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. The global stock
rally stalls with Nvidia leading a sharp
selloff in heavyweight tech shares.
Futures indicate further declines.
Treasury Secretary Scott Bessant signals
the US is satisfied with the current
tariff setup with China. A sign perhaps
the administration is looking to
maintain calm with its economic rival.
and UK inflation on deck. We'll bring
you the latest CPI numbers as they cross
the terminal.
>> Okay, let's talk about these markets.
It's Wednesday. It is the 20th. Do you
buy the dip? Not yet would seem to be
the indications from the futures
picture. Euro stocks futures are lower.
NASDAQ futures are still lower. That CPI
data and it's just been talking about
dropping onto the screens right now. I'm
trying to watch the pound to see if
there's a reaction that I can glean what
the data is telling me. I'll bring you
that data in just a moment. And can you
have a doubbish kiwi? Well, that's
certainly what we've had overnight out
of New Zealand. Uh the Reserve Bank very
dovish and as you can see a big reaction
in the currency as a result of that.
Lots to talk about this Wednesday
morning. The countdown to the opening
trade starts right now.
Right, here we go. Hot economic data out
of the UK. The inflation numbers are
hot. Uh and that is going to pose a
problem for the Bank of England.
Certainly the doves over at the BOE. CPI
yearonear rises to 3.8% from 3.6. That
is the headline number. That is well
above the surve well not well above the
survey it's 0.1 above the survey uh of
3.7. Uh the services number though is
where the shock maybe comes through.
That has now risen to 5% up from 4.7. Um
the expectation there 4.8 eight and
there we are definitely above where the
Bank of England anticipated we would be
at this point. So a hot reading out of
the UK and it looks like this looks like
Sterling's risen a bit on the back of
this. I wouldn't say a lot on the back
of this. A little bit of reaction to the
upside.
>> Yeah. So the number is hot compared to
estimates as you said out there guy and
certainly that services number at 5%.
That's just got that sticker shock
hasn't it when it's classed with a five
for sure. Um but but interesting that I
think the Bank of England had an
estimate themselves that was slightly
ahead of where the market was. So I
think 3.8% is broadly in line with where
they saw it. But of course we have heard
from the Bank of England pretty recently
just earlier on this month. We got that
hawkish cut from them and they saw
inflation peaking at 4% in the month of
September. That has been one of the
things that has led to lots of
conversations about whether we are going
to get any further rate cutting from the
Bank of England. Of course, I think
Bloomberg economics has another cut in
in November, but they acknowledge that
there, you know, there are a lot of
questions around that kind of move right
now.
>> Beat to the grocery store recently quite
expensive. Certainly the food story is
is something that we're focusing on and
you talk about sticker shock. People
feel that on a daily basis and it feels
like inflation is still a problem in
this country certainly when it comes to
the basics of what a lot of people rely
on. Yeah.
>> The bank had 4.8 for services. We've got
five.
>> Right. Okay. So, on the services side,
yes, absolutely. a higher number than
expected for them. Then
>> we're ahead of where we and the services
is the bulk of the economy. So that is
maybe slightly concerning. So yeah,
we'll see uh we'll see what Bailey has
to say later on this week. He's now got
the data. What does he say at Jackson
Hole? What does he do in terms of
guiding expectations? Obviously, we're
going to watch for POW, but but Bailey
speech could be gotten quite
interesting.
>> And yields have been on the rise as we
talked about quite a lot yesterday. And
there's a lot of global dynamics behind
that. But then in the UK context, is
this because we're pricing out cuts on
interest rates because we're
acknowledging that this inflation story
is a little bit stickier than than had
been
>> poses a problem for the chancellor as
well.
>> Yes.
>> So debt costs become even more of a
problem which means she's going to have
to raise more money and you wonder where
she's going to do that. There are a lot
of kites being flown at the moment
around property and wealth taxes which
are causing conststonation I have to say
certainly here in the city of London and
across London and across the southeast.
It's going to be interesting to see how
the politics reacts to that.
>> Yeah, absolutely. So, we'll watch the
property story, we'll watch the tax
story here in the UK as it involves
evolves as we get further into the
autumn and uh and budget season. Let's
talk about tech and the sell-off that we
saw in global tech recently over the
last 24 hours. So, this is relevant for
looking back, but also looking forward
because US futures are negative, down by
half percent right now. The NASDAQ was
down by 1.4% yesterday, the MAG 7 down
by 1.7%.
And and just putting this in context, we
had a selloff on August 1st, didn't we?
But that was around the payrolls number.
Yesterday's sell-off for big tech seemed
to be around nothing or around not much.
Ongoing concern surely about valuations
about whether the AI theme has run run
its course. Some people are pointing
towards this a story that uh that that
that Fortune had I think that talked
about AI and whether it's really
delivering as much as we think it is.
But there wasn't a huge data point.
We're waiting for Nvidia numbers and
that's going to be really important next
week. I I wonder whether this is a
Treasury story, whether actually the
ongoing tick higher and the steepening
of the curve is certainly something
that's that could feed back into tech
valuations. If you're of a positive
disposition, this is this is fantastic.
That Nvidia numbers are coming. They're
going to be great. This is an
opportunity to buy in at a cheaper
price. You buy the dip, see what
happens. We're not there yet, certainly
in terms of NASDAQ pricing this morning,
which has firmed a little bit,
>> but not much.
>> And of course, it is August. Volumes are
really low. Yes, the markets live blog
asking, you know, saying you can't tell
really in in a month like August, in a
time like this when volumes are what
they are, you can't tell if this is just
a sort of summer school or the start of
a real storm and and both courses could
could open themselves up as we head into
>> I have another reason which is to SLOK
over at Apollo posted a note yesterday
basically saying we are in late 98 in
terms of the timing. If you were to put
this in dotcom bubble kind of territory.
>> And again, if you're an optimist, that's
that that's another two years.
>> Precisely. Well, a year and a bit. So
March was March 2000 was when the
sell-off came.
>> Yeah.
>> Um but he's got this love an overlay
chart. He had a fantastic overlay chart
yesterday. Anyway, let's talk about
Scott Bessent.
>> Always a fun topic. Um the Treasury
Secretary apparently is currently
satisfied with the situation with China,
which is unsurprising considering it's
generating huge amounts of revenue uh
for the uh for the Treasury given what
the tariff situation is at the moment.
It's interesting. So So what is the
objective of of the tariff regime? Is it
to raise revenue? I Bessant seemed
really happy with that yesterday. We're
making loads of money off the Chinese.
Thank you very much. Great stuff. Uh
carry on. Or is it regarding
rebalancing? Didn't talk about that
quite as much. Is it about fentinel?
Didn't talk about that quite as much as
well. just quite likes the money.
>> Yes. Is it about both? And certainly on
the China side, they seem to be happy
with the amount of money that's coming
in on that front. It's interesting. I've
been away for a couple of weeks and I
was thinking surely we've had that
meeting between she and Trump, haven't
we? Have I missed that? But no, we're
still not only still waiting. We don't
know if it will happen, but we have
heard from Marco Rubio. He says that
that is still due. And some people are
drawing a line between the tone we're
getting from Bessant and others who are
quite satisfied with the relationship
with China that the tariff uh truce
extended to November and saying that
that that kind of positive language or
contented language is designed to try
and get that meeting to take place
>> maybe. But Trump keeps messing with it,
keeps announcing new tariffs going to
upset the Chinese as a result of that.
So I think that's going to be
interesting. It was interesting Home
Depot's numbers yesterday. I'm waiting
for Walmart to see what they say. Home
Depot indicating the tariff hit is yet
to come in the United States. I the
inventory story has cushioned them.
India I India is still a target which is
interesting as well which pushes China
and India together which again kind of
creates something for that that
potential she meeting to talk about and
you see the Japanese export numbers this
morning down really hard on the back of
tariffs that hit coming. They they have
a 15% deal and that's still not done.
Yes. So so everybody in some ways are in
the Chinese boat right now because even
if you've got a deal it hasn't been
enacted. So you're still in this kind of
limbo land that the Chinese are in.
Yeah, there's got to be a long lead
time, hasn't there, between these things
being announced at top level by Trump
and others between that and actually
signing on the Russian line.
Interesting. Our reporting, you talk
about India, our reporting suggesting
that India has just in the last couple
of days gone back to buying Russian oil
after a couple of days of a lull as as
if these these words from the US
administration not not scratching the
sides. Just
>> some would argue that they don't really
have a choice and that's what they need
to do. Um Melanie Baker is going to join
us very shortly. She's going to be
talking about the CPI data that's just
dropped onto our screens. The pound not
reacting actually very much. Richard
Winds is going to join us from Radio
Free Mobile to talk about Intel and what
is happening with this tech selloff.
We'll also have that conversation with
Mark Anderson, co-head of global asset
allocation over at UBS Wealth
Management. He's going to join us uh at
circa 8:00 just after the market opener.
Mike Parah, the CEO of DHL Express
Europe is going to be joining us. What
is the story with tariffs? What are we
seeing? How's it affecting the consumer?
There's a lot going on in his world
right now.
>> Yeah, there absolutely is. Uh, and in
terms of the data points, we didn't have
much to talk about yesterday when it
cames it comes to to macro data, but we
have a little bit more today. We've
already had the UK CPI uh, print. We've
got Euro area CPI at 10 a.m. UK time.
Then we'll get target earnings. Uh, I
may or may not have added to their uh,
to their uh, to their earnings over my
summer trip to the United States. So,
target earnings out at 2:30 p.m. UK
time. We'll watch for those guys been
referencing the importance of the US
consumer. Of course, the Fed's Waller is
speaking. I think we get Bostic speaking
as well. We have FOMC minutes a little
bit later on today. Is all of that going
to be overshadowed by the fact that
we're waiting for Jackson Hole. So, you
know, the minutes are interesting in
themselves, I suppose, but always
backward looking and we're going to hear
from the Fed so soon.
>> I think the minutes are more interesting
than they normally are in as much as I
think you increasingly have a series of
very divided central banks around the
world. You saw that in New Zealand
overnight. You've got that with the Bank
of England right now. You've got that to
a certain extent with the Fed. And do
these minutes will these minutes
highlight that division that we are
increasingly seeing? Where does the
center of gravity lie? Where does Pal
lie on the spectrum in terms of his
views on where we need to go with
interest rates next? Now, clearly we're
going to get some clarity Friday, but a
bit more detail setting the stage going
into that Friday speech, I think, will
be interesting.
>> Yeah. What might be less interesting is
Euro zone inflation. I mentioned that
that aggregate number is out later on
today. It's a final reading. It's
expected to be confirmed at 2%.
Yeah, this is, you know, what central
bankers dream of, I suppose, although
>> they shouldn't perhaps say so.
The debate that's increasingly growing
into that PAL speech is whether or not
Pal is going to address the issue of the
symmetrical target and whether or not he
he goes from having the symmetrical
target which we've had over the last few
years. I you spend three years above
target, you spend three years below
target which gives you a symmetrical.
