TheChek News Flow

After the UK Prime Minister Theresa May secured a joint statement from the G7 on Friday, backing a call for social media firms to do more to combat online extremism, a Conservative minister has suggested the party is open to bringing in financial penalties or otherwise changing the law in order to encourage more action on problem content from tech companies if it’s returned to government at the UK general election on June 8.

The Guardian reports the comments by security minister, Ben Wallace, speaking to BBC Radio 4 on Sunday. Wallace’s words follow an exposé by the newspaper of Facebook’s moderation guidelines — which the minister dubbed “totally unacceptable”, citing an example of Facebook’s moderator guidance saying it’s “OK to publish abuse of under-seven-year-old children from bullying as long as it doesn’t have captions alongside”. Facebook’s rules have also been criticized by child safety charities.

The company declined to comment for this story. But Facebook has previously said it intends to make it simpler for users to report content problems, and will speed up the process for its reviewers to determine which posts violate its standards (although it has not specified how it will do this). It has also said it will make it easier for moderators to contact law enforcement “if someone needs help”.

Beyond bullying and child safety issues, concern about social media platforms being used to spread hate speech and extremist propaganda has also been rising up the agenda in Europe. Earlier this year the German cabinet backed proposals to fine social media platforms up to €50 million if they fail to promptly remove illegal hate speech — within 24 hours after a complaint has been made for “obviously criminal content”, and within seven days for other illegal content. It appears a Conservative-majority UK government would also be looking seriously at applying financial penalties to try to enforce content moderation standards on social media.

Wallace’s comments also follow a UK parliamentary committee report, published earlier this month, which criticized social media giants Facebook, YouTube and Twitter for taking a “laissez-faire approach” to moderating hate speech content. The committee also suggested the government should consider imposing fines for content moderation failures, and called for a review of existing legislation to ensure clarity about how it applies.

After chairing a counterterrorism session at the G7 on Friday, which included discussion about the role of social media in spreading extremist content, the UK’s PM May said: “We agreed a range of steps the G7 could take to strengthen its work with tech companies on this vital agenda. We want companies to develop tools to identify and remove harmful materials automatically.”

It’s unclear exactly what those steps will be — but the possibility of fines to enforce more control over platform giants is at least now on the table for some G7 nations.

For their part tech firms have said they are already using and developing tools to try to automate flagging up problem content, including seeking to leverage AI. Although given the scale and complexity of the content challenge here, there will clearly not be a quick tech fix for post-publication moderation in any near-term timeframe.

Earlier this month Facebook also said it was adding a further 3,000 staff to its content reviewer team — bringing the total number of moderators it employs globally to review content being posted by its almost two billion users to 7,500.

Bain report predicts ‘solid and healthy’ market growth this year

The global luxury market is expected to grow by a solid 2 to 4 per cent this year in a clear sign that the turnround in performance for the sector that began last year is on a steady and sustainable footing.

Consultant Bain’s spring luxury update predicts that the global personal luxury goods market will grow to €254bn-€259bn this year, as consumer confidence returns in Europe and Chinese customers spend more at home and overseas.

Large luxury houses, such as LVMH, Kering and Hermes, began indicating this trend in their results from the middle of last year. The industry had previously suffered a difficult period as a result of an economic slowdown, a corruption crackdown in China and the impact of terrorism on spending.

“The market is growing again,” said Claudia D’Arpizio, a Bain partner and lead author of the study. “It’s less dependent on gift giving in China and less dependent on tourist flows that were driven by price differentiation and bargain hunting. It’s more solid and it’s healthier.”

Bain estimates that the overall market will expand to €290bn in sales by 2020.

Performance is polarised across geographical regions. In the US the luxury market continues to underperform, hurt by a strong dollar, political uncertainty and problems faced by department stores — a pillar of distribution for luxury brands in North America. Bain expects the region’s luxury sector to shrink by as much as 2 per cent in 2017.

Meanwhile fortunes in Europe, the region where luxury spending was worst hit by terrorist attacks, are improving. Bain forecasts growth of 7 to 9 per cent in luxury sales in Europe, and highlights the bright spots of the UK, where sterling has dropped in the past year following its vote to leave the EU, and Spain, which is perceived as a safe destination.

