(Reuters) -Activist hedge funds ValueAct Capital and Blackwells Capital moved on Wednesday to provide backing to Walt Disney as the 100-year-old media company defends itself against a board challenge from Nelson Peltz’s Trian Fund Management.

The latest development comes after Peltz nominated himself and former Disney executive James “Jay” Rasulo to the board of the company in December.

Here is what happened since Iger retired in 2020 and after his return as CEO in 2022:

Date Event

Feb. 25, Iger retires after 15 years as CEO, handing the

2020 reins to Disney Parks head Bob Chapek; Iger

assumes post of executive chairman

Sept. 29, Disney says it will lay off about 28,000 parks

2020 unit employees due to coronavirus hit

Oct. 7, Activist investor Daniel Loeb urges Disney to

2020 forgo paying a dividend and use the cash to

make and buy more programming for Disney+

Oct. 12, Disney restructures its media and entertainment

2020 businesses to accelerate Disney+ growth

Feb. 28, Disney pauses film releases in Russia over

2022 Ukraine invasion

March 4, Disney says it will offer a cheaper,

2022 ad-supported version of Disney+

March 10, Disney pauses all business in Russia

2022

May 16, Third Point liquidates its position in Disney

2022 during the first quarter, two years after the

hedge fund first invested and began urging the

media company to spend more aggressively on its

streaming platform

May 16, Florida Governor Ron DeSantis says he wants the

2022 state to take control of Disney’s special

district when it is scheduled to be dissolved

in June 2023

June 9, Chief Executive Bob Chapek announces a major

2022 leadership shift, promoting Dana Walden to

chairman of general entertainment content

June 28, Disney board unanimously votes to extend Chief

2022 Executive Officer Bob Chapek’s contract for

three years

Aug. 15, Third Point discloses a stake of roughly $1

2022 billion and said it plans to push the media

company to make a string of changes

Sept. 11, Third Point’s Daniel Loeb backs off from

2022 pushing Walt Disney Co to spin off ESPN

Sept. 14, Comcast Corp Chief Executive Brian Roberts

2022 signals to Disney the company will seek market

value for its minority stake in Hulu

Sept. 30, Disney announces a truce with activist investor

2022 Third Point, saying it will appoint tech and

media veteran Carolyn Everson to the board

Nov. 8, Disney reports higher streaming customers, but

2022 high costs disappoint investors

Nov. 11, The company plans to freeze hiring and cut some

2022 jobs, according to a memo seen by Reuters

Nov. 21, Bob Iger returns to Disney as chief executive

2022 less than a year after he retired, in a

surprise comeback

Nov. 28, Iger says one of his top priorities was to make

2022 the company’s streaming business profitable

Dec. 8, The ad-supported version of the Disney+ service

2022 launches, attracting major advertisers from

different sectors

Jan. 12, Activist investor Nelson Peltz formally

2023 launches a battle for a board seat at Disney

Jan. 17, In a letter to shareholders, Disney defends its

2023 board for denying Peltz a seat, saying he

“lacks the skills and experience” to help the

company

Feb. 8, Disney announces a restructuring, 7,000 job

2023 cuts, as part of its efforts to save $5.5

billion in costs and make its streaming

business profitable

Feb. 9, Peltz declares that his proxy fight is over

2023

March 27, Disney begins 7,000 layoffs as it seeks to

2023 control costs and create a more “streamlined”

business, according to a letter Iger sent to

employees, seen by Reuters

May 15, Trian adds to its stake in Disney by purchasing

2023 roughly 500,000 more shares since the end of

March, giving it a total of 6.4 million

Oct. 9, Peltz is expected to ask Disney for “multiple”

2023 board seats, including one for himself,

according to a person familiar with the matter

Nov. 15, ValueAct has built a large stake in Disney and

2023 sees room for the entertainment giant’s stock

price to roughly double, sources familiar with

the investment firm’s thinking said.

