Good morning from London. I'm Anna
Edwards alongside Guy Johnson. We're an
hour away from the opening trade. Here's
what you need to know. Jerome Powell
takes center stage at Jackson Hole later
today. Mo markets are hoping for signals
about a rate car next month, but could a
focus on inflation targeting sound
hawkish. Nvidia orders suppliers to halt
production on its China Focus H20 chip?
That's according to a report after
Beijing ordered local companies to avoid
the product. Plus, the EU and US outline
plans that could cut tariffs on European
cars, but lower tariffs on the drink
sector remain elusive.
Okay, let's talk about this markets.
Equity markets are like deer in
headlights this morning this Friday
going into Jackson Hole. Euro stocks 50
futures, S&P futures, nothing to see
here. We're a little softer, but not by
much. The action is elsewhere. The
Chinese market love that H20 story that
we just heard from Anna. Looks like
local producers will get a leg up. Tech
stocks have rallied in Asia. The CSI 300
is up by 1.64%. So that's one story that
we can fold into the markets this
morning. The dollar is definitely on the
front foot going into PAL. You can see
that. But I have to say the Japanese
inflation print is something to focus
on. UA is going to speak tomorrow,
Saturday. I think that's going to be
really interesting as well. It's not
just PAL in focus. It is some of the
other central bankers as well. But pal
obviously the main event of the day. The
countdown to the opening trade starts
right now.
Morning folks. Friday the 22nd, the day
we've all been waiting for. Powell is
going to speak at 3 p.m. London time. We
are 8 hours away from that speech. The
countdown is definitely on right now.
Expectations have been growing
throughout the week. You've seen it kind
of ebbing and flowing around whether or
not he is going to be dovish, but the
latest tone appears to be maybe less
dovish.
And that's going to potentially provide
some volatility later on.
Absolutely, that could provide
volatility because we've seen the
markets quite preoccupied by this
question certainly all week about
whether we're going to get any clues
about September, about a potential rate
cut in September from Powell today. But
as you say, some of the latest clues,
whether you look at the data, the PMI
coming in strong, or you look at the
commentary from Fed officials, not all
suddenly declaring that a rate cut is
required, or whether you look at some of
the expectations about what Powell is
really going to be talking about, which
is inflation targeting. All of that adds
up to something that could be a little
more hawkish than the market was maybe
anticipating.
If he's not doubbish, he's hawkish seems
to be the expectation. That seems to be
the kind of the line that we're looking
at here. and a more technical speech on
what exactly the structure of the
framework looks like maybe delivers
exactly that and I think that's going to
be interesting and the commentary from
some of the other Fed speakers going
into this as well appears to be less
dovish the market definitely got into
the more dovish camp at the beginning of
the week we faded that ever since but
you do wonder whether there's still as I
said significant volatility to come
and that PMI the manufacturing PMI data
that came in yesterday the market we
were talking about this with Valerie
before the program the market seemed to
really jump on that uh despite the fact
it doesn't support the market's view it
It was a strong set of data and strong
data was seen as bad news for stocks. We
saw stocks uh retreating. So the market
is prepared to listen to those kind of
arguments, prepared to perhaps tune into
that kind of message if we get from pow
some push back against September cut.
That's where the pain point is, isn't
it? Like strong
short end short end yields could be see
some pain as a result.
Um it's going to be interesting some of
the other central banks. I just want to
flag these as well. I think U8 is going
to be interesting. I think the Japanese
story is going to be certainly something
what you want to watch. I think the data
today speaks to the idea that maybe
actually Japanese inflation is a little
toppy and we are going to get a response
and I wonder whether U8 is going to set
that up. Lagard I'm not convinced is
going to be as interesting but I think
UEA will be interesting. I think the
Bank of England's also worth paying
attention to as well. Batty's going to
be speaking. He's got a real dilemma I
think to deal with in the UK and I
wonder whether we'll get some clarity
around that as well.
And this runs into the weekend, doesn't
it? We should point that out. This goes
on until Saturday. So, you know, the
central banking fund continues. Uh
meanwhile we need to focus on AI and
tech news then.
So so I was just flagging what was
happening with the Chinese stock market
today. The Chinese stock markets have
done well. Chips have led that. The tech
stories being front and center. The
reason for that is apparently Nvidia is
halting production or has asked its um
its manufacturers the fabs to stop H20
production. The Chinese have been
pushing back very firmly on this. We
were talking to Tom about this a little
bit earlier on as well. He was flagging
the lutnik comments a few days back
which seem to have been the catalyst for
these this kind of more abrupt shift
from the Chinese authorities. He was
saying, "Oh, you're getting the fourth
worst product out there or the fourth be
best best product, I guess, is maybe the
way of looking at it." The Chinese
really took offense to that. The
regulators have really taken offense to
that. And they've pushed back. They want
Huawei to have more demand for its
chips. They want to push that story
forward. They want to be domestically
focused. And this is the narrative. So,
can Nvidia kind of circle back around
again with a better chip for the Chinese
that they would accept? And would that
be something that maybe lifts the
narrative around Nvidia? because we're
going into earnings next week and and
that's one of the key event risk events
for next week.
It is absolutely going to be one of one
of quite a few. You there aren't that
many big events next week. So, it's
going to get even more focus than it
would normally, but Nvidia will be a big
focus for us next week. When I first saw
these headlines over stopping H20 or
putting pressure on or asking, as you
say, suppliers to stop H20 production. I
thought, is this a positive? Because
they've they've been move they've been
wanting to move towards a more powerful
chip for China. They need to get
approval from the White House for that.
But it doesn't seem to be that that's
the motivation here. It seems to be as
you point out the uh the pressure from
the Chinese on Chinese companies to not
buy this product because the Chinese
fear that there are back doors in here
and location uh technology. Juan's been
out in the media in Taiwan pushing back
against that and suggesting that the
technology doesn't have any of those
things. But this does seem to be a
negative. But worth pointing out in that
context though that US futures are you
know NASDAQ futures down 2 cents of a
percent which is worse than they were an
hour or so ago. But that's not a massive
tech selloff. Waiting for Jackson Hole
perhaps still. No, you think I think
precisely I think you're right. We're
waiting to see what happens with with
Jackson Hole. Um it is going to be
you do wonder how the White House is
going to respond to this in as much as
chip exports to China were meant to be a
revenue generating story as well. So you
do wonder whether there's more latitude.
Maybe China doesn't like that.
Maybe as well and the whole idea is that
the Chinese become addicted to US tech
and the Chinese don't definitely
don't like that. Talking of
transatlantic trade, let's talk about
what's happening with the EU. The deal's
kind of done but not done.
Yeah, absolutely. And this is the new
world we're in, isn't it? Where trade
deals are entirely done and not done all
at the same time, all at once. So, yes,
we've had the, you know, the fanfare
around the 15% deal for Europe. But so
many questions were left around specific
sectors, and the auto sector is one of
them. And so, we've got more details now
about how some of these sectors are
going to be accounted for, in
particular, those that were vulnerable
to sectoral tariffs. The auto sector
already has a sectoral tariff, but the
details on cars are quite interesting.
Yes, they might get a lower tariff on
cars. Europe, but this is reliant on
some specifics around industrial policy
and seafood policy that Europe has yet
to introduce. And until those things are
introduced, then the Americans won't
give the lower tariffs. So this is what
I mean about, you know, we're
perpetually in tariff negotiations.
Feels a lot more like Brexit. If we're
back to seafood and fishing and those
kinds of things, it feels like there's
definitely sort of a Brexit echo in all
of this. And and we still don't know
like the farmer story has been partially
done. There could be huge farmer tariffs
coming, pharmaceutical tariffs here. I
need to be specific. We're not talking
about fish farming. We're talking about
um drugs and and it'll be interesting to
see how how that story develops. We
still don't have a carve out when it
comes to wines and spirits. That that is
is still being hoped for. That doesn't
look like it's going to happen anytime
soon. There's a lot of work still to do
here.
Yes.
And to your point about the the
perpetual kind of uncertainty,
how do you how big an impediment is that
going to be?
Are we going to start to see it showing
up in the data? We haven't yet. It feels
like we may though still see that
because if you just don't know one week
to the next, day to day, minute to
minute, what's going to happen, how do
you plan?
Yeah, it's a rolling process. And whilst
many governments traditionally might
have been very alert to the idea, aware
of the idea that businesses price
certainty, you know, we've got a US
administration that has a policy agenda
it wants to enact and if that means some
uncertainty for business, it seems as if
they're quite comfortable uh with living
with that. Uh plenty then to talk about
with our guests today. Let's tell you
who's coming up on the program. Paul
Skinner, Wellington Asset Management,
Investment Director. A focus on fixed
income there. And that'll be
interesting. Thinking about the
vulnerability, particularly at the short
end of the curve then uh as we head into
Jackson Hole. Then what does the dollar
make of Jackson Hole? Sonia Martin will
be with us, DZ Bank, head of FX and
monetary policy research. So plenty to
talk to Sonia about again ahead of
Jackson Hole. Salman Amed will be with
us from Fidelity Global head of macro
and strategic asset allocation. Maria de
Mertzis the conference board economy
strategy and finance center Europe
leader will be with us to talk about the
European economy and I think I hope we
still have time to talk about uh travel
I think that's the plan it being Friday
at the end
it is so next week kind of next week
feels like peak summer the US is off the
the US is off the following Monday we're
off this Monday we're not going to be um
we will have a show tune in it's going
to be great um but it feels like we're
kind of in that so feels like a perfect
moment maybe to talk about what is
happening this summer wildfires heat
over tourism. All of that folding into
that narrative. Um, let's talk about
what else you need to know. This Friday
morning, Bloomberg understands the Meta
is hiring another key AI executive from
Apple, even as the social networking
company prepares to slow its
recruitment. We talked yesterday about a
hiring freeze. Uh, we're told that Frank
Chu, who led Apple's AI teams focused on
cloud infrastructure, training, and
search, will be joining Meta's super
intelligence labs. Chu follows several
of his colleagues to meta which also
hired the heads of Apple's AI models
team recently. Staying in the AI space,
Anthropic is nearing a deal to raise as
much as $10 billion in a new round of
funding. Sources tell us the fund
raising is bigger than expected and one
of the largest mega rounds to date for
an artificial startup. Bloomber
previously reported that Anthropic was
in advanced discussions to raise up to 5
billion in the round at a valuation of
170 billion. We've significantly stepped
that up. And Blooming has also learned
that the Trump administration will not
seek equity stakes in chip makers like
Taiwan, Semi, and Micron that are
boosting their US investments. Micron
has pledged $200 billion, sorry to yeah,
$200 billion, while TSMC has pledged to
invest an additional 100 billion in the
United States. The comments come as the
Trump administration is working on a
deal that could see the US government
taking a 10% stake in Intel.
