TheChek News Flow

Sam Altman to return as OpenAI CEO

Sam Altman is returning to OpenAI as its chief executive, the high-profile AI startup said Wednesday, capping an intense five days of discussions, debates and convincing following the sudden dismissal of Altman last week from the startup he co-founded.

OpenAI, which is the most valuable U.S. startup, said it has reached an “agreement in principle” for Altman’s return. The startup is also reforming its board, eliminating several members who faced intense scrutiny for their decision last week.

Former Salesforce chief executive Bret Taylor, former US Secretary of the Treasury Larry Summers, and Quora founder Adam D’Angelo will be part of the new board at the AI startup, it said. Taylor will serve as the chair of the board, the startup said.

Microsoft, which owns about 49% of OpenAI, was taken aback by OpenAI’s decision last week and rushed to hire Altman to lead a new AI group at the software conglomerate. Greg Brockman, former President of OpenAI, and countless other members of the startup resigned in protest of the earlier OpenAI board’s decision.

“I love OpenAI, and everything I’ve done over the past few days has been in service of keeping this team and its mission together. when I decided to join Microsoft on Sunday evening, it was clear that was the best path for me and the team. With the new board and with Satya’s support, I’m looking forward to returning to OpenAI, and building on our strong partnership with Microsoft,” Altman said in a statement posted on X.

Microsoft chief Satya Nadella, who also expressed disappointment in OpenAI board’s decision last week and pledged to ensure that Microsoft is never “surprised” again, said Wednesday that he was encouraged by today’s changes to the OpenAI board.

“We believe this is a first essential step on a path to more stable, well-informed, and effective governance. Sam, Greg, and I have talked and agreed they have a key role to play along with the OAI leadership team in ensuring OAI continues to thrive and build on its mission. We look forward to building on our strong partnership and delivering the value of this next generation of AI to our customers and partners.”

Emmett Shear, the former Twitch chief executive who was appointed as interim leader of OpenAI on Sunday, said he was pleased with OpenAI’s new decision. “Coming into OpenAI, I wasn’t sure what the right path would be. This was the pathway that maximized safety alongside doing right by all stakeholders involved. I’m glad to have been a part of the solution,” he posted on X.

The move — after the luxury scion transformed the shoe brand into a full-fledged maison — has triggered an executive shuffle in LVMH's watches and jewelry division.

Antoine Arnault, having transformed Berluti from an elite cobbler into a full-fledged men’s fashion house, is moving into a nonexecutive role at the Paris firm.

He is passing the torch to Jean-Marc Mansvelt, who has been chief executive officer of Chaumet since 2014, and has a prior background in leather goods. Mansvelt is to take up the CEO role at Berluti effective Jan. 1, according to an internal announcement seen by WWD.

The move has triggered an executive shuffle mostly impacting the watches and jewelry division of LVMH Moët Hennessy Louis Vuitton.

Charles Leung, CEO of Fred since 2018, is to succeed Mansvelt at Chaumet, also on Jan. 1, marking a return to the Paris house for the executive. Leung’s replacement at Fred has yet to be named.

“I am very happy and quite emotional to welcome Jean-Marc as the new CEO of the exceptional maison Berluti, building on values of elegance, audacity and unique savoir-faire,” Arnault said in the internal announcement. “Jean-Marc’s wealth of experience that he has demonstrated throughout these years will be decisive assets in driving the ongoing development of Berluti.”

Toni Belloni, group managing director of LVMH, noted that Mansvelt would be charged with building on Berluti’s positive dynamics. “Under the leadership of Antoine, it has emerged from the pandemic with a great positioning and remarkable revenue and profit growth,” Belloni said.

The eldest son of LVMH chairman and CEO Bernard Arnault, Antoine Arnault is to remain chairman of Berluti.

He also maintains a string of other roles at the vast luxury group, including chairman of Loro Piana, head of communication, image and environment at LVMH, CEO of holding company Christian Dior SE, and member of the LVMH board.

It is understood Arnault may take on additional missions for the group in the coming months, but these could not immediately be learned.

To be sure, the affable, hands-on executive passes the torch at Berluti having quietly built a solid foundation for future growth.