Whether they get rid of that is going to
be really interesting in how that sets
the tone in terms of interest rates
going forward from here and where they
are set. That's one of the subjects
we're going to be hearing about on
Friday. The labor market is of course
front and center. What else do you need
to know this morning? Talking of the
labor market, Meta is to reorganize its
AI team again. The company is splitting
its artificial intelligence division
into four distinct teams to better
capitalize on the expensive new talent
it has recently acquired. An internal
memo from the company's chief AI officer
uh said the new structure known as Meta
Super Intelligence Labs is aimed at
accelerating the company's pursuit of
so-called super intelligence. Bloomberg
is told there will be no layoffs as part
of the reorganization.
A package of security guarantees for
Ukraine is now taking shape with
European leaders weighing sending troops
to the country to backs stop a potential
peace deal. Ukraine's allies are hoping
to strengthen Keith's position ahead of
a potential meeting between Presidents
Putin and Zilinski. US special envoy
Steve Wickoff spoke to Fox News on a on
the US efforts to broker this peace
deal.
>> It's our job to bring the parties
together to narrow the issues and that's
what that's what President Trump does
better than anybody. He he he's got a
he's got a real sense I mean his on he's
got a real sense of what it's going to
take for Ukraine to meet in the middle
and to move the Russians.
>> History teaches us that details matter
and specifics of the US security support
remain unclear at this point. Thousands
of firefighters aided by soldiers and
water bombing aircraft continue to
tackle wildfires across Spain. The fires
have killed four people and burned an
area, get this, twice the size of
London. Temperatures have begun to drop,
but still Spain is confronting one of
its most destructive wildfire seasons in
recent decades. And there's talk now
that this could start to impact the
tourism industry. You've also got the
over tourism issue and whether or not
this starts to affect economic numbers
out of Spain. Obviously, we won't see
that just yet, but we could see that in
the data over the next few months.
>> Yeah, something we spoke to the foreign
minister about just yesterday, in fact,
on this program. Coming up then we'll
get back to the tech theme. Intel sudden
rebound sends its valuations to do level
highs. More on the share turnaround. Is
it sustainable? What does it tell us uh
about the tech sector more broadly?
We'll have that conversation later.
Plus, shares in the Chinese toy maker
PopMart soared on the back of strong
sales of its Laboo dolls. No, I've not
been buying any of those. I'm not guilty
on that particular front. We discuss the
growing hype around the company. Up
next, we dive deeper into the latest UK
inflation data. more on what the print
signals for the Bank of England's next
move. And if you want to get involved in
any of the conversations around the
desk, please do IB+ BBTV go. That's the
function that you can use to get in in
touch with the team. This is Bloomberg.
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.
>> See what happens next. Uh Michelle
Bowman, speaking of Bloomberg
exclusively, uh we'll have more
obviously Fed speak coming over the next
few days. The US Federal Reserve's top
bank watchdog.
It's an interesting conversation, but
where we go next with her, I think, is
the more interesting conversation. Um,
let's talk about what we saw yesterday.
We're scratching our heads trying to
work out why Wall Street's why the tech
selloff happened yesterday. Um, is it
repositioning ahead of Jerome Pal's
Jackson Hole speech Friday? That's one
argument. Uh, there are others. Look at
the bond market. Maybe for another one.
Valerie's here to answer some of our
questions. Val.
>> Oh man, I'll try. But yes, yesterday's
repositioning out of tech really did uh
make people scratch their heads and just
what was the catalyst? No clear catalyst
in the session yesterday. Maybe just
some new jitters about what we could
possibly hear from Jerome Powell's
Jackson Hole speech on Friday afternoon.
What the market really wants to hear is
that dovish pivot expressing some
concerns about the labor market maybe in
some way subtly uh uh giving the the
giving the green flag to that September
rate cut and possibly more to follow.
There could be a hawkish scenario and
this was written by our own Anna Wong on
the Bloomberg terminal. She's our US
economist saying that she thinks that
Jerome Powell could sound hawkish. And
the way he could do that was by dropping
this flexible inflation average
targeting framework. Now, this is some
framework that was very useful when
inflation was below target and the Fed
uh wanted a reason not to continue
easing. It's kind of creating problems
now that inflation is above target. That
could be something very subtle that
drone Powell could do to sound hawkish.
He could also just sound neither dovish
nor hawkish. Stress data dependence. We
do have another CPI and another NFP
print before the Fed convenes again in
midepptember. But take a look at the
price action that we've seen in the
front end. Those two-year yields have
held on to most of their rally from that
soft NFP report on the first um of
August. We have maybe come back just a
smudge after that PPI report, but we're
continuing to see options trades on the
front end targeting a 50 basis point
move in September. So clearly some
traders out there think that there is
good riskreward to bet on this dovish
pivot on Friday from Jerome Powell. But
remember the the Fed is also under some
political pressure. We just had a a true
social out from the president overnight.
In his mind, there is no inflation and
every sign is pointing to a major rate
cut. So I guess from the Trump
administration, they're penciling in 50
in September.
>> Change the Overton window, change the
language, change the discussion. That
certainly seems to be the president's
strategy right now and continues to be
into that speech Friday. The Bank of
England certainly has an inflation issue
to deal with. Uh we've just seen
headline inflation come in above
expectations. Services inflation is now
running uh at circa 5% in this country.
The breakdown's quite interesting.
Number of things stand out to me. One of
which the price of jam has gone up
really quite sharply. I'm assuming you
include marmalade in this which is to my
mind very serious.
>> This is a controversial controversial.
as you're talking marmalade then then
life starts to get quite concerning. Um
passenger transport by air is one area
that also stands out. The prior number
the June number 0.5 this number 15.5. So
that's a big contributing factor into
what we're seeing in terms of the
services numbers. Melanie Baker, senior
economist at Royal London Asset
Management joining us now around the
table to discuss. Is this the kind of
data that will that will force the Bank
of England to hold basically through the
rest of this year into 2026? Can I take
out November as a potential cut from the
BOE given what the numbers I'm looking
at on the screen right now look like?
>> I I wouldn't take it out yet. I think,
you know, I think it's uncomfortable,
right, that inflation just keeps rising.
That's not the greatest backdrop for a
central bank. And remember, the Bank of
England are already expecting inflation
to rise further. I'm expecting that to
peak in September. They have a 4%
number. So that's kind of in there. Um I
think for the bank uh a lot of that is a
lot of it's going to come down to okay
what are the drivers of that inflation
number and today's number I think a lot
of the supply seems to be airs. That's a
really volatile component. It's affected
by timing of school holidays and all
sorts. So I think they might put that a
little bit to one side and they'll look
instead at the labor market the
trajectory for wages. So I think you
know in terms of upcoming data I
wouldn't rule November. Are these the
kinds of numbers that will allow Labor,
I'm I'm not talking about the Labor
government, the Labor to say basically
we need a pay rise because because at
the moment the labor market appears to
be weakening and therefore you take the
wage risk out of the inflation risk.
These are high these are high numbers
and people are looking at jam prices and
marmalade prices and things like that at
the grocery store and seeing there is
sticker shock there. I things are going
up really quickly still and I'm just
wondering whether that does feed feed
through still into into wage demands.
>> Uh I think I think so. Yes. And things
like the energy energy bills especially
as well those very visible prices that
that consumers see. Um so yes and that's
that's one of those things that the Bank
of England are worried about right
that's why they keep talking about
inflation persistence. Does it feed
through in through wages through wage
demands um into more persistent
inflation. So be watching that very
carefully because at the moment in terms
of uh the labor market what we can see
is it does look like it is
deteriorating. It is it is weakening as
you say that does take some of the
pressure off I think and firms are still
saying they're expecting pay settlements
to come down uh next year
>> but but you don't see good morning to
you Melanie you don't see see this piece
of data is saying right that's it no
more cuts then from the bank of England
even with the services inflation rate
that starts with a five and services is
so much of the UK economy
>> services problem services is sticky but
the bank remember they've been moving
away from just looking at the overall
services inflation number and trying to
dig down to core services. Um, and if a
lot of that services number is actually
about airfares today, um, that won't be
in their that isn't in their kind of
core services number. So, it might not
look quite as bad from from that that
pure services perspective in that sense.
>> Yeah. help us understand a little more
about the the what these services
inflation numbers tell us then because
yes I've received an email from from one
uh one one viewer who was saying you
know that airfairs this looks if it's
airfares there's there's dem this is
demand driven uh is the suggestion that
that he makes and if you look at the
things that did lift uh lift the
inflation rate guys been talking about
about some of the specifics airfares
also hotels
does that that that sounds demand driven
doesn't it that sounds like
>> you have to be again very careful with
airfairs. So we know there are
differences in terms of the timing of
the collection dates related to school
holidays this year. That's in the ONS
statement. So I don't think we can say
that that bit at least is is demandled.
Um hotels again you get very funny
effects. We've had it before where there
have been key concerts in certain cities
that have impacted.
>> Is that what we need to throw in here?
>> I haven't seen I haven't seen it yet but
it might be. Um yes. So, you know, you
have to be a little bit careful with
those those numbers and look at the
overall overall pattern.
>> I'm trying to find some some I'm trying
to find the oasis line in in in the the
chocolate running at 17%.
>> Is that all the Dubai frenzy?
>> That maybe it is. Yeah. But chocolate
prices, chocolate prices another key
input into my household certainly seems
to be running at a fairly high level at
the moment.
If you take a step back and think about
this from the government's point of
view, inflation is running high, yields
are high, servicing costs are high,
particularly given the kind of a because
we've got a lot of linkers in in the mix
and b because we've got we've got a lot
of front end. H how how does how does
this kind of danger change the data
change the calculation do you think for
Rachel Reeves? Does it just just point
to the fact that she is going to have to
raise taxes? The hole is going to be
bigger that that she's going to have to
be more creative. The debate at the
moment is about wealth taxes and how you
tax property and how you change maybe
the mix there. Should we assume a higher
tax burden or what are the implications
of that for growth in the UK economy?
>> Yeah, I mean the economic backdrop isn't
particularly helpful for the for the
fiscal finances right now. That's that's
absolutely fair. And of course we do see
pay growth that that can be through
income tax receipts but generally no
it's it's not not been helpful. The
bigger things though have been the uh
watering down of the welfare um bill
reforms and a lot of UK analysts when
you talk to them are also worried or
assuming that the OBR are going to
revise their productivity assumptions
and that can make a really big
difference to the the fiscal projections
that could be instead what gets us to
those
>> possibly needed tax increases and it
does look as you say like they're
considering quite a number.
>> Yeah, it's so confusing all the the
various reports around property. We'll
see what actually falls into place on
that front. You mentioned data well some
of the ONS data and the detail there.
How concerned are you about the data at
the moment then they have the UK. We've
already got concerns about the Labor
report about GDP inflation and trade
about the quality of the data. I mean
and then just this week we heard that
retail sales data is being delayed by
two weeks to do some final checks. I
mean as an economist data is your you
you you need this stuff.
>> Rubbish in rubbish out.
