Luxury goods giant LVMH cancels $14.5B deal for Tiffany

NEW YORK (AP) — Luxury goods giant LVMH is ending its takeover deal of jewelry retailer Tiffany & Co., saying the French government had requested a delay to assess the threat of proposed U.S. tariffs and amid wider industry troubles caused by the pandemic.

The Paris-based conglomerate said that both the French government and Tiffany had requested that the closing of the deal be postponed by a few months. The French government, it said, wanted to assess the impact of the possible U.S. tariffs on French goods.

As a result, LVMH said, the $14.5 billion deal — which would have been biggest ever in the luxury market and was scheduled to close Nov. 24 — will be canceled.

Tiffany replied that it’s suing to enforce the merger agreement, which was signed in November 2019. The New York company said LVMH’s argument has no basis in French law. Tiffany also said that LVMH hasn’t even attempted to seek the required antitrust approval from three jurisdictions.

“We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction on the agreed terms,” said Roger Farah, chairman of Tiffany, in a statement.

Shares in Tiffany slid 6% in afternoon trading in New York. Those in LVMH, which owns 75 brands including Christian Dior, Fendi, Givenchy and Tag Heuer, were stable.

The deal’s value came under strain during the coronavirus pandemic, which caused retail sales to plunge around the world. Tiffany’s share price has been trading around $125 a share for weeks - below the $135 per share price that LVMH had agreed to pay last fall, before the pandemic.

Back then, industry experts had said the deal made sense. Tiffany, known for its delicate jewelry, distinctive blue boxes and an Audrey Hepburn movie, had been trying to transform its brand to appeal to younger and more digital shoppers, and could have used an owner with deep pockets to help expand.

LVMH, led by billionaire Bernard Arnault, had thought the deal would strengthen its position in high-end jewelry and in the U.S. market. LVMH was also making a bet on China’s economy, where Tiffany had been expanding its presence.

The pandemic threw all those assumptions and plans in doubt, and the threat of new tariffs between the U.S. and Europe was cited as a further complicating issue.

Before COVID, the global market for personal luxury goods was solid, reaching a record high of $307.1 billion (260 billion euros) in 2018 — a 6% increase from the year before, according to consulting firm Bain & Co. That sector slipped by 2.1% to $331.9 (281 billion euros) last year, according to Bain estimates. But given COVID’s financial fallout and the shutdown of tourism worldwide, those sales could drop by 20% to 35% in 2020, Bain estimates. Bain expects that personal luxury sales won’t recover to pre-COVID levels until 2022 and 2023.

Tiffany’s global sales declined 29% during the fiscal second quarter ended July 31, following a 45% drop in the fiscal first quarter.

Last year, France sought to impose a tax on global tech giants including Google, Amazon and Facebook. The French tech tax is aimed at “establishing tax justice.” France wants digital companies to pay their fair share of taxes in countries where they make money instead of using tax havens, and is pushing for an international agreement on the issue.

In response to the tech tax, the U.S. threatened to slap 100% tariffs on $2.4 billion of French products.

The two sides are at a tense truce as France has said it would delay collection of the digital tax until December, parking the issue until after the next U.S. presidential election where Trump hopes to secure another four-year term.

In a press conference on Wednesday, French government spokesman Gabriel Attal confirmed that a letter was sent by French Foreign Minister Jean-Yves Le Drian to LVMH and referred to international talks about U.S. tariffs as a “very important issue.”

“The (French) government is neither naive nor passive. We have objectives that we want to reach,” he said. He wouldn’t further elaborate and said that Le Drian is expected to express his views on the issue in the coming hours.

CFO Jean Jacques Guiony of the LVMH insisted in a phone interview with reporters that the letter received Sept. 1 from the French government was legal and valid and left the group no choice.

“I don’t think their objective is to please or not to please LVMH. They don’t give a damn…,” he said. “The letter is legally valid, is legal. When you get such a legally binding and legally valid letter, you just apply it…We will apply it.”

Asked about lowering the price to keep the deal alive, he said that had not even been considered as there is no article in the contract that would allow that.

