[Music]
news makers and market movers.
This is The Pulse with Francine Lqua.
>> Well, good morning everyone and welcome
to The Pulse. I'm Francine Lqua here in
London. Now, a package of security
guarantees for Ukraine is set to take
shape as soon as this week. It follows a
big week for European leaders working
with the US to broker a peace deal amid
ongoing trade and tariff uncertainty.
Now, this comes as US Treasury Secretary
Scott Bessant indicated the US is
satisfied with the current tariff setup
with China. We'll be joined in a moment
by our markets guest Joanna Kirkland
from Schroers. But first, let's dive
into those top stories with Susan Lynch,
our Brussels bureau chief, and Rosland
Mat, our chief Asia correspondent. Thank
you both for joining us. Suzanne, it
it's been quite a show at the White
House this week. What's next to try and
help Ukraine?
>> Yes, I think there's some relief uh here
across Europe about the way things have
developed over the last few days. Those
European leaders are now back at the
table. They were there on Monday h at
that meeting at the White House along
with President Zilinski. So, there's
quiet um slight confidence here that at
least uh they've got Donald Trump's ear.
Now of course the key question is what
happens next and particularly around
this issue of security guarantees. Uh
the European side and Zilinski have been
very very clear on this. They need some
security guarantees for Ukraine. Now
what form that might take um there is
discussion happening now about sending
European troops maybe a relatively small
number but some countries sending troops
to help uh protect Ukraine. Even though
in the first instance they're saying
that this is you know the Ukrainian army
in the first instance are uh the line of
defense as it were but also there would
be a hope that America in some way
perhaps provides air defense. Uh Donald
Trump has said it is not going to send
uh troops to Ukraine. So look this is
the the key issue now. Uh we have
meetings today between defense
officials. We've been reporting that
there will be meetings going on uh and
contacts between the US and the European
side on this over the next few days. Um
so we do expect that the early shape of
what the security guarantee may look
like and may emerge in the next few days
even
and Roz I mean the other big story is of
course coming from the Treasury
Secretary indicating that the US is
satisfied with the current setup with
China. Here he is.
We're at 50 or 55%.
Uh, China is the right now the biggest
revenue line in the tariff income. So,
uh, you know, if it's not broke, don't
fix it. They have a 10% tariff on us.
Uh, they have started shipping the rare
earth magnets which we agreed to. Uh, we
had put some counter measures on them
that we've taken off. So, I think right
now the status quo is working pretty
well.
So Aras are tensions between the US and
China easing a little bit.
>> Well certainly the relationship seems to
be on a better footing at least for now.
I mean you heard heard Scott Bessent
saying if it's not broken don't fix it.
You know the sense from from the US
administration and also from some
analysts that you know custom duties on
Chinese goods are helping the US
economy. Uh and and the sense above all
of that is that Donald Trump is keen at
some point to have a proper sitdown with
his Chinese counterpart Cinping. I mean
he's recently had that big meeting with
the Russian president. He feels he's
making progress on Ukraine. Another big
economy and issue for him is China and
can he get that onetoone meeting with Ci
Jinping later this year. So seemingly
wanting to keep things on a more even
kill to enable that meeting. I mean he's
not singled out China for importing
Russian energy. He's very much singled
out India for doing so. I mean there are
still tension points in the relationship
and things are fairly fragile. Uh
China's not come come to buy US soybeans
even though Donald Trump has said he
really expects them to be doing so and
harvest is upon us and no sense that
China's ready to do that although they
could do it quite quickly and easily in
a sense. Also, the US still is still
scrutinizing a lot of stuff that's
coming from China, including potential
goods that might have come through Sing
Jang and allegations there of any links
to to forced labor. And so, there are
tension points in the relationship, but
it does seem as though there's a real
desire on the part of the US at least to
keep things on a more steady footing uh
into November and possibly a meeting
between their leaders.
And Suzanne, what do we know about, you
know, President Trump calling the
Hungarian prime minister to discuss why
why basically to discuss in Ukraine?
>> Yes, we reported this last night. This
was an interesting development um that
emerged that just after from Washington
when the European leaders were there and
after he spoke to President Putin,
Donald Trump picked up the phone to
Victor Orban, the Hungarian prime
minister. Now, in one sense, this was
after European leaders um lobbyed Donald
Trump, asked them, asked him to use his
influence with Victor Orban to try and
get him on the same page as the rest of
Europe when it comes to Ukraine. The
context here is that Hungary and Victor
Orban has been opposed to further aid
for Ukraine. It blocked and delayed a
lot of the EU sanctions packages that
happened over the last few years. and
most importantly it opposes uh Ukraine
joining the European Union even
threatened to have a referendum about
that in Hungary. Um so we know that this
call took place and that perhaps
Budapest was named as a possible
location uh for this uh expected summit
that's going to happen involving
President Putin and Vladimir Zalinski
even though that hasn't been confirmed
yet. Now h the Europeans would prefer
somewhere like Geneva. There's still an
awful lot of of locations uh being named
and being discussed in the background.
But interesting that Trump and Orban
have this connection. Orban um kind of
symbolizes the right-wing nationalism
that a lot of people in Trump's or orbit
uh believe in. So uh interesting that
he's using those connections there to
try and pressure Orban
>> and and Ros. Finally, the chief
executives of Rio Tinto and BHP met with
President Trump to discuss a resolution
project copper project in Arizona. So,
could they act could we see a mega mine
in America?
