>>> US After Hours Summary: CG +6.2%, WPC +3.7%, ICUI +2.7%, CWEN +2.7%, WOR +0.

After Hours Summary: CG +6.2%, WPC +3.7%, ICUI +2.7%, CWEN +2.7%, WOR +0.5% all up on index change news; ZS -6.9% slipping following OctQ results
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: SDRL +3.2%
Companies trading higher in after hours in reaction to news: SNES +44.3% (launches Evolve Soft Bait), CG +6.2% (joining S&P MidCap 400), WPC +3.7% (joining S&P MidCap 400), ESLT +3.5% (awarded $500 mln U.S. Navy contract), BITF +2.8% (places order for miners), ICUI +2.7% (joining S&P SmallCap 600), CWEN +2.7% (joining S&P SmallCap 600), INTT +2.5% (authorizes $10 mln repurchase program), BUSE +2% (to acquire M&M Bank), OSK +1% (awarded $342 mln U.S. Army contract), ZIM +0.5% (to serve East Mediterranean and Israeli ports), OLED +0.5% (signs OLED supply agreement with BOE Technology), WOR +0.5% (joining S&P SmallCap 600), TENB +0.4% (authorizes $100 mln repurchase program), SYF +0.4% (selling Pets Best Insurance Services unit), KD +0.4% (signs collaboration agreement with AWS), SSRM +0.3% (repurchasing up to 10.2 mln shares), PACW +0.1% (replaced in the S&P SmallCap 600)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: ZS -6.9%
Companies trading lower in after hours in reaction to news: SLRN -5.9% (provides Izokibep update), ALDX -2.3% (receives complete response letter from FDA for Reproxalap), SRE -0.3% (appoints new CFO)

>>> Index Changes: Carlyle Group (CG) and WP Carey (WPC) to join S&P MidCap 400;

Index Changes: Carlyle Group (CG) and WP Carey (WPC) to join S&P MidCap 400; ICU Medical (ICUI), Worthington Industries (WOR), Clearway Energy (CWEN) to join S&P SmallCap 600
  • Carlyle Group (CG) will replace ICU Medical (ICUI) in the S&P MidCap 400. ICU Medical will replace PacWest Bancorp (PACW) in the S&P SmallCap 600.
    • Banc of California (BANC) is acquiring PacWest Bancorp in a deal expected to be completed soon, pending final closing conditions. Post-merger, Banc of California will remain in the S&P SmallCap 600.
    • ICU Medical is more representative of the small-cap market space.
  • WP Carey (WPC) will replace Worthington Industries (WOR) in the S&P MidCap 400. Worthington Industries will replace Avantax (AVTA) in the S&P SmallCap 600.
    • Aretec Group, Inc. is acquiring Avantax in a deal expected to be completed soon pending final closing conditions.
    • Worthington Industries is more appropriate for the S&P SmallCap 600 with an anticipated spin-off transaction expected to be completed in early December.
  • Clearway Energy (CWEN) will replace Veritiv Corporation (VRTV) in the S&P SmallCap 600.
    • Clayton, Dubilier & Rice, LLC is to acquire Veritiv Corporation in a deal expected to be completed soon, pending final closing conditions.

Changes effective prior to the open of trading on Thursday, November 30

FT : Volkswagen executives warn works council of job cuts

Volkswagen executives warn works council of job cuts
Head of German carmaker’s flagship brand tells unions not enough profit being made to finance EV transition

Executives at Volkswagen are warning of job cuts, as negotiations with the group’s powerful works council heat up while the German carmaker prepares the ground for a €10bn cost-cutting programme.

At a meeting with union representatives on Monday, the head of the Volkswagen brand Thomas Schäfer warned that the flagship business was not making “enough profit with our cars to independently finance the transition [to electric vehicles] and our own future”.

“Our administration is too expensive, our factories are not productive enough and our costs are significantly higher than the competition,” Schäfer said, according to an internal memo seen by the Financial Times.

