect the earnings targets. He was “much more concerned”, he said, about the broader risks posed by climate change or the possibility of a widespread global cyber attack.

FT : China struggles to shrug off weak consumer spending and property woes

China struggles to shrug off weak consumer spending and property woes
New home prices decline at steepest rate since 2015 while retail sales come in below forecasts

China’s economic data indicated further slowing momentum last month, with lingering caution in consumer spending adding to pressure from the country’s struggling property sector.

Retail sales, a crucial gauge of consumption, rose just 3.9 per cent year on year in November, well below economists’ forecasts of 4.7 per cent. A slight improvement in industrial activity, which grew 3.8 per cent, was overshadowed by a drop in investment across the real estate industry.

New home prices lost 0.3 per cent, their steepest fall since early 2015 and a third consecutive month of declines. Property investment rose 6 per cent in China over the year to the end of November, compared with a 7.2 per cent rise by the end of October.

Weakness across China’s vast real estate sector, which accounts for more than a quarter of gross domestic product, is weighing heavily on the economy at a time when the government has reaffirmed its commitment to strict coronavirus prevention measures.

Big real estate developers have struggled to bring in enough cash to repay their debts, with several defaulting over recent months, hitting market confidence.

“We expect the property downturn to continue into the first half of 2020 before real estate activity recovers somewhat in the second half, as anxiety about property developer defaults eases,” said Tommy Wu, China economist at Oxford Economics.

The consultancy pointed to housing starts and housing sales by floor space, which were 22.4 per cent and 16.3 per cent lower, respectively, in November year on year. New home prices fell across China’s 70 biggest cities compared with October, according to data from the National Bureau of Statistics, but they were still higher than in the same month last year.

Last week, Evergrande, the world’s most indebted developer, was finally declared to be in default by US rating agency Fitch after months of missed interest payments on its international bonds.

Ahead of the group’s payment deadline last Monday, the People’s Bank of China pumped close to $200bn in liquidity into the financial system by cutting the reserve requirement ratio, an important rate for banks. The decision was widely interpreted as an attempt to calm markets over the developer’s problems.

Officials have signalled that they would ease monetary policy to support growth, but they are also expected to commit to measures to cool the property sector and reduce debt levels.

Shimao, a more highly rated firm, was the latest developer to find itself at the centre of a market sell-off this week. The company’s $1bn bond maturing next year fell to 64 cents on the dollar, its lowest level on record.

In a statement released by its Shanghai subsidiary this week, the company said its operations are “normal”.

>>> US After Hours Summary: Quiet afternoon; SKIL +4.5%, COHU +4.4% higher on ea

After Hours Summary: Quiet afternoon; SKIL +4.5%, COHU +4.4% higher on earnings/guidance; Senate votes to increase debt ceiling

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: SKIL +4.5%, COHU +4.4% (updated mid-term financial target models), BOXD +0.1% (provides Q3 operating metrics)

Companies trading higher in after hours in reaction to news: DWAC +5.1% (enters into technology and cloud services agreement with Rumble), VIR +4.3% (preclinical data highlight the significant antigenic shift of the Omicron variant), LAUR +2% (raises existing share repurchase program to $600 mln), REE +1.9% (forms strategic agreement with Hitachi America to accelerate the adoption of EVs), EQC +1.8% (authorizes an additional $150 mln for share repurchases), ACB +0.9% (ACB and XXII announce IP license agreement with CRON), AVIR +0.4% (introduces updated program for AT-527 in COVID-19; to close out Phase 3 MORNINGSKY trial), PFE +0.3% (FDA approves XELJANZ for treatment of active ankylosing spondylitis), INCY +0.3% (FDA accepts for Priority Review of sNDA for ruxolitinib for treatment of vitiligo), MFA +0.3% (increases dividend), OPY +0.3% (declares special cash dividend of $1.00/sh), AA +0.1% (de-risks certain US pension plans through additional annuity contracts), KBR +0.1% (awarded eight prime contracts on GSA's ASTRO program), GCO +0.1% (signs three-year licensing agreement with ETONIC)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SGH -0.4% (reaffirms NovQ prior guidance)