“The deal cannot take place .. we are prohibited from closing this transaction … we have no choice.”

As for the threatened law suit, the CFO said that he doesn’t “see a way in between” the arguments the two sides could put forth – we don’t do the deal on Nov. 24 and they saying that you have to do it anyway, he said.

“We’ll see what happens.”

________

AP Writers Sylvie Corbet ad Elaine Ganley in Paris contributed to this report.

Associated Press

US increasing tariffs on Airbus planes to 15 percent from 10 percent

The United States is increasing tariffs on Airbus planes imported from Europe to 15 percent beginning March 18, authorities announced Friday.

The duties have been at 10 percent since October, when Washington hit $7.5 billion in European products with tariffs.

The announcement from the office of the United States Trade Representative came just days after President Donald Trump said it was time to talk "very seriously" about a trade deal with the European Union.

Washington imposed punitive taxes on the $7.5 billion in European products after the World Trade Organization (WTO) gave the United States a green light to take retaliatory trade measures against the EU over its subsidies to European aerospace giant Airbus.

Other products -- including wine, cheese, coffee and olives -- have been taxed at 25 percent since October.

Industry executives in Europe and the United States are on tenterhooks awaiting each new announcement from trade authorities.

"It has become abundantly clear that tariffs on distilled spirits products are causing rough seas on both sides of the Atlantic," the Distilled Spirits Council of the United States said in a statement Friday.

The council called on authorities to withdraw 25 percent taxes on American whiskeys in the EU, and 25 percent taxes on liquors imported from five European countries, pointing to fears of a negative impact on the US economy and jobs.

But Trump, a real estate developer turned politician, sees tariffs as a negotiating tool.

After a trade war with China that lasted nearly two years and featured punishing reciprocal tariffs, Trump declared at the signing of a "phase one" trade deal with Beijing in January that it was a "momentous step ... righting the wrongs of the past."

He has now turned his sights to Europe though relations remain tense as Washington brandishes the threat of taxing European auto imports, a move targeting Germany, Europe's biggest auto exporter.

Trump wants EU member states to further open their markets to American products, particularly agricultural goods.

He has also threatened to hike tariffs on French wine -- currently taxed at 25 percent -- even further unless there is a deal on a digital tax which European nations want to impose on American giants such as Amazon and Facebook.

Agence France-Presse

Asian equities mostly up after US, China tariff moves

HONG KONG, China — Asian investors on Thursday cheered Donald Trump's decision to delay a hike in tariffs on Chinese goods and Beijing's announcement that it would remove a range of US products from its own planned levies.

The moves signal an easing of tensions between the two economic superpowers ahead of a much-anticipated meeting of top-level negotiators next month.

They also provided an extra shot in the arm for investors as they await key announcements from the US and European central banks that are expected to see a further easing of monetary policy.


In a tweet on Wednesday night, Trump said: "We have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th."

He added that the delay was requested by "Vice Premier of China, Liu He, and due to the fact that the People's Republic of China will be celebrating their 70th Anniversary", on October 1.

Earlier in the day, China said it would temporarily exempt 16 categories of US exports from tariff increases in an olive branch to Washington before the talks take place and which Trump described as "a big move".

The more conciliatory tone from both sides -- after months of rancour -- fuelled hopes they can edge towards a solution to their long-running trade war, which has jolted the global economy and stock markets.

The delay "shows Trump doesn't want to increase tariffs before the trade talks in early October and it creates good conditions", said Tommy Xie, an economist at Oversea-Chinese Banking Corp. "It adds to the hope that there'll be good news from the October meeting, and markets will wait and see."

Wednesday's developments were broadly welcomed though Asian markets struggled to hold on to initial rallies owing to profit-taking from a healthy run-up this week.

Central banks in focus

Tokyo ended the morning 0.8 percent higher and Shanghai added 0.2 percent while Sydney climbed 0.5 percent. Wellington and Taipei also rose, as did Jakarta, but Hong Kong dipped 0.2 percent.