The VW brand in June announced plans to cut €10bn in costs by 2026 in an effort to boost profit margins in an increasingly competitive market for electric vehicles, as Chinese carmakers such as BYD push into Europe. Schäfer said on Monday that incoming orders “especially for electric cars, are below our ambitious expectations”.

The group, a fifth of which is owned by the German state of Lower Saxony, also produces the Porsche, Audi and Škoda brands. It has a notoriously large workforce, which is closely protected by the country’s strong unions, and its own works council — a group of elected staff representatives who negotiate with management.

Works council chair Daniela Cavallo in July had argued that the cost cuts would come about without “shedding jobs” — a red line she reaffirmed on Monday, according to the memo, stating that she would make VW stand by an agreement to secure jobs until 2029.

Instead, she said better management of the company and collaboration between its different brands was the “most important area of action”.

Clashes with the works council were partially to blame for the abrupt resignation of former VW group chief executive Herbert Diess last summer after he claimed the company had at least 30,000 excess staff among its 230,000-strong workforce in Germany.

Gunnar Kilian, VW’s board member for human resources, on Monday said the company would take advantage of the “demographic curve” and reduce jobs by not replacing some retiring employees.

But he warned that VW would eventually “have to get on with fewer people in many corners [of the company]”.

“If we want to future-proof the VW brand, we also have to become more efficient in the use of personnel and openly discuss the issue of labour costs internally,” Kilian said, according to the internal memo.

FT : Deloitte and KPMG ask staff to use burner phones for Hong Kong trips

Deloitte and KPMG ask staff to use burner phones for Hong Kong trips
Policies come as Beijing increases control over international financial hub

Some of the world’s biggest audit and consulting firms are asking staff to use burner phones when they visit Hong Kong, a sign of the increasing difficulties global companies are facing in a city long known as an international business hub.

Deloitte and KPMG have advised some US-based executives not to use their usual work phones in the territory, according to multiple people with knowledge of the policies. Several McKinsey consultants have also taken separate phones when travelling to the territory, the people said.

Some senior staff are reluctant to visit Hong Kong as a result of the inconvenience of leaving devices behind, according to an executive at one global consultancy. The policy applies even to people not involved with sensitive projects, the person said, adding: “People are not prepared to come here.”

Some companies in industries such as aerospace and semiconductors have for years asked employees to take separate phones and laptops to mainland China over security concerns. The application of the same approach in Hong Kong — a city that hosts the Asia-Pacific headquarters of many global companies — by a broader spectrum of businesses comes as Beijing has increased its control over the territory and people return after the end of lockdown restrictions.

In 2020, Beijing imposed a wide-ranging national security law on Hong Kong, an unprecedented step to exert greater control over the previously semi-autonomous territory. The US subsequently revoked the territory’s special trade status, saying Hong Kong was no longer sufficiently autonomous to warrant being treated differently from the mainland, which this year also strengthened its data and anti-espionage laws.

“With much talk [about] national security issues, the general feeling is that it is important to be cautious in Hong Kong as well,” said James Zimmerman, a partner at Perkins Cole in Beijing.

While the companies have not always given staff an explicit reason for using separate phones, some executives said their organisations were concerned about the risk of hacks and, in particular, the chance that data about their clients could be accessed.

“We have been recommending for several years that clients treat the risk of being in Hong Kong as the same as mainland China,” said a senior executive at a cyber security firm that counts large consultancies among its clients. “I think what you’re seeing is that message sinking in now.”

The person said there was “a range of risks, up to and including the risk of infiltration by a state-backed hacker”.

One UK-based consultant at a Big Four firm said consultancies had in general become increasingly risk averse, in part because of fear of legal liability for a leak of client data.

Deloitte, KPMG and McKinsey declined to comment.

Not all Big Four firms have such rules on devices. A PwC spokesperson said it did not have such a policy. EY declined to comment but an executive at the firm said they were unaware of any such policy at the company.

Still, the requirement by some companies that staff take separate devices sits uneasily with Hong Kong’s recent attempts to burnish its credentials as a global financial centre.

