Variety : Venice Film Festival Still On for September, Venice Governor Confirms

The Venice Film Festival will go ahead as planned this fall, the region’s governor confirmed on Sunday.

Luca Zaia, governor of Veneto, said the world’s longest-running film festival, which was due to take place Sept. 2-12, is still on. The official’s confirmation comes days after the Venice Biennale, which oversees the film festival among a number of other arts events, moved its Biennale of Architecture to 2021, but maintained the film festival’s fall dates. Previously, the architecture and film festivals were meant to overlap.

Zaia said on Sunday that the Biennale of Architecture was postponed due to complications in constructing the necessary pavilions. The film festival will proceed, although he warned that there will likely be fewer films this year.

Venice surveyed a wide range of film industry executives in early May to ask for concerns and suggestions about the upcoming edition, as reported by Variety. The letter, which was signed by Venice’s artistic director Alberto Barbera, was meant to gauge how many filmmakers, actors and producers are willing to attend the fest.

“We know that it would be simply impossible to plan a festival without knowing if you all are willing to use the Festival to give a new start and a strong sign for keeping cinema alive, even in these difficult times,” wrote Barbera. The letter also asked producers and sales agents about “the concrete possibility of bringing (talent) to accompany the invited films.”

Evidently, organizers — who were expected to take a decision in late May — are now confident the fest is able to go ahead as planned, although the look of the event will be different this year, as public health safeguards must be taken into consideration. The festival has not yet commented on plans for September.

Venice previously declared that it would not go the virtual route, but made clear in its industry survey that it was considering a “virtual screening room, using a safe online platform” for those who won’t be able to attend but have been previously accredited. In January, the fest revealed that Cate Blanchett would serve as jury president.

Italy will reopen its borders for European travellers on June 3, forgoing mandatory quarantine restrictions for inbound travel. The country, which was among the hardest hit by coronavirus in Europe, has slowly come out of lockdown in recent weeks, though it has reported 32,785 fatalities to date.

FT : EU watchdog hopeful most banks can absorb €380bn pandemic hit

EU watchdog hopeful most banks can absorb €380bn pandemic hit
Buffers ‘should be sufficient’ to protect lenders in short term, says European Banking Authority

European banks are expected to suffer a hit of up to €380bn to their capital due to the economic disruption from coronavirus, but most should be able to absorb the losses, according to the EU banking watchdog.

The European Banking Authority said it had carried out a “sensitivity analysis” based on the results of its 2018 stress test of the sector to determine the likely increase in non-performing loans and increased riskiness of their loan books because of the virus emergency. 

The share prices of many European banks have fallen almost 50 per cent this year as investors have anticipated how the economic and financial turmoil caused by the pandemic will hurt their weak profitability and may force some to raise extra capital.

However, José Manuel Campa, chairman of the EBA, told the Financial Times: “The starting position of the banks [was] very good at the end of last year [and] the measures put in place since the last crisis have held up.

“As a result of all that, the buffers are large and should be sufficient in the short term so we are not worried about [the banks’] short-term ability to lend to the economy and in the long term to have sufficient buffers to absorb the eventual losses,” he added.

Assuming an increase of between €169bn and €291bn in bad loans at the biggest eurozone banks, the EBA said the hit to their capital would be accentuated by an overall increase in the likelihood of borrowers to default.

The watchdog’s estimate for the capital likely to be wiped out by the crisis ranged from 2.3 to 3.8 percentage points of banks’ total risk-weighted assets — the main way they measure how much capital they need. Every percentage point of risk-weighted assets is worth about €100bn of capital.

At the end of 2019, banks had capital equivalent to nearly 15 per cent of their risk-weighted assets — roughly 3 percentage points above the level required by regulators. Several measures introduced by regulators in response to the virus have provided banks with capital relief equivalent to about 2 percentage points of risk-weighted assets.

The FT reported this year that European Central Bank officials have held high-level talks with counterparts in Brussels about creating a eurozone bad bank to remove billions of euros in toxic debts from lenders’ balance sheets — but the plan has faced opposition from some EU governments.

The EBA, which postponed a planned stress test of the sector until 2021 because of the virus, said: “As the crisis develops, banks are likely to face growing non-performing loan volumes, which can reach levels similar to those recorded in the aftermath of the sovereign debt crisis.

“Capital levels should help banks withstand the impact of Covid-19,” it said, adding: “There could be weaker banks (those with pre-crisis problems or heavily exposed to the sectors more affected by crisis) facing more severe challenges.”

Total NPLs in the biggest 121 eurozone banks had more than halved in six years to €506bn, or 3.2 per cent of their loan books, by the end of last year. But Greek, Cypriot, Portuguese and Italian banks still have NPL ratios above 6 per cent. 

The watchdog said that 18 per cent of European bank loans were to companies in sectors expected to be hardest hit by the disease, including hotels, restaurants, manufacturing, electricity and transport and storage.

However, it said there were a number of caveats to its estimates, including the government guarantees and moratoria being offered on bank loans in various countries, which could shield lenders’ balance sheets from the impact of the crisis.

