Good morning. I'm Guy Johnson. I'm
alongside Valerie Titel. We're an hour
away from the opening trade. What do you
need to know this Thursday morning?
Well, the Fed's Cook says she won't be
bullied into stepping down. Will her
future now dominate the debate at
Jackson Hole. After bouncing a little
yesterday, tech stocks struggling to
maintain the momentum. Markets are very
quiet. And Russia's foreign minister
Sergey Lavrov reiterates that Moscow and
Beijing must be involved in any security
guarantees for Ukraine. found.
>> Not going to lie, there is not a lot of
excitement when it comes to this market
board standing behind me. S&P futures
basically unchanged. We have had four
straight days of losses though for the
US equity market. Euro stocks 50 futures
also unchanged. They have been
outperforming the US market this week.
Euro dollar also unchanged 11650. But
dollar weakness has really been a theme
this week. It was also uh kicked off by
the recent allegations that Fed member
Lisa Cook, which we'll get into in just
a moment. US 10ear yield at 429 also
holding steady. The countdown to the
opening trade starts right now.
Thursday the 21st. Good morning. There's
not a lot going on out there. I'm not
going to lie to you. Today is a day
where I think we're just going to look
for the next catalyst, which could come
obviously tomorrow from Jackson Hole.
could come from what we see in terms of
the geopolitical story, but there isn't
much today. The market board, as Val
just showed you, quiet as a quiet as a
mouse this morning, a church mouse.
Very, very quiet. Nothing going on. But
this kind of stories bubbling up that I
think are really interesting. There's
actually, weirdly, despite the lack of
news, lots to discuss this morning. Lisa
Cook's future top of the agenda. Yeah,
Lisa Cook's future, the the new I guess
target of uh of Trump's ear or irk eye
to the Federal Reserve, let's call it,
has been uh you know, basically taken
aim uh by President Trump calling for
her resignation yesterday over
allegations of mortgage fraud over her
various homes in Michigan uh and
Georgia. Lisa Cook out with a statement
after this saying that she will not be
bullied into her resignation. So she has
no intention of stepping down. But I
think this opens up a huge can of worms
now that maybe every governor, every
FOMC member who doesn't vote for a cut
in September is going to have their
personal lives ripped apart by a lawyer
trying to find cause to fire them.
>> Do we have an independent central bank
in the United States anymore?
>> I this is the bigger question. And the
bigger question as well over the next 24
48 hours maybe is does PAL speech matter
or does Trump's reaction to Pal's speech
matter more? because it feels like the
White House is pulling the strings on
monetary policy if you look at the
market reaction rather than the Fed. And
is this the new narrative that we've
ultimately got to deal with? And if so,
what are the implications of that?
>> Yeah. Well, is this story around Lisa
Cook going to going to die or are they
going to file some charges and this
going to be taken seriously and push her
resignation? That's the big question
because I think we haven't really had a
test case over what happens when a US
president files a Federal Reserve
governor for cause. We haven't really
seen that. They know they wanted to temp
that with Powell. That kind of story
quieted down. Now they have taken
another aim and this could be perhaps I
mean the next thing to excite this
market because yesterday we had kind of
a mini sell America trade happening. The
dollar was weaker. Uh we saw the
Treasury front end yield decline on that
kind of political pressure and the
equity market was weaker as well.
>> If Trump fires Cook and we're a long way
away from that and there's all kinds of
things that have got to happen but if
Trump fires Cook, do you sell the
dollar?
That is the kind of is it as simple as
that? Do you believe that that the the
dollar's exorbitant privilege the this
this system that has been based on
institutional robustness is starting to
fray at the edges? And if so, is the
most obvious implication of that a
weaker dollar?
>> Well, remember when all this happened
around Powell? Remember all those
reports that that Trump had had, you
know, created this paper uh that he was
going to use to to to fire Pal this
letter? We had the dollar weakened by
1%. The US equity market went down by
more than 1% and treasuries sold off. So
that was kind of the blueprint for if
this pushes again further. But this
could really dominate what happens at
Jackson Hole. You know, will other
central bankers around the world show up
in support of of central bank
independence? Will they back Fed Powell
on this? And will that even make the
situation even worse with the Trump
administration?
>> Lots of questions, lots of answers
required. Still don't. We're still we're
still in the posing question phase. And
it'll be interesting the next kind of 24
48 hours to see what happens. Are tech
stocks marking time today because
they are waiting for Jackson Hole. Are
they waiting to see what happens there
in terms of interest rates? In theory,
they have there's an interest rate
component into this story. You saw a
rally yesterday.
>> Yeah. Or the the dip being bought. Okay.
Nvidia was down nearly 4% in the second.
>> Yeah. Okay. So, there was a but there's
a there was a bounce off the lows which
today is not carrying on. And is it not
carrying on today because people don't
believe that that bounce has got further
legs or do people are they just are
traders just waiting for Jackson Hole to
get out of the way and then they can
start buying tech. I I don't know the
answer to that question. I I'm trying to
understand the relationship between the
two this morning.
>> No, I do think people are still
scratching their heads trying to figure
out what exactly was the catalyst for
this tech market weakness. I mean many
people are saying it's just position
squaring ahead of Jackson Hole. But
again, the tech trade is not that
sensitive to monetary policy and
interest rates. had showed us that
previously. We also had these stories
that a meta is restructuring its AI
division, Wall Street Journal reporting
about a hiring freeze. We had that MIT
paper saying that 95% of these pilots
that these companies have built, these
generative AI pilots, aren't driving
meaningful revenue. So maybe people are
just wanting to hang their hat on the
most recent news flow and it's it's been
negative.
>> You're never going to get beaten up from
taking a profit, are you? So you've had
a really good run, Palanteer. Look at
that. Great example. I sensational run.
The shorts need to get paid. People need
to take profit. There is a sort of these
things do go in cycles and nothing ever
goes in a straight line. It it could
just be as simple as that as you say. I
I think the meta hiring freezes. They've
hired a lot of very expensive people
recently and you can't keep doing that
forever. A because I'm not sure there
are many people left. Yeah. And B
because the numbers are just quite
exorbitant and I'm not sure investors
are going to be that happy.
>> Yeah. So there is some sort of limit on
expenses when it comes to the AI trade.
That's what that's showing us.
>> Yeah. I very high limits, but but yeah,
>> nine nine pound or $9 million pay
packages or whatever.
>> Some of the numbers are extraordinary,
but they fell into insignificance
compared with the hardware spending that
is that is being delivered at the
moment. Let's talk a little bit about
Russia. Everybody got really excited
about Steve Wickoff coming back and
saying, "Yeah, Russia's agreed to
security guarantees and we're going to
have article five like security
guarantees being permissible for
Ukraine." And the Europeans are jumping
up and down trying to figure out exactly
how this is all going to work. Lavough,
big glass of cold water. No, thank you
very much. As you were, any kind of
security guarantees, we want to be
involved, which effectively means that
any security guarantee is not a security
guarantee. And significantly, and
they've said this before, you pointed
this out to me this morning, the Chinese
want to be involved as well.
>> I We're back to where we started. The
Russ has the Russian position really
changed. They still want territory. They
still want a lot of territory and
they're not really on board with the
idea of security guarantees. Was was the
last kind of week and a half did the
last week and a half actually produced
anything new and real?
>> I don't know.
>> He also downplayed the any imminent
summit between uh Putin and Zalinski
which I think we knew had some doubts.
Maybe we had some hope that that Trump,
you know, he does have the ability to
get people on the same page. You've seen
this what he's done in Congress to pass
that tax bill. Guess there was some hope
that he could get these two sides
together and have a bilateral and then a
trilateral argument. But yes, it does
seem like this excitement over the
security guarantees that we had on
Sunday that was in the markets on Monday
is seemingly not not what it appeared. I
>> I wonder whether Wickoff's
credibility is being questioned here as
well. His read on the room when it comes
to the Russians will come under the
spotlight further from here. And I think
therefore maybe actually it's going to
be interesting to see next time round
when he comes out and says they've
agreed to this
>> whether or not the market reacts in the
same kind of quite sharp way that it did
react to those security guarantee
headlines that we saw coming
>> because remember over the weekend
Wickoff's comments kind of differed from
from Mark Rubio's and that was maybe the
beginning of of some sort of tell that
there was a division or someone had
misread the situation.
>> Absolutely. What do we got coming up on
the show? Uh Alexandra Iva, fund manager
invesco is going to be joining us. Carol
Naka, founder and CEO of Crystal Energy,
joining us. What is happening these the
story with Russia is really related to
what is happening with the energy story
at the moment. We'll get into that as
well. Uh William Cells, uh global CIO
for private banking and wealth
management at HSBC and Jennifer McKun,
chief global economist, capital
economics. We have her on because we
need to talk about these PMI data.
>> Yeah, that's going to be the the key
data print today. We have the global
flash PMIs out around the world. The
European ones drop around 9:00 a.m., the
French ones 8:15, and the German ones
around 8:30. So, that'll be a key part
of the European session uh this morning.
Attention then does shift uh to the US.
We have jobless claims uh this
afternoon. We also have Walmart
earnings, which kind of ends this big uh
retail earning theme that we've had this
week. Had a kind of a mis picture from
Home Depot, from Lowe's, from Target.
So, really looking to Walmart, which is
one of the largest employers uh in the
US for a key read on the US consumer.
And then Jackson Hole does begin today,
the economic symposium out in Wyoming
with the big highlight obviously being
tomorrow's keynote speech from Jerome
Pal.
>> Is it still the highlight? Is that what
we're still talking about?
>> I or I I think the the cook thing just
to come back to it does call into
question the bigger kind of picture. I
does power matter does I this is the
debate we're having. It we we we've
moved on from a world where we pass
every single word like sort of
criminology kind of
what what what is the Fed saying? what
of individual members tweaks here,
tweaks there. We're we're into a whole
new world, a different world when it
comes to what we're watching with the
Fed.
>> Yeah. And then when it comes to the
Jackson Hole speech, look, I do think
yes, this political pressure is going to
take a big part of the of the weekend of
the discussion, but remember, we are
waiting for an update for what Jackson
Hole for what Jerome Powell thinks about
the labor market. He previously said it
was solid. There has to be a change in
language now. Just how steep is that
language going to be?
>> Yeah. Is it still solid? Don't know.
Most people would say not.