Coming up on the program, it's summer
and many vacationers are avoiding
traditional holiday spots. we are told.
We will talk with the uh talk about the
latest trends with an industry expert.
Where are the uh the new places to put
on your radar in terms of travel
destinations? Plus, German households
are buying stocks finally digging into
their savings apparently. We will
discuss the reasons for this new
phenomenon. And up next on the program,
Jackson Hole is of course in focus with
markets hoping that JPAL will signal
cuts next month. Will they get what they
want? Will they be disappointed? We'll
have plenty of views and opinions on
that front. If you have questions for
our guests, if you want to get involved
in any of these conversations ahead of
Jackson Hole, IB plus BBTV go, that is
the function to use on the Bloomberg
terminal. This is Greenback.
Today, Bloomberg is live at the Jackson
Hole Economic Symposium, bringing you
news and interviews with Fed leaders and
other economic experts. Tune in for a
special episode of Surveillance at 9:00
a.m. only on Bloomberg.
The last inflation report that came in
where you saw services inflation, which
is probably not driven by the tariffs,
really start shooting up is a danger.
That's that's a dangerous data point.
I'm hoping that that's bit of a blip.
So, I think we still have a fair bit of
information that we're going to get
before September or the whole fall to
determine what's what path we're going
to be on.
Some data dependence perhaps from
Chicago Fed President Austin Goulby
there speaking from Jackson Hole of
course. Let's bring in Bloomberg's
Valerie Titel who's been listening to
all this Fed commentary val and putting
it all together for us. So, what do you
conclude, Val?
Well, look, I'm reading the tea leaves
here. Yes, we did hear from a lot of
hawks yesterday, but no one is penciling
in a September cut as a done deal. We
heard from various Fed members. A few of
them all mentioned that given the
current stance of data, they don't see
that September cut as warranted. We
heard that directly from Fed's hammock.
We also heard it very much implied uh
from from Fed Schmid as well. We also
heard from Boston him saying that he is
still penciling in one cut for the
remainder of the year. So, it doesn't
seem to be that there is any uh dovish
narrative that is amping up into Jerome
Powell's speech. But maybe they're all
waiting to give the to hear the big
signal from the guy himself later this
afternoon. But we have seen a rise in
frontend yields that was very much the
focus of yesterday's session. Yes, we
had a rise in jobless claims. That's
another negative for the labor market,
but the PMIs came in strong and that
what's really led the selloff as well as
that hawkish language from Federal
Reserve members. We have now been
pairing these September rate cut odds
back after hitting over 100% last week.
Ever since that hot PPI every day, they
seem to be ticking down. We're now
standing at a 75% chance of that rate
cut come September with a lot of data
still between Powell's discussion to
today uh and the Fed's decision on
September 17th. But this kind of hawkish
positioning is leading the equity market
to fall from those all-time highs. were
now down for five straight sessions in a
row for the S&P 500 index. S&P futures
in the last six sessions down near 1.7%.
Wow. The Nick Timmerous, not Nick
Timmerous speech, uh the piece speech
got speeches and pieces. The journal
piece this morning, I think it is Timus
actually talking about the fact that
this is going to be a technical speech,
but he's going to talk about the
framework and the framework that was put
in place a few years ago and they're
going to reverse that and go back to the
kind of prepandemic framework.
If that's the speech, is that hawkish?
In my mind, yes, that is hawkish. Right.
We need some evidence from pal that he
has changed his tune on the labor
market. If we don't get that today, I
think the front end is vulnerable to a
sell-off. But as you mentioned, uh Nick
Timroth in the Wall Street Journal
talking about the uh the potential axing
of the flexible inflation targeting.
That's something that our own Anna Wong
has written about as well. This was a
tool that was really helpful for the Fed
back in 2020 to look through the initial
rise in inflation. It's not so helpful
now that we have inflation running above
target uh for so long. But if he wanted
to sound neutral guy, he could do what
other Fed members have done recently,
which is just stress data dependence.
That we still don't know what the
outlook for that September meeting is
because we have another CPI print,
another labor market print to go and he
needs to see some sort of evidence that
the labor market is continuing to weaken
and inflation is continuing to fall. So
come back to the point the idea that the
the the Fed's interesting but the
response in the White House is more
interesting and you do wonder how much
political pressure could be piled upon
the Fed if he is in any way hawkish or
even maybe neutral today Valerie thank
you very much indeed joining us now Paul
Skinner to talk about all of this
investment director at Wellington
management good morning
morning guy good to see you
if he's not dovish is he hawkish that's
the kind that seems to be the feeling
going in the front we the beginning of
this week everybody thought he was going
to be dovish the market the front end
moved like I the expectation was that we
were going to see a pivot back end of
the week going into the speech. What are
we 7 and 1 half hours to go? Doesn't
feel like that now.
I think it's a really exciting day and I
think it's a day that we're going to
look back on and say this is when the
market narrative changed
because that's like last year now.
Yeah. I mean last year I mean Jackson
tends to deliver. I mean over the years
it's delivered. But I I really well we
do believe that he's going to be quite
hawkish or he's certainly not doubbish
and okay that's a material you know
factor that markets haven't got
discounted into them and I think this is
symptomatic of central banks around the
world we're going to be changing the
discussion now we just look at what uh
pal has in front of him he's got clearly
all the things he warned about in July
coming to fruition when we look at the
underlying data in inflation in goods.
We're seeing apparel zero inflation
beginning of the year now up 3%. Uh
household goods was 2% now up 5%.
Electronic goods was zero now up 2%.
But service is where the problem is.
And it's high inflation is high there.
And so what we see is as we go through
to the end of the year PCE at 3% uh
headline at 3 and a half%. This is and
he's going to have data looking forward
as well. we saw but in the PMIs we also
saw um you know hiring intentions
increasing up to a level
what's mispriced off that scenario if
this is the pivot what's mispriced going
into the new paradigm that we're going
to I the front end of the curve
obviously
the short end the short end is got to
pivot up um and basically risk assets
are incorrectly priced we have really
full value
by how much by a lot or by a little
by a substantial amount of volatility
and I I think this is the key. You know,
we we got a paradigm here that we
actually think that um you know,
economies are actually rather good. Um
and that's going to be the problem that
faces central banks. So that paradox is
that risk assets are going to look at
you know a long-term good scenario i.e.
economies are coming but shortterm we
have to have a rethink about the
direction of interest rates. So you
think hawish then Paul is that
hawkishness going to be overt or do you
think it'll be hidden behind quite a
technical conversation about
um average inflation targeting and and
all of that stuff that guy was just
asking Valerie about that that that a
lot of people have have have focused on
ahead of this Jackson Hole speech.
That's why we're getting these leaks.
We're we're being gently informed that
this is certainly not going to be
dovish. It's going to switch to some
technical things, but I think within the
speech, he's going to be weaving in the
fact that he has uh inflation problem.
He's got a story on labor that, as we
all know, has signs of of slowing
demand, but also that supply story is is
slowing because of migration. I know
you've all discussed this many many
times, but also because of exactly the
subject they're talking about at Jackson
Hole, demographics. that you know in our
belief at Wellington demographics are a
secular driver for higher stickier
inflation and that's the issue he's
going to be talking about.
Okay. So this isn't an inflation problem
that's only about tariffs then you think
this is just a sort a more widespread
uh we're in a higher inflation
environment than we were post GFC and we
haven't quite got our heads around that
thing.
Correct. And I I would broaden that into
the global economy. I think you know the
global economy looks in goodstead. there
is, you know, a a a good sign that we're
going to see that economy pick up steam.
Why? Well, uh, real rates are basically
zero. We've got fiscal stimulus around
the world. But the problem is we've got
40, you know, 40-year lows in
unemployment in developed markets. We've
got inflation that came down and
plateaued at 3%. Those are all issues
that central banks around the world now
have to think about. And this is what I
mean about changing the narrative. I
think that markets are no longer going
to have to or or look at declining
rates. They're going to look at rates
that are potentially flat and
Okay. Which is why it's interesting. I
think in your notes I picked up on the
fact you said that that even a Trump
appointed chair will struggle to cut
rates and and that makes more sense to
me now after what you've said there
because you think we're in a higher
inflation world. We speak about being
data dependent and I think that data is
going to be punishing on the inflation
side and also that labor squeeze where
you end up with demand and supply both
low but matched and therefore you have
unemployment at 4.2% which is below the
inflation.
What happens if the next chair though
does cut rates aggressively as as the
president would like?
We've all Yeah, we've already
How big a move would do we get at the
back end? Well, it's it's it that's
going to be painful because we've
already seen the market discount that
we've got, you know, fives to 30s, 100
basis points in most countries at the
moment. And I think that's the the the
the warning sign that the market's on to
this story and you could see another 50
uh pretty rapidly if people feel that
the Fed is being controlled and doing
irresponsible things. So, 50 to 100.
What do I do here? So, so coming into
the week, I've got I've got the VIX at
14 with the starting with the 14 handle.
The move index is low. Volatility in the
bond market's pretty low as well. Do do
I want to get long V here? Is that the
trade going into this?
I mean, that is the story that we feel
is going to evolve over the next few
months. A long V trade. There's going to
be volatility. Now,
okay. But a flattener or or a steepener.
I
a bare flattener.
You think it Okay.
Bare flattener for the time being. And
then we we find out how what the quality
of of the new Fed will look like as we
go into next year. And that will
determine whether that back end loosens
up and and and sells off again. But
yeah, a bare flattener as as the short
end comes up,
flattens out the curve a bit and then we
wait and we watch. Now the the thing
you're going to see is volatility in
risk assets. Now that presents
opportunities, you know, Wellington,
we're active managers. There are going
to be some fantastic
Where are they? Where where are you
looking now? Well, uh, first and
foremost, you've got to look at things
that are inflation sensitive and, you
know, dial back what you're, uh, worried
about. Also, that long-term, you know,
rate is going to be that much higher.
So, overleveraged companies, you've got
to start worrying about. There's been a
sort of, um, in credit markets, uh, all
boats have been floating, you know,
regardless how good or bad they are.
We're going to see some discovery. We're
going to see dispersion. We're going to
see the overleveraged companies be
discovered. and you know root rooted
out. So yes, there's going to be some
variability dispersion in how both
countries perform and individual
companies and and just briefly then if
we're looking for inflation protection I
mean in terms of sectors are we going
back into commodities more if that is
that
the commodity story is going to run and
run absolutely um and because the whole
you know the thesis behind here is
sticky high inflation but with an
economy that's running quite comfortably
behind it and I think you know the
poster child for a a central bank that's
not been quite creating the slack
required by economy is the bank of
England and we saw that revealed when
they had their split vote and uh you
know there are some you know big views
in within that central bank and the
narrative has been that don't worry low
growth and tight fiscal policy is going
to get inflation down it simply hasn't
worked last year they thought inflation
was going to be about 2.1% by now it's
double that it's 4% so you've got an
economy in the UK where you've got
services inflation at 5%, wage inflation
at 5%. You've got growth at about 2%
which is 1% over over trend.