Jun Inoue, a senior economist at Mizuho Research Institute, said Trump's move indicates he "can be flexible to get concessions from China and that he’s not trying to punish Beijing at any cost".

The apparent easing of trade tensions boosted oil prices as the prospect of an end to the row revived hopes for demand.

However, the gains followed a sharp drop for both main contracts as traders bet on a possible return of Iranian crude to the market after the firing of Trump's hawkish national security adviser John Bolton eased fears of a conflagration in the Middle East.

Traders are now turning their attention to Frankfurt, where the European Central Bank is expected to unveil economy-boosting stimulus. While the exact measures are unknown observers say it could cut interest rates deeper into negative territory or a new mass bond-buying drive, among other things.

Then, next week the Federal Reserve meets, with speculation rife that it will lower borrowing costs again, which would please Trump, who in a Twitter outburst on Wednesday said they should "BE BROUGHT WAY DOWN".

In share trading, Hong Kong Exchanges and Clearing sank more than three percent after its shock bid of almost US$40 billion for the London Stock Exchange Group on Wednesday.

Reports said the proposal is likely to fail, however, as it is dependent on the LSEG scrapping a planned $27 billion takeover of US financial data provider Refinitiv, which the three-centuries-old exchange said it "remains committed" to buying.

There are also concerns about ongoing unrest in Hong Kong and the influence of China in the group, the Financial Times reported.

source: philstar.com

US proposes tariffs on $200 billion more in Chinese imports

WASHINGTON — The Trump administration is readying tariffs on another $200 billion in Chinese imports, ranging from burglar alarms to mackerel, escalating a trade war between the world's two biggest economies.

The Office of the U.S. Trade Representative proposed 10 percent tariffs Tuesday on a list of 6,031 Chinese product lines.

The office will accept public comments and hold hearings on the plan Aug. 20-23 before reaching a decision after Aug. 31, according to a senior administration official who briefed reporters on condition of anonymity.

Last Friday, the U.S. imposed 25 percent tariffs on $34 billion in Chinese products, and Beijing responded by hitting the same amount of U.S. imports.


The administration said the new levies are a response to China's decision to retaliate against the first round of U.S. tariffs.

President Donald Trump has threatened to tax as much as $550 billion in Chinese products — an amount that exceeds America's total imports from China last year.

The United States complains that China uses predatory practices in a push to challenge American technological dominance. Chinese tactics, the administration says, include outright cybertheft and forcing U.S. companies to hand over technology in exchange for access to the Chinese market.

The initial U.S. tariff list focused on Chinese industrial products in an attempt to limit the impact on American consumers. By expanding the list, the administration is beginning to hit products that U.S. households buy, including such things as electric lamps and fish sticks.

"Tariffs on $200 billion in Chinese products amounts to another multibillion-dollar tax on American businesses and families," said Scott Lincicome, a trade lawyer and senior policy analyst for the group Republicans Fighting Tariffs. "Given China's likelihood of retaliation, it's also billions worth of new tariffs on American exporters."

Members of Congress are increasingly questioning Trump's aggressive trade policies, warning that tariffs on imports raise prices for consumers and expose U.S. farmers and manufacturers to retaliation abroad.

"Tonight's announcement appears reckless and is not a targeted approach," Senate Finance Chairman Orrin Hatch, R-Utah, said in a statement. "We cannot turn a blind eye to China's mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy."

source: philstar.com

Asian stocks take a breather from trade tensions; markets up

SINGAPORE — Asian markets were mostly higher on Wednesday as traders sidelined tariffs that the U.S. and China have threatened to impose on one another, focusing on positive housing data instead.

KEEPING SCORE: Japan's benchmark Nikkei 225 index rose 1.2 percent to 22,540.07 and South Korea's Kospi gained 1.4 percent to 2,373.50. Hong Kong's Hang Seng rebounded 1.5 percent to 29,908.50 and the Shanghai Composite in mainland China increased 0.4 percent to 2,918.60. Australia's S&P/ASX 200 climbed 1.1 percent to 6,166.40. Taiwan's benchmark rose but Southeast Asian indexes were mixed.