>> The claims data would suggest that maybe
it is. Uh, what else you need to know
this morning? Let me update you. Israel
has reported to approve new settlements
in the occupied West Bank while its
troops have now reached the outskirts of
Gaza City. Earlier, Israel's 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. After,
and we were mentioning this a moment
ago, a monthsl long hiring spree, Meta
says it has paused some hiring while it
does quote planning and forecasting
considering the amount of money that's
being spent. You might have done that
earlier. Uh the move comes as part of
its latest restructuring of its
artificial intelligence division, which
will now be split into four stick teams
to better capitalize on the new talent
that has recently been acquired. And
staying in the space, Google has
unveiled a new slate of consumer
gadgets, including several smartphones,
a watch, new wireless earbuds. The
product launches are are more deeply
integrating its Gemini AI assistant with
features like Magic Q and camera coach,
which provide helpful suggestions and
photography ideas. Val's all in despite
the fact it's an Android phone.
>> Look, I'm really excited about this.
Yes, I know we've been waiting uh for,
you know, chat GPT to get into hardware,
but this is just a good theme that,
you know, your computer, your phone,
your watch is going to have an AI
chatbot in it, and I think that's great.
>> Assuming you're not an Apple customer.
>> Yeah. I mean, you would have to then
transition to a to a Google phone.
>> I can't might break my heart, but I I
think it's an exciting device.
>> I tried to use an Apple phone the other
day. Like, I just it's it's just not
intuitive to me. I having having always
used Android, I can't I've really
struggled to. So, so the transition is
hard. So, yeah. Yeah. But think of just
how overwhelming all of the data on our
phone is. All this junk emails, every
all the photos you take. It would be
wonderful to have a AI chatbot or an AI
bot really kind of put it together for
you in some way.
>> Okay. But you've got to go Android to
make that happen.
>> Yeah, that's the one drawback.
>> Obviously, Apple will come back with
this product. So, I'm not suggesting
that you should make that switch,
>> but I've always been on Android's side
of the fence. Uh coming up, ramping back
up, India is again buying oil from
Russia after a brief pause despite
facing higher tariffs uh and criticism
from Trump officials. Plus, oak tree how
oak trees Howard Mark says US stocks are
in the early days of a bubble. The early
days more from our high more highlights
from our exclusive conversation with
him. Uh up next, the Jackson Hall
Symposium kicking off later today. We're
going to dive into what traders will be
watching for ahead of that allimportant
speech from Fed Chair Jay Powell
tomorrow. You got any questions? You
want to join the debate? IB+
IB+ BBTV go is the function on your
Bloomberg. This is Bloomberg.
This week, Bloomberg is live at the
Jackson Hole Economic Symposium,
bringing you news and interviews with
Fed leaders and other economic experts.
Tune in for continuing coverage leading
up to a special episode of Surveillance
Friday at 9:00 a.m.
I've just realized that actually the
highlight of Jackson Hole is the place
itself and the wildlife and the
incredible images that you're going to
be seeing. Um Mike McKe has got a nice
gig. Uh he'll be there covering it for
us uh over the next few days. There are
obviously headlines that could come out
of the event despite the fact that we're
all going to be looking elsewhere at the
wildlife. The Federal Reserve Governor
Lisa Cooks says she won't be bullied
into stepping down from the central
bank. This, of course, after President
Donald Trump called for her resignation
over allegations of mortgage fraud.
Finance agency director Bill Py says or
told Fox News that the president had
reason to fire her.
>> 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.
>> The Federal Reserve finance director
talking to Fox about Lisa Cook and what
happens next. He's got a lot on his
plate. It's interesting that this is
where he's focusing his attention. Um we
obviously watched last night as well
what happened with the Fed minutes. Uh
are these so far in the rearview mirror
and has so much changed since then that
actually they are not worth paying
attention to? Clearly um there has been
a significant shift in terms of the
labor market. One would argue. Val's
here with more on this story. Uh
>> look guy, I do agree that these are in
the rearview mirror and backward
looking, but I think it does give us a
good state of play of the recent uh
words that the Fed has given us and how
we can maybe juxtapose it to what Powell
is going to tell us on Friday and if
there is a big change of language. But
in the Fed minutes, it was revealed that
a majority see inflation as the bigger
risk over the weakness in the labor
market. But there also was other hawkish
lines uh given in these minutes. Several
saw rates not far above neutral and
several noted concerns about elevated
asset valuations. Now that is screaming
not necessarily a scenario you want to
be cutting in. And that's why we expect
maybe there to be a change of language
on Friday when we hear from Jerome
Powell at 3 p.m. London time. The front
end of the bond market was really not
deterred by what we heard in these
minutes. It was actually more moved
around uh by these allegations against
Fed Governor uh Lisa Cook. We'll be
discussing that more in a moment. We
were still pricing in around an 80%
chance of that Federal Reserve cut when
it comes to their September 17th
meeting. And the attention now very much
goes to Jackson Hole in Friday
afternoon. I wanted to remind our
viewers of just what the theme was uh
for Jackson Hole this year. Labor
markets in transition. It does subtly
imply that maybe Jerome Powell will be
transitioning his views on the labor
market. Doesn't it guy?
>> Maybe. Or maybe the labor market is
transitioning and he's going to wait and
watch and see how that happens. Uh it's
going to be interesting see exactly what
he has to say because there's a lot of
expectations of polarization around that
story. Is he going to deliver or is this
all really about the political narrative
and his desire to resist the overtures
that are coming from the White House?
Um, we've seen some data coming out of
the UK that's probably worth paying
attention to this morning. The UK July
budget deficit coming through at 1.1
billion pounds. The median estimate was
for a deficit of two. So slightly better
maybe than anticipated. I think the
guilts market is a nice little microcosm
as well for what is happening more
widely particularly with reference to
what is going on in the United States.
Which should you focus on? Is it the
labor markets? Is it what is happening
with inflation? Is it what is happening
with politics and what is going on in
terms of the fiscal side of the of the
fence? Where should the guilt market be
looking? And by extension, can we argue
maybe this is where we see the treasury
market going next? Alexandra Evanova,
fund manager at IFI Europe at Invesco
joining us around the table. Good
morning.
>> Good morning. It's think there's a
useful comparison between the guilt
markets where we're worried about high
inflation in the UK and we're worried
about what is happening with the labor
markets and we're worried about what is
happening with government spending and
the size of deficits that we are seeing
here in the UK and what is happening in
tre with treasuries. Is one a useful
comparison for the other? Well, I I do
think that the um every every bond
market uh at this time has its own
idiosyncratic stories that are uh going
through, but there are similarities in a
way that for example the demand for the
long end uh in general has uh weakened
because uh the long um long buyers of
say pension funds, insurance companies
are no longer needing to buy super long
uh bonds at this rate and they're funded
uh and and that makes it kind of a
global phenomenon that we see the uh all
the eel curves are steepening um be that
in Japan, US or uh UK. However, UK has
its own uh internal domestic issues.
Inflation is quite sticky and we've seen
it yesterday. So, um there are a lot of
uh noises in there. I think some of the
uh volatile parts of the uh inflation
numbers came in too hot and for the Bank
of England that makes it quite difficult
to to make a case for a cut
>> is
are central because of because of what
is happening with inflation which you
could argue is kind of rearview mirror
stuff. Do you think there's a danger
that central banks are going to be late
by definition to deal with the labor
market crisis? the labor market crisis
is kind of creeping up in the background
and then suddenly will will kind of jump
onto stage and be be the central topic.
Is that the danger do you think the bond
markets are focusing on at the moment or
do they fundamentally believe that
actually inflation is going to be the
primary issue? It's just a question of
sequencing to my mind.
>> It is and uh when you look at the
terminal rate that is priced in the
market for UK it's around 3.6 six to 3.7
I think uh and you could argue that UK
uh relative to US is uh much lower
potential growth lower productivity
economy so the the traders in the market
is assigning much higher premium for
that stickier inflation
>> is isn't there like the danger here is
that you have high inflation which means
the central bank can't cut which means
lower growth yeah
>> it's kind of that's the that's the pivot
>> no I mean I think that's what the guilt
market rally told us Yesterday we saw a
big bull flattening in the guilt market
and it really stood out to what other
bond markets were doing around the
globe. I mean how do you explain that?
Is that what you're reading through that
in some way Bailey is going to force an
economic slowdown to get rid of
inflation?
>> Well um you you I mean there are some uh
commentators who who are arguing for
some kind of reset um in the economy and
and that might need to come uh from some
short and uh sharp recession. Um but I I
do think that there is also the supply
and demand element to it and um it has
been quite a tricky year so far to
invest in guilds and uh when we seeing
global bonds rallying guilds tend to lag
when we are selling off guilds tend to
sell off more but to me it looks like we
are getting to some kind of exhaustion
meaning you know we don't have a lot of
sellers at the moment and even if we
surprise to the upside the market is
starting to to feel like um maybe we are
getting to to to the extreme levels of
the yields and very low prices. So um I
would say that maybe at least from now
on we trade sideways um and then we wait
for what happens in the autumn
statement.
>> Yeah. Okay. So that's the state of play
when it comes to sovereign debt. But
what's your view on on corporate credit
and corporate debt? I mean, we had uh
earlier this week, we had uh credit
spreads, at least in the US, investment
grade credit spreads reached the
tightest that they've been in 30 years.
We've seen similar kind of moves here in
Europe. How do you justify credit
spreads where they are right now?
>> Well, um it is a headscratcher and and
and I have seen some strategies actually
uh bringing their forecast even tighter
from where we are at the moment.
And the way I think about it is overall
yield uh and overall cost of debt for
the corporates uh it's not necessarily
that high um but at the same time we
have the uh core yields that are much
higher. So if you are a multi-asset
portfolio manager, you have different
asset classes, right? The rates are uh
relatively attractive, but the spreads
are very very tight. But fundamentally,
credit is uh is much stronger than
sovereign debt. For example, credit uh
corporates have been more uh proactive
in managing their balance sheets. Yeah.
>> Uh the leverage has been coming down.
They are much more profitable. Of
course, if we see some weakness in the
economy, that might change, but so far
we haven't seen.
>> How big a change could that be? I If
you're buying for yield, not for price,
I you kind of I I do wonder how quickly
all that could shift, how how quickly
could the could the credit market
change? If you if in a recession
scenario,
>> how mispriced do you think the credit
market looks?
>> So, uh my personal view is that not
much. Uh the reason being that if we do
get a recession, where would the core
rates be? At least the front end. Let's
let's uh stick with the front end of the
credit curve and and and the bond
markets.