>> Um yeah and no I'd love everything to be
to be perfect. What I am happy about at
least is the on ands being very open and
transparent about this that they're
looking at things, they're trying to
improve things. Um that that to me is a
is a positive rather than a negative.
But yes, obviously I'd prefer the
problems not to be there in the first
place. And it look it just reinforces
you need to look at a whole range of
data from official data and survey data
as well. In the UK,
>> I found the Oasis line.
>> Excellent.
>> It's gone from 0.4 to 5.7
>> specifically attributed to
>> no cinema. No, cinemas, theater,
theaters and concerts.
>> There we are. Thank you very much. Well
done, guys. That's excellent digging.
Melanie Baker, senior economist at Royal
London and Asset Management. Thank you
very much for joining us. Coming up on
the program, we'll talk big tech. This
is Bloomberg.
Welcome back everybody. This is the
opening trade. It is Wednesday the 20th
of August. markets have a very August
feel to them. Certainly, we saw that
with regards to uh US equities and tech
trading yesterday, US stocks weaker,
tech stocks in particular weaker, but on
low volumes as is typical for this time
of year. Uh and and there's not a huge
amount of we'll get into this
conversation shortly. There's not a huge
amount of new news flow around tech, but
certainly something is weighing on
sentiment there. We've seen that through
the US session and into the uh Asia
session, and we are expecting some
weakness here in Europe as well. So,
Euro stocks 50 futures down by 6/10 of
1%. Let's have a look at where we are on
bond markets. Of course, we'll wait
another half hour to see how the guilt
market opens and that could be
interesting after we saw the pound pick
up on the back of the slightly hotter
than expected inflation print that we
just got from the UK. Uh this is the
picture then that we have around bond
markets around Europe as we continue to
focus on the long end yields higher
story. Today, we see something a little
bit different. Certainly at the 10-year,
we see those yields coming down just a
touch this morning. guy.
>> Just when you thought it was getting
really boring out there and calm and
like volatility was really low, take a
look at the VIX, we get some action.
Now, this week was always going to
deliver some action, but maybe we
thought it was going to come in the back
of the week. We're trying to struggle.
We're we're we're trying to find a
catalyst to the selloff we saw yesterday
because the calm cracked, big telloff,
big tech sold off, big tell-off. Uh
maybe that actually is the better way of
thinking about it. Um
you you have a big reliance in the US
markets in terms of the performance you
are seeing from the Mac 7 from this
handful of big tech stocks. In Asia,
Soft Bank shares fell for a second day.
Concerns over its investment in Intel
continued to weigh though Intel has had
a very good run recently. Tom McKenzie
tracking all of this of course and it's
here to provide answers as to why we saw
the sell off yesterday.
>> I'll be ticked off if I don't if I don't
provide those answers.
>> Well, precisely. It feels
>> told off.
>> Told off told off ticked off. Yeah. Uh
well well equity investors you know with
exposure to tech may be feeling a little
ticked off right now. All this is
obviously an opportunity precisely to
buy given given the upside we've seen
since since April. So so what is behind
the sell off that we saw yesterday?
NASDAQ 100 closing down 1.4%. Nvidia
falling 3 and a.5% Palanteer falling
more than 9%. That's the best performing
stock had such up still up about 120%
year to date. Palanteer this
interestingly on Palanteer the short
interest has increased. If you do the SI
function on the terminal, you can see
there's been a bit of a buildout in
terms of short interest on Palanteer.
>> Bit of short interest build out on Meta
as well. So what what led to yesterday's
move? Probably a combination of things.
Is is it the valuation story? Is it the
concentration risks that John authors
>> outlined in his opinion piece this time
yesterday ahead of the of the selloff
pointing out that about 2% of the
companies in the S&P 500 account for
about 40% of the value? Is it just the
momentum that we've seen since Emperor
running out of stream or is it a bit of
profit taking ahead of JPL's speech
because these are companies that are not
capex light anymore so interest rates do
matter.
>> So yeah, but y' been ticking higher. So
maybe that maybe it's maybe actually
it's the bond market leading this story.
>> Yes, you were mentioning that at the top
of the program. We're waiting for Nvidia
numbers next week. It feels like quite a
long time to wait if that's what of
course get Jackson Hole before then and
that could set the direction. I was
interested some some on the markets live
blog drawing a link between what we're
seeing in crypto as well where crypto is
uh is weakening into Jackson Hole and
suggesting that you know there's some
overlap if you do a ven diagram for the
people who are interested in crypto and
those who are interested in Nvidia there
is some overlap between the two and
Nvidia has been weak crypto is weak as
if the retail uh camp has maybe lost its
enthusiasm or is waiting perhaps just
for those Nvidia numbers next week
>> and and Paul Dobson from our Mive team
was pointing out this morning there is
data to suggest that historically at
This time of the year, the retail
investor in the US does take a bit of a
back seat for various reasons. So,
they're not at play as much as you would
expect in other times of the year.
Nvidia is going to be so central, isn't
it? As as it has been, of course, for
the last two years in terms of the
earning story next Wednesday that drop.
The geopolitics are back front and
center. So, the Reuters report yesterday
that they're looking at designing a new
more powerful chip for the Chinese
market is yet to be approved by the US.
We know of course that under this new
agreement they can sell the H20 chip
into China if they give 15% of their
revenues to the US Treasury. So geopolit
geopolitics rem remains a potential risk
for Nvidia. But of course given where it
sits and given its waiting the market is
is is likely to and we've seen this you
know move move on on on whether or not
those numbers come in in line and meet
meet those expectations that of course
investors have. I mean politics just
such an influence, such a force behind
what these companies can and can't do
right now that it's quite fascinating to
watch that the way that has changed.
Tom, thank you very much. Been Daybreak
anchor Tom McKenzie with the latest on
the broader tech selloff that we have
seen of late. Now, one tech company that
was not hit yesterday is Intel shares in
the chipmaker rallying 28% this month,
adding about 24 billion in market value.
This comes after reports of a potential
US government equity stake and a $2
billion uh investment from SoftBank. We
talked about both of those things a lot
yesterday. Now, our next guest says he
wouldn't buy Intel stock at any price.
So, he's not convinced. Let's speak to
Richard Windsor, founder and owner of
Radio Free Mobile and regular
contributor on this program and on the
network. Richard, great to have you with
us. Thank you for joining us. So, you're
not well, it's not enough for you. The
fact that SoftBank is SoftBank is
interested in Intel. the US government
might be interested in taking a stake in
Intel. Neither of those things are
convincing enough for you to buy Intel.
Why is that?
>> Well, it's fairly simple because if you
actually look at what is at the root of
Intel's problems effectively, Intel has
been facing two choices over the last 5
years or so. One of them is to invest
really hard, catch up with it TSMC, and
regain its crown. The other effectively
is to break the company up into separate
pieces, maybe sell them off. Um and the
problem is e both of those are valid
choices. The problem is is that the
current management and the board of
intel is effectively chosen neither of
them. And so the company is currently
sitting in a in a strategic quandry. Um
you add that to the fact that the its
core intellectual property is looks
almost obsolete these days and its
competitors are circling the waters and
taking massive bites out of it. Um, I
don't really see how a cash injection
from the federal government or Soft Bank
is going to fix that situation. Um, and
so it's not until I actually see Intel
make a real decision in terms of where
it's going to go that there is actually
a pro a possibility of recovery.
>> Yeah. Richard, how do you think about
the role of the US government in
businesses like this? I mean, we don't
know yet whether they will take a stake,
but they're talking about turning some
of the uh the grant funding that they
that this business Intel has received
under the chips act, turning that into
an equity stake. How would you think
about US government involvement like
that in a US chip company?
>> Um, I think this is really all about
ensuring that there is advanced
manufacturing in the United States. If
you look at the geopolitical situation,
virtually 100%
of advanced chip manufacturing is in
Taiwan. The rest of it is in uh South
Korea and all of that is effectively in
China's backyard. And that is that
creates a very uncomfortable
geopolitical situation. So that from a
US investment perspective, the federal
government will be looking at this and
saying we can't afford for Intel to go
away. We must make sure that the
factories that it's building, the
factories that it has remain in the
United States. and remain open and I
think that's really what the focus of
that is now whether that Intel remains
as Intel or becomes the factories become
owned by someone else I don't know but
from the outlook of the stock the shares
themselves having the federal government
in there doesn't guarantee a turnaround
in my opinion
>> Richard morning is guy haven't asked you
this question for a long time tech
valuations like where are we what do you
like broad brush what do you think right
now when you when you turn on and look
at the data that you're seeing at the
moment in terms of the numbers we're
getting I
does the b does the business case
justify the valuation
>> uh in some cases yes and some cases no
guy um if you look at Google for example
or alphabet um you can quite easily
justify the valuation of the stock I
mean the PE is somewhere in the low to
mid20s depending on depending on where
the stock is trading um you know and
from that perspective and the growth
outlook and its position in artificial
intelligence, autonomous driving and all
of the other assets that it have is not
unreasonable. Um, and you then you flip
to the other end of the spectrum and you
look at a stock like Palanteer which is
I think has the highest PE multiple in
the entirety of the uh of of the US
market. It's much difficult much more
difficult to make that value that
valuation argument. So I look at this at
the moment in terms of the market. I
think it's it's a question of selecting
the stocks that you want you want to
own. I think generally, you know,
valuation valuations are extremely high,
but it's really of the mag 7 as they
call them. Um, and if you look at the
rest of the market,
>> it's not it's really not that expensive.
>> What would what would change the
narrative here?
You've got to you I spent half my time
talking about kind of the macro forces
that are driving what is going on in the
world, the Fed, etc., and what's
happening with yields and whether or not
we get a recession or not and the other
half just talking about this unstoppable
force that is AI spending and data
center spending and everything that goes
around and I sometimes wonder how
interrelated these two topics are and
what the overlap is on the ven diagram.
Would a recession actually slow down AI
spending? Would we see an effect into
the tech space? How immune is the tech
space from the wider macro story? What's
your view on that? That's a that's a a
really great question. Um, at the
moment, you know, the the macro
environment certainly outside of North
America has not been particularly great,
but that hasn't stopped uh the AI
spending. So, at the moment, you know,
the two are completely unrelated.
However, if there comes a if there comes
a time when the all the investments have
gone in, $500 billion has been spent on
data centers and the returns that
companies are earning on the AI
investments that they have made have not
lived up to scratch, then obviously what
you're going to get is you're going to
get a confluence because the expectation
is of course is that all of these AI
investments are going to lift the
economy. Now if they don't then
obviously what will happen is the
economy will be weaker as a result and
then consequently you will get a
correction in artificial intelligence
valuations some of which I you know I've
been expecting for quite some time but
yet to materialize
>> and and thinking about AI and what it's
yet to deliver Richard or what it can
deliver in in a sort of short time frame
I read a broken note this morning that
was quoting a fortune piece uh that
quotes MIT that has some research that
shows that uh in their in MIT's research
only 5% of AI pilots are showing any
kind of success rate early on. I mean
what are you looking at when it comes to
getting a handle on the AI uh pilots and
what they're able to deliver because
there's so much hype and we really need
to understand what it's delivering
>> exactly. I mean that that report is
actually in my opinion is the reason why
we saw the stock wobble uh the market
wobble yesterday. Now, interestingly,
the headline, it looks terrible, but
actually when you dig into it, what you
actually find is is that the reason why
95% of the pilots have not delivered any
sort of tangible benefit yet is because
they haven't been implemented properly.
