Good morning from London. I'm Anna
Edwards alongside Guy Johnson. We're an
hour away from the opening trade. Here's
what you need to know. Donald Trump
pushes for a bilateral meeting between
Putin and Zalinski with the US and
European allies now promising security
guarantees for Keefe. We will have the
latest on Ukraine. Indian Prime Minister
Narendra Modi hails Vladimir Putin as a
friend as his government also moves to
bolster relations with China. And a
surprise from Soft Bank. The Japanese
investor has agreed to make a $2 billion
investment in the US chip maker Intel.
>> Good morning, Anna. Welcome back. Let's
talk about these markets and figure out
where we are. Euro stock 50 futures up a
little bit. S&P futures down a little
bit. We're in the middle of August,
folks. Come on. Let's not try and pin
narratives to what we're seeing on the
screen behind us. I think we're kind of
just marking time, waiting to see what
the next catalyst looks like. And there
are plenty coming. New York crude
though, I am prepared to talk about. I
think this is an interesting story. We
are softening up a little bit. I think
you can draw a line between what is
happening with crude and what is
happening with Ukraine and the
geopolitics. Europe in theory would be a
beneficiary of peace. Not seeing much
movement in Euro dollar this morning. I
do wonder whether we are pricing out a
little bit of the dovishness when it
comes to power Friday and whether that
actually just again just keeps euro
dollar fairly kind of balanced at the
moment. We're barely budging on that.
This is not an exciting board this
morning, but there's plenty of catalyst
still to come. And the countdown to the
opening trade starts right now.
The war is going to end. When it ends, I
can't tell you. But the war is going to
end. And this gentleman wants it to end.
And Vladimir Putin wants it to end. I
think the whole world is tired of it and
we're going to get it ended.
>> The biggest news as far as I can tell is
that Zalinsky was wearing a suit which
seems to have caused an uproar in DC uh
and many columns to be written about it.
Is that a significant development? Maybe
there's a signal there that peace is
coming. There was certainly a lot of
charm in the White House yesterday on
both sides and there was money as well.
Zilinski brought money. A big order for
US defense companies.
>> Yeah, absolutely. There was a lot of
charm. uh there was a better mood in the
room which you know let's face it
couldn't have been much worse than
February it was better maybe there's
message in the suit and maybe that
helped at the margin there was a lot of
focus on security though and this is
something that European leaders have
picked up on and so let's get the
European perspective on this let's go to
Oliver Kirk who's in Brussels who's been
watching these developments for us
overnight Ollie and and a lot of the
European leaders going with uh the
intention of trying to secure something
on security guarantees from the United
States or security involvement from the
US and getting some of that.
>> Yeah, I think they would be very
reassured from some of the things that
Donald Trump said in the conversations.
Again, I think he reiterated in a way
that was fairly strong the US commitment
to be involved in the security
architecture after a peace deal um in
Ukraine. And remember, this is something
that until a couple of days ago, the
United States has never really
explicitly stated in those kinds of
terms. So again, to hear that in person
from the president of the United States
will be a big victory for European
leaders. The question now is what do
these article 5 style guarantees
actually look like? Does it involve the
United States saying very explicitly
that if there is an further incursion on
Ukrainian sovereign so sovereignty by
the Russians at a later point after a
peace deal that the US would be directly
involved militarily? Does it mean and to
what degree does it mean uh European
troops from different nations um
stationed in Ukraine as sort of po of of
peace observing peacekeeping operations?
These are all still very much open
questions after the meeting. It's clear
that what the European leaders wanted
was more clarity on the security
guarantees. It is clear that an
architecture is being worked on. We
still had a pushing of a ceasefire by
Mau and Merittz. They were really trying
to push that idea forward in the
preliminary discussions that they gave
the statements before the meeting began
in the East Room of the White House.
Trump sort of pushed back on that. He
said a ceasefire would be nice, but
really it's not clearly a priority of
his. The other thing that they really
want to do is talk about the sort of
territorial situation. I think they'll
be reassured by the fact that Donald
Trump is not trying to impose verbally
in any sort of explicit way those kinds
of things on the Ukrainians. But of
course, the big prize after all of this
will be the trilateral meeting between
uh Putin, between Trump, between
Zalinski. That is what all the European
leaders were pushing for. It seems that
after that Trump spoke to Putin after
those meetings. He said that he's
organizing a bilateral between Zalinsky
and Putin that will hopefully after that
be organized by the tri that trilateral
meeting between the three leaders in
order to try to make some meaningful
progress for the Europeans. Now the task
at hand as they return home is trying to
sell some of this to their domestic
audience. Remember this is not a done
deal. It is not done that the European
nations will sign on to stationing
troops for example in uh Ukraine after a
sort of peace deal. So all of these
things are still open questions, but
it's clear that progress is being made
on some kind of architecture for
security.
>> Yeah, and that does seem like the big
takeaway, doesn't it, from these
developments overnight European time.
Oliver, thank you very much. Boom.
Oliver Crick with the latest on what
European leaders take away from this and
and there was a substantial conversation
and a substantial a change of tone
really from the United States when it
comes to what they're prepared to do,
although we don't know what the details
look like. And they talk about it as
being a coordinating role for the US. It
feels like we're back to where we were
pre Putin in terms of where Trump's kind
of sense of direction is right now. And
I think the Europeans have done quite a
good job in in getting him back to
there. Are we going to see bilateral
meetings between Putin and Zilinsky? I
don't know. Are we going to see a
trilateral meeting? I don't know. But
what is clear is that Europe,
>> to Wally's point, is going to have to
spend some money here. And and can
Europe afford this? Can Europe sell this
to its domestic audience? Is there
something that will have to give in
terms of spending elsewhere if Europe is
going to be doing this and putting boots
on the ground and kits on the ground and
money on the ground? So all of that I
think remains an open question.
>> Absolutely. Is this more money versus
what we previously already knew about 5%
of GDP at those NATO summits. So
questions on territory, questions on
whether these meetings take place, this
bilateral being proposed then a
trilateral and as to your point Guy,
we've had no confirmation from the
Russia side that they agree to go ahead
with any of those those meetings. Um
talking about Russia takes us on to
China and India. Actually
>> I this is really interesting. So this is
is this is this the fallout that
ultimately we are going to see from a
tariffs
b Ukraine and and kind of seed the Trump
policy towards China and India and you
do wonder whether a new group is forming
and it certainly feels that at the
moment we've seen obviously inklings of
this in the past with with sort of the
the brick summits and all kinds of other
summits that have taken place but this
feels this feels firmer than that
>> India and China together talking about
being friends and And you've got this
Wang Yi meeting that's taking place
currently with the Chinese in India.
You've got Modi describing Putin as a
friend. I you you've got a triangle here
that is forming that I think the United
States is going to take very seriously
going forward from here. But in some
ways the United States has created this
connection between these countries
>> and and you wonder ultimately where this
is this one's going to go and there are
implications of this for Africa. What
happens in Africa I think is going to be
hugely significant as a result of this.
India, Pakistan I think gets affected by
this as well. There's lots of different
reads on this, but what is clear is that
you are getting a big sphere of
influence being created here which could
have a very long-term effect on
geopolitics.
>> Yes. And so is this a reshaping of
geopolitics on the back of President
Trump's trade policies or that and other
policies coming out of the White House
right now. And just to reiterate what
we've seen with regards to India over
the last couple of weeks, a big
evolution there of course uh which
you'll be well aware of the fact that
these these tariffs on India have been
doubled. And so no surprise perhaps that
Modi is pushing back against that and
finding friends elsewhere and finding
friends in Russia and finding friends in
China which and the Chinese relationship
has been strained over the last 5 years.
>> Russia provides the energy. Thank you
very much indeed. We'll we'll take your
cheap oil.
>> Peter Navaro's uh upset anger.
>> Of course India is a huge market,
China's a huge market. Obviously it's
going to be interesting to see how those
relationships work. Are they in the past
they've been competitors? Do they feel
like competitors now? I don't know if
you've got two massive markets that
potentially could have huge overlap and
it'll be an economically fascinating to
watch how how that could evolve.
>> Yeah.
>> And and that has implications for
Australia, Arcus, all kinds of other
geopolitical fallout from that.
>> So, global geopolitics being reshaped
then under a second Trump
administration. We're also seeing a a
new a new version of capitalism in the
United States where the government is
incredibly involved in certain sectors
and chips is really one of those. So,
let's talk about Intel. Let's talk about
some of the news flow we've had there.
There are two strands to this story and
the first of them is that SoftBank is
buying a two billion uh2 billion stake
in Intel. They've increasing their
footprint. This comes on the back of a
Japanese trade deal which the Japanese
are still trying to get to, you know, to
the to the crossing of the tees and the
dotting of the eyes on but but that's
sort of the background context. It's a
bit of a v vote of confidence in Intel
which is variously described as um his
what's the word storied or belleaguered
depending on who's whose copy you read
this morning but but a vote of
confidence in the new CEO then perhaps
who is lit Bhutan who's had a really
busy time so developing that
relationship with master Yoshi son to
secure this but he's also been busily
talking to the white house and he's
managed to convince according to our
reporting the government to consider
taking a 10% stake in Intel
>> does this take break up of Intel off the
table I think is one key question that
has been that has been talked about how
do you derive value from Intel? One of
the ways so that you could do that is a
some of the parts calculation and break
it up. Maybe that would be something
that would be harder to do with a
government holding. Well, again, we'll
wait and watch. And how does it how does
it compete? How does it scale up with a
government holding sitting on its back
because governments are brilliant at
running companies like there's there's a
long history of governments being
brilliant at running companies to
compete with to compete with firms like
TM TSMC. There's a note out from Richard
Rinser at Radio Free Mobile which is
really interesting this morning. This is
a gift to its competitors which I think
will be able to continue taking market
share without having to try very hard.
There remains no price quote at which I
would want to take a position in Intel
says Richard Windsor.
>> Okay, not sitting on a fence there. No,
>> it's interesting actually what unites
these story a couple of the stories
we've been talking about this morning
you know in the Intel context our our
reporting suggests that the government
is going to try and convert some of the
money it's giving in the chips act into
an equity stake and just in this I mean
not same but similar vibe coming through
and what what the US is trying to do
with the relationship with Ukraine
they're sending you it's it's less about
the money it's more about Ukraine
placing orders for weaponry as as you
>> I thought it was about rare earths
wasn't that the original deal that they
were going to talk about rare earths
there was A lot of rare earth going on
for a while. Uh let's talk about what's
coming up on the show.
