LVMH to counter sue Tiffany in fight over troubled takeover By Reuters


© Reuters. FILE PHOTO: A LVMH luxury group logo is seen prior to the announcement of their 2019 results in Paris

By Sarah White and Silvia Aloisi

PARIS (Reuters) – Luxury goods group LVMH said on Thursday it would counter-sue Tiffany, accusing it of mismanagement through the coronavirus crisis after the U.S. jeweller accused the French group of trying to bow out of a $16 billion acquisition deal.

The owner of brands such as Louis Vuitton, led by billionaire Bernard Arnault, said on Wednesday it could not complete its Tiffany purchase after the French government requested a delay on closing the transaction.

Tiffany has filed a lawsuit against LVMH in Delaware – the U.S. state in which the New York-based company is registered – to force it to complete the deal as agreed last year, before the COVID-19 pandemic took hold.

The spread of the virus has dealt a big blow to the luxury sector and raised questions about whether LVMH was overpaying.

“LVMH was surprised by the lawsuit filed by Tiffany against the group,” the French group said in a statement, calling it unfounded. “LVMH will defend itself vigorously.”

LVMH, which said it would also lodge its claim in Delaware, added that the lawsuit would challenge the way Tiffany managed its business during the pandemic, including its payout of dividends.

Tiffany approved quarterly dividend payouts of $0.58 per share in May and August, as allowed by the merger agreement. LVMH says that given the U.S. company was losing money and its sales were falling because of the health emergency, it should not have done so. LVMH cut its own dividend for the fiscal year 2019 by 30%.

LVMH has said it cannot complete the deal under the agreed terms because of the French government’s request to delay it, and that it had no desire to extend the closing deadline beyond the original date of Nov. 24.

But it has rejected Tiffany’s claim that it was stalling the transaction by putting off its antitrust clearance requests and also that it was using the French government as a fig leaf to back out of the deal.

It said on Thursday it would file its requests for approval to European competition authorities in the coming days, and expected to win approval in October.

SALES DROP

LVMH said in its statement on Thursday that Tiffany had significantly underperformed LVMH’s own comparable brands in the first half of 2020, and said the U.S. group’s prospects for 2020 were “very disappointing.”

Tiffany recorded a net loss of $33 million in the first half of 2020, compared to a 17 million euros loss for LVMH’s jewellery and watches division, which includes the Bulgari brand.

The French group does not disclose the financial performance of individual brands. Like-for-like sales fell 39% at its group’s watches and jewellery division in the first half compared with a 34% fall for Tiffany.

However, the French group as a whole, a diversified conglomerate, limited the sales decline for the period to 28% and booked a 1.67 billion euros profit from recurring operations.

According to the merger agreement, a material adverse effect (MAE) is triggered if Tiffany’s business underperforms its peers substantially. The MAE is a standard clause in merger agreements that a buyer can invoke to pull out of a deal if an event occurs that harms the target company before the deal is finalised.

Tiffany said in its lawsuit that LVMH had tried repeatedly to find a pretext to invoke such a clause, and did so for the first time when Tiffany postponed the original August 24 closing deadline for the deal by three months.

Sources told Reuters in June that Arnault, a shrewd deal maker known as the “wolf in cashmere” who has built an empire through acquisitions, was exploring ways to renegotiate the price of the Tiffany deal – something the company’s finance chief denied on Wednesday.

Analysts said the two sides may still agree to close the deal at a lower price, though some did not rule out that Arnault may have already set his sights on a different prey.





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Citi, JPMorgan and State Street back fintech startup Capitolis By Reuters


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© Reuters. FILE PHOTO: A woman walks past a Citibank logo displayed outside the Citibank Plaza in Hong Kong

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By Anna Irrera

LONDON (Reuters) – JPMorgan Chase & Co (N:), Citigroup Inc (N:) and State Street Corp (N:) have invested $11 million in Capitolis, a New York-based technology startup that seeks to help banks use capital more efficiently, the companies said.

Capitolis, which was founded by Gil Mandelzis, a former senior executive at ICAP (LON:) and former Thomson Reuters (NYSE:) Chief Executive Tom Glocer, will use the funding to grow its team and operations, the startup said. The company did not disclose its valuation.

Capitolis expects its team to grow to 90 people by the end of the year from 50 at start, Mandelzis said.

Founded in 2017, Capitolis has developed software to improve liquidity in capital markets by allowing banks to rapidly source capital needed for trades from other financial institutions with large balance sheets.

Regulations implemented following the 2008 financial crisis have increased the amount of capital banks must post as collateral for risky trades making it more costly for them to participate in some markets.

“Banks are constrained by the costs of capital, but there is a lot of capital in the world looking for returns,” Mandelzis said. “We are allowing the banks to tap into infinite sources of financing.”