Companies trading lower in after hours in reaction to news: LEGN -4.7% (announces public offering of $300 mln of ADSs), LESL -4.4% (announces offering of 12.5 mln shares by selling stockholders and concurrent share repurchase agreement), TTC -0.2% (increases dividend), CRON -0.1% (ACB and XXII announce IP license agreement with CRON), LYB -0.1% (files mixed securities shelf offering)

WSJ : Study Finds Two Pfizer Vaccine Doses Offer Less Protection Against Omicron

Study Finds Two Pfizer Vaccine Doses Offer Less Protection Against Omicron Than Against Delta
Protection against hospitalization falls to 70% from 93% and against infection to 33% from 80%

The first large real-world study of how vaccines hold up against Omicron found that two shots of Pfizer Inc. and BioNTech SE’s Covid-19 vaccine lowered the risk of hospital admission by 70% for patients infected with the highly mutated variant.

The study, by South Africa’s largest private health insurer Discovery Ltd., found that while Omicron reduced vaccine effectiveness against infection to 33% from 80% for Delta, its effect on protection against hospitalization was less marked, falling to 70% from 93%.

While the study provides important clues about how vaccines hold up against Omicron, it is difficult to draw wide-ranging conclusions from South Africa, which has a much younger population than Europe and the U.S. and also has a different mix of immunity, with high levels of prior infection but a relatively low vaccination rate. For conclusions that may be more relevant for the U.S., health authorities will look closely at the U.K., whose demographic profile and vaccination rates are more like the U.S. and where the variant is already well established.

It comes as many governments rush to roll out booster shots more widely in the hope that—as early studies have suggested—a further shot will shore up protection against Omicron.

“It’s very heartening to see this result and that we still have vaccine effectiveness [against hospital admission] that is still greater than 50%,” said Glenda Gray, president and chief executive officer of the South African Medical Research Council, which collaborated with Discovery.

The study examined 211,610 Covid-19 test results in adults reported since the beginning of September. It used that data to compare vaccine effectiveness during September and October, when Delta was dominant, with the three-week period between Nov. 15 and Dec. 7, when Omicron took hold. Discovery Health insures around 3.7 million people in South Africa.

The study—the largest to provide clues about how the vaccines hold up against Omicron in the real world—suggests that although the new strain can easily infect people who have been fully vaccinated, it is still much less likely to cause serious illness when it does. The research hasn’t yet been published or peer-reviewed in a scientific journal and scientists not involved in the research said the conclusions could change as more data emerges.

The Omicron variant was first identified by scientists in South Africa around three weeks ago and has driven a sharp rise in cases there. It has now been detected in 77 countries across the world, according to the World Health Organization. On Friday, scientists estimated Omicron’s R number in South Africa—a measure of how many people the average infected person goes on to infect—stood at 2.5, higher than any earlier variant.

New daily cases averaged 20,488 for the week ending Dec. 13, nearly double the week before. On Monday, in an indication that a large number of infections are being missed, health authorities said 31% of tests had registered a positive result.

The findings build on earlier, laboratory-based research from various groups around the world examining how well the blood of vaccinated people neutralizes the Omicron variant. Those studies found that antibodies in the blood of people who had received two doses of vaccine were much weaker against Omicron than earlier strains.

Last week, Pfizer executives predicted that the vaccines would hold up better against severe disease because the immune cells that fight the virus once it takes hold could still recognize most parts of Omicron’s spike protein, which the virus uses to enter cells.

Neutralizing antibodies act as the body’s first line of defense, aiming to prevent infection by stopping the virus from entering cells. Other parts of the immune system, such as T-cells, come into play to prevent serious illness once infection takes hold.

The Discovery study also found that protection against infection from Omicron appeared to wane over time in vaccinated people. People who had received their second dose in the two to four weeks before the Omicron period were 56% protected against infection with the new strain. That protection fell to 25% for people who had received their second dose three to four months earlier. In the study, infection referred to a positive PCR test result, so is likely to reflect symptomatic disease, the researchers said.

