>>> US Close Dow +0,10% S&P +0,18% Nasdaq +0,30% Russell -1,29%

Closing Stock Market Summary
The market experienced some consolidation today following the best week of the year for the stocks. The major indices were largely supported by mega cap gains while many other stocks declined due to profit-taking activity.

The Vanguard Mega Cap Growth ETF (MGK) rose 0.8% while the market-cap weighted S&P 500 closed with a 0.2% gain. Meanwhile, the Invesco S&P 500 Equal Weight ETF (RSP) fell 0.5% and market breadth was negative at both the NYSE and the Nasdaq. Decliners led advancers by a 5-to-2 margin at the NYSE and a nearly 2-to-1 margin at the Nasdaq.

The S&P 500 real estate sector (-1.4%), which jumped 8.6% last week, saw the steepest decline today followed by energy (-1.2%). The next worst performing sector was materials, which closed with a modest 0.5% loss.

The heavily-weighted information technology sector (+0.8%) led the pack followed by health care (+0.7%) and consumer discretionary (+0.2%).

Rising market rates were another factor keeping stocks in check. Like equities, Treasuries experienced some consolidation after last week's big gains. The 2-yr note yield rose eight basis points to 4.94% and the 10-yr note yield rose ten basis points to 4.66%.

The Treasury market will see a rush of new supply this week, beginning with the $48 billion 3-yr note auction on Tuesday, followed by the $40 billion 10-yr note auction on Wednesday and the $24 billion 30-yr bond auction on Thursday.
Separately, some individual stocks made outsized moves on specific news catalysts. Paramount Global (PARA 12.69, -1.07, -7.8%), which was downgraded to Underperform from Buy at BofA Securities, and Albemarle (ALB 119.46, -8.52, -6.7%), which was downgraded to Neutral from Buy at UBS, were among the losing standouts in that respect.

There was no U.S. economic data of note today.
  • Nasdaq Composite: +29.2% YTD
  • S&P 500: +13.7% YTD
  • Dow Jones Industrial Average: +2.9% YTD
  • S&P Midcap 400: +1.0% YTD
  • Russell 2000: -1.3% YTD

Looking ahead, Tuesday's economic calendar features:
  • 8:30 ET: September Trade Balance ( consensus -$60.1 bln; prior -$58.3 bln)
  • 15:00 ET: September Consumer Credit ( consensus $9.0 bln; prior -$15.6 bln)

FT : European countries boost funding for Ariane 6 rocket programme

European countries boost funding for Ariane 6 rocket programme
Deal between France, Germany and Italy reflects continent’s effort to build capacity for independent launches

France, Germany and Italy struck a deal on Monday to pump €340mn a year more into the troubled Ariane 6 heavy-lift rocket programme, in a bid to ensure the future of Europe’s sovereign access to space.

As part of the long-awaited tripartite agreement, Europe’s approach to commissioning launch services will open up to competition, in a fundamental shift that will put pressure on Airbus and Safran, the joint owners of ArianeGroup.

Italy has also opted to withdraw its Vega-C medium-lift rocket from ArianeGroup’s marketing arm, Arianespace. Vega-C will eventually be operated by Italian group Avio.

The agreement underscores Europe’s anxiety to close the gap in low-cost launch capacity with Elon Musk’s SpaceX in the US, which is dominating the race to exploit the rapidly developing commercial space economy.

In a decision that has been widely criticised since the programme was launched in 2014, Ariane 6 was not designed to be reusable, in order to preserve jobs.

Bruno Le Maire, French finance minister, said the three-way deal “opened a new era for European launch. It will allow Europe to continue to play a role as a great space power.”

The three countries have agreed to provide €340mn a year in extra funding to cover the costs of flights 16 to 42 of Ariane 6, which are expected to launch between 2027 and 2029-30.

The maiden flight is set for next year, but it is running some four years behind schedule. The delays have left Europe with no sovereign launch capability.

Ariane 5 made its last flight in July, while the new Vega-C medium-lift rocket was grounded after a flight failure late last year. Europe stopped using Russia’s Soyuz rocket after the full-scale invasion of Ukraine. 

