[Music]
news makers and market movers.
This is the pulse with Francine Laqua.
>> Good morning and welcome to the pulse.
I'm Tom McKenzie in for Francine Laqua
in London. Now, Federal Reserve Governor
Lisa Cook says she will not be bullied
into stepping down from the central
bank. This after President Trump called
for her resignation over allegations of
mortgage fraud. Federal Housing Finance
Agency Director Bill PZ says Trump has
cause to fire Kirk.
>> She lied in my view in her statement
this tonight because she said that the
first time she heard about it was
through my tweet. She didn't hear about
it from my tweet. There's no way she
doesn't follow me on Twitter. I think
this lady is a professional liar. She
shouldn't be at the Federal Reserve.
She's going to resign in my view. And if
she doesn't resign, I do believe that
the president has caused to fire her and
that will be up to the president whether
he decides to do that or not.
>> Important to note, of course, that no
charges have been filed against Lisa
Cook. Let's bring in Bloomberg's chief
Asia correspondent, Ross Matson, now for
the details on a Lisa Cook who is now in
the firing line of this Trump
administration. what is being alleged?
How has she responded? How significant
is this potentially?
>> Well, it is significant because it's the
latest salvo by this administration
against the Fed chip chipping away at
the Fed um over time. Obviously Jerome
Pal, but now also Lisa Cook and it's
it's the White House, but it's also the
Federal Housing Finance Agency which is
coming heavily for her as you just
heard. And the accusation seems to be
that she was essentially juggling
mortgages for primary residences. So
you've got more than one on the go
around the same time. They're
overlapping and it's not an completely
uncommon practice, but obviously it's
very much into a gray area. And that's
the accusation that's been leveled
against her. Obviously, she's denied
this and says she stands ready to defend
herself. But it's interesting because
it's also the accusation that the
administration has leveled at some other
people uh who they're having
disagreements with. So some politicians
including you know leaders in certain
states they put these allegations
against other people too saying you're
accused of mortgage fraud. So it's not
something that's completely out of the
playbook for this administration. I mean
she's obviously come out again and said
very strongly that she's going to defend
herself. But the overarching uh message
here is that this is an administration
that's not going to stop coming for the
Fed either way.
>> This is an administration that wants to
rework and rebuild the Federal Reserve.
How should we be thinking about this
accusation in that context?
>> Well, that's right. So, obviously, you
know, if they can loosen up another
vacancy on the Fed that enables this
administration to rebuild the Fed in
their own image in a way perhaps with
some more like-minded individuals, and
they've got quite a few balls in the air
on that already. I you've got the point
where Jerome Pal's term will end.
They've kind of stopped the idea of
firing him or the possibility of trying
to do so, but they're not stopping
criticizing him um either way. And we've
got, of course, you know, the temporary
replacement at the moment for Adriana
Kougler, um, Steven Moran, who's in
until January. Um, and that gives them
time to map out who they would put in
properly for that vacancy potentially.
And there's a lot of names in the air
from within the administration, but also
within the Fed itself, and perhaps some
Fed officials who they see as more
conducive to Donald Trump's thinking,
especially on interest rates. uh but
what it could do is enable them to build
the Fed into something that they want to
some extent. You know that raises
further questions about the independence
of the Federal Reserve and you see that
in institutions across America. It's not
just the central bank but it's looking
at courts and other important parts of
the of the machinery for the US and are
they you know looking to put in uh
people who would be more conducive to
their own thinking. Okay, Ros Matson,
thank you very much indeed overseeing
our coverage of course out of Asia here
in London for today at least with that
context. Ross, thank you. Meanwhile, US
mega caps dragging down the NASDAQ
despite a bounce off session lows. We
did see a bit of dip by towards the end
of the session yesterday. It seems
markets are in something of the wait and
see mode ahead of the Federal Reserve's
Jackson Hole meeting. Joining me now is
Karen Ward, Amir, chief market
strategist at JP Morgan Asset
Management. Karen, good morning. Thank
you for joining us. Is JPAL the next
catalyst for these markets?
Um quite possibly. I mean I think the
market is expecting JPAL to do a
continual good job as he has been doing
of getting the balance right of making
absolutely clear that what's going on in
the background is noise. They are an
independent central bank. They will set
policy according to what's happening in
the polic in in in the economy. But this
he's in his safe space. He's got his
fellow central bankers around him. And
the topic of the conference is the labor
market. And I think really laying out
that yes, demand is weakening for labor
in the US economy, but there's an awful
lot also that's happening on the supply
side because of migration and therefore
the outlook for inflation and second
round pressures should we get a bump in
headline inflation which seems very
likely after the tariffs. Um I think
that would get markets pretty concerned
about the current pricing because that's
the part of markets at the moment that
concerns me. There's a lot of rate cuts
for the Fed price. We've still got over
100 basis points in the coming year.
That doesn't sit with how I see the
outlook for the US economy.
>> The market pricing, the markets are over
their skis in terms of price. Are they
over their skis in terms of pricing
September?