Y
that's an economy you shouldn't be
cutting rates, you should be raising
rates and that's the discussion we're
going to be having as we head to the is
will the Bank of England raise rates?
Okay, Paul, thank you very much. Paul
Skinner, investment director at
Wellington Management. A lot to think
about then as we head towards Jackson
Hall and the wider inflation narrative
globally. Will Jerome Pal then signal
September rate cuts or will as we was we
were just talking about be more hawkish?
We'll get into an FX conversation next.
This is Boom Back.
Welcome back. This is the opening trade.
It is Friday morning. 30 minutes until
the start of trade though. We still have
one day to go. We still have a Jackson
Hole speech looming on the horizon. 3 PM
UK time we hear from the Fed chair
futures then with that in mind showing a
little bit of movement but not much down
by a tenth of a percent or so on Euro
stocks 50 futures US futures also being
influenced by that report guide from the
information talking about whether the
whether Nvidia has asked its suppliers
to stop production of the H20 chips
NASDAQ futures over in the United States
down by 210 of 1%
everything's calm in the equity market
waiting for Jackson Hole we'll see what
happens a little bit later on we have
got seven and a half hours until that
speech from JP PAL Treasuries absolutely
be calmed as well. Nothing to see there.
Uh 4.3% on the US 10-year EGBs, European
government bonds, big day yesterday on
the back of the PMIs today. Little bit
of a move higher higher in yields, but
not by much I have to say. Um so again,
maybe waiting, watching, trying to sort
of discern what we're going to get out
of power because that will obviously
have a transatlantic effect. One thing I
will flag is that the back end of the
Japanese bond market is worth paying
attention to. Inflation is a factor in
Japan. We're going to hear from UEA
tomorrow as well at Jackson Hole.
Japan's 30-year yield hitting fresh
record highs. Um that that bond was
debuted in 1999, which was an
interesting time to debut a bond uh
going into obviously 2000. Uh but we
have now hit a record high on yields as
inflation continues to be an issue for
UEA.
Yes, absolutely. So long end in focus
for those reasons globally. The short
end in focus in bond markets then
because of what we might hear from
Jackson Hole. Bond investors are heading
into te today's much anticipated Jerome
Pal speech looking for any clues as to
what policy makers intend to do next
month when we get to the September
Federal Reserve meeting. Joining us now
is Sonia Martin, head of FX and monetary
policy research at DZ Bank. Sonia, thank
you so much for being with us. So at the
beginning of this week, lots of the
conversation was all about what clues
would we get around a rate cut from
Jerome Pal. As we've gone through the
week, we've got more positive data.
We've got not necessarily doubbish
commentary from Fed officials and now
we've got clues that perhaps there'll be
some hawkish lines around inflation
targeting from the Fed. So does that add
up to something more hawkish? What are
you expecting from Jerome Powell?
Well, I mean the Fed is sort of stuck
between a rock and a hard place. Uh as
you said, I mean you know there is sort
of conflicting evidence looking at the
labor market and the inflation front. I
mean inflation has ticked higher. Maybe
not as much as people had feared but
it's definitely on the move up. We had
some weak data from the labor market.
So, you know, the Fed, I think, does
definitely have room to cut rates
further this year. Uh, and that is, I
think, the message that power will send.
However, I mean, we have to keep in mind
that quite recently people had started
discussing a very aggressive path for
the Fed and I think that's something
he's not going to open the door for. um
partially because I think fundamentally
there's no reason to and also he's got
to really make sure here that in term
the way that he communicates with the
market he makes it very clear that he
would not be pressured by the white
house to to go down a path that might
not be fundamentally justified. So I
think 24 basis points next cut September
that door is going to be open but I
don't think he's going to be more
aggressive than that. So very data
dependent I think at this point.
So data dependent perhaps. Is that going
to be the message he wants everyone to
take away? So no commitment either way.
Or will he talk about ending flexible
average inflation targeting? That's a
bit of a mouthful. Will he talk about
ending that with a view to trying to
deliver a slightly more hawkish message
because you can interpret that uh policy
change as slightly hawkish.
Well I mean Jackson Hall has always been
good for some surprises. I mean, we have
seen that in the past, so I wouldn't
rule it out. But I think he's just I
don't think he's going to be as
aggressive as that. I think there's no
point in sort of poking the bear in the
White House. So, I think, you know, a
sort of cautious, slightly doubbish, you
know, data dependency. I think that's
the smart way for him to go, unless of
course he does want to go into open
confrontation with Trump, which, you
know, may happen, but it's not our base
case scenario.
That sounds like it's slightly hawkish
at the edges. If he's not doubbish, he's
being hawkish. Do I want to be long the
dollar Sonia going into today?
Yes, I think there is a risk here
because we have seen Euro dollar you
know sort of struggling to make headway
up north. You know we had we had sort of
seen lower highs developing over the
past week or two. Um so there is a lack
of dynamic. I do think that you know the
dollar has some there's some potential
for correction. um you know when you
look at the speculative market the
there's a massive overhang here still of
long euro dollar positions and it
worries me slightly because I do think
there's a risk that if we do see a
correction lower maybe as a result of
today's speech then that can of course
accelerate as these positions get closed
people sort of give up hope that we're
going to see 120 soon so there's risk I
think that we're going to see more of a
correction u and possibly yes as a
result of today's speech
is that correction going to be a buying
opportunity is the longer term trend
dollar negative. If we see a Fed chair
that comes in next year that is overly
doubbish as a result of White House
policy, would that be dollar negative?
Is is this going to be an opportunity
that's created here effectively to buy
the dip?
Yeah, absolutely. I I would absolutely
underline that. I do think if we see a
bigger correction low that is going to
be an opportunity come in to build fresh
long positions. I mean the dollar is
fundamentally damaged. You know, we have
seen, you know, a lot of a lot of things
have happened this year that we never
would have believed possible before.
And, you know, with the Fed heading next
year, definitely into a very doubbish
direction. I do think that the dollar is
on a downward trajectory in the medium
term. I would say though that we
shouldn't forget the other side of that
coin. I mean, it's easy to be bearish on
the dollar. I mean, there's plenty of
reasons to it is a little bit more
difficult maybe to make a strong case
for a strong euro given, you know, the
situation here is difficult still. So,
you know, I think one shouldn't get, you
know, too excited about levels, you
know, massively above 120. Uh, but I
think yes, buying opportunities
absolutely on the dips.
And what is it about the Euro story,
Sonia, that remains a little
unconvincing right now? Is it that we're
just going to get more cuts from the ECB
at some point because tariffs are going
to take their toll and uh the economy is
going to struggle a little bit more or
or is it not that and it's and it's just
and it's something else that's going to
weigh on the euro? Well, I mean when you
think about what happened this year, I
mean the euro has been performing really
well, not just against the dollar all
year round. I mean, we've have seen a
really strong performance and that's
sort of based on hopes for growth in
2026. You know, this is where fiscal
policy in Germany in particular comes
in. Uh then the realization that the ECB
will you know will end its rate cutting
cycle, you know, very soon or has
already ended it. Uh and and so that's
all driven the euro higher. Um and of
course we had a market that was
massively short euro in the beginning of
the year was caught completely on the
wrong foot. So we had position
adjusting, building of fresh longs, all
that's driven the euro. But all of these
factors, you know, I think are pretty
stretched at this point. So you know, we
would need some massive positive
surprise from the European economy to
justify just on the euro's own steam
more advances higher. And so I think
we're going to now depend much more
what's happening in the US. So I think
it's more of a dollar story now than it
is a euro story.
Okay. So we keep watching the dollar of
course. um in terms of flows and and how
people are positioning here then Sonia
our last guest was saying that money is
is going from the US into Europe and
Japan but you say that you see foreign
investors still piling into to to the
United States maybe you're looking at
different data sets different asset
classes but what what what is the what
is the story there
well I mean we have heard quite a lot of
anecdotal evidence throughout the year
of investors looking to leave the US go
elsewhere diversify more actively and
the latter I'm sure has happened but
when you look at the US portfolio flow
data and we've just got the numbers for
June. You know, the first half the year
foreign investments in long-term US
dollar assets amounted to $800 billion.
That's 70% of the flow we had the entire
of last year. Strong demand still for US
treasuries, US equities in particular as
well. So I mean I mean of course one
could argue that it should have been it
would have otherwise been more but the
fact of the matter is that demand for US
asset remains strong and we've long said
that the reason for this is not just
that people are particularly bullish on
the US. I think part of the reason it's
always going to be the lack of real
alternatives if you're looking at the
really big flows. I mean you the the
German bond market is like was a tenth
of the US market. So I mean there's a
limit to how much you can diversify.
Sonia, do you think the BG's BOJ is
going to have to raise rates? Are we
going to get hints from that from UEA
this this weekend? What does that mean
for the yen in terms of policy going
forward? How far does this policy hiking
cycle ultimately go? Well, I mean,
there's definitely room and and the
need, I think, for rate cuts from the
BOJ. I mean, certainly the level of
interest rates much too low at this
point. 1% ultimately seems a much more
sensible level to get to maybe. Uh, and
we're definitely big fans of the yen. I
mean, with the shift in monetary policy
in Japan and everything that's
happening, we do favor the yen. I mean,
we have a dollar yen forecast on 12
months of 135. So, we definitely think
that the yen is going to be one of the
currencies to wash over the next 12
months.
Great to catch up, Sonia. Have a great
weekend. Thank you very much indeed.
Sonia Martin, head of FX and monetary
policy research, joining us from DZ
Bank. Coming up, we're going to be
tracking wind stocks today. This after
the Trump administration launches an
investigation into imported wind
turbines. We're going to talk about that
and all the other stocks you need to be
watching this Friday morning into
Jackson Hole. This is Bloomberg.
Just over 7 hours until the Jackson Hole
speech delivered by Fed Chair Jay Pow.
We're all on tent hooks waiting to hear
what is going to be said. Hish doubish
could mean a lot to the market a little
bit later on. Uh this is how futures are
positioned going into that. Not a lot of
movement. A little downside uh in the
DAX. There's a few upgrades actually
that could affect the DAX this morning.
The CAC though down two ten of 1% as
well. The footsy 100 after a fairly good
run actually recently absolutely
flattened as a pancake going into the
Friday session. Um let's talk about what
we have heard though going into the PAL
speech and kind of how that sets the
tone and expectations. Kansas City Fed
President Jeffrey Smith says American
businesses are showing renewed optimism
that's filtering through to the labor
market and putting the focus back on
inflation. Smith spoke with us from
Jackson Hole about the economy and of
course the growing political pressure
that is hitting the Fed.
