FT : Regulators begin to grapple with DeFi

Regulators begin to grapple with DeFi
Blockchain projects that aim to cut out the middleman are growing so fast that regulators risk being overwhelmed

On private video calls last week, some of the world’s fastest-growing cryptocurrency start-ups educated global financial regulators on a corner of the market that has largely evaded oversight: the booming world of decentralised finance.

The event featured presentations by the decentralised exchange Uniswap and derivatives trading venue dYdX, among other popular so-called DeFi programs, according to people familiar with the conference. 

Representatives from the Commodity Futures Trading Commission and the Securities and Exchange Commission also attended the event, which was hosted by the International Organization of Securities Commissions, the people said.

The gathering, which has not been previously reported, shows how financial regulators have begun paying greater attention to DeFi, a collection of cryptocurrency projects that aims to cut out the middleman and provide financial services such as lending and trading using automated software programs.

Lawyers and cryptocurrency advocates said the rapid growth of DeFi in the past year had caught authorities off guard, while also raising unprecedented questions about the nature of financial regulation. 

Bitcoin is the most high-profile effort to bypass traditional financial systems but the so-called DeFi sector extends far beyond cryptocurrencies into insurance, derivatives trading and even savings accounts.

In the US, CFTC commissioner Dan Berkovitz has suggested that many DeFi apps could be illegal, and SEC chair Gary Gensler has singled out the programs as raising “a number of challenges” for investors and regulators.

“There’s so much happening so quickly that regulators just cannot respond, as a practical matter,” said Lewis Cohen, a partner at DLx Law, a cryptocurrency law firm. 

Cohen compared the boom in DeFi to a “giant DDoS attack on global financial regulation”, referring to a kind of cyber security assault where hackers overwhelm their targets with huge volumes of activity.

A representative for Iosco declined to comment on the event, saying that it had been organised to “support internal work”. The CFTC confirmed the agency’s attendance but declined to comment on the discussions. Uniswap, dYdX and the SEC declined to comment.

DeFi apps push back against early rules
While employees at DeFi projects said they would welcome clearer guidance from regulators, increased oversight could pose an existential threat to the growing sector, which has ambitions to create an entirely new financial system.

Regulators have traditionally monitored the activity flowing through intermediaries such as banks, and may decide that the decentralised nature of DeFi apps makes the sector unaccountable.

Founders of some of the largest projects, such as Uniswap, have begun introducing governance systems that aim to spread responsibility for the apps among their users, rather than with a central authority.

Several projects have also distributed tokens that have surged in value in the past year, raising concerns that regulators might classify them as securities and introduce greater oversight.

The total assets pledged as collateral in DeFi applications has soared in the past year, growing from less than $2bn to more than $50bn, according to data collected by DeFi Pulse.

Cryptocurrency advocates have resisted early attempts to regulate the underlying software programs, arguing that the open-source projects are protected speech. 

“If you try to put prior restraint and permission-based regulations on these activities, what you’re basically doing is creating a ban on certain types of speech,” said Peter Van Valkenburgh, director of research at Coin Center, an advocacy group.

An early flash point emerged around new guidelines developed by the Financial Action Task Force, an intergovernmental organisation that develops standards to prevent global money laundering.

A draft version of the group’s newest guidance appeared to widely expand the group’s definition of “virtual asset service providers” to include decentralised software programs.

Cryptocurrency groups have protested against the measures, which could force DeFi apps to begin implementing know-your-customer rules similar to those required of banks, and FATF said on Friday that it would delay the final guidance until October.

US regulators yet to take firm action
US regulators have also taken notice. Berkovitz, the CFTC commissioner, said in a recent speech that automated software programs for derivatives trading appeared to violate the Commodities Exchange Act, which requires futures contracts to trade through regulated bodies and bars individuals with less than $10m of invested assets from entering swap contracts.

“I’m totally open to having certain applications that can be done more efficiently without intermediaries,” Berkovitz said in an interview. “But the intermediaries in many respects do serve an important function, and we can hold them accountable.”

Berkovitz’s comments suggested that the CFTC could begin regulating DeFi apps if they begin replicating traditional derivatives markets. So far, though, the CFTC and SEC have not taken any concrete action against DeFi.

“If it were to be an unregulated direct competitor in the futures market, that would be problematic,” Berkovitz said.

DeFi project founders argued that users of their open-source software programs benefited from transparent, rules-based systems for executing transactions.

