Good morning from London. I'm Kitty
Gupta alongside Tom McKenzie. We're an
hour away from the opening trade. Here's
what you need to know. Fed chair Jay
Powell signals an interest rate cut
could come as soon as next month despite
division among policy makers over
inflation and the jobs market. And Mario
Draghi issues a dire warning saying the
EU can no longer rely on the size of its
economy to bring influence onto the
world stage. And the US government takes
an almost 10% stake in Intel worth $ 8.9
billion dollar in an unorthodox deal
funded by the Chips Act. Tom.
>> Okay, let's check in on the markets
then. US futures pointing a little flat
right now after the gains that came
through. Of course, one and a half%
upside for the S&P 500 by the end of the
close on Friday. Stronger gains even for
the Nasdaq 100. Gains of around 1.9%.
The Russell 2000 soaring close to 4 uh%
as well by the end of the close. All on
the back of the pivot of course from
JPAL. European futures though looking a
little softer down 3/10en of a percent
after notching record gains last week.
The Asian session the strength is coming
through from mainland China. Even all
the question marks about potentially
being in bubble territory across that
regional gauge you're seeing gains of
around 1% the baton being handed over to
Asia of course on the back of
expectations of that cut in September
about 85% priced in the benchmark 2year
not the benchmark the 2-year the
benchmark at 10ear is seeing yields up
but the 2-year at the front end 371
after of course that rally that we saw
on Friday pairing some of that just
around the edges yields up one basis
point on the 2-year at 371 the countdown
to the opening trade starts right Now,
good Monday morning. Lots going on on
the geopolitical front. Lots going on on
the policy front. Except no one here in
the UK is here to see it. Don't worry,
the European markets are open despite
the bank holiday right here in the UK.
Let's start with what we learned on
Friday and over the weekend, which is of
course the policy story out of Jackson
Hole. The idea that a cut is on the
table for as early as September. The
first time really the J Powell is going
as far as to kind of confirm that
possibility.
>> And if we take a step back early in the
week, the drum beat of commentary from
Fed officials was caution not committing
to September. JPAL comes out and he
opens the door for that cut. He does not
undermine the market pricing for
September in terms of the first cut of
this year for the Federal Reserve. Even
with inflation data where it is well
above target and an unemployment rate
that yes, there's some questions around
the edges as to the softness that we're
starting to see, but an unemployment
rate of around 4.2 4.3% and yet he opens
the door for that cut. Is this a Fed
official who's also looking a Fed chair
who's also looking at what will be a
reconstituted Fed around concerns that
maybe he will be outvoted at some point
or is he more concerned in terms of the
labor market data and getting ahead of
that story?
>> The politics very much bleeding into the
monetary policy there. I thought the
line that was so interesting from his
speech was that there is a possibility
that this tariff kind of read through is
a one-time hit, which I think is code
for transitory from from from his uh
prior prior uh 2022 days. I think it's
fascinating though that you do start to
have J Pal because this is and Dan
Curtis, our our Marcus producer, pointed
this out in one of his charts this
morning. This is actually one of the
longest periods that the Fed has been on
pause in an easing cycle. and we don't
really have a roadmap for what that
looks like or how the market should even
be pricing it. And you mentioned in the
two-year uh market check this morning,
you're looking at a 10-year 426. So even
with this kind of pricing that cuts are
coming, you really haven't seen the
Treasury market break out of its range.
>> And of course, we only needed to look
back to 2024 to your point to see an
environment where the Fed is cutting and
yet yields are grinding higher. So is
that a story that starts to evolve and
come back for this market as well as we
look at treasuries on the labor market?
at line curious a curious labor market
as JP Pal pointed to both a drop off in
demand for workers and yet also a drop
off and a decline in supply. The
crackdown on immigration having an
effect in terms of mudding the water
when it comes to clarity on the jobs
market of the US as well.