Europe has had to book flights on SpaceX vehicles for next year’s planned launch of satellites into its Galileo navigation system.

The decision to give extra funding to Ariane 6 was hard won. Le Maire said it had come only after months of discussion and negotiation. France and Germany in particular have been at odds over funding for Ariane 6, which is expected to be more expensive than SpaceX’s Falcon 9. 

France funds 55 per cent of the Ariane 6 programme and will continue to assume that proportion of the extra funding, Le Maire said.

Josef Aschbacher, director-general of the European Space Agency, hailed the progress on Ariane 6 as an important step towards solving the “crisis” in European access to space. Europe was on the brink of a “historic moment” in space transportation as it moved to a more competitive model for the development of launchers, he added.

He said he hoped to be able to announce a date for Ariane 6’s inaugural flight after a test later this month. “We need to get Ariane 6 on to the launch pad as soon as possible.”

WSJ : U.S. Plans $320 Million Weapons Transfer to Israel as Gaza Toll Mounts

U.S. Plans $320 Million Weapons Transfer to Israel as Gaza Toll Mounts
The Biden administration notified Congress of plans to send American-made precision Spice bombs

The Biden administration is planning a $320 million transfer of precision bombs for Israel, a major weapons deal that comes amid heightened concerns in Congress and among some U.S. officials about the rising civilian death toll during the Israeli military campaign in Gaza.

The administration sent formal notification on Oct. 31 to congressional leaders of the planned transfer of Spice Family Gliding Bomb Assemblies, a type of precision guided weapons fired by warplanes, according to correspondence viewed by The Wall Street Journal.

Under the agreement, weapons manufacturer Rafael USA would transfer the bombs to its Israeli parent company Rafael Advanced Defense Systems for use by the Israeli defense ministry, the correspondence says. The plan also includes the provision of support, assembly, testing and other technology related to the weapons use. It follows a $402 million transfer of the same weapons that the administration first sought congressional approval for in 2020.

The planned weapons deal comes as the death toll in Gaza from Israel’s continuing assault on the enclave surpassed 10,000 people on Monday, according to the local Health Ministry in the Hamas-run enclave. The figure doesn’t distinguish between civilians and combatants but more than two-thirds of those killed in Gaza have been women, children and the elderly, according to the Health Ministry affiliated with the Palestinian Authority.

Officials at the departments of State and Defense didn’t immediately respond to a request for comment on the matter.

Israel launched the current offensive in Gaza in response to a cross-border incursion by Hamas militants on Oct. 7 that killed more than 1,400 Israelis including many civilians. Israel has vowed to remove Hamas from power in response to the mass killing.

The Pentagon has refused to say how much military weapons, equipment and other aid it has provided Israel since the Oct. 7 attack.

After being the recipient of widespread Western and other international support in the aftermath of the Hamas attack, Israel is now facing a growing international outcry over killings of civilians and the deepening humanitarian crisis in Gaza.

Israel has imposed a total siege on Gaza, cutting off supplies of food, water, electricity, medicine and other essentials. The military offensive has also displaced nearly 1.5 million people according to the United Nations. Some humanitarian aid has arrived via convoys of trucks from Egypt, but the delivered supplies are not nearly enough for the entire population of Gaza, according to the U.N. and aid groups.

A series of Israeli bombings that caused extensive casualties have heightened scrutiny on the Israeli military campaign, including a pair of bombings in Gaza’s Jabalia area last week that flattened apartment blocks and killed dozens of people. Israel said it was targeting Hamas personnel and infrastructure.

The Israeli bombing campaign has also hit U.N. installations including schools used as shelters for people who have fled their homes, hospitals and ambulances, and other civilian targets.

Israel has urged civilians to leave the north of the Gaza Strip as it encircles the area and attempts to crush Hamas. An Israeli military spokesman also said Israel’s forces limited capacity for precision strikes because they are stretched thin. The Israeli air force has said its strikes are causing “maximum damage.”