The general expectation is is that if I
have a worker and I give him chat GPT,
then suddenly his productivity is going
to increase 10fold. The real answer is
if you look at where what these AI
systems are really really good at is
they're really great at ingesting vast
amounts of data from all over the place,
cross referencing and then being able to
surface it in an easy to use way. The
problem with that is is that if I'm a
company and I get a generative AI, I've
got to train it on my data before it's
really useful. And that's where the
mismatch is. And if you if you delve a
little bit deeper into the report,
that's effectively what you see where
where the main reason why you haven't
seen these returns yet. What I think
that means is is that it, you know, you
need these companies, they need to
actually implement the AIS properly and
target them in the wrong place. At the
moment, you know, if you speak to, you
know, many companies have said
historically, yes, yes, we must do
generative AI, but we're not quite sure
how we're going to use it. Once you get
past that and there are a number of use
cases, then I suspect you'll start to
see the kind of returns that one would
hope for.
>> And does that keep the train on the
tracks and is that what we're going to
see effectively in the Nvidia numbers
coming up? Like what are you expecting
from the Nvidia numbers? It's the last
kind of big piece of the puzzle that
we're looking for in the near term.
>> I think you're going to see a steady
steady numbers from Nvidia. The beauty
thing about Nvidia is is that um
effectively they're sold out about 12
months in advance. Now what that means
is is that their revenues is simply a
factor of how much capacity they've
booked at TSMC 12 months forward and in
turn that I think that gives them very
very good visibility uh at the moment
and so consequently I think what you're
going to see there's been very careful
management of expectations over there
the guidance that they've set I think
what you'll see is the numbers will come
out they'll beat them a little bit um
just enough to keep the train on the
track so you know from that perspective
I'm not expecting any surprise prices
from Nvidia at this point in time simply
because at the moment demand is so high
they've got great visibility.
>> Richard, thank you. Thanks for your
time. Richard Windsor, founder and owner
of Radio Free Mobile. We continue to
track the tech sector. NASDAQ futures
down by 4/10en of a percent. That's
actually not as much as they were top of
the hour, but we'll continue to watch
that negativity around tech. Coming up
on the program, we'll be watching shares
of the Swiss dairy giant Emmy this
morning after the company boosted its
organic sales forecast. We'll talk about
that and other stocks that we are
watching this morning. This is Mayback.
Welcome back. This is the opening trade
747 here in London and the futures
picture looks pretty negative actually
for European stocks. Uh so we are
expecting some negativity at the start
of trade. There's this tech theme
selling of big tech over in the US which
translates awkwardly into Europe
sometimes but we'll see where that takes
us. We don't have a huge amount in terms
of individual companies reporting this
morning. So we'll watch for uh for for
the for the big macro picture as we head
towards Jackson Hole Fed minutes later
on today. Let us see what is on the mind
of our markets life executive editor
Mark Cardmore who joins us for three
minutes on the markets. Uh Mark, we were
just talking uh to Richard Windsor about
tech and about the tech selloff we've
seen and what drove that. I know on the
markets live blog uh you guys have been
talking about how there wasn't much of a
catalyst. Some people have attributed
this MIT report and a write up of it
that suggests that AI projects and
pilots are not very successful. Um what
are you looking at in terms of this
selloff in tech and and how sustained it
will be?
>> Uh I think it makes complete sense. We
talked about this in the show on Monday
that we suddenly came into this week and
AI was suddenly looking very vulnerable
specifically AI after not being the weak
link for the last few years. Uh and and
I think you know obviously valuations
are stretched but that's never a timing
tool. But we've come into a period of
where it's seasonally not great for the
retail sector that's been a big buyer of
these mega cap tech names. But the
really big catalyst on the horizon is of
course Jackson Hole. And the bias for
the next month out of maybe not
immediate reaction out of Jackson Hole
but it delayed reaction Jackson Hole or
immediately will be higher longend
yields and that's when AI is much higher
duration asset than it was previously
because the of its capex cycle. So,
we've got a a hype cycle that's extended
relative to the impact cycle. We've got
retail participation down just
seasonally. We've got Jackson Hole on
the horizon. We've got Nvidia earnings
that are like priced wonderfully and
they will be wonderful. They'll be
absolutely wonderful. We know that all
the AI earnings been really strong this
month. So, that's already fully priced.
They'll they'll beat they'll do great
next week and still the AI sector will
sell off. I do expect this to be
extended. I expect the next month to be
very tough for AI. It's something we
talked about already on the show this
week. I and I and I think that's going
to be weigh on risk sentiment everywhere
because we've got such a concentration
of risk there. And it's not just about
Jackson Hole. Remember, we've got
potentially chip tariffs on the horizon.
And we've also got the US administration
taking revenues directly from some of
the big names in this sector. Nvidia and
AMD have already been targeted, but the
White House announced last week they're
looking to expand that revenue sharing
idea, which means this is a a chunk of
profits being taken directly from
companies.
Mark, is Pal going to flatten the curve?
>> I don't think so particularly. I'll say
that there's two ways we go this way.
Let's simplify it, right? So either he's
he's validates the dovish pricing and
then the reaction will be oh my god,
he's folding to administration pressure
and you'll see a twist steepening.
You'll see the front end come down and
the and the long end rise. Now, the
alternative is is that he emphasizes
that, hey, we've got a supply side
problem in the labor market um because
the immigration crackdown and therefore
you don't respond with with rate cuts to
a supply side problem. That's not going
to solve the labor issue. And hey, we've
got a big inflation problem and that
would ultimately see a short-term
flattening, but it be a bearish
flattening or see front end yields jump.
It won't see longend yields kind of come
down too much. And that's because the
backdrop picture is everyone knows as
soon as he pushes back on rate pricing
the administration will double down on
pressure uh kind of because of Powell's
intransigence and that means that all we
do is see a tw a delayed twist
steepening from a higher level. So if he
is hawkish you actually see higher
yields just move higher later but in a
much more powerful fashion. Either way
yields are going higher over the next
month.
It's interesting the administration's
already getting its reaction in early
indicating massive rate cuts are coming.
That according to the president that
certainly seems to be the occasion going
in to Jackson Hole just to kind of set
the tone. Uh Mark, great stuff. Thank
you very much indeed. Mark our executive
editor for Markets Live. MLIV is the
function of course. You now know that on
your Bloomberg terminal stocks to watch
this morning. We're talking about
seafood, salmon, Chloe.
>> Yes, good morning guys. So yeah, let's
start with something a little bit
different today and we are indeed
talking about fish and salmon in
particular. We got results from two
salmon companies this morning. Mo and
Leroy Seafood Group. Both of them said
that the harvest was was really good at
the moment and MOI even upgraded its its
forecast for the harvest for this year.
But salmon prices are coming down a
little bit. So we might see some
weakness feeding through there. Both of
those companies have been moving in
tandem as we can see here and they're
currently on the up. So, we'll see how
those latest updates kind of change the
picture at the open. Moving on, but
staying in food, we're talking about
Emmy, which is a Swiss dairy producer.
So, it raised its sales guidance this
morning. That might provide a bit of a
boost. We are seeing a little bit of
weakness. We're down about 1.6% year to
date. And what's really interesting
there is that the demand for higher
protein products, natural products,
healthy products was really what drove
this sales boost this morning. So
definitely a trend to keep an eye on for
dairy producers but also meat producers
as well. And then finally let's end on a
little bit of a more well-known stock
perhaps LVMH which got downgraded this
morning by CIC and we have seen already
so much weakness in the shares. We're
down 22% uh year to date. Um so we might
see a little bit of further weakness uh
there. Um, in terms of what the analysts
are saying, we are still at the majority
of buys, but quite a lot of holds. And
so that really indicates there's a lack
of clarity going forward with all the
tariff uncertainty and that weak
consumer sentiment that is really
holding back that luxury sector at the
moment. Chloe, thank you very much. Our
equities reporter, Chloe Melly. Now, it
falls to me to make some unlikely pivots
from the luxury that is LVMH to Laboo
Dolls. Chinese toy uh the Chinese toy
maker has reported robust revenue and
profit growth boosted by high demand for
its labu dolls. There they are.
Apparently there is now the CEO has now
said that um mini Laboos are going to be
available. And we mentioned this because
the share price of Popmars which makes
these has soared guy 11%. Is that
soaring? I'm not sure that's soaring but
anyway it's risen 11%. I'm not sure if
these are will they put people off their
breakfast? We did have some um
>> net profit net profit is up 400%. This
is a company that's now worth more than
Hasbro.
>> That's soaring.
>> Has Hasbro it's worth more than Hasbro
and Mattel combined. I guess the link
maybe to LVMH is you can you could
probably attach the the Lubu to your
LVMH handbag. I don't know which work
which would be worth more and which
would cost more to
>> Yeah, I I'm sure that's what people are
doing right now. Of course they are. Um
>> guy shows incredible insight.
>> I can read basically. Um, these toys
apparently are sold in a blind box
format. You don't know what you're going
to get. So, this reminds me of kind of
football cards. You don't know what
you're going to get, so you got to go
and buy another packet. So, you got to
fill out the book. So, you got to get
what you want. But yeah, this is this is
this is a frenzy. I'm trying to think of
a parallel in the stock market.
>> Well, I don't know. But I I'm thinking
about a link into geopolitics. I mean,
these are made in China and they're a
big hit in the United States. Does
President Trump know about the
popularity? Does Scott Bessant know?
>> I'm sure he does because he's talking
about the amazing revenue that's coming
in from China. Maybe this is where we're
saying that's where coming from.
>> Okay, coming up on the program, we'll
bring you the opening trade, leoos and
everything. Uh 7:54 here in London. So,
6 minutes until we see the start of
equity trading. Tech will no doubt hang
over the trading day today. This is
Blingberg.