>> I thought it was fascinating as well
that that was the US take at least when
it comes to the monetary policy
officials. We got plenty of commentary
from other uh global central bankers as
well. Christine Lagard of course was in
attention in attendance. Andrew Bailey,
Governor Ua among many many others and
the commentary from outside the US seem
to be really centered around
independence when it comes to monetary
policy really underscoring that of their
own own central bank decisions. That
being said, let's go to another uh story
that's catching our eye this morning.
Mario Draghy making headlines over the
weekend uh really saying that the EU is
not where it used to be and kind of
undermining this idea that I think we
started talking about in the states
which is that ultimately foreign policy
and economics have now started to clash
in the states and that basically as
Donald Trump is passing on his his trade
agenda he's using economics as a weapon
basically to talk about or as a tool I
should say to talk about geopolitical
outcomes you can see that in the likes
of Russia you can see the likes of
Israel and other uh parts of the world
as Now Mario Draghi is making a very
similar comparison saying that the EU
despite the size of its global economy
isn't actually able to wield the
economic power or influence on the
global stage that it once used to.
>> And Amara Drug of course came out with
that drug report to which so many eyes
were drawn in terms of the prescription
for Europe to get back it on its footing
when it comes to trade when it comes to
defense. And what you were saying was
that we have essentially I'm
paraphrasing but struck a raw deal with
the US when it comes to that trading
partnership where we accept 15% in
Europe and ex accept of course uh lower
lower barriers uh in Europe 15% tariffs
in terms of shipments into the US market
and on defense spend. He says maybe that
was the right thing to do, but that was
under pressure from the US and maybe the
defending the the money being put to
work in defense isn't necessarily going
to be put to work in the places that
would be best and is benefiting Europe
the most because it's coming under that
political pressure from the Trump
administration. So talking to those
vulnerabilities and suggesting that
Europe needs to do a lot more work to
round out the edges in terms of having
its own sustainable footprint going
forward.
>> Yeah. And in that dry report, he made
that very key piece quoting Goldman
Sachs as well, that 70 to 80% of that
defense spend in Europe ultimately gets
leaked to the United States. And he was
making the case, which has really been
the European stock market's bull case
here, that the European defense ramp up
is coming. This kind of throws cold
water on that whole psychology. It's not
just the defense story we've got our eye
on. It's the tech story as well.
>> So the national security impetus of this
Trump administration taking 10% in
Intel. We've been reporting around this
now. We've had it confirmed. Close to $9
billion being invested. is going to be
the subsidies from the chips act that
will be converted into equity for the US
government. But this is part of a
broader story for this Trump
administration that is more
interventionist when you see what
they've done in terms of the steel
industry. When you've seen what they've
done in terms of taking a major stake in
a rare earth's company and of course
that policy to take 15% from sales and
revenues of Nvidia and AMD into the
Chinese market, now 10% in Intel. This
is a Trump administration focused on key
sectors and of course national security.
But big questions as to what happens
with other chip makers, other
industries. Could they be facing a
similar purchase, a similar investment
from the US government? And is that
necessarily good for investors and for
the taxpayer?
>> This doesn't happen in the states. The
US government does not take stakes in
companies unless you're bailing them
out. And even then, it's kind on kind of
a loan, a one-off. You've seen it with
the banks, for example, in '09. You saw
it with, of course, the auto sector and
the TARP Act as well. But an actual
stake for a company that isn't on the
verge of bankruptcy nonetheless is is
very unusual. I know it's more common
here in Europe to have kind of
government stakes in companies. Commerce
Bank is a great example among many many
others. But I think this is so crucial
because now you have Nvidia earnings
coming in on Wednesday. And geopolitics
are front and center with this kind of
will they won't they when it comes to
the H20 chips and how much of a piece of
that bottom line it makes up.
>> Yeah. as they look to design potentially
a new chip for the Chinese market.