Its de facto central bank, the Hong Kong Monetary Authority, this month hosted a finance conference attended by 300 senior financiers from global companies, including Goldman Sachs’s David Solomon and Morgan Stanley’s James Gorman.

Hong Kong’s chief executive John Lee said in a speech at the event that “what distinguishes and sustains Hong Kong is our ‘one country, two systems’ framework”, a reference to the special administrative region’s ability to operate under different rules from the mainland.

While the consultancies’ policies have in some cases been in place for a year or more, they have had relatively little impact until recently because Hong Kong’s strict Covid-19 rules meant few executives were travelling to the territory, the people said.

Hong Kong scrapped hotel quarantine rules for visitors arriving in the city in September last year and lifted other pandemic-era restrictions in December.

WSJ : Fast-Fashion Giant Shein Files to Go Public

Fast-Fashion Giant Shein Files to Go Public
The Chinese company was valued at $66 billion earlier this year

Shein, the China-founded online fashion company that won over hundreds of millions of shoppers around the world, has confidentially filed to go public in the U.S. in what could be one of biggest IPOs in years.

Goldman Sachs, JPMorgan Chase and Morgan Stanley have been hired as lead underwriters on the offering, which could happen in 2024, people familiar with the matter said.

Shein, now based in Singapore, was valued at around $66 billion in a fundraising round in May and is likely to aim for an even higher valuation in an initial public offering.

Shein has disrupted the clothing industry with its on-trend $5 skirts and $9 jeans in the past few years. The 11-year-old company is now one of the largest fashion brands in the world.

Chinese media earlier reported on Shein’s confidential filing.

>>> US Close Dow -0,16% S&P -0,20% Nasdaq -0,07% Russell -0,35%

Closing Stock Market Summary
It was tough watching the stock market today, not because of how poorly it did, but because of how little it did until there was some seesaw action in the last hour of trading. The major indices had a mixed disposition throughout today's trade as neither buyers nor sellers showed much conviction. The Invesco S&P 500 Equal-Weight ETF (RSP) declined 0.2%.

The Nasdaq Composite had a small performance edge, drawing added support from select mega-cap names like Amazon.com (AMZN 147.73, +0.99, +0.7%), NVIDIA (NVDA 482.42, +4.66, +1.0%), Tesla (TSLA 236.08, +0.63, +0.3%), and Microsoft (MSFT 378.61, +1.18, +0.3%). Those gains also helped keep the S&P 500 in a fairly steady position relative to Friday's closing level. In fact, the S&P 500 traded in just a 14-point range between its high and low today.

The deliberate move was reflected in the modest changes for the S&P 500 sectors. The biggest gainer was the real estate sector (+0.4%) and the biggest loser was the health care sector (-0.6%). Everything else fell somewhere in between.

Market breadth tilted in favor of declining issues by a 4-to-3 margin at the NYSE and by a roughly 7-to-4 margin at the Nasdaq.

Separately, Treasury yields took a lower turn to begin the week, aided by a weaker-than-expected October New Home Sales Report and a $55 billion 5-yr note auction that trumped some soft demand seen at the $54 billion 2-yr note auction. The 2-yr note yield fell eight basis points to 4.87% and the 10-yr note yield dropped eight basis points to 4.39%.

The drop in market rates did not excite the stock market like it has for the most of the month, but arguably it helped keep selling efforts in check on this Cyber Monday, which saw the retail stocks deliver a lackluster performance.

The SPDR S&P Retail ETF (XRT) declined 0.6%.
  • Nasdaq Composite: +36.1% YTD
  • S&P 500: +18.5% YTD
  • Dow Jones Industrial Average: +6.6% YTD
  • S&P Midcap 400: +5.2% YTD
  • Russell 2000: +2.3% YTD

Reviewing today's economic data:
  • New home sales decreased 5.6% month-over-month in October to a seasonally adjusted annual rate of 679,000 units ( consensus 720,000) from a downwardly revised 719,000 (from 759,000) in September. On a year-over-year basis, new home sales were up 17.7%.
    • The key takeaway from the report is that new home sales activity slumped noticeably in October despite a big drop in median and average selling prices. The latter had to do with a large decline in sales in the high-priced West region, but in general, high mortgage rates and generally high prices combined to create affordability pressures for prospective buyers.