It warned that its analysis was only for credit risk, and there could be “additional losses from market, counterparty and operational risk”. It added it had not taken account of the rise in bank lending since the start of this year, as many companies drew down credit facilities.

NYT : The Coronavirus Is Deadliest Where Democrats Live

The Coronavirus Is Deadliest Where Democrats Live
Beyond perception and ideology, there are starkly different realities for red and blue America right now.
The staggering American death toll from the coronavirus, now approaching 100,000, has touched every part of the country, but the losses have been especially acute along its coasts, in its major cities, across the industrial Midwest, and in New York City.
The devastation, in other words, has been disproportionately felt in blue America, which helps explain why people on opposing sides of a partisan divide that has intensified in the past two decades are thinking about the virus differently. It is not just that Democrats and Republicans disagree on how to reopen businesses, schools and the country as a whole. Beyond perception, beyond ideology, there are starkly different realities for red and blue America right now.
Democrats are far more likely to live in counties where the virus has ravaged the community, while Republicans are more likely to live in counties that have been relatively unscathed by the illness, though they are paying an economic price. Counties won by President Trump in 2016 have reported just 27 percent of the virus infections and 21 percent of the deaths — even though 45 percent of Americans live in these communities, a New York Times analysis has found.
The very real difference in death rates has helped fuel deep disagreement over the dangers of the pandemic and how the country should proceed. Right-wing media, which moved swiftly from downplaying the severity of the crisis to calling it a Democratic plot to bring down the president, has exacerbated the rift. And even as the nation’s top medical experts note the danger of easing restrictions, communities across the country are doing so, creating a patchwork of regulations, often along ideological lines.
Why has the virus slammed some parts of the country so much harder than others? Part of the answer is population density. Nearly a third of Americans live in one of the 100 most densely populated counties in the United States — urban communities and adjacent suburbs — and it is there the virus has taken its greatest toll, with an infection rate three times as high as the rest of the nation and a death rate four times as high.
In a country deeply segregated along racial, religious and economic lines, density also aligns with political divisions: Urban America tilts heavily blue. In the 2016 presidential election, Mr. Trump’s vote share increased as population density fell in almost every state.
But the divide in infections has been exacerbated by the path the virus has taken through the nation, which is not always connected to density. In some parts of red America, cities have been virtually unscathed and the sparsely populated outlying areas have been hardest hit. Researchers have also found links between the virus’s effects and age, race and the weather, and have noted that some of the densest cities globally have not been hit as hard.
If seeing is believing, the infection has simply come to some areas of the country on a far different scale than others. As of Friday, Alabama had experienced 11 deaths per 100,000 residents and New Jersey had lost 122 per 100,000. Both states have had a huge spike in unemployment claims.
Texas, solidly Republican territory and the second most populous state in the nation, had one of the country’s hottest economies before the outbreak. The state’s biggest cities have so far escaped the worst of the damage. More than 200 metro areas in the United States have higher infection rates than both Dallas and Houston, which may explain why Texas residents are particularly frustrated by the shutdown.
“The cure is worse than the disease, no doubt,” said Mark Henry, a Republican who oversees the Galveston County government in southeast Texas. “There are businesses that were shut down that are never going to open again.”
How the New Outbreaks Factor In
There has been a rapid increase in the number of 2016 Trump-supporting counties that have serious coronavirus outbreaks. Still, the cumulative infection rate in the nation is much higher in counties that supported Hillary Clinton.
In the country as a whole, outbreaks in conservative rural counties are rising, but not on a scale that would close the gap in the virus’s impact on red and blue counties.
Over all, the infection rate is 1.7 times as high in the most urban areas of the country compared with nearby suburbs, and 2.3 times as high in the suburbs as in exurban and rural areas.

Amid the pandemic, there are densely populated red counties near major cities with high infection rates — Suffolk County in New York, Jefferson Parrish in Louisiana, and Monmouth County in New Jersey, for example.
But those are true outliers.
A recent spate of outbreaks in meat plants, prisons and nursing homes has created hot spots in 245 counties that supported Mr. Trump, double the number at the beginning of the month. Some of those outbreaks are hitting subsets of the population that historically have not voted for Republicans. In Iowa, for example, Latinos make up 6 percent of the population but nearly a third of those infected. The population is 4 percent black, but 12 percent of those infected are black.
Over all, African-Americans and Latinos have had higher infection and death rates from the virus, and are far more likely to identify as Democrats than as Republicans.

Several companies have studied social distancing metrics based on anonymized cellphone location data, including the mobility research firms Unacast and Descartes Labs. While the companies do not break down findings by political party, the underlying data they collect shows less social distancing in counties that supported Mr. Trump than in those that supported Hillary Clinton.
Rural and exurban county residents, who tend to favor Republicans, do have to travel more for essential services and are less likely to have jobs that allow for working from home. Yet even in more densely populated suburban areas, there was less evidence of social distancing in counties that voted for Mr. Trump.
The pandemic has divided the country in ways that have never played out so vividly in a public health crisis. For scholars who study party identity and division in the United States, the reality of the different responses was a surprise.