There's a question about whether or not
China will want those chips, whether the
government will allow their companies to
purchase those chips and indeed whether
or not the Trump administration will
sign off on those export controls or
those licenses to allow them to ship
into the Chinese market. That could be
the risk event. The Nvidia story with
those earnings on Wednesday.
Expectations are always so stretched,
but of course, it is a gauge in terms of
that demand around AI spend.
>> Absolutely. Will the party stop on
Wednesday? We'll find out. Let's tell
you what we've got coming up on the show
today. Lots of analysis. George Larius,
Forbis Mazar's chief economist, will be
joining the program. We'll see what he
makes out of the developments, maybe the
tone shift out of Jackson Hole as well.
Nicholas Wleski, Alcan Asset Management
founder, talking to us a little bit
about these markets as well. Plus, do
you even trade these markets or do you
just brace for impact for the
seasonality of September? Valerie Noel
over at Seas Group, the head of trading
there, will weigh in at the open.
>> Okay, here's what else to think about
through this week then. Today, we of
course in a in a bank holiday here in
the UK. The markets are closed and enjoy
the holiday if you are on one. Of
course, here in the UK, the German EPO
data drops in terms of sentiment survey
as well later today. We'll break that
for you. On Tuesday, US durable goods,
that data giving a sense in terms of, of
course, demand domestically and
externally uh for those US products as
you're starting to get some concern
about the tariff pass through, of
course, with the producer prices coming
in higher than expected. On Wednesday,
of course, it's Nvidia. It's the big one
in terms of the earnings pulse and that
momentum. those earnings dropping late
in the day of course on Wednesday. So
we'll be getting reaction early Thursday
for you on that story. And Thursday of
course on the data front, US jobless
claims. So more detail in terms of the
labor market of the US. On Friday
though, it's the inflation pulse again
and a reminder that inflation has been
ticking up in the US and remains above
target. US PCE of course it's the
favored gauge for this Federal Reserve
and expected to come in at what 2.8 2.9%
uh 2.9% is the estimate. So just edging
up year on year in the month of July is
the expectation crit.
>> Well the PCE data is so crucial because
as we saw the CPI data hasn't budged
really. We saw seen it in shelter
prices. We haven't seen it show up in
the nominal price yet. But the PPI data
is where that tariff read through has
already shown up in a really big way.
And that's the read through we were
expecting PC and the markets were more
sensitive this time around to the PPI
data than the CPI data. And I think
that's really crucial in terms of even
if we do get say a positive earnings
print from Nvidia and everything is
great and the party continues, does the
party stop then on Friday?
>> Is this Fed setting itself up for
trouble ahead? If some analysts and some
economists are right, which is that the
pass through of tariffs is going to
happen. It's been relatively muted up
until this point. But in the second half
of the year, that's when the pass
through comes through. The inventories
are drawn down. Companies are going to
have to start passing on some of the
cost to consumers. They've been
absorbing that into their margins, but
that is not going to be sustainable into
the second half of the year is of course
the arguments being made and maybe we'll
get a sense as to that story on Friday
with that gauge and to what extent that
story is starting to adjust.
>> Yeah. And the timing is really
fortuitous here because of course in the
PCE data, energy is such a big component
and energy prices have been fairly
stable despite the geopolitical kind of
tug and and and uh tug of war that we've
seen around the world. So that is
perhaps something that will feed into
the data as well. I want to point out
some of the other stories you need to
know this morning. Morning. I'm going
start off in the deal space. Curig Dr.
Pepper set to acquire Dutch coffee
company JDE Pete for about $18 billion
in an allcash transaction. The combined
company will later separate its beverage
and coffee operations, effectively
undoing the 2018 deal that combined
Kurig and Dr. Pepper. And the Trump
administration has halted work on an
offshore wind farm off the coast of
Rhode Island in another blow to the
green energy industry. The revolution
wind project by Denmark's Orstead
commenced construction last year and has
been stopped as work nears about 80%
completion. Moving over to France, they
have issued an unusual rebuke to US
ambassador Charles Kushner after he
accused French authorities of being lax
on anti-semitism. Kushner, who's the
father of President Trump's son-in-law,
Jared Kushner, made the accusations in a
letter to President Emanuel McCron. The
French foreign ministry called Charles
Kushner's comments quote unacceptable
and say they violate a convention
forbidding foreign diplomats from
interfering in the host country's
affairs.