Capitolis’ technology also allows banks to reduce the notional value of their derivatives portfolios by replacing multiple offsetting derivatives contracts with smaller residual trades. This frees up capital but is often done manually with spreadsheets and paperwork.

To date the company says it has eliminated $5 trillion in overall positions for more than 50 financial institutions including JPMorgan, Citi and State Street.

“We are happy to support them as they invest and build technology that helps free up capital creating greater efficiencies within the global markets industry,” Troy Rohrbaugh, Head of Global Markets at JPMorgan, said in a statement.

Capitolis’ existing investors include Spark Capital, Index Ventures and Sequoia Capital.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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UBS advises private clients to pick ‘sustainable’ investments By Reuters


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© Reuters. Logo of Swiss bank UBS is seen in Zurich

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LONDON (Reuters) – UBS Group (S:) said on Thursday that it would advise private clients investing globally to choose sustainable investments over more traditional options, the first major financial institution to do so.

Money has flowed into a range of sustainable investments in recent years as policymakers look to retool the financial system in the fight against climate change and “build back better” from the economic ravages of the COVID-19 pandemic.

UBS, which manages $2.6 trillion in assets for some of the world’s wealthiest people, said it believed a 100% sustainable portfolio could deliver the same or potentially higher returns and also offer strong diversification benefits to clients.

“The shift in preferences toward sustainable products and services is only just beginning,” said Iqbal Khan, co-president of UBS Global Wealth Management.

“We believe sustainable investments will prove to be one of the most exciting and durable opportunities for private clients in the years and decades ahead.”

UBS said clients currently have around $500 billion invested in its “core” sustainable assets, such as Green Bonds and low-carbon index funds.

While traditional investments such as plain vanilla bonds or a mainstream stock index would still be more suitable in some circumstances, UBS said the coronavirus pandemic had fuelled its belief that a fundamental shift in markets was underway.

“COVID-19 has put the exclamation point on one of the most important shifts in financial services in a generation,” said Tom Naratil, co-president of UBS Global Wealth Management and president of UBS Americas.

“The pandemic has brought the vulnerability and interconnected nature of our societies and industries to the forefront of investors’ minds and shown that sustainability considerations cannot be ignored.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Wall Street sees a bright side in ‘healthy’ tech selloff By Reuters


© Reuters. FILE PHOTO: A street sign is seen in front of the New York Stock Exchange on Wall Street in New York

By Lewis Krauskopf

NEW YORK (Reuters) – Some of Wall Street’s biggest players are viewing the stock market’s recent tech-led selloff as a bout of turbulence rather than the start of a longer slide — and they don’t see it as a reason to run for the door.

Invesco this week called the Nasdaq’s sharp decline a “healthy period of consolidation” while fund manager Lord Abbett said U.S. stock valuations are likely merited, based on an analysis of companies’ earnings.

On Sept. 4, Goldman Sachs (NYSE:) reiterated its year-end price target of 3,600 on the S&P 500, roughly 6% above the index’s close on Wednesday, while UBS Global Wealth Management recommended clients “ease into the markets” rather than stay on the sidelines.

Their optimism highlights how the Federal Reserve’s pledge to keep interest rates at record lows and hopes of a breakthrough in a vaccine for COVID-19 have underpinned market gains this year, though many remain wary that the U.S. presidential election and massive options bets on tech-related stocks could exacerbate market swings in the remaining months of 2020.

“What we think we are going through is a healthy correction, removing the froth,” said Troy Gayeski, co-chief investment officer of SkyBridge, an alternative investments firm. “We certainly could fall more. But if you’re a tech investor you had to understand that the valuations were very high.”

The Nasdaq posted its best day since April on Wednesday, a day after falling into correction territory, commonly defined as a fall of 10% or more from a recent peak. The other major indexes also rebounded on Wednesday after steep declines.

“I think of this rout not so much as a correction, but as a digestion,” Kristina Hooper, Invesco’s chief global market strategist, said in a recent note.

Second-quarter reported earnings on the S&P 500 were 23.1% above expectations, far above the trailing five-year average of 4.7%, analysts at Lord Abbett said in a recent note.

“Earnings momentum, and the magnitude of analyst earnings revisions, is outpacing that in other markets, suggesting that higher valuations on U.S. equities are merited,” the report said.

Still, some believe more volatility is in store. A recent poll of investors from UBS Global Wealth Management showed 65% viewed politics as their top concern, with the Nov. 3 U.S. presidential election just weeks away.

Prominent investor Stanley Druckenmiller – a skeptic of this year’s rally – again sounded a bearish note on Wednesday, warning on CNBC https://www.cnbc.com/2020/09/09/stanley-druckenmiller-says-were-in-a-raging-mania-and-the-next-3-to-5-years-will-be-challenging.html that the stock market is in a mania fueled by the Federal Reserve.

Uncertainty over huge options purchases by SoftBank Group Corp (T:) also hung over markets, creating another risk.