>> It was interesting. You saw the the CEO
and the incoming CEO of Rio Tinto in the
room there. The readouts are very very
cautious. It's very unclear exactly what
was said in the minute, but obviously
Donald Trump is keen to boost copper
production in the US. he's got his eyes
on this Arizona project, but that
project's been going on for decades.
It's been beset by legal delays,
controversies. It's held up currently
yet again uh by by by litigation over
environmental issues. Um and these
projects take many many years to come to
fruition. So even if it gets the final
green light and it goes ahead, getting
this copper and getting it out into the
US economy could take decades. And most
of the copper that's closer to the
surface has already been mined. So we're
talking about stuff that's very very
complex to extract very very deep deep
down in very hot areas also and takes a
lot of time and effort to do so. So any
benefit to to the US economy is going to
take years if not decades uh possibly
well beyond any term that Donald Trump
might be involved in. And certainly for
these CEOs there's nothing lost by
coming and having a meeting and saying
we hear you on copper. We're willing to
work on this because the reality is this
project may never ever see the light of
day.
>> Yeah, thank you both with a terrific
briefing to get us started. Rosen Mat,
our chief Asia correspondent, Susan
Lynch, our Brussels bureau chief. Now, a
global stock rally has stalled. Nvidia
leading a tech sector selloff. Markets
could be further tested as investors
turn their attention to J. Pal's Jackson
Hall speech on Friday. Let's talk to
Johanna Kirkland, group chief investment
officer at Schroer. Joanna, thank you so
much for joining us. I mean, there's
just a lot. It's the geopolitics. It's a
trade, it's it's the copper, they
everything depends on whether the US
consumer holds up, inflation and GDP in
the US. So how do you see that dynamic
going?
>> Well, we generally been very positive on
stocks for this year and just last week
we started to take a bit of profit.
>> Now crucially, we don't think this is
the end of the cycle
>> because actually we see a low risk of
recession in the United States. We think
that the consumer can muddle through
this.
>> Um but nevertheless, we need to
recognize a lot of good news has been
priced in. We've been right to ignore
the trade uncertainty in recent weeks,
but at some point we will start to see
the impact of those tariffs on inflation
potentially on the US consumer. And so
right now we're a bit more in a wait and
see mode. But crucially, I don't think
this is the end of the cycle. I think
what will be the end of this cycle is
when the bond market revolts and we're
not there yet.
>> So what needs to happen, you know, for
that to to come to fruition.
>> That's kind of the ultimate constraint
on this populist environment that we're
in, right? Ultimately, we're seeing high
levels of fiscal spending, pressure on
the central bank in the United States.
You know, there's a whole debate
between, uh, Powell and Trump. Um,
ultimately, um, populist policies can be
quite helpful for markets because they
boost nominal growth,
>> but but the ultimate constraint is when
the bond market starts to say spending
is too much. You start to see a rise in
the long bond yield. We've already seen
a steepening of the yield curve,
>> which is starting to to s show that that
risk is starting to get priced in. I
don't think it's a risk for now, but it
could be a risk in 2026 or 2027.
>> Jonah, I guess I mean the main question
is that it does seem that a lot of these
tariffs are to bring revenue back to the
US and for the moment it's it's holding
strong and it's even working if you
listen to some of the rating agencies. I
mean, if inflation picks up, is that
when they're in hot trouble?
>> Well, you're right. I mean, actually the
tariffs are we've got a fragile
equilibrium here, but it is kind of
working in the sense that our biggest
concern is about the long-term
trajectory of fiscal spending in the
United States and the debt levels.
actually the tariffs are helping on that
front and helping to keep a lid on the
bond yield which means that ultimately
that underpins the valuations of
equities. So it is an equilibrium of
sorts but yes I think if we start to get
into the next cycle with inflation
rising that's where we might have have a
challenge particularly if the
independence and the credibility of the
central bank has been questioned at that
point.
>> I mean there's so much writing on this
Jay Powell speech. I know every August
we say it's all about the J Pal speech
but this also has a political component.
Normally, we're used to seeing really a
focus more on the short term, but here
you're seeing an issue at the front end.
What is he going to do on rates? And
obviously, we've got rate cut priced
thin now. And then a more medium-term
issue about um again the independence of
the central bank, the credibility of the
central bank. So, that's what's
interesting about this time round. It's
a more structural concern that we have
about the the fraying of institutional
credibility.
>> Are you expecting a cut in September?
>> Yes, we are. But you know certainly on
the Trump so the debate with Pal we
would probably side with Pal in the
sense that he's been right so far to
hold tight. The market is repeating
tried to price these very aggressive
pivots by the Fed because we're kind of
hooked on the dopamine hit of lower
rates after you know a decade of that
after the financial crisis. But
ultimately in a different kind of
environment with inflation being more
persistent. Um we think a rate cut is
likely in September. It's what's priced
into the market. But generally our bias
is still to think that um Powell is
right to on the side of caution not cut
too quickly.
>> What happens with the Bank of England
and this this you know CPI print uh was
hotter than expected which complicates
matters a lot for the Bank of England.
>> Yes, generally central banks in a
difficult environment. I think they get
a lot of criticism but I think that
they're having to balance many things
here and yes that CPI print wasn't
helpful in the UK although we would say
that a lot of that volatility came from
the transport prices. It's a volatile
component. Um, ultimately I think that
the Bank of England, like the Fed, will
be guided by the state of the labor
market. If the labor market starts to
weaken, they'll look through some of
this volatility on the CPI. But for me,
the labor markets what's key.