>> I think uh in that scenario, you will
see that the Fed, Bank of England
cutting aggressively. That means that
the core rates will uh rally quite
significantly and your spreads would
widen quite significantly as well. But
it could be just wash in in the price
action. So um then then you're still
getting your carry.
>> Yeah.
>> All right. Thanks to Alexander Ivanova,
fund manager for IFI Europe at Invesco.
Coming up, India ramps up buying Russian
oil despite US criticism. We'll discuss
with Carol Knackle from Crystal Energy
next. This is Bloomberg.
30 minutes from the start of opening
trade here in Europe. Let's take a look
at how equity futures are fairing this
morning. There is not a lot of action.
We do have NASDAQ futures though
slightly in the green. So that rebound
in tech stocks is continuing. Euro stock
futures though are in the red down
onetenth of 1%. Footsy 100 let's call
that flat. CAC just slightly in the red
as well. Let's take a look at European
fixed income at the open. And there was
a rally yesterday around two to three
basis points across the curve. Uh
Germany 10-year yields unchanged this
morning at 271. The big theme though
this week has been the breakout in the
long end of European government bonds.
Some of those yields reaching decade
long highs. A lot of questions on what
exactly has been spurring that move.
>> Got PMI data coming out. Maybe there's
some movement that comes after we see
that data. We'll wait and we'll watch uh
and bring it to you live as it hits our
screens. Um let's talk about what is
happening in the crude market, the
energy space. India has returned to
buying Russian crude after a brief
pause. That's despite the country facing
higher tariffs for trade and criticism
from Trump officials. Meanwhile, oil
held gains after US crude stockpiles
shrunk the most since mid June. Diesel
demand very strong at the moment it
seems, which is interesting. Uh that
kept inventories below seasonal
averages. Uh joining us now, Carol Nlay,
founder and CEO of Crystal Energy.
Carol, good morning. Is it the Ukraine
story that is driving the energy market
at the moment? And how much clarity is
the energy market really operating
therefore with?
>> Absolutely. I mean we always sit down
and try to figure out what is driving
oil prices and looking at different
fundamentals and geopolitical factors.
But today for me the main driver is
crystal clear. It is the negotiations
ongoing talks about the Ukraine war and
the potential for a ceasefire between
Russia and Ukraine. And you can see it
clearly. So if you're following oil
price movements, you can see how the
market reacts as soon as there is
certain new announcement, a big
beautiful announcement about the
negotiations, but then it goes quiet and
the whole momentum fades away. So this
is really the main driver. But overall,
if I look at what the expectations, the
main concerns today, it seems that
people seem to be expecting some kind of
deal to happen. Uh but honestly, from
the way I look at it, I don't think
anybody knows where we're heading. And
this is why perhaps we're seeing the
market reaction. Yes, we are seeing some
movement but we remain in a pretty
welldefined corridor. Or it could be
that actually nobody think that
something big is going to happen and the
situation is going to continue where we
are today. But it would be very
interesting to see what the outcome
would be from those negotiations because
that in turn will have a big impact on
>> Okay. So it would be so if there was a
peace deal there would be a big impact.
Is that what I'm hearing you say?
Well, I tell you the big mistake and it
would be really naive and simplistic to
believe that if there is a peace deal,
then the market is going to be flooded
by Russian oil because Russian oil never
left the market. It has always been
there. It has been going to different uh
clients including particularly India. Um
so in that respect we should not expect
the market to be flooded. We're going to
see of course the Russian economy will
benefit because the Russian oil has been
selling at a steep discount especially
today more than before because of the
latest European sanctions and also um uh
the fact that you have secondary uh
sanctions threat from the US whereby the
which caused pushed Russia to offer
bigger discount to its buyers like
India. But the key problem would be for
the market for consumers in particular
is if no peace talk uh no peace deal is
achieved and President Trump imposes or
acts on his threat uh of severe
sanctions on Russia and effective
implementation of secondary sanction
then we're going to have some supply
losses from the market and the market
will take notice in that respect.
at Carroll in that kind of situation you
just outlined there. Where do you see
Brent trading?
>> I mean you can look at it like like a
glass half full of half empty. So people
think that brand today is pretty low. Uh
actually I think that given the existing
situation and the fact that OPEC plus
has released 2.2 million barrels a day
quite rapidly into the market in a
matter of few months. I think for brand
to be trading in the range of the high
60s to um low 70s is pretty a good sign.
It means that the prices are holding up
quite well. So yes, OPIC plus did not uh
maybe they did not if they did not
release their barrels, we would have
seen a much tighter market, but they did
not crush the market either. So for me,
I think the prices to be where they are
today tell us that the market is not um
is rather in a certain balance. It's not
over supplied, but it's not under
supplied. So it's holding up pretty uh
pretty well. Where it's going next
depends on uh really who you believe in.
So so far the consensus is for a supply
a market comfortably supply to quote the
latest report from the IEA. Whereas it
seems that OPEC continues to be the most
optimistic when it comes to all demand
forecast maintaining the tradition from
last year and really today they are
expecting double uh the demand growth
compared to the IEA and also for next
year. But I would say that the majority
given last year's experience and number
seem to be subscribing to the IIA
numbers and that's why we are seeing
lots of um lower uh forecast for oil
price even in the 50s uh from some uh
major institutions forecasting agencies.
>> Cor a bigger downside risk to oil might
just be around the likelihood of a of a
global economic slowdown around how the
US economy and others are dealing uh
with tariffs. What kind of numbers have
been floated on the back of perhaps
seeing evidence of a slowing global
economy?
>> I think we had earlier this year a big
shock when the the tariffs were
announced and the big numbers were
announced and how they were imposed on a
very large number of countries. And this
is where we saw economic forecasts from
the World Bank, from the IMF and other
institutions and organizations drawing a
more pessimistic picture about global
economic growth. That picture has not
changed drastically, but it has not
worsened. On the contrary, I saw some
moderate and modest improvements in the
forecast as if the initial shock of the
terrorists has been absorbed. And mind
you, we're still in rather unknown
territory because yes, some deals were
achieved with some countries and some
regions such as the EU, but we are still
guessing what will happen with other
players. So it's not a feta complete yet
but it's not as bad as uh perhaps people
expected earlier this year. Mind you for
instance today when we saw the latest
uptick slight uptick in prices um and
the draw down in inventories in the US
because of the travel season that kind
of tells me that the American economy is
not really in bad shape. Uh so it's not
as pessimistic as people expected at the
beginning of the year. But again, the
jury is still out on the impact of
tariffs once we have the full clarity on
who is going to pay what and when and
how much.
>> Carol, and how much? What would what
would a peace deal mean for European
gas? Because energy prices remain high
and I'm wondering whether that would be
where the change may come from.
I don't for me the gas story especially
in Europe is much more interesting than
oil and uh it did not unfold suddenly
because Europe was always the biggest
buyer of Russian gas and they had a
decade of relationship connecting
pipeline but then suddenly after the war
in Ukraine we saw this kind of changes
drastic changes in the relationship but
Russia managed to compensate for some of
the losses of pipeline gas by sending
LNG to Europe but for me Europe is an
interesting market Not because it is
growing. Actually, even before the war
in Ukraine, it was barely moving.
Whereas Asia is the interesting market
from the demand growth perspective. But
the way I find interesting is the
competition because the biggest
competitor to Russian gas was and still
is and likely continue to be US LNG. So
that when you look at the players in the
European market, they changed
drastically structurally. What will
happen if a seize uh fire or a peace
deal more importantly is achieved? Will
Russia reinstate its relationship with
Europe in terms of selling gas via
pipeline or will they continue to expand
with LNG to give them the flexibility
and stronger negotiation especially when
they lost Nordstream? And what will the
Europeans do? Are they going to put back
some trust in Russia or are they going
to be continue to buy from elsewhere?
Especially with a tariff deal with
Trump, energy plays a central role in
terms of selling LNG to Europe.
>> Be interesting to see how the German
economy would react to cheaper energy
and how that would impact some of the
data that we're watching at the moment.
Carol Nlay, founder and CEO of Crystal
Energy. Thank you very much indeed. Aiko
Dangote, Africa's richest person has
built a 20 billion oil refinery in
Nigeria. So that just by way of context
is bigger than any that we currently
have in Europe. Critics are questioning
though whether his dominance will truly
benefit the nation or mainly just enrich
himself as he seeks to ban foreign
competition within his country. Let's
talk more about this and what is today's
Bloomberg big ch big take. Our chief
Africa correspondent and anchor Jennifer
Sabasagio joins us now.
Talk to us about the significance of
this of this refinery. Obviously in some
ways it frees up the Nigerian economy
from dependence on external refining. It
allows Nigeria to be much more
independent, but it also gives Dangote a
huge amount of influence.
>> Right, Guy? And I think many people who
are looking at this story do look at it
uh through both of those two lenses. Uh
but I don't think we should understate
just how significant it could be for
Nigeria. If we take a look at just uh
what we've seen uh with the economy over
the past few years, uh it's Africa's
biggest oil producer, the most populous
country within OPEC. And yet for decades
it's had to rely on exporting barrels to
Europe and elsewhere and having to
import them back uh and then having to
rely on and actually turn to things like
fuel subsidies also having corruption
and theft uh being into the mix. Uh and
so for Nigeria as you were just
mentioning there guy uh it does
potentially give the economy for the
first time in three decades an
opportunity to actually export refined
products. But again, as our big take
does note today, it has made Dan Go even
richer than he already was. Actually,
since we have seen the facility actually
come online, uh he has in the past 3
months, uh ex his wealth has grown from
$1 billion to $28 billion as this full
screen is just showing. Uh and that is
coming as you were just mentioning. It's
this is a $20 billion project. It took
him over 11 years. He had to frequently
had to deal with the government and
inadequate uh policies and
infrastructure uh in the mix as well as
consumers and and constituents being
upset about the displacement. And yet uh
he's able to get this through the mix.
But it's not where he stops. He still
has his eyes set on a lot more refining
capacity uh and also is looking to other
commodities potentially. But then many
people as you were just noting there guy
are noting or are wondering does this
mean Dangote continues to have a tighter
grip on the Nigerian economy or is this
really going to see Nigerians actually
benefiting from these refined products?
>> Uh Jen, what's next for Dangote? Is he
aiming to build even more refineries or
expand his capabilities? What's on his
plate?