The increasing tendency for Chinese consumers to buy luxury goods at home is expected to drive growth of 6-8 per cent this year for the mainland China market. Chinese consumers account for one in three luxury purchases globally and will nonetheless remain an important source of overseas tourist flows. Outside mainland China, however, Bain predicts the Asian luxury market will shrink by 2 to 4 per cent because of decreased tourism in Taiwan and Southeast Asia.

“Digital is the channel that is fastest growing,” said Ms D’Arpizio, who added that there was increasing differentiation between winners and losers. Brands that are doing well are typically those that have invested in digital platforms and engaged with a “millennial mindset”. This strategy means shifting part of their advertising budgets to online, using social media to talk directly to the final customers, and using a so-called “omni-channel” approach that combines the best of digital and e-commerce with physical stores.

“Brands need to be customer obsessed and millennial minded,” said Bain partner Federica Levato, co-author of the report. “Buying a luxury good now is not just walking into a store. It has become a journey of engagement through multiple touchpoints well before the point of sale.”

An overall reduction of traffic to physical stores means that “a big topic for the future is the role of the store and the number of stores,” said Ms D’Arpizio. “You probably need fewer stores that are more focused on consumers, experiences and telling the story of the brand.”

She added: “It’s clear from the last 18 months that this market is very reactive to brands’ strategy. In the past the industry behaved too much with a one-size-fits-all approach. Now the brands that are differentiating themselves are far outperforming the market.”

Bain’s report is published in collaboration with Fondazione Altagamma, the trade association for Italian luxury goods manufacturers.

Betting shops are heading in the same direction as other high street participants

UK high-street bookmakers are giving short odds on a Conservative election victory next week. That outcome may only limit the pain from a government review of restrictions on lucrative fixed odds betting terminals (FOBTs).

Ladbrokes Coral and William Hill together have over half of the 9,000 UK shop estate. Each face the problem of a declining business that owns too much property. Betting on horseracing has been moving into cyber space, where sports wagering is buoyant but punters fickle. Retail bookmaking is a race to the bottom where the winner will be the one best able to capture customers online while managing shop closures.

Over half of retail profits now come from FOBTs, which the opposition Labour party believes should pay out no more than £2 per winning bet. Lobbyists claim a much lower cap set by either party would be the coup de grâce for almost half of existing shops. With jobs at stake any compromise will probably bring closures in the hundreds rather than thousands.

As the pool of traditional punters shrinks, operators face the same choice that has hit other businesses with real estate; margin or market share. Consider first-quarter results. Wagers placed at Ladbrokes Coral shrank 7 per cent. At William Hill they rose 2 per cent. While gross win margins — the money the bookies keep — grew at the former, they shrank at the latter. Offering better odds brings customers, but magnifies losses when they win.

Operating margins for high-street divisions are equally gloomy, losing 5 percentage points at both Ladbrokes Coral and William Hill since 2014 to hit 10 per cent and 16 per cent respectively at the end of last year. Shares have fallen accordingly.

Both companies are growing online but a reliance on bricks and mortar for earnings leaves them vulnerable. A damaging decision on FOBTs would merely accelerate the decline of betting shops along a trajectory traced by pubs and music shops. The stock of traditional bookies should appeal only to punters with a taste for long odds.

It proposes axing a fund the agency uses to build tools for spotting insider trading

The Trump administration is planning to eliminate a part of the Securities and Exchange Commission budget that the regulator has been using to build tools for identifying insider traders and pursuing enforcement actions.

A line item buried in the proposed budget released by the White House last week would scrap a $50m annual “Reserve Fund” created in the Dodd-Frank Act that Congress passed in 2010 following the financial crisis.

The SEC has used the fund to modernise its technology to better police the stock market, and the proposal to take away the money drew criticism from Mary Jo White, who chaired the SEC until January.

The SEC needs “the ability to fully use the Reserve Fund in order to discharge its critical responsibilities”, Ms White told the FT.

“The fund is very important to the SEC and especially its ability to engage in spending for long-term, critical IT projects, which is an area where all agree it is important for the SEC to keep pace with the rapidly changing technology of the industry and markets it regulates.”

Some Republicans in Congress have condemned the money as a slush fund and have taken aim at it before. While it is capped at $50m a year, it has been slashed in half by lawmakers in three of the past six years.