Nov. 28, Iger tells employees he faced a “myriad of

2023 challenges” upon returning to the company, but

remained upbeat about its prospects

Nov. 30, Peltz pushes ahead with plans to seek at least

2023 three board seats at Disney as Trian is not

satisfied with Iger’s changes, several people

familiar with the matter say

Dec 14, Disney braces for a bitter proxy battle as

2023 Peltz nominates himself and former Disney Chief

Financial Officer James “Jay” Rasulo to the

company’s board

Jan. 3, Activist hedge funds ValueAct and Blackwells

2024 moved to provide backing to Disney as it

defends itself against a board challenge from

activist investor Trian Fund Management.

(Reporting by Akash Sriram, Tiyashi Datta, Jaspreet Singh and Samrhitha Arunasalam in Bengaluru; Editing by Sriraj Kalluvila, Pooja Desai and Shounak Dasgupta)

(Reuters) – Wall Street’s main indexes opened lower on Wednesday as investors locked in profits after a strong 2023 and awaited economic data and the Federal Reserve’s December meeting minutes for hints on the path of interest rates this year.

The Dow Jones Industrial Average fell 85.81 points, or 0.23%, at the open to 37,629.23. The S&P 500 opened lower by 17.76 points, or 0.37%, at 4,725.07, while the Nasdaq Composite dropped 124.47 points, or 0.84%, to 14,641.47 at the opening bell.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shinjini Ganguli)

By Sruthi Shankar and Shristi Achar A

(Reuters) -U.S. stock indexes were set for a lower open on Wednesday, as investors locked in profits after a strong 2023 and awaited economic data and the Federal Reserve’s December meeting minutes that could offer hints on its interest rate path.

Wall Street kicked off the new year on a downbeat note on Tuesday, halting a blistering rally in stock markets, as Apple and high-growth companies came under pressure from higher yields.

Shares of rate-sensitive megacap stocks extended their drop on Wednesday, with Nvidia, Apple and Tesla down between 0.5% and 1.2% before the bell, as the 10-year Treasury yield climbed for a fourth straight session to 3.969%. [US/]

“The decline yesterday, today and maybe for the next couple of weeks, is a result of people locking in profits and reconsidering what the narrative is – are rates really going down five or six times as it appeared to be the narrative at the end of last year?” said Ken Polcari, managing partner at Kace Capital Advisors

The benchmark S&P 500 came within striking distance of its all-time closing high last week as investors priced in aggressive rate cuts this year following signs of cooling inflation.

While the Fed is widely expected to keep rates on hold in January, traders have priced in a 67.2% chance of a 25 basis point rate cut in March, as per CMEGroup’s FedWatch tool.

The minutes of the Fed’s December meeting are scheduled for release at 2:00 p.m. ET and could offer details about the central bank’s pivot to interest rate cuts.

“The minutes are going to show that they’ve been talking about potentially starting to cut rates, but not at the rate at which the market is expecting,” added Polcari.

The U.S. central bank is “making real progress” towards taming inflation without inflicting major damage on the job market, and a soft landing seeming “increasingly conceivable,” said Richmond Fed President Thomas Barkin, a voting member in the FOMC’s rate-setting committee this year.

Investors are also awaiting Institute for Supply Management’s December manufacturing activity survey and November job openings data later in the day.

At 8:40 a.m. ET, Dow e-minis were down 93 points, or 0.24%, S&P 500 e-minis were down 15.5 points, or 0.32%, and Nasdaq 100 e-minis were down 76.25 points, or 0.46%.

Shares of Pfizer edged up 1.3% and Moderna gained 1.4%, adding to sharp gains in the previous session as investors picked up beaten-down stocks of 2023.

Verizon Communications rose 2.1% after KeyBanc upgraded the stock to “overweight”.

Charles Schwab dropped 1.6% after Goldman Sachs downgraded the stock to “neutral” from “buy”.

(Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru; Editing by Shinjini Ganguli)

By Natalie Grover

(Reuters) -Oil benchmark Brent rose by around a $1 a barrel on Wednesday, after reports of a disruption to Libya’s top oilfield added to supply concerns emanating from tensions in the Red Sea.

Brent crude gained 63 cents to $76.52 a barrel by 1346 GMT, while U.S. West Texas Intermediate crude futures rose 50 cents to $70.88 a barrel.

Protests have forced a partial reduction in production in the Libya’s 300,000 barrels per day (bpd) Sharara oilfield, two engineers told Reuters.

Meanwhile, oil prices had climbed around $2 earlier in the week following attacks on vessels in the Red Sea by Houthi rebels.

On Tuesday, the U.S. Central Command said they fired two anti-ship ballistic missiles into the Southern Red Sea, though no damage was reported.

A wider conflict could close crucial waterways for oil transportation and disrupt trade flows.

“Although the supply of oil has not been affected, as reflected in yesterday’s oil price sell-off, the nervousness is conspicuous,” said Tamas Varga of oil broker PVM.

Both oil benchmarks ended Tuesday more than 1% down, as optimism about early and aggressive U.S. interest rate cuts ebbed ahead of the release of Federal Reserve meeting minutes and jobs data on Wednesday.

“The market bade farewell to 2023 with a considerable liquidation of length and persisting anxiety about the geopolitical outlook failed to draw buyers back to the fore as the new year has kicked off,” added Varga.

Israeli forces intensified their bombing of the Gaza Strip on Wednesday, after the war stretched into Lebanon with the killing in Beirut of Hamas’ deputy leader.

Meanwhile, expectations of ample oil supply in the first half of 2024 have contained prices ahead of OPEC+ plans to hold a meeting of its Joint Ministerial Monitoring Committee (JMMC) in early February.

An exact date has not been decided, three sources from the alliance told Reuters.

The market’s focus will return to the demand side and whether central banks can deliver the soft landing they have aimed for, said OANDA analyst Craig Erlam.

“Any outperformance for the global economy would ease the burden on OPEC+ at a time when compliance with quotas looks like it’s going to be a struggle,” he said.

Ahead of weekly U.S. crude and product inventory reports, analysts polled by Reuters expected crude stockpiles fell last week, while distillate and gasoline stocks likely rose.

(Reporting by Natalie Grover, Trixie Yap and Laura Sanicola; editing by Jamie Freed, Jason Neely, Barbara Lewis and Louise Heavens)

By Stephen Nellis

(Reuters) – Intel on Wednesday said it was forming a new independent company around its artificial intelligence software efforts with backing from digital-focused asset manager DigitalBridge Group and other investors.

Intel executives would not comment on the value of the deal or whether it would retain a majority stake in the new venture, other than to say the firm would have an independent board of directors and the chipmaker would remain a shareholder.

The new entity, which will not be publicly traded and will be called Articul8 AI (pronounced “Articulate AI”), is an outgrowth of work on corporate AI technology that Intel initially carried out with Boston Consulting Group (BCG).

Using one of its own supercomputers, Intel developed a generative AI system that can read text and images using a combination of open-source and internally developed technology. Intel then modified that system to run inside BCG’s own data centers to help address BCG’s privacy and security concerns.

Arun Subramaniyan, who was formerly vice president and general manager in Intel’s data center and AI group and will become chief executive of Articul8, said many other potential customers expressed similar reservations about turning their data over to large cloud computing companies for AI work.

He also said potential customers were concerned about runaway costs if thousands of their employees start using the systems.

“We’ve been really trying to address the biggest gap in generative AI today, which is that building a proof of concept is easy, but getting things into production and doing it safely and in a cost sustainable way is really what is missing,” Subramaniyan said in an interview.

Intel’s move to create Articul8 is its latest move to seek outside capital for business units.

The chipmaker spun out car chip firm Mobileye Global and plans an eventual initial public offering of its programmable chip unit.

Beyond DigitalBridge, which is publicly traded and a major investor in data centers, other Articul8 investors include Fin Capital, Mindset Ventures, Communitas Capital, GiantLeap Capital, GS Futures and Zain Group.