You know his expectation Val if you
speak to him is is he wants Africa to be
able to continue industrializing. He's
been in the commodity space though for
decades. His family has been in it for
decades. Uh so now that we have seen the
oil refinery up and running to a certain
extent he does want to see uh the
capacity uh continuing to grow. He's
also though uh looking to his fertilizer
plant continuing to grow and uh our
reporting suggests that he's even sought
a permit for the biggest deep seapport
uh in Nigeria. So clearly uh he does
have a lot more plans to continue to
expand and grow his empire. But if we
take a look at how he made his first
billions uh which is the cement
business, he has recently stepped down
or decided to retire as chairman from
Dangote Cement, naming uh a former Echo
Bank uh executive to the ranks, but
still likely to be very involved as well
uh as his daughters uh in the business
and in his growing empire.
>> Jen, final quick question. This was
something that that caught both Val and
my eye yesterday. Kenya is in talks with
China to convert dollar loans into UN
loans. How significant a move is this?
And is this something that could be
replicated elsewhere? There's clearly a
kind of push by China to ddollarize. How
big a part of this could this be?
>> You know, Guy, this is uh really for
Kenya uh very important. If we take a
look at the infrastructure and how
they've been able to finance their
infrastructure uh in the past few
decades, they have relied on China quite
substantially. And so now over the past
few days, they've been in Tokyo for this
Japan Africa summit. Uh and our
understanding is that they're actually
talking about uh having some yen
denominated bonds. Uh potentially that
could open the door to expansion uh for
the government who which has actually
had a difficult time finding diversified
economic sources. is they tried to raise
their own taxes and we saw how that
played out on the streets with Kenyans
and so potentially this opens the door
uh for them to have another option. Uh
we've seen similar um efforts by the
likes of Ivory Coast which also did have
a yen a 50 a $50 billion yen denominated
bond. Uh but potentially Kenya can look
elsewhere outside of China potentially
to Japan. Now the only question marks
though we have uh is what are the terms
going to be and how much exactly because
we did hear from President R uh saying
that he does want to strengthen ties
between Japan and Kenya but we know that
Kenya has been in its own economic
situation given a number of the loans
the billions of dollars in loans that it
owes to the likes of China. So
potentially then that frees up a bit of
space for them if they are uh to focus
then in on a yen denominated bond. But
we still need to get a few more of the
details. But we could potentially see
other African countries doing the same
as we see more African countries in
Japan uh speaking about deeper economic
ties between their nations.
>> All right, Bloomberg's Jennifer Zabaja,
thank you for joining us, taking us
through some of the recent developments
in Africa. Coming up on the show, we'll
be watching two of France's biggest
banks today after they got caught in a
downgrade at KWB. We'll talk about that
and other stocks to watch next. This is
Bloomberg.
I'm assuming the coffee shops of London
are doing great business this morning
and everybody's out getting a early
morning shot because nobody seems to be
at their desks or if they are at their
desks, they don't seem to be doing a
lot. I the data I'm looking at on the
screens this moment this morning is very
unconvincing in terms of a sense of
direction. I'm being polite here.
Basically, nothing's moving. Like
nothing's moving. The rumor has it
though that Mark Cardmore is excited
about Indian and Australian PMI data.
Let's confirm this story now and try and
figure out exactly why we are so
excited. Update us. Enlighten us. Mark,
good morning.
>> I think you've set the scene pretty well
there. I am scraping the bottom of the
barrel here I admit but I did just
notice that the both the services and
manufacturing components and therefore
clearly the competent uh PMI reading for
both India and Australia were at
multi-year highs and I thought it was
just interesting given like the
negativity around global growth at the
moment India in particular is meant to
be right at the target of the of the US
trade war and you know it hasn't been
backing down is suffering from great
tariffs and yet both the manufacturing
component and service component surged
again and so you know this this global
resilience
story continues to go on. U I should I
should kind of give the disclaimer that,
you know, the market wasn't even excited
in real time. Maybe they all missed it,
too. They're not used to these being big
big market movers. And maybe that shows
just how much we're kind of scraping the
bottom of the barrel because there isn't
a lot of excitement today. The backdrop
is very exciting, though. It's only
because we're on pause because there's a
couple of big dynamics in play. And
that's the fact we continue to see
longend yields around the world go
higher and that's into this big key
Jackson Hole meeting this weekend where
I think the risk is for even higher
longend yields. So I think that's a very
interesting dynamic. We've obviously got
tech finally weakening which has been
the whole story higher and that goes
into Nvidia earnings the key name next
week which we expect to be beat. We
expect to be super strong earnings. I
don't think it's going to save AI. So I
think that those dynamics are really
really big and and and I think there's
an interesting background story. It's
just the major catalyst to move us on
next are unfortunately not coming until
Friday.
Well, Mark, talk us about the price
action yesterday in tech because Nvidia
was down nearly 4% during the session
and basically made its way all the way
back to flat, closing down just onetenth
of 1%. Do you read that as a bullish
fundamental that this tech dip that we
have seen for now nearly four days
straight could be bought ahead of
Jackson Hall?
>> No, I don't particularly. I I wouldn't
read it as anything as being overly
bearish right just yet or overly
bullish. It's just choppy. The fact is,
you know, we know we have a couple of
key drivers, catalysts coming up in the
next few weeks. It's not just Jackson
Hall. It's not just Nvidia earnings, but
then of course we have that jobs data.
We want to kind of given what a shocking
NFP we had last time. We want to see
whether this follows through. And then
of course we have a CPI print when we
know we've got a growing inflation
problem that's broadening out before the
September FOMC. That's the next four
weeks. There's so much to to react on.
So it's just choppy at the moment.
>> Okay. Okay. like today. We'll we'll take
it easy today, but there's there's news
coming. I promise. I hope so. Um, if
Trump fires Lisa Cook, do I sell the
>> It's a great question. We didn't really
answer it this morning. I think the
knee-jerk reaction is absolutely
because, you know, even if she was at
the more dovish end of the spectrum,
it's still seen as more interference in
central bank policy. So, the instinct is
to sell the dollar. Now I think probably
people that qualify that after a little
bit. It doesn't sell off too much, but
ultimately we know that every
replacement is still going to be in the
dovish vein from here on out. So all
these catalysts around the Fed pressure
are ultimately dollar negative.
>> All right, that was Bloomberg's Markets
Live editor Mark Cudmore. And remember,
you can get up-to-date analysis and
insight from Mark and the rest of the
team. Just go to MLIBGO on your
terminal. Now let's get your stocks to
watch with Khloe Melly. Chloe,
>> good morning Valerie. Let's start with
UK home builders this morning and we
might see a little bit of weakness in
the sector after some data from
NightFrank that shows that those home
builders are really delaying putting off
projects for longer and longer after
receiving permits. So we could see
further weakness there. We already have
had quite a tough year especially for
Barrett Red which is the biggest home
builder in the country and also Taylor
Wimpy which is down about 18%. This
obviously does not give much confidence
in in the outlook for that market and
the person behind that data from
nightfrank said that this was really a
new low for the market. So definitely
something to keep an eye on today. Uh
moving on and going over to France where
we have got a downgrade for both BNB and
Ky agricult this morning. Both of those
have been downgraded to a underperform
rating by KBW. They've both had quite
resilient second quarter results. But if
we look at the uh at the performance
against the wider sector benchmark um we
can see that they have been
underperforming and that gap has been
widening further and further. So we'll
see how much this downgrade moves the
needle at the open. And finally let's
end with Aegon. So Aegon the insurer um
reported quite positive results this
morning. We have got a profit that B
estimates and an increased buyback. The
shares have already been doing quite
well after obviously a massive dip in
April, but they are up about 12% 12.5%
year to date. So, we'll see if we get an
extension of that gain on the back of
those results this morning.
>> Great stuff. Thank you very much indeed.
Keep an eye on what is happening with UK
house prices uh and the feed through
into the house build. That seems to be
the narrative right now. It's a quiet
I'm joking about it being a quiet
market. It is a Thursday. You got a lot
going on coming up later on this week.
In in some ways, you can understand why
traders just want to wait and watch
because actually there's some really
quite big events on the horizon. I
Jackson Hole is obviously one of the
main ones we're going to be watching
tomorrow, but Nvidia is coming up next
week. It's not as if we are short of
catalysts right now. They're just not
here right now, but they are coming
soon.
>> And I mean, add that into this, you
know, this building pressure on the
Federal Reserve. Will Lisa Cook resign
at some point over the next few days?
Will Trump attempt to fire her? You
know, that's going to be another key
thing uh for uh for the market reaction.
>> I How does the market react to that? If
he fires her, I this feels like a this
feels like a big event.
>> Well, it also could be a blueprint for
doing so for other members.
>> Precisely. Precisely. Once once you've
done it, once I
>> makes it easier,
>> makes it easier. Does power come into
the to the firing lines despite the fact
what actually the what the Supreme Court
said? I there's all I The implications
of this go way beyond simply
>> screams fed cuts to me. I don't know
about you.
>> Yeah. But are those going to be taken
well? And what happens to the long end
of the bond market? The opening trade is
next. We are 5 minutes away. This is
Thursday the 21st of August. A quiet
session expected. Let's talk about
yesterday though, which was a little bit
more exciting actually. European stocks
actually rallied quite nicely. US stocks
initially dipped but then rally quite
nicely into the close as well. We're
kind of holding ground this morning.
Futures are are giving us very few clues
as to kind of what happens next. The
catalysts are coming, but they're not
here just yet. Uh it's going to be
Powell Jackson Hole. It's going to be
Nvidia numbers. Uh it's going to be what
happens with Lisa Cook's future. All of
these questions are out there. Just I'm
not entirely sure we're going to get as
much clarification today. So that's what
yesterday looked like. Let's talk about
today. Give you an idea of how that is
setting up. And as you can see, Euro
stocks futures are mildly negative.
Footsie 100 futures are mildly positive.
Footsie has been one of the quiet
stories in the background. High after
high after high throughout this year,
and it had a decent rally yesterday. DAX
futures down a fraction this morning.
Futures aren't giving us much of a sense
of direction right now, but there's a
few single stocks out there. Val's
looking for a catalyst, and I think
she's found one.
>> Looking for a catalyst? I got one for
you. It's an organic catalyst company.
They make uh biochemicals and enzymes.
That's Novonis. Uh they outlined their
2030 targets. Growth is looking good. So
that's one stock in the Netherlands.
We'll have our eye on. Also, Aegon in
the insurance space operating profit
came in strong. Lastly, UK homebuilders
London delays. You also have the
chancellor talking about raising
property taxes. So that one will also be
under our radar. Guy,
>> absolutely. We're going to watch all of
that as we work our way through this
open. It is Thursday. There's lots of
London XD in the market as well. Uh
which you need to bear in mind too. Uh
so you got to be thinking about that.