>> I think quite possibly. I mean, all it's
going to take is a bit of stickiness in
inflation and actually a labor market
print which shows it's not falling off a
cliff for for the market to say, "Hang
on, maybe actually this is not this
isn't going to be a particularly
preemptive Fed." And for markets, that's
what's really important. Markets love
preemptive central banks, not reactive
central banks, because of course when
they're then reactive, usually downturns
have already gathered momentum. So yeah,
I think it could be a really important
meeting.
>> Do you do you worry about Fed
independence?
>> Yeah, I mean I was sitting listening to
Rosalyn speaking just then and all that
was going through the back of my mind
was dollar dollar. You know, everything
we're talking about here, all of these
checks and balances on the US system um
is all what underpins its reserve
currency status. everything that
underpins why global investors have for
the last 20 years wanted to park their
money in US assets and the the Federal
Reserve is absolutely central to that.
So picking away at global investors
perceptions of whether the Fed can
safeguard preserve that value of the
dollar you know we we have to be very
mindful of that. So I think as investors
even if what transpires over the next
few years ends up in a Federal Reserve
more willing to cut short rates what we
need to be thinking about is what's
happening to the long end and what's
happening to the dollar because
particularly us outside of the US
investing that's where that any
perception that this is not appropriate
policy is going to show up
>> and as you were thinking about the
dollar I was thinking about Hungary I
was thinking about Turkey I was thinking
about how those institutions were
remolded in the likes of Erdogan and
Orban over in Hungary. When we think
about how that ties in then to the
rotation trade out of US equities into
Europe that had been such a frontal
front and center trade earlier in the
year. It seems to have faded on the on
the back of strong earnings out of the
US particularly with tech.
>> Yeah.
>> Does does that come where are we in that
story?
>> I still think we're at the beginning. I
mean if I look at valuations to me it
still suggests that you know there's
still a lot of pessimism about Europe
generally although the valuation
discount has closed slightly it's still
beyond what's normal um and so I think
that relative optimism about the US
pessimism about the Europe is still
there so when I think about how we then
move forward it's coming from both sides
my from my perspective in the US I it
tech is an important and as you say an
important component of the story. I'm
still a little bit nervous that we
haven't really gone through the real
tech test yet. You know, these companies
are investing massively in these new
technologies, but the question is how
much are they going to be in demand and
at what price in the broader economy?
It's quite rare historically to see a
capex downturn because of uncertainty
and tech earnings not decline. So I'm a
little bit there's a few risks around
that. And then on the Europe story, you
know, we've just seen the composite PMI
this morning. I think we're just at the
beginning of Europe's recovery. We
haven't yet seen the German fiscal money
hit the economy yet. The consumers just
waking up to lower interest rates.
They've got all those savings that they
can go out and spend. So I think the
growth differential is going to look
increasingly appealing. And you know,
after a decade of Europe
underperforming, there's still a lot of
skepticism. And there's still a lot of
money to move.
>> How how do you explain then you I mean
you've touched on on this partly, but in
terms of the moves that we've seen into
equities in Europe and what's really
driven the growth in the upside that
we've seen here to date has been value
stocks and small caps and in the US it's
been growth.
>> Is this a hedge by investors? Is it two
different groups of investor? How do we
make sense of that of that kind of split
view on the stock story regionally?
Well, I think in Europe, so as you say,
value and small cap, the small cap is
interest rates have come down. We know
small cap is pretty interest sensitive.
Interest rates have in Europe. That
small cap space is responding. And
Europe's small cap is often an exciting
area of the market. So, it's been
revitalized. And value is all part of
just this reassessment that maybe Europe
isn't stuck in the rut that it's been in
the last decade. Maybe actually this
confrontation from Russia and from Trump
is actually galvanizing the region into
some good policy and maybe we're
discounting some of those sectors too
heavily. And then you know tech as I've
already explained on the US side we're
going to see. I'm I'm not pessimistic on
tech. I just think there's a very high
expectations on quite how easy the
transition from investing to selling the
product's going to be. And usually
historically it's never a straight line.
>> Yeah. MIT coming out with a survey and
some data suggesting that the ROI is
still a piece that is missing in terms
of investments around around AI and
adoption by around around uh businesses
and by businesses. The Footsie 100 a
fresh record yesterday and and part of
that seems to be because the Footsie 100
doesn't have a lot of exposure to chips
or to AI. Is is there is there further
to run do you think for for UK big cap
stocks and and the Footsie 100 or is it
looking a little stretched at this
point? Well, we know that uh the UK
benchmark is heavily weighted towards
energy and mining. So energy partly
because of political factors, but
actually partly just the AI story
itself. You know, we know these
technologies are incredibly energy
hungry that's underpinning energy
prices. We've seen that uplift. So the
footsie tends to go with I mean, it's
one of the things we've said is that
when you're thinking about hedging
yourselves from some commodity risk or
from some inflation risk, actually the
UK benchmark is a pretty good place to
be. I mean, if you go back to 2022 when
most markets were down because they were
worried about inflation, the UK
benchmark was one of them that was up.