For the SEC to take action against DeFi, it would need to assert “securities jurisdiction” over the programs and their related digital assets, said Michelle Bond, chief executive of the Association for Digital Asset Markets, a cryptocurrency industry body. 

“Just as a doctor shouldn’t recommend heart surgery for a knee scrape, regulations from one asset class or platform shouldn’t be broadly applied to non-similar asset classes or technologies,” Bond said.

Antonio Juliano, founder of dYdX, said the project had held multiple discussions with the CFTC, and its so-called perpetual contracts were not yet available for trading in the US largely for regulatory reasons.

“A lot of things that had to be done manually before, no longer have to,” Juliano said. “That’s great for investors.”

FT : Cobham sets sights on UK rival Ultra Electronics

Cobham sets sights on UK rival Ultra Electronics
Private equity-backed aerospace group adds to wave of interest from buyout firms in UK companies

Cobham, the private-equity backed UK aerospace and defence group, is considering a bid for rival Ultra Electronics in a deal that it said would create a “global defence electronics champion”.

The company, which was itself acquired for £4bn by US buyout group Advent International last year, said on Friday that it was examining a “number of structures” to effect a combination with Ultra. 

These included a takeover offer for its London-based competitor or reversing into Ultra in exchange for new shares in a combined group. 

Cobham said that both companies had a “long heritage as innovators, and share advanced complementary capabilities delivering mission critical solutions to the US, UK and other key allies”. 

The two groups are key suppliers of components to the Eurofighter Typhoon aircraft and the F-35 fighter jets which will be deployed on the Royal Navy’s two new aircraft carriers.

Cobham’s interest elicited a strongly-worded statement from Ultra which said it had received no proposal from its suitor. It said it had been at “very early stages of exploratory discussions around a possible combination of some or all” of its communications assets with those of Cobham’s electronics business, CAES.

Ultra added that, within the scope of those talks, Advent and Cobham had confirmed that they were “not actively considering an offer for Ultra”. It said it had now terminated those talks.

Shares in Ultra jumped almost 7 per cent in late trading on Friday to £23, valuing the company at £1.64bn after news of Cobham’s interest broke.

Ultra is in the midst of a turnround under chief executive Simon Pryce. The company managed to shrug off much of the impact of the coronavirus pandemic, reporting in March a 14 per cent rise in pre-tax profits to £103m for the year to the end of December. It has seen increased demand for its submarine hunting equipment and other kit used in cyberwarfare.

News of Cobham’s interest in Ultra adds to the recent push by private equity groups, which have emerged from the pandemic flush with cash, to acquire some of the best-known names on the UK stock market.

US firm Clayton, Dubilier & Rice has made a bid to take over the supermarket chain Wm Morrison. Lone Star earlier this week walked away from a possible offer for Senior after being rebuffed by the FTSE 250 aerospace and defence parts supplier.

Overall, private equity bids for UK-listed companies have amounted to £21bn this year, according to Refinitiv. 

Advent’s takeover of Cobham was opposed by the family of its founder as well as several former executives of the company who raised concerns over what they said was an apparent lack of scrutiny from the government. The company’s pioneering air-to-air refuelling technology is used on all western fast jets and there were concerns that Advent would break up the group.

Opponents of the deal have pointed out that Advent has since gone on to sell a number of Cobham’s businesses, including the air-to-air refuelling technology.

Advent committed to a series of undertakings at the time of the purchase which it has said it has continued to comply with.

Cobham said there was no certainty that any combination would result, nor that an offer would be made. The company has until July 23 to announce a firm intention to make an offer for Ultra or walk away.

Barrons : This Copper Miner Is Facing New Taxes in Chile. The Stock Is Already T

This Copper Miner Is Facing New Taxes in Chile. The Stock Is Already Taking a Hit.

Shares of copper mining company Antofagasta look set to deflate because of a political lurch to the left in Chile, raising the possibility of higher taxes on resource companies. Recent drops in the price of copper aren’t helping either.

As a result, investors might want to reduce their positions in the stock (ticker: ANTO: United Kingdom).

The major issue for U.K.-incorporated Antofagasta is Chile, where the company’s mines are based. In May, Chile’s lower house approved a bill that would impose a new royalty fee on producers operating in the top copper-producing nation.

“The left-wing is on the ascension in Chile, and that doesn’t bode well for where the taxes come out in the end,” says Tyler Broda, head of EU mining research at Canadian financial company RBC Capital Markets in London. “We think it is going to be hard for the shares to hold in where they are.”