But a quiet session. People are
watching. People are looking for maybe
things that are going to move this
market in one direction or another. But
this today it's just not clear that
we're going to get the answers to that
question. So maybe a flattish open in
prospect. Let's find out. It's time for
the opening trade. These are the numbers
I have for you. This is the direction
we're moving in. Uh and at the moment,
as you can see,
we are moving. No, even the footsy 100
just went through a phase there. Did you
see that? Of of zero either side.
Basically, we are moving just a few
ticks. Either way, the stock 600 is
absolutely flat as a pancake. It is not
often you see a market open where the
stock 600 at this point actually just
has zeros. And there you go. There's the
foot just with zeros. The the IBEX is
moving a staggering uh 0.01% to the
upside. The DAX is moving in the
opposite direction. Everything seems to
be balancing out nicely. At an index
level, I am struggling Val to find much
sense of direction and much to talk
about. So, I'm going to hand things over
to you to to give us some excitement.
>> Well, when it comes to the sectors
picture, we are looking at fairly
balanced. We have around eight sectors
in the green, the remaining 12 in the
red. At the top of the basket, we are
seeing energy stocks perform the best.
Vestos wind systems actually driving a
lot of that gains. To the downside, we
do have sectors like media. But I do
want to note one of our stocks to watch,
Novonus, that we thought could actually
rally on some better growth targets is
actually the worst performing stock this
morning down over 7%. This is a an
enzyme uh company related to the pharma
space in the negative catalyst a
negative catalyst there for noises down
7%. But the the sector's picture at the
moment is increasingly turning uh more
red across my screen. We only have four
sectors now in
>> Anglo's XD, AIB is XD, Babcock's XD, IHG
is XD, Legal and General is XD,
Schroeders. There's a whole raft of
others as well that are all X dividend
this morning. So just bear that in mind
when you look at the numbers.
>> Look, I thought broadly this week we
would have European stocks outperform
because of the better thanex expected
Russia US meeting in Alaska, but that's
turned out to be not necessarily the
catalyst. But overall, European stocks
have outperformed US firms this week and
a lot of that is down uh just to the
weakness in the tech trade mega. It's
it's interesting that Shell is up. So
you can argue that that if if you are
reading the Ukraine story now is more
negative. You would think that oil
prices potentially could go higher. We
were talking about this earlier on the
show. So Shell is tracking a little bit
higher. It's up by 1%. So that's that's
interesting. Interesting that Rhy metal
this morning is a little bit higher.
Maybe also indicating uh maybe that the
conflict is likely to continue maybe in
its current form. Rhyatal is up by 1%.
Rolls-Royce is tracking a little bit
higher. BA systems reacts a little bit
to the to the upside as well. That's
where the move is coming from. If you're
looking for some positivity, positivity
maybe is the wrong word, but it but it's
maybe actually the Lavrov comments. This
this idea that actually there are going
to be no security guarantees that that
are going to work realistically that the
conflict is going to continue likely in
its current shape. That would certainly
seem to maybe be being priced into the
market this morning.
>> Yeah, still a lot of questions on the
security guarantees and then how they
would feed feed their way into the
European equity market is obviously
still a question as well. But joining us
now is William Cells, the global CIO for
private banking and wealth management at
HSBC. Thank you for joining us on this
snoozy August Thursday we'd like to call
it. But inject some excitement around to
this table. How are you thinking about
the AI trade because I think that's
really captured a lot of the interest
when it comes to the global equity
market this week. The the hit that
Nvidia took in the session yesterday
that was bought. How are you thinking
about this negativity where it's come
from?
>> Stick with the AI trade. um you know
because you're going to have the
combination of that AI liftoff which
we're seeing across industry and the
real economy as well as the Fed rate
cuts which obviously are going to
support the growth stocks. It's natural
ahead of Jackson Hall where a lot of the
rate cuts are already priced in very
high expectations together then with the
Nvidia results coming later you know
that the market is is is a little bit um
you know wobbly here. There was a lot of
chatter over the last few days about
value versus growth and how much growth
had uh you know outperformed. So I think
it's not surprising that we have a
little bit of a profit taking um you
know but I do think that um you know you
need to stick with that AI trade but
basically broaden it out across the
ecosystem. So that includes the
infrastructure it includes even the
energy provisioning for all of that and
that's what our clients are doing.
>> Look I I do agree that there does seem
to be profit taking at least on on
momentum type trades but overall tech is
quite resilient to monetary policy. So
why would you be taking tech off the
table given it's maybe less likely to
move if we get a surprise from Jerome
Powell on Friday?
>> So so given that a lot is priced in I
think um you know in terms of those rate
expectations if we don't get it um you
know then you know obviously growth
stocks could potentially see a little
bit of a hit but I do think that
ultimately what what number one we do
think that you're going to have the
cuts. Yeah. Number two, um I do think
that you you you need to look at uh the
earnings picture where now actually
expectations looking ahead because
companies have done so well. The growth
figures in terms of earnings growth for
analysts for the tech sector are
actually reasonably low. The MAX 7 in
particular reasonably low and we could
have positive surprises. Um and then um
you know the fact that this is you know
spreading across industries and
therefore gives you a lot of opportunity
to sort of widen that trade even also
into China right because a lot of the AI
companies tech companies they are
trading at 30 40% discount
>> how would tech do it at a recession
>> so a lot of the tech companies are seen
as quality companies and that's how they
have behaved over the last uh you know
number of quarters. So I do think that
>> and current multiples
>> um you could potenti well you have the
you have the the shrinkage in terms of
sort of multiples coming from the growth
side but then if you are looking for
lower growth and therefore then have um
you know lower interest rate
expectations as well that could offset
it. Um you would have probably a little
bit of a dip off in in multiples but not
not extremely so. You would probably
still be better off in tech than in a
lot of the other industries
>> on a relative trade or on an absolute
trade
>> on a Okay.
H how what are your what questions are
your clients asking right now?
>> So there is so market narratives change
and therefore client questions change as
well. There was a lot of there were a
lot of questions around eric policy
making around the debt pile therefore
around darization and therefore do I
need to flee from the US and so we've
seen that in the data that people have
not fled right there's been a little bit
of a dip in in bond buying and equity
buying but not a huge amount from
foreigners now the story has changed a
little bit and it's about well the US is
dominant uh you know twothirds of the
equity market tech is dominant within um
you know within uh the equity market and
then you have US dollar weakness. So for
other reasons we need to kind of
diversify again not flee but diversify.
So um
>> because of the dollar weakness
>> because of the dollar weakness the fact
that you you you own as any investor if
you buy the market you own a huge amount
of tech you own a huge amount of the US
and you have a US dollar weakness. So
I'm just very exposed to that trade. Do
I need to actively diversify? That's
that's the kind of question. And so I
would say from a sector perspective
certainly diversify into financials into
industrials as well. Industrials also
benefiting actually from the trade. So
not completely uncorrelated. Uh from an
geographical perspective we do like
China, Singapore and UAE small market.
And then obviously now um you know there
is a reason to start to diversify more
into bonds. Again people have been
sitting on cash. It was comfortable and
it was reasonable as the Fed was in a
wait and see mode. But as we now are
coming really to the next uh you know
interest rate cut uh you need to start
to lock in um you know those those bond
deals and we're starting to really see
those flows now.
>> Are you talking about sovereign bond
yields or are you pushing clients into
credit
>> quality quality? So you know private
clients will typically prefer investment
grade for that little pickup. Um you
know as long as they're comfortable it
won't widen too much. Um the the real uh
discussion though is how far do you go
in terms of duration and as the as the
curve is very flat up to the 5year point
it's really you know interesting to to
try to pick up uh you know a little bit
more duration than that. So maybe do a
little bit less in terms of notional
value um but go beyond the 5y year
point.
>> You mentioned you also uh looked at
diversifying into China tech stocks
something you're willing uh to take a
look at at these levels. Yeah, I do
think that they uh at these levels 30
40% below below weather uh below weather
markets and I do think you we are
starting to see also now from western
investors more flows into China. We're
seeing that in the industrywide data as
well, but we are seeing it in our
business and that is in part because
they see all of the tech innovation and
the valuations and they're looking for,
you know, and that diversification from
the US, but also this uh topic which we
all hear a lot about. I think the
anti-involution uh the supply side
reforms um you know because uh an a big
reservation from foreign investors had
been the deflationary forces um you know
over capacity leading to very low margin
power for companies is um you know
addressing over capacity going to lead
to higher earnings expectations and
therefore more uh sustainable upside. Um
clearly people are still underinvested.
So if those flows go in, it can push the
market up.
>> The US does the US equity market need
rates to be cut to maintain current
levels and continue to push on from
here.
>> I do think so. Yeah. To some extent that
that we do need that that we do need the
cuts. Um you know we have three cuts
pencled in and for September uh December
and March you have um you know quite a
high real yield um both compared to
other markets right compared to the UK
compared to Japan compared to the Euro
zone. Different economies I know.
um but quite a significant real yield
both on the policy rate side and on the
and on the uh 10-year u treasury as
well. So I do think that you can have a
number of rate cuts while still
remaining in a restrictive um you know
monetary policy environment. Obviously
then the market turns that into you know
quite generous financial conditions by
being you know having so such such tight
spreads and and such low volatility. But
I do think that the Fed can cut it a few
times.
>> Philip, nice to see you. Thanks for
stopping by to see us for themselves.
Global CIO for private banking and
wealth management joining us from HSBC.
Quick look at what is happening in
Europe. The answer to be honest is is
not a lot and you can see that on the
screen in front of you. Little bit of
weakness coming through maybe in Nestle.
There's a few XDs out of the London
market. defense is coming back and I do
wonder whether that is related to the
comments we've seen from Sergey Lavrov
indicating maybe that actually any kind
of security guarantee for Ukraine is
going to be hard to produce and make
work with current Russian views on that
subject. LVMH is a little bit softer
down by 7/10 of 1% uh and you got not
much else happening elsewhere but Khloe
Melly is here with some details of
things that are moving. Chloe,
>> good morning guy. Let's start with Aegon
today. So Aegon reported operating
profit that beat estimates by quite a
large margin this morning and it also
increased its buyback. So that is
leading the shares sorry up this morning
were up about 7% for the insurers. So
quite quite a good day for Agon. Moving
on to defense. So defense stocks have
been going up or down depending on what
the market sees as the likelihood of
this peace deal in Ukraine. At the
moment it seems that this this potential
peace deal is looking a little bit more
unlikely and that is driving the shares
of those defense uh names this morning.