I'm a little philosophical about the
whole conversation of Fed independence
and and where our role is uh in the uh
American economy. Um, we're almost 250
years old as a nation. I think there's
uh something to be said. We were built
on words and and and we continue to
debate those words uh legislatively and
judicially. Uh whatever those whatever
friction we might have with other
branches of of the government. I think
great steel's tested by fire. So what we
can always be better, we can always do
this better. But I think I think the
nature of independence uh and and I
think don't believe me believe other uh
nations that have central banks and
don't uh it seems to work but but uh but
I'm always open for the conversation of
how do we make it better?
Well, the big question for everybody,
especially for Wall Street, is what
happens on September 17th.
So, uh, this is, as you know, kind of an
interesting, uh, uh, month because we've
got Jackson Hole and and then, uh, we've
got quite a few weeks of data to kind of
pull in. So, uh, so I'm I'm really I
think everybody's quite interested in
some of the maybe the prints that
happened in the last couple months and
kind of where where they go from here.
Um, so I'm I'm I'm like everybody. I'm I
I think there was some fascinating
conversations at the last FOMC as you
know there were a couple descents. Uh I
I think my interpretation of what's
happening especially in the labor market
is that the first couple quarters a lot
of business people were just saying um
it it there's uncertainty enough and I
think they kind of cooled a little bit
on the higher side. But the most recent
couple weeks that we've been talking to
businesses in the district, uh there
seems to be a burgeoning optimism again
that they've kind of digested and and
they've been agile enough to try to work
their way through some of the new
policies uh from the administration and
maybe going forward uh maybe we'll see a
little bit of uptick. That said, I still
believe there's that the that the
inflation number uh is is trending
closer to three than two. Well, we saw
that in the minutes that in general the
open market committee felt that
inflation was a bigger danger at this
point. Would you say that's your view
now?
It it would be my view now. I I think
with an understanding that what may have
happened in the first couple quarters on
the labor side, which I think concerned
several people uh were on the committee
uh me included. But I I think the the
this PPI was interesting. That print was
interesting. But I I really believe that
that when we talk to uh a lot of our uh
uh a lot of folks in our district is
that if you if you had to kind of lean
or have a bias toward it would be on the
inflation side.
Inflation still seems to be the problem
and we're hearing it time and time again
from Fed speakers going into Jackson
Hole. How does Pal deal with that
narrative that actually the symmetric um
setup that the Fed has to deal with
right now may be more biased in that
direction despite the fact there are
signs in the labor market that things
are getting a little more unruly than
they have been in the past but we don't
know yet. There's there's so much
ambiguity particularly on the labor
market side that it's such a difficult
call and the market's got so certain
that a that a September cut is going to
be delivered but the data is not there
yet.
Right. and the and the commentary such
as we just heard seems to focus more on
the inflation side and very overtly
saying there's more of a concern about
inflation on the other subject around
Fed independence. Well, it's a very
linked subject around Fed independence.
I thought that was quite uh quite
wonderful language from Schmidt not
picking a fight at all trying to find a
way through with language that avoids
sort of fighting even though he's not
saying what the Fed what what Trump
wants him to say is he? He's saying he's
more worried about inflation and that's
not going to lead to rate cuts. But he's
saying, "Look, independence works, but
I'm always open to a conversation about
how we make it work better." Uh, which
is a nice frame of words uh to try and
take the heat out of this perhaps.
But the market is clearly, and you can
see this at the long end, beginning to
get nervous about that independence. And
if it continues to get more, you're
going to end up with a situation where
long ends have to price more and more of
this in. there is this this discount
that has to be applied to the United
States because of the fight that is
happening within government between
between the white house and the Fed and
and it feels only that that is going to
intensify.
Yes, absolutely. And this is something
that Mark has been talking about this
week. So let's get to him now. Our
markets live executive editor Mark
Upmore for three minutes on the markets.
Your latest thoughts then ahead of
Jackson Hallmark. Earlier this week, you
were very preoccupied by the political
pressure being applied to the Fed and
what that will either in the short term
or longer term do to the long end of the
curve.
Absolutely. I think the really important
thing to remember that that going into
Jackson Hole this weekend, it's clearly
going to be market moving today. There
seems to be a complete divide in the
market whether it'll be hawkish or
dovish. For what it's worth and not very
much, I think he's going to be hawkish
relative to expectations because of
course there is no economic
justification for a rate cut just yet.
And he's probably going to have to point
that out particularly the topic on the
labor markets. But that's not worth very
much. The much bigger point is is that
Jackson Hole pal speech is going to
really matter in the short term today
probably into next week. It's not going
to change where we're going to be in a
few months time. And that is US assets
are going to continue to suffer.
Monetary policy in the US has been
completely undermined. Doesn't matter
what happens this weekend. It's been
undermined. We know the fiscal situation
is problematic and got worse. We know
with institutional credibility has been
undermined. We know that the cost of
doing business with the US is both more
expensive and more uncertain and more
problematic. It is going to continue to
be a world of US underperformance. We've
seen US stocks lose their a share uh
decrease in their share of global market
cap this year. That will be an ongoing
theme. It'll likely accelerate into the
end of the year. It's it's been
accelerated a little bit in August, only
slightly, but it's likely to continue.
And linked to that, we're likely to see
the dollar to continue decline. So, it's
just a matter of when do you play the
next big dollar down leg? Not if
Mark, US assets have outperformed over
the last 3 months while all of this has
been going on. Why?
Sorry. You US assets have not
US
they they've outperformed European
equities. Okay, I'm being simplistic
about this. you US equity markets have
come roaring back.
Are you judging them both in local
currency terms?
You're forgetting about the currency
budget. You
No, I'm not. It It's If I put put it all
in euros, I've got the S&P up by 6% and
I've got the Euro stocks 50 up by less
than 1% in euros over the last three
Okay. I tell you've picked two arbitrary
benchmarks there and they're important
benchmarks. A better way to look at is
the glo is the overall picture of the
region versus each other. Now I don't
have the the the chart in front of me
but I'm pretty sure that the US share of
global market cap has declined from 3
months ago. Now specifically versus
European stocks I don't have the chart
in front of me. The point is it's
underperforming global stocks. It is
below 48%. It was above 50% six months
ago, eight months ago. All those months
I'm not picking between both six months
and eight months ago. US share of global
market stocks is declining. Now if you
want to tell me then the last 3 months
that the outperformance has been more
about in Asia. Absolutely. I think the
much better story is in Asia. I fully
believe that. I don't think it's just a
choice between US and Europe. I think
that Europe is the obvious liquid one
for people who you know want to
diversify from the US and don't really
care about global affairs. But Asia is
the much much better story. Absolutely.
The point is US shares are
underperforming globally.
When do you pick Europe? When do you
pick Asia? For me, it's Asia.
Uh, well, you're you're absolutely
right. Asia has massively outperformed
and Asia has been the star over the last
3 months. Adjusted full currencies. I
put it all into the euros. I the the CSI
300 up by 9%. Uh, you've got the Nikai
up by nearly 9% as well. Smashing what
we've seen in the United States and
smashing definitely what we've seen in
Europe. So, yeah, that has been where
the outperformance has come. And maybe
we in different parts of the world see
things slightly differently. You from an
Asia point of view, me from a European
point of view. Mark, great stuff. Thank
you very much indeed. Mark Cubmore,
MLIVgo is the function on your
Bloomberg. Uh, and you can get some
fantastic coverage on that. Let's talk
about some of the single stocks we are
going to be watching into today's
session. Chips front and center. Chloe's
here with the details.
Good morning, guys. So, let's start and
keep an eye on European semiconductor
companies this morning after reports
that Nvidia told some of its key
suppliers to uh to hold production
related to H20 chips, which of course
comes after China uh urged local
companies to stop using those particular
chips. So, let's keep an eye on
companies that supply video. So,
companies like Celtronic or B
Semiconductor, which as we can see have
already been having a bit of a tough
year already. Uh, Blueberg Intelligence
said that this really adds fresh
uncertainty to Nvidia's China business,
which of course has consequences for
those key suppliers. Moving on to Poland
where we might see a bit of weakness in
the banking sector. That is after the
government announced fresh taxes on the
on banks. So the taxes are going to go
from 19% currently to 30% and that is to
plug a fiscal deficit which is currently
the second widest in the EU. So there's
definitely a sense of urgency there. So
we could see some weakness across those
banks which have been actually having
quite a good year so far. PKO Bank in
particular is up more than 60%. So let's
keep an eye on that this morning. And
finally, let's have a look at wind
stocks. Um the Trump administration
opened a probe into imported wind
turbines and parts and that could open
the door to more tariffs. So let's keep
an eye on Vestas and Nordex which have
been doing uh which have been doing
really well. Nordics is up more than 90%
year to date, but obviously news of
tariffs could dent that performance a
little bit.
Chloe, thank you very much. Our equities
reporter Khloe Melly and yeah, as Chloe
was going to talk about wind stocks guy,
I was just digging out the Vestas share
price remembering the big fall we saw
linked to the election of Donald Trump
of course and then of course the bounce
just Monday, wasn't it? That we saw a
big bounce in Vestas share price as a
result of some better news. So I mean
the volatility around this sector is
absolutely incredible but we're
basically back to where we were around
the time of the election on that one.
Yeah. So the stock went up because of
some big orders that were made in the
United States. The numbers were actually
fairly good. The outlook was confirmed
going into the back half of the year,
which which poses challenges for Henrik
and the team in order to make those
numbers. But Trump just doesn't like
windmills. He made it very clear that he
didn't favor them. He thinks they're
ugly and they shouldn't be happening.
And it does seem as if that's now very
much part of the narrative in terms of
how they're going to be restricted in
the United States.
It's sort of shades of not liking
windmills that we're debating now. And
that seems to be in the driving seat
when it comes to the share price. Let's
keep an eye on Sander Charted as well.
Well, they seem to have had some legal
news that could play out well. Sudzuker
could be in focus as well on the back of
uh um well, it's basically an earnings
story there. So, we'll continue to watch
those businesses. Coming up, we'll bring
you the opening trade. Uh futures
expectations are fairly muted. We're all
waiting for Jackson Hole, folks. So,
that's coming up later today, but we'll
have the market open in the meantime.
This is Bloomberg.
Friday the 22nd, the day we've all been
waiting for. Pal is going to speak in,
let's call it circa 7 hours time.
There's a great little bug that we've
got. The opens 1 minute 43 uh away.