U.S-CHINA TARIFFS: A burgeoning trade war between the U.S. and China is showing no signs of abating. On Tuesday, China's government called President Donald Trump's threat of new tariffs on $200 billion of Chinese goods "blackmail" and warned to retaliate with measures of its own. Trump has already announced a 25 percent tariff on up to $50 billion of Chinese products starting July 6. China retaliated by raising import duties on $34 billion worth of American goods, including soybeans, electric cars and whiskey.


POSITIVE HOUSING DATA: The solid U.S. job market has helped to boost demand for new homes. The Commerce Department said housing starts rose to a seasonally adjusted annual rate of 1.35 million in May, the strongest pace since July 2007. All of May's construction gains came from a 62 percent jump in the Midwest, while building slumped in the Northeast, South and West.


QUOTEWORTHY: "Trade tension is going to dominate market sentiment in the weeks to come. The market is waiting for Beijing to come out with counter measurements to offload more chips," said Margaret Yang, market analyst at CMC Markets Singapore.

WALL STREET: Major U.S. benchmarks finished lower. The S&P 500 index dropped 0.4 percent to 2,762.57 and the Dow Jones industrial average lost 1.1 percent to 24,700.21. The Nasdaq composite dipped 0.3 percent to 7,725.59.

ENERGY: Oil futures recovered losses from the previous day ahead of an OPEC meeting on Friday. Saudi Arabia and Russia are seeking to raise production by 1.5 million barrels per day, but they may not get their way. Benchmark U.S. crude rose 38 cents to $65.28 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled at $64.90 per barrel on Tuesday. Brent crude, used to price international oils, gained 32 cents to $75.40 in London.
CURRENCIES: The dollar rose to 110.19 yen from 110.07 yen in late trading Tuesday. The euro ticked up to $1.1579 from $1.1575.

source: philstar.com

Asian stocks tumble after new Trump tariff threat

BEIJING — Asian stocks tumbled Tuesday after U.S. President Donald Trump escalated a dispute with Beijing over technology policy by threatening a tariff hike on additional Chinese goods.

KEEPING SCORE: The Shanghai Composite Index fell 2.3 percent to 2,953.54 points and Hong Kong's Hang Seng lost 2 percent to 29,685.28. Tokyo's Nikkei 225 retreated 0.9 percent to 22,482.89 and Seoul's Kospi lost 0.8 percent to 2,356.57. Markets in Taiwan, New Zealand and Southeast Asia also declined. Sydney's S&P-ASX 200 gained 0.3 percent to 6,123.00.

TRADE TENSIONS: Trump directed the U.S. Trade Representative to prepare new tariffs on $200 billion in Chinese imports, stepping up a dispute companies and investors worry could drag down global trade and economic growth. Trump accused Beijing of being unwilling to resolve the dispute over complaints it steals or pressures foreign companies to hand over technology. China's Commerce Ministry criticized the White House action as blackmail and said Beijing was ready to retaliate.

ANALYST'S TAKE: "President Donald Trump's unwillingness to back down became apparent this morning, once again sinking markets into a risk-off atmosphere," said Jingyi Pan of IG in a report. "Attention now turns to China for the country's response towards the latest accusations from the White House, but mostly signs of further retaliation."


WALL STREET: U.S. stocks finished mixed in trading that ended before Trump issued his latest tariff threat. Household goods companies took some of the worst losses as the Standard & Poor's 500 index fell for the third time in four days. The S&P 500 fell 0.2 percent to 2,773.75. The Dow Jones industrial average dropped 0.4 percent to 24,987.47. The Nasdaq composite edged up 0.65 points to 7,747.03. The Russell 2000 index of small-cap stocks rose 0.5 percent to a record 1,692.46. Many investors feel smaller and more U.S.-focused companies are less vulnerable in the event of a major trade dispute.

ENERGY: Benchmark U.S. crude lost 26 cents to $65.59 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 79 cents on Monday to $65.85. Brent crude, used to price international oils, fell 41 cents to $74.93 per barrel in London. The contract rose $1.90 the previous session to $75.34.