>> Coming up, Donald Trump will meet South
Korean President Lee Jay Mong for the
first time today. We will preview that
visit as trade of course tops the
agenda. Plus, wind energy continues to
face blowback from Washington as Critty
was saying. We're going to check in on
those stocks at the open. Up next,
markets still digesting the Fed chair's
comments at Jackson Hole. We'll get more
analysis. If you have any questions of
your own for our guests, do send them to
us on IB plus BBTV go. This is
Bloomberg.
The stability of the unemployment rate
and other labor market measures allows
us to proceed carefully as we consider
changes to our policy stance.
Nonetheless, with policy in restrictive
territory, the baseline outlook and the
shifting balance of risks may warrant
adjusting our policy stance.
>> Fed chair Jay Powder there speaking from
the Jackson Hole conference making that
dovish pivot. the market was very much
expecting. He's not alone. Former St.
Louis Fed President James Bullard,
saying he thinks there's a case for 100
basis points of rate cuts before next
year. Bullard, a contender to succeed
Jay Powell as Fed chair and spoke to us
after Powell's comments over at Jackson
Hole. Take a listen.
>> He used the the uh speech to uh solidify
expectations for 25 basis points in
September. Uh I was expecting that
anyway. markets were expecting that. Um
he leaned into the most recent labor
market report which was uh very soft. Uh
and so I think that's uh that's a done
deal. Um he didn't say too much about
beyond that um uh what you want to do
with the October meeting or the December
meeting. I have said 100 basis points
you know going into 2026. So I think you
could uh adjust as you go forward uh and
and eventually get a full 100 basis
points but I would go slowly in order to
watch the data and then on the framework
review I'm sure uh much earlier in the
year they they had targeted that uh they
would have the framework discussion and
that they would use the Jackson Hole
speech to talk about changes to the
framework. I did I thought those were
thoughtful uh and they were well
presented in this in this speech and
they're about what uh many have
speculated on. Uh so I think they did
about as much as I can on the framework
side.
>> Jim Buller, Tom Kenan, good morning to
you. I definitely consider this my
conversation of the day. You serve a
lengthy term at the St. Louis Fed. You
have lived the decline of a greater
economy decades and decades ago in the
effort to provide for a resurgence St.
Louis. As a next chairman of the Fed,
whoever that may be, do they have to
manage for two American economies, a
technologydriven
exceptional economy and another, to use
a cliche, America flat on their back?
How would a chairman execute those two
Americas? just everything all the way
around.
>> Yeah, I think income and wealth
distribution have become more uh salient
topics for the Fed. Uh it's not that
clear how much the Fed uh can really do.
Uh providing interest rate policy for
the whole economy. Uh if you change the
rate structure that affects everyone,
not just one particular group that you
might be uh targeting. So I think uh
that's been something we've had to
wrestle with and I I've actually done
research on it myself to try to
understand it better uh from my point of
view. So uh I think this has been a been
a theme for a while and that'll be uh an
important theme in macroeconomics uh
going forward.
>> Okay. Former St. Louis Fed President
James Bullard speaking of course to
Bloomberg's Tom Keane making the case
for 100 basis points of cuts through the
end of this year from the Fed. Let's
check in on the Asian market reaction
then. Pick up the baton from the
strength that we saw over in the US by
the close on Friday. You're seeing a
strong session in Asia with the regional
gauge up a little over 1%. The strength
over in Chinese equities as well being
propelled up 1.6% on the CSI 300. The
HSI over in Hong Kong up more than 2% as
well. Tech leading some of the gains in
Asia. We'll focus of course on South
Korea and Japan meetings there and then
the South Korean president heading over
to Washington DC. That is a check in
terms of some of the enthusiasm
filtering through to the Asian markets
in the session today. A big week of
course for Asian earnings with some of
the big names like Alibaba reporting
through this week and then Nvidia will
have a read across of course the Asian
session as well when they report later
on Wednesday.