>> Do you see any value in in owning UK
assets?
>> We see opportunities. We've seen
increased interest in the Footsie from
overseas investors. I think it's a
market that's cheap.
>> I think guilts in some sense against the
backdrop where we're generally concerned
over medium-term trends in fiscal
spending. Fortunately, the UK guilt
market is still one of the weaker links
in that. Um, so although it might look
cheap to some international investors,
generally it's not a market that we're
buying.
>> J, I mean, given all of the geopolitical
news with Russia and Ukraine, I know
that there was, you know, a little bit
of move on oil, but actually largely the
markets for the moment are ignoring it.
Is there a way to play it in the
markets? Is it through defense or do you
just keep an eye on it?
>> I think the situation Ukraine, I mean,
it's had two important impacts. There's
been an element of tail risk pricing to
European equities. any kind of
some kind of resolution clearly would be
helpful for European equities because it
removes some of that tail risk and we
have other reasons for liking Europe.
But I think the more important
consequence of um the Ukraine crisis has
been the major shift in defense spending
we've seen in Europe. That's a
structural trend again which is helpful
to European growth does ultimately put
further pressure on government finances
but that is the defining consequence um
of the Ukraine crisis.
>> What do you do with China? So China
again I mean in generally emerging
markets we're quite positive on we
generally think the dollar is going to
be weaker. Um now I think sometimes I'm
worried a little bit that's become quite
a consensus trade. So you can see
volatility in the short term but medium
term we are seeing international
investors reviewing their exposure to US
assets not because they hate the US but
just because they realize maybe their
starting exposure is a bit too high. So
a weaker dollar is helpful to emerging
markets in general. China is a more
complicated market. It's got different
trends to the rest of emerging markets,
but again, great companies in China. Um,
so we still see opportunities there. We
we've always said that about China.
>> I mean, does it all go back to the tech?
And actually, I don't know whether you
were surprised, you know, to to see this
tech sell off given the valuations where
we've been. Was it is it just letting a
little bit of air out of the bubble or
do you worry that this is a longer term
trend?
>> I think it's let letting a bit of air
out of the bubble. I mean, part of the
reason why we started to take profits on
our overweight position, by the way,
we're still neutral, so we're not
getting bearish, but was partly just
because the narrow the market had got
narrow again. And so, I think it's kind
of falling a bit under the weight of its
own expectations. You know, we don't
like seeing such narrowness in the
market. So, I think that's been the
challenge there. I think it's a sign of
exhaustion. Um, and we need to see some
clarity on the economic trends so that
hopefully then there's fresh ideas that
we can put into the portfolio.
>> It's very well put, Joanna. Thank you so
much for joining us today. Joanna
Kirkland, their group, chief investment
officer at Schroers. Coming up, UK
inflation rises faster than expected in
July, adding pressure on the BOE to
reconsider its pace of rate cuts. We'll
discuss that more next. And this is
Bloomberg.
Well, the Federal Reserve Governor
Mickey Bowman has brushed off
speculation that she's in the running to
succeed Fed Chair J Powell, saying she's
focused on her regulatory portfolio.
Well, Bloomberg spoke exclusively with
the vice chair for supervision ahead of
this week's meeting at Jackson Hole.
I think what we're looking at doing is
going back to the original Basil
agreement from 2017 to make sure that
we're we're huing closely to what that
agreement included. We've also seen that
every other jurisdiction around the
world that's subject to the Basil
requirements has already published their
requirements. So, we want to make sure
that we understand what those
requirements are as we're looking to to
frame our own proposal.
>> What's the timing uh on that, do you
think? So, as we're looking at all four
of these pieces of capital in a
comprehensive way, we want to make sure
that we have proposals out that help us
understand how they'll all work together
because we have overlapping,
duplicative, and sometimes conflicting
requirements within the existing capital
framework. So, uh, Basel 3 will probably
be the last one that we propose um, uh,
or repropose essentially, and we'll hope
to have all of these initial proposals
out early next year. I sit on the jihas
which is the the heads of supervision
committee for the Basil uh for the Basel
committee and that these are
conversations that we'll be having going
forward u for the rest of the year and
you know I think time will tell
>> we'll have you back and and get the
update on that. Uh I did want to ask
about um the way the the policy system
works. We have three regulators in the
US. Uh most other countries have maybe
one. uh and we shift uh the people in
charge of it. Uh as you mentioned,
you're the third one here and Michael
Bar, your predecessor, had a much more
comprehensive Basel 3 proposal. Um we're
going to have a new Fed chair in June of
next year. Will all this change again?
>> Oh, I wouldn't think so. Obviously, our
board has to approve anything that we
put forward as a regulatory proposal.
So, anything that we move forward will
be broadly supported by the members of
the board that are that are present at
that time.
>> You've been on the Fed for quite a while
now and almost seven years.
>> Almost seven years. And uh now you're in
the supervisory role uh that you're
really wellqualified for. You know,
you've been mentioned as a potential Fed
chair, but do you prefer the supervising
and regulatory side? Well, right now I'm
committed to doing the job that I have
and we've really hit the ground running
with our with our request for um
information on check fraud and other
payments fraud with the uh the SLR
proposal that we just put out, the LFI
rating system. We're taking a really
hard look at our supervisory uh
components and and across our reserve
banks as well as at the board to ensure
that we're focused on material financial
risk. So, I have a big agenda. We're
moving through it quickly. Um, obviously
we need to get the the capital proposals
completed uh in the near future. Um, but
you know, I'm I'm really focused on the
job that I'm doing and I'm grateful to
the president for appointing me and and
the Senate for confirming me to this
role. So, that's what I'm focused on
right now.