Luxury analysts estimate revenues at Berluti have multiplied by about eight times since Arnault assumed the management helm in 2011, approaching 300 million euros this year, and with apparel accounting for about 20 percent of the business. It is understood the company is profitable, and now employs close to 1,100 people, up from roughly 200 in 2010.

Meanwhile, Stéphane Bianchi, CEO of LVMH’s watches and jewelry division, touted the promotion of two of his star executives.

He thanked Mansvelt for his “tremendous achievements at Chaumet” over a nine-year tenure. “His strong vision, his unique understanding of this amazing maison and his ability to create and drive successful teams have taken Chaumet to an unparalleled level,” he enthused.

Analysts estimate Chaumet revenues have reached around 450 million euros, having grown more than fourfold under Mansvelt’s tenure.

As for Fred, Bianchi said Leung “consolidated its unique positioning within LVMH jewelry brands, and experienced a strong and healthy growth, opening new markets while developing a qualitative retail network.”

It marks a return to Chaumet for Leung, who had joined the Place Vendôme jeweler in 2006 to develop and grow its business in the Asia Pacific region.

“I am convinced that with his strong drive and business acumen, his understanding of the jewelry industry and of the different markets, he will take Chaumet to greater heights,” Bianchi said of Leung.

To be sure, Antoine Arnault wrote a key chapter in the modernization of a legendary European name in footwear.

Founded in Paris in 1895 by a transplanted Italian, Berluti is best known for shoes in unusual colors and patinas, attracting such celebrity clients as Andy Warhol, Pierre Bergé, Jean Cocteau, Alain Delon, Dean Martin and Yves Saint Laurent.

Back in the day, Berluti hosted polishing parties, which involved a touch of Champagne at the end to achieve a high sheen. Antoine Arnault reprised the ritual in 2015 as the brand marked its 120th anniversary.

Berluti’s most famous style, dubbed the Alessandro after the founding cobbler, is a court shoe fashioned from a single piece of leather without any seams.

At LVMH’s annual shareholders meeting earlier this year, Bernard Arnault called out Berluti’s “shining” performance among its smaller brands, urging members of the audience to test drive its shoes.

“You’ll see they are really amazing,” he said, recalling a visit to a Berluti boutique shortly before LVMH acquired the house in 1993. Olga Berluti, then the maison’s chief bootmaker, greeted the luxury titan, inviting him to sit down and remove his shoes.

According to Arnault, she simply looked at his feet without measuring, dove into the stockroom and returned with “precisely the right shoe. I thought that was extraordinary, so I bought the business.”

Antoine Arnault has had an eventful career at Berluti, charged with leading one of the group’s underdeveloped jewels, which at the time of the handover generated an estimated 80 percent of its revenues from footwear. (It had added leather goods in 2005.)

One of CEO’s first big moves came in 2012, when he acquired French heritage brand Arnys to apply its made-to-measure expertise — and prime retail site on the Left Bank of Paris — in support of Berluti’s expansion drive.

Berluti staged its first runway show in January 2012, the ready-to-wear collection designed by its first artistic director Alessandro Sartori, who also created loafers and sneakers that would become iconic shoes for the brand as it embraced more casual styles alongside Arnys’ legacy of fine tailoring.

After Sartori returned to design for Ermenegildo Zegna, where he earned his reputation, Haider Ackermann took up the reins for a few seasons, bringing his signature nonchalance and a nomadic spirit.

Designer Kris Van Assche, who helmed the creative studio at Dior Homme for 11 years, stepped into Berluti in 2018, bringing meticulous tailoring, zesty color and runway razzmatazz.

At the request of Arnault, the Belgian designer developed a sneaker dubbed the Shadow that has since become of its biggest hits, on track to sell about 20,000 pairs this year, according to market sources.

Berluti wound up its collaboration with Van Assche in April 2021, and now relies on its studio to realize collections in tune with its template of contemporary luxury and timeless style. Key product launches have included the Play-Off sneaker, a logo canvas dubbed La Toile Marbeuf, furniture and leather home objects.