Protection against severe disease appeared to decline with age, but the researchers cautioned that the data was uncertain and could be complicated by a larger waning effect in older groups, who would have received their shots earlier. The researchers also found that Omicron eroded the protective effect of prior infection.

The study couldn’t examine the real-world effect of a third shot because South Africa only recently approved boosters, and hasn’t yet started rolling them out. But the researchers said it was likely that a booster would strengthen protection against infection. Pfizer and BioNTech last week said a third dose restored antibodies to a level where they could block the Omicron variant in lab tests.

“The vaccines were designed to protect against hospitalization and death,” said Shirley Collie, chief health analytics actuary at Discovery Health. “These breakthrough infections we do expect to see. This is something a boosting strategy would mitigate.”

Separately, the study found that, adjusting for various factors, including age, adults infected with the Omicron variant were 29% less likely to need hospitalization than during the country’s first wave, which was dominated by a strain known as D614G. It also found that, among those who were admitted to hospital, the disease appeared to be less serious, with 5% of hospitalized patients needing intensive care, versus 22% during the Delta wave.

The researchers said they couldn’t determine whether Omicron is inherently less virulent than earlier strains, or whether the lower rate of hospitalization resulted from a high level of immunity in the population from either prior infection or vaccination.

Officials from the World Health Organization on Tuesday also cautioned against premature conclusions that Omicron causes milder disease. And even if it does prove to be a milder variant, the sheer number of cases could lead to a surge in hospitalizations and overwhelm health systems.

“A more transmissible virus can do just as much damage or even more than one that is more severe but less transmissible,” said Bruce Aylward, a senior adviser to WHO Director General Tedros Adhanom Ghebreyesus. “We need to see this over time.”

The South African study also found that children have a 20% higher risk of being admitted to hospital with the virus compared with the first wave, but researchers said the figure may just reflect a higher infection rate among children being admitted for non-Covid care, because hospitals routinely test all admissions.

WSJ : SEC Takes Rare Court Loss in Insider-Trading Case

SEC Takes Rare Court Loss in Insider-Trading Case
Federal judge says agency’s case centering on a Gartner acquisition in 2017 was based too much on speculation

WASHINGTON—The Securities and Exchange Commission suffered a rare defeat in an insider-trading case, with a judge finding the regulator failed to prove a Virginia mortgage banker traded on illicit tips.

A federal judge in northern Virginia on Monday dismissed the civil fraud case against Christopher J. Clark, whose bullish and risky trades just before a 2017 acquisition were spotted by regulators’ high-powered surveillance databases. The SEC alleged Mr. Clark’s brother-in-law, a former corporate accounting officer, told him days before the deal that Gartner Inc. IT -2.01% would buy CEB Inc.

U.S. District Judge Claude Hilton dismissed the SEC’s claims after regulators presented their evidence and before the case was sent to the jury. “There’s just simply no circumstantial evidence here that gives rise to an inference that he received the insider information,” Judge Hilton said Monday, according to a transcript.

The SEC brings an average of about three dozen insider-trading cases a year, and many lawsuits involve more than one defendant. Most traders settle before going to trial. The SEC rarely loses when it does go to court, said John Reed Stark, a former SEC enforcement lawyer now teaching at Duke Law School.

“Here you really had suspicious trading, highly suspicious trading, but no evidence of any communication about a conspiracy or wrongful act,” Mr. Stark said. “This is an out-and-out, clear-cut loss” for the SEC, he added.

Mark Cummings, a lawyer for Mr. Clark, said the outcome underscores that regulators can rely too much on statistical evidence, such as trades made just before an event that caused a company’s stock price to rise or fall. Data alone isn’t sufficient to support a civil or criminal case against a trader, he said.

Mr. Clark, 53 years old, refused to settle the SEC’s lawsuit because he had good reasons for believing CEB shares would rise, Mr. Cummings said. His research had nothing to do with his brother-in-law, William Wright, who had worked as CEB’s corporate controller.