>> Yeah, absolutely. We've got a host of
guests lined up to talk about some of
these stories this morning. Rafaro
Chiraseri is going to be with us, fixed
income head of the British Isles at RBC
Wealth Management, although able to talk
much more uh expansively in a
geographical sense. Olivia Patchy joins
us, managing director for strategy and
risk advisory at JS Health. So we'll be
talking there about what we take away
from this Ukraine conversation on
security on territory. Uh Eric White
tennis joins us in a head of investment
strategy at JP Morgan Private Bank. What
what does the AI story look like as we
put the earnings story to to behind us
to some degree? How do we look forward
uh to the rest of the year? And Jose
Alvarez will be with us. The Spanish
foreign affairs minister. Spain not
represented at the White House
yesterday. I mean represented by Ursula
Vandereline if you think about it. All
of Europe was but they were not there
but clearly have something to say when
it comes to Ukraine and have been
involved in other initiatives. Yeah,
there's a few challenges going on in
Spain right now
>> and spending. Yes, there are. There are
and and spending on defense perhaps
there a little bit of push back we saw
at that NATO meeting.
>> Would Spain be prepared to put boots on
the ground because that's certainly the
movement that we're seeing. How unified
is Europe going to be on that front?
What else do you need to know? What is
it this Tuesday morning? Hamas says it
has agreed to a truce deal proposed by
Qatar and Egypt to pause fighting with
Israel in Gaza. A diplomat has told
Bloomberg the proposal would see Hamas
release half of the hostages it still
holds in exchange for the release of
Palestinian prisoners and a partial
withdrawal of Israeli troops. It is not
clear whether Israel has received the
proposal or whether it would agree to
the terms. Bloomberg understands that
Shien is considering moving its base
back to China to help its hopes for a
Hong Kong IPO. The fast fashion retailer
is currently doiciled in Singapore, but
sources say it has consulted lawyers
about setting up a parent company in
Beijing in the hope that it would sway
authorities in China to sign sign off on
its listing in Hong Kong. The company is
running out of places to float after
failure to secure regulatory approval in
London and in New York. And fully
underlying profit of BHP has fallen by
more than a quarter to its lowest level
since the pandemic. The results in the
world's largest miner were broadly in
line with expectations and came as
prices of BHP's key earners, iron ore,
and cocal came under pressure from
softer Chinese demand.
Everybody's chasing higher standards of
of of living. Uh to feed that growth, to
feed those higher standards of living,
the reality is the world's going to need
more of the commodities that uh that BHP
produces. there's more steel needed to
build cities, more copper uh needed not
only to to electrify the world but for
the for data centers. So for AI um and
so we've tried to to orient the BHP
portfolio towards those commodities the
world's going to need more of
Mike Henry there speaking uh more
positively then about China. Coming up
on the program, S&P has reaffirmed its
double A+ long-term rating for the
United States, saying tariff revenues
will help reduce the fiscal hit of
President Trump's recent tax and
spending bill. Plus, we will watch
European defense stocks at the open on
the back of that meeting with Trump and
Zalinski. What is at stake uh for that
sector uh in these conversations? Up
next, UK 30-year inflation linked yields
hit the highest since 1998. We'll dive
deeper into the moves. If you have any
questions for our guests, if you want to
get involved in any of these
conversations around this desk, IB plus
BBTV go this morning and every morning,
that is the function to use to get in
touch with the team. This is Bloomberg.
This week, Bloomberg is live at the
Jackson Hole Economic Symposium,
bringing you news and interviews with
Fed leaders and other economic experts.
Tune in for continuing coverage leading
up to a special episode of Surveillance
Friday at 9:00 a.m.
42 minutes to the opening trade here in
Europe. What is going on in fixed
income? There's a lot of moving parts
over the last couple of days that I
think are worth folding in. Uh S&P has
affirmed its uh double A plus rating for
the United States, saying the tariff
revenue apparently will partially offset
the weaker fiscal uh revenues from
Donald Trump's so-called big beautiful
bill. How does it all work? How does it
all fit together? Valerie's here to
explain.
>> Well, S&P uh Global calling the tariff
revenue meaningful in their report out
overnight where they affirmed that
double A rating and said the outlook was
stable uh for the US economy. They also
in some way revised a better track for
the US deficit over the next three to
four years. And all this on the back of
tariff revenue. Remember for the month
of July they came in quite positive. 28
billion was collected by the US
Treasury. And we even heard from
Treasury Secretary Scott Bessant
speaking to Bloomberg last week saying
he expects tariff revenue to exceed 1%
of GDP in this year. That's being well
over 30 billion dollars for tariff
revenue in 2025. But it's helping the
UK, the US government's bottom line, but
you could argue what's been going on in
the back end has not really paired with
that kind of discussion. We've seen
yields creep higher in the 30-year
yield. We're now getting close uh to 5%
yet again. We've erased the gains in
yield uh from that week NFP uh print at
the beginning of the month. We're up 11
basis points over the last four days.
Whether this is worries about inflation
after the hot PPI print or perhaps
upgrades to growth expectations after a
better thanex expected earning season,
that really remains to be seen. But
while we're talking about the back end,
we have to talk about what's going on in
guilt. UK 30-year uh the highs of the
year trading at 560 uh for the 30-year
yield. It's also been up substantially
over the last few sessions. And this has
been a mix of things. We had better
thanex expected data last week. the the
payroll uh number came in better than
expected and then we had the growth uh
growth numbers on Thursday also not
confirming the worst fears uh for the UK
economy and this in some way is a
double-edged sword here guy you have
better than expected growth outlook but
then that backend rise in in yields is
deteriorating the UK government's fiscal
picture and take a look at what's been
happening in linkers I bring this up
because the UK has 25% of its debt pile
in inflation linked securities and those
yields have now surpassed the trust era
highs and are trading at the highest
since 1998. Again, a double-edged sword
for the UK economy when you're thinking
about debt sustainability.
>> Yeah, you can't inflate your way out of
it. Basically, that would seem to be the
argument if you have that many linkers.
Seemed like a good idea at the time.
Valerie, thank you very much indeed.
Rafaro Cheriseri, head of fixed income
for the British Isles. Nice to include
Gernzie and Jersey, the Alaman, RBC
Wealth Management, uh, joining us now.
Good morning.
>> Good morning, guy. linkers. I the UK
seems like it's it's between the devil
and the deep blue sea right now and it's
really difficult to see a way out for
the chancellor for the economy more
broadly. What do you make of current
pricing? Can the Bank of England cut any
further? What do you think the outlook
for inflation is? What do you think the
outlook for linkers are and for plain
vanilla bonds?
>> I think it's sort of a mixed picture,
right? because I think the pricing
action that we're seeing in the bond
market at the moment, it's really sort
of feeding through I guess it's
anticipation for is that inflation print
going to be hotter than what the BOE had
initially anticipated. I think after the
US data we did see inflation came in
line but then the PPI data started to
show that inflation might be something
that's coming back to the four and so
that food price aspect as well mentioned
by CLA Lombardelli that's still an
aspect that a lot of market participants
would be watching for and so ultimately
I think it's some of those inflation
expectations coming back into the market
once again and we've started to see it
in break evens um and we sort of look at
one year out inflation expectations
they've tracked a bit higher so that's
feeding into linkers but we I think
ultimately um the inflation picture is
going to be driven by what's happening
in the wage market and so we think
that's actually going to track lower
this year.
>> Um and we look at the CFO surveys sort
of 3 and a half to 4% and hopefully that
should help to feed to have a lower
inflation figure but of course
>> that's not a great outcome. I I
>> but but maybe way but but maybe a way of
defeating inflation.
>> So I I think ultimately it's not
necessarily that inflation will be at
target but it's it's tracking downwards
and I think that's the key thing. Um the
BOE already forecast 4%. Which is a
pretty punchy number for September. Um
but we're hoping that through the course
of the year as this wage pressure starts
through
>> not necessarily this year,
>> the next 12 months
>> over the next 12 months. I think
certainly that wage pressure is starting
to ease um into the back end of this
year. And that's really because we're
seeing that weakness in the labor
market. We've got um essentially labor
market below equilibrium at the moment.
And so essentially that should hopefully
feed through to lower wage pressure
going forward. Is is the UK story being
driven entirely by domestic drivers
referr or or is there an international
dynamic going on here? Because as
Valerie was describing some better than
expected GDP data that's a sort of
positive take on on on why yields go
higher but we're seeing globally you
know whether it's Germany last week or
Japan just recently long end yield
certainly that there's an issue there
and the and the world is worried about
debt sustainability and fiscal spending.
So is this an entirely UK story? um and
and those worries apply to the UK or or
is there this whole global story taking
place?
>> I think it's it's not uh unique to the
UK and we heard from uh Dave Ramston at
the MPC that um s sort of at their
conference that they were saying that
this was not a UK story only. We've seen
the same thing across uh most key
markets. What's I I suppose more starkly
sort of uh surprising for the UK is that
we have seen quite a bit of steepening
sort of 5 to30s for the UK that that's
steepened quite the most. Uh the US and
Germany are sort of uh on par Japan is
steepened even further. So it's not a UK
phenomenon only but certainly for the UK
some of these prospects around I suppose
what does the fiscal picture look like?
uh what's going to happen with QT that's
also another big uh big risk for the
guilt market and so the market's really
looking for that QT aspect to be dialed
down uh that envelope to be uh much
smaller we think it might land around
that 62 billion level um and so that
would mean that the maturity is coming
up plus perhaps about 13 billion of
sales that should help to sort of keep
at least a lid on the long end of the
yield curve but of course term premium
is also coming back to the full once
again
>> okay and then I suppose the big thing
happening this week is kind of quiet
really isn't in terms of global macro
agenda but we have got Jackson Hole
taking place at the end of this week and
you know that can have an impact on the
global narrative around uh fixed income.
Are you expecting no clues from Jerome
Powell and and clearly your focus is the
UK but all global markets will be
watching what he has to say.
>> Absolutely. Um I think the the way the
cards were stacked for Jackson Hall in
2024 is quite different to how it is um
today. Then we had unemployment that was
tracking higher. we had four months of
uh weakening jobs data. So, and then
inflation was also tracking downwards.
So, the policy direction there was
pretty clear. But, um we sort of look at
the sort of situation that we've got
today. Um inflation, yes, we did sort of
get big upside, but in that sort of
goods sort of sector, you're starting to
see a bit of warming up in inflation
there. And so, um and we still think
some of that inventory sort of uh
windown will start to feed through into
consumer prices going forward. So,
inflation still does remain a risk. and
the jobs market is sort of a low hiring
low firing mode and so it's not
necessarily in sort of deterioration and
so perhaps this is where it's finally
balanced for the Fed. So perhaps the
market is uh maybe a bit too excited in
terms of that they'll get I guess big
clues from power. I think it would sort
of teeter on the lines of uh finally
balanced.