Wednesday the 20th. Good morning. Europe
has a little gap to fill in terms of
where we are expecting equities to open
this morning. This was the picture
yesterday coming into the end of the
session. Up up up up up up up. But then
the US had a different story. Down down
down down down down. As you can see uh
that was the tech sell-off. Uh and and
as a result of which we got to price
that in first thing this morning. That
means you have this chart or these
series of charts, not charts, numbers uh
to look at this morning in the form of
European futures. Uh the stocks 50 down
by 610 of 1%. The Footsie, very little
tech in the Footsie 100. Bit of a
problem, but not today. Uh only down by
210 of 1%. The DAX futures though, a
little bit more tech with names like SAP
uh down by nearly 8/10 of 1%. So that'll
be the opening trade this morning. Where
we go from there, I think probably
remains to be seen as we price towards
what is going to happen in Jackson Hole
a little later on this week. Anna,
>> yeah, absolutely. How quickly we'll be
be able to move on from the tech
selling. Well, US futures suggest that
that continues to be a theme and so we
have put this in our stocks to watch
this morning here in Europe because as
you point out, Guy, there's some catch
up to be done with the US session of
yesterday. So, we'll watch those tech
stocks. As I said earlier, the read
across from, you know, the big tech, the
mega uh the mega caps in the US is a
little awkward into Europe, but we will
look to see if there's any weakness and
NASDAQ futures do point down by 3/10en
of a percent. UK stocks could be in
focus. We haven't seen a huge amount of
reaction in the pound as a result of
that inflation print. It came in hotter
than expected. They got that 5% services
inflation number. Uh we'll watch for the
guilt market open, which could be uh
interesting to keep an eye on in terms
of where we uh go there. We didn't see a
huge amount of reaction to all the
stories about taxation of the property
market yesterday. It feels as if maybe
the London market is on holiday right
now. Alcon is in focus. The Iare
business uh that business that company
out with some further guidance for the
markets guy.
>> Absolutely. Airfares maybe the reason
for the CPI print today. Did they drop
out? That's the story it seems this
morning. Okay, here we go. Equities.
What are we going to see? How low do we
go? This is the picture that we're
looking at first thing this morning. Got
a Footsie 100. Park the Footsie 100. it
doesn't really have a tech effect into
it which is going to work today for the
Footsie 100. We'll wait for the German
market which could take a little while
to get going this morning but the stock
600 yet to get everything in and pricing
and moving so we don't really pay
attention to that at the moment. The
IBEX though is down by 3/10en of 1% so a
little bit of weakness coming through
there. We are going to watch the main
event today basically is the DAX and for
those regular viewers um they know that
the DAX takes a little while to get
open. Uh, so we've got the CAC down by
4/10en of 1%. A downside move, but not a
big downside move. Let's see how SAP
opens. Let's see how Infinian opens.
Let's see how some of these big tech
names open in the DAX this morning. Uh,
we will wait and see what that looks
like in just a moment. So, let's look at
sectors. Let's look at individual
stocks. What do you got, Anna?
>> Yeah, well, we do have some some of
those stocks that are open in the tech
sector are weaker. So, the technology
sector is one of the sectors that is to
the downside down by around 4/10en of
1%. And I can see that we've got things
like Infinian and ASM International that
are down by more than 1%. So there is
some negativity around tech. It's not
the worst performing sector though that
still goes to industrial goods and
services. We were talking about this
sector yesterday with a particular focus
on the defense names. And again we see
some weakness in defense. So Leonardo
and BAE systems and TAL is all down by
more than one and a half% as is SAR. So
we do have again another focus on on
defense. Even though we don't have a
huge amount of news on the Ukraine
front, we're still waiting to find out
whether we get a meeting between
Presidents Putin and Zalinski. Where
will that be? Perhaps Budapest, but a
lot of news lines being explored, but no
great sort of revelations there. But
still a bit of weakness in the in the
defense space. Uh this morning, personal
consumer discretionary and grocery
stores is the best performing sector uh
across lots of inflation
>> up by 2%. Lots of inflation in the food
space. Pricing power certainly seems to
still exist in that space at the moment.
SAP's not open. Rhy Mattal's not open.
MTU engines not open. Zean's not open.
These are the stocks that are the reason
for the DAX not being open at this
point. I'm interested to see what Ry
Mattel does on the back of what Anna's
just said in terms of what we're seeing
in the defense space. Um
it's are we moving towards peace seems
to be the narrative and we're watching
that that quite carefully. Still don't
have a price on SAP. I think we're about
to get one though. Uh so we're going to
see some of these stocks open. Ry Metal
is down by four nearly 5% or 4 and a.5%
uh at the moment. SAP is now open but
it's only down by 1.1%. So maybe not the
big downside move that we were
expecting. Actually that's probably in
line with what we've seen in terms of
the story out of the states.
>> Okay. So we are responding to that US
tech sell off. them. We do see some
weakness in tech and we see another day
of focus on defense stocks uh going
lower just at the margin. Not giving up
all their gains of the year of course,
but we are seeing a little bit of
negativity there on the back of the
positivity around what could could
develop in Ukraine. Let's talk about the
big picture though as we move towards
the Jackson Hole Symposium over in
Wyoming. Mark Anderson joins us, co-head
of global asset allocation at UBS Wealth
Management. Mark, very good to have you
with us. And I mentioned Jackson Hole
because you you remind us in our notes
that markets are still pricing in a
roughly 90% chance that the Fed will cut
at its upcoming meeting in September.
That's that's that you know that's
pretty that's pretty uh a pretty high
percentage. Do you think that that is
misplaced because that is one of the key
things that seems to be under
underpinning the strength of stocks give
or take some tech sell off here or
there.
I think you're absolutely right that
underpinning global equity markets and
technology in particular over the last 3
to six months has certainly been this
expectation that central banks driven by
the US Federal Reserve are likely to cut
interest rates and we certainly have 100
basis points of cuts until mid of next
year from the Fed. We think they're
likely to kick that off uh in around
four weeks uh time as as well. It's
still a little bit of a nervous time for
markets because we have Jackson hold
coming up and I think a lot of people
are sort of hoping for Chair Powell to
sort of lean into that cutting cycle. Uh
but with some producer price indices
that have come in a little higher. I
think he's unlikely to give sort of an
all clear for cut next months because we
are still four weeks away from that
meeting. He has a lot of discussions to
be had before they're going to make that
decision.
>> Okay. So Mark, you're pricing in like
many others, quite a lot of cutting and
from the Federal Reserve over the next
12 months or so. If we see all of those
cuts come through from the Fed, do
stocks go higher or do stocks go lower?
Because we were having this debate
yesterday, stocks could go lower because
maybe this cutting is driven by weakness
in the US economy or or they could go
higher because obviously markets tend to
like uh cuts in interest rates. So So
what are you thinking about the link
between Fed policy and stocks?
I think our historical analysis suggests
that when the Fed is cutting into
something which is simply a slowdown but
not really a more dramatic uh slowdown
call into sort of recession-l like
territory uh stock markets are likely to
respond very positively to that and I
think a lot of people are seeing some of
the weakness in the US labor market as
an early indication that companies are
unwilling to hire. That's certainly what
we've seen with a three-month average of
payroll rises of 64,000 down from around
150,000. Clearly in a below trend type
of growth environment, but the
unemployment rate is not ticking up.
We're still seeing very solid average
hourly earnings, meaning that there is
still a consumer that's likely to keep
spending at a at a decent clip here. So,
we think that stock markets are going to
respond very positively to these rate
cuts as long as it's not going to be a
US and global economy that that falls
apart. And there's still plenty of room
to be be cutting from from here.
>> Mark, good morning. Should your clients
be buying the dip in tech after the sell
off we saw yesterday and the ongoing dip
we're seeing in European defense names?
>> Yeah, so we lean still in on the bullish
side when it comes to AI. I'm not going
to lie on on that. Growth assets, long
duration assets, they tend to like Fed
cutting interest rates. We think they're
going to do the same this time around.
Uh when we look at technology, it's
still the sector that we expect to see
very close to a 20% earnings growth from
this year, outpacing by far uh most of
the other sectors that we are that we
are covering. It's very clear at the
moment. It is a little bit of an
uncertain time just because we have
Jackson Hole coming up with that very
important sort of rate setting guidance.
We also have Nvidia coming up next week
as well. So that's a little bit of an
uncertainty at a time where valuations
seem to get done on on the stretch side.
So, so, so, so, so no, we still like it
guy to to come to the conclusion here.
>> Okay. You you say, as you say, long
duration assets, they respond to what
happens in interest rates. That's fine.
I shortend yields are going potentially
going to go lower if the Fed does cut
and and you're right on that front. But
long end yields are doing the exact
opposite right now, Mark. The curve is
steepening. I've got a US 30-year that's
north of 5%. I've got a US 10 year
that's pushing higher as well in terms
of the yield. Shouldn't that be a
negative for tech stocks?
that would be a negative for tech
stocks. So what we're expecting is that
the long end of the curve will start to
come down as we start to see those cuts
coming in as well. So if we look at
something at the US 10ear point which is
currently yielding at around 4.3%.
We expect that to come down to around 4%
we expect the five the 30-year to rally
from from current levels close to 5% as
as as well. So we think that there is an
opportunity here uh in tech names both
from the sort of the cutting cycle but
also earnings that are still well on on
track. I think what is happening we saw
this unhinging of the long end of the
curve is certainly uncertainty around
inflation expectations again we saw
these producer prices coming up
inflation expectations in Michigan
survey were sort of moving upwards uh
again Stephen Moran coming in on the Fed
eventually this Fed independent story is
something that makes markets a bit
nervous but I don't think it's going to
change sort of the overall course of of
the Fed and ultimately we think that
long end yields are going to be driven
by the short end as we usually See
>> and Mark, how are you disagregating the
tech sector in the United States right
now? Because of course there's the likes
of Nvidia and those that have led the AI
enthusiasm trade and then there are
those you might deem to be AI lagards
but still exposed to that trend. How are
you uh separating the two and over what
kind of time frames?
>> Uh that's a good question. So we've very
much in this early phase over the last
one two years focused very much on the
enablers of be it sort of the the chip
makers and and and the like at the
moment we tend to focus a bit in around
some of the more defensive names with
sort of more stable earnings growth. I
think as we're moving out over the next
one to two years we're going to see more
of the sort of applications or the usage
of AI that's going to be exciting. So I
think this is a journey that has started
where we're still in the early innings
of of this game. So when we look at the
surveys that are being conducted within
US firms, how many have really adopted
AI, we're not even at 10% yet. So I
think again we're in a very early days.
There's still a long game to be played
and we're trying to staying on top of
this as one of our core investment
themes that we guide our our clients
towards in our multiasset portfolio is
something that we continue to to like.
>> Mark, how are you thinking about the
peace process, the attempts at a peace
process around Ukraine? We've got
another day where defense stocks are
going weaker and that's uh easy to
understand if people really do see that
these uh these conversations between
global leaders could lead to peace. How
are you thinking about a peace dividend
for Europe?
>> So we are certainly hopeful as many
others are. We happy to see some of
these discussions that are current
ongoing. I'd say we're also realistic
probably to say that we don't think
we're going to see a peace deal by the
end of this year and we would not be
surprised to see that some of the
fighting continues into next year. And
as much as we are hoping for that peace
as everybody else, I think what we have
witnessed over the last few months and
quarters is still two sides that appear
to be a bit too far away to really come
to that agreement. But we're certainly
hopeful. We think in terms of defense
spending, when we look at the European
Union and where we're going to see some
of that government money will be flowing
over the next couple of years, h there's
no doubt that defense is certainly one
of those areas and there's going to be
both benefits within sort of the big
listed stocks that we know very well and
you speak on here. But we think that
there is a whole game to be played
around some of the say younger unlisted
company in a tech space that can do
things around drones and similar sort of
the new areas of warfare that we think
has loads of potential in it as well
over uh several years here.