Matthew Gentzkow, a Stanford University economist who is leading a group of researchers tracking partisanship in the virus response, said his team initially thought that a health crisis would minimize differences — assuming that people who disagree over taxes or guns would agree about a pandemic. But instead they found that Republicans were more skeptical about the effectiveness of social distancing than Democrats and have been traveling more outside their homes.
“We initially saw partisanship and thought maybe by the time we looked at the data it would be gone,” Dr. Gentzkow said. “But it turns out that no, this is pretty serious and what we see is that the gap got bigger and bigger. These are real belief differences that should have us really concerned.”
Public opinion polls do show widespread support for stay-at-home orders, but also indicate that Republicans are less likely to see the virus as a significant threat to their health. Some skepticism around the impact of the pandemic can be traced to a distrust of the government that has grown among conservatives in the last decade, according to Arlie Hochschild, a sociologist at the University of California, Berkeley, and the author of a 2016 book about the American right called “Strangers in Their Own Land.”
“In the absence of trust, you just believe your eyes and the information that you see in your Facebook feed,” she said.
The experience of residents in Texas underscores how much direct evidence of the virus’s toll has shaped how people view the measures taken to mitigate it.
At the onset of the crisis, Gov. Greg Abbott, a Republican, tried to appeal to both sides of the political spectrum, allowing local governments to make their own decisions until Texas became one of the last states to issue stay-at-home orders and one of the first to roll them back last month.
In Hardin County in southeast Texas, where the population is about 57,000, there have been just 125 cases and five deaths. Kent Batman, 60, the county Republican chairman, who has spent his life in the region, said he had heard of only two fatalities, both of which he dismissed as anomalies.

To Mr. Batman, like many other Republicans in East Texas, the health crisis has felt far away, like a big city plague. “We’re not New Orleans, we’re just not like that,” he said.

Interviews with dozens of Republicans in southeast Texas and other parts of the country over the past month found a pervasive it’s-not-coming-for-my-neighborhood attitude, with many seeing themselves as a world apart from the regions that have been overwhelmed by the virus. They are enthusiastic backers of rolling back restrictions not just as a way to spur the economy, but also based on the belief that individuals should make their own decisions about risk. They dismiss factual reports from the news media as exaggerated and trying to incite panic, because the reports don’t align with their own experience.
Toward the end of March, Judy Nichols, 60, began monitoring charts daily to see how many people near her had the virus. She lives in Jefferson County, not far from Beaumont, and serves as the chair of the county Republican Party. After two weeks, she stopped keeping tabs on the numbers as her worry subsided.

Over the past several weeks, Ms. Nichols said, she has felt like the winner of a product lottery. She owns several Papa John’s pizza franchises, and business has increased nearly 80 percent — pizza in a time of anxiety seeming to be one thing many people can agree on. But nearly everyone she knows is struggling to pay the bills.
On the other side of the partisan divide in Texas, Lina Hidalgo, a Democrat and the top elected official in Harris County, which includes Houston, put in place stay-at-home orders before the governor did in March. Last week, she extended her “stay home, work safe” guidelines until June 10.
She is concerned about the economic impact. She just doesn’t see a safe alternative. “When you have a political system, there are going to be attacks,” she said. “But let’s debate the politics when this is over.”

Jim Meadows, a 60-year-old refrigeration parts repairman in Nederland, Texas, who describes himself as an “extreme conservative,” doesn’t think the economic question can be set aside. He is upset by the unemployment and financial devastation, which is clearer to him than what he called “this invisible plague.”
Through his work he has, however, begun taking orders for plexiglass partitions that many businesses around him want to use. He said he was “pandering to the uninformed.”
Rashell Collins Bridle, a 42-year-old mother of five who also lives in Nederland and makes her living selling items on eBay, said a minister she knew had died after contracting the virus. Even so, she said she and her friends were more focused on freedom than on health.
“I guess other people expect us to set our futures on fire to keep their fear warm,” she said. “I think that’s incredibly selfish — if you’re that fearful, then just stay home.”

For Professor Hochschild, who studies division, sentiments like this in a crisis reinforce what she has seen across the country.
“There is an underlying stoicism that was there before the pandemic that is really getting tapped,” she said. “There’s a notion of snowflake liberals who can’t take it, who are too dainty and fragile and not hearty like us.”
On the first weekend that Texas lifted the stay-at-home orders, Ms. Bridle took her family to a state park on the Gulf of Mexico. She said American flags were flying from many cars and trucks on the road “as if it were the Fourth of July.”
She said that if schools open with hefty restrictions on recess or how far desks must be spaced together, she will instead place her daughter in a Christian home school co-op.
And if there is another stay-at-home order this year?
“We probably won’t stand for that again,” she said. “I myself won’t comply. I will never comply with anything else like this ever. ”

NYT : Wealthiest Hospitals Got Billions in Bailout for Struggling Health Provide

Wealthiest Hospitals Got Billions in Bailout for Struggling Health Providers
Twenty large chains received more than $5 billion in federal grants even while sitting on more than $100 billion in cash.

A multibillion-dollar institution in the Seattle area invests in hedge funds, runs a pair of venture capital funds and works with elite private equity firms like the Carlyle Group.

