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By Alexander Marrow and Dominique Patton LONDON/PARIS (Reuters) -Ageing brands and declining sales could make Coty's makeup business a hard sell, raising the prospect of piecemeal deals or lower than expected proceeds that might complicate the group's plans to cut debt and invest in growth. Coty said on Tuesday it had launched a review of its mass-market Consumer Beauty business, a prelude to a possible sale or spinoff of some brands in a bid to cut debt, reverse shrinking cash flow, and focus on more profitable fragrances.  The business, home to the CoverGirl and Rimmel brands, generates around $1.2 billion in annual revenues, but has been losing market share to competitors with faster innovation cycles and more accessible price points. WHO COULD BUY COTY'S CONSUMER BEAUTY BRANDS? "It's hard for these brands because they don't look new to today's consumers. And newness is important, especially in colour cosmetics," said Morningstar analyst Dan Su. Barclays analysts described the division as a "tough asset to sell". They said it could be worth anywhere between $690 million and $950 million. Buyers this year have shown strong interest in smaller, fast-growing brands like Hailey Bieber's makeup and skincare line Rhode, snapped up by retailer Elf Beauty for $1 billion, and the vitamin A-based skincare business Medik8 bought by L'Oreal for an estimated $1 billion. Buyout firms could look at the division, much as private equity house KKR bought a majority stake in Coty's professional and retail haircare business, Wella, in 2020.  "I expect piecemeal deals rather than a one-shot sale," Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors, naming private equity firms Permira and L Catterton among possible suitors. Coty said it did not comment on speculation. L Catterton declined to comment. Permira did not immediately respond to a request for comment. Coty's Consumer Beauty business reported an 8% drop in sales in the year ended June 30. Morningstar analysts expect another high-single-digit percentage decline this financial year, as it struggles to compete with social media influencers launching their own brands and selling on fast-growing online channels. Coty's in-house manufacturing has made it slower to innovate when compared to firms like Elf that use third-party producers, resulting in market share that is slipping over time, said Bank of America analyst Anna Lizzul. "It's a melting iceberg situation," she said. COTY CAME LATE TO SHIFTING FRAGRANCE TRENDS Coty became a beauty industry giant after buying Procter & Gamble's perfume, hair care and makeup businesses for $12.5 billion in 2015. After divesting from hair and now possibly consumer cosmetics, fragrance will be its primary focus. Its newly combined fragrance division accounts for 69% of Coty's sales and, with categories growing between 2% and 9%, is performing far better than Coty's consumer cosmetics.  But it relies heavily on licences, and about 14% of them are due to expire in the next three-and-a-half years, said BofA. The blockbuster licence for Gucci fragrances, which analysts believe runs until 2028, brings in about $500 million a year, BofA estimates – almost double Coty's free cash flow of $277.6 million in its last financial year.  Selling the makeup business could bring in money for what some analysts think is much-needed investment. "It would have probably helped to do this strategic review 10 years ago," said Alfonso Emanuele de Leon, a beauty industry veteran and partner at FA Hong Kong Consultancy. "Most importantly, when it was getting clear that the fragrance market was moving towards conceptual, experiential brands." Top sector player L'Oreal has invested in niche Chinese fragrance brands To Summer and Documents, Estee Lauder in fellow Chinese brand Melt Season, and Spanish rival Puig acquired a majority stake in Sweden's Byredo. Coty should have recognised that its fragrance segment was shrinking and made acquisitions too, Emanuele de Leon said. "They can still do it, it's just going to be more expensive and maybe too late because the wave has already reached the shore." (Reporting by Alexander Marrow and Dominique Patton; additional reporting by Abigail Summerville. Editing by Lisa Jucca and Mark Potter)