>> So Mark just to come back to my earlier
question we we talked about tech and
buying the dip. Ryal's down by 14% over
the last 10 days. Again you would buy
that dip. Would that be the the the
trend that you would continue to look
for an opportunity to get into that
defense narrative?
>> So, we typically don't go out and then
say let's just buy this this one stock
here. Defense is definitely one of the
areas that when we like uh within the
European equity space. Uh it's very
clear after the rally that we've seen
year today. These are also stocks that
are very hyped and we've seen a strong
concentration in few individual names in
Europe where Europe as sort of defense
sector maybe has not been as strong as
we've seen in in other countries. So I
think there's been some rotation
obviously out of defense when we've seen
some of those peace talks advance. It
says we like to go into defense as a bit
more of a diversified manner and both
look at sort of listed as well as as
unlisted stocks here uh and in the
unlisted space where we seeing maybe
some of the more stronger technological
advancements that I think is very
exciting around this sector as well.
>> Mark ready to catch up useful insight
interesting insight. Mark Anderson
co-head of global asset allocation
joining us from UBS wealth management.
Uh as I bring up what is happening in
the defense space let's show you what is
happening in the core six. Uh we have
Rhy Matal down by 2 and a half%. The
rest of the space is under pressure as
well. Tech is also as you can see softer
today. But let's start with the defense
theme uh with Chloe. What else you got?
>> Good morning guys. So yeah, so we've
seen again some weakness in defense
stocks. It's a bit of a deja vu from
yesterday where I was stood in front of
the same ball that was also all in red
yesterday. There's not that many more
news coming through as you mentioned
earlier, but there seems to be this
narrative of potential peace in Ukraine
taking hold and leading to some weakness
in those defense shares. So, Ryan
Mattel, Hensel, Leonardo, BAE, all of
them down this morning. Moving on to the
tech sector where we can see some
negative reads from the tech selloff
where we saw a huge share drops in in
Nvidia or Intel for example and that is
feeding through uh to some weakness in
uh European uh tech names including
Infinian, ASM, SD Micro in more of that
semiconductor space but also a little
bit of weakness in in SAP the software
giant. Moving on to K and SK pluss which
is a fertilizer maker for the
agricultural sector. It got downgraded
at Baronburgg uh which said that the
expectation for lower prices uh for 2026
were put going to put pressure on that
company. It is down 3.2% of the back of
that downgrade. And finally, let's check
in on our seafood stocks. Um so there
were actually three. We talked about Mo
and Leroy, but Oval was also reporting
today and this is the one that did the
worst and the second quarter earnings
really disappointed and so we are down
3.5%. A little bit of weakness in Lero
as well and Moy because of that upgraded
harvest forecast is seeming to hold up a
little bit better. So it's not all good
news for for that salmon production
business, it seems.
>> Okay, Chloe, thank you very much. 8:13
in the morning here. Perfect time to be
talking about seafood. Chloe Melly from
our equities team. Thank you. Uh perhaps
we'll stick with the food theme because
we're going to talk UK inflation next.
UK inflation rising faster than expected
in July, adding pressure on the Bank of
England perhaps to reconsider its pace
of rate cuts. Uh we will discuss what to
expect from the BOE. That's next. This
is Blink.
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.
Grace Moose pictures on that video on
that promo. Massive. Um anyway, Jackson
Hole coming up. cowboy hats moose at the
ready. Um let's show you what's
happening in terms of the numbers this
morning. As you can see, a little bit of
weakness in European stocks. Um the DAX
is under quite a lot of pressure. Tech
is down, but you've also got defense
stocks down quite sharply as well. Both
of those two combining uh to deliver a
bigger blow to the German market. Let's
talk about what is happening uh over in
Spain. The the country tackling several
major wildfires which are ongoing. Uh
the country's this season is one of the
most destructive that we've seen in
recent decades. Temperatures are
beginning to roll off. They haven't that
happened in Portugal first. Now it's
beginning to happen uh in Spain as well,
but we have seen obviously fires across
the entire Iberian Peninsula. Sophia
Hoto E Costa joins us now from Lisbon,
Portugal, Spain have been suffering and
the numbers are just mindboggling here
Sophia in terms of the scale of the
fires that we are seeing. Spain seeing
fires that have destroyed land,
destroyed territory twice the size of
London. Just put this in context for us.
How bad is this?
So in terms of area burnt, um it's uh
shaping out to be one of the worst years
since records began in Portugal. Um
yesterday, one of the fires was
spreading and it was uh in terms of area
burnt, the largest fire ever recorded in
Portugal. Um the problem here guy is
that uh we had a very wet uh spring, a
very wet winter as well, which is quite
unusual for Spain and Portugal. Um and
then a very very hot uh dry summer um
that's extending uh these these kind of
heat waves. This is this is the fourth
heat wave uh that the area is uh
suffering. So those uh conditions have
really made it worse. And even though
temperatures are dropping uh in the
Iberian Peninsula, the problem guy is
that the wind is picking up. So um in
Portugal, one of the fires is spreading
very very quickly. Right now, we have
more than 1,500 firefighters at the
scene. One person was critically injured
yesterday, so it doesn't seem like it's
going to let up anytime soon, which was
the hope for this week uh when
temperatures drop and humidity picked
up.
>> Yeah, Sophia, what kind of pressure then
are the governments, both of these
countries under as we as as as uh as
people continue to deal with these
fires?
Yeah. So, it's it's a very sensitive uh
political issue especially in Portugal
since 2017
uh when more thanu
20 people died. Um and the problem Anna
is that uh the the regions that are
facing these wildfires this year are are
in exactly the same regions uh as that
time. So, the Portuguese prime minister
is under a lot of pressure to do more.
He hadn't yet visited the affected
areas. He finally did yesterday. He went
to the funeral of one firefighter who
had passed away uh on his way to the
scene. Um and also in Spain, Sanchez
facing a lot of pressure to do more. Now
Sanchez actually called for European
help uh earlier than his Portuguese
counterpart. It's the largest
international assistance for wildfires
that Spain has ever seen. Um the
Portuguese PM is facing uh criticism
that he didn't do that sooner. He did
cancel his summer holidays u but he only
did that after a party uh conference in
the Algarve in the in the south of
Portugal. So he's facing pressure um to
do more and one of the parties here the
farright sugar party is is going further
and pressuring for the inter interior
minister to resign. So you can see it's
a really hot button issue uh both in
Portugal and Spain for politicians to do
more to prevent this because it does
happen every single year.
Sophia, to that point, is there now a
growing sense that this could actually
impact the economy that we could see a
read across into tourism that people
aren't going to be going to these
countries in the high season that they
normally would that people go later on
in the year? I I'm just trying to I'm
wondering how this feeds through into
the data. Obviously, this clearly is
going to affect things short term, but
is there a longer term story here as
well?
>> There is. is I mean um a lot of the
fires are not in the hot spots of the of
the tourism. These are this is in rural
areas mainly. Um but the flip side to
that is places like the Algarve uh like
Ebiza um have uh heat warnings. Um and
this means you know you can't uh there's
a lot of activities that you can't do a
lot of restrictions um but also the
optics of it all. I mean if people uh
see um these countries burning and also
summer um the summer season is getting
longer and longer because temperatures
are getting higher in the in what was
before the shoulder seasons um of spring
and autumn. It means there's more
pressure on resources. Uh water
resources are depleting in Spain. Um you
actually have uh less space because you
have rising uh sea levels. So you are
seeing the long-term impact of not just
climate change uh and obviously
wildfires are an are a feature of that
um but also the increasingly long
tourism season. Um we've yet to see that
in the numbers because people still come
um but rising temperatures and also
remember guy um air conditioning is not
really uh popular in many parts of
Portugal and Spain. So that does also
deter tourists who, you know, say that
they're just not comfortable in these
incredibly intense temperatures. Um,
again, you know, it's it is um we we've
yet to see the impact on the hot spots
uh in the Algarve. We're not seeing
fires there thankfully. Um but it is an
area of concern.
>> Sophia, thank you very much. Weber's
Lisbon Bureau Chief Sophia Hter Costa
joining us with an update there on those
wildfires. Back to the UK now and the
inflation story that we've covered
already this morning climbing for a
second month in July adding pressure on
the Bank of England to reconsider its
pace of interest rate cuts. Joining us
now Bloomberg's Mena Conam with details.
So your key takeaways then we've had an
hour and 23 minutes to digest all the
details. We went through some of them
earlier in the program. Your key
takeaways from this this CPI reading
seemed at first glance hotter than had
been anticipated. Yeah, I mean really
across the board in most categories we
did see inflation accelerating. Um
particularly the services figure it was
more than economists expected and I
think that's the key thing you know that
we'd expected things to accelerate in
general but this was more than people
had been expecting. That is going to be
a concern for the Bank of England and
particularly some of the sticky areas
like services which makes up 80% of the
UK economy. Um that's one of the reasons
why the Bank of England was hesitant to
begin its um cycle of interest rate cuts
last year because the services sector
inflation had prove proved more sticky.
So that's going to be a concern and
we've also seen things like you know
jobs data um and and GDP coming through
to suggest that maybe these cuts aren't
quite so urgent. So we've seen traders
um consequently pairing back their debts
this morning on further rate cuts from
the Bank of England and now only seeing
about a 40% chance of another one this
year. We're really looking at the first
quarter of next year um for there to be
another 25 basis point cut scene. So
that would be a slowing down of the pace
um than than had been expected earlier
this year.
>> Can I is isn't there an argument for
just looking through this data? Airfares
are up, school holiday timing always a
factor. This time around it seems like
it's been more extreme. So you got a 15%
whatever it is on airfares. I can look
through that number that's going to drop
out really quickly. I I can blame I
Oasis maybe you're seeing concert
tickets up really quite sharply.
Marmalade prices I think are a whole
separate issue.
>> Much more worrying dynamic for for guy
>> much more concerning chocolate prices
also um for my wife. Um the these but
but the headline number seems to have
been driven a lot by airfares and isn't
the bank just going to go that's going
to drop out. I'm worried about the labor
market. That's where that's where our
concern should be.
>> I think you're right. There are some
costs there that will be um transitory.
Um airfares is certainly one that can be
quite volatile, although it's frequently
>> been mentioned as one of the driving
factors. So it seems to be more of a
trend than a one-off
>> and that's also driven by higher fuel
prices as well. So there's actually a ge
geopolitical dimension there, I think.
And that's something which depending on
what happens to Russia in Ukraine, we
might see um changes there. Um but the
food cost inflation I is important
because it does feed through into how
much money people feel like they have
and how much money they do have on a
monthly basis that then drives demand
for wage increases and what we have seen
as well is those costs in trans in um
accommodation services and restaurants
that's driven through by those higher
wages too and those are hard to reverse.