But it is not just another deep-pocketed investor hunting for high returns. It is the Providence Health System, one of the country’s largest and richest hospital chains. It is sitting on nearly $12 billion in cash, which it invests, Wall Street-style, in a good year generating more than $1 billion in profits.

And this spring, Providence received at least $509 million in government funds, one of many wealthy beneficiaries of a federal program that is supposed to prevent health care providers from capsizing during the coronavirus pandemic.

With states restricting hospitals from performing elective surgery and other nonessential services, their revenue has shriveled. The Department of Health and Human Services has disbursed $72 billion in grants since April to hospitals and other health care providers through the bailout program, which was part of the CARES Act economic stimulus package. The department plans to eventually distribute more than $100 billion more.

So far, the riches are flowing in large part to hospitals that had already built up deep financial reserves to help them withstand an economic storm. Smaller, poorer hospitals are receiving tiny amounts of federal aid by comparison.

Twenty large recipients, including Providence, have received a total of more than $5 billion in recent weeks, according to an analysis of federal data by Good Jobs First, a research group. Those hospital chains were already sitting on more than $108 billion in cash, according to regulatory filings and the bond-rating firms S&P Global and Fitch. A Providence spokeswoman said the grants helped make up for losses from the coronavirus.

Those cash piles come from a mix of sources: no-strings-attached private donations, income from investments with hedge funds and private equity firms, and any profits from treating patients. Some chains, like Providence, also run their own venture-capital firms to invest their cash in cutting-edge start-ups. The investment portfolios often generate billions of dollars in annual profits, dwarfing what the hospitals earn from serving patients.

Many of these hospital groups, including Providence, are set up as nonprofits, which generally don’t have to pay federal taxes on their billions of dollars of income.

By contrast, hospitals that serve low-income patients often have only enough cash on hand to finance a few weeks of their operations.

After the CARES Act was passed in March, hospital industry lobbyists reached out to senior Health and Human Services officials to discuss how the money would be distributed.

Representatives of the American Hospital Association, a lobbying group for the country’s largest hospitals, communicated with Alex M. Azar II, the department secretary, and Eric Hargan, the deputy secretary overseeing the funds, said Tom Nickels, a lobbyist for the group. Chip Kahn, president of the Federation of American Hospitals, which lobbies on behalf of for-profit hospitals, said he, too, had frequent discussions with the agency.

The department then devised formulas to quickly dispense tens of billions of dollars to thousands of hospitals — and those formulas favored large, wealthy institutions.

One formula based allotments on how much money a hospital collected from Medicare last year. Another was based on a hospital’s revenue. While Health and Human Services also created separate pots of funding for rural hospitals and those hit especially hard by the coronavirus, the department did not take into account each hospital’s existing financial resources.

“This simple formula used the data we had on hand at that time to get relief funds to the largest number of health care facilities and providers as quickly as possible,” said Caitlin B. Oakley, a spokeswoman for the department. “While other approaches were considered, these would have taken much longer to implement.”

Hospitals that serve a greater proportion of wealthier, privately insured patients got twice as much relief as those focused on low-income patients with Medicaid or no coverage at all, according to a study this month by the Kaiser Family Foundation.

“If you ever hear a hospital complaining they don’t have enough money, see if they have a venture fund,” said Niall Brennan, president of the nonprofit Health Care Cost Institute and a former senior Medicare official. “If you’ve got play money, you’re fine.”

In a letter this month to the Department of Health and Human Services, two House committee chairmen said the Trump administration appeared to be disregarding Congress’s intent in how it was distributing the aid.

“The level of funding appears to be completely disconnected from need,” wrote the two Democrats, Representatives Frank Pallone Jr. of New Jersey and Richard E. Neal of Massachusetts.

It is the latest instance in which enormous and hastily enacted federal bailout programs have benefited those who don’t appear to need the money. A package of $170 billion in federal tax breaks, for example, will go overwhelmingly to many of the country’s richest people and biggest companies. A program to rescue small businesses initially directed hundreds of millions of dollars in loans to publicly traded companies while many smaller firms were frozen out.

That pattern is repeating in the hospital rescue program.

For example, HCA Healthcare and Tenet Healthcare — publicly traded chains with billions of dollars in reserves and large credit lines from banks — together received more than $1.5 billion in federal funds.

An HCA spokesman said the aid didn’t cover the expected lost revenue and higher expenses caused by the coronavirus, while a Tenet spokeswoman said the pandemic had suppressed the company’s profits.

The Cleveland Clinic got $199 million. Last year it had so much money on hand — its $7 billion in cash helped generate $1.2 billion in investment profits — that it paid investment advisers $28 million to manage the fortune.

Angela Kiska, a Cleveland Clinic spokeswoman, said the federal grants had “helped to partially offset the significant losses in operating revenue due to Covid-19, while we continue to provide care to patients in our communities.” The Cleveland Clinic sent caregivers to hospitals in Detroit and New York as they were flooded with coronavirus patients, she added.

The St. Louis-based Ascension Health, which operates 150 hospitals nationwide, has received at least $211 million from Health and Human Services. The company, with $15.5 billion in cash, operates a venture capital fund and an investment advisory firm that helps other companies manage their money.