We've also got another bug which is
fantastic, which is the countdown uh to
the PAL speech as well. That little uh
that little um I'm pointing the wrong
way. Uh the uh the little bug down there
in the corner. You're going to want to
pay attention to that today because
we're all on tent hooks. This was the
story yesterday as you can see a rally
into the close for Europe which the US
then faded which we've now got a price
into uh our open this morning. This is
what futures are telling us. Uh it is a
fairly mixed picture mildly negative but
not by much. Stock 50 futures are down
by 210 of 1%. Footsy 100's barely
budging. DAX is down by 210 of 1%. There
are actually some single stocks that are
probably worth paying attention to and
Anna has got all of those.
Yes, absolutely. Let's dive into a
couple of sectors that could be in focus
today. And one of them is anything chip
related. And actually this is
interesting and it's gaining in interest
for me actually because NASDAQ futures
are now down by 3/10en of 1% having been
quite muted for much of the morning. But
the information is carrying a story that
says that Nvidia has asked its suppliers
to stop work on H20 chips for China. H
and that could be because of all the
pressure that the Chinese government has
put on companies to not buy Nvidia
chips. So what does that do to those who
supply NVIDIA and to the wider AI story?
We'll watch the chip sector. defense
stocks in focus. Yesterday they rallied
and this was on the back of the you know
sadly we're pricing out expectations of
peace in Ukraine anytime soon given
we're hearing from Lavrov of Russia uh
words about collective security which
according to European officials are
designed to stall the conversation. So
that's the latest there. Vestas in focus
as we were just discussing with Khloe
Milly because of the latest twists and
turns and how much the Trump
administration likes or does not like
wind uh turbines. guy.
Twists and turns appears to be the
appropriate language to use when it
comes to wind turbines. Okay, here we
go. Friday's session. It's going to be
reasonably calm, I suspect. Europe,
we're waiting for the power speech a
little bit later on. Uh we are now into
the open. The opening trade is upon us.
And as you can see, it is a quiet one.
It was a quiet one yesterday. We're in
mid August here, folks. As probably, as
you are well aware, uh that does tend to
lead to quiet markets. But I wonder
whether we're going to get some
volatility later. Volatility has been
really suppressed of late, though. It
has come up this week. Look at the VIX.
We've gone from 14 to 16 this week. So
just incrementally beginning to tick
higher. Not by much. Not a big spike,
not a scary spike, but just pay
attention to that. Stock 600 barely
budging. Footsy 100 actually down by 210
of 1% which is interesting considering
the expectation for a more muted open.
But I we're we're dealing with um sort
of splitting hairs here. The CAC's down
by 210 of 1%. The IBEX is down by 210 of
1%. We'll see what the DAX does this
morning. There's a few defense stocks
that might be kind of in focus there. So
keep an eye on them. Uh we'll wait and
we'll watch and we'll see what the DAX
does in just a moment. Anna, sectors,
single stocks. What do we got?
Yeah, let's go into the sectors because
we set this up with a reference to
Nvidia and that story and whether we'd
see weakness in the technology sector.
As ever, it's tricky to always find that
directly in Europe, but we do see it.
So, technology is the worst performing
sector today. So, that Nvidia story,
NASDAQ futures down 3/10en of 1% does
seem to be having a negative impact on
stocks. And so, as I say, that sector is
weaker. SAP down, but we're not talking
about by much, you know, down by 4/10en
of 1%. ASML down by 7/10en of 1%. So
there is weakness in technology but not
not to a huge degree. To the upside we
see energy stocks up by 4/10en of 1%. We
see a slight bounce in the oil price.
67.86 is the Brent price right now and
some of the oil names are a little
stronger but again very little moving
more than a percent. So uh we're not
talking about big moves here. On balance
guy things look negative. We've got
three quarters of sectors uh would we
say in negative territory around a
quarter or maybe a third in positive but
the the so the balance of of things is
negative as we wait for as we wait for
Jackson Hole
SNL is down so that is certainly a
factor that we are seeing in the market
this morning is Polish bank C2 down I
want to get back to that and figure out
what is happening there I just want to
check there's no X dividends that I'm
missing or maybe there's another story
that I'm missing
yeah Chloe was talking to us about some
of that wasn't she about the the latest
on the Polish banking sector
but we've got Shell Standard Chartered
is as you say up on some legal news.
Tatal is trading higher. BP is up. So
that there is definitely an energy trend
uh to the upside. Um but yeah I it just
it feels as if we are seeing a fairly
quiet market this morning. You got 225
up 335 down.
Yes, this is summer folks and we are
here for another week perhaps. Salmon
Amed joins us global head of macro and
strategic asset allocation at Fidelity
International. And I want to start with
that actually. It is summer. It is
August. I remember last August things
got really choppy. That was to do with
Japan, Japanese data and expectations
around rates. But that went global
because not everyone's at their desks. A
lot of computers in charge and things
can volatility can happen in those kind
of markets. And I wonder if there's a
risk of that right now. We've got
Jackson Hole today. We've got Nvidia
earnings next week. Both of those could
be big volatility events, couldn't they?
Yes. And they have certainly the
potential to be in the sense as you're
right. I mean last uh last last year on
August we did get some uh wobble which
was corrected fairly fairly quickly but
of course I think in terms of the uh uh
what happens over the next few months I
think uh the Jackson speech today
especially the September FMC meeting
coming through in midepptember I think
it's a it's a quite an important event
uh and volumes are down and as you said
market liquidity can be thin so you can
get oversizes reactions but those two
events uh are the known unknowns at the
moment
yeah and how are you thinking about
Jackson Hole then summon I mean we in
we've had every view imaginable some
people suggesting you know the markets
yeah are right to think that we'll get
some clues around a rate cut others
saying no we'll get something more
hawkish and some saying he'll try to not
poke the bear in the views of of one
guest and uh and not try and trigger any
political backlash and try to keep a low
profile.
Sure. So I think we have been in the
camp of that uh Fed will only cut once
in December and this has been our view
for many many months now and and we are
still think that this is a live meeting.
So it's a 50/50 meeting uh and and they
are I think if you take a step back
there are three dimensions I think we
have to be thinking about not only for
September but onwards as well. Firstly
with the this hyper data dependent Fed
will take a step back and start thinking
about forward-looking uh indicators when
it comes to tariff impact on inflation
for example. Second step is is this
inflation shock oneoff or uh it's going
to be you know more persistent and I
think that depends on uh as Powell has
already chair Powell has already said on
how the Fed may respond to it. So those
are the two traditional factors and then
there is the unspoken politics
uh elephant in the room and I think
that's also important because the
institutional uh uh you know signaling
uh is has to be passed and I think
that's uh that's not an event that is a
trend and I think the first signs of
that are potentially going to come
through hopefully today. Do
you h the downside in stocks given all
of that? So technically there has been
some a little bit down you know we've
seen some profit taking I would say uh
in uh in US equities they've done really
really well over the last few months. Uh
I think the epicenter of this is the
bond market and dollar. I think that's
where you have to
but if if the bond market freaks out
particularly the long end how vulnerable
are tech stocks and by extension US
equity markets and do I want to be
buying like volatility the VIX is only
at 16 at this point. insurance is cheap
still on the downside. Is that something
I do? I want to be thinking about
protecting my downside after such a
strong run as you as you say.
So I think we have been focused more on
the credit market. We think out of
because from a cross asset perspective
that is the market which is the most
expensive. If you look at for for
example if you believe in the growth
slowdown story
y
then credit market spreads are too
tight. If you believe in a
stackflationary kind of a uh you know
tension again credit market is exposed
and then if you think okay the monetary
policy setup is changing fiscal macro
volatility so you're not getting paid uh
in that in that segment of the market
and that's where we are focused on
rather than the equity I think equity is
probably going to get affected if things
get really bad
how mispriced is credit then
so sorry
I think it's probably the most mispriced
ones spreads are at alltime tight levels
then so they keep getting tight exactly
it keeps grinding tighter. So if you
have a choice from an asset allocation
perspective, I think we are leaning more
towards that. Okay, you may still get
upside and you have a pro risk view,
play it through equities. Don't play it
through credit. You're not getting paid.
And is the tariff story going to hurt uh
some of the well provide more weakness
for some of the credit names? Is that
going to be the thing the straw that
breaks that camel's back or moves us
away from those record tights than
Salman? is uh you point out that the
effective tariff rate is now closer to
19% than the 15% that people were sort
of talking about when we had uh more
positive expectations I suppose
definitely and it's creeping higher so
of course uh uh you're not expecting oh
this will double now because obviously
tariff rates are less than 3% going into
this uh uh change in economic policies
it has increased multiple times over uh
but the the intake of revenues right now
is running at around 10%. So that is
what the system is taking in but that is
start that would gradually go up as the
scope of these tariffs continues to
widen. So the main I think complication
in terms of the macro signal which is
coming in right now and I think it has
linkages with the monetary policy
developments as well and depending on
which side of the narrative power comes
through today uh is that inventories
have gone up as well. So that they are
mixing the picture in the sense like how
much frontal run happened. Yes.
And how much confusion they are creating
into the real impact of that. So we are
in that camp and we remain in the camp
that stack
tension in the US will continue and
that's related to the credit view but
also the fact that we think this is a
Fed which will be on hold because uh uh
uh because that inflation is in the
pipeline.
Yeah. Have companies dealt with the
imposition of tariffs better than you
would have anticipated some then because
I suppose that's the inventory story
isn't it? is the ability of businesses
to uh frontr run the tariffs by bringing
in a lot of inventory to find additional
suppliers and and that maybe limits the
extent to which we see this in inflation
or at least delays it.
I think I we are in the second camp
which is delay camp. So because you
can't there is fund trending we saw in
the data but it comes with a lag. So so
the economic side of supply uh supply
factors is very patchy. We are a demand
driven system. So we have very good data
on demand, very bad data on supply and
inventory is a is a very good example of
that. It it comes with a lag. You can't
tell how much uh you know has been used,
how much has been run down till it's too
late uh if if you uh from from that uh
like inflationary impact perspective. So
we think that uh the pass through will
start to move towards 50%. But that may
take few months. Remember there's only
two months uh till the 10% collection
rate was breached. M
so it's only it hasn't been a like this
is not a financial crisis right this is
an economic policy shift so it will take
time so we are in that delayed response
camp rather than that this is not going
to happen
what's your view on the dollar right now
so we are we have and remain in the camp
that dollar is a in a multi-year
downward trend tactically speaking uh if
uh even if the Fed is on hold for
interest rate differentials to favor the
dollar uh other things have to start
changing changing right there is not you
have the medium-term fiscal picture, you
have the economic
how does how does that impact my
investment strategy if if I'm looking
does it undermine the case of the United
States to and to what extent if I if if
I'm getting 10% returns out of the
United States but I'm getting a lot of
that eaten up by dollar depreciation as
a non- US investor do I do I need to
look elsewhere or is the US still the
best place to be so I think uh we are
pushing for diversification and a lot of
our clients investors are looking to
build in diversific ation from a
strategic asset allocation perspective.