(Reporting by Stephen Nellis in San Francisco; Editing by Jamie Freed)

LONDON (Reuters) – Bond exchange-traded funds (ETFs) gathered an annual record of $300 billion of assets under management in 2023, BlackRock said on Wednesday, as investors were lured in by the highest yields in decades.

BlackRock, the world’s biggest asset manager, said it expects bond ETFs to grow to $6 trillion under management by 2030, from just over $2 trillion currently.

It took 17 years from BlackRock’s launch of the first bond ETF in 2002 for the market to raise $1 trillion, but just three more years to double that amount to $2 trillion by July of last year.

Bond yields surged last year as central banks raise interest rates to tame inflation, making fixed income funds look more attractive than they had in years.

Strategists and investors have said ETFs offer benefits over more traditional mutual funds, including that they trade throughout the day and typically have lower fees.

Data shows that mutual funds have been losing ground to ETFs in the bond market. U.S. fixed income mutual fund assets peaked in November 2021 at $5.6 trillion, according to ICI data, but had fallen to around $4.6 trillion by the summer of 2023.

(Reporting by Harry Robertson; editing by Dhara Ranasinghe)

By Naomi Rovnick and Dhara Ranasinghe

LONDON (Reuters) -Global stock markets extended a New Year slide on Wednesday, while the dollar held firm, as market optimism about early U.S. interest rate cuts ebbed and the latest escalation of hostilities in the Middle East weighed on sentiment.

MSCI’s broad index of world equities <.MIWD0000PUS> slipped 0.3% to its lowest level in almost two weeks, while U.S. stock futures pointed to a weak open for Wall Street.

In a further sign that recent blistering gains for stocks and bonds were faltering, U.S. Treasury yields rose while European shares fell 0.7% and Asia Pacific shares outside Japan shed over 1%.

Caution was rising ahead of the release of minutes from the U.S. Federal Reserve’s December meeting, due at 1900 GMT on Wednesday, as well as a slew of important U.S. data this week.

Fed officials in December predicted 75 basis points (bps) of rate cuts in 2024, driving money market bets for around double that amount of cuts that prompted a cross-market year-end rally.

“We had that whacking great rally at the end of last year when markets convinced themselves there would be a soft (economic) landing, cooling inflation and a rapid pivot to rate cuts,” AJ Bell investment director Russ Mould said.

“But if you get an unexpected hard landing or an inflationary boom, you might get a slightly different script, so I guess people are now pausing for reflection.”

Futures markets still see a 70% chance of the Fed starting to lower U.S. borrowing costs from their current 22-year high from March. But Reuters analysis of Fed policymakers’ recent comments shows that, while many of them have noted improvements on inflation and some easing of wage pressures, most have not said monetary easing is urgent.

U.S. data this week should clarify the outlook, with ISM’s manufacturing survey, due later on Wednesday, set to show whether the central bank has new recession signals to worry about. The market-moving U.S. non-farm payrolls report is due on Friday.

Market sentiment was also undermined by souring tensions in the Middle East.

Hamas deputy leader Saleh al-Arouri was killed on Tuesday in an Israeli drone strike in Lebanon’s capital Beirut, Lebanese and Palestinian security sources said, raising the risk of war in Gaza spreading well beyond the Palestinian enclave. Israel has neither confirmed nor denied that it killed Arouri.

Denmark’s Maersk and German rival Hapag-Lloyd said on Tuesday their container ships would continue to avoid the Red Sea after a series of attacks on vessels blamed on Houthi militants.

“Supply curves of commodities, inputs, intermediates, and final goods remain much more volatile than one would like. Furthermore, Western labour markets will remain structurally tight,” Rabobank said in a note.

Futures markets tipped Wall Street’s S&P 500 index to open lower on Wednesday. The index came within striking distance of its all-time closing high last week as investors priced in aggressive rate cuts for 2024.