>> Well, some Republicans on Capitol Hill
have suggested that we should change
this three-headed uh regulatory system
and maybe uh take regulation away from
the Fed. uh what are you telling them
and what do you think the odds of
something like that happening are?
>> Well, I think the most important part is
to remember that we have uh we have a a
banking system that's a dual banking
system. So, we have national banks and
we have state chartered banks and the
FDIC and the Federal Reserve oversee
those state chartered banks together
with the state banking commissions. So I
think it's important that we maintain
the the ability to oversee both the
state chartered banks and the and the OC
OC with the national banks and that we
have a rational framework that is very
similar for all of those banks going
forward so there's not arbitrage between
the three regulators but Congress is
obviously responsible for making any
changes to that system. So, you know,
we'll be working closely with them to
ensure that they understand what we're
focused on and what we're doing. That's
supportive of of the efforts of all of
the agencies together.
>> So, you come out to Jackson, but you
also go up to Capitol Hill a lot.
>> I spent some time on on Capitol Hill.
Absolutely.
>> Well, that was the Feds at Mickey Bowman
speaking exclusively with our very own
Michael Nikki. Now, UK inflation climbed
to an 18-month high last month on the
back of surging fuel, food, and
transport prices. Consumer prices rose
3.8%. 8% from year earlier, up from 3.6%
in June. Well, we're now joined by Dan
Hansen, chief UK economist for Bloomberg
Economics. Dan, thank you so much for
joining us. So, there's also UK React. I
love it. So, we basically have some data
points out of the UK, and you're one of
the first ones uh with your hot take on
what this means. Now, CPI rise does not
rule one more BOE cut in 2025. That's
your hot take. Does it complicate
matters for the BOE?
>> Of course it does. But I think I think
the way I've looked at this data at
least is to say we had a we had a
hawkish meeting in August where they the
vote split was very close. They clearly
are worried about inflation.
You look at that meeting and I think the
question you have to ask is if the
economy performed in line with their
forecast and inflation came in line with
their forecast. What would they do over
the rest of the year? Now my view on it
was that they would cut once more. We've
got the data this morning. It's in line
with their forecast. So my view is still
they're going to cut once more. Now I'm
not saying for one second that this is a
strong high conviction call. I think
anyone looking at this right now is 5545
one way or maybe 4555 the other way. But
it feels at this point in time with the
data we've had the doves are going to be
the doves. Who were the doves in at the
August meeting? And the hawks are going
to be the hawks. And we haven't had a we
haven't had something that shifts that
balance. You know the person to watch.
We've got Jackson Hole this weekend. The
person to watch is Bailey. He's the
median. He is the median voter. He's the
one that will shift and I imagine he'd
bring a couple with him as well. You
know, no one's debating September, which
is the next meeting. Everyone is
convinced they're going to remain on
hold. I think that's absolutely right.
>> But I do think there is a question mark
around November and possibly even
December if they do skip in November
because we've got the budget as well.
Remember,
>> and we don't have a date for that yet.
We don't have a date and I think I mean
it's impossible to know but chances are
it will be after the November meeting I
think given because we haven't heard
anything so middle of November end of
November if they see that and there are
fairly chunky tax rises in it obviously
that at the margin makes the case for
lower interest rates as well so
>> your to go to answer your question in a
very short way that was a very
long-winded way yes this makes things
very difficult for the bank of England
but there is a balance to be had here
between inflation and a weak labor
market and an economy that did okay in
the first half of the year, but I think
is probably going to slow in the second
half.
>> Dan, I mean, when you look at inflation,
how much of this is tariffs and how much
of it is actually, you know, um, UK
made?
>> Yeah, I think that that's a really
interesting question be and I've had a
couple of client questions about this
this morning about why has there been
this decoupling between UK inflation and
Euro area inflation. So if you look at
21, 22, 23, inflation went up in a
almost similar way, came down in a
fairly similar way. Um there has now
been this decoupling and I think it it's
a function of two things. One is policy
in terms of taxes, administered price
increases, obviously the national the
increase in the national insurance
contributions. So those three things are
differentiators.
The other thing is that wage growth is
still high in the UK and that's a
domestic thing and that's goes to this
point around UK supply growth and
productivity growth and just underlying
weakness in the UK economy even relative
to Europe. And what that means is it
doesn't take much growth to create an
inflationary impulse.
>> Dan, thank you so much as ever for the
great insight. Dan Hansen there, chief
UK economist for Bloomberg Economics
with his hot take that came out about
well 55 minutes ago. Coming up, we speak
to Greg Fleming, the chief executive
officer of Rockefeller Capital
Management about the US economy and what
to expect from J. Powell's big speech
this week. That's coming up next. And
this is Bloomberg.
Good morning everyone and welcome to the
pulse. I'm Francine Lqua here in London
and these are your top stories. The US
Treasury Secretary Scott Besson says
tariffs on China are working pretty
well. A sign that the current tradecom
may be maintained. Stocks end their
record-breaking rally with a sharp tech
selloff. Traders now look ahead to J.
Powell's Jackson Hall speech on Friday.