>> Finally final quick question. Credit
spreads are epically tight.
>> I think we're kind of back to tights we
haven't seen for like nearly 30 years.
Like do I continue buying?
>> We we continue to like credit but
predominantly on the short end and part
of that is because of that tightening
story. We think um the risk of spreads
widening is there but at the same time
fundamentals are pretty strong. We are
seeing pretty good demand going into
credit and so we think you can still
pick up some credit juice but perhaps
>> can
>> potentially it could spreads could
tighten a bit further from here but that
will be pretty sort of that would be
record tights. Um but I think
essentially the risk is potentially
widening from here and so uh we prefer
to keep short duration. Uh we like
financials, we like communications. So
we think some of those idiosyncratic
plays would be quite interesting rather
than a broad um index exposure given our
spreads are so tight.
>> Rafaro, thank you very much. Thank you
for joining us. Rafaro Churiseri, head
of fixed income for the British Isles
and RBC Wealth Management. Coming up,
we'll get back to our top story this
morning. We take a closer look at the uh
whether we are getting any closer to
peace following the Zalinski Trump
meeting in the White House. So we'll be
talking to Olivia Olivia Pangi from JS
Held getting her perspective on the
focus on security. What exactly is the
US going to be able to deliver on that
front? Is it going to be article 5 like?
How like article five? And would
President Putin really agree to that?
We'll get all the analysis. That's
coming up next. This is Bloomberg.
Welcome back. 7:30. Uh this is the
opening trade. It is Tuesday the 19th of
August. Let's take a look at the futures
picture. And we do sense a little bit of
upside in European futures. Not by much,
but certainly a little bit. It it's more
than we see in US futures. They are down
by around 1 210 of a percent depending
on which index you look at. Do you sense
any read across from the Ukraine
conversations that took place in the
White House yesterday? Some are
suggesting so, others are saying we're
just sitting on our hands waiting for
the next catalyst. Could that come from
Jackson Hole? That is later on this
week. We have a bit of data this week,
but we don't have much in the way of
data to focus on today. Let's have a
look at the bond market picture and see
how European bond markets have opened up
this morning. Um, we do see yields going
a little bit higher here in Europe. Not
by much at all, but certainly a slight
movement. And actually, the Japanese
story has been interesting overnight,
Guy. We've seen yields go higher a
little bit there on the back of a
20-year auction that was a little
lackluster. Continuing our focus on the
long end, I suppose
>> little softer than anticipated.
Actually, it was pretty much anticipated
to be soft. So, uh, we knew that going
in. Let's turn back to the geopolitics
and talk more about what is happening
there. The US President Donald Trump has
called Vladimir Putin and urged the
Russian leader to begin making plans for
a summit with Vladimir Zilinski after
meeting the Ukrainian president and
European leaders at the White House last
night. European leaders made their case
to Trump to avoid a quick deal with
Moscow at Ukraine's expense.
>> I think that we had very good
conversation with President Trump.
>> Very good.
>> And it really was the best one uh or
sorry, maybe the best one will be in the
future.
>> I think if we play this well, we could
end this and we have to end this. We
have to stop the killing. We have to
stop the destruction of Ukraine's
infrastructure. Now we are here um to
work together with you on a just and
lasting peace for Ukraine. Stop the
killing. This is really our common
interest. Stop the killing.
>> The next steps ahead are the more
complicated ones now. The the path is
open. You opened it last uh Friday, but
now the way is open for complicated
negotiations. Everybody around this
table is in favor of peace
and uh and we work very hard and we've
worked very hard during the past few
years to have a peace which is a robust
and long-standing peace.
>> European leaders getting their say on
the matter of what happens next in
Ukraine. Peace front and center, but
details we hearing from Mets are going
to be complicated and how we make this
work has yet to be determined. Let's
find out all the other takeaways we got
from the events in DC last night. Ollie
Crook joins us with the details. Ollie.
>> Yeah, that's right, guy. You can really
sort of always rely on the Germans for
that sober perspective to focus on the
difficulties ahead. And I think that
that is something that you can't really
sort of underplay at this point. All of
that being said, just at a very broad
level, this is a meeting that went much
better, of course, for Zilinsky than it
did back in February. This is a
situation in which European leaders are
very conscious of the fact that the
Trump train is leaving the station and
the only thing worse than being on a
train whose direction you don't know is
entirely where it's headed. You don't
not necessarily familiar with the route
is not being on the train. So they're
making a fullthroated effort to get on
board completely. They thank Donald
Trump repeatedly and there are sort of
three main priorities that they wanted
to take away from this meeting. first
was to get more detail on what these
article 5 like security guarantees that
the United States now has been talking
about for the first time over the last
48 hours. What do those actually
include? What is Europe's role within
that? That is something that we are
starting to get more clarity on. We
still have a lot of ambiguity around it,
but it's clear that this architecture is
being worked on. This idea of a
ceasefire, this was really pushed by MO
in merits. It's something that Trump
really has sort of been pushing back
against now over the last 48 hours since
that meeting um in Alaska. There's
always a question also about the
trilateral meeting going forward. When
will that happen between Trump uh Putin
and Zalinsky and of course I think
they'll also be reassured by the fact
that territory did was not something
that was so um prominent in the
conversation. The pressure on Zilinski
to give up territory. Trump has been
reiterating that this is a Ukrainian
decision. Have a listen though to the
conversation that we had in the Oval
Office. A little flavor of the change in
tone that we had between Zilinsky and
Trump.
We need to stop this war to stop Russia
and we need support American and
European partners. We will do our best
uh for this.
>> If everything works out well today,
we'll have a trilad and I think there
will be a reasonable chance of ending
the war when we do that.
>> And sort of looking ahead to what is
next, we got some idea of what Trump has
in mind in terms of the sequencing. He
came out on truth so social saying this.
At the conclusion of the meetings, I
called President Putin and began the
arrangements for a meeting at a location
yet to be determined between President
Putin and President Zalinski. After the
meeting takes place, we will have a
trilat which would be between uh the two
presidents plus myself. We are starting
to see some reporting here um from
Reuters recently that this meeting could
take place um in Hungary as soon as in
the next two weeks. That being said, you
know, no one expected the Putin Trump
meeting to take place in Alaska, so we
take that with a grain of salt. All of
this being said, the European leaders
are unified. They came to DC with a
single message, but they still need to
go back to their homes in Europe and
sell this at home. There is a lot of
money that will be involved in whatever
article five style like security
guarantees looks like. There will also
be a question about boots on the ground
looking forward. This is something that
I've spoken to many German officials
about over the last few months. It is
something that the Germans, for example,
a large supporter of Ukraine, have been
very reticent to sign on for. So, there
is a huge amount of work still to do in
the future. The what is very clear it
seems from this meeting is that this
architecture of what security guarantees
uh will look like has become clear and
it's something that they're all very
much working on over the last few weeks
and continue into the next few weeks.
>> Oliver Crook in Brussels. Thank you very
much indeed. Let's get more commentary
on what is happening here and what
happens next. Livia Pi, managing
director of strategy and risk advisory
at Jazz Held joining us now. Where do we
go from here? The meeting at the White
House seemed to go okay. Now what
>> I I think the first thing we have to
acknowledge is what Trump has actually
done with this summit with by meeting
Putin. I mean he has entirely changed
the direction of how negotiations have
taken place. So what what Trump's looked
to do is he's effectively looked to
normalize relations with Russia, treat
it as a great power on par. And really
we it looks like you know Europeans and
Zilinski have suddenly become secondary
players. Um this makes it all much more
difficult to predict what can happen
next. And certainly um although it's a
win for Zalinski that he's been able to
have this meeting, I think the future is
still very uncertain.
What probability would you assign
to Putin accepting a a across the table
meeting with Vladimir Zalinski?
I think that Putin might uh be willing
to accept the meeting with Zilinski as
this is one of the conditions that Trump
is, you know, could set and certainly
they are now on what appears to be good
terms or certainly there is a dialogue
that's open. Uh but what we have to
remember and what's key to remember is
that Putin for this this is not just a
conflict about territory. This is a
conflict about sovereignty and
domination. So it is very difficult to
envision what an end point looks like
that would be satisfying for Putin.
>> Olivia, good morning. What role would
you expect the US to play in security in
any post-war security for Ukraine?
President Trump kept talking about this
in the context of the US playing some
kind of coordination role. What what
thoughts do you have on what that might
look like?
>> At the moment, we've talked about
there's a possible arms deal that the US
could support, continue to support
Ukraine militarily to give it
protection. Um, and then really the
second point, which is what George
Maloney brought up, which is sort of
like a NATO uh article 5 support, which
is that there could be troops on the
ground, but the reality of that is much
more difficult um in practice. For
example, just take Europe alone. uh the
Germans are very uh ambivalent towards
the idea of putting troops on the ground
although Starmer has said that that is
something uh that he would be willing to
do in the US also. Similarly, I just saw
a poll come out that 20% of Republicans
are not favorable of of sending troops
on the ground. So certainly now that
means that probably we're talking about
uh supporting, you know, the Ukrainian
drone system and giving arms and that's
that's what looks most concrete at the
moment. But certainly troops on the
ground, we I don't see really yet how
that would look in practice.
>> And Libya, I know our focus is very much
on Ukraine right now. We don't know what
conditions are going to be attached in
terms of having to give up any land that
is either occupied or not yet occupied
by Russian troops um that that Ukraine
might be might be uh end up agreeing to.
Are you concerned that we end up in a
situation where Russia is essentially
rewarded for its hostility and and what
kind of read across into other fields of
action should we be thinking about
there?
>> I think the biggest issue with Russia at
the moment is as I said it's an issue of
sovereignty and domination of a certain
part of Europe where it feels that it
has the right to influence and have
political uh oversight over. So
therefore it is it's very difficult just
to to resolve it from a territorial
immediate territorial point of view. The
biggest concern uh is is that obviously
if you give up the Dawnbast then what
would be next? Would it be the Baltics?