Remember the strategic ass allocation
shifts are big shifts but they take time
uh to come through and we have seen uh a
lot of strategic ass allocation reviews
being done this year uh usually they're
done once every 3 years we this year
there's a higher frequency of strategic
ass allocation reviews especially from
Asia uh which are coming out which tells
us that uh and there's a lot of
discussion on FX hedging there's a lot
of discussion on you know what should be
your optimal hedging ratio benchmark
design so I think this uh uh work will
start to translate into big shifts but
they will happen over a longer period of
time rather than it's not like a one day
story in that sense. Okay, Salmon, nice
to see you. Thanks for stopping by to
see us. Sammed, global head of macro and
strategic asset allocation joining us
from Fidelity. Core 6 looks like this.
This is what we're watching across
Europe. Tech stocks firmly in focus. Uh,
as you can see, defense stocks coming
back, continuing to come back. ASML is a
little bit softer this morning, as is
Schneider. Little bit of weakness in
luxury, but not very much. Uh,
elsewhere, the the action appears to be
in that Nvidia trade. So, let's get some
more details on that with Chloe.
Good morning. So, yeah, let's start with
a little bit of weakness. Oh, actually
it just turned back to to the green here
for Sultronic, but there was a little
bit of weakness at the open for those
two which are suppliers to Nvidia and
Nvidia told some of its suppliers to
hold production related to H20 chips
after China directive to to stop using
those particular uh chips and we have a
little bit of weakness for B semi
buttronic is actually going up a little
bit. Those are not major moves in any
case. Moving on to Polish banks. Polish
banks are down by quite a bit and that
is of the back of news about new taxes.
So their taxes are going to go up from
19% to 30% from next year as the Polish
government tries to plug a massive
fiscal deficit. So they're taking quite
a beating across the board. We are down
7% kind of across those those three
major Polish banks. Moving on to the
defense sector where we've got a bit
more of a positive story for Rank and
Hensold. Both of those companies got
upgraded to a neutral rating by city
analyst. City analyst said that those
two would really benefit will really
benefit from a rise in defense spending
in Germany in particular. So we are up
particularly for Hensel up 3.7%.
And finally, let's end with Axo Nobel,
which is a paint maker, a Dutch paint
maker. And Sean Capital took a stake in
the company and said that there was
significant value potential for that
company. And so we're up on the back of
that 4.3% this morning.
Chloe, thank you very much. Chloe Melly
from our equities team with the latest
on those stocks. Really interesting that
story around Axon Nobel and chemicals
the best performing sector at some part
this morning in the in the early early
hours of this morning guy as we watched
Sebian take a stake there and you know
do you interpret that as a vote of
confidence in the management team's
strategy or are they after some change
I interpret that as paint's going to get
more expensive it's already quite
expensive looks like it's going to get
even more expensive wind stocks have
actually moved this morning which I
think is interesting as well um I Vestus
is coming back a little bit it's it's
it's certainly off its low So it got
lower first thing this morning and has
come back a bit. Still down by 1.1% on
the back of Trump's eye
directed towards windmills which is now
started to show up in terms of in terms
of trade policy.
Yeah, it does seem to be though every
couple of weeks we get new stories that
that reset our expectations about how
much he doesn't like them versus our
earlier expectations. And so that's
there's a lot of volatility in this
sector, isn't there? We've been talking
about Nvidia all morning. We will
continue to do so. Nvidia reportedly
halting production of its H20 chips,
asking its suppliers to to do so. Uh
we'll get the details next. This is
Blooming Back.
Friday the 22nd, 8:17, 17 minutes into
the equity market session and you are
looking at a very bear market. We are
going nowhere in a hurry. We are waiting
for Jay Powell a little bit later on. Uh
he is the main event of the day. You
could see some volatility around tech
stocks though in the United States a
little bit later on. We're seeing a
little bit of that this morning and this
is very much focused on what we are
seeing in terms of the Nvidia story that
we've been bringing to you. Apparently,
the company has reportedly instructed
suppliers, including Samsung and Amcore,
to halt production of its H20 AI chip.
This is the chip that's designed for
China. Uh tech publication, The
Information, says this comes after
Beijing advised companies to steer clear
of the chip on security concerns. Robert
Lee, senior analyst at Bloomberg
Intelligence joins us now. Roberts, good
morning. Is this about security
concerns? Is this about something else?
What are we learning?
Okay. Well, thanks for having me on. Um,
so according to the story that broke
about a week ago, the one you mentioned
in your prelude that uh Chinese
government um unconfirmed I should say,
was encouraging local ch local AI
companies to procure their suppliers,
their supplies from uh companies like
Huawei on national security concerns. As
to you know, how grounded those um
claims were or not, we'll have to wait
and see. But I think let's just take a
step back from the news and the
headlines at the moment. It's very clear
that one of China's strategic objectives
is to secure self-sufficiency on the
technology front for all sorts of
reasons. I suppose you know to state the
obvious, China and the US are major
geopolitical rivals. Uh I think from a
Chinese perspective, the US has also
proved itself to be an unreliable
partner. Um, so I think those are two of
the reasons why China will continue and
double down efforts to become
self-sufficient in tech. And just an
additional reason obviously as the
government looks to rebalance the
economy away from previous years where
the economy was very much driven by
fixed asset investment high-tech is seen
as a major driver of uh future economic
growth so-called uh new productive
forces. So again, that's another reason
that underpins China's strategic move to
becoming um self-sufficient in tech and
these sort of headlines really I think
will again cause the Chinese authorities
to if anything increase or double down
their efforts to achieve that.
Yes. So we'll see what it is exactly
that Nvidia has been saying to its
suppliers about production of H20 then
with all of that in mind and and that
Chinese logic. Um, in terms of what
Jensen Huang's been saying, he keeps
pushing back against any Chinese
perception that there are back doors in
the chips or location functionality in
the chips that they're supplying in the
H20 chips. What do you make of his
comments then, Robert?
Far be it for me to contradict Jensen
Huang, but I I I think it's always
incredibly difficult from an engineering
perspective to to prove these claims
either way because don't forget that
these chips are fabricated at literally
the atomic scale. So whilst we can use
very powerful electron microscopes to um
you know to look at their physical um
you know how they're physically put
together it's very hard to make a hard
and fast conclusion based on the
physical structure as to whether there
are any so-called back doors. But
similarly software or the middleware and
other software operating software that
that that is operating on these chips
it's very hard to get access to the
source code to to prove or disprove such
claims. But I think again what is
underlying this is the you know
heightened geopolitical rivalry between
China and the US. China will almost
certainly double down efforts to achieve
self-sufficiency. It obviously wants to
um fully support its emerging national
champion Huawei uh which on a uh global
scale is the main um local rival to
Nvidia. So obviously that helps support
Huawei's business domestically and helps
reduce that reliance um on US
components. So very briefly that begs
the question looking forward even if we
look forward 6 months 12 months or
beyond you know how will this story
evolve China is obviously still relying
on American components whether it's
Intel chips whether it is Qualcomm chips
whether it is American software if this
story continues to evolve in the coming
years we could see you know further
moves by the Chinese authority to push
and champion local suppliers at the
potential cost to American companies
Do the Chinese suppliers have the
software stack and the infrastructure
that goes around the chips in order to
be able to compete? Is that where the
real gap actually ultimately lies? And
that's where the Nvidia advantage sits.
Okay. I I think in terms of third-party
benchmarking services that have tried to
compare uh the performance of Nvidia's
chips, I I think it's still nobody would
disagree even in this part of the world
that the American technology is
superior. But again with the full weight
of the state behind them and you know
with uh obviously a a very strong
engineering base who is is rapidly going
up the skills curve uh you know China is
progressively narrowing the gap more so
on the software side of AI but
progressive progressively on
semiconductors as well. The big issue or
stumbling block that they face is really
um access to high-end lithography
equipment which as you appreciate is
dominated by the likes of ASML. ASML is
the only company globally with EUV
equipment that can produce very advanced
leading edge chips. So obviously there
is an strategic imperative for the
Chinese government and Chinese authority
to try and drive a technological
breakthrough. as to whether that will be
achieved or over what time scale um
remains to be seen. It could take years.
Um but again, it is of national
strategic importance and I think with a
very strong engineering base uh
ultimately the Chinese will do it. It's
just a question of exactly when that
happens.
Okay, Robert, thank you very much.
Robert Lee, senior analyst at Bloomberg
Intelligence, thank you for the update
on Nvidia and tech. Now, after decades
of cautious saving, Germans are finally
embracing the stock market. We
understand a booming market has spurred
a significant shift. 3 million Germans
have started to invest in stocks since
2022, the largest increase in stock
ownership in Europe outside of Britain.
For more, let's talk to Bloomberg's
Sagarikica Jason Ghani, who's deputy
team leader for Amir Equities and
investment strategy. Sakara, great to
have you with us. So, um, Germany hasn't
typically been known for a big retail
investment community. Uh, so what what
have we learned here?
Sure thing, Anna. Uh you're absolutely
right when you talk about the countries
in Europe across the world that are most
famous for retail participation. Germany
doesn't really feature highly on that
list. Having said that though, I mean
there's reasons for that, right? You
said that um the the psychological scars
that were at the results of the
hyperinflation era and more recently you
know relatively speaking the tech bubble
as well because the data that we have
shows that the number of retail
investors in Germany just before the
tech bubble was actually on the rise it
was quite significant. Are you talking
about you're talking about 2000? Right.
Okay. We're going back away.
Yes. Not 2022. U not that that was a
bubble but uh after that the proportion
of investors really fell off. So they
got quite burned in that one and it's
taken a long time for that mindset to
now shift out of that. What is finally
driving them back into the market now?
That's uh the answer to that is twofold.
One is the German stock market has been
very hot. Not just this year. This year
of course it is outperforming the S&P
500 at you know tracking 20% plus gains
but it has had a similar scale of
performance over the last two years as
well. So it's becoming more of a
buzzword among you know younger
investors who are more open to this.
There's a very significant um worry also
which is the second part of this which
is what is the pension outlook looking
like. The current system in Germany is a
pay as you go system for pensions which
is that the current workforce is funding
essentially pensions for current
retireies. So as the population ages
what happens to that? So there's qu the
people that we spoke to for this there's
significant questions on is that even
sustainable? So there's two factors at
play here.
Just quickly kind of how fast is this
evolving that all sounds very sensible
in the United States. We're kind of
getting the gamification effectively of
the markets. Is there any evidence of
that happening in the in Germany? Is
this becoming entertainment in the way
that maybe we're seeing over in the
United States or is this kind of quite
Germanic and quite sensible and this is
the right thing to do?