FT : OpenAI set to launch store as ChatGPT reaches 100mn users

OpenAI set to launch store as ChatGPT reaches 100mn users
Group aims to turn artificial intelligence interface into a digital platform

OpenAI is launching custom versions of ChatGPT that can be adapted and tailored for specific applications, turning the chatbot interface into a digital platform like iOS or Android.

Known as GPTs, the tools can be built using plain English for cases such as tutoring a child in maths, creating a travel concierge or designing a website. The Microsoft-backed artificial intelligence company said it planned to launch a GPT Store in the coming weeks, to collate the best apps, and eventually split revenues with the most popular GPT creators.

The store’s launch comes exactly a year after the public debut of ChatGPT, echoing Apple’s decision to launch the iOS App Store a year after the iPhone, which brought it into the software services business.

In an event for developers on Monday, OpenAI said ChatGPT had 100mn weekly active users, and launched a new AI model, GPT-4 Turbo, for developers, which can analyse more than 300 pages of text in a single prompt, and is more than two times cheaper than its previous offering.

“We believe if you give people better tools, they will do amazing things. Eventually you’ll ask a computer for what you need and it will do all these tasks for you,” said Sam Altman, chief executive of OpenAI.

Allowing people to build these chatbots without coding makes it more “accessible and gives agency to everyone”, Altman said, adding that “gradual iterative deployment” was OpenAI’s approach to creating autonomous AI safely.

Satya Nadella, the chief executive of Microsoft, joined Altman on stage, saying OpenAI had “built something magical” and that ultimately the groups’ partnership was about “getting benefits of AI broadly disseminated to everyone”.

Altman said: “I think we have the best partnership in tech and I’m excited to build [artificial general intelligence] together.”

Some of the examples of GPTs showcased by the company include a computer science lesson planner from its partner Code.org, a non-profit that teaches kids to code, as well as an Airbnb house manual, for which its AI models such as Dall-E2 automatically generated images and instructions based on user prompts.

“We believe natural language will be a big part of how people use computers in the future. This is an interesting early example,” Altman said.

Since launching its conversational chatbot last November, OpenAI has introduced a mobile app version, and added features including image generation and analysis to ChatGPT. The new custom GPTs can be created by existing ChatGPT Plus subscribers, and shared online using a link or designed for internal use by its enterprise customers, OpenAI said.

The tools can also be used to complete actions, such as booking restaurant tables. Altman said AI chatbots like GPTs would start to handle online tasks autonomously, turning them into so-called agents. “They will gradually be able to plan and perform more complex actions on your behalf,” he said.

As OpenAI expands its ambitions in building a viable business and developing cutting-edge AI, it is under pressure to raise significant capital for infrastructure and computing costs. The company is in talks with existing investors including Thrive Capital about selling shares at a valuation of $86bn, roughly three times what it was worth six months ago.

A stock sale at the level OpenAI is targeting would make the San Francisco-based group one of the world’s most highly valued private companies.

FT : Italy strikes deal to set up migrant centres in Albania

Italy strikes deal to set up migrant centres in Albania
Giorgia Meloni and Edi Rama sign agreement to outsource Italian asylum process

Italy will build two centres in Albania to host migrants trying to reach the EU by sea, the prime ministers of the two countries announced on Monday.

Italian premier Giorgia Meloni described the deal as a “European agreement” and “an innovative solution” aimed at curbing a rise in illegal crossings on the Mediterranean Sea. More than 145,000 migrants have reached Italy’s shores from northern Africa since the beginning of 2023, compared with 88,000 people last year.

“Mass illegal immigration is a phenomenon that EU member states cannot tackle alone. Collaboration [with] non-EU states can be decisive,” Meloni said in a joint news conference in Rome, alongside her Albanian counterpart, Edi Rama.

It is the first time an EU country is outsourcing its asylum procedures to a country that is not yet part of the bloc. Albania is in talks to join the EU and has been a Nato member since 2009. The deal echoes the UK’s agreement with Rwanda, which however has been bogged down in legal challenges.

The European Commission said it was aware of the arrangement but that it had not yet received details. “It is important that any such arrangement is in full respect of EU and international law,” a commission spokesperson said.