In its budget plan, the administration gave notification of the proposed elimination in a paragraph under a broader section about financial regulation: “The budget also proposes to restore the Securities and Exchange Commission’s accountability to the American taxpayer by eliminating the “Reserve Fund” created by the Dodd-Frank Act.”

If the language survives negotiations and is passed by Congress, the SEC’s fund would be axed in 2019. The SEC declined to comment.

The SEC has discretion on how to use the Reserve Fund. It is distinct from the agency’s annual budget appropriation — proposed by the administration at $1.6bn for 2018 — in which money is earmarked for specific divisions.

The SEC has tapped the fund to:

• develop investigative tools that officials have used to bring insider trading cases;

• create case management systems for its examinations and enforcement division;

• build projects for digesting growing volumes of financial data that the agency inputs into its surveillance and oversight systems;

• and modernise its Edgar corporate filings system.

A July 2015 report by the SEC’s inspector general warned that, without the fund, “the SEC would not have the capability to ingest, mine, and use large data sets to meet its oversight mission”.

In its budget request earlier this year, the agency said it “contemplates continued access to the commission’s Reserve Fund to fund long-term capital investments in information technology”.

Asian equity markets are mixed and volatility is low with mainland China on holiday for Dragonboat Festival. US market holiday on Monday is adding to tepid price action across all assets. Friday's trading session was highlighted by improvement in US Q1 GDP thanks to better than initially reported consumption. G7 concluded its meeting in Italy with merely a vague commitment to existing exchange rate arrangements, pledge to "fight protectionism" and reduce global imbalances to support growth. Climate change friction amid speculated intentions by US Pres Trump to pull out of Paris Accord was among the more noteworthy developments, as leaders failed to bridge differences on the issue. The focus now turns to China-EU investment agreement taking place next weekend, as Europe appears to pivot toward greater cooperation with the East. Australia index is a notable decliner amid weakness in Energy and Mining sectors. North Korea fired another projective deemed to be a scud missile from the east coast, Japan PM Abe went as far as to state that concrete measures will be taken by US/Japan in response to ongoing provocations.

Nikkei +0.11% Hang Seng +0.15% CSI Closed Shanghai Closed

Eur$ 1.1167 CNH 6.8156 CNY 6.8555 JPY 111.30 GBP 1.2831 CHF 0.9753 RUB 56.80 WTI$ 49.69 (-0.22%)

S&P +0.06% EuroStoxx +0.14% Dax +0.13% SMI -0.04% FTSE Closed

- WOOD LN : Wood Group Said to Be Keen in Keeping Amec’s Nuclear Unit: FT

/

>>> Down

/

>>> Initiation

*Inventiva New Buy at SocGen, PT EU14

>>> Call

/

Despite weather headwinds, 1Q17 results were mostly ahead of market expectations, which on average resulted in a positive performance for stocks on results days. And though conditions were difficult for generation and supply, utilities kept full-year guidance.

Veolia, RWE, EON and Gas Natural had the most positive stock reaction on results day… Veolia's management's more optimistic view on organic growth, post a cautious tone on the FY16 call, triggered the positive stock reaction. Suez was also very strong on the day of Veolia's results on expectations that it could have benefitted from the same trends. RWE also reported strong results, which gives us confidence it should reach top end of guidance for the year. Gas Natural's stock performance was triggered more by the possibility of a stake sale of the Spanish gas distribution business, which management confirmed it is studying (but has not taken any decision). We found Gas Natural's results to be weak. In our view, EON reported weak results, however the one-off positive pension adjustment within the grids business (disclosed as being worth c€100m for FY17) may have led to the good stock performance on the day.

...Endesa, Verbund, Dong and Innogy had the worst. Endesa reported results in line with our expectations, so we attribute the negative share reaction to profit taking following the stock's strong performance ahead of results and concerns on guidance. Dong's weak 1Q (mainly seasonality) may have discouraged investors on the day, but guidance was maintained and we believe it can meet it. As for Verbund, while the company raised guidance on the back of stronger thermal results, the company discussed expectations for power to trade within a €25-35/MWh range medium term. Finally, Innogy's poor performance in UK supply (and management's recognition that the outlook for this business has deteriorated) led to the negative reaction on the day.

Adidas chief keen to pace himself after swift start