CURRENCY: The dollar declined to 109.98 yen from Monday's 110.54 yen. The euro edged up to $1.1633 from $1.1623.

source: philstar.com

Trump’s tariffs prompting some US fund managers to look overseas

NEW YORK – President Donald Trump’s announcement of import tariffs, and the prospect of retaliation by other countries, is prompting some fund managers to pare their holdings of US stocks and look for opportunities overseas.

The high turnover of key staff in the White House, including the exit of Gary Cohn, the director of the National Economic Council this week is undermining confidence in policy making also.

President Trump said Thursday that he would begin imposing import tariffs of 25 percent on steel and 10 percent on aluminum in 15 days, sparking fears of a global trade war.

Gary Cohn, the chief economic adviser to Trump, who argued against trade protectionism, resigned late Tuesday after
Trump first announced the tariff plan and his successor has yet to be named.

Fund managers from Oppenheimer, Federated, and Wells Fargo are among those that now see international and emerging market equities as more attractive than the US, where the prospect of higher interest rates contributed to a slump in stocks in February, leaving the benchmark S&P 500 stock index up about 2.0 percent for the year-to-date, after turning in a 7.0 percent gain in January.


Overseas stocks, by comparison, are benefiting from synchronized economic growth in both Europe, Asia and the Americas, but offer lower valuations.

The gross domestic product of countries in the eurozone, for example, expanded at a 2.7 percent annual rate in the fourth quarter, outpacing the 2.5 percent gain in the U.S. economy over the same time. The Stoxx 600, an index of companies in the eurozone, trades at a trailing price to earnings ratio of 14.9, compared with a 22.7 P/E ratio for the S&P 500, according to Thomson Reuters data.

“You’re still seeing an earlier stage of an expansion cycle overseas versus the United States, which is likely to bounce between expansion and slowdown in the year ahead,” said Brian Levitt, senior investment strategist at OppenheimerFunds.

Emerging markets such as China and Russia also look attractive given their prospects for economic growth and low equity valuations, he said.

In the US, meanwhile, a Democratic party takeover of at least one branch of Congress in elections in November would bring more stability to Washington by curbing President Trump’s ability to expand protectionist policies, he said.

“History suggests markets do better with divided government because there is less uncertainty with policy because it becomes harder to get anything enacted,” he said.

WHY TARIFFS HURT

The prospect of import tariffs could damage the U.S. economy by raising costs for US. manufacturers and consumers, while prompting its trading partners to impose their own levies on U.S. exporters, increasing their costs also and sapping overseas demand.

Daniel Pinto, a co-president at JPMorgan Chase & Co, said in an interview with Bloomberg on Thursday that the US equities could fall by between 20 and 40 percent over the next three years if a global trade war breaks out.

Brian Jacobsen, multi-asset strategist at Wells Fargo Asset Management, said that the risks of retaliatory tariffs is prompting him to add to emerging markets and international stocks but at a slow pace, despite the fact that they look more attractive on a fundamental basis.

“Strategically, we still really like international and emerging markets, but when you have asymmetric risks, that makes us a little cautious on non-U.S. assets for now”, given that markets have not yet priced in the possibility of more protectionist policies, he said.

Overall, US fund managers have been reducing their stake in domestic stocks as interest rates rise, making bonds more attractive.

US balanced funds, which hold both equities and bonds, now have an average of 55 percent of their assets in stocks, a 4.0 percent decline from 2014, and nearly 41 percent of their assets in bonds, according to Lipper data.

Yet Ashwin Alankar, head of global asset allocation at Janus Henderson Investors, said that he remains a fan of large-capitalization US stocks despite the likelihood of higher trade costs and inflation.

The recently-passed US corporate tax cuts provide on-going fiscal stimulus that should balance out higher interest rates, he said, a boost to stock prices that is not found in other markets.

As a result, he is moving more of his portfolio in large-cap US stocks, he said.

“Europe isn’t talking about fiscal spending, Japan isn’t,” he said. “The US is the only market in the world right now that could have the tailwind of fiscal spending.”

source: interaksyon.com