So, I think it's part of that inflation
narrative where actually the UK market
will give you a bit of resilience.
>> Okay, Karen Ward, thank you very much
indeed. JP Morgan asset management.
Amir, chief market strategist. Investors
should be ready in portfolios to that
point for inflation surprises and the
rotation from US to European equities as
further to run. Coming up, Russia
demands a role in the security plan for
Ukraine and says China needs to be
involved too. Details are next. This is
Bloomberg.
The conversations matter, the insights
you need. This is the pulse. I'm Tom
McKenzie in London. So, US Vice
President JD Vance says negotiations
over ending Russia's war in Ukraine are
focused on security guarantees for
Ukraine and territory that Russia wants
to control. Speaking to Fox News, Vance
added that this would include Ukrainian
territory that Russia is not at this
point occupying.
>> And we've made a lot of progress, Laura.
Like I look, who knows what's going to
happen. The president tells me this all
the time. You can never say with
certainty what the outcome in this
situation is going to be. But we now
have the Russians talking to the
Ukrainians. They're talking details
about what would be necessary on each
side to stop the fighting and stop the
killing. We've made more progress in 3
months than the country had made in 3
years in stopping this conflict. And I I
think it's because sometimes you just
need a president who will pick up the
phone and call somebody.
>> Well, for more, Tony Halpin, who leads
our Russia economy and government
coverage, joins me. Tony, what sort of
guarantees in terms of security
guarantees are being considered for
Ukraine and potentially Russia's own
involvement in those security
guarantees?
>> Yeah. So, Vice President Vance's
comments there just illustrate some of
the difficulties because uh while he
mentioned it in terms of security
guarantees and territory for Ukraine,
some of the territory that Russia wants
is critical to their defense. So, it's
not as simple as two separate issues.
Russia is also clouding the uh horizon
somewhat by talking about the need to be
involved in any security arrangements
for Ukraine and also potentially
involving China as one of the United
Nations permanent five powers. European
powers on top of that are also trying to
forge some kind of NATO light agreement
that would um set out what kind of
security uh defense uh provision they
would make in the event that Ukraine
gets attacked in the future. So there's
a very complicated picture, lots of
moving parts.
>> Tony, it is it's quite remarkable on
some levels to to consider that Russia
is is suggesting that he it has a a role
in a security guarantee
which would involve securing Ukraine
against ultimately Russia Russian
aggression. Is is what we've been
hearing from the Russian foreign
minister Sergey Lavrov, is this an
attempt by Russia to pour cold water on
the on the modest optimism that has come
out since this meeting in the White
House?
>> Yes, in some ways it is. It's just to
underline the difficulty really of
trying to come to a solution to this
war. But it's also part of how Russia
views the conflict. In many ways they
don't view it simply as a confrontation
with Ukraine, a conflict and a war with
Ukraine. Putin has always viewed it in
many ways as a confrontation between
Russia and the West which is taking
place in Ukraine. So Russia is trying to
use this moment to establish some sort
of broader security architecture in
which it would have a role and Ukraine
security would form part of that
security architecture. But that's very
difficult to argue for when you're the
one that's actually uh committing the
invasion and committing the aggression
because Ukraine wants to be sure that it
will be protected in future just against
Russian aggression. So, it's all part of
a a rather complicated chess game
between the Kremlin and the White House
and NATO on one side with with Ukraine
in the middle.
>> And Tony, are we any closer to this much
touted meeting between Putin and
Zilinski?
Well, Zilinski said yesterday he's
willing to meet Putin, though he won't
see him in Moscow and casted out on
places like Budapest. He said it should
be in neutral Europe. Putin's given no
sign yet that he's ready to meet
Zalinski. Um, he's always said that he
will do, but they have to have an
agreement on the table and they're very
far from that right now.
>> Okay, Tony Halpin, who leads our Russia
economy and government coverage. Tony,
thank you for that update. to Israel now
which is reporting to reported to have
approved new settlements in the occupied
West Bank while its troops have now
reached the outskirts of Gaza City. The
Israeli military called up around 60,000
more reserve soldiers to join the war
against Hamas, a sign that preparations
are underway for a stepped up offensive
despite ongoing talks about a ceasefire.
And in technology, Microsoft is limiting
Chinese company's access to early
warnings about flaws in its technology.
The company has been whether a leak led
to vulnerabilities in its SharePoint
software being exploited. Microsoft has
blamed state sponsored actors in China
for a series of SharePoint hacks that
affected hundreds of government
agencies.
And it's another busy week of earning
state side with retail stocks in the
spotlight. We got a disappointing sales
outlet from Target yesterday. Today
up front and center is Walmart up on
deck of course the biggest retailer at
least the biggest grosser in the US. For
more let's bring in Bloomb Jennifer
Kreery for what to expect and what the
earnings so far has told us about the
health of the consumer and what's
happening in terms of the retail space
in the US.
What are we learning so far about this
sector and whether or not there is
resilience amongst the US consumer where
we're starting to get question marks
about the labor market and maybe a
little bit of softening?