Plus, UK inflation jumps to an 18-month
high, adding pressure on the Bank of
England to reconsider the pace of its
interest rate cuts. So, investors are
and will be paying even more close
attention to the Fed chair J. Pal's
remarks and the central bank's gathering
in Jackson Hole on Friday. Traders have
dialed back their rate cut expectations
after a hotter than expected inflation
read. Well, let's talk more about this
with Greg Fleming, president and chief
executive of Rockefeller Capital
Management. Greg, as always, thank you
so much for coming on. There's so much
focus on Jay Powell. I mean, it's
unclear whether it's going to be a full
policy speech or whether it's a little
bit more like sometimes you get in
Jackson Hall, a little bit more of a
thinking piece and whether you focus
more on what he says or the reaction
from the Trump administration.
>> Well, you know, I I think he might use
this for a little bit of foreshadowing
and I'll explain that in a second. So
what the Fed's dealing with, Francine,
and and you're seeing it in in the data
dayto-day is the continuing tugof-war
between the uh employment and growth
side and the inflation side. And you and
I have talked about this on this
program, their greatest desire is to
avoid having both problems. They don't
want that word stagflation. Uh and it's
playing out markets and everybody
watching this uh in the data dayto-day.
So, I think a week or two ago, you had
this a good CPI number, stock market,
equities rally, and literally a day or
two later, you have a a hotter than
expected PPI number, and the the markets
go the other way. So, uh, nobody really
knows which side is going to be the
bigger problem. So, they've tried to
straddle that, and that's why they've
kept rates where they are all year long,
despite lots of pressures on them from
all directions. I think if anything
they're starting to tilt toward a a
first cut because the employment numbers
uh in the last three or four months are
definitely in a different spot than they
were and unemployment is starting to
tick up but uh workforce participation
is in particular down more.
>> So he may use this as an opportunity to
say to to try to foreshadow that a
little bit. Yeah,
>> I I still think before I would say that
they will definitely cut in the
September meeting, they will watch the
data again for the reasons that I'm
talking about here. It's so uh at the
margin close on both sides. They'll see
what happens between uh you know the end
of August and the end of you know the
meeting later in September before they
actually make a decision. But I think
they're starting to tilt toward a cut uh
at the September meeting.
>> But Greg, I mean I I guess central banks
don't have anything if they're not
credible, right? It's all about trust.
So I is, you know, J. Powell going to be
a little bit more reluctant than, let's
say, go for a 50 basis point cut just so
that he's he, you know, is seen as
independent.
>> I Well, I think also the data will keep
him away from a 50 basis point cut. I
know there are parts of the market that
are saying maybe he'll cut 50. I think
the market's ahead of itself there. I
think this is still he's got pressure on
both sides. I mean, it's not like
inflation is, you know, absolutely in a
bottle and there aren't things that are
pressuring the inflation side. Plus,
Francine, on the market side, he's got a
very healthy equity market. He's got a
risk appetite on uh in the in the US.
So, he's got to look at all of that as
well. You have AI, which is uh you know,
a force right now, but it's certainly
fueling tremendous investment. So, I
think he uh it's not just the the
political side and and I I think he's
tried to you know, block that out this
year somewhat. I think it's more the
data would suggest if he wants to put
his foot in the water on the employment
side, he's going to do it in a more
cautious manner manner than 50 basis
points. 50 basis points would be a
statement that he really thinks the
economy is slowing,
>> you know, in a way that he's he's really
concerned about. I I I don't expect him
to go there.
>> I mean, my favorite mo most geeky
question, is there a data point that you
look at to try and understand exactly
what we're seeing? Because as you're
saying, we're kind of in the balance
right now. I know we also have retail uh
companies. We have Walmart target a
little bit later on this week. I mean,
are they almost a better indicator of
where inflation goes than some of the
data that's a bit more backward-looking
from the Fed?
>> Well, they they're an indicator, but
again, that's a process, you know, and
and one of the things I've said, and you
and I talked about this last time as
well, uh this is the first time in any
of our careers, anybody, that we've had
tariffs at this level in the United
States. So exactly how that plays out
and how much the uh consumer ends up
eating versus different parts of the
value chain along the way including the
US corporate uh corporations who don't
raise prices or raise them less than
otherwise. That's all still playing out
and you have a lot of economists saying
well wait a minute why hasn't it
triggered greater inflation quickly and
that might be because the value chains
eating in along the way. So with that in
motion I think he's hesitant to look at
retail sales anything in particular.
Francine, if if there was something that
I think they they look at very closely,
it's employment. And I think the the
employment picture in the US is
unequivocally softer than it was six or
12 months ago. And that's why I think if
if he tilts and starts to move toward
the cut side, that that is the single
piece of uh market information that
they're taking in.
>> And Greg, you're I think you're right. I
mean, looking at the data, we're
uncertain how how a lot of the exporters
are actually reacting for the moment to
some of these tariffs. Do you have a
good template of what the US economy
looks like in let's say you know 12 18
months? We also heard this morning about
this uh you know meeting between Donald
Trump and actually some of the big
miners Riotinto and BHP to build some
kind of mega mine in the US. I mean does
it you know does the composition of the
American economy change?
>> Well one one thing Francie and I'll say
12 or 18 months out we're pretty
optimistic on the US economy. Okay.