Shares of rate-sensitive megacap stocks including Nvidia, Apple and Tesla fell marginally in premarket trading. Apple shares hit a seven-week low on Tuesday after Barclays downgraded its shares.

“I don’t think the last two days marks a trend shift but a pull back in what’s likely to be a good start to the year for equities,” said Tim Graf, head of macro strategy for EMEA, at State Street Global Markets in London.

U.S. Treasury yields meanwhile continued to edge higher. The benchmark 10-year yield, a barometer of expected long-term borrowing costs, was last up 3 basis points at 3.97%. It briefly popped above 4% on Tuesday.

Germany’s 10-year Bund yield was steady at around 2% , while Britain’s 10-year gilt yield was a touch higher at 3.65%

The dollar index touched a fresh two-week high at 102.49 as rate cut bets eased and was last up around a quarter of a percent.

The dollar gained 0.6% to 142.83 yen, while the euro slipped around a fifth of a percent to $1.0919

Brent crude oil futures were flat at $75.88 a barrel as expectations of ample supply outweighed concerns about disruptions to Red Sea shipping routes for now [O/R].

Spot gold slipped 0.5% to at $2,048 an ounce.

(Reporting by Naomi Rovnick and Dhara Ranasinghe in London and Stella Qiu in Sydney; Editing by Chizu Nomiyama)

By Kenneth Li

(Reuters) – ChatGPT was well on its way to becoming a household name even before 2023 kicked off.

Just weeks after the Nov. 30 launch of the generative artificial intelligence-powered chatbot, OpenAI, the non-profit behind ChatGPT, was projected to rake in as much as  $1 billion in revenue in 2024, sources told Reuters at the time.

The so-called large language model’s ability to turn prompts into poetry, song, and high school essays enchanted 100 million users within two months, accomplishing what took Facebook four and a half years and Twitter five in becoming the fastest growing consumer app ever.

Sometimes, the answers were wrong, despite being delivered with conviction. This happened often enough that “hallucinate,” in the sense of AI producing wrong information, was selected as Dictionary.com’s word of the year, owing to the technology’s deep impressions on society.

Such mistakes did not sap the euphoria or stop the existential dread this new technology inspired. Investors, led by Microsoft’s multibillion dollar bet on OpenAI, injected $27 billion into generative AI startups in 2023, according to Pitchbook. The battle for AI supremacy, stewing in the background between big tech firms for years, was suddenly in focus with Alphabet, Meta and Amazon.com all announcing new milestones.

By March, thousands of scientists and AI experts, including Elon Musk, signed an open letter demanding a pause to training more powerful systems to study their impact on, and potential danger to, humanity. The move drew parallels to “Oppenheimer,” Christopher Nolan’s box office hit about the titular atomic bomb maker’s warnings that the relentless pursuit of progress could lead to human extinction.

“This is an existential risk,” said one of the “godfathers of AI,” Geoffrey Hinton, who quit Alphabet in May. “It’s close enough that we ought to be working very hard right now, and putting a lot of resources into figuring out what we can do about it.”

WHY IT MATTERS

Consultancy PwC estimated AI-related economic impact could reach $15.7 trillion globally by 2030, nearly the gross domestic output of China.

Powering this growth optimism is the fact that nearly every industry from finance and legal to manufacturing and entertainment have embraced AI as part of its foreseeable strategy.

The winners and losers in the AI era are only just emerging. As in other eras, beneficiaries will likely be drawn along socio-economic lines. Civil rights advocates have raised concerns over potential bias in AI in fields such as recruitment, while labor unions have warned of deep disruptions to employment as AI threatens to reduce or eliminate some jobs including writing computer code and drafting entertainment content.

Chipmaker Nvidia, whose graphics processors are the hottest commodity in the global AI race, has emerged as a big early winner, with its market capitalization soaring into the trillion dollar club alongside Apple and Alphabet.

In the final months of the year, another winner appeared unexpectedly out of turmoil. In November, the board of OpenAI fired CEO Sam Altman for “not being consistently candid with them,” according to its terse statement.