Even if Ascension stopped generating any revenue whatsoever — a doomsday scenario — it would have enough cash to fully operate for nearly eight months.

Nick Ragone, a spokesman for Ascension, said the federal funds “facilitated our ability to serve our communities during this unprecedented time.” He said Ascension had not furloughed or laid off any workers and wouldn’t do so for “as long as possible.”

Critics argue that hospitals with vast financial resources should not be getting federal funds. “If you accumulated $18 billion and you are a not-for-profit hospital system, what’s it for if other than a reserve for an emergency?” said Dr. Robert Berenson, a physician and a health policy analyst for the Urban Institute, a Washington research group.

Hospitals that serve poorer patients typically have thinner reserves to draw on.

Even before the coronavirus, roughly 400 hospitals in rural America were at risk of closing, said Alan Morgan, the chief executive of the National Rural Hospital Association. On average, the country’s 2,000 rural hospitals had enough cash to keep their doors open for 30 days.

Many hospitals that primarily serve low-income people have received federal grants that their executives say may not be enough to see them through the current crisis.

At St. Claire HealthCare, the largest rural hospital system in eastern Kentucky, the number of surgeries dropped 88 percent during the pandemic — depriving the hospital of a crucial revenue source. Looking to stanch the financial damage, it furloughed employees and canceled some vendor contracts. The $3 million the hospital received from the federal government in April will cover two weeks of payroll, said Donald H. Lloyd II, the health system’s chief executive.

“This is just a Band-Aid,” Mr. Lloyd said.

The Harris Health System, which operates two hospitals in Houston, treats mostly uninsured patients. In a good year, it has a 1 percent profit margin, said Esmaeil Porsa, its chief executive.

The system has lost about $43 million in patient revenue during the pandemic, Mr. Porsa said. So far, it has received about a quarter of that in federal grants. It is unclear how it will make up the shortfall.

“I know there are hospitals out there that have some God-awful amount of money in reserve,” Mr. Porsa said. “We are not that, and we will never be that. Whatever cash we have we’re going to pour into services.”

That is not how things work at the Providence Health System, which in some ways resembles a Silicon Valley powerhouse as much as a health care company. Providence owns 51 hospitals, including Swedish Medical Center in Seattle, and 1,100 clinics in California, Texas and others states.

Even with the federal grants, Providence lost $179 million in April, said Melissa Tizon, a company spokeswoman. The bailout money has helped the company avoid laying off staff or reducing their pay.

“Remember, the pandemic isn’t over,” Ms. Tizon said. “We need to be financially stable for the next possible wave.”

But Providence’s financial stability does not appear to be in jeopardy.

The hospital network has nearly $12 billion in cash reserves. It has invested that money in hedge funds, private equity firms and real estate ventures.

It also oversees two venture capital funds that manage about $300 million on behalf of the health care chain. The venture funds do deals alongside some of the country’s highest-profile investment firms, including Kleiner Perkins and Carlyle.

Last year, Providence’s portfolio of investments generated about $1.3 billion in profits, far exceeding the profits from its hospital operations. Like other nonprofits, Providence generally does not owe federal taxes on its earnings.

In 2018, Providence paid its chief executive, Dr. Rod Hochman, more than $10 million.

That would be enough to finance about a month of operations at the St. Claire hospitals in Kentucky.

WWD : Groupe Arnault Takes Stake in Lagardère

Groupe Arnault Takes Stake in Lagardère
The media company, focused on books and travel retail, had been fending off an activist investor.

PARIS — Helping out a family friend — and widening his media holdings — Bernard Arnault has taken a minority stake in embattled publishing and retail conglomerate Lagardère SCA via his Groupe Arnault holding.

Following a capital increase and share purchase, Groupe Arnault will hold a stake equivalent to around one-quarter of the share capital of Lagardère Capital & Management (LCM), Arnaud Lagardère’s holding company.

The development offered an additional safety net to Lagardère, who in recent months had to fend off an activist investor, Amber Capital, that had attempted to take control of the ailing company.

At Lagardère’s annual general meeting earlier this month, shareholders rejected all 18 resolutions submitted by Amber to assemble a new supervisory board.

A joint statement Monday said the Arnault and Lagardère families would share the long-term strategic interest for the company, active in book publishing under the Hachette umbrella, plus travel retail under the Relay, Aelia Duty Free and Vino Volo banners.

“This linkup will strengthen the corporate structure and financial capacities of LCM. The family groups led by Bernard Arnault and Arnaud Lagardère will act in concert with regard to Lagardère SCA,” it added.

It is understood the investment was made out of loyalty to the Lagardère family — Arnault was very close to founder Jean-Luc Lagardère, Arnaud Lagardère’s father — more than a belief in the media group’s current business prospects.

“I have welcomed Arnaud Lagardère’s proposal to join forces with him,” Bernard Arnault, also the chairman and chief executive of luxury giant LVMH Moët Hennessy Louis Vuitton, said in a statement. “My friendship with Jean-Luc Lagardère brought our families together, and I have the utmost respect for the group that he built. I am delighted that we are now, alongside Arnaud Lagardère, a long-term shareholder of the company that bears his name.”

