TheChek News Flow

Brexit Min Davis: immediate goal is an agreement on the Brexit implementation period; confident a political agreement can be reached at the March meeting of EU council 

- The transition period will have a strict time limit 

- Extending Article 50 would not resolve the legal problems around ratifying withdrawal 

- EU and UK are on same page when it comes to need for Brexit transition period 

- We need continued access to each others' markets on current terms; EU and UK must follow the same rules for implementation period for it to work 

- We have to find a way of resolving laws which do not work for Britain

- Speed is key in agreeing on implementation period

Paris thinks EU business could be conducted in French again

Never mind the looming collision between Berlin and Paris over Emmanuel Macron’s expansive plans for the eurozone. Brexit has triggered a more emotionally charged contest. For France, there is something much more important than money at stake — it’s a matter, you could say, of national pride.

Not so long ago, the business of Brussels was conducted in French. Paris thinks it could be so again. The bloc’s rules allow each member state to designate an official EU language. Britain’s departure will leave English without a sponsor on the present list of 24. Ireland and Malta use English at home, but have nominated their mother tongues for EU business.

On the face of it, banishing English is a ludicrous suggestion. It is deeply embedded in the day-to-day work of Europe. On the other hand, there are some determined to extinguish all traces of UK membership from the EU’s institutions. Once removed from the list, English would cease to be one of the bloc’s three working languages. The language of Molière and Proust could be restored to its centuries-old primacy in European diplomacy.

The former communist states of eastern and central Europe take a different view. Pardon our Latin, but they regard English as the de facto lingua franca. Not to put too fine a point on it, the Poles, Czechs and Hungarians have no intention of learning French. Nor will they embrace the EU’s other working language, German. There is too much history there.

As for the political class in Berlin, it is one thing for Mr Macron to demand a eurozone finance minister and budget, quite another to expect the continent’s most powerful nation to give French an advantage over German. Helmut Kohl might once have made such a gesture, but the days when Berlin put the European cause ahead of the German interest have long passed.

The result? A deadlock seemingly as intractable as that over Britain’s future trading relationship with the EU27. Suggestions that Ireland and/or Malta could designate English as well as Gaelic and Maltese are shot down by Francophiles. And it would be too much to expect Dublin or Valetta to jettison their own languages in favour of English.

All may not be lost. The French think the Brexit clock is on their side: that English will lose its legal status at the end of March 2019. Paris, however, may have forgotten the first rule of EU treaties: they can always be reinterpreted by clever lawyers. Officials from the European Commission say that article 342 of the treaties requires a unanimous vote of the council of ministers to change the language regime. To their mind, this means that even when Britain goes, English stays, unless ministers decide otherwise. The ghost of Britain forever stalking the corridors of Brussels? What price French pride?

French luxury group weighs sale of 50% holding back to British designer

French luxury group Kering is in talks with Stella McCartney to sell its 50 per cent stake in the eponymous label back to the British fashion designer, according to a person familiar with the discussions.

Stella McCartney and Kering have operated the Stella McCartney brand since 2001 as a 50-50 joint venture. The discussions come as Kering is looking to remould itself as a pure luxury group, announcing this month that it will distribute most of its stake in German sportswear business Puma to shareholders.

A joint statement from Stella McCartney and Kering said: “As often between stakeholders there are regular discussions about the future of the partnership. Any significant change to the current relationship would naturally be made public at the appropriate time.”

Stella McCartney is a small label in the overall context of Kering, which recorded €3.93bn of revenues in the third quarter of 2017. According to the latest accounts for Stella McCartney, sales rose 31 per cent during 2016 to £41.7m, and the label booked a profit of £9.5m. This only reflects its UK business and does not take into account international sales.

The aim of the Puma stock sale is to allow Kering to focus on its higher-margin and faster-growing luxury brands, such as Gucci, Saint Laurent and Balenciaga. It provides them with centralised human resources, marketing and communications functions, while working with individual brands to drive growth. Kering has said it prefers to devote its attention to larger labels, finding that the smaller brands are too much work with too much uncertainty for the pay-off they provide.

Ms McCartney has made ethical fashion a pillar of her label, long before the current vogue for sustainability. A vegetarian, she is known for the use of vegan and animal-free alternatives in her work, and her fur-free approach was recently adopted by Gucci. Last year Ms McCartney launched a debut menswear collection.

She studied fashion design at Central Saint Martins in London and completed an apprenticeship with tailor Edward Sexton, an old friend of her father — Paul McCartney of The Beatles — before taking over from Karl Lagerfeld as creative director at French house Chloé. Ms McCartney launched her own fashion house through the joint venture with Kering.

Kering (then known as PPR) entered the luxury sector in 1999 with the acquisition of a stake in Gucci. Since then it has added other designer labels including Saint Laurent, Bottega Veneta and Balenciaga, and signed partnerships with Alexander McQueen, as well as Stella McCartney.

The discussions over a stake sale were first reported by The Business of Fashion.

Intel: Color on the Qtr -- > +5.75% @ 47.90

* Mizuho Securities notes that INTC continued strength moving into 2018, expecting to be up high single-digits. Intel noted it was addressing the security concerns with Meltdown and Spectre and continues to see no material financial impact. Raising their estimates, reiterating their Buy and raising their PT to $52, as they see a slow meltup with Data Center stronger and a tailwind with from lower taxes, higher dividends and an attractive valuation.

* FB Riley notes that 4Q's biggest surprise was Data Center's large upside, while a material PC beat essentially matched their preview. They are encouraged that following steady outperformance to C17's financial targets, C18 starts with an above-Street +3.5% y/y growth target, although with $3.55 in EPS a bit below the Street. On the plus side, they like 4Q's DCG-led revenue beat, significant GM upside, a much larger-than expected tax rate reduction to 14.0%, and a +10% dividend boost. Alternatively, 1Q's -12.0% q/q sales decline will fuel Bearish "peak cycle" concerns while C18 GM are lower than they previously expected due to higher 10nm fab start-up expense. C18's capex view is $14.0B/+22.0% y/ y, a much larger-than-expected increase driven by Memory and less so Logic. Risks persist such as AMD competitive inroads but they are encouraged with C17's execution and suspect conservatism in C18's targets. Their C18/19 PF EPS tick $0.04 and $0.39 higher, respectively to $3.54 and $4.29. Valuation is 13.3x and 11.0x these estimates, an attractive entry point in their view. Thier PT ticks up from $53.00 to $55.00 and they retain a Buy rating on value-oriented INTC shares.