When Arnault arrived in 2011, Berluti’s business was concentrated in Western Europe, China and Japan. During his tenure, he overhauled and expanded the retail network almost threefold to 67 boutiques, gaining Berluti a foothold in important cities worldwide for luxury goods, and also in promising emerging markets like Southeast Asia.

Another key event in the life of the brand was the 2015 opening of a new production site for shoes and leather goods in Ferrare, Italy, designed by Barthelemy & Grino Architects.

Arnault is a graduate of HEC in Montréal and also has an MBA from INSEAD. He started his career with internet start-up domainoo.com.

He joined the family business in 2002, working in Louis Vuitton’s marketing department and overseeing stores in the French provinces. He became a member of LVMH’s board in 2006 and was named Vuitton’s communications director in 2007.

His appointment at Christian Dior SE last December came in tandem with the conversion of Financière Agache, Bernard Arnault’s main holding company, into a limited joint-stock partnership, further locking in family control over the LVMH luxury empire, as reported.

Dior SE is a listed company that is highly symbolic for the family, as Christian Dior was one of the linchpin acquisitions by Bernard Arnault that initiated the construction of the world’s biggest luxury company.

Antoine Arnault is leaving Berluti a fine parting gift: On Thursday, he confirmed the brand would dress French teams for the opening ceremonies of the Paris 2024 Olympic and Paralympic Games next summer. He had also spearheaded LVMH signing on as a premium partner of the global sporting event.

In a note sent to Berluti employees, also seen by WWD, Arnault thanked his collaborators for their commitment. “With you, we invented the Berluti wardrobe, we developed bold, innovative, but always elegant collections,” he wrote. “I will always keep a watchful and passionate eye on Berluti.”

Before joining Chaumet, Mansvelt was leather goods and accessories director at Louis Vuitton. A graduate of the HEC business school, Mansvelt started his career at L’Oréal in 1988, working in marketing and product development. He joined Vuitton in 2004.

Leung boasts degrees from both the Chinese University of Hong Kong and French business school ESSEC in Paris. He started his fine jewelry career at Cartier in marketing and retail before joining Chaumet in 2006.

The Italian luxury giant has gone to court again, suing Sam's Club, Century 21 and Lord & Taylor, to protect its brand against what it alleges are counterfeit goods.

Gucci has gone to federal court to protect its branded turf.

The Italian luxury brand’s Gucci America Inc. division filed three lawsuits in Manhattan Tuesday afternoon, seeking to protect itself from what it alleges were counterfeit goods sold at Sam’s Club and Lord & Taylor.

Mark that as the next battlefront for the Gucci brand, which has repeatedly been the target of counterfeiters and is active in defending itself.

“After an extensive investigation, Gucci confirms it has taken legal action against Lord & Taylor, Sam’s Club and Century 21 for their role in marketing and selling counterfeit Gucci products,” the brand said in a statement. “Gucci remains committed to protecting its customers from retailers profiting from the sale of counterfeit goods.”

In the Lord & Taylor suit, the brand said: “Each year, Gucci spends millions of dollars on advertising to promote the goods and services offered under the Gucci marks in the United States. As a result of Gucci’s efforts and the appeal of the Gucci brand, Gucci sells high quantities of consumer goods annually in the United States.”

Gucci is seeking injunctive and monetary relief in the suit, which alleges Lord & Taylor and other unidentified individuals infringed on the company’s trademark and engaged in unfair competition. A representative for Lord & Taylor did not immediately respond to a WWD query late Tuesday.

Lord & Taylor was among the retail brands to succumb to bankruptcy during the pandemic. It was bought by Saadia Group in 2020 and relaunched a website.

In the suit, Gucci alleged that Lord & Taylor and the other defendants “manufactured, advertised, offered for sale, sold, distributed, imported, and/or exported handbags bearing marks that are identical to or highly similar to the Gucci marks.”

This year, Gucci said it purchased several handbags from the Lord & Taylor website, including a red bag labeled as the “GG Marmont Matelassé Camera Bag” listed at $1,555, and a black bag referred to as the “GG Marmont Shoulder Bag” for $2,400.

“After purchase, Gucci examined the Counterfeit Products, and confirmed that they are non-genuine,” the suit said.