>> Absolutely. It's fascinating to see this
kind of celebration really. The markets
are partying on really a confirmation of
what so much was getting priced in in
the leadup to it. Let's get another
perspective here this morning. George
Legary is chief economist over at Forvis
Mazers joins us this morning. George, a
pleasure to have you on the program.
Thank you for making time for us. Just
give us your initial take about the
commentary that came out of Jackson
Hole. It felt like Jay Powell did mark
this dovish pivot, but did he really or
did he just acknowledge it as one
possible solution? How are you reading
it?
So, first of all, his words were very
carefully chosen and the markets hear
what they want to hear. And I don't
think necessarily they're just hearing
25 bits on September. Markets now are
beginning to price in um if we're being
honest, yield curve control, okay?
Because that's that's the end game here,
okay? It's not just a short-term rate
because, you know, you might alleviate
some pressure on the short term, but um
pressure builds up on the long term,
okay? Where mortgages are, by the way.
So the endgame here is yield curve
control and risk markets, especially
equities, are beginning to to price that
in.
>> You're talking about yield curve
control, George, which I feel like kind
of kicks the can down the road to August
or sorry, I mean, we're in August in
September, October when we start to see
the X date. How consequential is that
when we talk about the debt ceiling in
an environment where the Fed is expected
now to ease perhaps more significantly
than previously thought?
So again, um you can control the short
end if if you're the Fed, but you can't
really do much about the long end. So
unless you start printing money and
buying long-term bonds, that's that's
yield curve control for you. Um is it
consequential for the debt? Yes, a lot.
Does the debt ceiling is the debt
ceiling really a problem? Well, there
have been what 54 discussions in
Congress about the debt ceiling since
the whole thing began. And every time
they manage to to raise the debt
ceiling, the US doesn't doesn't default.
Okay, it wouldn't default on a on a
failure to to to agree something in uh
in the Senate or the House. So that's
not a huge issue. Okay, that's that's
the way the US has decided to go. It
will create probably sugar rush for
markets. Okay, which is good for risk
assets over the shorter medium term. But
obviously longer term risks will now be
building up much quicker and investors
should be um acknowledging that.
>> So George, those risks need to be
acknowledged in terms of longer term and
the debt buildout in the US. But in
terms of that yield curve control thesis
that you're drawing out for us, what
does that mean in terms of your
expectations into next year as to where
the Fed goes and how aggressive they are
on rate cuts?
>> Look, again, if if we're being honest,
we see the Fed um we see the Fed's
independence somewhat compromised. Okay,
that's what we're looking at here. Okay.
And that would mean, you know, if you
take the 70s as an example, and some
exertion of of pressure on the Fed to
keep the cost of money very very low in
hopes that this would help uh growth. So
again, this is good for risk assets uh
over the shorter term for 2026.
Um I'm I'm be I'm beginning to be more
positive about risk assets. But if I'm
looking at longerterm uh consequences,
it's not good for the dollar. Uh and uh
investors should be considering
um various hedges to to their exposure.
>> Again,
their portfolio,
>> but tactically tactically you should you
should take some advantage.
What what would that look like, George?
What What are some of the hedges that
investors might be looking at?
>> Well, gold is is always a good one in
those situations. I know it's parochial
to say it, but if you're looking at the
end or, you know, the near end of a of a
classic debt cycle, then that's usually
the time to to build up uh some some
gold, some other precious metals. um I'd
be on the fence for uh some other real
assets like uh commodities, other
commodities or real estate in the sense
that they can be a little bit
idiosyncratic.
Um so you need to be looking more at
real assets because
when when we talk about yer control also
we're talking about the weaker dollar.