“The lesson here is suspicious trading is not necessarily illegal trading,” Mr. Cummings said. “Just because the circumstances look bad, there can be an equally innocent reason for the activity.”

The SEC sued Messrs. Clark and Wright in December 2020, alleging they communicated several times in the month before technology research firm Gartner acquired CEB, a management consulting company, and that Mr. Wright shared news of the undisclosed deal with his brother-in-law.

Mr. Wright agreed in October to settle the SEC’s lawsuit without admitting or denying the claims. He paid a $241,000 fine and agreed to be barred for two years from serving as an officer or director of a public company. “He’s grateful for Judge Hilton’s ruling,” said Kevin Muhlendorf, an attorney for Mr. Wright.

An SEC attorney at Monday’s hearing suggested the agency could appeal the judge’s decision. An agency spokesman declined to comment further.

To pay for his trades, Mr. Clark sold investments owned by his wife, borrowed money from a credit union and took a loan against his car, according to the SEC. Mr. Clark bet on the shares because he believed CEB’s stock price was undervalued at the time and would climb as the broader market roared higher after Donald Trump’s election in November 2016, Mr. Cummings said.

Mr. Clark’s bets on CEB options weren’t out of character with his previous trading, according to court records. He regularly traded CEB options over the years, usually betting that the shares would fall after the company reported earnings, according to the SEC’s complaint.

The SEC alleged that some of Mr. Clark’s earlier trades followed phone conversations with his brother-in-law, although court records didn’t detail what was said.

Judge Hilton said he was unpersuaded by the SEC’s argument, which wasn’t strong enough to allow a jury to infer that Mr. Clark had access to material nonpublic information.

“The government can speculate that he made a little too much money, he was a little too successful or more successful than he ought to be, so therefore he’s getting insider information,” Judge Hilton said, according to the hearing transcript. “But there’s no evidence of it.”

FT : England to drop all 11 countries from coronavirus travel red list

England to drop all 11 countries from coronavirus travel red list
Move signals acceptance by UK government that Omicron variant can no longer be contained

The UK will remove all 11 countries from England’s coronavirus travel “red list” of travel restrictions, signalling that ministers accept that the Omicron variant can no longer be contained.

The UK’s Covid-19 testing system remained under pressure on Tuesday, with people in England unable to book PCR tests for a few hours while the website for ordering rapid lateral flow antigen tests remained closed to new bookings.

Sajid Javid, health secretary, told the House of Commons that hotel quarantine for travellers arriving in England from the red list countries would cease from 4am on Wednesday.

“Now that there is community transmission of Omicron in the UK and Omicron has spread so widely across the world, the travel red list is now less effective in slowing the incursion of Omicron from abroad,” he said.

The 11 African nations were added to the red list after South African authorities became the first to alert the world to the Omicron variant in late November. The countries on the list, which requires a mandatory 10-day hotel quarantine, are Angola, Botswana, Eswatini, Lesotho, Malawi, Mozambique, Namibia, Nigeria, South Africa, Zambia and Zimbabwe.

As public health is a devolved matter, Javid’s decision only applies to England but the administrations in Northern Ireland, Scotland and Wales typically follow suit.

Since the emergence of the Omicron variant, all arrivals to the UK are required to undertake a day two PCR test and must isolate at home until they receive the result. Paid for lateral flow tests are also required before departure.

Those with knowledge of the discussions said that ministers had concluded it was “pointless” maintaining the red list that will restrict travel over the Christmas period given the new variant was spreading so rapidly. The decision was backed up by public health advice, officials said.

Transport secretary Grant Shapps said that the testing regime would be reviewed in the first week of January.

“As always, we keep all our travel measures under review and we may impose new restrictions should there be a need to do so to protect public health,” he said.

Javid hinted that those currently in quarantine may be able to leave early and added he was “persuaded” by pleas to reimburse those who had paid for hotel stays.