Would it be Poland? And this is a
particular concern for Europe um which
obviously the US doesn't have the same
issue because the conflict is not on its
territory. For Europe is where does it
stop? where how do we put the right
lines in place that this conflict can
end not just in the immediate short term
with a ceasefire or a peace deal but
also in the medium to long term and that
is the most difficult question
>> and obviously those countries you
mentioned some of them are NATO members
I mean that that still matters does it
>> yes absolutely and in fact if you see
many of the Baltic countries in Poland
that is where the defense spending is
going up um and that would create a much
more difficult situation for Europe
because that is when no longer can you
ponder whether you can put in send in
troops or not, but that is where likely
you would have to and that would
fundamentally draw in the rest of Europe
into an on the ground conflict.
>> Olivia, thank you very much. Thanks for
joining us. Livia Paji, managing
at JS Health. Coming up on the program,
we'll be watching SAB and Erikson as
Canada's industry minister meets with
the Swedish companies uh to for uh to
forge investment deals. We'll get
details on that in our stocks to watch.
More on that shortly. This is Bloomberg.
Welcome back. This is the opening trade,
Tuesday the 19th of August, and the
futures picture for Europe looks broadly
positive. Uh there's not a lot of data
around this week, certainly not in
today's trading session. There's plenty
of geopolitics to talk about. We spent a
lot of time talking about Ukraine. Let's
talk about some of the other
geopolitical dynamics that are of
importance right now. The Indian Prime
Minister Narendra Modi hailed Russian
leader Vladimir Putin as a quote friend
and discussed bilateral cooperation with
him in a phone call. The call comes as
Mod's government moves to bolster
relations with China. Modi is due to
meet with the Chinese foreign minister
Wang Yi today as both nations push to
normalize relations amid diplomatic
tensions with the United States. develop
confidence to dispel interference,
expand cooperation and to further
consolidate the momentum of improvement
and development of China India relations
so that while pursuing our respective
rejuvenation, we can contribute to each
other's success.
Having seen a difficult period in our
relationship, excellency, our two
nations now seek to move ahead. This
requires a candid and constructive
approach from both sides.
>> For more, let's bring in Bloomberg
government reporter Sudi Ranjansen who's
in New Delhi and tracking these uh these
meetings and this relationship for us.
What can we expect from Wang's meeting
with Modi later today. The backstory
here of course is that the uh the
relationship between China and India has
been has been strained for the past 5
years or so but perhaps being pushed
closer together by other global
developments
>> to I mean we're not expecting some major
breakthroughs or major announcements but
this meeting in itself is a huge message
uh that's one and number two what this
meeting does uh the Chinese foreign
minister's meeting since I mean starting
yesterday with India's foreign minister
and Now the ongoing meeting with India's
national security adviser Ajit Duval and
later with the prime minister is setting
the tone uh for Prime Minister Modi's
visit to China later in the month. Mind
you uh this is going to be the first
visit of Prime Minister Modi uh to China
in 7 years. Uh and that kind of gives an
indication and an understanding of how
bad the relations were following the
border crisis. Both sides since then
have kind of moved um and and tried to
you know quieten down the border
tensions. There has been a lot of
improvement on the border. Uh both you
know militaries have pulled back uh
substantially reducing the possibility
of an unintended war. So so lot of
positive developments on the military
side. Now what both sides are looking at
is to normalize and get into a working
relationship. And therefore this meeting
while there may not be big announcements
is an indication and a message uh
towards that.
>> Narendra Modi spoke to Vladimir Putin
after the Trump call Trump meeting. What
do we take away from all of this? Um and
and the fact that he called him a
friend. How significant is that?
Well, I mean it is significant that you
know a prime minister calling uh Putin a
friend, but it is not unheard of. India
and Russia have a very very old and a
time-t tested relationship. Uh and it
goes back uh to the cold war and it is
sustained. uh India's dependence on
Russia uh on fuel on energy is very very
recent but uh India's dependence on
Russia for military hardware for support
in the United Nations are all time
tested and the fact that uh President
Putin took the you know took took time
off took the pains to call up president
uh Prime Minister Modi to brief him on
his discussions with President Trump
just shows the closeness of the
relationship uh and and this is
happening at a time when you know India
has been berated by the United States
for buying Russian oil. So it the
context itself makes it a very very
important call although there are no
major takeaways from it. It is the
messaging of it all that makes it
important.
>> Thank you very much Sudi. Great to get
your perspective government reporter
Sudi Ran Jansen with the latest on the
relationship between China and India and
global geopolitical developments there.
Uh let's talk about markets then with
our markets live executive editor Mark
Cupmore. Three minutes on the markets
with Mark and Mark we've had
considerable developments of a
geopolitical nature. We were just
talking about the relationship there
between uh between India and China and
Russia comes into that and then
elsewhere we've been focused very much
on the white house and all of the
meetings that have taken place there
with regards to Ukraine. Does any of
that cut through into markets? You know,
some people are suggesting there's a
little bit of upside maybe for Europe,
but but it seems too early to be really
making that call. I wonder how how from
a markets perspective we watch the
developments around Ukraine.
>> I think you've summed it up pretty well
there and I think the fact is we have
made a little bit more progress than was
probably expected by most people in
markets a week ago. there are signs that
potentially uh a peace deal is is
available there and I think that's got
the market a little bit optimistic as
you say it'll take some time uh and
there's still lots that can go wrong so
we've got a a slightly higher level of
optimism that's priced into market you
can see that European equities are doing
particularly well this month uh compared
to most other global markets they're
having outperforming on that basis and I
think that's kind of priced in from
there I think it's going to be hard for
us to nudge further from there I don't I
don't think in the short term it's the
forward-looking dynamic unless those
kind of talks get derailed. But
definitely it has been a driver of the
optimism the last few days. What's
interesting is it's not kind of
spreading into global optimism. We seem
to have kind of stagnated a little bit
in global markets outside Europe.
Things are getting bleak when we start
talking about the guilt market. Again, I
hear you're interested in UK inflation.
>> Yeah, I'm not normally excited about UK
inflation. Of course, UK data has been
so undermined in recent years. We're
always a bit suspicious of it. UK
inflation's always way above target, but
it's really very far above target and
not getting any close to target. And of
course, we've still got cuts priced in
and I know the economy is not doing
great. But, you know, look, long end
guilt yields are really kind of getting
quite a bit higher again. And I think
this is in a backdrop that the global
story is yields and the long end are
rising all everywhere again. We're
seeing it in Chinese yields, which
wasn't part of the dynamic before. We're
seeing obviously in Japanese yields. US
yields are only about 10 basis points,
higher than they were a week ago. But
the point is they have bottomed. They
are rising again this month. So I think
we're seeing, you know, the word bond
vigilantes gets used a bit too freely.
And I'm probably going to make that same
error here by saying we're seeing the
the slight creep of bond vigilanteism
creeping back into the market this
month. And I'm worried given Jackson
Holes coming up that it might really
accelerate. So I think bond yields are
the next big catalyst for markets and I
see higher bond yields being a problem
for global stocks over the weeks ahead.
>> Okay. and Jackson Hall. Do you think
that Jerome Powell is going to try hard
to say very little or or will he have
some other aim in mind? Mark,
>> I think he is going to try, you know,
saying very little and trying to keep
his options open. What that will
essentially mean is maybe pushing back
on the idea of validating a September
cut. I don't think that the data
warrants that yet. Um, but he might want
to be have a September cut if the data
we get in early uh September is really
really poor. So I think he's going to be
slightly hawkish but not overly so which
is going to leave the market a little
bit disappointed.
>> Great stuff Mark. Thank you very much
indeed. Bloomberg markets live executive
editor Mark Cardmore. MLIV is the
function on your Bloomberg. That's when
you will find Mark and the rest of the
team. Lots of commentary this morning on
what is happening in the guilt space.
Let's turn from fixed income to
equities. What's on Clay Melly's mind
this morning in terms of the stocks we
should be watching.
>> Good morning guys. So let's keep an eye
on European miners today. That is after
BHP which is over in Australia reported
there's significant a major fall in
profits and that is because there's been
a real pressure on iron ore prices
because of weak demand from China and
also a lot of global supply. All of that
has got a conse consequences of course
for European listed miners, UK listed
miners in particular. So let's keep an
eye on Riotinto for Expo which has been
having the worst year out of all of them
and Glenor as well this morning at the
open. Moving on, let's go over to Sweden
where we might see a bit of activity in
the shares of Erikson and Saab. And that
is because Canada is trying to forge an
economic partnership with Sweden and the
industry minister is meeting with those
two companies. For Saab in particular,
Canada might be buying some of its
fighter jets instead of Loheed Martin.
So that is quite important. uh this is
all in the context of course of Canada
trying to really improve its
relationship with Nordic countries
because its relationship with the US is
deteriorating at the moment of course
and then finally let's end on the
downgrade for Merc. So Barclays
downgraded Merc the German uh biotech
company this morning. We have seen a
steady slide in the shares and that
might continue today. We are down 35%
over the last year and Barkley said that
this had a lot to do with the tariff
uncertainty that is still of course
weighing on the outlook for that
company.
>> Chloe, thank you very much. Our equities
reporter Chloe Melly with the latest on
some of the sectors we're watching. So
we're watching the defense names.
Yesterday's section uh session was
pretty muted guy. were down by a a
quarter of of 1%. Vestas was a big
gainer. But these are really
idiosyncratic stories, aren't they? Away
from the global narrative.
>> We're in the middle of August. We have
to bear that in mind. So that's
something that needs to be born in mind.
Also, the the catalyst this week come
later in the week.
>> Yes, Jackson Hole. Pal
>> Jackson Hole obviously is going to be
the big one. We'll watch for what
exactly Pal does. That still feels like
it's going to be the major market mover.
But this defense story, I think, is
going to be interesting. It's going to
be interesting to watch some of these
names this morning. Try and understand
what what is going to happen here. you
have seen a little bit I it's it's hard
to if Europe is putting boots on the
ground does that imply more spending or
is the current spending kind of the
level we should stick at
>> yes exactly is there anything new in
these latest developments and more
broadly what does any kind of peace
dividend look like for European stocks
more broadly I suppose is the wider
context there we'll be bringing you the
market open of course in just a few
minutes time European stock futures
point higher this is Bloomberg
Tuesday morning. Good morning. So, we've
had a a rally in just about everything
recently and I think equities are
struggling to digest that maybe over the
last few days. I think there's an
obvious catalyst out there, is there? I
I think one's coming or two or three
potentially coming uh by the end of the
week, but Monday, Tuesday have felt a
bit lackluster when it comes to a kind
of pure market story. I think the guilt
market story is interesting, but the
focus has been on geopolitics. So, I
think the markets have kind of just gone
sideways. You saw that yesterday when it
came to equities. Little bit of
choppiness in the European session. We
pushed up to this is where we closed. US
markets ticked up a little bit from
there, but but not by much. US futures
are down this morning. I I don't think
there's an obvious kind of read this
morning that gives us a clear sense of
direction, Anna.