Broda sees the shares headed substantially lower, and rates the stock Underperform with a target price of 10.50 pounds ($14.60), 28% below the recent price of £14.49. Apart from avoiding owning the shares, risk-tolerant investors might consider shorting the stock. In other words, they could sell borrowed shares with the hope of buying them back at a lower price for a profit.

A recent report from RBC states the proposed tax “would reach 75% of revenues above $4/pound copper.” Copper recently fetched $4.16 a pound.

While the proposed law may get modified, it likely won’t go away. “The political backdrop is not promising for the government to stop this bill as it has stated it wants to,” according to a recent report from Barclays. “Our base case is that the bill gets passed in some form in the senate – whether watered down or not remains to be seen.” In other words, the likelihood is that royalty fees on copper miners will end up higher than they are now.

That’s particularly bad for Antofagasta because 100% of the firm’s net asset value is in Chile, according to RBC and Barclays. No other comparable copper miner is as exposed as Antofagasta. The company, which has a market value of £14 billion ($19 billion), declined to comment.

Antofagasta shares have staged a spectacular rally over the past 12 months, with a 63.3% return including dividends, compared with a 17.4% rise for the FTSE 100 index, as copper prices soared.

Shares took a 7% hit over the past month, along with a dip in copper prices. The metal recently fetched $4.16 a pound, down 13% from a record-high of $4.76 on May 11, according to Macrotrends.net.

Two events partly sparked that copper market weakness. First, the Chinese government decided to release the metal from the country’s strategic reserve to help stabilize materials prices. Second, the Federal Reserve indicated it would likely raise interest rates sooner than investors had expected, making owning the metal less appealing.

Further weakness in the copper market would hurt Antofagasta’s revenue, but that downside looks limited, according to Carlos Sanchez, director of commodities management at commodities consulting company CPM Group. He sees the price remaining above $3.63 a pound over the long term.

Antofagasta produced 734,000 metric tons of copper in 2020, and smaller volumes of other metals such as gold and molybdenum. It posted a profit of 55 cents a share in adjusted earnings last year, with RBC forecasting $1.44 a share for the current year, which reflects the jump in copper prices over the past 12 months. However, RBC sees profits sliding to $1.08 and 79 cents a share in 2022 and 2023, respectively.

Barrons : Under Elon Musk, Tesla Has Disrupted the Auto Industry. What’s Next?

Under Elon Musk, Tesla Has Disrupted the Auto Industry. What’s Next?

In the past year, Elon Musk has declared himself Technoking of Tesla and Imperator of Mars. Under his guidance, Tesla has bought and sold Bitcoin. It also began accepting Bitcoin as payment, and then stopped doing so. Tesla’s CEO has run into more trouble with the SEC over his tweeting habits, too.

Tesla stock, however, is up more than 200% in the past 12 months, making the company the world’s most valuable auto maker. What’s more, Musk’s space-exploration and technology company, SpaceX, is now the fifth most valuable aerospace and defense franchise in the world. SpaceX’s value has increased as the company delivers more astronauts to the International Space Station and more of its Starlink satellites into low Earth orbit. SpaceX plans to offer space-based high-speed internet across the globe.

Tesla and Musk, 50, have their critics. More than 25% of analysts covering the stock rate it Sell. The average Sell ratio in the S&P 500 index is about 7%. Still, the average analyst price target for Tesla stock is up about 360% over the past year. Even the bears seem willing to admit that Tesla is disrupting the auto industry and is worth hundreds of billions of dollars. Musk is the main reason for that.

Barrons : Activists Could Face Less Time to Report Large Stakes

Activists Could Face Less Time to Report Large Stakes

Activists may find themselves with less time to report large investments in companies they plan to target.

Speaking at the City & Financial Global conference in London on Wednesday, Securities and Exchange Commission Chairman Gary Gensler said he has asked the agency to consider reducing the typical 10-day timeline that investors have to report stakes in companies that exceed 5%. The rule, which is more than five decades old, may not reflect the “rapidity of current markets and technologies,” Gensler said.

Shortening the window may stir the ire of activists. While the speed of trading—and settlement—has certainly accelerated since the 1970s, the 10-day window allows activists to build up stakes without seeing prices rise due to the disclosure of their position. However, it’s also worth noting that activists have been able to evade filing by holding their positions in derivatives and other instruments.

Proponents of a rule change argue that knowing about the involvement of an activist could affect an individual investor’s decision to hold the stock.