>> Moana thank you very much Moana with the
latest from UK inflation. Coming up we
check in on the global trade and supply
chain story amid Donald Trump's trade
war. We'll be speaking to Mike Parah,
the CEO of DHL Express Europe. That
conversation next. This is Bloomberg.
opening trade 30 minutes into today's
session. Let's take stock then of where
we are. And we see negativity across
these markets largely driven by a
catch-up trade around technology.
Industrial goods and services though
having another day of negativity. So all
of that plays out fairly weakly for the
DAX and for the cataron the footsy 100
less tech there of course and so is a
bit more resilient broadly. Then uh we
do see stocks weaker by around a quarter
of 1% guy. And we can ask how long this
is maintained. If this is a tech sell
off, a max 7 sell off over in the United
States then it's difficult to see that
being sustained into Europe. for the
moment we see that here and we do see
some selling in defense names as well.
Another day of perhaps the market's
thinking about what could happen in
Ukraine.
>> So volume is quite light. Like what is
it? August the 20th. We're mid August.
Let's call it mid August. A lot of
people are on holiday. Not a lot
happening you could argue in terms of
therefore trading. And you can see that
reflected in the numbers. We're down by
52% 53% in terms of the what is it the
100 day average. Uh there are more
stocks down than up. So yeah the
arithmetic is fairly straightforward.
Obviously, that doesn't account for
waitings, but we are definitely down. On
my screen this morning, there are not
many 52- week highs and lows, which
again kind of speaks to the idea that
actually markets are kind of not doing a
lot at the moment. One stock that does
stand out as a 52- week low is Alcon.
That stock on a year basis is down by
22.35. And this morning, squint and
you'll see this. You're going to need
some glasses or contact lenses or
something potentially to see this. Uh,
but it is down here. The stock has
dropped quite sharply this morning on
the back of what are being described as
quite uninspiring numbers. Now, the bar
was already pretty low going into these
figures. So, the fact that that bar has
been a struggle to clear has been a
little bit problematic for the analyst
community this morning and the stock has
sold off fairly sharply. So, that stock
uh certainly won and as I say, you need
to squint to see it, but contact lenses
may fix that. Uh is where the story is
this morning. Alcon down by 22.4%
over 52 weeks. Anna,
>> very nice. Right, here's some of the
other stories that we're watching for
today. We talked about UK inflation a
bit on the program, but let's get an
update on some of the detail there. UK
inflation climbed to an 18-month high
last month on the back of surging fuel,
food, and transport prices. Consumer
prices rose by 3.8% from a year earlier.
That's up from 3.6%. That was the rate
in June. And it's the fastest pace since
January of 2024. The uptick puts the
Bank of England under some pressure to
reconsider perhaps the pace of interest
rate cuts. Although as we've discussed a
lot coming from airfares and hotels and
maybe they uh profess to look through
that stuff will continue to keep that
under review. Now Wall Street's summer
calm has finally cracked as a selloff in
big tech dragged down stocks. Nvidia
shares dropped by three and a half% with
Palanteer slumping more than 9%. The
move underscores the US market's narrow
reliance on a handful of tech giants.
And Scott Bessant has indicated the US
is satisfied with the current tariff
setup with China. a signal that perhaps
the Trump administration is looking to
maintain calm with its economic rival
right now. The US Treasury Secretary
told Fox News the administration is
quote very happy with the situation and
that the status quo with China is
working pretty well.
>> Let's talk more about all of this and
what is happening with that China story
in a little bit more detail. Bloomberg
News Desk editor Jill Dies joining us on
the story. Why don't I read in Jill to
these comments that we're getting from
Bess and he made them on Fox yesterday
talking about trade and and where we go
forward from here. He said that he's
reasonably comfortable with the current
picture and that revenue is very strong
coming from those China tariffs. Does
that tell us more about where actually
the administration's objectives lie with
these tariffs, i.e. revenue raising than
maybe reshaping global trade?
Well, Guy, uh, what I would put these
particular comments in the context of is
this idea that we're still maybe paving
the way for a potential meeting between
Donald Trump and Xiinping. Um, kind of
reads to me like, you know, I'm not
really sure whether Washington wants to
rock the boat um, before that potential
bilateral. So, that's something that we
could be seeing as soon as maybe uh the
end of October, early November. that's
when the apex summit takes place in
Soul, South Korea. Maybe there's an
opportunity for Trump and she to meet
ahead of then or during then or just
after then. Um and we've got now this
trade truce between uh the US and China
that's not due to expire until just
after that around November 12th I think
is that deadline. So, I think if you're
looking in terms of just kind of
stabilizing USChina relations for the
moment, um not trying to ratchet up
rhetoric as it was earlier this year
when we were talking about 100%, you
know, 150% tariffs and all that kind of
stuff, um then just kind of keeping
things as they are, maintaining the
status quo may be the the best
opportunity uh for both of those nations
to kind of just again pave that way for
that potential leader summit.
>> And President Trump does seem to be
widening though the tariffs on some
areas, metals tariffs for example. What
does that mean for global supply chains
then Jill?
>> Yes. Well, Anna, I think um what you're
referring to there is just some recent
uh um you know some information that we
got um sort of from the customs
department looking at those steel and
aluminum tariffs in particular. It
seemed that um at the end of last week
um suddenly those seem to apply to a
much broader array of goods including a
lot of consumer goods, motorcycles, that
kind of thing. um that seem to catch
some sort of sort of logistics firms a
bit offguard as to the fact they didn't
realize that those would necessarily be
applying there. I think what that tells
you is um look I mean I think we've said
this many many times on this program and
others um that trade agreements in
general uh before this year I mean
typically took months if not years to
sort of negotiate and try to figure out
and everything like that and now uh
we've gone from a cadence where you know
you might see broad trade agreements
take that long to ultimately come to
fruition to now the Trump administration
has really tried to kickstart how
exactly it h it handles tariffs and
trade agreements and a a lot of these
things were happening uh within weeks if
not days and so it does kind of indicate
that you know obviously the tariff
regime seems to be a bit bumpy as people
kind of you know get used to what
exactly that looks like on a day-to-day
basis.
>> Jill thanks very much Jill Dis with the
latest on the trade narrative. Let's
stick with the trade theme and turn to
one of the key players in the global
logistics and express delivery industry
and that is DHL Group. Of course it
reaches over 220 countries. is joining
us now, DHL Express Europe CEO, Mike
Parah. Mike, nice to speak to you. Thank
you so much for for giving us your time
this morning. So, we were just hearing
from Jill the latest installments of the
tariff drama and all of the news flow
that comes along with that. It comes
thick and fast. It changes all the time.
How do you as a business manage? Have
you had to change the way that you
manage the business as a result of this
fast changing tariff environment?
>> Yeah. No, no, absolutely. First of all,
thanks for having us. Um, and
absolutely. I mean the volatility would
be our key word um that I would uh stay
on and that is we've seen nothing but
volatility since the announcement in
February March going into April time
frame and now what's about to happen on
the 29th of August when dimminimus goes
away in the US so it's been a lot of
complexity uh and costs which we can do
well as an organization managing there
the area where we see the biggest risk
is the volatility so it's the change of
tariff from one day to another 25 to 50%
% for India or the change in tariff for
Brazil as an example. Um I think one of
the great things that we've seen is for
the European Union where I currently sit
in is the fact that the EU albeit maybe
a bit high or or people might see a bit
low um 15% at least there's some
stability there or the UK going in early
and getting a 10% uh agreement from that
perspective. So I I also will say that
when we look at the state of the
business uh for us we are seeing a shift
in trade. Um and one of the words that
we use as an organization is global
trade is too big to fail. Global trade
is too big to fail and it's like water.
It's going to find its lowest point and
there has been a shift in trade. So as
an example, China US was a big trade
lane for us and Asia Pacific to US was a
big trade lane for us. Well, now that's
shifted to China and Asia-Pacific to
Europe.
>> Uh so we have seen a shift uh in trade.
>> So too big to fail, but it's being
reshaped now under the the US
administration. We've just had some
comments actually coming through from
Christine Lagard over at the ECB saying
that recent trade deals have alleviated
global uncertainty, but they haven't
eliminated uncertainty. And I'm sure
that reflects how a lot of CEOs around
the world feel about the global
environment right now. What do customers
say to you? How do how do they manage
how does that look to you? That level of
uncertainty that they're dealing with at
this point.
>> Sure. The the feedback we're getting
from customers are can almost fit in a
couple of buckets. One of them uh as we
were talking offset is they're in this
wait and see mode. They're going to wait
and see what happens on the 29th of
August uh as an example when dimminimus
goes away. We have customers that are
coming to us and saying DHL you're in
219 countries across the world. Help us
to go global to other countries. So,
we're looking at markets like Latin
America uh from Europe as an example.
We're also taking a look at growth that
we're seeing in Eastern Europe, whether
it be Poland or Hungary or Czech, where
we're seeing foreign direct investment
that's taking place there. And we're
calling that the GT20, what we're
calling our geographical tailwinds. And
that is markets that we see top 20
countries globally that we see growth
in. So, customers are saying to us, how
do you help us to go international? How
do you help us to shift some of our
business from the US and go to other
markets from that perspective?
>> You said a moment ago that you're seeing
a shift from Asia to US to Asia to
>> Yes. The fear was going into all of this
was that we would see deflation in
Europe because we're going to see more
goods arriving in Europe as a result of
the fact they're not going to the United
States. Can you give me a sense of the
scale of the shift that we're seeing
there?
>> Yeah, it's it's gradual, I would say. So
it's not an onslaught where we're
overwhelmed with the volume that's
coming in, but we are seeing growth, but
we're also seeing growth in Europe. I
mean, Germany, we're seeing growth in
Germany that's happening, which is
normally a good indicator for us in
Europe of what's going to happen. We're
seeing the PMI index in Europe that's
almost at 50 from a low of mid40s. Now
is almost at 50, which is a good
indicator for us. uh we did see some
frontloading in March that took place
across the world but more specifically
into the US and some of it uh as well
but what we've seen is a steady flow of
increase coming into Europe from that
perspective
>> just just back to that US point
how far through that do you think we are
was there a kind of you saw front
loading and then people stopped are they
back ordering again is that inventory
being used inventory is not being used
up you would suggest
>> well we saw some front loading in the
month of March And then it's slowed down
April, May, June, and July. And I think
what's happening here going back to the
volatility is what's going to happen
after the 29th of August once dimminimus
goes away.
>> How big like is that just is it just a
hard stop when dimminimous goes away?
>> Absolutely. 1201 on the on the 29th of
August, dimminimus in the US is gone.
And that will be one of the things for
us is we're prepared for it. Um so we've
hired extra resources in the area of
customs processing. We were talking
about all the changes in tariffs on a
daily basis. How do we keep up with it?
It's ever changing every single day. And
as it happens, we update our systems. We
update our customers. And a lot of our
customers, you got to think about 90% of
our active account customer base are
small to medium-siz enterprises who
don't have a lot of resources that can
get this information. And so they rely
on an organization like DHL to be able
to provide that to them and also help
them to go international to other key
locations.