>> Yeah, absolutely. So, we'll be keeping
an eye on some of that geopolitics, but
as you say, perhaps not really setting
the pace. uh waiting for later in the
week when we get Jackson Hole and other
developments to see if that that tells
us a little bit more. Let's focus in on
a few stocks that could be active this
morning. One sector to watch is the
mining sector. We've had numbers out of
BHP and even if they uh showed a retreat
from the performance of the previous uh
the previous year. There was some
optimism being expressed by the CEO
around China and a way that that might
develop. So, we'll watch that. And that
stock actually BHP was higher in the
Australian session. So, that's a reason
to watch it as well. Uh we will focus in
on some of the uh potential supplies to
the Canadian government as well. SAR and
Erikson. Uh Khloe Melly was telling us
earlier on that Canada is holding some
conversations with Sweden on a
partnership with Sweden and that could
result in them buying some more jets
from SARS. So as a result we keep an eye
on those and the defense sector more
widely could be in focus because of the
Ukraine conversations and merca
is in focus. A downgrade at Barclays and
according to this list we're also
watching Collast guy. We certainly are
many stocks to watch. Not much of a
macro top down read, but let's see how
these markets open. I think we're
expecting kind of one or two ten to the
upside, but gain still nevertheless. US
markets, remember, we are looking at
futures a little saggier than that,
soggier than that. So, here we go.
Footsie 100 out of the gates with an
exciting and impressive 0.012%
of a gain. As I say, I don't think these
markets have a clear and obvious
catalyst this morning uh to work with.
Those catalysts are coming. You've got
US retailers reporting numbers later on
this week. Clearly, we're going to be
watching power. You got UK inflation
data to watch tomorrow. There are things
that are going to be happening that may
give us a little bit more. I'm
fascinated to see what the uh the AVAT
screen looks like in terms of the
volume. I suspect we may be a little
light on the volume side right now. But
there you go. Look, European markets, I
think, are just drifting at the moment.
We're waiting for something to latch on
to to give us a little bit of momentum
in one direction or the other. Uh but at
the moment, we've had a great rally.
We're coming into the middle of August.
We're waiting for the next catalyst that
comes at the end of the week arguably uh
from Jackson Hole, but we'll wait and
watch. But at the moment, no clear sense
of obvious direction coming from the
index level. Let's get below the surface
though. Anna, what are we seeing in
terms of kind of the single stock story
and also some of those sectors?
>> Yeah, a bit of an energy theme actually
playing out across markets this morning,
Guy, and and you mentioned this at the
top of the last hour, the fact that
we've seen a retreat in oil prices and
partly linked to what's been going on
with regards to Ukraine. And maybe we
haven't done quite enough justice to
that theme. uh this morning because we
see both ends of the sector picture
responding here. So the best gaming uh
or one of the best gaming uh sectors uh
was travel and leisure. In fact, it's
just lost that point that spot.
Technology has taken the top spot, but
that's one of them. And energy is the
worst performing sector. So there is
that energy play there. Uh we're also
seeing basic resource stocks go a little
bit higher this morning. Technology
going higher up by 4/10en of 1% which is
interesting in the context of all the
Intel news. We talked about that a lot
at the top of the program. Um not sure
there's a huge amount of read across
there, but certainly there's a lot of
news being written about the technology
sector and about the chip sector uh at
this point. Whether it is Nvidia's
ability to sell into China, whether it
is the government purchasing a stake in
Intel, which is according to our
reporting being discussed, whether it's
SoftBank taking a stake, which we've had
confirmation of. Uh so there's the tech
theme for you, but also yeah, this
energy theme evident to some degree at
least across these markets.
>> Yeah, money money rotating out of shell.
You can see that with BP a little bit as
well. You're also seeing money rotating
out of some of the big farmer names. So
no is a little softer after its recent
good form in terms of some of the drug
delivery news that we've had uh from
that that company treating liver
disease. We saw that yesterday. So we're
kind of rotating back out of that. But
defense stocks is actually an an area of
interest. So Ryan a little bit softer.
You got BA systems a little bit softer
this morning. Tles is down. Sab's a
little softer as well. Is there a
geopolitical narrative that comes out of
the the peace talks that we saw
yesterday?
Is that a is that a a view that actually
we're moving towards peace and there is
a peace dividend or maybe actually you
take some of the the recent kind of very
strong pricing out of these stocks?
>> I don't know. I it's it's so hard to
read on a day-by-day basis and get a
kind of clear and obvious line between
one and the other.
>> Yes. Although we do have a number of
those defense names down by more than 1%
today. So we've got Ry Metal, Leonardo,
Tales, SAB, D, Henalt, a you know, a
number of companies that that you would
include in that defense space are
retreating a little bit this morning.
More than 1% as I say on all of those
names. So we'll continue to keep that
>> look at look at it over the last five I
rhyme 5day charts. Uh it's still up by
nearly 5%.
>> So not really not really cutting through
perhaps. Let's get a broader perspective
on where we are on markets. Eric Whiteis
joins us in the ahead of investment
strategy at JP Morgan Private Bank.
Eric, good morning to you. Thank you for
joining us. Midsummer, 19th of August
here in Europe. We don't have a great
deal of data points to trade on, but we
have plenty of geopolitical news. Uh and
and we have stocks in on good form. It
seems not far from all-time highs on on
global stocks driven higher by the
earnings story, AI. Um we got Jackson
Hole looming. What is the big picture
driver for markets right now for you,
Eric? Stocks really are on good form and
it ultimately comes down to earnings
which have been very impressive. The
last three quarters of earnings in the
US have been plus 18% plus 13% and it
looks like this quarter will be about
plus 12 to 13% relative to expectations
just before earning season of about 5%.
>> That is rather impressive resiliency of
the earnings delivery of the major
companies in the US. We have an
increased amount of buybacks that are
also expected which is helpful from a
supply demand standpoint and overall US
corporates are showing an impressive
amount of dynamism to eb and flex around
tariffs adjust pricing source the
supplies that they need and lo and
behold risk asset prices are performing
nicely.
>> Okay, the the the the Grinch would say
isn't this just the tariff impact
delayed? the tariffs have not hit as
quickly as as expected and there was
plenty of inventory buildup ahead of the
tariffs being imposed and so we're not
seeing the full impact of those tariffs
I suppose
>> August might be slightly early for a
Grinch reference but I appreciate where
you're where you're coming from and yes
it is certainly possible that an
increased amount of tariff impact
gradually feeds through to the consumer
for example just recently our analysis
showed that only about 40% of the tariff
impacts were being borne by the consumer
and then more recently north of 45%.
So if that trajectory continues, we
could start to see more cost pressure
start to impact the consumer. But one of
the things that's very fortunate about
the circumstance is US corporate margins
are close to all-time highs. So they've
been able to absorb a good chunk of the
overall tariff impact, therefore not
passing it all on to consumers. Lo and
behold, consumers continue to spend. We
just saw some solid US retail sales
numbers last week and again the um the
risk rally ultimately marches on.
>> An eventful 20 I read your notes this
morning. You kind of buried the lead to
my mind a little bit maybe at the
bottom. Uh an eventful 2025 now at
healthy levels of risk asset rally
suggest a close look at one's asset mix.
That sounds a little cautious to me.
>> Well, the point that I'm trying to get
at there is so of course we have Jackson
Hole later this week which will be
incredibly closely watched. every
sentence, every piece of grammar, every
utterance and so on. What I would
encourage people to think about is if
you fast forward say 6 to9 months in the
future, we could be maybe two full
points about 200 basis points lower in
US cash rates than we were off of the
highs. That's a big change because we
cut 100 basis points last year. It looks
likely the Fed will start cutting in
September. And then if you fast forward
say to about the springtime of 2026, we
could be about two full points off of
the highs. Therefore, we think it is
very sensible to think about how much
cash you have in your asset mix.
>> Y
>> and lock in duration or considering
other ways to produce greater degrees of
yield because the cash yield has been
attractive in dollars.
>> It's going up at the moment. It's not
going down. Yields long yields are going
up, not down.
>> But the overall cash levels that you can
achieve are going to track most likely
what happens with Fed. confident the
Fed's going to cut rates quite
aggressively though.
>> Aggressively is probably a strong thing.
We think we think it's likely they start
with 25 in September and take a bit of a
gradual path and then maybe land at
about 3 and a.5% or so at some point in
2026 as an ultimate terminal rate and
therefore those cash yields that you can
achieve on money market types of
products are going to head south.
>> Why are they cutting rates?
>> They've got substantial weakness that's
starting to develop in the US labor
market. And what happens in a recession
to to assets in the states? If you get a
recession, what happens?
>> Well, of course, you would have pressure
on risk asset markets overall. You also
would continue to see yields most likely
head south. And that's where the fixed
income component of your portfolio would
probably help buffer what could happen
there. But we don't look for a US
recession. The resiliency of the US
economy has been impressive. We just
discussed earlier how consumers have
continued to spend. Overall, we think a
bit of an insurance cut type of approach
might be what's forthcoming out of the
Fed and a bit of a gradual path to
softer rates.
>> So that so this is a picture of a weaker
labor market but not weak enough that it
undermines consumer spending and and and
and therefore you know stocks don't your
view is that stocks don't have much to
fear from to guy's point the reason that
the Fed is cutting rates.
>> Correct. It ultimately does come down to
earnings which have been delivering and
delivering. We've got an extraordinary
amount of capex that is committed to for
2026 out of the big tech companies. We
have that sustainability of what's been
happening with the overall performance
of the US economy. But back to Powell
for a moment in terms of uh the Jackson
Hole confab on Friday. There's going to
be a bit of a balance that he's going to
have to think about there between the
softer amount of labor performance
that's been coming through. The
three-month moving average for non-farm
payrolls in the US is now down to only
about 35,000 which is not a spectacular
number. But we also have a degree of
upside inflation pressures that have
been coming through most recently PPI
numbers and others. So there's a little
bit of a balance there about what to
signal between the Fed's dual mandate
between trying to help ensure full
employment and also help ensure price
stability.
>> Yeah. You see, I was mentioning the
Grinch guy, but he he's the one who's
looking for the looking for the cracks,
aren't you?
>> Green makeup at the ready. Eric, nice to
see you. Thank you very much indeed.