>> Yeah, from these retail earnings, we're
seeing some of the holes in some of
these retailers business models. I think
if we were to take one message from the
US retail earnings so far, it's that
it's a good time to be a discount
retailer. Customers are really shopping
around for value. So some of the winners
so far, TJ Maxx for example, raising
their fullear earnings per share
guidance and that's thanks to its value
proposition. Um on the negative side,
there's Target. You know, big news
coming out yesterday that it's replacing
its CEO as it's really trying to
turbocharge its turnaround. Um and you
know, it's it's having some difficulty
with tariff induced kind of price rises.
Uh and it's it's going to have to
weather those storms. Now looking ahead
to Walmart, it's seen as slightly more
resilient. It's probably able to weather
some of those storms a bit better than
its rivals. Um so analysts have a pretty
positive read on retailer so far.
>> Okay. Maybe a bit more resilience
amongst amongst the Walmart numbers that
we will get later today. You you touched
on tariffs. What is our broader
understanding of the tariff impact?
There's been there was a reluctance
after April for companies to pass on
higher prices. Maybe there was a
political play there were concerned
about about being targeted by President
Trump. Is that starting to change? Are
prices going up? Are tariffs starting to
have an impact?
>> Yeah, I mean, all retailers are very
cautious to say much about tariffs at
the moment. Of course, they don't want
to spook investors, but we can point to
a few so far. So, Estee Lauder, for
example, highlighting a $und00 million
hit to profitability from tariffs. Um,
we're seeing some retailers already
raise prices. Walmart in Q1, for
example, raising some prices on certain
products, including baby products. uh
targets as well in their earnings saying
that they'll have to negotiate lower um
uh lower prices with suppliers. So
they're really having to try and manage
those costs before passing them on to
the consumer. So we're seeing different
ways. Um so TJ TJ Maxx, for example, as
well. Um they're a bit they're an
interesting case because they're a bit
more shielded. They um their business
model means that they buy kind of excess
inventory from uh other businesses and
so a lot of those fees are already
covered by those businesses. So, we're
really seeing uh the differences in how
retailers are shouldering some of those
costs. Now,
>> Jennifer, excellent. Thank you very much
indeed. Really great setup in terms of
what to think about with the Walmart
earnings up front and what we've learned
already from the likes of Target.
Jennifer Creary with that update and
preview. Thank you. Meanwhile, to the
auto sector, Ford is looking to develop
a supercar for off-road racing as a
follow-up to its new $325,000
Mustang GTD sports car. The CEO, Jim
Farley, says he sees the vehicle as a
dirtloving, high-performance machine
that could compete in the Dhakar Rally.
>> I'm very interested in that. The
off-road the the on-road performance
hierarchy is very simple to see.
>> Um, and the very top is over served in
my opinion, but no one's ever done this
off-road supercar.
And after a month's long hiring spree,
Meta says it has paused some hiring
while it does quote planning and
forecasting. The move comes as part of
its latest restructuring of its
artificial intelligence division, which
will now be split into four distinct
teams to better capitalize on new
talent. And OpenAI says it could
eventually offer a service whereby it
helps other businesses to tap into the
data centers and physical infrastructure
needed for AI. The service could help
offset some of the company's immense
costs and would be loosely based on the
success Amazon had in renting out its
spare cloud computing capacity. Success
of course Amazon continues to see. Let's
check in on the markets then as we lead
up of course to really the market moving
setpiece of the week which is Jackson
Hole and JPAL's speech of course
tomorrow on Friday. European stocks
across the benchmark a little softer by
a tenth of a percent. The DAX over in
Germany dropping five points over in
France slightly heavier selling down
3/10en of a percent on the Kahant and
the Footsie 100 after a 24th record
close yesterday year to date. Further
upside in the session today for UK
stocks up just a tenth of a percent. US
futures. Let's check in after there was
a bit of dip buying for some of the tech
names yesterday. S&P futures flat,
NASDAQ 100 futures pointing higher by a
tenth of a percent. Coming up, we'll
focus on the UK and Chancellor Rachel
Reeves. Stay with us. This is Bloombo.
Good morning. Welcome to the Pulse. I'm
Tom McKenzie in for Francine Laqua in
London. These are your top stories.
Happy Thursday. Fed Governor Lisa Cook
says she will not be bullied into
stepping down after President Trump
demanded her resignation over
allegations of mortgage fraud. Tech
stocks stabilize after a two-day selloff
as markets tread cautiously ahead of
Jerome Pal's Jackson Hole speech
tomorrow. Plus, the US says Russia wants
Ukrainian territory it does not yet
control as Moscow pushes for a role in
the security plan for Ukraine. Let's
check in on guilts right now as we look
as well crossing the terminal right now.
The redhead on terms of the data around
services and composite PMI out of the UK
August services PMI rising to 53.6.
That's a pretty strong number. The
forecast have been for 51.8. to the
services PMI data convincingly in
expansionary territory. Composite PMI
for the UK coming in at 53. The forecast
had been for 51.6. This of course on the
back of the latest GDP data that we got
a couple of weeks ago that suggested
slightly more strength in the UK economy
than some had expected. The guilt
markets then currently you're seeing
yields up two basis points across the
curve. The front end, the 2-year is
yielding 394, the 10ear at 469.