Travel sector bosses said the removal of the 11 countries from the red list was welcome but argued that the rapid spread of Omicron also negated the need for PCR tests and quarantine for travellers.

“The UK testing requirements for vaccinated international arrivals continue to stifle businesses across the inbound tourism industry, which employs over 500,000 Brits,” said Joss Croft, chief executive of UKInbound, a trade association.

Data from Trivago, the online travel agent, shows that the rate of holiday cancellations in the UK has increased from 5 per cent in October to around 25 per cent at the beginning of December.

Javid also said that the bottleneck with people accessing lateral flow tests was not because of a shortage of supply.

“The situation at present is the warehouses at UKHSA (UK Health Security Agency) have plenty of stock,” he said. “But the distribution channel has been limited although they have added to that significantly in recent days.”

Downing Street said that it was working with private companies such as Amazon to boost availability of lateral flow tests.

“Royal Mail are freeing up additional delivery slots to become available in the next few days and we’re working with a range of businesses including Amazon to further expand capacity,” the prime minister’s spokesperson said.

UKHSA has said that it was issuing “record numbers of rapid test kits”, including 1.6m tests on Monday. “There is no shortage of lateral flow tests. More tests should become available for home delivery every few hours.”

On PCR tests, the agency said that appointments were available but conceded that “high demand can lead to temporary reduced availability in some areas”. More PCR appointments are made available to book every afternoon, the agency said.

FT : How did the UK reach 200,000 Omicron infections in one day?

How did the UK reach 200,000 Omicron infections in one day?
Scientists warn rates of the coronavirus variant will continue to rise ‘like a rocket’

Health secretary Sajid Javid sent shockwaves through parliament on Monday when he revealed that an estimated 200,000 people in the UK had been infected with the Omicron coronavirus variant that day.

If Omicron infections continue to double every 2.5 days, as current estimates suggest, there will be a million people infected this coming Sunday alone.

Why are Omicron infection estimates so much higher than confirmed cases?
On Monday, when the UK Health Security Agency estimated around 200,000 new Omicron infections occurred, there were 59,610 confirmed cases of Covid-19, of which around 37,000 are estimated to have been Omicron. The daily caseload was the fifth highest recorded during the pandemic.

Yet the 200,000 figure, which is based on modelling by UKHSA, could be an underestimate, according to to health officials. “It’s ripping up like a rocket . . . close to everyone is going to get it,” said Carl Pearson, a research fellow in mathematical modelling at the London School of Hygiene and Tropical Medicine.

However, infections and cases are two separate metrics. Chris Jarvis, an assistant professor in biostatistics at the London School of Hygiene and Tropical Medicine, said a large proportion of infections are asymptomatic and would be largely missed by testing.

“Even if every single one of those 200,000 people did a test, which they won’t, they won’t arrive in our case data till the weekend at the earliest,” because of reporting lags, he said.


Prof Steven Riley, director-general of data and analytics at UKHSA, said that as infection rates rose further, testing capacity may affect how many infections are picked up in case data.

“The actual peak number of cases will probably revolve around peak testing capacity,” he told MPs at the science and technology select committee on Tuesday. In the week ending December 13, the average daily PCR testing capacity was just above 800,000 tests per day.

Which age groups and regions are driving Omicron infections?
Cases are currently rising fastest in London, where they have more than doubled in the past week and are now climbing at more than 10 per cent per day, effectively doubling every 6 days.

Next is the east of England, where daily case growth stands at 8 per cent, equivalent to one doubling every nine days.


The two regions have the highest prevalence of Omicron in England and as the variant accounts for a larger share of cases in the coming days, these number of total cases is expected to rise.

Within London, growth in case numbers is being driven by young adults. Cases among people aged 20-34 are increasing by 15 per cent every day, with the number doubling in less than five days.

“London is much younger and so will have higher mixing rates, and travel from South Africa is probably going to come via London, so importations happened there first,” said Jarvis.