There may be reason to change the rule in light of current market mechanics, but a rule change could have other effects, such as “disincentiviz[ing]” activists who play a role in holding companies accountable, Andrew Freedman, partner and co-head of the shareholder-activism group at Olshan Frome Wolosky, tells Barron’s.

“Don’t fix what hasn’t proven to be broken,” Freedman adds, noting there isn’t evidence that any rapid accumulations of shares have put investors in a bad position.

>>> Weekly Market Update: Stocks roar higher on optimism about reopening and inf

Weekly Market Update: Stocks roar higher on optimism about reopening and infrastructure spending

The NASDAQ composite finally arrived at the party this week, joining the S&P 500 and Dow by reaching a new high water mark. The Transports continued to lag, keeping some market watchers worried that stocks remain ripe for a correction, but nevertheless US indices forged further into uncharted territory. Two additional Fed members, Kaplan and Bostic, joined Bullard from a week ago by outing their individual dots within the dot plot by confirming they too expect the Fed to begin raising rates sometime in 2022. That acknowledgement, however, came amid a litany of Fed speak that largely echoed the message from last week’s statement and press conference. In contrast, the Czech central bank began moving rates higher along with a surprise hike from the Mexico Central bank. The Bank of England left both rates and asset purchases unchanged and no new MPC members chose to join outgoing member Haldane by voting to cut GILT purchases.

Overall investor sentiment was aided by continued strength in global PMI readings along with growing hopes that a bipartisan infrastructure plan can get done in Washington. By Friday, President Biden was touting a $1.2T bipartisan agreement on portions of infrastructure spending, but it remained unclear how members of each caucus will ultimately vote given the parallel track of reconciliation being taken by the Democrats for the more progressive portions of their agenda. US Treasury yields largely stayed in check before modest selling late in the week pushed rates higher at the long end. The Biticoin and etherium slide continued, at one point giving away all the gains for the year before attempting to stabilize. Crude oil prices continued to firm amid growing bullish sentiment around world supply & demand dynamics which overshadowed reports OPEC+ producers were considering easing production curbs by another 500K b/d in August. For the week, the S&P gained 2.7%, the DJIA rose 3.4%, and the Nasdaq added 2.4%.

In corporate news this week, Nike gained on Friday as investors applauded strong earnings and an upgrade to forecasts through FY25 as North America sales doubled to a new record and the greater China market remains strong. FedEx shares weighed on the Transports despite notching record earnings as investors worried about rising costs. KB Homes moved lower after missing analyst estimates on Q2 revenues, despite strong housing demand and net orders. Major tech firms were in the crosshairs of the House Antitrust Committee this week, as the panel approved a slew of antitrust bills aimed at limiting the power of big tech, including legislation that could require Amazon to sell its logistics business. Southwest Airlines announced Chairman and CEO Gary Kelly will transition roles in early 2022 to Executive Chairman, as EVP Robert Jordan takes the reins to become CEO on February 1st. Visa acquired Swedish digital financial services platform Tink for €1.8B in cash as it moves to insert itself in Europe’s fast-growing open banking market.


MON 6/21
MRW.UK Notes Clayton, Dubilier & Rice's conditional non-binding proposal; Unanimously rejects it as it significantly undervalued Morrisons
1288.HK Said to ban customer accounts associated with cryptocurrency transactions - financial press
ETH/USD Breaks below $2,000 for 1st time in a month amid news from Chinese city Ya'an and Sichuan province announced to root out all Etherium and Bitcoin mining within 1 year
(DE) German Health Minister Spahn: there is a risk of 4th wave due to Delta variant
(US) Fed Chair Powell: inflation has increased notably in recent months but expected to drop back towards Fed's goals - prepared congressional testimony
AMZN New Antitrust bill could require company from favoring own services, potentially sell logistics business - press

TUES 6/22
(EU) ECB Strategy Review said to be in the final stages but policymakers said to be some way apart on its new inflation strategy - press
*(US) MAY EXISTING HOME SALES: 5.8M V 5.72ME (drops for a fourth straight month)
(US) Fed's Daly (non-voter, dove): Could reach 'further progress' taper threshold in late 2021 or early 2022; rate change discussion is not on table right now - Q&A with reporters