So very modest soiling pressure. You're
seeing that reflected by the way in the
sovereign debt of France and Germany as
well on the back of slightly better PMI
data there. So it's not just the UK
where you're seeing a bit of selling
when it comes to sovereign debt, but
you're seeing yields up around two basis
points with the front end at 394. Now
the UK chancellor will be heading into
the autumn once again on the fiscal
ropes. We've said that before, haven't
we? Bloomberg understands Rachel Reeves
is weighing a tax on high value family
homes at the point of sale to plug a 10
billion pound budget hole. That's just
for one year. Bloomber's John Stepp
joins me now in terms of what we should
be thinking about. So John, what you
follow this very closely, what kind of
taxes, what kind of changes should we be
braced for then? Well, I think well this
is interesting because this is classic
August news stories. Um there's a lot of
kite flying going on at the moment,
which is worrying for for other reasons.
But on Monday, we got a report that the
chancellor was looking at reforming
stamp duty um and council tax and
replacing them with a kind of annual
property tax that would basically be
like a sellers tax. In some ways, that's
actually a good idea, but it's extremely
complicated and quite easy to mess up.
And it appears the Treasury sort of
pushed back against that. And then on
Tuesday we were hearing that actually
what they were looking at was uh at the
moment if you own a home and you live in
it then you get an exemption when you
sell it from capital gains tax. And what
they were looking at was scrapping that
exemption on people with houses worth
more than 1.5 million. So when you sell
your 1.5 million or plus house you'd be
liable to capital gains tax on that. Now
it sounds like an easy way to raise
money. Um and you can also turn it's a
mansion tax. It's tax on the rich, you
know, you're not kind of talking about
inflicting pain on working people, but
it's actually it's rife with potential
for disaster. Uh because the first thing
that will happen if capital gains tax is
imposed on houses of this value is that
the Tories and reform will turn around
and say come 2029 we're scrapping this.
So no one will sell their house.
>> Um because you know why would you uh
when you you know you can avoid the
capital gains on it simply by waiting.
Um, so I don't think any of these
proposals will fly. Um, and if they do,
I don't think they'll raise the kind of
money that they hope they will.
>> So, what are the other options, John?
What are the other options? What else?
What are the other levers that this
chancellor could reach for? She's going
to have to do something.
>> Oh, she has to do something. Um, but
this is the problem. She's kind of ruled
out all of the things that would
actually move the needle easily. I mean,
this is the real problem. The real
problem with this is that she's she's
ruled out raising income tax, national
insurance, VAT, and corporation tax. And
between them, they account for basically
75% of the UK's tax take. So that leaves
you with be 25% of somewhat more random
taxes and tax reliefs. But if you mess
about with any of those, then everyone's
financial planning is completely messed
up. Um, so we already had messing about
with inheritance tax at the last budget.
We uh you know we have constant rumors
and we have done for decades actually
that pension t pension relief is going
to be changed in some way but as soon as
you pull it's a bit like the kind of
reforming property tax issue. As soon as
you pull on any of the threads of that
it suddenly becomes incredibly
complicated and at best you could launch
maybe a you know a review or a report at
the budget into how you're going to do
this properly and I mean that might be a
good idea. I mean certainly I mean stamp
duty is a terrible tax. It should be
replaced. It could make the property
market much more efficient if they got
rid of it. But doing what they're
thinking about doing just now would just
be a disaster. It would grind the market
to a halt and it's already, you know,
it's already not doing brilliantly.
Yeah.
>> Um so yeah, I mean she she there's lots
of things she can look at, but I think
the the the problem is because she's
boxed herself in. In an ideal world, she
would just reverse the national
insurance cuts that the Tories made at
the end of their turn. Um, which were
kind of clearly a bear trap for Labor to
fall into. Well, unfortunately, that is
exactly they have fallen into it. Um, I
mean, the other option is she could look
at the fiscal rule. The the fiscal rule
is kind of made up. Um, as long as you
have a good story to tell markets about
why you've decided it's no longer
tenable, then I don't think the guilts
market would throw a wobbly. Um but no
no I mean
>> that's what the left wing members of the
Labour party are pushing for isn't it?
>> Yeah I mean well the problem is you've
got to tell a good story and they
wouldn't you know it's like you got to
kind of make it you got to make people
understand that we aren't throwing this
aside because
>> you know we don't want to meet it. We're
throwing it aside because it's too
restrictive at the moment and we're
going to you know make considered
reforms that are going to promote growth
while cutting the debt. Um but yeah,
you're right. I mean, if they actually
just said, "No, we're not doing it." And
then just, you know, kind of decide to
spend a load of money and putting up
doctor's salaries or something like
that, the guilts market would be less
keen on on that.
>> Okay, John Stepp, fantastic. Thank you
very much indeed. On the tight rope, of
course, that this chancellor has to walk
and the unenviable options as well. John
Steek is of course the author of
Bloomberg's money distilled newsletter.
