Chapter 1: What is the main topic discussed in this episode?
Good morning from the Financial Times. Today is Thursday, May 7th, and this is your FT News Briefing. American fuel is making its way around the globe, and hedge funds are really enjoying last month's tech stock rally. Plus, luxury conglomerate LVMH is trying to declutter its wardrobe.
They own 75 different brands spanning hotels and fashion brands. They own media houses, and they are now sort of making hard decisions about what actually still fits.
I'm Mark Filippino, and here's the news you need to start your day. The U.S.
Chapter 2: What recent trends are impacting US fuel exports?
is exporting more fuel than ever. It sent over 8.2 million barrels of refined fuels overseas every day last week. That includes gasoline, diesel, and jet fuel. And it's a 20% increase from the same time last year, according to U.S. energy data. It's to make up for the shortages caused by the Iran war. Asia and Europe have been hit especially hard.
Everyone's holding their breath as Tehran considers a peace proposal from the U.S., but things are on shaky ground. Israel struck Beirut on Wednesday despite a ceasefire, and the U.S. hit an Iranian ship it says violated Washington's blockade of the country's ports. Still, the cost of Brent crude dropped below $100 a barrel at one point yesterday in anticipation of peace.
The S&P 500 closed about 1.5% higher. Hedge funds are sitting pretty right now thanks to a tech stock rally that's led to hedge funds having their best monthly performance since 2020. I'm joined now by the FT's Kostas Morselis to learn more. Hi, Kostas. Hi, thanks for having me. Good to have you. So give us a sense of scale here.
So it's been a huge rally. We saw some very strong earnings from big AI companies like Alphabet for the first quarter. And they signaled a huge amount of spending, hundreds of billions on AI infrastructure like chips. And that sent a lot of stocks soaring higher. So Intel more than doubled. AMD went up 74%. And that has also meant that big blue chip indices like S&P 500 was up 10%.
So it's been a huge rally in one month. And hedge funds have taken advantage. So it's been a very, very strong month. So is this a big switch from earlier in the year? It's definitely a dramatic turnaround. March was a terrible month for hedge funds, one of the worst since the COVID lockdowns, which shut down the world economy in 2020.
And I mean, hedge funds were really hit badly by the Iran war, which suddenly revised up inflation expectations and that hit government bonds. The stock market was partly impacted. So it was a brutal month. So it's a big rebound.
So hedge funds performance was really tied to equities in the past month. Is that usually the case?
Yeah.
Hedge funds are typically quite correlated to the market, which means they rise in the market, they fall in the market. We reported on some research from BNP Paribas that said that they were the most correlated to the market last year than they've been in over five years. And this is partly mechanical. It's because equity hedge funds tend to be more long biased than short.
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Chapter 3: How are hedge funds performing in the current market?
And they are now sort of making hard decisions about what actually still fits.
Yeah, let's talk about that a little bit. What is it trying to let go of? And what is it hanging on to or even acquiring?
So LVMH is not looking to sell any of their really big central businesses that drive profits. One of the things that they've been looking at is selling Marc Jacobs, the fashion brand, which was very, very successful. And its design was very successful in the early 2000s and is now not really going anywhere. And they're also looking at things like Fresh and Makeup Forever.
So brands that probably aren't as high end, maybe aren't super stylish right now and that they've owned for a while. Interestingly, they're also looking for a buyer for their stake in Rihanna, the singer. in case you live under a rock, her beauty brand that she founded, in which they own almost half. So they're looking for a buyer for that stake, and that's actually a super valuable asset.
So that's estimated to be worth between $1.5 and $2.5 billion.
So what does this tell you about the future of large luxury brand conglomerates?
Well, I think they're facing a real question that, I mean, maybe saying existential question is too strong, but there is a big question mark hanging over this industry that has grown immensely over the past two decades and especially in the past five to seven years. You know, luxury used to be this very rarefied world where you were buying high quality products that most people could not access.
But now these have been transformed from brands with a few shops in Paris or in Milan into multi-billion dollar sales machines, essentially. And the question of how big can you get as a luxury brand has been asked many times over the past decades. And each time it's been proven wrong and these brands have continued to grow.
But I think it bears thinking about again, because at some point, do shoppers get disillusioned? And sort of the trick mirror of an exclusive product that's also available to everyone starts to fall away a bit.
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