So Ryan Matau, Hansel, Leonardo, BAE all
in the green this morning which is a
reversal from what we saw yesterday.
Moving on to Saffron. So Saffron is an
engine manufacturer. It's also a little
bit exposed to that defense trade, but
it's mostly up on the back of an upgrade
from Bernstein which said that there was
really a great aftermarket performance.
And this aftermarket segment has really
been driving uh the the earnings um over
the last few quarters and it seems like
that will be continuing for Saffron. So
we're up um about 1% this morning.
Moving on to CTS Aventim. So this is a a
bit of a smaller company. It is in the
ticket business. So tickets for
concerts, theater, sporting events and
it reported profit that missed estimates
uh this morning and that is it's not
being rewarded by the market at all. We
are down 17%. a major underperformance
this morning and perhaps uh a little bit
of an indication of this live
entertainment sector having some uh some
tough tough times ahead. And finally,
Novanis is also down. We thought it
might be up maybe perhaps on the targets
for 2030, but those may have
disappointed the market this morning and
the enzyme maker is therefore down.
>> All right, Chloe Mele from our equities
team, thank you for the update on the
recent movers. 12 minutes into the
equity session, we also have some
headlines around Zalinsky we want to
bring to you. He has been speaking to
reporters saying he sees positive
signals the US may join security
guarantees. Guy, I know we were just
talking about the Russia's side of the
of the view on that situation.
>> He's ruling out a meeting in Moscow with
Putin. Uh he is ruling out Ukraine,
sorry, Hungary as well. You see
Switzerland, Austria and Turkey as
possible venues for such a meeting.
remember that the Russians to a certain
extent are kind of backing off that idea
that you could see a Putin Zilinsky
meeting. Uh peace talks would take place
in neutral Europe. Um he is uh he's he's
sort of I I would say maybe being a
little bit cautious in terms of managing
expectations around whether or not this
meeting will actually take place. The
more that's ruled out, the harder it is
to rule things in.
>> Well, they're talking about a location.
Maybe that's positive signal in itself.
No,
>> maybe
>> guys still underwhelmed on the
situation. But coming up on the show,
Oak Tre's capital, Howard Marx says the
US stocks are in early days for a
bubble. We'll hear more from our
interview next. This is Bloomberg.
French PMI data breaking onto our
screens right now. 49.8 is the comp
number up from 48.6.
So basically we're at the flat line uh
on the French data. Uh this is the line
you have from market PMI markets as they
produce these numbers after a sustained
period of contraction in the Euro zone
second largest economy. August flash PMI
data showed signs of stabilization,
stabilizing business conditions as
French private sector output was largely
unchanged on the month. More excitement.
I we're unchanged.
>> More excitement, but I guess you see it
reflected in the euro. We're slightly
slightly higher, though it did test its
50-day uh 55day moving average earlier
in the session. Dollar weakness has been
a key theme. Maybe these strong PMIs if
they continue to roll in across Europe
will be something that will change that.
>> We'll look for more data a little bit
later on. Remember, Lagard's going to be
speaking as well over the next few days.
We'll watch her along with all the other
central bankers that are going to be
giving us commentary on what is
happening in the world right now.
Somebody else that's been giving us
commentary on what is happening in the
world right now is Oak Tree Capital's
co-chairman. He of course is Howard
Marks and he's warning that US stocks
appear to be in the early days of a
bubble. Mark spoke exclusively with
Bloomberg about his concerns over rising
valuations and investor complacency.
This is all just feeling and and uh and
uh and 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 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 um
uh bubbles and uh 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 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.
97. It's interesting that that actually
to slot yesterday put us at 98. He put
us at late 98, I think.
>> I don't know how do you pick these
things? It's hard to say. I I think what
he did say there was just interesting is
that there's this kind of bias within
the market to to continue doing what has
worked.
>> Y
>> until it doesn't, but nobody believes
that it's ever going to get to that
point. You just continue going. Calling
whether we're 97, 98, 99. The party's
going to finish at some point. I don't
know whether the part is just getting
going close to midnight, right? That's
what they're saying.
>> I think I think well I think probably
most good parties don't end at midnight.
They end at 2 am. I'm just going to
point that out. I they go way beyond
where they probably should uh finish.
And that's kind of the point. Um I don't
know how do you call this one? It's it's
it's it's hard to call. There are some
metrics that say we're beyond 2000.
There are some metrics that say we're in
the early days. Like it's it's what he's
saying is that
>> the market cannot conceive of a
different world than the one that we're
in at the moment. It cannot conceive of
mean reversion. It cannot conceive that
things change into a different operating
environment. And that does feel like it
does resonate at the moment. Nobody
nobody can quite get their head around
the fact that stocks don't go up. I and
always will continue to go up. That
seems to be the the narrative that has
existed for a long time and people don't
believe that that's going to change
anytime soon.
>> Yeah. But I think this week people have
gotten a bit more sensitive to this
negative news that we've seen. You know,
even look at take at what happened with
Meta restructuring their AI organization
and having a hiring freeze, you know, at
some at some time.
>> You still buy the dip?
>> Well, they did yesterday.
>> My point.
>> My point exactly.
>> All right, moving on uh to some European
auto stories. Volkswagen pivoting once
again on its bet on electric vehicles.
The automaker had set its ambitions on
selling more EVs globally than Tesla by
this year, but that was back in 2021.
Let's get more from this story on
Bloomberg's Global Auditors editor Craig
Trudeell. Thanks for joining us this
morning on this Volkswagen story. They
set out some big ambitions, put a lot of
money behind it. What's changed now?
>> Yeah, I I I think uh we can sort of rule
out the the likelihood that they will
sell uh outsell Tesla globally this
year. They will, however, uh they are on
track to to uh pull back ahead of Tesla
here in in in Europe. uh they're they
are getting some some momentum at least
in some regions and with some models. Uh
do they have a sort of smash hit EV like
a Model Y? I I think it's safe to say
they they do not. Uh and it's really
been an up and down decade, right, where
uh you know, you had some some real
issues with trying to replicate what was
working for Tesla with uh throwing a lot
of money and a lot of people at at
software. And it turns out you need uh
more than just that, right? you need uh
you need to do software well and I think
Volkswagen is still very much uh
figuring that out. And so we've seen uh
some some indications that uh parts of
of this uh vast group is going to pump
the brakes a little bit on on on EVs uh
in part because of the issues they've
had with uh developing software
internally.
>> What do customers want to buy right now?
I I think uh you know it's a it's a
complex question where there are still a
lot of consumers who are are reluctant
and I think uh we can look at Bloomberg
intelligence has been doing you know
regular surveys where they find uh this
very consistent reluctance on the part
of consumers. Uh but isn't isn't that
isn't that kind of marketing 101? You
give the customer I what is the customer
asking for? You give them what they are
asking for because ultimately they're
probably going to buy it if you do that.
Well, and and I think you know we do get
to this question of how much of this is
consumer demand this some of this
momentum versus how much of it policy
right and and uh it is the case that uh
so much of of the European market is is
company cars right and so there's maybe
uh you know sort of you you get a a
option of uh sort of a menu of of cars
presented to you by your employer in
some cases sometimes you don't have a
choice whether or not you go electric
right and so
>> that's still a thing I thought company
cars had long I Oh, it's it's still very
much a thing in in in Europe and it's
something that really sort of uh
Americans, you know, have trouble
grasping that. Uh but in in China,
right, I think there it's a different
story where uh we we are not uh we are
still seeing, you know, serious
intervention on the part of governments,
but we're also seeing legitimate
consumer demand of people wanting to go
out and buy a Xiai, wanting to go out
and and and get a BYD. And they're doing
that because uh you know the range is
great. The charging you know experience
it's it's sort of closer or at least
getting there in terms of an equivalent
to to fueling up and that's attractive
to a lot of people.
>> B's in the market for a new car.
>> I am in the market for a new car if you
have any recommendations for a midsize
SUV. I'm all ears. But what's
Volkswagen's plan moving forward? Are
there big ambitions just going
elsewhere? I think in in China it's
going to be very interesting that that
they're really going the the partnership
route. I think in in terms of software
uh there's a consistency there as well
where they were trying to stand up an
internal software e effort called
Kerryad that has really been just sort
of an unmititigated disaster. I think in
the US it's going to be interesting as
well where uh trying to you you
mentioned being in the market for an
SUV. They're they're really trying to uh
go uh more in the direction of of where
the American consumer is, which is
pickups and SUVs. Uh the question I
think
>> large cars whether or not Yeah. Whether
or not people want electric trucks or
SUVs uh is still in
>> another question. Yeah, that's right.
>> Yeah, I they don't fit in London. We
have this debate constantly. It's a
struggle. Craig Judell, very nice. Thank
you very much indeed. Coming up, we're
going to talk about the data. Jennifer
Mchuan's going to join us. That's next.
This is Bloomberg.
Welcome back to the opening trade. We're
30 minutes into the cash equity session,
but the focus is now on the PMIs. After
we got better than expected French PMIs
and got a boost in the euro, we're now
looking at the German numbers dropping.
Composite PMI rising to 50.9. The
forecast was for 50.2. So better than
expected PMIs out from France and from
Germany. Remember this data is the first
data prints that we're getting from when
those higher reciprocal tariffs were
hitting the Eurozone economy. And so far
it is looking pretty good. Euro headed
towards session highs but trading flat
on the session. Guy
>> let's talk about what is happening out
there in terms of the market moves that
we are watching. Not a shock that you
see this number 54.5 negative 54.5 I.
Volume is pretty anemic today. Uh in
terms of the uh the market move, we're
pretty balanced. 241 up, 333 down.
Defense is doing a little bit better. Uh
you are seeing some of the tech stocks
still a little under pressure this
morning. I tell you where you are seeing
a bunch of 52- week highs today and that
is in the insurance space which I think
is quite interesting. Ahon is hitting a
52- week high. The Dutch insurer uh is
up on the year by 18 18% let's call it
18%. Spike here uh that you can see to
the right hand side of the screen on the
back of the earnings. This is propelling
this this stock sharply higher this
morning. in this earnings report that
we've seen this morning, better than
anticipated, but the entire sector is
doing a little bit better this morning
and AON certainly the catalyst for that.
That's the 52-W week high. There aren't
many out there this morning. Many
exciting ones at least that we're
watching carefully. What else we need to
know this morning, Val?