You can get it on Bloomberg.com and of
course on the terminal. Do read that.
Now, the UK government staying with the
UK is preparing to take control of
Tycoon Sanjie Gupta's steel works should
they fall into liquidation. Lawyers for
a creditor to Specialtity Steel UK, part
of the Liberty Steel Group, told a
London court that government officials
were preparing to appoint special
managers in the event that the steel
operations are wound up. It would be the
second time that the government has
intervened in the steel industry after
it took over the British steel plant in
Scumthorp earlier this year.
Does loyalty pay? If you ask a member of
Gen Z, the answer is probably not.
According to a new survey conducted by
Intuit Credit Karma for Bloomberg, many
young people have multiple current
accounts to manage their money these
days. Wait, did we need a survey for
that? Let's get more from Bloomberg
senior digital finance editor Anna Era.
Um, I'm being flippant, of course, but I
just I could do an unscientific poll of
of younger friends of mine, and they all
have three, four, five different bank
accounts. Why Why is this Anna? Why is
this potentially a a problem
particularly for the incumbent banks?
>> So banks spend so much money in
acquiring customers and even more now
that you have so much choice, right? But
traditionally you make more money from
customers when they age and when you're
able to sell them more profitable
services like loans, right? So if
they're not sticking around, they never
get to the threshold where they're
making you money. And that's becoming
more of a concern with Gen Z because
they have we spoke to someone who had
made 2008 2,800 pounds just opening bank
accounts from like incentives and he had
over a dozen
>> account just by opening bank accounts.
>> Yeah. And he had and he had so and he
had a dozen bank accounts, right? And he
was saying loyalty doesn't pay pay off
and he has a Tik Tok account where he's
he's teaching other genzers how to uh
make money from incentives. So so it is
it is starting to become a little bit of
a challenge for both fintech banks and
also the bigger banks. So how how is the
industry responding?
>> Uh they are launching more incentives
which I guess and also ones where they
they pay you if you stick around. So an
annual incentive if you're staying for
for a year for example
>> you get paid you get paid for being a
customer cuz in the US sometimes when
you open an account you have to pay for
that account but here in the UK now
you'll get paid.
>> Yeah. Exactly. Or if you're referring
friends because we saw Gen Z actually is
more inclined to join a bank if they
have a friend referral. Um and some
others are just leaning in. They're
saying you know what we can't get them
to stick around on one app. let's open
multiple apps because they like ease of
use and um so we'll just lean into it or
we'll let them stay in our ecosystem but
you know get services from other people.
>> What what are what are some of the
craziest promotions that you that you've
come across?
>> Yeah, we we spoke to Nationwide and they
they took over a fried chicken shop in
shortage last year and they were uh and
they got in influencers and they were
paying uh food delivery uh bonuses. So
So they gave around £200 I think it was
to to to spend on food delivery.
>> Yeah. So when I asked about crazy, I did
not expect your answer to involve
nationwide. I don't usually associate
nationwide with crazy and chicken shops
in shortage, but there you go. This is
what's happening as they try to respond.
Anna, thank you very much indeed. That
reporting of course on the terminal and
on blueber.com. Bloomberg, senior
digital finance editor on the lack of
loyalty amongst Gen Z. Anna Er, thank
you. Now we are going to switch focus
talking about wealth but of a slightly
different scale because Africa's richest
person Alika Dangoti has built a $20
billion oil refinery in Nigeria bigger
than any in Europe. But critics are
questioning whether his dominance will
truly benefit the nation or mainly just
enrich himself as he seeks to ban
foreign competition. Joining us now for
more on Bloomberg's big take is Jennifer
Davis who's across this story for us.
Jen, who is Dan Goatei? How did you
become so wealthy and why why is this
refinery so important to Dangote and and
potentially Nigeria itself?
>> Right, Tom? Uh Dangote for many people
stirs a bunch of different emotions. But
if you take a look at what he's actually
been doing over the past few decades, uh
he made his first billions in his cement
business. But his family has been in the
commodity space for a number of years.
uh he's traded things uh like cocoa uh
and other uh commod cocoa, cotton,
cashew nuts, and even sesame seeds. But
really the focus over the past few years
has been on this oil refinery that you
were just speaking about. Uh and the
reason is a bit twofold. If you take a
look at uh Nigeria, it is Africa's
biggest oil producer. It's also the most
populous OPEC nation. And yet it has
spent the bulk of the past few uh years
and decades uh having to export crude uh
to Europe and other places and also and
then import it back as a refined product
that has cost the government uh billions
of dollars. Uh not just that it's also
uh been a drag on the economy because of
the subsidies and also corruption. And
so the fact that now there is this
refinery in the country uh has been very
significant for this administration uh
and of course Dangote you mentioned it's
$20 billion. It took him uh nearly 11
years to actually get this up and
running. Uh and as our Bloomberg big
take really digs into this is for the
first time in three decades we're going
to be seeing Nigeria being able to
export refined products uh in a way that
they haven't been able to do before. So,
uh, many people, as you were just
mentioning there, critics are wondering
though whether or not this is going to
be a lasting change for this economy,
uh, and whether or not oil sales are
really going to be a boost for the
Nigerian economy or whether or not it's
join just going to keep making, uh, Dan
Go even more wealthy than he actually
is. And just to give you a bit of stat,
Tom, a bit of stats, uh, in the past
three months, his wealth has gone up $1
billion to$28 billion. And so this is of
course adding to the empire he already
had uh but still affecting uh one of the
most po or the most populous OPEC
producer.