Brussels in the past has questioned whether schemes for processing asylum claims in non-EU countries are in line with international rules, which stipulate that people seeking protection in another country cannot be sent away without their claim being heard there first.

Meloni has repeatedly floated the idea of building reception centres outside Italian and even European borders, suggesting they could be set up in northern Africa. She zeroed in on Albania in August, when she interrupted her holiday in the Puglia region to spend some days meeting Rama in his country.

The construction of the two migrant facilities — where Italian jurisdiction will be applied — will be entirely funded by the Italian state, she said. Migrants rescued at sea by the Italian coast guard would disembark in the port of Shëngjin, in northern Albania. They would first be hosted in reception centre where they would be registered and where they could apply for asylum in Italy.

An expulsion and detention facility will also be built 20km away from the coast, in the settlement of Gjadër. Albanian police guards will be in charge of patrolling both centres.

“If Italy calls, Albania is there,” Rama said. “Lending a hand in this case means helping to manage a situation that everyone sees is difficult for Italy.”

Meloni said Italy expects these centres to be fully operational by spring 2024 and to have the capacity to manage between 36,000 and 39,000 migrants per year. She added that she hoped this agreement could become a “model” for other countries to follow.

The facilities would only host people rescued at sea by Italian law enforcement and not by vessels operated by charity groups, according to a government official. Women, children and migrants in vulnerable conditions will not be brought to Albania but will continue to be disembarked in Italy.

>>> Fed Nov Senior Loan Officer Survey (SLOOS) on Bank Lending Practices: On bal

Fed Nov Senior Loan Officer Survey (SLOOS) on Bank Lending Practices: On balance banks eported tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes
- Banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
- For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages, for which standards remained basically unchanged. Meanwhile, demand weakened for all RRE loan categories.
- In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Moreover, for credit card, auto, and other consumer loans, standards reportedly tightened, and demand weakened on balance.

Autos:
In a set of special questions, banks were asked to assess the likelihood of approving credit card and auto loan applications by borrower FICO score (or equivalent) in comparison with the beginning of the year. Significant net shares of banks reported that they were less likely to approve both credit card and auto loan applications from borrowers with FICO scores of 620. Moderate and significant net shares of banks reported that they were less likely to approve credit card loan applications and auto loan applications, respectively, from borrowers with FICO scores of 680. In contrast, a modest net share of banks reported being more likely to approve credit card applications from borrowers with FICO scores of 720, while the likelihood of approving auto loan applications to borrowers with FICO scores of 720 was basically unchanged in comparison with the beginning of the year.

FT : Britishvolt staff warn battery start-up may be trading while insolvent

Britishvolt staff warn battery start-up may be trading while insolvent
Australian entrepreneur David Collard has left bills and staff unpaid for months

Staff at Britishvolt are warning the UK battery start-up may be “trading while insolvent”, after they were left unpaid for the past four months.

Two current staff said the company’s owner, Australian entrepreneur David Collard, who agreed to purchase the business out of administration earlier this year, has left its bills and staff unpaid for months.

One employee said staff were “at the mercy of David”. The person added: “Every week [the money] is coming the following week. I think the reality is we are currently trading while insolvent.”

To trade while insolvent is not against the law, but directors should only continue trading if they believe there is a reasonable prospect for avoiding an insolvent liquidation.

Directors continuing to trade with the knowledge that insolvency is unavoidable, risk being personally liable for a company’s debts. They could also face other sanctions and penalties, including a 15-year ban on acting as a director of a company.

On a call on Friday, Collard told the handful of remaining staff that he was in advanced talks with a potential investor, and said he expected money to come in this week, said two people who were on the call.

However, they said Collard has made such promises several times before, and no funds have arrived.

Another staff member said the business appeared unable to pay its bills and should be wound up. They added Collard had given “promises after promises after promises” that money would arrive.

“He’s always promising to raise the cash but he never does,” said another person involved in the administration process.