In the absence of explanation, the spectacle became a referendum over AI evangelism, represented on the one hand by Altman’s push to commercialize AI, versus skeptics and doomsayers who sought a slower and more careful approach.

The optimists – and Altman – won. The ousted CEO was restored just days later, thanks in no small part to OpenAI employees who threatened a mass exodus without him at the helm.

In explaining what brought the company to the brink, Altman said people were fretting over the high stakes of developing AI that could surpass human intelligence. “I think that all exploded,” he said at a New York event in December.

Some OpenAI researchers had warned of a new AI breakthrough ahead of Altman’s ouster, through a top-secret model called Q* (pronounced Q-Star), Reuters reported in November.

WHAT DOES IT MEAN FOR 2024?

One question provoked by the OpenAI saga: will the future of AI and its societal impact continue to be deliberated behind closed doors, by a privileged few in Silicon Valley?

Regulators led by the EU are determined to play a lead role in 2024 with a comprehensive plan to establish guardrails for the technology in the form of the EU AI Act. The details of the draft are due to be disclosed in the coming weeks.

These rules, and others being drafted in the U.K. and U.S., come as the world heads into the biggest election year in history, raising concern about AI-generated misinformation targeting voters. In 2023 alone, NewsGuard, a company which established a ratings system for news and information websites, tracked 614 “unreliable” AI-generated sites in 15 languages from English to Arabic and Chinese.

Good or bad, expect AI, which has already been conscripted to make campaign calls in the U.S., to play an outsize role in many of the elections taking place this year.

(Reporting by Kenneth Li in New York; Editing by Daniel Wallis)

By Laila Bassam, Nidal al-Mughrabi and Arafat Barbakh

BEIRUT/CAIRO/GAZA (Reuters) – Israel killed Hamas deputy leader Saleh al-Arouri in a drone strike in Lebanon’s capital Beirut on Tuesday, Lebanese and Palestinian security sources said, as its tanks and warplanes pummelled Gaza in further “high-intensity” warfare against the Islamist militant group in the enclave.

Arouri, 57, was the first senior Hamas political leader to be assassinated since Israel launched a shattering air and ground offensive against Gaza’s Hamas rulers almost three months ago after a shock Hamas militant rampage into Israeli towns.

His killing could heighten the risk of the Israel-Hamas war spreading well beyond the Gaza Strip. Lebanon’s heavily armed Hezbollah group, a Hamas ally, has been exchanging near-daily fire with Israel across Lebanon’s southern border since the war in Gaza began.

Hamas radio and TV and Lebanon’s pro-Iranian Mayadeen TV confirmed word from security sources that Arouri, a member of the Palestinian Islamist movement’s politburo based abroad and a co-founder of Hamas’ military wing, the Izz-el-Deen al-Qassam Brigades, had been killed when a drone struck a Hamas office in south Beirut.

In all, the drone attack killed six people in the city’s southern suburb of Dahiyeh, a Hezbollah redoubt, the Lebanese state news agency said. Two security sources said the drone targeted a meeting and Hamas’ Al Aqsa TV said commanders of the group’s armed wing in Lebanon – Samir Findi Abu Amer and Azzam Al-Aqraa Abu Ammar – were among the dead.

Asked to confirm that Israel was behind Arouri’s slaying, Israeli military spokesman Daniel Hagari told a media briefing: “We are focused on killing Hamas.”

He declined to elaborate.

Mark Regev, an adviser to the Israeli Prime Minister Benjamin Netanyahu, said in an interview with MSNBC TV that Israel “has not taken responsibility for this attack.”

“But whoever did it, it must be clear – this was not an attack on the Lebanese state,” he said. “Whoever did this did a surgical strike against the Hamas leadership”.

Israel had accused Arouri of ordering and supervising Hamas attacks in the Israeli-occupied West Bank for years.