>> Well, here's what else you need to know
on this Thursday morning. Federal
Reserve Governor Lisa Cook says she
won't be bullied into stepping down from
the central bank. This is after
President Trump called for her
resignation over allegations of mortgage
fraud. No charges have been filed
against Fed Governor Cook. And 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,
which include some land that's currently
under Ukraine's control. Meanwhile, it's
reported that Russia's foreign minister
says Moscow and Beijing must be included
in any Ukraine security guarantees.
And lastly, the UK's budget deficit
shrank more than expected in July as a
deadline for paying self-assessed income
tax boosted the Treasury's coffers.
Spending exceeded revenue by 1.1 billion
pounds compared with 3.4 billion pounds
a year earlier. It was the first
year-year decline in borrowing since
November and the lowest July borrowing
for three years. Guy,
>> okay, let's go back to some of the data
that we're watching. We'll come back to
that UK story in just a moment. And I
just want to reference what is happening
with the German data this morning and
the French data we've seen in terms of
the PMI numbers better than anticipated
and this was when we were suffering as
well uh from the uncertainty around what
the tariff story was going to be
delivering. So actually you put that
into into the mix and and maybe this
data does look significantly better than
anticipated. Uh we'll come back to the
UK borrowing story as well and of course
we've got to talk about what is
happening at Jackson Hole a little later
on this week and the lessons we're going
to learn there. Jennifer Mchuan, chief
of global economist at capital economics
joining us around the table this
morning. Good morning.
>> Good morning.
>> Better data out of Europe. Should I get
excited?
>> Well, no. Those are those those are very
small those are very small. That's
right. And uh we're still looking at
PMIs, you know, hovering around the 50
mark, which is supposed to be consistent
with no change in GDP. So, um it's
nothing to get excited about, but it's a
bit of a relief. The big news since the
previous PMI has been the trade deal,
>> uh which is a bit disappointing, that
15% tax. So it could have been that you
saw a worse effect. We saw both the
Centix and the ZDW surveys deteriorate a
a little bit
>> um this month. So it could have been
that that followed through to the PMIs
which are more relevant for activity.
>> If I'm Christine Lagard, I'm looking at
this data. Do I think policy is in the
right place?
>> Yes, I think so. I think the Euro zone
feels a bit like an economy at
equilibrium at the moment. That's always
a risky thing to say, but with with
growth at 2%ish per quarter, inflation
around two, interest rates around two, I
think I'd feel fairly comfortable. I
mean, not not excited by it. You might
obviously grow a lot stronger, but
>> you know, it's it's the Euro zone. it's
not grown strongly for a long time and
and things feel broadly stable.
>> But Jennifer, at the same time, this
manufacturing print, we're nearing
expansion and it's the best print that
we've seen since the middle of 2022 and
this is an economy that's supposedly
buckling from tariffs. Do you think that
that kind of flies in the face of this
>> narrative that that tariffs are going to
have an impact on the economy when
German manufacturing seems to be doing
okay and and slightly rebounding? Yeah,
I mean it it's early days and I think
the caveat there is you said nearing
expansion that that's hardly
>> 49.9 clearly um clearly that the Euro
zone is still suffering um a very long
hangover from that sharp rise in energy
prices. Um but tariffs don't seem to
have had a a disastrous effect on the
Euro zone economy. It's early days.
We'll need to see what happens and
particularly what happens with
pharmaceuticals and so on. That that's
going to be really important um for some
European economies. So far so good
really in terms of of tariff impacts on
the Euro zone.
>> What's the next big catalyst in your
mind? Is it a potential peace talk with
uh Russia and Ukraine maybe denting the
oil price and helping some of these
German companies out or is it uh more on
the the trade deals? You know, we still
haven't had clarification on those
pharma tariffs or on on the
semiconductor tariffs. What's what's on
your mind as the next catalyst?
>> Yeah. Well, um not really Russia Ukraine
to be honest. We don't think there's a a
really big risk premium priced into the
oil price and neither do we see big
flows of of gas resuming even if there
is a ceasefire from from Russia to to
the Euro zone. The Euro zone has pulled
back from that. There are clearly
serious risks associated from rely with
relying on Russia for for gas supply. So
it's unlikely that you're going to see
really major changes in commodity prices
related to that. That said, we do expect
the oil price to to fall off a bit as
OPEC plus um raises its production. So
that should be something of a boost. Um
and also we've got um defense spending
still coming through in Germany which as
that materializes that should start to
boost the economy somewhat. So those are
the positives. The potential negative is
those um tariffs on pharmaceuticals
which we'll see what happens later.
>> So I'm bringing a story about the UK
data this morning and I'm going to quote
from it. Um according to Alex Kerr uh UK
economist of capital economics July's
undershoot quote is not as good as it
looks and even if it is and even if this
undershoot persist the chancellor will
probably need to raise tax raise taxes
by 17 billion to 27 billion in the
budget later this year if the chancellor
raised taxes what I I it's hard to
answer this question but what are the
implications she's raised taxes before
on on employment we've seen the effect
>> she's changed the non-dom rules we've
seen the effect I If we further push up
tax rates in the UK, is that growth
negative?
>> Yes. Well, well, yes. T tax rates need
to be negative for growth really. But
the alternative is to let this slippage
continue and then more than likely you
get a reaction in bond markets which
which again is is going to be negative
for growth. So the chancellor's stuck
between so negative for growth and
negative for growth.
>> Yes.
>> So the outlook for the UK economy is
quite negative. want.
>> Um yes um I I think it is fairly
negative given the fiscal position that
we're in. Um we would expect some growth
um in the UK and we should have the
effects of previous rate um cuts still
coming through more interest rate cuts.
>> How sensitive is the UK economy to rates
at the moment?
>> Quite sensitive. Um the the mortgage
market is is more sensitive than in the
US or in Germany for example. Um so that
that should do something um to to boost
the economy to support the housing
market. Um but offset by this ongoing
fiscal tightening unfortunately.
>> Do you see what's happening in the UK as
a real kind of doom loop scenario of
what happens when government
>> I haven't gone quite that far. Doom
loops. You're not getting doom loops.
>> What happens when government debt gets
too big? And you know, like what we had
last week, we had better thanex expected
GDP data, which is great for the
chancellor, but then yields rose that
ate they ate into her headroom. I mean,
it it's she really can't win in this
scenario. And in my mind,
>> is there really any way out?
>> Uh well, growth really is is absolutely
the way out. And the hope that those
real growth, if not nominal growth,
>> real growth, absolutely. Yeah. So, the
hope that those interest rate cuts do
start to have an effect that inflation
starts to come down. I think that the
real risk, well, a really big risk
>> at the moment is that um the
um the increase in um taxes on employers
and the increase in the minimum wage
feed through further to wage growth and
to inflation expectations keep inflation
high, then we can't get the rate cuts
from the Bank of England that that we're
all hoping will continue and and that
would be a real blow. But on the on the
other hand, if it's those effects are
temporary, if those interest rate cuts
continue, then then I think that should
be really helpful and that's that could
>> How are you thinking about the division
at the Bank of England?
>> It's really surprising and you know I
mean hardly any central bank has this
kind of division and the uh you know
that the chair Bailey still exists in
some way. Why why is there no calls for
Andrew Bailey to step down in order to
try to get some sort of
better clarity on where the Bank of
England is going? Well, you know, the
reason that you have large committees is
so that differences of opinion can be
expressed and it's very clear um that
that things unclear in in the UK that
things are uncertain. On the one hand,
you have these persistent price
pressures, but the economy is really not
fairing well. So, I think it's no
surprise that there are divisions. It's
really interesting that we had that that
second vote for the first time. be
interesting to see whether that happens
again in future. But but I don't think
that this is really a sign that the that
the bank is performing poorly. It's just
a sign that there is a a lot of
uncertainty at the moment around the
economic data and I think we're going to
continue to see these divisions.
>> Is J Pal I the title of Jackson Hole is
all about the labor market and the
transition. There is a view that maybe
the hint there is that J Pal is going to
transition to a new view on the labor
market. Is that what you're expecting?
>> Um, no, not really. I I think there's
it's very likely there will be more
emphasis on the labor market just given
the data that we've seen. Y um and we
know that the Fed explicitly has this
this dual mandate where it needs to look
at the labor market too. So and and that
I think will be emphasized. But on the
other hand, the inflation risk, the
stickiness of inflation, the recent rise
in services inflation, which suggested
that maybe when the Fed was worrying
about the tariffs and goods prices, it
had been looking in the wrong place. I
think those are uh two two sides of the
coin which um pal's going to need to um
>> express and we'll need to walk a very
careful line between not implying that
um that that the labor market downturn
is by far the more important thing.
>> Um
>> I do wonder if he if he's if he's not
overtly doubbish whether he's perceived
as being hawkish.
>> Yeah,
>> that does seem to be the risk that maybe
>> I think he might be. Yeah, he he might
be. And I think that the the the greater
likelihood is that the market movement
is in that direction after after his
speech in in the the hawkish direction
in my view because I think he'll try to
be very balanced.
>> Great to see you. Thanks for seeing us.
Really appreciate it. Jennifer, you are
>> chief global economist joining us from
Capital Economics. Coming up, retail
earnings in the spotlight. We've got
disappointing sales. We got a
disappointing sales outlook from Target
yesterday. The big news actually in some
ways came in terms of senior management
changes. Uh we have Walmart coming up.
That's the big one. We'll talk about it
Welcome back. You're watching the
opening trade. 45 minutes into the
equity market session and I have nothing
to report. Um, as you can see, equity
markets are going nowhere in a hurry.
We're waiting for the next catalyst.
What will that catalyst be? Could it be
what happens around the Ukrainian
situation? Could it be what happens out
in Jackson Hole? Uh we will wait and we
will watch, but we don't have any
clarity on any of that subject. Now it
does see so the the excitement and and I
think where we are seeing some some
action this morning is in defense talks
and I do feel that that is a reaction to
maybe actually the Russians pouring a
lot of cold water on the idea that a
we're going to see some sort of Zilinsky
Putin meeting and I think Zalinski is
setting out some sort of criteria for
that as well. So I think that feels like
it's a more distant prospect. But also
this idea of some sort of security force
operating in Ukraine to to provide
guarantees for Ukraine appears to be
further away now than maybe it was a and
that feels like something that that
basically puts us back to where we were
before. I the stat square has maintained
the conflict continues. The kind of the
ordinance being used at the moment that
is being provided by the United States
and Europe is going to continue to flow
into that country. That in some ways is
good for the defense companies that we
see on our screens in front of us.