Collard declined to comment. He recently told associates that a new investor had signed an equity commitment letter for an investment that would allow the company to pay what is owed and meet its obligations.

Collard’s Recharge Industries has yet to pay former administrators EY for about £2.5mn of the agreed £8.6mn purchase price, according to two people, more than half a year after the original deadline for payment had passed.

EY on Monday said it “ran a thorough and competitive sales process” to find a buyer for the business. It said the £6.1mn paid so far was “materially above the next best alternative, deliverable offer received by the joint administrators”.

It added: “The joint administrators are taking steps to recover these further outstanding monies owed and continue to pursue options for the sale of the site in Blyth.”

When it launched in 2019 amid great fanfare, the company had plans to develop a UK battery factory with homegrown technology and had secured financial backing from the UK government as well as prospective orders from Mercedes-Benz.

However, it collapsed into administration earlier this year after running out of funds, and was bought by Collard, a former PwC partner. About 26 former employees were kept on following the administration.

EY, which drew criticism for running BritishVolt’s administration after being a longstanding adviser to the company, selected Collard as the preferred buyer for the business, over other offers that included a buyout from existing shareholders.

Collard’s aim was to resurrect the factory plans, although he has yet to purchase the land for the factory site in Blyth, said several people with knowledge of the arrangement. The site, reckoned to be one of the most promising for a battery factory in the UK, would now cost about £11mn to secure, the people added.

As a result of the long delays, the receiver for the land is pursuing interest elsewhere and has received approaches from other parties to buy the land, with Collard’s Recharge business no longer seen as a credible buyer, according to a person familiar with the matter.

Staff said their laptops stopped working last month, which they assumed meant that the IT company had not been paid. Some also received payslips from HR in recent months, but without the money ever landing in their accounts.

FT : Klarna studies ‘eventual IPO’ after first profit in 4 years

Klarna studies ‘eventual IPO’ after first profit in 4 years
Swedish ‘buy now, pay later’ group sets up UK company to go along with its Swedish banking licence

Klarna reported its first quarterly profit in four years as the Swedish “buy now, pay later” pioneer prepares for a possible stock market listing.

The Swedish fintech eked out a net profit of SKr90mn (€8mn) in the third quarter, compared with a loss of SKr2.1bn a year earlier, while revenue increased 30 per cent to SKr6bn. It almost halved its credit losses to SKr800mn, a drop which it attributed to improvements in the precision and accuracy of its underwriting models.

Klarna is taking what it calls an “early step on a journey towards an eventual IPO” by establishing a UK holding company to go along with its Swedish banking licence. It has not yet decided on the location or timing of any listing.

The once high-flying payment group was forced to slash its valuation by 85 per cent to $6.7bn last year and cut a tenth of its workforce after reporting heavy losses in the wake of rising interest rates.

But Sebastian Siemiatkowski, the co-founder and chief executive, said in August that Klarna was ready for an IPO whenever market conditions improved after establishing itself in the US, returning to profitability and demonstrating it had growth potential.

On Monday, Siemiatkowski said that Klarna had “achieved exactly what we set out to do” by posting a quarterly profit and that it would “build on this momentum” in the final quarter to “drive value” to its consumers and merchants.

A London listing would be a boost for the LSEG as companies, such as Cambridge-based chipmaker Arm, have opted for the greater liquidity and valuations offered by US public listings. A series of UK flotations have flopped in recent months, including CAB Payments, another fintech whose shares collapsed 72 per cent last month after it cut its revenue forecasts.

Other payments companies have also been hit by weakening investor sentiment in the economic downturn. Shares in US rival Affirm are down more than 85 per cent since their peak in November 2021, while Dutch fintech Adyen suffered an almost 40 per cent drop in its market cap in August after missing analyst expectations. 

In addition to economic pressure, the sector is under growing scrutiny from regulators who have expressed concerns about whether BNPL companies are doing enough to scrutinise whether the loans they make are affordable. Data released by the UK’s Financial Conduct Authority in October showed that frequent users of BNPL were more likely to be in financial difficulty.