Eric White Tennis, EMA, head of
investment strategy at JP Morgan Private
Bank. Corix looks like this this
morning. Little bit of movement in some
of the defense names. Ryal, as you can
see, off by 2%. tech a little higher.
ASML up by 8/10 of 1%. What else are we
watching? We should probably spend some
time, a little bit more time maybe
focusing on what that defense story
looks like with Chloe Mel.
>> Good morning, G. Yeah. So, let's start
with defense today. We can see a little
bit of weakness. That's off the back of
the latest updates from Trump's efforts
to bring about that peace deal in
Ukraine. So, it is pushing for a meeting
between between Putin and Zalinski. And
off the back of that and maybe us moving
closer to that potential peace deal, we
are seeing some weakness in some key
defense names this morning. Ran Matal,
Hansel, Leonardo and BAE systems, we've
got a wall of red across that sector
this morning. Moving on to the mining
sector. So the read across from the BHP
results actually was fairly positive. So
we can see Riotinto, Forexo, Glenor,
Asetal all moving up. Even though BHP
reported a fall in profits, it did
indicate a little bit of a brightening
outlook there. So that is reading across
quite positively uh for that mining
space this morning. Moving on to to Doc
Morris, which is a pharmaceutical
retailer in Switzerland. The uh first
half adjusted margin uh missed estimates
and that is leading to a little bit of
weakness in that stock this morning.
We're down about 4.5%.
And then finally, IWG is seeing so IWG
is the provider of of co-working spaces
and it is also down uh because the
forecast was a little bit also lower
than expected. So we can see a bit
actually a lot of weakness. We're down
13% in IWG this morning.
>> Ah I remember the we work heyday. Chloe,
thank you very much. Thanks for joining
us. Chloe Nelly from our equity team
with a look at some of those stocks on
the move this morning. Coming up on the
program, after Ukraine reportedly
offered to buy US weapons, uh how will
defense companies respond to pledges of
security guarantees? We'll take stock as
Chloe was just doing for us there of the
weakness, the little bit of weakness
that we're seeing in defense names, even
if they've been up very, very strongly
of late. Of course, we'll talk about the
sector next. This is Bloomberg.
Welcome back. What are we calling it? 15
minutes into the equity market session.
I We've not gone very far since the
open. I just want to check the AVAS and
see kind of what the uh uh the volume
figure looks like cuz it's been quite
quiet over the last few days. There are
catalysts coming. There just aren't any
obvious ones today. And yeah, we're down
quite hard in terms of the volume
picture that we are watching quite uh
carefully at the moment. Defense stocks
certainly front and center this morning.
That's where actually there is some
quite interesting action. Uh and as you
can see the names are generally on the
screen lower right now. Not a lot. I
take a look at the 5-day chart. You'll
see actually this movement is is
significant but not kind of out of
kilter with what we've been watching.
You've seen some quite big upswings.
Donald Trump pushing a Putin Zilinski
meeting. He's also stressing the
European nations are quote going to be
taking a lot of the burden for security
guarantees. Uh though the US would be
chipping in apparently, but the scope of
those guarantees unknown at this point.
For more details, we're joined by
Bloomberg's Jerry Doyle. What have we
learned yesterday about what Europe is
going to have to do in terms of the
commitments that it's going to have to
make and how big it could be?
>> Honestly, we didn't learn much. Uh
security guarantees can mean all kinds
of things. It can mean boots on the
ground. It can mean additional supplies
of equipment and war material. uh it
could mean additional uh ISR
intelligence, surveillance,
reconnaissance, satellite pictures,
things like that. But right now, we
don't know what those security
guarantees are look like are going to
look like. And as a result, we don't
know what impact it's going to have on
uh defense companies and what they might
be asked to provide.
>> The initial read in in markets this
morning, as Guy was just pointing out,
is a little bit of weakness in defense
stocks. Is that about the overall
small steps towards some kind of peace
deal? Is this is this what might be a
peace dividend for the rest of the
market would end up being a negative for
for defense companies? Is that the big
picture takeaway?
>> It could be. I think it's probably more
just a function of uncertainty. Nobody
knows what's going to happen next. And
so as a result, uh, nobody knows what
it's going to mean for the defense
companies and what they might be asked
to contribute. And so investing becomes
a little trickier. What what kind of
capabilities historically have you
needed to provide for some sort of a
security force? Is there kind of are
there historical precedents here that we
can look to?
>> I don't think there's a direct one to
one president we can look at, but I
think it's safe to say that if there are
troops on the ground, they would need
things like small arms and ammunition,
armored vehicles, things of that nature.
>> They need to be quite mobile.
>> Yes, exactly. And then for sort of a a
larger picture uh security guarantees
for Ukraine to make sure that they uh
were sort of safe against future
attacks, you would need higherend
equipment such as missile defenses, air
defenses, uh more sort of elaborating
expensive gear.
>> Yeah. On the one hand, you could see
that if we did get peace in Ukraine,
that might weigh on on defense stocks at
one level because obviously if there's
not active fighting, then there's less
requirement perhaps for some of the the
the things you just described. But on
the other hand, the uh the burden to
provide defense is now going to
increasingly fall on Europe and maybe
less on the United States and maybe
these European players actually set to
benefit from that. Is that big picture
still what we're looking at here, Jerry?
>> I think so. And Europe has already
committed quite a bit of resources into
expanding its defense industrial base.
That's not going to go away. So, a lot
depends on the scope of what a security
guarantee would look like, how many
troops are on the ground, what needs to
be supplied to be to Ukraine. uh but the
defense industrial capacity is there and
I don't think that's going to dissipate.
>> Okay, Jerry, thank you very much. Thanks
for the update. Jerry Doyle,
Bloomingber's global defense editor.
Let's switch focus then from the defense
sector to the mining sector. We've had
plenty of news flow from this uh
overnight as well. BHP's fullear
underlying profit fell to its lowest
level since the pandemic as prices of
its key earners, that's iron ore and
cocing coal, came under pressure from
softer Chinese demand. Let's go to
Bloomberg's Martin Richie in Shanghai
who has more details here. Uh so that's
the sort of negative story that that
that we can tell here I guess Martin
about the comparison with last year but
actually the CEO trying to tell a
slightly more positive story around
China and and last I looked that had
certainly pushed the stock price up
during the Australian session. So what's
the big takeaway?
>> Uh yeah, I think you're absolutely right
to to point that out. Uh we've seen the
headline number uh the profits down I
think 26% uh from a year earlier uh and
the lowest since the since the start of
the pandemic actually in uh in 2020. So
uh it's a low result but it is generally
quite expected. Uh BHP gets a lot of its
earnings from iron ore obviously a lot
from from cocal which are reliant on
China's steel industry. Now uh in that
regard uh demand hasn't really slumped
hasn't fallen very much uh but at the
same time supply of iron ore is is
rising and China's economy is sort of
slowing down uh and so prices have come
down but on the positive side uh as you
pointed out you know and as Mike Henry
was very keen to point out uh you know
demand is still by
standards of recent years still
relatively strong. You've seen pockets
of strength for example in Chinese
exports which also helps steel uh in
some areas of manufacturing electric
vehicles is one example. Um so there's
still despite the property slowdown in
China which everyone knows about um this
was a sort of inline result.
It is copper going to make that big a
difference going forward. How does the
balance work? They they were
highlighting how copper is one bright
spot. Is that set to continue? A and as
we do see these large miners looking to
have more exposure to copper,
do how far through the kind of
revaluation process around that are we?
>> Um yeah, I mean copper is something that
big miners BHP uh most amongst them of
course have been uh talking about for uh
many years now. you know, more than more
than half a decade going back even
further as like their big bright
prospect. So, you've got iron ore demand
starting to fade. It's getting more
difficult to find the best types of iron
ore. So, you're seeing BHP, Rio, many
others try and get more exposure to
copper. And, you know, that is a
sensible strategy because copper demand
is starting to uh expand very rapidly in
a whole range of of industries. In in
terms of the timing though, it's a very
long-term process. Uh as uh Rio's CEO
said uh fairly recently, you know,
they're still going to be digging up
iron ore in huge volumes from Australia
uh in a decade from now. So it it's
really a kind of long-term process where
it's hoping that you know their earnings
can stay at stable high levels rather
than fade away along with the property
boom in China.
Yes, we've seen iron ore prices
extending declines and part of that
being attributed to these BHP numbers
and comments then uh Martin and we and
we've actually seen it declining for
five straight sessions now. What is the
bigger picture around the supply story
that's that's weighing here?
>> Um
yeah, I mean I wouldn't I wouldn't read
too much into you know link between BHP
results and the and the iron price
dayto-day. Uh iron ore has been steady
just above $100 for for quite a while
now. Um and and that speaks to still
relatively uh strong demand in China. in
in recent times uh prices have gone up
because there's this expectation of
uh what's called anti-involution
measures in China to try and restructure
the industry that it might actually help
iron or because it raises steel maker
margins. Um but I think investors are
still waiting to see what the real
fruits of that campaign are. Uh and so
Argon is kind of following the macro
mood at the moment which is slightly
slightly downbeaten I guess.
>> Okay, Martin great stuff. Thank you very
much indeed. Martin Richie on what is
happening with the mining story after
BHP. I want to turn our attention to
what is a story that that could develop
later. Um Reuters is reporting that
Nvidia is preparing a new AI chip for
China. It would be more powerful than
the H20. They are calling it the B30A
apparently. um they're aiming to deliver
samples according to Reuters uh to
Chinese clients early as next month. Now
the indications are that US regulatory
approval for this are is not in any way
guaranteed, but we have to remember
obviously the deal that was done in the
White House regarding effectively an
export tax for some of these chips. Um
was it last week or the week before? and
and it'll be interesting to see whether
this is a direct reaction to that
effective opening up of the Chinese
market which kind of just leans against
the idea of the EU US having security
concerns.
>> Yeah, we and we're used to Nvidia making
specific chips designed for the Chinese
market. That's what they did before but
they were told to stop selling those
particular ones and now they're talking
about a different variety. I think
there's a nice line in the story uh that
that you that you quote here, the Reuter
story where where Nvidia is is saying
that a variety of products for our road
map are being evaluated. so that we can
be prepared to compete to the extent
that governments allow and that tells
you a lot about the sector and where
we're at in this sector right now. It's
all at the uh you know you can go as far
as the government will let you it seems.
>> Which government?