“In June 2023, Gucci notified defendants about the counterfeit products that are offered for sale on Lord & Taylor’s website,” the suit said. “Counsel for Lord & Taylor responded by admitting that it was aware that it was selling counterfeit products, but then failed to respond further to Gucci’s communications.”

In addition to an injunction, Gucci also asked the court to compel Lord & Taylor to turn over counterfeit goods for “impoundment and eventual destruction, without compensation.”

The suits against Sam’s Club and Century 21 made similar claims.

Gucci said in the Sam’s Club suit that it purchased “two handbags from Sam’s Club’s website bearing the Gucci marks: one black handbag, which was referred to as the ‘Gucci GG Marmont Matelassé Mini Bag in Black’ and had a listed price of $1,100 on Sam’s Club website, and one pink handbag, which was referred to as the ‘Gucci GG Marmont Matelassé Mini Bag in Dusty Pink’ and had a listed price of $1,100 on Sam’s Club’s website.”

A spokesperson from Sam’s Club said: “We expect our suppliers to provide authentic, quality products that meet customers’ and members’ expectations. Once Gucci made us aware of their concerns, we removed these products from our clubs and website and connected Gucci with the suppliers. We will respond to the complaint in court as appropriate once we are served.”

Century 21 did not immediately reply to a WWD request for comment.

UK, Canada and Germany lead fresh push against coal power at COP28

Letter by ministers from 15 countries urges tougher action after failure to make progress since pact signed two years ago

The UK, Canada, Germany and 12 other countries are stepping up a push to halt new coal-fired power stations and clamp down on polluting existing plants, after failure to make progress in the two years since a UN pact on coal was first signed.

The ministers of 15 nations are behind a letter seen by the Financial Times that urges the upcoming COP28 UN climate summit in Dubai to deliver an agreement that will end public and private finance for new coal power projects.

Almost 200 countries agreed for the first time at COP26 in Glasgow in 2021 to phase down coal power without the emissions captured.

But coal power has barely declined since then, according to the International Energy Agency, mainly as energy demands grow in China, India and south-east Asia, while it has ebbed as a power source in the richer US and Europe.

The letter addressed to the COP28 presidency, led by the UAE’s Sultan al-Jaber, says coal power generation remains the largest source of carbon dioxide emissions and “needs to be phased out first and fastest”.

The signatory countries have mostly already benefited from coal power to varying degrees: the UK has scaled down the use of coal for electricity since the 1990s to a few per cent, and in Canada it is now less than 10 per cent, while Germany relies on coal for about a third of its generation.

While the UK recently approved its first new coal mine in 30 years, the production is focused on coking coal used in steel production.

Canadian environment minister Steven Guilbeault, co-chair of the Powering Past Coal Alliance of governments, businesses and other groups behind the letter, said: “The time for half-measures and gradual change has passed. The time to act is now.”

“We must significantly accelerate action on coal. It is now critical that we immediately stop approvals and construction of new coal power plants and radically accelerate the coal-to-clean transition,” they wrote.

The letter comes ahead of what is expected to a fierce debate at COP28 about the reliance of emerging economies on fossil fuels, including coal, oil and gas.

While it is not a signatory to the letter, a senior state department official said the US maintained there should be an immediate halt to the permitting of new, unabated coal developments.

US climate envoy John Kerry has been strident, telling the FT in a recent interview that he felt “increasing anger” about the scale of coal power expansion that would make it “impossible to achieve 1.5 degrees”, in a reference to the global temperature rise since pre-industrial times.

The G7 earlier this year committed “to accelerate the phaseout of unabated fossil fuels so as to achieve net zero in energy systems by 2050”, despite resistance from Japan.

But a focus on coal at COP28 is likely to provoke many developing countries, which are often more heavily reliant on coal for power and have less access to the finance needed to make their energy systems greener.  

India, which relies heavily on coal power, has been critical of the developed world’s emphasis on dumping coal rather than all fossil fuels.

The letter, also signed by Spain, Greece, Denmark, Chile, Colombia and Vanuatu, said no country should have to “compromise between sustainable development and the fight against climate change”.