Oh, there's definitely both of that
because if you look at, you know, the
avenues that are being used to advertise
to mom and pop investors, it's across
the board. There has been a I mean,
social media is the go-to in today's
world. So there's been a crop of
financial influencers, fin influencers
as they call themselves. Again, they're
common in the US. This is not a
conversation we were having in Germany,
you know, a couple of years ago. They
are everywhere now. There is um we spoke
to one of the people we spoke to. He's
an 82year-old influencer self. He is a
former broker and a trader, so he's
definitely a finance professional. He
said, you know, I've spent 50 years
trying to get Germans to invest in
stocks. And what I heard was, "Oh, it's
it's like a casino. It's only for the
rich." Some said it was um like a
highway robbery. That is now changing
because of all of this education and
information that's out there.
I can be doing this for a while. Yes.
Keep going. Sarica, thank you very much
indeed. Sarina Jen Garnney joining us on
the markets. Up next, we're going to
talk trade. That's next. This is
Bloomberg.
This is the opening trade. 30 minutes
into today's session. Let's take stock
of where we are then on Friday's
session. We see some weakness, a little
bit of weakness across European equity
markets, but not much. We're waiting for
uh the Jackson Hole address later from
Chair Powell. So, that's going to be the
big thing in markets to watch out for.
In the meantime though, we do see a bit
of weakness and technology to the four.
NASDAQ futures are weaker. Uh that all
has to do with what Nvidia has been
saying to its suppliers about the H20
chip into China. Interesting reporting
from elsewhere on that and that's taking
the edge off NASDAQ futures. Also taking
the edge off European tech stocks. We
watch that. On the other side though,
some chemicals uh positivity coming
through in the shape of Axon Nobel which
has attracted some interest from Sevian
Capital. So we keep that in focus. So
we're kind of flat, not doing much guy
as we wait for Jackson Hole. If you want
a snapshot of an August market, I'm
going to give you one. Here you go.
Stock 600 higher 275, lower 297. I guess
we're going to call that fairly finely
balanced. Take a look at the volume.
We're down by uh nearly half. We are
seeing a light volume day. I do wonder,
remember Pal speaks at 3 p.m. London
time. The markets in Europe have still
got an hour a bit in which to trade. I
do wonder where the volatility
potentially has the uh picks up later on
in the day. We get a quiet kind of
morning early afternoon and then things
start to move. There's an interesting 52
week high out there. That's 52 week lowe
low. Sorry. Actually, Taylor Wimpy. This
is the one year on Taylor Wimpy. This is
the UK house builder. Look at it.
Tracking lower and lower and lower.
There's a bunch of factors here that are
coming in. One of which is what is
happening with the regulatory backdrop
in terms of what is happening with
housing uh in the UK. That's one factor.
Just trying to get houses built is hard
and we don't see much easing of that
despite what the Labor government is
saying. You've also got the rate
environment which is worth paying
attention to as well. House building is
slowing down, it seems, not speeding up,
much to the annoyance of the government.
And we're going to get Bailey speaking.
The data in the UK at the moment speaks
to maybe steady rates, not lower rates,
not significantly lower rates. And
that's being priced into these kinds of
stocks. And as you can see, Taylor Wimpy
down by nearly 40% this year. That stock
certainly being punished. And today,
another 52-we low. Anna
Guy, let's get an update on some of the
other stories that we need to know about
this morning. The Justice Department in
the United States has signaled possible
plans to investigate Federal Reserve
Governor Lisa Cook with a top official
informing Fed Chair Powell of the probe
and encouraging him to remove Cook from
the board. Cook on Wednesday said she
intended to remain at the central bank
after Trump called for her resignation.
Nvidia has reportedly instructed
suppliers including Samsung and Amcor to
hold production of its H20 AI chip. tech
uh publication the information says this
comes after Beijing advised companies to
steer clear over security concerns for
the chip especially built for the
Chinese market. Nvidia for its part has
repeatedly denied it adds back doors
into its uh its its chips. Now the US
and the EU have outlined trade plans
that could reduce tariffs on European
cars to 15% within weeks and potentially
offer discounts on steel and aluminium.
European Commission President Ersandon
Delayian says the deal provides
predictability and stability for
companies and consumers and strengthens
transatlantic relations. Though Guy,
crucially, there are still hurdles to
overcome to achieve those lower tariff
rates.
Many many hurdles still to be ironed
out. Can you iron out a hurdle? Wrinkles
maybe I should be putting uh into that
sentence. Maria Deertzis, economy
strategy uh and finance center Europe
leader at the conference board joining
us on this subject. Maria, good morning.
We thought we had a trade deal. We
thought we'd be kind of dealing with the
reality of that now, but we feel that we
are still a long way away from it. What
is going on? Why is it taking so long to
get this trade deal between Europe and
the United States to actually work and
deliver?
Uh well, trade deals are notoriously
difficult to agree in the best of
circumstances. They are anything between
18 and 18 months and 5 years and that is
under normal circumstances. I don't
think we have normal circumstances now
given that what's at stake is so high
and given that actually it's not just
about a trade deal. It's all about
geopolitics much more than just about
trade. Uh so that's not uh surprising.
Um where we are now uh we've got a
little bit more clarity on the
possibility of a deal. Again we don't
have a deal. We have a framework meaning
an agreement of how we are going to
approach this. Some good news that came
out of uh yesterday's announcements. the
15% of course which is better than 30%
and crucially uh it will include some
pharmaceuticals semiconductors and also
some pharmaceuticals will be under the
most favored nation uh uh clause which
is under WTO which means effectively
lower tariffs. So these are good news
perhaps the most important in my view uh
of this good news is that we have dodged
the bullet of an outright trade war. I
think this is crucial. Uh there are big
voices here in Brussels and in capitals
that would have wanted a slightly
different reaction from the EU, meaning
an escalation. Uh but we've managed to
avoid this and I think that's that's
that's a a success.
Have we managed to avoid this for now?
How big is the risk of escalation still?
Yeah, I'm afraid you're right in the
sense that it really is just for now.
And I think the most obvious
um example of this is in cars. very
little has been agreed on cars uh in
terms of you know get reducing the
tariff rates for the moment cars are
under the close to 30% tariff they have
not been included to this new 15% tariff
rate not only that but also the what we
understand from the what was announced
yesterday the Europeans will need to go
first in terms of removing tariffs on
some industrial goods and allowing
easier access to agricultural products
uh for these things to happen in the the
way that the EU is governed, it will
require capitals to agree on this and
where possibly the European Parliament,
which means that it will take a long
time. All of this makes me believe that,
you know, it will not happen in the uh
in the in the short run. It won't happen
in the medium run either in my view. And
that of course is important because the
countries that have been pushing for a
greater trade deals, better trade deals
with the US have been those countries
that produce cars and I mean here
Germany. So you know if Germany doesn't
get lower tariffs on cars I think the
mood might actually change and then of
course we're back to what can we do to
escalate
Maria in terms of the process and and
how it is managed now in this new world.
Do you feel that we're in a kind of
rolling situation of permanently in
trade negotiations? I mean, do do you
think the the new administration in the
United States is minded to bring these
things to conclusion or does it suit
their purposes to have this being an
ongoing narrative?
Difficult to tell. I think on the one
hand, we have President Trump who's
always arguing for deals. On the other
hand, you see that these things are not
easy to achieve. I think the the time
scale that he had always been putting
forward is unrealistic. Like I explained
earlier, trade deals take a long time
because there is a lot at stake. In the
current situation where negotiations
isn't just about trade, it's about, you
know, dependencies on defense. It's
about dependencies on energy. All of
these things are so complicated and the
new administration, the US is really
interested in extracting rents from all
of this. On the other hand, the EU has
very little cards in its hands simply
because we depend on the US very much on
semiconductors and on primarily on
defense. This is crucial for the EU and
you know it will be a very difficult
negotiation time in the next couple of
years. So dare I say the whole lifespan
of the administration for the EU.
Take us into one sector that I know has
got a lot of attention perhaps because
of well it always attracts outside
attention and that's the drink sector.
Um the Europeans failing to achieve any
kind of carveout or special treatment
for wines and champagne. I mean how
should we view this kind of
conversation? Are the Americans going to
be uh facing pressure from consumers to
bring things in more cheaply or is
everybody in the states going to be
fairly happy with just replacing with
domestic uh production?
Well, I mean I think you know if your
question is about the inflationary
impact in the US, yes, we are going to
see it. We already see it in import
prices in the US and this is this is
only going to deteriorate and actually
some of the numbers in terms of consumer
confidence but also expectations are
telling us this. there will be uh there
will be an impact on prices in the US
and that of course will mean two things
the US consumer will start substituting
they will have to substitute but that
means that there they have less choice
that's why we say that actually tariffs
is not a good thing for the consumer
because it reduces choice so it will be
the choice for European goods or or for
you know general goods in the
consumption basket and it will be much
more expensive for that um now when it
comes to the particular product when
from the point of view of the EU. I
think the EU is now taking the position
that we need to discuss economic value.
So what is the products that represent
the highest economic value and next to
that and in my view more importantly
what is the most important goods when it
comes to economic security and that is
why semiconductors are really the ones
that matter the most uh for the
negotiation process rather than other
goods like wine or or or or agriculture.
I think this is is absolutely crucial
and of course remember next to that uh
we need to buy more defense from the US
and we need to rely on the US for
security guarantees when it comes to
Ukraine that reduces the uh space that
the EU has to negotiate anything.
Maria, is this a permanent situation
that that may even outlast the Trump
administration?
How long-term is is the current
environment going to exist for? have
trade deals, as you say, trade deal take
take a long time to to to do. If you
were to change the administration in
Washington, completely change the
strategy right now, how long would it
take to put things back to where they
were before? Do you think things are
ever going back to where they were
before?
It's difficult to think of going back.
These are one-way streets typically. Um
I I think the uh the issue of uh who is
the ally here is crucial and that may
possibly change with a change of tone
coming from the US. Uh for the moment it
doesn't feel like we are allies with the
the EU, the UK and the and the US. We
don't feel like we are allies. It feels
much more like a negotiation about
extracting rents and of course with at
the expense of Ukraine because this is
really uh what needs to be resolved as
quickly as possible. So in the current
administration I don't think much will
change but in the next administration I
think with in the possibility of
realizing that we need allies everybody
needs islands and that includes the US
that may change it could change quite
fast but I don't think we can we can
really realistically say I'm going back
back to what these are oneway street and
we will go somewhere else we will find
better ways of being friends and and
some things will resolve and some we
won't
but a new reality is now with us and is
unlikely to change. Maria, great to
catch up. Thank you very much indeed.
Maria Deztes, economy strategy and
finance center, Europe leader at the
conference board. Coming up, will Jerome
Pal signal September rate cuts in his
speech at Jackson Hole today?