Lagardère said he and Arnault “have long shared the values of family entrepreneurship. Groupe Arnault’s exceptional achievements in France and worldwide, its success in the field of distribution and its investment in the creative and cultural industries, are aligned with the fundamentals of my group and are the mark of an enduring and productive working relationship.”

Bernard Arnault was on the supervisory board of Lagardère SCA from 2004 to 2012, and his son Antoine, chief executive of Berluti and head of communication and image at LVMH, took a seat from 2012 to 2013. In turn, Arnaud Lagardère sat on the board of directors of LVMH from 2003 to 2009.

Via LVMH, Arnault also has investments in French newspapers Le Parisien and Les Echos, the Radio Classique station, plus the financial weekly Investir and magazine Connaissance des Arts.

Groupe Arnault’s investments, meanwhile, include a 16 percent stake in retail giant Carrefour SA via Blue Capital, an investment fund owned by Groupe Arnault and Colony Capital.

Founded in 1992, Lagardère generated 7.21 billion euros in revenues in 2019. It operates in 40 countries and employs 30,000 people.

Revenues in the first quarter of this year dipped 12.5 percent to 1.36 billion euros, reflecting the impact of the COVID-19 crisis, particularly on travel retail.

Over the past decade, the group has whittled down its activities, particularly in magazine publishing, though it still holds the Elle brand license and owns the iconic celebrity title Paris Match and weekly newspaper Le Journal du Dimanche.

In 2011, Lagardère sold 102 international titles to Hearst Magazines, most notably Elle in 15 countries, including the U.S., Canada, Germany, Italy, Russia, China and Japan. It sold off its stake in Marie Claire in 2018.

Monday’s statement noted that the partnership between Groupe Arnault and LCM is subject to the approval of the employee representative bodies of the entities concerned.

The parties have yet to make the requisite declarations to the French financial markets authority.

FT : Bernard Arnault to buy stake in Arnaud Lagardère’s holding company

Bernard Arnault to buy stake in Arnaud Lagardère’s holding company
Billionaire LVMH owner’s investment comes after Vivendi raised stake in media group

LVMH’s billionaire owner Bernard Arnault has agreed to buy 25 per cent of Arnaud Lagardère’s holding company, coming to the aid of his fellow French businessman weeks after he saw off a challenge from an activist investor.

Through the holding company, Mr Lagardère owns a 7.3 per cent stake in the publicly traded Lagardère, the media group founded by his father and whose biggest businesses are book publisher Hachette and a unit that operates retail outlets in airports and transport stations.

Mr Lagardère has been battling to keep control over the company as the activist hedge fund Amber Capital attacked his record of underperformance and his creditors pressured him to pay back heavy personal debts. The unexpected arrival of Mr Arnault assists Mr Lagardère on both fronts.

In a joint statement on Monday, Mr Arnault and Mr Lagardère said shares would be issued in Lagardère Capital & Management so as to “strengthen its structure and financial capacity”. The investment was worth about €100m, according to two people close to the matter.

Mr Arnault’s help may be worth much more than that to Mr Lagardère as it neutralises a line of attack that Amber used against the CEO, namely that his personal debts threatened his ability to lead the company.

Mr Lagardère has borrowed against the value of his stake, and LCM owes as much as €200m to Crédit Agricole.

Amber, which is Lagardère’s biggest shareholder with an 18 per cent stake, has argued that Mr Lagardère’s financial situation is important because of the way in which the media group is structured as a partnership.

Known as a société en commandité par actions, this means that despite owning just 7.3 per cent of Lagardère, Mr Lagardère has a tight grip on the group. He cannot be removed by shareholders but he also has unlimited responsibility for the company’s liabilities.

The joint statement did not mention LCM’s debts. But before the recent shareholder meeting in which Amber tried and failed to replace the board, people familiar with the situation said Mr Lagardère might be willing to negotiate ending the commandité structure and use the proceeds to pay down his debts.

That scenario is now less likely given that LCM will receive cash that will be used to pay down the Crédit Agricole loan, the second person close to the matter said.

Mr Arnault’s investment will also help Mr Lagardère protect his company from the other French billionaire whom he recently convinced to invest to rally votes against Amber.

Vivendi, which is controlled by renowned corporate raider Vincent Bolloré, bought an 11 per cent stake in April and backed Mr Lagardère at the shareholder vote.

Vivendi has since raised its stake to 16.5 per cent. Analysts have speculated that Mr Bolloré might have his eyes on Hachette, since Vivendi is in the publishing business.

The ties between the Lagardère and Arnault families go back decades. Mr Arnault used to play tennis with Lagardère’s father, Jean-Luc, and sat on Lagardere’s board from 2004 to 2012. Arnaud Lagardère was on the LVMH board from 2003 to 2009.

“I have welcomed Arnaud Lagardère’s proposal to join forces with him,” said Mr Arnault in a statement. “My friendship with Jean-Luc Lagardère brought our families together, and I have the utmost respect for the group that he built.”