>> So you got the US government obviously
restrictions export restrictions have
been been part of the landscape for
quite some time but you kind of wonder
whether Trump is is changing that but
the Chinese government as well. Chinese
government is very keen to ensure that
actually China has an alternative to
some of these chips and and the argument
has been certainly from Joseph Wang that
you you want China to be addicted to chi
to to US chips and therefore you want to
be as close to the edge of the envelope
that is allowed on security terms and
it'll be interesting to see whether the
Chinese push back on that. They
certainly were last week talking about
the idea that there were security flaws.
there are all kinds of issues
surrounding some of these chips that we
shouldn't be using them in anything
government related and I just wonder how
the balancing act of those two things
are going to fall. There was also the
deep sea story suggesting the deep sea
was struggling though some cold water
was poured on this using domestic chips
to train
>> and and maybe this again is a reaction
to that.
>> Yeah. And and Jensen Wang did have some
success in persuading President Trump of
that view. We heard him using those sort
of Jensen Hang talking points talking
about the need for US chips to be there
in the mix in China. Uh so that's one of
the chip stories that we're watching
today. We started at the top of the
program. They're talking about Intel and
that's also going to be something that
develops because there are so many
strands to what's going on with Intel.
We've got Masayoshi and SoftBank taking
you through SoftBank taking a stake a $2
billion stake and five times larger we
have our reporting suggesting that the
US government is considering taking a
stake in it.
>> Is 10% nationalization? I don't know. I
there's headlines in US newspapers
talking about nationalizing Intel. Is
this what this is? I don't know. You
certainly put the government on on the
board. Well, maybe not the ball, but
certainly put the government with a
significant amount of influence. What
happens? Does it take certain options
off the table? Can you break this
business up in the current form?
Therefore, um governments, as we
discussed earlier, brilliant at
brilliant at running companies. Picking
winners are fantastic.
>> That's a phrase gets thrown around a lot
when you see
>> states. So, yeah. Is this is this I we
were we were discussing Val and I were
arguing discussing about this. Is this a
good thing for Intel or a bad thing for
Intel?
>> Yes, indeed. Well, uh, the stock
responded, uh, positively to early
conversations, early reporting around
the US government taking a state, but
we'll see how it responds, uh, later
today, uh, to to these latest news
lines. Plenty of them around intel. We
will pivot back to the Ukraine story
shortly. Coming up, Spain's foreign
affairs minister will be speaking to us
about how the country is responding to
Ukraine. Uh, uh, take taking on a number
of other themes for us as well. This is
Bing Bag.
This is the opening trade. We're 30
minutes into today's session and it's a
bit of a mid August feeling to markets
it seems today. We're pretty flat across
European equity markets. A bit of
downside on the DAX. A bit of upside
coming through on the cataron but
broadly speaking then guy pretty flat
across these markets. the footsie almost
entirely. So, we've seen some
underperformance coming through from
some energy names, a weaker oil price,
the defense names on the back of edging
closer perhaps to any kind of resolution
of uh of war in Ukraine. That's weighing
on defense names. Uh to the upside,
we've seen some technology stocks doing
okay this morning. A lot of news lines
around technology, but most of that
based around the United States, around
Nvidia and Intel, as we discussed
earlier on, and some of the travel and
leisure names getting a boost from a
weaker oil price this morning. So net
net that adds up to a bit of a waiting
game waiting for Jackson Hole guy uh and
a bit of data middle of this week. So we
still got plenty to talk about as we get
through the week
>> in search of a catalyst and the catalyst
comes as you say towards the back end of
the week uh 411 up 173 down. It's
interesting to obviously tell that tells
you that the weight is actually these
are bigger companies that are to the
downside. Um you've got light volume
today. I think we can anticipate that in
the month of August. Let's talk about
52- week highs. There's not many lows
out there this morning. bit of a kind of
bit of a sort of infrastructure theme.
Hawk teeth is at a 52- week high up by
9/10 nearly up a percent. That stock is
tracking a little bit higher. Uh ADP is
up by 1.23%. It's at a 52-W week high.
Prismian's also up as well 1.56%. So
something of an infrastructure theme
maybe running through European markets
this morning. You're certainly seeing a
few banks hitting 52-we highs. That's a
given. There's only three or four though
this morning. Some days there are
absolutely loads of them. So, a quietish
market with an infrastructure theme
maybe running through there, Anna.
>> Yeah, an infrastructure theme here in
Europe. A tech theme developing then
over in the United States. Let's tell
you about some of the other stories then
you need to know this morning. Soft Bank
has agreed to buy $2 billion worth of
Intel stock in a surprise deal to shore
up the struggling US chip maker.
Meanwhile, Bloomberg has learned the
Trump administration is in discussions
to possibly take a stake of about 10% in
the company. Such a deal would make the
US government Intel's biggest
shareholder. The Indian Prime Minister
Narendra Modi has hailed Vladimir Putin
as a quote friend after discussing
bilateral cooperation with the Russian
leader. The call comes as Mod's
government also moves to bolster
tensions with the United States. And
President Trump says he's called
Vladimir Putin to urge him to begin
making plans for a summit with Vladimir
Zilinski. It comes after his meeting
with the Ukrainian president and several
European leaders at the White House just
yesterday. US Secretary of State Marco
Rubio says Washington is working on
security guarantees for Kev Guy.
>> Okay, let's talk more about what is
happening on that geopolitical story and
where we go from here. Oliver Crook
joins us from Brussels with more
details. Ollie, how unified is Europe in
this idea that it is the Europeans that
will be providing the bulk of the
security guarantees? We obviously heard
from those around the table yesterday,
but not everybody was there. Is this a
unified picture across the continent?
this is a unified picture that they want
to present to Donald Trump that they're
all on the same page that they're all in
agreement that this is going to be
relatively easy to get through because
obviously that makes Donald Trump's job
a lot easier if he feels like he's
speaking to the Europeans with one
voice. Remember even during the trade
negotiations one of the big frustrations
was that the Europeans don't speak with
one voice. So on this issue of Ukraine,
they really want to be speaking with one
uh one voice. But guy, I think as to
what you're alluding to here is that the
difficult parts of this conversation, as
difficult as the United States has been,
as Donald Trump has been for the
Europeans to get on their side, there
are very serious, very complicated
issues that they need to discuss, not
just between each country within Europe,
but domestically for their own audience.
I mean, we are talking about basically
taking on fully the sort of defensive
measures of Europe on the European side
from a financial standpoint. If there
are those article 5 style like
guarantees, what do they actually look
like? Does it mean that the United
States would engage in military conflict
if after a peace deal, Russia were to
impose once again on Ukraine? That is
still an open question. But at the end
of the day, what the United States has
sort of called for um in private
conversations is that the Europeans need
to be basically on the ground in Ukraine
if that's what's going that's going to
look like. And that is not something
that there is total agreement on in
Europe. when I have spoken to a number
of German government officials and we
can say that Germany is one of the
biggest supporters of Ukraine
financially um verbally in all the other
sort of respects they have been very
reticent to commit to any sort of
agreement like that that would mean
German troops on the ground that would
theoretically return fire on any
encroachment from uh the Russians so I
think that this is going to be the very
beginning of a conversation one that is
a lot more difficult that just sort of
is not betrayed by the united front that
the Europeans wanted to present to
Donald Trump but this was a question of
money and it's a question of basically
risk of willing to put your own troops
at risk, willing to put yourself in the
firing line um against Russia. That is
why it's so important to get those
security guarantees from the United
States because at the end of the day, if
they can rely on US support, that will
make that a lot easier a decision to
make for European leaders.
>> Ollie, thank you. Blooming's Oliver
Crick with the latest on Ukraine. We're
joined now to continue this conversation
by Joseé Alvarez, uh the Spanish foreign
affairs minister. Minister Alvarez,
thank you so much for giving us your
time. We appreciate it. uh Spain not
directly represented at that meeting
yesterday although uh under the EU
umbrella I suppose represented there. Uh
what did you make of the conclusions uh
so far from those meetings at the White
House and and un underline for us why it
was that Spain was not in attendance.
>> Spain is part of the coalition of the
willing. Today at noon here in Europe we
will be joining and we are a very
important part in backing uh Ukraine
sovereignity. Yesterday was discussing
with the vice prime minister of of
Ukraine about European integration.
President Sanchez is in full contact
with President Silinski and we are
committed to back Ukraine as long as it
take. Yesterday we saw uh President
Silinski back by Europeans leaders in uh
the White House talking about peace and
any conversation about peace is welcome
but we must be talking always giving the
same content to the world peace. A just
and lasting peace a peace that will not
be just a parenthesis between two words.
That's why we need a ceasefire first of
all to make sure that we stop the
killing of people and then we will want
to see Russia that is giving no sign of
being in good faith engage in real
conversation for a just and lasting
peace.
>> Yes, we've seen some in other European
countries calling for that ceasefire,
but President Trump doesn't seem minded
to go in that direction. Just sticking
with this theme of why Spain was not in
attendance, does it have anything to do
with the way that Spain stood apart from
other European nations at that NATO
meeting and didn't quite commit to the
level of NATO spending that the United
States wanted to see?
>> We have not got any signs of of two
things being related because Spain is a
very committed ally. We have a
historical deployment of troops in the
eastern flank of of NATO with uh 3,000
soldiers, tanks, aeroplanes. We are an
integral part of the security of the
Baltic countries. We are present in
countries like Eslovakia before in
Romania. We have a patriot battery
deployed in Turkey, another NATO ally.
and we have been since the very
beginning part of the financial,
humanitarian and military equipment
effort to Ukraine. So I think that the
commitment of Spain to Euro Atlantic
security is out of question and we in
the last NATO meeting we said that with
a lower percentage that 5% we could meet
all the objectives all the targets that
we had to meet both in capacities and in
joining the Euroatlantic security. So I
think both things are not related. There
are many other Europeans leader that
were not present. For instance, the
current presidency of the European
Union, the president of Denmark.
>> Minister, good morning. If the
requirement was that Europe needed to
put troops boots on the ground in
Ukraine,
would Spain be providing some of those
boots, some of those troops?
I don't like to make political fiction.
The reality today is that Russia has not
given yet any sign that wants a real
peace. I want to see first of all if
that Sinski Putin meeting becomes
concrete if they can agree on a
ceasefire and work towards a real peace.
So there are a lot of things to talk
including security guarantees and that
what we should be focusing today and not
in future scenarios that doesn't exist.
The reality of how far is that Russia
continues to wage war an unjustified war
against Ukraine.
>> How far would Spain be prepared to go in
providing security guarantees for
Ukraine? Was there were there to be a
ceasefire or peace? How far would your
country be prepared to go to guarantee
Ukraine security?
>> We have been given all the support that
Ukraine has been asking for and
requesting so far.