Gayeski, of Skybridge, said he could see an opportunity to increase equity risk if there was a sharper drop, such as the Nasdaq falling 20% or the S&P 500 declining 15% from their respective highs and there were other supportive signs for the market such as the Fed’s expanding its balance sheet further.

Any selling that spreads beyond the big tech-related stocks that have led markets higher could be an indication that the pullback may be extending further, said Willie Delwiche, an investment strategist at Baird.

In the coming days, Delwiche is looking for signs of increasing investor caution — such as buying of put options, outflows from equity funds and diminishing bullish views in surveys — that indicate any over-exuberance has waned.

Another indicator is how investors respond to key technical support levels, said Keith Lerner, chief market strategist for Truist/SunTrust Advisory. The Nasdaq, for example, on Tuesday closed below its 50-day moving average for the first time since April, but was back above it on Wednesday.

“If you see these markets just slice through support levels, that’s a sign that the sellers have the upper hand,” Lerner said.





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Asian stock markets gain following tech bounce, euro waits for ECB By Reuters


© Reuters. People wearing protective masks, following the coronavirus disease (COVID-19) outbreak, are reflected on a screen showing stock prices outside a brokerage in Tokyo

By Tom Westbrook and Jessica DiNapoli

SINGAPORE/NEW YORK (Reuters) – Asia’s stock markets snapped their longest losing streak since February on Thursday and rose following a bounce on Wall Street, though subdued trade in currency, commodity and bond markets suggested investors remain cautious about the outlook.

MSCI’s broadest index of Asia-Pacific shares outside Japan () gained half a percent, lifting away from a one-month low made on Wednesday.

Japan’s Nikkei () rose 0.5% and markets in Shanghai () and Hong Kong () opened higher. But pressure returned to the oil price on worries about soft demand, a harbinger of weaker global growth. [O/R]

An overnight rally in riskier currencies also paused, as foreign exchange traders look for the European Central Bank’s tone at its meeting later on Thursday to guide the next move for the euro, dollar and the broader market. [FRX/]

S&P 500 futures () and Nasdaq 100 futures () each fell 0.4% in Asia.

Indonesia’s main stock index () dropped 4% to its lowest in more than a month on news the country’s capital Jakarta will reinstate social distancing restrictions due to a rise in coronavirus infections.

“The price action suggests that strong buying interest remains on market corrections given the backdrop of ample central bank liquidity,” economists Liz Kendall and Brian Martin at ANZ Bank said in a note.

“However, with some volatility having returned to markets it’s too soon to say whether the rout is over, or whether last night’s recovery is simply a pause,” the added.

Overnight on Wall Street the tech-heavy Nasdaq () posted its steepest rise in more than four months, gaining 2.7%, to halt a three-session selldown that whacked tech stocks. ()

Stay-at-home companies such as Facebook Inc (O:) and Google-parent Alphabet Inc (O:) climbed, while electric-car maker Tesla Inc (O:) rebounded nearly 11%, a day after suffering its biggest ever percentage drop.

The Dow () rose 1.6% and the S&P 500 () 2% and bonds sold off in concert with the rally. The yield on benchmark 10-year U.S. government debt () rose about 2 basis points to 0.71% overnight, with soft demand at a $35 billion auction.

That retraced a little bit to sit at 0.6951% in Asia. [US/]

MARKET DISLOCATION

The rebound in equities has steadied a sharp selloff that has highlighted the fragility of a rally that has carried the Nasdaq up 70% from March lows.

“It’s a double-edged sword,” said Oriano Lizza, sales trader at CMC Markets in Singapore, as retail investors who had great success on the way up now facing a tougher environment.”

“This is where there’s a lot of trepidation,” he said. “The market structure is dislocated at the moment… with stimulus and (markets at) all time highs – there’s no reference point.”

The ECB policy decision at 1145 GMT, followed by a news conference from President Christine Lagarde at 1230 GMT, is the next focus for investors.

Earlier in the week worries that the bank is concerned at the euro’s recent rise had the euro under pressure.

However, hopes for an improving economic outlook, following a Bloomberg News report that ECB economic projections would be broadly steady since June, had the euro () on the front foot in Asia at $1.1817.

“The risk now is that the euro could lift after the ECB meeting, if that is the case and there is more confidence,” said Commonwealth Bank of Australia (OTC:) currency analyst Kim Mundy, something that would pull other currencies higher on the dollar.

Elsewhere oil prices paring some overnight gains on worries about fuel demand after data showed U.S. crude stockpiles rose last week, rather than dropping as expected.

Brent crude futures () fell 0.4% to $40.63 a barrel and U.S. crude futures () fell 0.6% to $37.82 a barrel. Gold was steady at $1,943 an ounce. [GOL/]

GRAPHIC: Asian stock markets https://product.datastream.com/dscharting/gateway.aspx?guid=516bc8cb-b44e-4346-bce3-06590d8e396b&action=REFRESH





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