Shares in Lagardère jumped 13 per cent by mid-day in Paris.

FT : Van owner wins landmark Dieselgate case against VW

Van owner wins landmark Dieselgate case against VW
German court ruling will force carmaker to compensate tens of thousands more customers

Germany’s highest civil court has ordered Volkswagen to pay more than €28,000 to an owner of a diesel minivan, in a landmark judgment that will force the carmaker to compensate tens of thousands of customers.

In the first Dieselgate claim to be heard at the Bundesgerichtshof (Federal Court of Justice) in Karlsruhe since the company was found to be cheating on emissions results more than four years ago, the court found in favour of Herbert Gilbert, who bought a VW Sharan in 2014 for about €31,500.

It ruled that the 65-year-old was entitled to return his vehicle and receive a partial refund, plus interest.

The precedent will de facto force VW to compensate claimants in at least 50,000 outstanding cases.

However, the world’s largest carmaker has largely mitigated the risk of a worst-case scenario.

Last month, it reached a settlement with 240,000 drivers in Germany, who had sued VW in the country’s largest collective lawsuit. They will receive between €1,350 and €6,250 each, as part of a €750m payout.

In 2015, the German group was forced to recall more than 11m cars worldwide after it was revealed that its EA189 diesel engines contained software that manipulated the results of pollution tests.

While VW swiftly reached a €10bn settlement with US owners, and has been forced to set aside more than €31bn in Dieselgate costs, it has taken years for drivers in Germany to receive any compensation en masse.

Instead, tens of thousands of individual cases have wound their way through the country’s legal system, often overwhelming local courts, before the law was changed to allow for a collective lawsuit.

“Today we have made history,” said Claus Goldenstein, whose law firm brought Mr Gilbert’s case.

“The ruling means legal certainty for millions of consumers in Germany and shows once again that even a large corporation is not above the law.”

Volkswagen said it did not expect a wave of new claims, as the statute of limitations may have run out for many of the 2.4m owners of affected VW vehicles Germany.

It added that it would now approach remaining plaintiffs with “appropriate proposals” in order to “relieve the burden on the judiciary as quickly as possible”.

Further cases being heard at the Bundesgerichtshof in July are expected to clarify whether claimants who bought their VW diesel vehicles after the scandal was uncovered are also entitled to compensation.

The Wolfsburg-based carmaker is also awaiting the result of one of the largest consumer lawsuits in the UK, in which more than 90,000 British VW customers are claiming damages.

The bigger risk for the carmaker, and the wider auto industry, is the upcoming ruling from the European Court of Justice, which is examining whether newer diesel engines, used by VW and several other large brands, were also illegally manipulated.

In April, EU advocate general Eleanor Sharpston advised the ECJ that the technology did contain a “defeat device”.

If the court accepted her opinion, owners of diesel vehicles in Germany “could then refer to our Bundesgerichtshof ruling and enforce compensation in the billions”, said Mr Goldenstein, whose company also represents a further 21,000 claimants against VW.

WSJ : Cyclical Stocks Are Staging Comeback

Cyclical Stocks Are Staging Comeback
Industrials and energy sectors logged biggest gains in S&P 500 last week; financials group also rallied

Much of the recent optimism in the stock market has been driven by signs of progress toward a coronavirus vaccine, hopes that have propelled the S&P 500 to its highest level since early March. Some traders are betting on effective virus protection by the end of 2020, enabling economic activity to return to pre-pandemic levels.

Bargain hunters last week scooped up shares that have been badly beaten down during the pandemic. Boeing Co. surged 15%, Halliburton Co. rose 18% and Bank of America Corp. added 5.7%. All are down at least 35% this year.

Meanwhile, the rally in big technology stocks that has fueled the market’s gains over the past two months slowed. Netflix Inc., a key beneficiary of the lockdown, lost 5.5%.

“It makes sense that people are buying cyclicals on the [vaccine] optimism,” said JJ Kinahan, chief market strategist at TD Ameritrade. “But the part that makes me nervous is midmonth in June when most states [are open]…I don’t know if the reality will be able to keep up with the great expectations that we’re seeing right now.”
Next week, investors will parse fresh data on April consumer spending and the Conference Board’s index of consumer confidence for May. Both economic indicators are expected to fall. They will also review earnings reports from home builder Toll Brothers Inc. and apparel maker Ralph Lauren Corp.

The S&P 500 is now off just 8.5% for the year after rallying 3.2% last week and 32% from its late March low. The industrials, energy and financial sectors of the index all remain down 22% or more for the year.

The coronavirus pandemic has brought the economy to a near halt, forcing more than 38 million Americans to seek unemployment benefits as stay-at-home orders have closed businesses and prompted companies to shave their workforces. As a result, consumer spending has plummeted and manufacturing output has slumped. Analysts are projecting record declines in gross domestic product in the current quarter.

Most analysts agree any meaningful recovery in the stock market will be driven by cyclical shares. But when so much remains unknown about the outlook for the economy, many are questioning the viability of the recent rally. A second wave of coronavirus infections, long-lasting economic fallout from stay-at-home orders and escalating tensions with China could send the economically sensitive shares tumbling, they warn.