“I am waiting for martyrdom (death) and I think I have lived too long,” Arouri said in August 2023, alluding to Israeli threats to eliminate Hamas leaders whether in Gaza or abroad.

Arouri had spent time recently in both Lebanon and Qatar, where a Hamas official said he was at “the heart of negotiations” conducted by Cairo and Doha over ways of resolving the Gaza conflict, and the release of hostages Hamas took in its Oct. 7 incursion into Israel.

Lebanese caretaker premier Najib Mikati condemned the attack as a “new Israeli crime” and an attempt to pull Lebanon into war. His office said he asked his foreign minister to file a complaint to the U.N. Security Council over all “new Israeli violations of Lebanese sovereignty”.

Nasser Kanaani, spokesperson for the foreign ministry of Iran, a major supporter of Hamas and Hezbollah, said Arouri’s killing would “undoubtedly ignite another surge in the veins of resistance and the motivation to fight against the Zionist occupiers, not only in Palestine but also in the region and among all freedom-seekers worldwide”.

In a televised speech in August, Hezbollah leader Hassan Nasrallah had warned Israel against carrying out any assassinations on Lebanese soil, vowing a “severe reaction”.

Hundreds of Palestinians took to the streets of Ramallah and other towns in the West Bank to condemn Arouri’s killing, chanting, “Revenge, revenge, Qassam!”

The Gaza war was triggered by a shock cross-border Hamas assault on Israeli towns on Oct. 7 that Israel says killed 1,200 people with some 240 hostages spirited back to Gaza – the bloodiest single day in the Jewish state’s 75-year history.

The Gaza health ministry said 207 people had been killed in the past 24 hours, bringing the total recorded Palestinian death toll to 22,185 in nearly three months of war in Gaza, the most lethal chapter of the decades-long Israel-Palestinian conflict.

Israeli Defence Minister Yoav Gallant said operations around Khan Younis, southern Gaza’s main city, concentrated on areas above the tunnel network where Hamas leaders were believed to be hiding.

“We are reaching them all ways. There already is engagement and there are (Israeli) hostages there too, sadly,” he told troops in Gaza in footage shown on Israeli television.

Civilian casualties have mounted in south Gaza as the brunt of Israel’s offensive has shifted there from the north. Israel says it tries to avoid harm to civilians and blames Hamas for embedding fighters among them, an accusation Hamas denies.

The United States, Israel’s main supporter, has been urging it to rein in its air and ground blitz, which has demolished vast tracts of densely populated Gaza, in favour of more targeted strikes focusing on Hamas leaders.

Israel has announced plans to pull back some troops, hinting at a new phase in the war amid a rising global outcry over the plight of Gaza civilians, although also warned its offensive has many months to run.

Israeli bombardments have engulfed Gaza’s 2.3 million residents in a humanitarian disaster in which thousands have been left destitute and threatened by famine due to a lack of food supplies.

HAMAS RESPONSE TO CEASEFIRE PROPOSAL

Shortly before Arouri’s killing, Hamas’ paramount leader Ismail Haniyeh, who is also based outside Gaza, said the movement had delivered its response to an Egyptian-Qatari ceasefire proposal.

He reiterated that Hamas’ conditions entailed “a complete cessation” of Israel’s offensive in exchange for further releases of hostages.

Israel believes 129 hostages remain in Gaza after some were released during a brief truce in late November and others were killed during air strikes and rescue or escape attempts.

Israel has vowed to keep fighting until it has wiped out Hamas but it is unclear what it plans to do with the enclave should it succeed, and where that leaves the prospect of an independent Palestinian state.

Gaza residents said Israeli warplanes and tanks stepped up bombardments of eastern and northern districts of Khan Younis, where tens of thousands of displaced Palestinians have sought refuge after being forced to flee their homes elsewhere.

In the Gaza Strip’s north, Gallant said, Israel had destroyed 12 Hamas regiments and only a few thousand militants remained out of 15,000-18,000 that had been based in the area. Others had fled to the south, he said.