They called for “collective momentum at COP28 to develop a strategy for coal power phase out that generates the necessary financial flows and ensures that the right guardrails are put in place to protect coal-dependent regions, workers and communities”.

The ministers also argued financial institutions should commit to end financing for new, unabated coal.

Of the world’s 60 largest banks, 47 have at least some exclusion policies on coal in place, according to the Banking on Climate Chaos report.

The COP28 leadership said it was aware of the “strong views” about the phaseout of fossil fuels and was “seeking to build consensus”. The UAE is pushing for carbon capture technology to reduce emissions, as well as a system of carbon credits issued to essentially pay for the retirement of existing coal plants.

How one woman’s rape allegations were twisted into a fight over the reputations of two powerful men

Foes to swap 50 Israelis held by militants in exchange for some 150 Palestinian prisoners held in Israeli jails and pauses in fighting

Israel said it agreed to a deal with Hamas to free 50 civilian hostages held by militants in Gaza in return for the release of Palestinian prisoners from Israeli jails and a series of pauses in fighting.

The Israeli cabinet approved the deal after a long deliberation that started Tuesday and went into the early morning hours of Wednesday in Jerusalem. It capped weeks of painstaking negotiations brokered by Qatar, Egypt and the U.S., marking the first major diplomatic breakthrough since the war began on Oct. 7. Hamas confirmed the deal in a statement.

“I am extraordinarily gratified that some of these brave souls, who have endured weeks of captivity and an unspeakable ordeal, will be reunited with their families once this deal is fully implemented,” President Biden said in a statement. “It is important that all aspects of this deal be fully implemented.”

The deal will be carried out in two phases. In the first phase, 30 children, eight mothers and 12 other women will be released over a period of four days. The first hostages could be freed as early as Thursday, people familiar with the deal said.

In exchange, Israel will release 150 Palestinian women and minors held in Israeli prisons and there will be a pause in fighting over the entire Gaza Strip. Israel has also agreed to forgo any drone surveillance in northern Gaza for six hours, the people said.

The starting time of the pause in fighting “will be announced within the next 24 hours and last for four days, subject to extension,” Qatar’s foreign ministry said on social media. It added that during the pause, humanitarian convoys and relief aid, including fuel, will be allowed to enter Gaza.

In the second phase, up to 30 hostages would be released over a three-day period. In that phase, non-Israeli hostages could be freed, the people said.

Ahead of the announcement Prime Minister Benjamin Netanyahu said Israel will continue to fight the war against Hamas despite the pauses. Israel would continue “the war in order to return all the hostages, to complete the elimination of Hamas and to ensure that there will be no renewed threat from Gaza to the State of Israel,” the government said in a statement.

U.S. officials hailed the agreement between Israel and Hamas to release 50 hostages, including at least three Americans, as a major breakthrough following intensive negotiations for the last several weeks.

The hope among U.S. officials is that the release of these hostages could lead to the release of many more, not only the ones held by Hamas but by other groups, including the Palestinian Islamic Jihad.

“We’re determined to get everyone home,” one U.S. official said.

U.S. officials also believe a pause in the fighting could also ease some hostilities near Lebanon where the Israel Defense Forces and Lebanese Hezbollah have been exchanging attacks. The U.S. has been acutely concerned about the violence inside Gaza spreading to other parts of the region.

For Israel, the exchange helps alleviate mounting domestic pressure on Netanyahu to cement a deal to free the 236 men, women and children being held by Hamas, including as many as 10 Americans, U.S. officials have said. In exchange for the hostages, Hamas stands to realize one of its long-held goals of freeing Palestinian prisoners being held by Israel, whom many Palestinians view as wrongly imprisoned.

International pressure has been growing for Israel to cease its incursion into Gaza, which has killed 13,000 Palestinians, mostly women and children, according to authorities in Hamas-run Gaza, and touched off a humanitarian crisis. The figures don’t distinguish between militants and civilians. The Israeli military says it has taken all feasible precautions to avoid civilian casualties, but accuses Hamas of using Gazans as shields, which Hamas denies.