WEDS 6/23
2330.TW Said to raise prices for 8-inch and 12-inch wafers by as much as 20% next year (2022); cites strong demand - press
(CN) US will reportedly ban some solar goods from Xinjiang, China - press
KBH Reports Q2 $1.50 v $1.29e, Rev $1.44B v $1.48Be
(US) Fed's Kaplan (non-voter; hawkish): Forecasts first rate hike in 2022; Sees 2022 inflation moderating but broadening
(US) Fed's Bostic (FOMC voter, hawk): Fed is close to meeting standard for bond buying tapering; it is fully appropriate to debate taper prospects; tapering decision could be in 3 to 4 months
*(US) DOE CRUDE: -7.6M V -4ME; GASOLINE: -2.9M V +1ME; DISTILLATE: +1.8M V +0.5ME (crude stocks fall to lowest since March 2020)
*(US) MAY NEW HOME SALES: 769K V 865KE
*(US) JUN PRELIMINARY MARKIT PMI MANUFACTURING: 62.6 V 61.5E
LUV Chairman and CEO Gary Kelly will transition roles in early 2022 to Executive Chairman; Robert Jordan to become CEO on Feb 1st
*(CZ) CZECH CENTRAL BANK (CNB) RAISES 2-WEEK REPURCHASE RATE BY 25BPS TO 0.50%; AS EXPECTED
GEF Announces a $50/Ton Price Increase on All Uncoated Recycled Paperboard (URB) Grades
SON Announces 30-day notice to raise at least 6% price increases for paperboard tubes and cores; 7th price increase of 2021
*(UK) JUN PRELIMINARY PMI MANUFACTURING: 64.2 V 64.0E (13th straight expansion)
*(EU) EURO ZONE JUN PRELIMINARY PMI MANUFACTURING: 63.1 V 62.3E (12th month of expansion)
*(DE) GERMANY JUN PRELIMINARY PMI MANUFACTURING: 64.9 V 63.0E (12th month of expansion)
*(FR) FRANCE JUN PRELIMINARY PMI MANUFACTURING: 58.6 V 59.0E (7th month of expansion)

THURS 6/24
SIE.DE Affirms FY21 outlook; Raises mid-term Rev growth 5-7%/yr (prior 4-5%/yr); Plans new share buyback of up to €3B until 2026 - CMD
V Acquires European open banking platform Tink for €1.8B in cash
EBAY Confirms to divest 80% stake in Korean business to E-Mart for KRW3.44T (~$3.03B) in cash
*(DE) GERMANY JUN IFO BUSINESS CLIMATE SURVEY: 101.8 V 100.7E
*(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.10%; AS EXPECTED
(UK) BOE maintains Total Asset Purchases at £895B
*(UK) BOE JUN MINUTES: VOTED 9-0 TO LEAVES INTEREST RATES UNCHANGED AT 0.10%
*(US) INITIAL JOBLESS CLAIMS: 411K V 380KE; CONTINUING CLAIMS: 3.39M V 3.46ME
*(US) MAY PRELIMINARY WHOLESALE INVENTORIES M/M: 1.1% V 0.8%E
(US) Atlanta Fed GDPNow cuts Q2 GDP forecast to 9.7% from 10.3%
*(US) PRES BIDEN: WE HAVE AN INFRASTRUCTURE DEAL; WE MADE 'SERIOUS COMPROMISES ON BOTH ENDS'
FDX Reports Q4 $5.01 v $5.04e, Rev $22.6B v $21.7Be; Guides initial FY22 inline, Op Margins expands materially
NKE Reports Q4 $0.93 v $0.51e, Rev $12.3B v $11.1Be
(US) Federal Reserve: All 23 banks stayed above minimum capital levels in stress tests; additional restrictions put in place during the COVID event will end

FRI 6/25
CS Reportedly CS's top management is under pressure to present overhaul plan, which may potentially lead to merger talks with UBS - press
(CN) S&P affirms China sovereign rating at A+; outlook stable
*(US) MAY PERSONAL INCOME: -2.0% V -2.5%E; PERSONAL SPENDING: 0.0% V 0.4%E
*(US) MAY PCE DEFLATOR M/M: 0.4% V 0.5%E; Y/Y: 3.9% V 3.9%E
(BR) Brazil Econ Min Guedes: proposes raising capital gains tax to 20%; taxes to be cut for 30M workers - tax reform address in Congress
(US) JUN FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 85.5 V 86.5
(US) Atlanta Fed GDPNow cuts Q2 GDP forecast to 8.3% from 9.7%

Reuters - Reality check for VW in China after sluggish start for electric car se

Reality check for VW in China after sluggish start for electric car series

SHANGHAI, June 22 (Reuters) - Volkswagen AG's (VOWG_p.DE) ID series - the backbone of its electric vehicle ambitions - is off to what even company sources call a worryingly slow start in China.