Primal, BA systems, names like that
doing relatively well this morning.
>> Yeah, I think there still a lot of
questions to be answered on these
security guarantees that Wickoff
mentioned uh to the press on Sunday and
I think that you can kind of see that in
the market reaction this week. You know,
I thought maybe we'd have some big uh
big surprise, big breakthrough, big drop
in oil, big rise in the euro. It's not
something we we necessarily got.
>> Definitely not getting that right now.
Uh it's interesting actually because the
other thing that the the Russians Sergey
Lavrov have has have suggested over the
last 24 hours is that maybe China would
be involved in any kind of security
guarantee for Ukraine. Now this morning
the Ukrainian president Vameir Zilinski
very much pushing back on the idea that
China could be added to as a security
guarantor in terms of a ceasefire. Not
actually interesting enough ruling out
Russia, but I'm assuming that that's
kind of there's a sort of tacet read on
that. Silinsky says he needs security
guarantees only from those countries
that are ready to help Ukraine. Does
that rule out Russia? One would have to
assume so. Uh joining us now is our
Brussels bureau chief Suzanne Lynch.
Suzanne, where are we on this idea of a
security guarantee? Uh we heard Wickov
over the weekend talking about the fact
that the Russians had accepted the idea.
The Europeans have been running around
trying to sort one out. And now you've
got Lavrov basically saying, "Yeah, we
want to be involved and the Chinese want
to be involved." And you do wonder
therefore whether any security guarantee
is actually worth the paper it's written
on. Where are we?
>> Yes. I mean these statements by the
Russian side in one sense are not a
surprise that they were going to respond
uh to this uh idea of a security
guarantee in this kind of way. But it's
it's obviously really a non-starter. the
idea that Russia would be involved in
dictating the terms of a security
guarantee when they are the aggressor uh
that these European allies are trying to
protect Ukraine from. So that's one
issue. Um secondly, this issue of China
being involved. This is an interesting
uh point. Um there has been whispers of
this over the last few years since this
full-scale invasion of Ukraine by
Russia. Russia and China obviously some
something of two allies when it comes to
for example the UN security council when
they meet there and but again the idea
of Chinese troops or Chinese presence in
Europe which is what this would mean in
reality is something I think that will
be rejected by European allies but of
course it's not just European allies
it's the United States too they're also
a member of NATO and they're part of
these discussions so you know there will
be questions asked about how much
traction this might get in Washington
But ultimately, no. Here in Europe, what
they're looking at and what they're
trying to scramble to put in place is
some kind of a system NATO light that
they would be there to try and help and
back up Ukraine um with the help they
hope of some kind of US involvement.
>> All right, that was Bloomberg. Suzanne
Lynch joining us from Brussels on the
latest on Ukraine Russia developments.
Let's take a look at some other
catalysts that we do have on the docket
for you today. We do have some more
global flash PMIs. Eurozone numbers drop
at 9:00. We also have the UK numbers at
9:30. And then later today, US jobless
claims. We also get Walmart earnings
before the bell and the Jackson Hole
Symposium begins later today out in
Wyoming.
>> Well, let's pick up on that retail
story. Busy week. We always get it kind
of towards the end of the earning
season. It's the retailers that come
out, the big box retailers out of the
United States. Uh we've had a few
already. Uh we got a disappointing sales
outlook from Target yesterday. Today
though is the big one. Walmart is on
deck and Jennifer Kre is here to give us
a sense of what we could learn. Such a
useful tell on what is happening a in
retail, what's happening with the tariff
story, what's happening with the US
economy. What are we going to learn?
What should we expect to learn from
Walmart today?
>> Yeah, so it's been a real mixed bag so
far for retail earnings. Uh so far we've
seen um some some of the stronger
results. TJ Maxx, for example,
performing very well. they raised their
fullear earnings per share guidance and
that's thanks to its value proposition.
So the lesson we can take away from that
is that customers are really looking for
value. So it's a good time to be a
discount retailer. uh perhaps some of
the weaker weaker results. Target for
example uh the big news coming out
yesterday that it replaced its CEO and
that's in an effort to you know really
turbocharge its turnaround uh and it's
having to manage some you know higher
costs as all retailers are uh relating
to tariffs and so the big one today
Walmart analysts are expecting a pretty
positive read on it um because of its
you know really tight inventory
management um and you know as you
mentioned you know it's a seen as kind
of a barometer for US consumer sentiment
so that's a that's one investors will
really be keeping an eye out for.
>> Jennifer, what have these results told
us about how these companies and how
consumers are dealing with the hit from
tariffs?
>> Yeah, I mean, no retailer wants to raise
their prices, but we're already seeing
that bleed through. So, um so Home
Depot, for example, uh Target as well
saying that they'll uh potentially have
to raise prices. Walmart as well warned
in the previous quarter that they're
going to have to raise prices on certain
products, including baby products, for
example. But we're also seeing evidence
of some retailers trying to manage those
costs, swallow those costs, either by
negotiating lower prices with some of
their suppliers, which Target mentioned
in their results. Uh, and so it's it's a
tricky time for retailers, but they're
going to have to try and keep cost low
because we know the customers are
looking for value. All right, that was
Bloomberg's Jennifer Curry giving us an
overview of these retail uh earnings
that we've got this week. Bit of a mixed
picture, but I like what she said there
about some of these retailers warning
that they'll have to re raise prices in
the future. No one actually saying that
they've raised them already.
>> Yeah. But but it's coming and
inflation's already quite inflation
sticking up and we haven't raised prices
yet. Is that
>> still beating through that inventory? I
guess.
>> But moving on to Jackson Hole. It kicks
off today in Wyoming. Joining us now to
discuss is Bloomberg senior strategist
Neil Campling. Traders are still
expecting this rate cut in September.
Are we going to get that solidified by
what we hear from Powell tomorrow? Um, I
think the message from Pal tomorrow is
going to be the same message that he's
had before, which is trust the data.
Wait for the data. And I think that's
going to be the ongoing message.
>> Doesn't sound very doubish. I was about
to say, so this is the debate this
morning. Okay. Absolutely. So if it's
not dovish, it's hawkish. Seems to be
the tone. And if it's hawkish,
>> then the market's not going to like it.
Is that the kind of
>> Well, I think we're going to get the the
probably the social media post from from
somebody in the White House saying too
late pal again, aren't we? Um, in one
sense, I think some of the I think
traders when talking to to uh clients
this morning, actually, I think the
message back is that the short-term
message is is actually less important.
>> The most the longerterm message is going
to be look, we've got at least three
seats that are coming up
>> and we probably got 11 candidates now
and it's a question of the most doubbish
of those candidates are probably going
to likely find themselves in seats
within the within the F.
>> If you if you're managing a P&L though,
right, does it I are you worried about
the long term or are you worried about
the short term? Well, I think I suppose
again I think again if you look at what
equity clients are talking about,
they're saying that what we've seen so
far is the the huge kind of uh V-shaped
recovery we saw since the April dip is,
you know, an even shorter Vshape than we
had over after
>> co. Yeah. They get
>> they get shorter and shorter and so now
we're in a situation where you got so
many kind of mixed messages that are out
there. There's also the question about,
you know, what do we see within the data
itself?
>> Yeah. So there'll be an eye-shaped
recovery. I I you can't actually tell
the difference between there's no
there's no gap between
>> 5 seconds of a dip.
>> Yeah, we're going from months to weeks
to days at this this rate to hours even
perhaps.
>> But I have a question. Powell needs to
change his the way that he's
characterized labor market. He
characterized it previously as solid.
>> Do you think he's going to use that same
language tomorrow? And if he doesn't,
what what else is he going to say? Is he
going to sense that the labor market has
weakened? I mean there again I think and
you've just been talking about retail
earnings for example and the messages
you're getting from the from the
corporates where we haven't seen it come
through yet and actually we look at the
PPI data again we haven't seen it come
through yet as in they're not passing
through the costs so only two things can
happen then if you think about it
slightly longer term we either have to
have margin compression or we have to
have job losses
>> so even if he takes out the word about
the robust labor market I think he's
still going to say look look core PC
which what they care about is still hot.
>> It is still. Yeah, it is. But here's the
bit that I can't figure out. Okay. It
feels like the market wants a slowdown.
The market wants the labor market to
weaken so the power can say that it's
weakened so therefore we can get rate
cuts.
>> Yeah, rate cuts which is great for
growth and is great for stocks and
>> but but is isn't a isn't a isn't a bad
labor market bad
>> is like isn't isn't that the kind of the
concern?
>> No, we want it to we want it to weaken
slightly, not fall off a cliff. But
history does tell us that once the
>> labor precisely that's my point. Be
careful what you wish for here. You want
a labor market that's slowing so power
can cut rates. But then
>> they come in and do QE again and
everyone's happy.
>> We all know that playbook
>> and if and again you know if the cut if
and I don't think it will happen but if
the cut was 50 basis points rather than
25 what message does that send? The data
we haven't told you about yet is really
bad. So you know what what do you want?
I mean the other thing is like if we
look at back at the 2Q earning season
you know it's quite clear that tech was
the heavy lifter for for the whole of
the S&P earnings. If you go slightly
down the market cap level then we had
near 9% earnings growth for small caps.
>> And we was expecting of a 3% decline.
Now small caps really at the end of the
day are the lifeblood of the economy. So
it's not showing up in that data yet
either. So we've got so many mixed
messages that you know I think
>> which ones are you listening to?
>> I'll listen to all of them obviously.
I I mean given the theme of Jackson Hole
as a labor market in transition and then
it does discuss immigration within the
subhead of that. I'm looking for a big
update on what Powell thinks immigration
is going to have on the US economy. Is
it going to be weaker labor market or is
it going to be weaker growth? How is
>> But can you have but can you have you
can have an unemployment rate that's
stable?
>> Exactly.
>> And and a labor market that is producing
75,000 jobs a month. Like that feels
like stability to me.
>> It's not off a cliff, is it? We're not
talking about a kind of COVID type
situation or even with all the
uncertainty around tariffs and we've had
some pretty worrying data again this
week from some of the corporates like
toll brothers
>> James
the housing market's not great
construction retail numbers etc. I mean
there's a lot of
>> lot of things a lot of things out there
to listen to. Anyway that wraps things
up for us. Uh the pulse is coming up
next. Enjoy the rest of the day. Friday
is going to be a big day. Disciplin.