Will rapidly rising Omicron infections put pressure on hospitals?
Preliminary research from South Africa suggests the likelihood of an Omicron case ending up in hospital is lower than in earlier waves of Covid-19. Since November 15, the risk of a Covid-positive adult being admitted to hospital has been 29 per cent lower than during the first wave, according to a report from Discovery Health, South Africa’s largest private healthcare provider.

But if infections reach the numbers projected, even a small fraction of hospitalisations could still put massive pressure on the NHS.

“If we have a million infections a day, even a very small proportion of those individuals requiring hospitalisation will put significant impact on healthcare,” Susan Hopkins, chief medical adviser at UKHSA, told MPs on Tuesday.


The latest modelling published by the London School of Hygiene and Tropical Medicine estimates daily admissions in England may peak at around 2,000 in mid January, just over half of last winter’s peak.

The UK government is banking on high vaccine booster coverage to restrain infection rates and has pledged to offer every eligible adult in England a third dose before the end of the year.

On Tuesday, the rule requiring a 15-minute observation period after the administration of the mRNA Covid vaccines from Pfizer/BioNTech and Moderna was suspended temporarily to “help the NHS get more jabs in arms more quickly to give people vital protection this winter”, Javid told MPs on Tuesday.

But Christina Pagel, professor of operational research at University College London, warned that while they can make a “big difference”, “boosters alone can’t catch up with and tame” fast-rising infections because immunity “takes about a week to kick in” and because 11.5m adults are “not yet eligible”.

“Omicron has been doubling every two days and even if that slows over the coming weeks, there is no doubt that we will see a large number of new infections over the next four weeks,” she said.

Prof Thomas House, a mathematical epidemiologist at Manchester University and member of SPI-M modelling group, said he “would not be surprised at all” if daily hospital admissions hit similar levels to the UK’s first and second waves. “For the average person, your personal risk is low,” he said. “The problem is that because it’s going to be a lot of us all at once, it’s going to have this societal effect.”

How high will the infection numbers go?
Hopkins said that over the three weeks that she and her colleagues had been monitoring the Omicron variant, its growth rate seemed “to be shortening, rather than lengthening”.

But experts stressed that eventually this growth rate will slow. “It has to slow eventually,” said Jarvis. He explained that fall-off in the growth rate would be “a function of what restrictions we have in place, how many people have been infected, how many people have been vaccinated and behaviour changes”.

Prime minister Boris Johnson has acknowledged there is a “huge spike coming”, but Downing Street maintains that the government’s current measures — including work from home orders, mask mandates and the accelerated booster programme — will be enough to combat Omicron’s spread.

FT : Chanel names Unilever veteran as global chief

Chanel names Unilever veteran as global chief
Consumer goods group’s head of HR Leena Nair to lead French label

Chanel has appointed Leena Nair, a 30-year veteran of consumer goods group Unilever, as global chief executive, turning to an outsider to the luxury sector as it looks to bounce back from the coronavirus-induced hit to profits.

The privately held company controlled by France’s billionaire Wertheimer family said on Tuesday that Nair, Unilever’s chief human resources officer for the past five years and a member of its executive committee, would assume her new role at the end of January 2022.

She replaces Alain Wertheimer, who owns Chanel alongside his brother Gerard and took over the role from Maureen Chiquet when she left the label after “differences of opinion about strategic direction” in 2016. Wertheimer will now take the role of global executive chair.

Nair and Wertheimer “will further ensure [Chanel’s] long-term success as a private company”, the luxury brand said in a statement on Tuesday.

Nair, who joined Unilever in 1992, was responsible for more than 150,000 employees across more than 100 countries as global head of HR. But she has little experience in luxury fashion where marketing tactics differ greatly from mass-market products.

Alan Jope, chief executive of Unilever, said Nair had been a “pioneer” and a driving force on its equity, diversity and inclusion agenda.

“Nair has built a global reputation for progressive and human-centred leadership, delivering significant business impact,” Chanel said.