>> The pace of innovation continues. the
amount of investment in AI uh is
enormous. Um and it's at a at a level I
wonder if it's sustainable. I mean even
Altman said earlier this week uh you
know it was bubble like in AI land. Um
but having said that what what's
happening in AI and that is the leading
indicator of entrepreneurialism and
innovation right now. You basically have
two forces in the world that are really
pushing AI. You have the US private
sector which is investing literally
hundreds of billions of dollars in it
right now and then you have China which
is more the government putting its own
money in and pushing companies to invest
in it. Those are the two forces that are
engaged in pushing AI for forward. The
rest of the world's really watching that
and both sides want their uh standard to
be the one that everybody uses. Both
sides are trying to get ahead from a
technological standpoint, but the
positive for the US on that is enormous.
And you know, almost every American
company of any size is already grappling
with how do you take these uh incredible
tools which are uh maybe more powerful
than anything humanity's ever seen and
uh implement that in their businesses.
Uh how what changes, what jobs can be
automated, you know, what things can be
done more efficiently. in the United
States that's something every single
company public and private is already
working on
>> but it could change everything in terms
of job market it could change everything
into reaction function of the central
bank it could change absolutely
everything so how does you know what
does it mean for markets
>> well you know that's the thing it could
it could change everything and there are
going to be winners and losers there are
already winners and losers from uh the
introduction of AI uh you know the the
uh the education space in the US you
know online education has been
transformed because everybody uses the
bots for whatever questions they whether
they're at university or just somebody
who's doing research on on something
they're involved in. So I think it will
change industries. It will change the
way central banks look at uh you know
growth versus employment. It it may uh
it may take some jobs away in the near
term. I still believe a breakthrough
technology like this always creates more
jobs. At least history would suggest the
internet created new more jobs.
Railroads combustion engine. I think
this fits into that over time. But could
it be more difficult in the transition
period? Yes, on the employment side.
>> Greg, thank you so much for joining us.
Greg Fleming,
>> great to see you, Francine.
>> Chief executive of and president of
Rockefeller Capital Management. Now,
Spain also tackled several major
wildfires yesterday in one of the
country's most destructive fire seasons
in recent decades. And that's despite
temperatures dropping across the Iberian
Peninsula. Fires have also been ranging
in raging in neighborhood Portugal.
Bloomberg Sophia Arta Costa joins us now
from Lisbon. Sophia, thank you for
joining us. So, how bad has the season
been for wildfires in Portugal and
Spain, and why?
>> So, Francine, yesterday, um, uh, we we
got the data for just how much land
destruction, uh, these fires have caused
this year, and it seems that it's, uh,
it's starting to hit records. So, um,
Portugal has already seen the biggest
fire ever recorded. Um, the amount of
land burned here is is about 2.4% 4% uh
of all of Portugal's territory was which
is more than double the average of the
previous year. So really really uh bad
in terms of destruction in Spain. Uh
we're seeing the highest levels of CO2
emissions from uh these fires in
history. So really the scale um is is
really of of very worrying magnitude.
The problem is we had a very wet uh
winter and an unseasonally wet spring uh
which led to overgrowth uh and then that
was followed by very dry uh and very hot
spell um the fourth heat wave uh that
the area has seen already this year. Now
temperatures are dropping Francine, but
the concern uh from local authorities is
that the wind is actually picking up. Um
and in Portugal we have four existing
fires. one of them is spreading very
very quickly and more than 1,600
firefighters are are tackling that one.
So, um the worst isn't over and
temperatures are set to pick up uh again
um in the on the weekend. So, still very
concerning situation in both Portugal
and Spain.
>> Sophia, what kind of pressure are are
both governments facing then?
>> Yeah, so the wildfires are are really a
focus of political bickering in
Portugal. the opposition um has already
called for the interior minister to
resign. Uh the problem was that the the
the prime minister Luis Montenegro, he
was actually uh in the Algarve and he
hosted um a a a party um festivities for
for the PSD party. So the optics of that
were not great. Uh he did cancel his
holidays and yesterday uh he made it up
um to the funeral of one of the
firefighters who had died uh on his way
to the scene over the weekend. Um but a
lot of questions over whether there was
mismanagement there. Uh also Sanchez in
Spain facing pressure. There's a lot of
political bickering. Uh especially in
the areas where the fires are because um
they're controlled by the opposition. So
um this isn't likely to to hold up. Um
let's remember also in 2017 in Portugal
when more than 100 people died, the
government almost collapsed. So these
can have very serious consequences on
the politics of the countries.
Sophia, thank you so much. As always,
Bloomberg's Portugal bureau chief Sophia
Orta E Costa. Now, shares of Chinese toy
maker PopMarts have jumped in Hong Kong
after posting a huge first half earnings
beat. Both revenue and profit actually
surged more than 200% yearonear boosted
by global demand for its high hugely and
highly popular Laboo dolls. Now, the
company is planning to launch a new mini
Laboo. For more, we're joined by
Jennifer Krery, our global business
reporter. Jennifer, I mean so many
people are going crazy for these little
like trolllike dolls. How do we know how
much the market is worth?
>> Yeah, I mean it's it's one of the f our
favorite stories in the consumer space.
Everyone going crazy over these little
monsters. Um and and their popularity is
really propping up PopMart's market
value. So we saw in 2023 that it stood
at about 6 billion yen. That's more than
doubled to 13 billion yen. That's about
uh 1.8 a billion USD. So really really
boosting its uh market valuation and
laboo themselves cost anywhere between
you know 18 bucks to almost a,000 bucks.
Uh and a lot of this value is placed on
these um the blind box packaging. So
consumers don't know what they're going
to get and that's really adding an
element of of scarcity uh and mystery
around these uh little monsters and
that's what's really uh pushing up their
popularity.