Sales in May of two ID.4 electric SUV models, launched only two months earlier, came to a mere 1,213 combined. And that was about 200 fewer than in April, according to auto consultancy LMC.

The sales fall far short of initial hopes, four people with knowledge of the matter said, and what some other automakers have achieved with early sales of flagship EV offerings in the world's largest auto market.

Volkswagen's venture with state-owned SAIC Motor (600104.SS), which makes the slightly bigger ID.4 X model, had been targeting sales of 50,000-60,000 vehicles this year, according to comments by Yang Siyao, a company marketing executive, in Chinese media in March.

A separate venture between the world's No. 2 automaker and FAW which makes the ID.4 CROZZ had similar targets, one of the sources said. Those goals now seem unrealistic.

Furthermore, both ventures' EV plants are running below 10% of production capacity, according to three of the people.

The sources blamed the less than auspicious debut on a lack of smart tech features, fierce competition, a late launch compared to Tesla Inc (TSLA.O) and Chinese EV makers as well as hiccups with its new EV sales network.

"Sales so far are behind our earlier expectations. We've had to dial down production plans for the ID.4 again and again," said one person, who like the other sources was not authorised to speak to media and declined to be identified.

"This is not healthy, but at the moment customers are not coming to buy them."

In another sign of sales stress, SAIC-Volkswagen has suggested staff members buy ID.4s, according to an internal memo seen by Reuters.

By comparison, Tesla sold 6,612 of its Model Y in China in the first two months after its launch. The ID.4's sales performance in China also contrasts sharply with Europe, where it is a top-selling electric car with 12,101 sold in the first two months post-launch, according to JATO Dynamics.

Volkswagen said in a statement to Reuters that ID. China sales were in line with expectations as it builds up production and a new sales network, adding it does not view Tesla's Model Y as a direct competitor for the ID.4, which occupies a different vehicle type segment.

It also said it was confident the two ID.4 models would see sales growth and noted plans for three more ID models to be launched this year in China.

NOT SMART ENOUGH?

More than any other country, China has aggressively pushed for the adoption of electric cars, introducing sales quotas as it seeks to cut pollution, encourage the growth of its auto industry and reduce reliance on oil.

Volkswagen, the country's biggest foreign automaker with 3.85 million vehicles - mostly gasoline - sold last year, has more riding on successfully transitioning its customers to EVs than the average automaker. It has also declared its intention to surpass Tesla as the world's top EV maker by 2025, ensuring that China will become a crucial battleground.

But getting customers on board is another matter altogether.

At a shopping mall in western Shanghai last week, David Qian, a 50-year-old engineer, was looking for an EV for his wife but found he was not drawn to the ID.4 X, which starts at just under 200,000 yuan ($31,000).

"The car looks okay but I know it is not smart enough," said Qian, who owns a Tesla Model 3 and enthuses about its assisted driving technology.

Unlike Tesla models and a growing number of vehicles from Chinese electric car makers like Xpeng Inc (XPEV.N) and Nio Inc (NIO.N), the ID.4 cannot park itself and does not offer advanced self-driving features or advanced voice-controlled functions.

"Chinese consumers value the sense of technology and science fiction of electric vehicles, and brand loyalty has always been low which is completely different from the European market," said Yale Zhang, head of Shanghai-based consultancy AutoForesight.

And unlike Europe, electric car competition is already cutthroat in China, where a plethora of manufacturers compete and the top-selling Wuling Hong Guang MINI EV, an entry-level sedan made by a General Motors (GM.N) joint venture, costs just 28,800 yuan ($4,450).

At the shopping mall where Qian checked out the ID.4, the SAIC-Volkswagen showroom is right next door to a store run by Xpeng and close to rival stores belonging to EV startup Neta and Huawei, which sells an electric car in partnership with automaker Seres. A store for Chinese EV maker Aiways is also set to open nearby soon.

"Compared with Europe, this car has too much competition and they are all new models with a strong tech sense," said Zhang.

Volkswagen said in its statement it would be offering new software feature updates in the future and with newer models.

TEETHING PROBLEMS

Volkswagen has been faster than some other foreign automakers in China with EV development such as Toyota Motor Corp (7203.T) and Ford Motor Co (F.N), but sources say ideally it should have moved quicker.