Since it is not publicly traded, Chanel releases few financial figures, but in June its chief financial officer said it was on track to increase revenues by “double digits” this year compared with pre-pandemic levels of $12.3bn, with sales propelled by consumers in China and the US.

Alongside other big luxury groups, like LVMH and Hermes, it has largely shrugged off the impact of the pandemic as affluent people continue to splash out.

Its ready-to-wear sales have continued to climb under Virginie Viard who became creative director in 2019 after the retirement and subsequent death of Karl Lagerfeld.

“Chanel has made the most of high desirability and has materially increased prices to beef up margins during the pandemic,” said Luca Solca, analyst at Bernstein. “It is important for Chanel to follow up with product innovation to sustain high desirability [in the] medium term.”

The spread of the Omicron variant of coronavirus could hurt sales across the sector, he added.

Nair’s appointment follows an industry trend of attracting top talent from consumer goods into the luxury market.

“Unilever and P&G stand tall as management reservoirs for the relatively young luxury goods industry,” Solca said. “The cases of Toni Belloni at LVMH and Fabrizio Freda at Estée Lauder are a benchmark in this respect.”

Antonio Belloni, managing director of LVMH, joined the company from Procter & Gamble in 2001. Fabrizio Freda, another P&G veteran replaced William Lauder, grandson of Estée Lauder, as chief executive in 2009.

FT : UAE suspends talks with US over purchase of F-35 fighter jets

UAE suspends talks with US over purchase of F-35 fighter jets
Abu Dhabi halts $23bn deal after concerns about restrictions from Washington on use of warplanes

The United Arab Emirates has suspended talks with the US over its $23bn deal to buy up to 50 F-35 fighter jets and other weapons in a sign of friction in the Gulf state’s relations with Washington.

An Emirati official said Abu Dhabi had informed the US that “technical requirements, sovereign operational restrictions and cost-benefit analysis led to the reassessment”.

The sale of the F-35s was initially agreed last year by the Trump administration after the UAE signed an accord to normalise relations with Israel. But the deal has come under mounting scrutiny since President Joe Biden took office.

Abu Dhabi has raised concerns about the restrictions Washington is seeking to put on the Gulf state’s use of the F-35 warplanes. The Biden administration meanwhile has been worried that the UAE’s use of Huawei’s 5G technology raises the risk that sensitive information could be leaked to Beijing.

Washington has been putting pressure on the UAE to reduce its exposure to the Chinese telecoms technology. General Kenneth F McKenzie, commander of the US central command, said this year that he was concerned about the risk of technology transfer. He added that the US was “working hard both internally within the United States and with our UAE partners to ensure that’s resolved satisfactorily”.

But as the talks have dragged on, the UAE — a key US ally in the Arab world — has become frustrated with the US pressure, as it tries to strike a balance between its relations with Washington and China, its biggest trade partner.

Emirati officials argued that there were few cost-effective alternatives to Huawei’s 5G technology and were worried that they would be sucked into a new cold war between the US and China.

The decision to suspend the talks, first reported by the Wall Street Journal, comes just over a week after the UAE sealed a €17bn-plus deal with France to buy 80 Rafale jets and 12 Caracal helicopters manufactured by French groups Dassault Aviation and Airbus.

Sheikh Mohamed bin Zayed al-Nahyan, Abu Dhabi’s crown prince and the UAE’s de facto leader, has struck up a deepening relationship with French president Emmanuel Macron, particularly on security matters.

At the same time, there is growing unease about the perceived US disengagement from the region and its commitment to its Arab partners, a concern exacerbated by America’s chaotic withdrawal from Afghanistan.

A person briefed on the UAE position said Abu Dhabi was confident that the issues related to Washington’s concerns over Huawei’s 5G could be resolved. But the critical issue was over whether the US would put limits on how and when the UAE could use the F-35s.

“From the Emiratis perspective, they want the strongest possible relations with the US,” the person said. “The question is, is the US ready to reciprocate and be committed? The UAE wants a strong commitment on mutual security in the region.”