>> They are little monsters. I was asked if
I could find a tempura one. I was like
what? But I mean some of these things
just really go wild. Yeah.
>> 12 months or if this really has
longevity.
>> Yeah, I mean that's the key concern for
the company at the moment. And I think
that's why we're seeing them release
these mini lab boooos because they're
trying to sustain interest. We know that
viral toys do have a limited shelf life.
Uh and so PopMart is going to have to
find ways to really sustain that
interest and and we're seeing that
reflected in the share price as well.
You know, investors are uncertain over
longevity of these little toys. That's
something the company really needs to
keep an eye out for.
>> Yeah, it's it's funny cuz they're toys,
but they're fashion. Do you have Do you
love them? Do you hate them? I can't
make I love them as much as I hate them.
>> I mean I mean I I love them as well, but
when I see Rihanna and Kim Kardashian
wearing them, I mean, that makes me want
them all.
>> There you go. You You've heard it here
first. Thank you, Jennifer, for joining
us, Jennifer Creer. They're a global
business reporter on Laboo and the mini
version as well. Coming up, we speak to
the chief executive of the UK tech
unicorn for that's next. And this is
Now, whilst tech headlines have been
dominated by US companies recently, tech
firms in Europe have quietly been making
strides. So Fterero is a software
company that provides solutions for the
industrial sector. Now it's a UK based
tech unicorn and one of this country's
fastest growing software providers. The
chief executive Dean Forbes is with me
now. Dean, as always, thank you so much
for coming on Bloomberg. Look, there's a
lot going on and I don't know whether
when you look at software and some of
the tech valuations in the US, you you
worry about market sentiment or this is
this feels like it's still the one thing
that's propping up the US economy almost
on its own. Well, uh, the UK tech sector
is worth over 1.2 trillion pounds and
over the last few years, we've seen that
consistently grow at around, uh, 13%.
Um, first half deployment of venture
capital is 10% up over second half uh,
last year. So I think your your point is
absolutely correct that in the in the UK
and in Europe these companies and
companies like Foriero just continue to
go about our business quietly try to
build great software companies and when
it comes to valuations you know good
companies continue to be valued
extremely well uh in the UK and Europe.
>> So Dina how do you see forero like
evolving from here? How much more can it
grow and actually what do you know
what's your biggest hope for it? Well,
if we look over the last three years,
again, Foro's on track to treble in size
between 2022 and by the end of 2025. And
our incredible
>> it's been it's been an incredible uh
incredible journey, you know, and at a
time when the economy has been
challenging for for all of us. So, it's
a growth trajectory where we're we're
incredibly proud of and it's driven by
our customers need to continue to
digitize their processes and look for
more efficient ways to deliver their
products and services to their customers
and that's not going to change. So I
expect our growth trajectory to to
continue on this steep upward
trajectory.
>> When you look at your clients, how much
they're spending, do you see a big spend
when it comes to software because they
also need to keep up with with AI?
>> Uh well, for sure. I mean the whole
manufacturing supply chain has been
disrupted again over the last few years
ever since we came out of the the
pandemic. Uh it's been more and more
challenging for our customers. The uh
economic climate again brings another uh
challenge for them. So where do people
go? They look to technology. They look
to technology like uh Forterero to find
those additional elements of uh
productivity uh efficiency gains
speeding up uh their delivery to their
customers and again that's a trend that
we expect to continue and for hero is
incredibly well placed to continue to
serve.
>> I mean if you look at valuations in the
US for a lot of the AI do you think it
has an impact actually on at the end of
the day how much you would be valued or
are the two slightly disconnected? Of
course, I mean AI is now the leading
trend uh in software and it's the
leading trend uh in enterprise software
and we've managed to find some uh
incredible ways to deploy AI internally
at Foro to make us uh more efficient and
unlike a lot of our peers that hasn't
led to uh adjustments in our headcount.
We continue to grow headcount and
continue to grow the way we uh deploy
and spend on AI. And then when it comes
to our customers um our customers have
relied on us uh to help them deliver,
you know, their products and services.
They rely on us to serve them in the
cloud and they're going to rely on us to
serve them when it comes to AI as well.
>> Um Dean, can you talk to me a little bit
about, you know, this long-term
strategic partnership with Amazon Web
Services? So, what does that look like?
>> Well, that that comes back to the fact
that the manufacturing sector is really
focused on building products and
shipping products to their customers.
So, when it comes to IT and technology,
they rely on Foro to to come up with
answers to those uh IT questions. uh and
cloud is one of the ways that we can
move the cost and burden for running our
systems and systems like ours out of our
customers and we can take on that that
burden for them. So in doing that as a a
very important part of our strategy we
looked for a best-in-class uh provider
and partner to help us move their move
those products into the cloud and Amazon
uh came out at the front of that pack.
So that's where we will be focusing most
of our cloud and most of our AI
investments so that our customers can
kind of leverage that across the board.
>> I mean a lot of the IT used to be done
inhouse, right? Have you seen a a shift
actually as it becomes more costly but
also as companies try to keep up with
technology and even some some of the
benefits of AI going to um you know
second or third spaces like Ferro. AB
>> absolutely and if you look at our
customers again we're talking about the
the mid-market across Europe. We're
talking about the heartline heartland of
most of the European economies, right?
It's always that mid-market that brings
economies back after after downturns.