Its joint ventures' EV plants, which can each build 300,000 vehicles per year, were ready for mass production in early 2020 but time taken to develop the vehicles in Germany meant the new ID.4s did not get regulatory approval until July, they added.

At the distribution level, Volkswagen is grappling with the introduction of new sales strategies popular with pure-play EV competitors.

Rather than relying predominantly on its existing roughly 2,000-dealer network, it is shifting to an agency sales model for EVs where showrooms are typically located in shopping malls, prices are fixed and there is no inventory for showroom operators.

The lack of inventory, however, has meant that staff who are used to the pressure inventory brings have less financial motivation to sell product, people familiar with the matter said.

Volkswagen said in its statement that production at its EV plants was running on schedule and that internal feedback on its new agency model is very positive.

It had 12 ID. stores in China as of end-May and plans to have more than 100 stores by the end of this year. It is also boosting its number of ID. sales agents to more than 1,000 by the year's end from 825 currently.

>>> US Close Dow +0.69% S&P +0.33% Nasdaq -0.06% Russell +0.03%

Closing Stock Market Summary

The S&P 500 (+0.3%) set new intraday and closing record highs on Friday, largely due to strength in the financial stocks. PCE inflation data for May remained on the hotter side, which contributed to a bump in long-term interest rates. 

The Dow Jones Industrial Average outperformed with a 0.7% gain, while the Nasdaq Composite (-0.1%) closed lower as the higher rates clipped its growth-stock components. The Russell 2000 (+0.04%) erased its intraday gain in the last ten minutes of action, as trading volume surged at the close amid the annual FTSE Russell index rebalance. 

Specifying the data, the PCE Price Index for May rose 0.4% m/m and the core-PCE Price Index, which excludes food and energy, rose 0.5% m/m (Briefing.com consensus 0.6%). On a year-over-year basis, the Fed's preferred measures of inflation were up 3.9% and 3.4%, respectively. The 10-yr yield increased five basis points to 1.54% after an initial muted reaction.  

The higher rates naturally worked in the favor of the S&P 500 financials sector (+1.3%), which was further supported by expectations for increases to share buyback programs and/or dividend payments after a positive showing in the Fed's latest stress test. The utilities sector (+1.1%) joined the financials sector with a gain over 1.0%.

The information technology sector (-0.2%) was the only sector that closed lower, which really held back the benchmark index given it's the most heavily-weighted sector in the S&P 500. Money seemed to prefer the value/cyclical stocks, many of which saw renewed strength this week. 

Nike (NKE 154.35, +20.75, +15.5%) and CarMax (KMX 127.40, +7.97, +6.7%) stood out with nice earnings-driven gains, especially Nike's 15% move after also issuing upbeat FY22 guidance. FedEx (FDX 291.95, -10.99, -3.6%), on the other hand, underwhelmed shareholders with its small EPS beat. 

The 2-yr yield was unchanged at 0.27%. The U.S. Dollar Index was little changed at 91.78. WTI crude futures rose 1.0%, or $0.75, to $74.06/bbl.

Reviewing Friday's economic data:

  • Personal income decreased 2.0% month-over-month in May (consensus -2.5%), driven by an 11.8% decline in government social benefits, while personal spending was unchanged ( consensus +0.3%) following an upwardly revised 0.9% increase (from +0.5%) in April. The PCE Price Index jumped 0.4% month-over-month and was up 3.9% year-over-year (versus 3.6% in April). The core-PCE Price Index, which excludes food and energy, rose 0.5% and was up 3.4% year-over-year (versus 3.1% in April).
    • The key takeaway from the report is the initial reaction to it. The inflation readings are eye-popping, yet the futures for the major indices went up in their wake while long-term bond yields barely moved. The seeming connection in those reactions is that this is at, or close to, peak inflation, meaning market participants are anticipating better inflation news in coming months.
  • The final June reading for the University of Michigan Index of Consumer Sentiment slipped to 85.5 (consensus 86.4) from the preliminary reading of 86.4. The final reading for May was 82.9.
    • The key takeaway from the report is the understanding that the uptick in sentiment in June was driven by households with incomes above $100,000 and their view of future economic prospects.

Investors will not receive any notable economic data on Monday. 