>> Yeah, of course. I mean certainly and
and the changes are there and he's made
this commitment this investment. What
what is next then? What what is next the
next step? What is the next what is the
future looking like for Dangote himself?
There's still a lot that this refinery
needs to do in order to get the maximum
capacity that Dangote sees and even uh
that local producers are hoping to see.
Uh and so there's still quite a bit that
we're waiting for uh in terms of this
refinery. Uh for Dangote himself, we did
recently hear that I was mentioning
earlier that the the first uh bit of his
billions in wealth did come from his
cement business. He recently announced
that he was going to be retiring from
the chairmanship role. Uh in instead uh
they're appointing a former executive of
Echo Bank to be the chair of Dangote
Cement. Uh but Dangote's empire, as I
was mentioning, doesn't just stop there.
He's been in the commodity business for
his whole entire life. He now sees
fertilizers potentially being the next
boon for the Nigerian economy. Uh he
also is looking at a deep seapport for
Nigeria. And so this is not the last of
Dangote, this refinery. And as he says
to us, he wants Africa to be
industrialized and be able to produce
and export their goods and get the value
add that many leaders talk about day in
day out.
>> Okay. Well, that ambition is still
there, isn't it, for Dan Goi Jennifer
Zapasa in Johannesburg. Thank you. You
can catch more of course of Jen in the
next edition of Next Africa that is on
Friday.
Coming up to the earning story and this
time, shares of Novanis slumping. One of
the biggest losers in the session so
far. That's after the company trims its
revenue forecast. Margins not as punchy
in terms of the outlook as some had
hoped for. I'll be speaking to the CEO
next. This is Bloomberg.
Oak Tree Capitals co-chairman Howard
Marx is warning US stocks appear to be
in the early days of a bubble. Mark
spoke exclusively with us about his
concerns over rising valuations and
investor complacency.
>> This is all just feeling and and uh and
uh an opinion. None of this is factual.
But it it it does seem that that stocks
are expensive relative to what I call
fundamentals or you might call reality.
And uh you know the outstanding reason I
think is that um you know there hasn't
been a serious market correction in 16
years. So uh people get out of the habit
of uh of of thinking about market
corrections. uh the biggest single
mistake I've been thinking a lot what is
the biggest single mistake investors
make and I've concluded that it is that
they conclude that that the way things
are today is the way it'll always be and
the things that have been happening will
always continue to happen whereas uh
reversion to the mean is is much more
likely so I just think that it's worked
very well uh being being an equity uh
investor has worked very well doing it
on leverage has worked even better. Uh
concentrating in a few stocks has been
gone very well. Uh investors are by
nature optimistic and that optimism dies
hard and uh and u you know um uh I just
think that the fluctuations of the
market are mostly related to
psychological fluctuations. Uh and uh
and people go from uh neutrality to
liking stocks to liking them a lot to
liking them a ton to liking them too
much. And uh that's the continuation
that creates u bubbles and you know
we're we probably in the early days of
that.
>> When you talk about liking Howard uh
maybe liking these assets a little bit
too much. Can you put into perspective
the last time you saw this type of
environment that left you thinking maybe
some of the opportunities aren't as as
great uh when it comes to buying some of
these assets at current valuations? Is
there another time that this sort of
reminds you of in any capacity?
Well, I guess Lisa uh the last time was
probably around uh 90 uh 97
when when the market was uh uh kind of
falling in love with tech stocks and um
you know uh the market was rocketing
along. People were not worried about the
level of valuations. People were
extremely optimistic about the
opportunities for the internet. Um and
um you know Alan Greenspan famously
cautioned uh that there might be uh
irrational exuberance. Um u now I picked
97 uh because even though Greenspan was
concerned about exuberance the market
went on to rise for another two and a
half to three years. Uh, so remember I
said we're in the early days.
>> Oak Tree Capital co-chairman Howard Mark
speaking exclusively to Bloomberg. Back
to the news story now. Noveneis shares
slumping today. The biosolutions company
that produces enzymes, proteins, and
pharmaceutical ingredients reported
earnings earlier. Analysts say a
profitability miss and merely reiterated
margin guidance disappointed. Joining me
now to discuss the news behind the
numbers is Esther Baette, CEO of
Novanis. Esther, thank you for joining
us this morning. The stock is now down
6.6%. It seems to be margins and the
forecast around margins is where some of
this disappointment lies. You're
projecting margins for the longer term
by 2030 of 39%. Some of the markets
expected 40% or more. Why couldn't you
meet those expectations?