Tuesday's economic calendar features:
  • 09:00 ET: September FHFA Housing Price index (Prior 0.6%)
  • 09:00 ET: September S&P Case-Shiller Home Price Index (consensus 4.1%; Prior 2.2%)
  • 10:00 ET: November Consumer Confidence (consensus 100.0; Prior 102.6

FT : Struggling European property group Signa held rescue talks with Elliott

Struggling European property group Signa held rescue talks with Elliott
No deal was reached with hedge fund after efforts to secure more than €400mn of financing

Crisis hit Austrian property business Signa Group held talks with hedge fund Elliott Investment Management to try to secure more than €400mn of financing to save it from collapse. 

Two people familiar with the discussions said no deal had been reached with Elliott and that Signa was running out of options to secure urgently needed funding.

Elliott looked closely at Signa, those people said, but had concerns about the size of the group’s debts, the complex corporate structure, the ownership of assets and the role of its billionaire founder, René Benko, who was forced off the board this month but continues to control the company via family trusts in Liechtenstein.

Signa and Elliott declined to comment. Elliott’s talks with Signa were first reported by German news outlet Der Spiegel.

Elliott is not the only investor Signa has held talks with, according to industry insiders.

Dozens of lenders to Signa across Europe are scrambling to assess the potential financial damage if Signa collapses. 

On Monday Swiss bank Julius Baer said it was reviewing its private debt business after revealing a €606mn exposure — its single largest — to a “European conglomerate . . . in commercial real estate and luxury property,” which people close to the bank said was Signa. 

Analysts at JPMorgan believe that Signa has more than €13bn in outstanding debts. According to two people familiar with the details, loans to several banks are already in arrears and the company is only afloat because of standstill agreements.

Many creditors say their exposures are well-collateralised by Signa’s high-value real estate portfolio. 

The firm — which co-owns businesses including Selfridges in London, KaDeWe in Berlin and the Chrysler Building in New York as well as dozens of other luxury retail and commercial properties in European cities — has been struggling to meet its financial obligations all year. 

Its finances have deteriorated sharply in the face of falling commercial real estate values, consumer caution and rising interest rates. 

Benko has been trying to raise additional capital, turning to investors in Europe as well as the Middle East, but with little success. 

On Friday, a German subsidiary of the group, Signa Real Estate Management (Signa REM), applied for bankruptcy protection in Berlin, according to a court filing seen by the FT. That follows the bankruptcy of retailer Signa Sports United last month, and last year, the restructuring of the Signa-owned Galeria, Germany’s biggest department store chain. 

Signa REM managers told employees in an internal letter this weekend, published by magazine Wirtschafts Woche, that efforts to secure a rescue package for the two main parent companies of the Signa Group were ongoing with “undiminished strength”. 

Those two companies, Signa Holding and Signa Prime Selection, are at the centre of a complicated network of corporate entities — with debt issued at multiple levels — that together control Signa’s €27bn European property portfolio and its €25bn pipeline of projects.

Concerned about the finances of the group, Signa’s minority investors — which include some of the best-known family offices in Europe — moved to force Benko aside earlier this month, and insisted on the appointment of an independent restructuring expert to try and save the business. 

Arndt Geiwitz has been tasked by the minority investor group with trying to pull a rescue package together. Geiwitz has told the investors a solution must be found by the end of November.

A €200mn bond, held by an unknown investor, and issued by Signa Prime, is due to be repaid on Thursday. 

Despite the urgency of the situation, Benko was pictured taking his private jet to Barcelona for the weekend. He spent time shopping with his wife, according to pictures published on Monday in German tabloid Bild.