Klarna, which partners with retailers including H&M, Ikea and Airbnb, earlier this autumn launched an AI-powered feature allowing its customers to find where to purchase items at advantageous deals by snapping pictures of them through its app.

FT : Germany seeks national ‘pact’ to stave off rising far right

Germany seeks national ‘pact’ to stave off rising far right
Bitter immigration debate has pitted Scholz’s coalition and opposition parties against each other

German chancellor Olaf Scholz is seeking to seal a national “pact” among mainstream parties and settle an increasingly bitter public debate on immigration in a bid to stave off resurgent rightwing populism.

On the table are proposals to sharply reduce benefits for asylum seekers, radically speed up deportations, and even open processing centres outside the EU — a measure so far only attempted by Britain in Rwanda, with little success. 

The prime ministers of Germany’s 16 state governments were hosted by Scholz on Monday in a meeting that was expected to last well into the evening.

Originally conceived by Scholz in September as a summit to agree a path forward for the country’s moribund economy, the “pact for Germany” has become consumed by disagreements over migration.  

Plans to cut government red-tape, agree ambitious new infrastructure plans and secure funding for the government’s popular flat-price national rail ticket are still due to be discussed. But without a consensus on migration it is unclear what the summit will be able to agree.

The Monday meeting “will have a significant impact on Germany’s political future”, said the prime minister of Saxony-Anhalt, Reiner Haseloff.

“We need a new realpolitik in migration policy,” said Bijan Djir-Sarai, general secretary of the ruling liberal Free Democrats. “This is about the credibility of the state as a whole.”

It is barely two weeks since Scholz’s coalition government, composed of the social democrats, greens and liberals, proposed fresh legislation to speed up deportations. But those measures have failed to appease demands by coalition party and opposition politicians concerned with a surge in immigration that exceeds the 2015-16 crisis that brought more than 1mn refugees, mainly from the Middle East.

German officials expect more than 300,000 people to apply for asylum in Germany this year. That figure does not include any of the 1.1mn Ukrainians who have moved to the country since Russia’s full-scale invasion last year. 

“What the government is currently preparing is in no way suitable to limit the influx into Germany,” said prime minister of Saxony, Michael Kretschmer.

“The expectations on the part of the federal government are so high that we must not disappoint people now.”

Kretschmer is also the federal vice-president of the Christian Democratic Union (CDU), Germany’s main party of opposition.

Scholz has held discreet meetings with CDU leaders over the past few days, in an effort to try and find common ground. 

Although he does not need the party’s support to legislate, it is his hope that by bringing the CDU together on the topic of migration with his government, he will have greater legitimacy to face down the political threat posed by Alternative for Germany (AfD), the hardline populist party that has surged in the polls since the summer. 

More than one in five Germans say they would now vote for AfD at the federal level, making the party the second-most popular after the CDU.

In two regional elections in October, the AfD scored breakthrough victories in Bavaria and Hesse. In three further regional elections next year the party is expected to extend its support. 

It is not only the CDU advocating for stricter measures to staunch the political momentum of AfD, however, but also voices from within Scholz’s coalition.

Christian Lindner, German’s finance minister, and Marco Buschmann, the justice minister — both of the liberal FDP — called for financial support for illegal migrants to be “cut to zero” in an article two weeks ago. 

FDP figures have also advocated for processing asylum claims in non-EU countries — a plan critics say is unworkable, both because of legal challenges, and because no one has yet been able to find a host country willing to strike a deal with Germany.

“I am in favour of discussing the whole thing very objectively and pragmatically,” Lars Klingbeil, the head of the Social Democrats — Scholz’s own party — told German media on Monday. “If procedures can ultimately be carried out in other countries, that is a viable option,” he said.

Other measures under discussion include proposals to lengthen the period of time asylum seekers must spend in Germany before they are eligible for full social security benefits. Asylum applicants currently become eligible for full benefits after 18 months in the country.

Funding will be another sticking point. The federal government wants to cut the support it gives the 16 regional governments for asylum processing by €2.5bn annually. That is regarded by all 16 states as deeply problematic, and may ultimately prove to be an insurmountable stumbling block.