Thank you very much for for jo for
inviting us uh today. We we're very
pleased with the results we deliver in
the first half with 9% uh uh revenue
growth and profitable revenue growth
also maintaining the IBIDA guidance for
the year including the headwinds we're
seeing for currency. So upgrading the
revenue growth for the year and then
maintaining the IBIDA margin for the
year guidance including the strong
headwinds we're seeing from currency. to
your second part of the question uh on
uh the guidance for the long term. We
are a growth company and that's exactly
what we're committing to profitable
growth 6 to9% growth while expanding
profitability from a very strong base
from 37 to 38 with the margin. We feel
very pleased of of where we are. We feel
very comfortable of the strong
foundation in place and we're going to
continue to build on a success formula
of growth. be close to our customers, be
there with innovation, continue to
invest with resources to be the partner
of growth for our customers and deliver
on this beautiful 6 to9% profitable
growth at 6 to9% that we're committing
to.
>> Okay, that beautiful 6 to9% by by 2030.
Esther, how would you characterize that?
How would you frame that? Is that is
that a conservative outlook?
>> I think it's a quite a strong outlook. 6
to9% at 39%
uh Ibida margin at the end 6 to9% kagger
through the period and at the end of the
strategic period 39% IA margin we're
talking here about bringing solutions
that transform the way that we produce
and the goods that we consume. We're
talking here about solutions that a high
protein content without compromising
taste, texture, pitability nor cost.
We're talking solutions that enable
cleaner label. with all solutions that
allow high efficiencies, higher yields,
less microplastics,
new building blocks on how we the fools
that we use and the energy that we
consume. Those are the categories that
we in and those are the categories that
we continue to invest to deliver on that
6 to9% and also margin expansion through
the strategic period
>> at at a time of course where we have
tariffs and we have 15% on the euro zone
agreed in that deal with the US. What
what is the tariff essay? What is the
tariff impact on the business now and
into the future?
>> That's an amazing question because that
implying that you know what is going to
be the tariff situation in the in the in
the future. So I'm going to base uh and
frame my answer on on on today. Uh we do
live in the same world that we do that
you that you do. We foresee uh forecast
a not neutral net no impact of tariffs
for 2000 uh for 2025. We are exposed to
tariff marginally. Most of what we
produce, what we sell in US, it's
produced in US. And then the areas that
we're not, we will bring mitigation
efforts through optimizing extremely
global and resilient footprint while
also through pricing through our
customers through net net impact for the
t from tariffs on 2025. It's it's
margin. It's none. It's neutral and
none. Then it is true that this could
cause impact on the consumer behavior
and that's the reality that we live. We
see some slowdown in household care. We
see also some softness in beverages. But
at the same time, we continue to see
extraordinary pull on the and demand for
growing demand for solutions for cleaner
labor, higher yields, higher efficiency,
muscle weight, advanced protein
solutions that complement the way that
we eat and to bring that solutions to
the consumers.
>> And and you updated your strategy today,
Esther. To what extent will M&A play a
role in that strategy?
>> The 6 to9% it's organic growth. So we
committing to on what we are going to
deliver on what we have today by
continue to invest on whom we are and by
continue to be closer to the customers.
We are a biosolutions powerhouse. We
bring biological based solutions to
respond our customer needs of today and
the future. And always we are going to
be explored and uh open uh to options in
the in the market that could build up
and expand and boost our performance and
drive uh a value added accretion for our
shareholders while making us also even a
stronger partner of growth for our
customers.
>> Okay. You describe yourselves as that
powerhouse. Some of your competitors
have come out as well. They've given
their guidance. Essa, do you think if we
took if we take a step back, do you
think growth for the industry is is
normalizing?
>> Yeah, I mean we bear in mind that we we
play in the same markets that play
markets that they grow one to 2% and
we're putting a guidance to six to 9%.
So we are always outgrowing the markets
that we present and we being that by by
doing that by being closer to the
customers and by bringing them more
portion of the answers of the future
that they grow faster. You cannot make
low sugar added with cheaper sugar. You
cannot make low salt with less with with
uh uh also more competitive sugar. We
cannot make no microplastics with
cheaper microplastics. So this is why
we're growing faster of that the markets
that we play in. We see a little bit of
a slowdown as I mentioned in household
care particularly in North America.
We're watching that very closely. But
that's also embedded within the guidance
and also on what we see uh for the
strategic period on how we seeing the
normalized growth of household care
moving forward.
Esther Bett, CEO of Novanis on the back
of those earnings and those results and
those targets into 2030 of course 6 to9%
in terms of organic sales growth.
Esther, thank you very much indeed for
your time. Let's stay on the corporate
news story in a redhead crossing right
now. We've seen talking to talking about
dealmaking there. This time it's deal
making in terms of the finance space.
Media banker investors rejecting banker
general's bids in a blow to the CEO.
Media Banker investors rejecting Banker
Generali's bids. They're saying that the
offer on Banker Generali has lapsed.
That is according to Media Banker. This
is a story we will keep across for you.
The pricing reaction to that
and more details.