The Emirati official said both states “were working toward an understanding that would address mutual defence security conditions for the acquisition”. “The US remains the UAE’s preferred provider for advanced defence requirements and discussions for the F-35 may be reopened in the future,” the official said.

In a statement, the US said: “The Biden-Harris administration remains committed to the proposed sales of F-35 aircraft, the MQ-9B, and munitions even as we continue consultations to ensure that we have a clear, mutual understanding of Emirati obligations and actions before, during, and after delivery. We are hopeful that we can work through any outstanding issues, and we look forward to the US-UAE Joint Military Dialogue later this week.”

>>> US Close Dow -0,30% S&P -0,75% Nasdaq -1,14% Russell -0,96% VIX 21,89 +7,78%

Closing Stock Market Summary

The S&P 500 fell 0.8% on Tuesday, as concerns about inflation and economic growth weighed on sentiment during an important Fed policy meeting. The Nasdaq Composite (-1.1%) and Russell 2000 (-1.0%) both underperformed the benchmark index, while the Dow Jones Industrial Average declined just 0.3%. 

Prior to the open, the Producer Price Index for November came in hotter than expected, with the index for final demand up 0.8% month-over-month ( consensus 0.5%) and up 9.6% year-over-year. The hot inflation report may have put additional pressure on the Fed to announce a faster tapering plan and signal a more hawkish rate path tomorrow.

The market appeared concerned about the implications a more aggressive Fed would have on global growth with COVID-19 still disrupting supply chains and contributing to restrictive policies. Reports indicated that companies in a manufacturing hub in China suspended operations because of an outbreak in cases.

While the market eased off intraday lows in the afternoon, ten of the 11 S&P 500 sectors still closed lower. The information technology sector (-1.6%) led the retreat and featured influential weakness in Apple (AAPL 174.33, -1.41, -0.8%), Microsoft (MSFT 328.34, -11.06, -3.3%) and Adobe (ADBE 614.86, -43.44, -6.6%).

Apple, like Microsoft, succumbed to profit-taking interest, even though BofA Securities upgraded AAPL to Buy from Neutral. ADBE was downgraded to Neutral from Overweight at JP Morgan.

The financials sector (+0.6%) escaped with a respectable gain amid an uptick in Treasury yields. The 2-yr yield increased two basis points to 0.66%, and the 10-yr yield increased one basis point to 1.44%. The U.S. Dollar Index rose 0.3% to 96.58. WTI crude futures fell 0.9%, or $0.67, to $70.57/bbl.

The modest reaction in the Treasury market to the hot inflation data was an interesting development. Selling interest may have been capped by growth concerns and/or a view that a more aggressive Fed could rein in inflation pressures next year. 

Separately, Pfizer (PFE 55.54, +0.34, +0.6%) specified its COVID-19 oral antiviral reduced the risk of hospitalization or death in high-risk patients by 89% when taken within three days of symptom onset. PFE shares rose to an all-time high. 

Reviewing Tuesday's economic data:

  • The November Producer Price Index showed that the index for final demand increased 0.8% month-over-month ( consensus 0.5%) while the index for final demand, less foods and energy, increased 0.7% (consensus 0.4%). That left the year-over-year increases on an unadjusted basis at 9.6% and 7.7%, respectively.
    • The key takeaway from the report is that it is another sign that inflation pressures are persisting in an unacceptable manner and it will likely force the Fed into an uncomfortable position of taking a more aggressive policy path at a time when the market also has festering concerns about a slowdown in growth.
  • The NFIB Small Business Optimism Index increased to 98.4 in November from 98.2 in October.

Looking ahead to Wednesday,, investors can expect the FOMC Rate Decision, Retail Sales for November, the NAHB Housing Market Index for December, Import and Export Prices for November, the Empire State Manufacturing Index for December, Business Inventories for October, and Net Long-Term TIC Flows for October.

  • S&P 500 +23.4% YTD
  • Nasdaq Composite +18.2% YTD
  • Dow Jones Industrial Average +16.1% YTD
  • Russell 2000 +9.4% YTD