Israel launched the military campaign in Gaza in response to the Oct. 7 Hamas attacks—a surprise assault that Israeli officials say left around 1,200 people, mostly civilians, dead in their homes and army bases, at an outdoor music festival and in the streets.

Once a pause in fighting takes effect, the pressure on Israel to pursue talks and potentially make its pause permanent could rise, say analysts. It could also invite further pressure on Israel to negotiate the release of the rest of the Israeli hostages and potentially curb the government’s plans to pursue the total destruction of Hamas, according to analysts and former Israeli officials.

“You could see a real crescendo of pressure in Israel to continue with getting deals for the rest of the hostages,” said Daniel Levy, president of the U.S./Middle East Project and a former senior adviser in the Israeli Prime Minister’s office under Ehud Barak.

Relatives of the hostages have in recent days organized street protests and a march to Jerusalem that drew tens of thousands of demonstrators, and on Monday met with members of the war cabinet in Tel Aviv. Israel has been split over how many concessions the country should make to retrieve the hostages.

Israeli Defense Minister Yoav Gallant said on Tuesday that Israel will be making “difficult, important decisions over the coming days.”

“I am aware of the pain that the families are experiencing and I would like to tell you that for me—returning the hostages is a primary goal and I will do everything possible to achieve it,” he said.

Israeli officials have said in recent days that such a deal to release the hostages wouldn’t have been possible without Israel having put intense military pressure on Hamas.

Israel Defense Forces spokesman Rear Adm. Daniel Hagari said in a press conference Tuesday night before the deal was voted on that all hostages will undergo an investigative debriefing, stating it will assist the IDF in “solving the puzzle.” Hagari confirmed that the IDF benefited from intelligence gathered from previously released hostages, including the female IDF soldier Ori Megidish, who was reportedly rescued during an overnight ground operation inside Gaza in late October.

For Hamas, a U.S.-designated terrorist organization, the pause in fighting promises to give it time to regroup amid a punishing Israeli military campaign while achieving one of its political goals of freeing Palestinian prisoners.

“For Hamas, this will absolutely be presented at the very least as a symbolic victory. But keep in mind, there’s no doubt that Hamas has been significantly degraded by Israel’s assault,” said Tariq Kenney-Shawa, a U.S. policy fellow at Al-Shabaka, a Palestinian think tank based in the U.S.

For Hamas’s leader in Gaza, Yahya Sinwar, the release of Palestinian prisoners would achieve one of the militant leader’s long-held goals. Sinwar, who learned Hebrew during his years in Israeli prison on a murder conviction, is determined to free more Palestinians from Israel’s custody, according to analysts and those familiar with his thinking.

Sinwar himself was freed from prison in 2011 in a historic prisoner exchange in which Israel freed more than 1,000 Palestinians in return for a single Israeli soldier, Gilad Shalit, who had been held by militants in Gaza. Sinwar remembered the exchange as a lesson that Israel will pay, sometimes in the extreme, to return captured Israelis.

Before Oct. 7, Israel held more than 5,000 Palestinians from the West Bank and Gaza in its prisons, many of them convicted of security offenses. Since Oct. 7, the Israeli prison service has absorbed 2,601 new security prisoners, most of whom are adult male Palestinians.

Before the war, Israeli prisons held a few dozen female Palestinian prisoners and less than 200 minors, mostly teenage boys between the ages of 14-18, with some under administrative detention, according to data from Hamoked, an Israeli human-rights group. Most of the women are convicted of committing attacks against Israelis while many but not all of the minors are arrested for stone throwing, Jessica Montell, Hamoked’s executive director, said.

The deal “brings into play the leverage that Hamas always had by virtue of holding these people, but it was a kind of latent leverage as long as Israel wasn’t going to go down the release negotiations path. That latent leverage now becomes quite potent leverage,” said Levy.

Managers caught out in ‘painful’ rally as investors bet on quicker interest rate cuts

Hedge funds betting on a decline in US and European stock markets have suffered an estimated $43bn of losses in a sharp rally over recent days.