>> How how big a driver of volumes or
whatever metric you want you want to you
want to think about Mike were things
like de or are things like dimminimus? I
mean how much business was that creating
for a business like DHL? And I asked
this in the US context because we know
that's going away. But also, you know,
politically a lot of politicians around
Europe will be watching this and and and
possibly asking themselves questions
about whether they want to change the
regime in Europe. The rules are very
different, but they they exist in in
other forms in Europe as well.
>> Absolutely. I had a feeling you would
that question would come up in some way,
shape, or form. We did see a drop going
in business going into the US. So, if
anybody would say, have you seen a drop
from your China, Asia-Pacific business
or even Europe going into the US? Yeah,
we have seen a drop, double-digit drop,
which we've publicly already shared. So,
I would say if if they're thinking about
eliminating dimminimus, they have the
right to do that. We would obviously
advocate and share the customer opinions
of eliminating a dimminimus, let's say
here in the UK, as an example, which is
up for discussion. We would advocate it
and share our feedback, but at the end
of the day, we're not policy makers. um
we'll follow the policy and we'll make
sure that we inform our customers
appropriately, but there has been a
drop.
>> Mike, I'm sure you're using AI given
given what is going on and the
volatility that you're seeing. I'm sure
you're trying to use it as effectively
as you possibly can. How effective is
it? Like you're a business that that
would seem an obvious choice to start to
implement some of this technology bots
communicating with customer all there's
there's lots of ways of doing it.
I how effective is it right now? what
kind of rate of return are you getting
off the investment maybe you're making
where do you see the opportunity is is
all the hype justified in terms of what
you're seeing
>> yeah for us I would say um we continue
to grow in that space and have been in
that space for some time now
>> uh one of the areas that we're looking
at deploying Agentic AI as an example is
in the area of customs where we can work
upfront through AI to leverage it and
then redeploy and upskill our employees
that are currently in that area and put
them in other areas where they can help
our customers who are calling in and
saying, "Can you help me on this change
in tariff? What does it mean? Can you
tell me what an HTS code is and how do I
apply it? Can you tell me what the
landed duty and taxes will be? Hey, can
you help me with the appropriate inco
term that I want to use going into the
US, whether it's delivery duty taxes
unpaid or delivery duty taxes paid?" So
we're using AI now on areas where we can
interact with customers and then we take
the individuals that we're doing that
and we upskill them and redeploy them in
other areas.
>> But is the is it is the hype
>> it's real.
>> It's real. It's justified. You think
this is going to be transformative in
terms of your business?
>> Absolutely. It's going to help us in the
space of customer service. It's going to
help us in the space of customs.
Absolutely.
>> Great to catch up, Mike. Thanks for
stopping by to see us. You're a busy
man.
>> Mike Parah, DHL Express Europe CEO.
Thank you very much indeed. Coming up,
we're going to turn back to what we're
seeing on the geopolitical front.
European leaders look to offer troops as
a Ukraine security package begins to
take shape. Uh we may be talking about
air cover from the Americans as well.
All of these details, we'll give you
more next. This is Bloomberg.
48 minutes past the hour. Welcome back.
You're watching the opening trade. This
is where markets are nearly 50 minutes
into the session. As you can see, we are
down, but not by that much. It is tech
and defense that is causing the damage
on the downside. I care as well
apparently. Alcon suffering as we see
its numbers disappointing. Uh let's turn
our attention to what is happening with
the geopolitical story though, which is
impacting you could argue some of those
defense names. Uh a package of security
guarantees for Ukraine is taking shape
with European leaders weighing sending
troops as part of a potential peace
deal. Ukraine's allies are hoping to
strengthen keys position ahead of a
potential meeting between President
Putin and Zalinski. Let's talk to
Bloomberg Stephanie Baker, author of
Punishing Putin inside the global
economic war to bring down Russia.
Security guarantees. Security guarantees
could imply US air cover. The journal is
reporting that today. European boots on
the ground in Ukraine in some shape or
form. This is this is Putin sees this as
as as Russian territory. This is this is
NATO forces operating inside Ukraine. Is
is that something that's going to be
acceptable in this Zalinski Putin
meeting that we could be talking about?
>> Well, I think the thinking is that any
deal is only enforceable if there is are
these security guarantees. Um so, uh
they're trying to hammer out the
details. The devil is definitely in the
details. You have the US Joint Chiefs of
Staff uh meeting with his British
counterpart Tony Ratkin today to try to
pin that down. There is this talk of
potential air cover. US support
logistics and intelligence is absolutely
crucial. But Europe European countries
haven't gotten together to commit enough
forces on the ground. So that's a huge
hurdle. And although coming out of the
Alaska summit, Steve Whitoff, Trump's
envoy, said that Putin had agreed to
allow these sort of NATO article 5 like
guarantees. The statements coming out of
the Kremlin are rejecting that, saying
we do not accept the idea of any
European troops from NATO countries in
Ukraine. So there's a lot we're very far
off from any kind of firm agreement as
to how exactly that's going to work and
whether or not those security guarantees
would be legally binding. I mean because
Ukraine had the Budapest memorandum of
1994 after it gave up its nuclear
weapons and you know that was not
legally binding and it didn't hold.
>> Yeah. I mean we've seen two days then
Stephanie since these meetings at at uh
in Washington we've seen two days where
defense stocks have weakened across
Europe as if there are many market
participants who are thinking that this
could be material but actually we don't
have a date for a meeting we don't have
confirmation from the Russian side yet
that that that President Putin is
prepared to meet uh Zilinski or that
they feel there's enough to meet to talk
about is is that the case how likely is
this meeting to take place
>> right and out of the Alaska summit Um
Trump had proposed this uh uh Putin
Zalinsky meeting and said that Putin had
agreed to do it. And then again you get
a different readout from the Kremlin
saying um a lot of preparation needs to
go into that and we think we need to
just have more senior negotiators meet
first. So it looks like Putin is once
again playing for time. He has called
Zalinsky an illegitimate leader. He has
said that certain conditions need to be
set up before he would meet with him and
that is those conditions is really
double speak for uh Ukraine giving up uh
giving up territory and you know
Zalinsky has said he's not going to do
that. So I think
>> we're pretty far away from a bilateral
meeting and it does seem to me that
Trump is basically saying you guys go
work it out and that's not going to end
>> Does he seem Does Putin seem like he's
ready to to stop the war? No, he doesn't
seem like he's ready to stop the war at
all. In fact, the Alaska summit was all
about heading off tougher sanctions,
playing for time because the Russian
troops are on the up on the ground in
Ukraine. They're slowly gaining
territory, but they're still nowhere
near gaining control of the rest of
Daetsk that is demanded at negotiations.
The UK defense estimate is that it would
take them four years to take that.
>> Stephanie, thank you very much. Member
Stephanie Baker with the latest on
Ukraine. Back to the macro picture as
far as markets are concerned and we're
still waiting for some data today. We've
got 10 a.m. UK time. Euro area CPI
expect it as a final reading expected to
come in at 2%. Uh bang on the nose
around 11:30 a.m. UK time we'll get
target earnings. An important reader
perhaps on the US consumer. 4 p.m. UK we
get Waller speaking the Feds. Waller
that is of course and FOMC minutes later
on today. So plenty for Valerie Tidell
to digest
>> and she's just been she's been whistled
wheeled in
>> around the set to join us. Wheeled in.
Um so what are we focusing on? Is it is
it the retail earnings? Is it just what
is happening in tech? Set the stage for
us.
>> Uh look, I think there's two key themes
today. One of which does this uh
weakness in tech persist? Because I
think if it likely is persist through
today, the narrative is just going to be
that no one is going to be around to buy
the dip until we hear from Jackson Hole,
until we hear from Fed Chair. uh in
Jackson Hole on Friday. The other really
big thing though is retailer earnings.
We had Home Depot yesterday where their
results showed that consumers were
pulling back from big ticket items and
the CFO actually uh implied that they
are running through their inventory and
are likely going to have to increase
prices on some of their goods in the
last quarter of the year. So, a bit of
an inflation warning from Home Depot.
Kind of the stock ended up in the green
at at the end of the day. Yes, it did
fall down 5% after the immediate results
uh from the earnings. We do have Target
today and Walmart uh tomorrow. So really
looking for a good picture on the US
consumer and how these companies are
dealing with passing through uh price
rises as well. Yes, because you know how
much they stocked up and therefore there
was a lot of inventory that doesn't have
to respond to the tariffs just yet. You
know, all of that conversation no doubt
very important and that feeds us into
the Fed conversation, doesn't it? is uh
how the US consumer is coping, how
retailers are coping with the tariff
environment really crucial to to the to
the Fed's tone. Any change in your
thinking uh on Jackson Hole then Valerie
and what we expect?
>> Well, look, Anna Wong, our own Bloomberg
economist, wrote a great piece on the
terminal talking about in her mind what
is the hawkish scenario and she pencled
out this scenario where Jerome Powell uh
pivots away from this monetary policy
framework called flexible inflation
targeting and that could be seen as as
mildly hawkish. It was something that
was really useful when inflation was
below target as a reason for them not to
continue easing or continue cutting
rates which were also which were at zero
at that time. It's not really been that
useful now that inflation's been running
above target
>> to keep the White House on board. Does
he need to signal rate cuts and does
anything else generate a big response
from the This is the question I think
people are trying to work out because it
feels like the strings are being pulled
by politics at the moment which is which
is percolating into the market. So kind
of do we is it is it the re what's more
market moving the pal speech or the
reaction to the speech from the white
house? Look, that's a good point, right?
Who are we watching? Are we still
watching Fed Jerome Powell or are we
watching Chris Waller who is speaking,
you know, later today? It's on Bitcoin
and on cryptocurrency, so probably not
monetary policy moving. But who who do
we watch now? If if you're of the mind
that Fed Chair Powell is not going to
last through the remainder of the year,
>> would it be Scott Bessent who is in
charge somewhat of the first round of
Fed chair interviews, who has talked to
Bloomberg even last week about the Fed
needing to cut around 150 basis points?
He's talked also around a a major rate
cut in September around 50 basis point
rate cut or is it going to be Powell's
speech uh you know on Friday if he
someway opens the door for easing policy
moving forward if he concedes anything
about the labor market not being as
strong as he previously characterized
there could be some central bankers who
might choose to hide behind some quite
technical language if you're trying to
fend off political pressure and to to to
make the message a little more uh
difficult to read I suppose or you know
available to the pros But Valerie, thank
you very much. We'll continue to of
course work our way towards Jackson
Hole. Coming up on the program, the CEO
of Forterero, one of the UK's largest
tech unicorns, will be on the pulse at
9:45 London time. That keeps up the tech
theme. One that we'll continue to watch
as the day progresses.
>> Absolutely. Airfares are up. Marmalade
prices are up as well. Ticket prices are
>> Has a lot to
in so many ways. Uh anyway, that wraps
things up. That was the UK inflation
story. The opening trade is done. The
pulse is next. This is Bloomberg.