Any stumbles could propel defensive sectors forward again—in particular, the health-care, consumer staples and utilities groups that tend to shine in times of turmoil. Since the stock market peaked Feb. 19, the health-care sector has fallen just 4.3%, making it the best performer of the S&P 500’s 11 groups.

Analysts say the sector’s resilience this year has been twofold. Traders initially flocked to the shares in part because spending on health care, like consumer staples or utilities, tends to be more stable, even when Americans tighten their budgets.

At the same time, the sector has benefited as investors bet on which biotechnology company will be first to find an effective coronavirus vaccine or treatment. Moderna Inc. and Inovio Pharmaceuticals Inc. both said last week that their vaccine candidates showed promise in early trials. The stocks have more than tripled this year.

Gilead Sciences Inc. is also working on a drug to fight Covid-19 and has seen some success, pushing its shares up 13% in 2020.

The stocks are also popular among institutional investors. Global health care remains the most overweight sector among fund managers, according to a May survey conducted by Bank of America Global Research, with managers’ net allocation to the sector at an all-time high.

Meanwhile, some of the cyclical sectors that tumbled the most during the selloff have subsequently seen the largest gains off this year’s low. Energy shares have recovered the most since stocks bottomed March 23, jumping 60%.

Some analysts and traders, however, caution that some of those gains could be driven by short sellers rushing to cover their bets. Energy stocks have been particularly battered this year as fuel demand plunged from stay-at-home orders and an oil-price war between Saudi Arabia and Russia sent supply surging. A recent curtailment in output and signs of an increase in demand for gasoline have pushed oil prices higher and lifted the shares as well. U.S. crude is up by a third over the past two weeks.

Despite some signs of a brightening economic picture, Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., said she would like to see a stronger rally among financial stocks to bet the tide has turned.

She and others said it will be difficult to achieve meaningful economic recovery without the group, given how intertwined the sector is with the economy. During the nearly 11-year bull market that followed the financial crisis, financials were the third-best performing group, according to Dow Jones Market Data.

Despite last week’s gains, the group’s rebound from the March low is still among the smallest. Bank stocks, in particular, have been hit hard by the possibility of a surge in loan losses, as well as declining interest rates. The yield on the 10-year U.S. Treasury note settled Friday at 0.659%.

“For me, it’s hard to envision a scenario where we are truly getting back on our feet economically with financials being [among] the worst performing sectors,” Ms. Sonders said. “It would be very odd that we see the economy recover and not see some participation by financials.”

WSJ : Chinese Companies Fleeing New York Will Find Warm Welcome at Home

Chinese Companies Fleeing New York Will Find Warm Welcome at Home
With Hong Kong in turmoil, Shenzhen and Shanghai could also be beneficiaries

Tensions between the U.S. and China have spilled into the capital markets. Many U.S.-listed Chinese companies will start to plan their trips back home.

On Wednesday the Senate unanimously passed a bill that could force Chinese companies to delist from U.S. stock exchanges. The key issue—China’s refusal to let American regulators inspect the audits of its companies—has festered for years, but escalating tensions have lifted it to the top of the political agenda. The recent accounting debacle at Luckin Coffee has added impetus.

The legislation would prohibit trading in a company’s shares if its auditor hasn’t been inspected by the Public Company Accounting Oversight Board, a U.S. audit watchdog, for three straight years. It would also require listed companies to reveal whether they are owned or controlled by a foreign government.

Chinese companies with a primary listing in the U.S. have an aggregate market capitalization of around $1 trillion, or 3.3% of U.S. markets, according to Goldman Sachs. More than half of that comes from just one company—Alibaba.

The Senate bill still needs to be passed by the House and signed by the president to become law, and along the way the terms could be watered down. But it still makes sense for U.S-listed Chinese companies to look for a fallback option.

Hong Kong is an obvious candidate. New York Stock Exchange-listed Alibaba raised $13 billion there last November in a secondary listing. Its Nasdaq-listed rival JD.com has filed a confidential application to do the same. Perhaps tellingly, shares of Hong Kong Exchanges & Clearing, the city’s stock-exchange operator, have outperformed the Hang Seng Index since President Trump said two weeks ago he’s looking at Chinese companies that trade on U.S. exchanges but don’t follow U.S. accounting rules.

But the national-security law Beijing is about to impose on Hong Kong casts a cloud over the bourse’s future. Hong Kong’s rule of law and strong protections for free speech and the press, along with its open capital account, have long been its advantages over mainland Chinese exchanges. The day after plans for the new law were announced, the Hang Seng Index fell nearly 6%.

A potentially higher valuation in Shanghai and Shenzhen may be an even bigger draw for newly footloose U.S.-listed Chinese companies. After Hong Kong-listed Semiconductor Manufacturing International Corp., China’s leading chip maker, said it may seek to raise billions of dollars on the Shanghai Stock Exchange’s new technology stock board, its shares jumped 11% in one day. The chip maker delisted from New York last year—over low volume and administrative costs, it said, rather than U.S.-China tensions.

Expect to see a flock of Chinese companies migrating homeward from the U.S.