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By Laura Matthews and Saqib Iqbal Ahmed NEW YORK (Reuters) -The long-awaited resumption of the Federal Reserve's rate-cutting cycle is likely to cheapen hedging of dollar exposure for foreign investors and increase their motivation to guard more of their U.S. assets against further currency weakness. In September, the U.S. central bank lowered interest rates by an expected 25 basis points to 4.00-4.25% on labor market concerns and indicated more cuts would follow later this year. That cut narrows the interest-rate differential between the U.S. and other developed countries, which helps to lower the hedging costs for foreign pensions, sovereign funds and other institutional investors, managers and analysts said. The ICE U.S. Dollar Index is down about 10% this year, partially driven by foreign investors increasing hedging activity on worries about the impact of U.S. trade and tariff policies on their U.S. assets, market participants said. "There are some people that are watching it, that have been waiting for the resumption of the cutting cycle by the Fed," said Van Luu, global head of solutions strategy for fixed income and foreign exchange for Russell Investments in London. "Now they are inclined to raise the hedge ratio, and they're waiting for the right moment or they're waiting for some kind of catalyst." Hedging is a way to limit losses on an existing portfolio by using financial instruments such as derivatives to create an offsetting position. Since it often involves selling dollars via forwards or swaps, any rise in hedging activity can spell additional weakness for the beleaguered greenback. NEW-FOUND NEED TO HEDGE High hedging costs and a bullish view on the buck were two major factors suppressing FX hedging ratios in recent years, according to a June report from the Bank for International Settlements. Years of dollar strength meant foreign investors could leave U.S. assets unhedged since it boosted their overall returns and was a source of diversification. Now that's set to change. With the greenback down significantly this year and with more potential weakness on the horizon, hedging could help blunt the hurt from unfavorable FX moves. Markets are pricing in about two more quarter-point rate cuts this year, which could incentivize investors who want to ramp up their hedges but have found the cost to do so a deterrent. GUARDING MORE BUSINESS AGAINST CURRENCY SWINGS Foreigners currently have more than $30 trillion invested in U.S. stocks and bonds, according to Morgan Stanley, $8 trillion of which is held by European investors. Rising concerns over Fed leadership, its independence, and U.S. policy uncertainty have helped keep pressure on the dollar, even as U.S. stocks have rallied. The S&P 500 is up about 14% for the year, near a record high. "The strong gains in U.S. (stock) market and the very sharp U.S. dollar falls are unusual but they’re not unheard of – we think an increase in hedging is part of the reason for this divergence," said Steve Dooley, head of market insights at Convera in Melbourne. A July research note from Deutsche Bank showed that equity investors in Germany and Austria have increased their hedge ratios to 60-70% from 20-30% at the start of the year. A new report from the Danish central bank showed that insurance companies and pension funds are shielding more than three quarters of their dollar investments from currency swings. The Deutsche note stated that some high-profile pension funds plan to top up those ratios after the summer. "I think foreign investors are still inclined to hedge away their dollar exposure," Thierry Wizman, global FX and rates strategist at Macquarie in New York, said. "So they will come out again at some point in the next few weeks … you're going to see another round of dollar hedging by foreign institutions," he said. Research from MillTechFX also shows that 86% of European corporates are currently hedging their forecastable currency risk, up from 67% in 2023, with their mean hedge ratio rising to 49% from 43%.  Joseph Hoffman, chief executive officer at Mesirow Currency Management, said the shift among international investors is not mainly about short-term interest-rate advantages, but is driven "more by a bearish structural view on the dollar rooted in the Fed’s policy, heightened political uncertainty, and persistent fiscal deficits." WHAT'S MY COST? Still, a lower cost of hedging will likely draw those investors who may have held off boosting hedges due to price considerations. For instance, the 4% annual hedging cost for investors in Japan and Switzerland, based on current interest rates, remains a big hurdle. It costs other euro-based investors around 2% annually. "I think there's like a psychological level that if the hedge cost goes to 1% or below, which is on the horizon for EUR investors over the next 12 months, people wouldn't worry about it as such," said Russell's Luu. (Reporting by Laura Matthews and Saqib Iqbal Ahmed in New York; Editing by Alden Bentley and Andrea Ricci)

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By Rocky Swift TOKYO (Reuters) -The yen edged lower on Friday, trimming its sharpest weekly gain in more than four months, as traders considered the impact of potential rate increases by the Bank of Japan and a leadership election this weekend. BOJ Governor Kazuo Ueda struck a cautious tone in comments about the global economy, lowering expectations of an imminent rate hike. Markets are also focused on a Liberal Democratic Party election on Saturday that will determine Japan's next prime minister. The dollar rebounded overnight despite a closure of the U.S. government that has halted the publication of key economic data, including the closely watched monthly jobs report for September that was due to be released on Friday. Canada's currency held near a four-month low on a slide in oil prices. "The government shutdown has not had a major short-term impact, but if anything, underlying pressure remains toward a weaker dollar," said Hirofumi Suzuki, the chief currency strategist at SMBC. "That said, with yen-depreciation pressure likely to linger ahead of this weekend's LDP leadership election, the pair is likely to hover around current levels," he added. The yen slid 0.3% to 147.72 per dollar, still on track for a 1.2% advance this week that would be the biggest since mid-May. The dollar index, which measures the greenback against a basket of key currencies, rose 0.1% to 97.90. The euro was up 0.1% at $1.1722. Sterling was little changed at $1.3437. Markets were keeping a close eye on speeches by BOJ officials this week after the central bank's tankan survey on Wednesday showed confidence among big manufacturers improved for the second straight quarter. Deputy governor Shinichi Uchida said on Thursday that the business mood is improving and corporate profits remain high even as U.S. tariffs weigh on exports. But in a speech on Friday, Governor Ueda put the focus back on how global factors, particularly the health of the U.S. economy, could impact the trajectory of wages and prices in japan. Goldman Sachs economists said in a note that Ueda's speech "supports our view that the possibility of an October rate hike is very low." Japan's market is also girding for an election on Saturday that has consequences for its budget and central bank policies. Among the front-runners, dovish party veteran Sanae Takaichi could trigger more bond market uncertainty, while farm minister Shinjiro Koizumi and top government spokesperson Yoshimasa Hayashi are less likely to rock the boat. In the U.S. overnight, a Chicago Fed report that combines private and available public data estimated the September jobless rate was 4.3%, the same as in August and evidence that a feared rapid rise in unemployment had not yet begun. But details of the report, along with other data, pointed to sluggishness in the labor market. The ADP National Employment report on Wednesday showed private payrolls decreased by 32,000 in September, boosting expectations that the Federal Reserve will cut interest rates two more times this year. Traders see a 25-basis-point cut at the Fed's October meeting as almost certain and are pricing in an 89% probability of an additional cut in December, according to the CME Group’s FedWatch Tool. Dallas Fed President Lorie Logan on Thursday said the central bank appropriately cut rates last month to guard against the risk of a sharp deterioration in the job market, but said that so far the cooling has been gradual and signalled she is not eager to cut rates further. The Canadian dollar weakened to a four-month low against its U.S. counterpart on Thursday as the price of oil fell more than 2% and investors worried about negotiations to renew a U.S.-Mexico-Canada trade agreement. The Canadian currency traded little changed at 1.3968 per U.S. dollar after touching 1.3986 on Thursday, its weakest intraday level since May 16. (Reporting by Rocky SwiftEditing by Shri Navaratnam)

(The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)