  • Russell 2000 +18.2% YTD
  • S&P 500 +14.0% YTD
  • Dow Jones Industrial Average +12.5% YTD
  • Nasdaq Composite +11.4% YTD

WWD : Louis Vuitton Men’s Spring 2022, The French luxury house partnered with Ni

Louis Vuitton Men’s Spring 2022
The French luxury house partnered with Nike on new versions of its iconic Air Force 1 sneakers, marking a full-circle moment in hip-hip culture.

‘Tis the season of the mega-collaboration.
Just hours after Dior revealed it was teaming up with Travis Scott on its spring 2022 men’s collection, Louis Vuitton dropped another bombshell during Paris Fashion Week: The French luxury brand has partnered with Nike on new versions of its iconic Air Force 1 sneakers.
The shoes, which come in 21 colorways, were unveiled on Thursday as part of Virgil Abloh’s men’s collection for Vuitton, but additional details were scarce. Asked whether they would be made available for sale, the house merely said: “Stay tuned for more details.”

The launch marks a full-circle moment in hip-hop culture. Abloh, who has a highly successful collaboration with Nike through his Off-White label, was inspired by the cover of the 1988 album “It Takes Two” by Rob Base and DJ E-Z Rock. It shows E-Z Rock wearing a Nike Air Force 1 basketball trainer altered with a swoosh adorned in the Louis Vuitton monogram.
“The cover embodied the hip-hop community’s early practice of hacking together high fashion and sportswear, sidelining diverging brands with equal reverence. A cultural symbol in its own right, today the Nike Air Force 1 serves as an objet d’art emblematic of self-generated subcultural provenance,” Vuitton said in its collection notes.
Or as Outfitgrid founder Dennis Todisco commented on Instagram: “When the fake becomes real.”

For Abloh, the U.S.-born son of Ghanaian immigrants, it’s yet another chapter in a narrative that has seen him rise from outsider to kingmaker. He acknowledged as much in a short speech to his team, gathered in a cinema in Paris for the premiere of his collection film, titled “Amen Break” after a famous drum sample.
“Fashion can make you feel like things are impossible. We’re a part of a team that can make people feel a specific way. And through this body of work that we’re about to see on the screen, we deconstruct and dissolve and melt away this idea that fashion is elitist, or fashion is for only a select few,” he said.
Indeed, Abloh has blown open the gates of luxury to a whole new category of participant, from the kids who line up for his sneaker drops to the talent that takes part in his shows.
Musicians GZA, Goldie, Saul Williams, Lupe Fiasco and Shabaka Hutchings appear in the film alongside “Les Misérables” actor Issa Perica, in a storyline inspired by the classic Japanese kung fu film “Lone Wolf and Cub.” Chess is a sub-plot, inspired by the cover of GZA’s seminal album “Liquid Swords,” as well as Vuitton’s signature Damier motif.
In fashion terms, the theme translated into a plethora of check motifs, on items ranging from luxed-up track suits to tailored suit jackets paired with floor-length skirts, in a nod to traditional garments ranging from kilts to kendo uniforms. Checkered bodysuits served as an underpinning for a fuchsia suit, a silver foil jacket and pants, and sober black outfits inspired by martial arts garb.
The central idea was a confrontation between tailoring and trackpants, which materialized into a human chess game — though there was ultimately no winner. “I’m not choosing between one or the other. My signature is both,” Abloh said, noting that the logo of the film contains a yin-yang emblem. “That symbol fits perfectly in my canon.”
Hence the leap between his new-gen suits — think short, belted jacket and pooling pants — and the raver elements in the collection, including airbrushed monogram-embossed leather jackets, and an outfit pieced together from rainbow-colored flyers printed on leather, featuring the logo of Goldie’s record label Metalheadz.
Abloh said he wasn’t playing along traditional gender lines either. “We have straight-up A-line skirts. It’s liberating in 2021,” he said, pointing to a black-and-white rain jacket worn over a hoop skirt. The designer considers it as the natural evolution of a year that has seen social issues from Black Lives Matter to trans rights take center stage.
“The next thing in fashion isn’t in fashion. It’s in people, it’s in the atmosphere, it’s in the streets, it’s in the socio-political,” he said. “Decision, gender, diversity: those aren’t even hot topics. That’s top line. That’s already been established. Now, it’s developing men’s wear into showing the freedom that can be.”
Now on his seventh collection for the house, Abloh feels increasingly legitimate in delivering his point of view. “I’m older, so I don’t feel the fear of being young and trying to stake a claim or aim high,” he said. Yet the striver in him is never far below the surface: by bringing the bootleg back to the source, he’s scored yet another win for the culture.