Expectations are maybe moving away from
that. We're going to look forward to
what we can hear and what we should
expect. That's next. This is Bloomberg.
the last
where you saw services inflation which
is probably not driven by the tariffs
really start shooting up is a danger
that's that's a dangerous data point.
Somebody waiting for the data then at
least partially Chicago Fed President
Austin Goulby there speaking from
Jackson Hole ahead of Chair Powell's
speech. Let's get an update from Valerie
Titel on what she's uh thinking ahead of
Jackson Hole. And we're all waiting
hours until 3:00 UK time, I think, Val.
Yeah, that's right. I am holding my
breath until Jerome Pal's speech is
released. Uh, but I think those Goulsby
comments we just heard really put into
good perspective what we've heard from
Fed officials over the last 24 hours. No
one out there claiming that the
September rate cut is a done deal. Many
of them saying that they still want to
see more evidence in the data before
they make that kind of decision. That
compared with some uh that that as well
with some hot data we got yesterday. The
PMI is coming in strong led to a slight
repricing in the front end. We did see
yields uh shoot up in the 2-year yield.
And ever since that hot PPI print now,
these two-year yields have drifted
higher around 10 basis points higher uh
since last Thursday. And that's led to
the pricing for this September rate
decision to start edging down over it
was over 100% last week. It's now ticked
all the way down to 75% before this uh
before we hear from Fed Chair Pal later
today. It's also given the equity market
a big bit of a struggle. This rise in
frontend yields and that tech route has
led to the S&P 500 to underperform uh
falling for five straight sessions
looking to make it six with S&P futures
down over one and a half% in the last
six sessions. But it all really comes
down to today where to next for this
equity market and for the bond market.
If he's going to be dovish, he's going
to have to change his tune when it comes
to the labor market. That is the big
catalyst for a dovish surprise. on the
hawkish side of things guy, we could be
looking at maybe a quite technical
speech where he removes um some sort of
monetary policy framework that was put
in during COVID. And if he wants to
sound neither and in some way say that
there's still big questions ahead, he'll
point to the more data we have before
that September 17th decision. Remember,
we still get another payroll report and
another CPI before that decision.
Great stuff, Valerie. Valerie's going to
be holding her breath until 3 p.m.
today. Sounds dangerous.
I'm going to watch that with interest to
see what happens. Jackson Hole. I what a
place to hang out this weekend if you
don't have the luxury of hanging out in
Jackson Hole this weekend. Um and I can
think of fewer nicer places. There are
other options available. I have to say
there's going to be some great tennis
coming up. I think Algarath has got a
really tough uh a tough run through this
morning. I think Jovovich as well uh is
going to have a tough run too. So that's
going to be interesting to watch. The
women's rugby world cup is on. Going to
be paying attention to that. The Notting
Hill Carnival.
I generally avoid that part of London
during this this weekend, but I'm told
it's fun.
It it's great fun. Yeah. very loud but
great fun if you like that kind of
thing. Great food. You were keen to
point out which sport we were talking
about the US Open. I think it's
self-explanatory. I think that looks
like a tennis ball.
Yeah, I think it's US Open. I think
golf, but anyway, but we it does look
like a tennis ball. I admit moving quite
quite swiftly. So, yeah, I like the
graphic. Um Anna's going to be pending
spending a great deal of attention
focusing on what is happening at
Reading. The lineup I hear is
I'm not sure many of our viewers have
reading and leaves festival in mind for
their weekends, but those with teenagers
might be focused on what's happening
over at Reading and Leads.
Yeah, Anna is going to pay a great deal
of attention cuz she is definitely one
of those. Um, if you are not attending
Jackson Hole or any of those fantastic
events uh this weekend, you may be
heading off on your annual summer
holiday. We've also got a UK bank
holiday coming up this weekend and then
you've got another holiday coming up in
the United States next weekend. So, this
kind of feels like it's peak season uh
for holidays and there's plenty of
choice out there, but where should you
be going? Well, let's ask a few experts.
Blueber Pursuits luxury reporter Sarah
Rapaore joins us now to talk about
trends in travel. So, I I'm nervous
about using the word hotspot because
hotspot has different connotations these
days, particularly given what is
happening around Europe at the moment.
So, let's kind of park hot spot. But if
I was looking for a cool spot to go to,
where would it be?
Lines it up perfectly, guy. It's all
about cool occasions now because the
weather in the Med is just so hot. We're
seeing record temperatures in places
like Greece and wildfires. So people are
p pushing their August holidays into
September.
The shoulder shoulder season. Yeah,
they're really the peak times now. Rates
are rising. You can't get the kind of
deals they used to be able to in in
September or even June. So in places
like Auntie Paros and Paros, hotels are
just as booked in September and June as
in July and August. And people are
picking places like Copenhagen or
Stockholm or even or even Scotland to go
to instead of the Mad, which I know is
wild, but
going wild in Scotland.
Wild indeed. Um, you have one of the
best jobs at Bloomberg, I think, Sarah,
because you get to write about and
experience luxury travel and and and all
that goes with that. Um, and for some
people this would be a dream, what I'm
about to mention, and for others this
would be a nightmare. But luxury sleeper
trains are making a resurgence.
Orient Express, isn't it? This is what I
think about. But is that the reality?
I think they're wonderful, but they are
a very high price point. And just for
you, guy, I found a fun fact. It's the
200th anniversary of the British rail
rail system this year.
And luxury sleeper trains are going to
improve since then.
Well, maybe, maybe not. But um Belmont,
what we're seeing now um has launched
the Britannic Explorer and it is the
first luxury sleeper train in England
and Wales and it launches soon this
month 11,000 for three-day journeys to
Wales Lake District in Cornwall. So that
does include food and drink and
activities.
So you go you go to Cornwall, then you
go to Wales and then you go to
different journeys. Some go to Wales and
some go like Cornwall in three days. You
can pick three different destinations.
Yeah. And those are booking up with
Americans excited to go on trips. Mostly
rich Americans to be honest, but They're
very popular with the people trying to
go to to the UK.
Okay. So, sleeper trains and a return of
cooler holidays and shoulder months for
for some of the hotter hotter places. Uh
those are some of the trends. We'll
continue this conversation, but Sarah,
thank you very much. And Sarah Rapaort.
Let's widen the conversation now with
Tom Katalan who's founder of Luxury
Travel Agents uh Dorsia Travel. Tom,
thank you for joining us. So, no doubt
you recognize some of the trends that
Sarah was just talking about there. But
if you're thinking of uh new and
exciting up and cominging destinations
that um luxury travelers should think
about and have on their radar, what
comes to mind?
Oh, Hannah, have you considered the
Redin and Leadeds Music Festival this
weekend?
No, I'm kidding.
That sounds very luxurious.
Exactly. I love that being there. um
we're seeing very very similar to what
um's just been said regarding
I always used to recommend May September
great time for Europe the rates have
gone up so high now that September is
peak season the weather can still be
very very hot so we're actually seeing a
lot of people prepared to travel
significant distances to places like
Mosamb beek now there it might not seem
quite as uh as normal as you might
think, but you've got extremely high-end
luxury properties there. You've got a
lot of money going into conservation.
So, as a result of that, y
you've got new um new national parks for
being um restored to what they used to
be
and value for money is very very high in
these places as well.
Okay. And I think that's been seen
generally across a lot of places like
the Indian Ocean other than the Sey
Shells. It's generally off peak this
time of year. You can risk the rainy
season. But when you're comparing rates
of getting say a 250 m villa in the
Maldes in one of the best luxury resorts
in the world versus a 30 m room in
Centrope to a lot of people it can be
very appealing to uh to look elsewhere.
look much further a field.
Is is climate change, Tom, changing
things? Is the over tourism narrative
changing things? How quickly are we
seeing the tourism industry evolve
around both of those two stories?
Yeah, that's an interesting question
because going back to the mortage
traditionally a lot of properties in May
they just shut and some of them even go
into June and July and they they're so
low peak you can be singledigit
occupancy numbers
but now actually it can be quite a good
time of year to go there and some of
that is because of climate change but it
works both ways so I'm just focusing on
the mold for a moment but traditionally
peak time is end of December till April.
This year, January was extremely wet. It
rained a lot there. So, it can work both
ways in that you think you're going
somewhere when it's peak, but the
weather can be so sporadic, you don't
quite know what you're getting. So, I
think
generally you're Sorry.
Well, I was going to say, and what is it
that people are going for? Is it still
luxury hotels or is it about uh the the
sort of villas and the large homes and
the big parties taking your friends with
you? What what what's the vibe these
days? film
I it's all going to depend but we are
seeing a lot of multigenerational family
bookings and so the way that companies
have responded to this since co is I
think initially from co you had
companies going people are afraid of
being around each other let's build
villas but subsequently co is not a a
point that comes up anymore but people
have realized that spending time with
their friends and family and having
these exclusive use large villas is an
extremely appealing element of it. So
you're going to have certain people it's
going to be just purely it's a beautiful
location some because you get to take
all your friends and family and again if
you're comparing that to certain places
if you're comparing what you can get
even at peak in say the Moldes where you
can take an entire private island for
less than you could take two or three
entry level rooms in in certain parts of
the south of France or Italy. It starts
to become uh a real It's still not
cheap, but it starts to look like value
for money.
Yeah, everything's relative,
particularly when you've got your
relatives with you. Tom, thank you very
much indeed. Tom Carlan, uh co-founder
of Dorsia Travel and what you should be
maybe thinking about this weekend if
you're not of course going to the
Reading Festival or or the Central Bank
Festival which is in Jackson Hole.
Absolutely. I'm going to spend all
weekend trying to focus on what's
happening in Jackson Hole and monetary
policy instead, guy, because I mean,
have we still got our countdown clock?
That should be running.
Not many not many hours to go.
Still holding her breath.
We're still
We're checking on her at regular
intervals to make sure she's okay. Uh
but yeah, not many hours to go. And so
the big the big question remains, what
kind of
is he a dove or is he
message? Yes. And does he try to be
neither? Is it possible to be neither?
Does he upset people? Does he upset the
White House?
Maybe a moose. Um, plenty of moose there
as well. Stay with us. Great coverage
coming up from Jackson Hole, the
economic symposium. We've got some
interviews coming up which you are
definitely going to want to pay
attention to. Uh, some former Fed
presidents. Uh, some great guests. Rich
Claren, I think, has got some really
interesting things to say around what is
happening here. Uh, also Mr. Bullard, I
think he's going to be worth listening
to as well, considering he potentially
could be on the list for the next Fed
chair. Anyway, the big event, of course,
is the Fed chair, Jerome Pal. He is
speaking at 3 pm UK time. Everything's
basically about the countdown into that.
As a result of which that will be the
big focus on the pulse next. It is
coming up shortly. Have a great weekend
folks. This is Bloomberg.