And those are small businesses led by
great entrepreneurs who don't want to
spend their time trying to manage
technology and manage it. And that's
where Foreo and our team and our
products and services come in. We take
that that burden uh away from them.
>> Um Dean, overall, I mean, you're one of
the most wellrespected, you know, uh
entrepreneurs in the UK. It feels like
it's a little bit tough in the UK. I
don't know whether it's the government
maybe not being as close to
entrepreneurs as some of the previous
governments or it's just you know global
funding. How does it feel to be a UK
entrepreneur?
>> Uh it's been the most volatile time uh
in my career and I think that that
what's made it a bit more challenging is
the fact that we haven't stayed in
either a downturn or an upturn for a
long enough period for us all to to
react to that. Right. The marketing has
really been volatile has really been
bouncing to the moment we become
cautious because times are tough.
interest rates come down and then we all
become a bit more buoyant again and then
we react to that and before you know it
we're back uh in a different cycle. Uh
it's become more important than ever
just to kind of hunker down the company
be extremely focused on delivering value
to end customer and let the markets play
out uh over time.
>> Yeah. Does it mean that you have to be a
lot more nimble and does it mean that it
almost hurts growth opportunities if you
never really know what's coming next?
>> Well, we we've been very lucky. our
business has shifted from being uh you
know a 50% recurring business to now 75%
recurring uh revenue business powered by
that 40% uh growth to the cloud that
we've been driving at for. So that gives
us a a you know a long-term horizon
because the revenue is more stable uh
and more predictable and that lets us
make longerterm strategic investments
for customers uh and for our employees.
So, it's been very fortunate that we've
driven that shift to the cloud and that
shift in the recurring revenue mix to
allow us to have that long-term view and
perspective.
>> I I know it's a it's uh tough fiscally
for the UK. We have a budget. We a new
budget. We're not 100% sure exactly uh
when that is. It could be in November, a
little bit later because the date hasn't
been announced yet. We have inflation
going up. What would you need from from
that budget or from the chancellor?
>> I think it's time again to come back to
stimulating entrepreneurship and
stimulating you knowmemes. uh and the
midmarket as I always say uh when the
economy is tough it's very rarely the
the giants and the top of the public
markets that bring the economy back to
to buoyancy it's the the heartland of
the UK France Germany it's those
mid-market businesses it's those
entrepreneurs so making it easier for
those types of companies to invest uh to
capture talent uh to build products to
to innovate is ultimately what's going
to bring these bring our economies back
to to growth
>> Dean thank you so much for joining us
Dean Forbes
Foro, chief executive on a great
conversation on technology,
entrepreneurship, and the UK. Now, let's
talk about the UK. Inflation rising to
an 18-month high due to surging fuel,
food, and transport prices. That's of
course adding pressure on the Bank of
England to reconsider the pace of
interest rate cuts. Well, guilt yields
fell at the open, now rising. Let's go
to Ven Ram from our MIVive team who
didn't think the drop in yields would
last. There's a lot going on. Uh, let's
start with the BOE and then I also want
to get your thoughts on Jay Powell. And
how are you seeing guilts behaving from
now on?
>> Well, I think that you know guilts are
going to kind of putting on a brave
front this morning, Francine, but I
don't think the demeanor is going to
last because, you know, we saw the
inflation readings for July ticking up
considerably higher than anyone thought.
And you've got, you know, core and
headline inflation at nudging 4% and
you've got services inflation claiming
back 5%. Now that is the component of
domestic inflation that the BOE policy
makers are very keenly watching
including the chief economist. So I I
think that you know the the fact that we
have got back to 5% is not good optics
for the BOE to be cutting rates into
that scenario. You've got, you know,
you've you've got a very ne very slim
real policy rate for the BOE given
current inflation. And if they cut rates
once more, we'll go into real negative
inflation adjusted policy rate and even
assuming service inflation stays put. We
are already in negative policy adjusted
inflation uh policy rate. So I think
that you know it would be a policy
mistake for the BOE to cut rates from
here. So, I think that the guilds will
see that reality and I think that the
2-year guilt yield will nudge to 4.10%
which is the level that has prevailed
since the end of the first quarter.
France,
>> um, Ven, talk to me about Jay Powell. I
mean, this is going to be the the big
show this week. What are you expecting?
Well, I think that you know he's got
very little incentive to push back
against market expectations for a
September rate cut because you know with
inflation kind of still hovering around
2.6 core PC 2.6 6 2.7 thereabouts. I
think that you know uh there is a little
bit of policy room. There's a bit little
bit of room for the Fed to be cutting
rates here. And I think that you know
having already flagged two rate cuts in
by the end of the year in the June dot
plot. The Fed has very le very little
reason to walk away from its own dot
plot.
>> And finally, we heard from Lagarde this
morning. What was your main key
takeaway?
Well, I think the key takeaway is that,
you know, Lagard is saying that look,
September rate cut is not happening and
probably um they're going to wait for
the forecast, the September
macroeconomic updated forecast. And she
did mention a little bit of weakness in
the economy and that kind of suggests
that you know the the ECB is ready to
deliver what is likely to be the last
rate cut for this cycle some probably in
December but not before that. And that
pricing is the most crucial metric for
the markets at the moment.
>> Ven, as always, thank you so much.
Bloomberg M live strategist Ven Ram with
some great great stories and analysis
out on the terminal and on our website.
Now, don't miss our interview with Oak
Tree Howard Marks. He'll be on
surveillance at 1:30 p.m. London time.
Up next, Bloomberg Brief and this is
Heat.