(This story has been corrected to fix the name of a suburb to say ‘Dahiyeh’, not ‘Daliyeh’, in paragraph 5)

(Reporting by Laila Bassam in Beirut, Nidal al-Mughrabi in Cairo, Arafat Barbakh in Gazaq, Maayan Lubell and Dan Williams in Jerusalem; additional reporting by Doina Chiacu in Washington; writing by Angus MacSwan and Mark Heinrich; editing by Gareth Jones and Tomasz Janowski)

By Akash Sriram

(Reuters) -Tesla delivered a record number of electric vehicles in the fourth quarter, beating market estimates and meeting its 2023 target, but lost its spot as the top EV maker to China’s BYD.

Tesla delivered 494,989 EVs in the October-to-December period, falling short of the 526,409 vehicles that Warren Buffett-backed BYD handed over – mostly in China – suggesting that car buyers were looking for cheaper models in a high-interest-rate economy.

While the U.S. automaker’s year-end sales push mostly paid off, helping it deliver 1.8 million vehicles this year, it fell short of CEO Elon Musk’s ambitious 2 million annual internal target.

However, it is still ahead of BYD for the whole year. The Chinese firm delivered a total of 3.02 million vehicles, including about 1.4 million plug-in hybrid EVs.

Tesla stock, which doubled last year, was nearly flat on Tuesday in a broadly weaker market.

BYD’s deliveries show price cuts are working for the Chinese company, said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“The fight will hurt margins for both companies, but BYD clearly believes it’s a price worth paying to increase market share and recognition,” she added.

Tesla increased discounts and offered incentives like six months of free fast charging if customers took deliveries by December-end, in a bid to boost sales before some variants of its compact Model 3 sedan lose U.S. federal tax credits in 2024.

That helped it post a growth of 11% over the immediately previous quarter and higher than estimates of 473,253, according to 14 analysts polled by LSEG.

It made a record 494,989 vehicles in the quarter after a production halt in the third quarter to upgrade assembly lines, taking total production in 2023 to 1.85 million units.

Tesla’s delivery numbers are “much, much, much better than domestic U.S. car companies,” said Gary Bradshaw, portfolio manager at Tesla shareholder Hodges Capital.

Smaller rival Rivian also reported deliveries on Tuesday, with the company missing market estimates amid a broader pullback in EV demand.

The weakness has led U.S. automakers including Ford and General Motors to become more cautious about their EV production capacity plans.

Tesla is also facing scrutiny from regulators over its self-driving technology with the company recalling more than 2 million vehicles last month to install new safeguards in its Autopilot advanced driver-assistance system, after a federal safety regulator cited safety concerns.

Consumer Reports — an influential U.S. non-profit group that conducts extensive reviews of cars, kitchen appliances and other goods — said its preliminary evaluation suggests the software update to fix issues were not sufficient and did not go far enough to prevent misuse and driver inattention.

TAX CREDITS

Some analysts said Tesla could have to continue the price cuts it started in January last year to maintain demand, after the end of the tax incentives under the Inflation Reduction Act (IRA) brought forward sales into the fourth quarter.

“Tesla may have to cut prices further, especially for a vehicle like the versions of the Model 3 that lost their tax credit,” said Seth Goldstein, equity strategist at Morningstar.

The rear-wheel drive and long-range variants of Tesla’s Model 3 no longer have federal tax credits of $7,500 this year as updated requirements on battery material sourcing kick in, under the IRA.

Goldstein, however, said that most of the price cuts were in response to higher interest rates by the U.S. Federal Reserve so Tesla may maintain prices if borrowing costs start coming down.

Model 3 cars and Model Y sports utility vehicles accounted for 461,538 deliveries in the quarter, while Tesla handed over about 23,000 units of its other models.

Tesla did not disclose if the deliveries included the newly launched Cybertruck.

(Reporting by Akash Sriram in Bengaluru; Editing by Shounak Dasgupta, Krishna Chandra Eluri and Pooja Desai)