Short sellers, many of whom had built up bets against companies exposed to higher borrowing costs over the past year or so, have been caught out by a “painful” rebound in “low quality” stocks this month, said Barclays’ head of European equity strategy Emmanuel Cau. That has come as the market has grown more confident that the US Federal Reserve’s cycle of rate rises is finally over.

The rally, which has left Wall Street’s S&P 500 index on track for its strongest month since July last year, was sparked by US Federal Reserve chair Jay Powell’s recent perceived reluctance to tighten monetary policy any further when he left rates on hold at the start of the month.

Weaker than expected US consumer price inflation data released on Tuesday last week then gave stocks a further boost, with the S&P 500 and the tech-heavy Nasdaq Composite indices both enjoying their best days since April.

Analysts said the upswing triggered a brutal “short squeeze” in which some hedge funds repurchased stocks to cover their negative bets, which helped push share prices even higher. 

“It’s been a very tricky market this year but this short squeeze is really killing year end performance for a lot of funds,” said Cau. “No one was able to monetise the rally in garbage stocks.”

The past month’s “easing of financial conditions may have caused some dead cats to bounce”, said Barry Norris, chief investment officer at Argonaut Capital, referring to the rebound in lower quality stocks.

Funds suffered $43.2bn of losses on short bets in the US and Europe from Tuesday to Friday inclusive last week, according to calculations by data group S3 Partners, which do not take account of gains that funds may have made in other stocks they own.

Bets against technology, healthcare and consumer discretionary stocks were among the most costly for hedge funds, S3’s data shows. A 14 per cent rise in the week to Monday in the share price of cruise line Carnival Corp, for instance, cost hedge fund short sellers a total of $240mn.

Indices tracking heavily-shorted stocks have rebounded sharply from recent lows as market sentiment has rapidly improved. Goldman Sachs’ Very Important Short Position index, which tracks the 50 constituents of the S&P 500 with the highest total dollar value of short interest outstanding, is on track for its best month since October last year.

Barclays’ most shorted stocks in Europe basket has climbed 9.9 per cent over the past three weeks, leaving it on track for its biggest monthly gain in at least 10 years, Bloomberg data showed.

Heavily shorted Swedish real estate company Samhällsbyggnadsbolaget (SBB) is among the groups to have hurt hedge funds in recent days. While its shares have collapsed by around three-quarters this year, yielding big gains for short sellers, it rebounded by a third in the week to Monday. That hit funds including Samlyn Capital, Balyasny and Arrowstreet Capital, according to regulatory disclosures and analysis by data group Breakout Point.

Meanwhile, Castellum, whose shares are shorted by Two Creeks Capital Arrowstreet and Fosse Capital, has jumped 16 per cent this month.

Last Tuesday, when the US inflation data was published, was a “squeeze day,” said Brian Heavey, an equity trader at JPMorgan, who wrote in a note that macro hedge funds had been “massively short” consumer goods groups due to their vulnerability to higher rates. As a result, the sector has registered “massive gains” during November’s index-wide rally, Heavey added. 

Other rate-sensitive sectors reacted just as strongly. Shares in US green energy companies Fuelcell Energy and Sunrun — which have tumbled this year and remain heavily shorted — on Tuesday surged by around a fifth.

The rapid reversal in markets has proved particularly tough for trend-following hedge funds known as commodity trading advisers, which use algorithms and strict risk management metrics to exploit market patterns in global futures markets.

Many have suffered as markets have changed direction and begun to price in extra rate cuts next year.

“You get inflation kind of collapsing . . . and all those shorts in these companies that are really susceptible to higher rates get this booming relief rally,” said Charlie McElligott, a cross-asset strategist at Nomura.

CTAs are down 3.7 per cent on average this month, according to data group HFR, leaving them down 2.6 per cent this year. A model portfolio run by Société Générale, which aims to replicate the positions typically taken by computer-driven trend-followers, is showing losses in all asset classes this month.

However, Barclays’ models suggest that even now CTAs remain net short both equities and bonds. “So [interest] rates down and equities up remains a pain trade,” said Cau.

“I’m surprised that people weren’t as dynamic in reversing some of their ‘higher for longer’ trade,” McElligott said. Hedge funds have missed out on November’s stock market gains in “brutal fashion”, he added.