>> Military equipment of all sort financial
uh assistant, humanitarian assistant
with 200,000 Ukrainian refugees in our
soil. accession uh talks for joining
European Union were open during our
European uh union presidency. So we are
on all sides uh helping Ukraine to
defend it sovereignity and its
territorial integrity.
>> Would would article five like guarantees
be acceptable to Spain?
>> Article five is not something that is at
the on the table right now. the best
security guarantee for Ukraine so far
today talking with the reality on the
ground is to reinforce the Ukrainian
army because that's what's providing
today safety sovereignity freedom for
Ukraine and that's what we are doing
providing military equipment to make
sure that the Ukrainian uh army is
capable of guaranteeing sovereignity and
territorial integrity for Ukraine
If Spain were to be part minister of the
these forces or a support effort to to
try and provide security for Ukraine,
what role would Europe require the US to
play?
>> I think we are both allies in
Euratlantic security and the security of
Europe is directly at stake in this war
in Ukraine. That's very clear. uh what
will be the future of Ukraine, it's also
what will be the future of Europe and we
have been together Europeans and the
United States since the very beginning
of this war of aggression of Russia to
Ukraine. So what I expect is that this
continue in the same path. Both of us
being together to make peace and to give
security guarantees to Ukraine to make
sure that this is not just a break
between two wars but a real just and
lasting peace because the security of
Europe and therefore the Euroatlantic
security is at stake.
Minister, I know that the domestic
attention in Spain is very much on the
wildfires that are taking place there
and Spain enduring one of its worst fire
crisis in its history, I am I am told.
Can you give us an a kind of update as
to when you expect these wildfires to be
under control?
This is a terrible situation right now
in Spain with 40 fires that are active
in different parts of of the country and
I really want to to to to have a thought
for those that have lost their lives.
The government is doing everything that
is in our hand. We have thousands of
people deployed fighting against uh uh
this fire. And I want to thank all those
countries, seven countries so far from
the the European uh mechanism of civil
assistance that are joining with their
capacities to fight against this fire.
The president today will be visiting
some of of those places. Unfortunately,
this there are many reasons for this,
but uh climate emergency is very much
related to this. This is not something
that affects only Spain. We see right
now several countries in Europe and
every year we have the same uh type of
fire. That's why the president has
proposed to all political forces a big
state agreement to prevent to reinforce
the capacities and to do as much as we
can against this climate emergency. We
need prevention to make sure that this
is the last time we see this sort of of
fires.
Minister, you started the conversation
talking about the fact that Spain does
not need to increase its defense
spending because it can meet the
capabilities that are required of it
with current amounts of money being
deployed. If we start seeing Spain using
its military though to deal with
wildfires and the environmental
catastrophe, can we still argue that
Spain is spending enough to be able to
meet all its commitments including
fighting wildfires
and deliver everything at the same time
with the current budget?
We will do it and we are proving that we
will do it. We have a a a European
mechanism today. It's a Spain that is
receiving that help from severe European
countries. But during many summers in
the past, it has been Spain putting its
capacities because we have a big
capacity. We are a south country with
high peaks of of heat. Therefore, we
have big capacities to fight against
fire with with aeroplanes and with
different equipment that we have been
lending it to to other countries. So you
can be sure that the Spain will meet all
the targets both the security targets
that are uh emarked by NATO. We are a
very committed and reliable uh ally and
we are proving it with a historical
deployment in the eastern flank both
with soldiers on the ground 3,000 but
also with equipment of all sorts. And at
the same time, we have to make sure that
this is the last time we see this type
of fire. And that's why we have proposed
to all political forces in Spain this
big state national agreement uh to uh
increase the capabilities and to
increase the prevention even more that
we have been doing it so far.
>> Minister, thank you very much. Thank you
for your time. Jose Alvarez, the Spanish
foreign affairs minister. Coming up on
the program, UK 30-year inflation linked
yields hit the highest since 1998. We'll
deep dive into what's behind these moves
ahead of some key data out for the UK
this week. This is Bloomberg.
49 minutes into the equity market
session. Let's call it 50 minutes into
the equity market session. As you can
see, the picture is exciting and uh
particularly for the footsy 100 uh going
nowhere in a hurry. The footsy 100 is
unchanged this morning. Uh you got a
little bit of movement elsewhere. It's
largely down to kind of single stock
stories that we're watching. Uh but
there there isn't a clear sense of
direction this morning. Defense is a
little softer. Maybe that's one theme
you can take away. some of the
infrastructure plays maybe getting a
little bit more traction, but but there
isn't a clear catalyst this morning to
work with. There are catalysts coming.
Stay tuned. They're on their way. Let's
talk about a story that we've all been
watching quite carefully over the last
few weeks. Air Canada's flight
attendants are going to stay on strike.
This after the country's labor board
ordered them to go back to work. So,
this is causing the airline to delay
plans to restart flights. Uh the
company's CEO, Michael Russo, spoke to
Bloomberg about the current situation.
>> That is one option is uh we could go to
the courts and seek an injunction. Um
which, um which we may do. Um I mean,
we're obviously very very disappointed
with the actions of the QP uh leadership
team. Uh they're violating law. Um and
it's impacting negatively impacting
hundreds of thousands of our customers
right now.
Let's talk to Danny Lee about this.
Danny, now what?
>> Well, significantly the union and Canada
did hold talks for the first time on
Monday since the strike started. Uh, and
there seems to be a willingness just to
see where each side is at. clearly for
the CEO Michael Russo of Air Canada is
raising the stakes by waving this threat
of trying to maybe get an injunction to
get the 10,000 cabin crew back uh you
know back operating their flights you
know because this is seriously damaging
for Air Canada you know hund over
100,000 passengers a day are being
impacted we also heard 24 hours ago from
Air Canada that they would be uh
suspending it guidance for the third
quarter and the full year because they
just do not have the visibility given
the the potential costs that the this
strike has. So there are limited options
frankly for Air Canada uh and given the
union has defied the country's labor
board uh in getting back to work. There
is a you know clearly a willingness that
the airline would want to see some kind
of resolution but things still remain up
in the air.
>> Still up in the air then appropriately
enough. Uh Danny, so so it's unclear
where this heads next. this coming at a
very busy time of year for for many
airlines and Air Canada uh falls into
that camp. Underscore for us just the
the level of disruption that we're
seeing as a result of this.
>> Well, Air Canada is one of the two major
airlines uh in in that country. And so
by you know crippling almost half the
flights that capacity that is offered it
is pretty damaging for not just Air
Canada but for the country's economy as
a whole. And that's something that does
cause concern for the government in
Ottawa. Clearly, there are benefits for
uh other airlines out there who will be
cashing in because when you try to look,
you know, internationally for seats, for
flights into Canada, most airlines are
full. You have to take maybe one or two
or three stops to try and get into
Canada at the moment. So, there is a
headache for for travelers out there,
you know, wide range of disruption. Uh
and yes, we just don't see when there
will be a resolution and clearly for Air
Canada to try and restart operations
that could take many many days with uh
know the crews unknowingly when they
will get back to work.
>> Yep. Danny, it's interesting because a
lot of people obviously have been trying
to go to Canada recently uh as a result
of changes maybe in perceptions of what
it's like to take a holiday in the
United States. Anna and I can debate
this at length, I suspect. Danny Lee,
thank you very much indeed. Danny on the
Air Canada story. Let's look to what we
are going to be watching for the rest of
the day and the rest of the week. Um
today a little light on catalyst, but
there are there are a few out there that
Valerie Titel has her eye on.
>> A few of them, one of them being that
the back end of the bond market has not
had a streak of a good few days. I mean,
we're approaching 5% yields again on the
third year. I mean, it could perhaps,
right? That is the big argument for how
far this equity market rally could go. a
backend blow up in the bond market could
definitely be something that could spook
uh the equity market. But it's not just
been isolated to the US. We're also
seeing uh European government bonds
shoot to multi multi-deade highs. On
Friday, it was French and German yields.
And then yesterday, guilt yields were
trading at year-to- date highs in the
30-year yield. And there was almost
hardly any catalyst for the weakness in
yesterday's session, which was very
surprising. Yes, you can talk about,
okay, the data has been better than
expected. Maybe that's tempting GDP
estimates to be revised higher,
inflation to be revised higher off the
back of that. Uh, but this is really
complicating things for um the
chancellor cuz we know that not only uh
do I mean better growth projections are
good for her, are nice for her, but if
we get higher yields off the back of
that, that just basically undoes it all
in one swoop.
>> So, we can raise property taxes. It's
going to be fine.
>> Yeah, that seems to be where the
conversation is heading. government
ministers on various airwaves this
morning try doing their best to not
answer any questions about the
speculation in various papers about
whether there'll be a change in property
taxes so the guilt yield story sort of
ties in with the long end u story that
we're seeing in lots of different
geographies and we get UK CPI tomorrow
Valerie uh I I suppose there's a linking
thought there well one of the biggest
data prints for Europe this week is UK
CPI dropping tomorrow at 7 a.m. Now the
narrative has been one of economic uh
resilience or better than expected
economic data frankly from yesterday.
This can be all undone if we see a
hotter than expected CPI print tomorrow.
We are expected to see services CPI tick
up just onetenth of 1% on a year-on-year
basis. This comes as the market has
really pushed out the likelihood of any
Bank of England cuts this year. We're
now pricing none.
>> Services inflation is running at 4.8%.
That's what the survey is. These are
punchy numbers.
>> From the UK,
>> punchy numbers. And maybe the Bank of
England has already said their response
to that as in that hawkish meeting that
they had two weeks ago that they're
going to be on hold. Uh but yeah, the
rate rate expectations for um rate
reductions have been pushed out. But on
the back side of that, yeah,
>> long end yields are still rising.
>> Meanwhile, we get closer to the US
session where they'll probably care very
well less about guilt yields and what's
going on the UK dynamics, but a lot
about the tech sector today because a
lot of headlines there, Val.
>> A lot about the tech sector and a lot of
thinking and thoughts. I know Guy has
some to share about whether you're more
bullish on the AI story because the US
government is getting involved saying
that they're going to take that that the
money that they've been given in the
chips act which is around 11 billion
they want to convert that into an equity
stake.
>> Okay, not everybody's convinces this is
a good idea.
>> We'll see whether the the market
responds positively or negatively. So
far positively we'll see how long that
lasts.
>> Valerie, thank you very much. Best
Valerie sign up with a look at some of
the macro drivers and a little bit of
the tech story as well. That is it for
the opening trade. The pulse is up next.
This is Bloomberg.