>> George I want to bring it right back to
the tariff story here. A key line that
stood out to me when Jay Pal was
speaking at Jackson Hole was that this
could actually be a one-time hit, and
that's a narrative he's been pushing
back against for quite some time. What
kind of risks do we see in terms of
economic policy, not the markets, but
the actual e real economy of the United
States if that is the wrong take as in
if tariff pressures persist and the Fed
isn't preparing for that? What are the
consequences of that kind of policy?
Um so before I joined we had a very
interesting conversation between Tom
King and and James Bullard. Okay. And
when we say consequences we have to be
cognizant of one thing. The Fed has one
rate. It's a very blunt instrument and a
you have two Americas as as Tom King
very well said. You have the tech
America and everything else. And also
you have very different inflations.
Okay. You have a lot of things inflating
right now at five and 10%. and you have
the um and you have the the housing
market which is deflating. Okay, so yes,
headline CPI looks somewhat okay, but
actually you have virus pressures uh
building up in in the ends. So I'm going
to to go out on a limb here and say that
the consequences of a wrong call would
not necessarily be that great because
the Fed has one rate. Okay. um there's
only so much it can do with it and you
know that would matter a lot more if if
this was a very leveraged market but it
is not. So economic decisions will have
consequences
and the only other tool the Fed has at
its disposal to uh to to alleviate
growth pressures would be money printing
but obviously this would accelerate
inflationary pressures more.
>> Okay. So I think we should again go back
to the idea of more yield curve control
because the rate 25 bit is not going to
make a big difference in this
environment.
>> Okay, George, we've run short on time,
but we appreciate your insights and of
course your analysis of what we've been
hearing from the Fed. George Legarius,
chief economist at Forvis Maz joining us
from Athens. Coming up, we're going to
take a look at European small caps as
money managers say a rally in the space
is just beginning. Stay with us. This is
30 minutes away from the start of the
opening trade. It is of course a bank
holiday here in the UK, but the markets
across Europe are very much open. When
you look at the futures picture,
remember you are still digesting a lot
of the green on the screen over on
Friday. There's a rally over in Asia,
one that's not really translating, it
seems, this morning into European
futures. Your stock 50 futures actually
taking a bit of a breather, down about
4/10en of 1%. Looks like the DAX is the
underperformer this morning. Uh we'll
see if that sustains into the open. In
the meantime, a quick check on the bond
market. Of course, this is going to be
light volume, light liquidity. It is
very much a uh a summer August Monday
here in Europe. But you are seeing
yields tick a little bit higher and that
might just simply be following the lead
from what you're seeing over in the
Treasury space from Friday. Treasury
market is closed at least during UK
trading hours. Uh we look forward to
seeing if that changes when the
Americans come online.
>> Okay. Well, let's get more insight then
on the Fed and bring in what we've been
hearing from Fed President Susan Collins
saying the September rate decision is
not not a done deal. She spoke to us at
Jackson Hole.
The tariff impacts are significant and
we have done analysis in the Boston Fed
understanding that it's not just direct
imports but the range of goods and
services that rely on imported
intermediate goods as well. A much
broader range. It would surprise many
people how many kinds of services
actually use imported intermediates as
part of what's happening there. And so
we are anticipating that over the next
couple of quarters, so the rest of this
year into early next year, inflation is
going to remain elevated and then my
baseline would be it would start to come
back down. But I don't rule out a larger
and more persistent impact.
>> But to Mike's earlier point, what is the
harm in cutting by 25 basis points or
even 50 basis points? Because would that
really cause runaway inflation at a time
when I know that the the chair has
talked about policy being relatively
restrictive?
>> Well, it's about the balance, right? I
mean the inflation side and again that
is what I hear about in every uh
conversation I have across the first
district which is most of New England
and so it's about balancing
uh that commitment to restoring price
stability with an understanding that
preserving healthy labor markets also
really matters for for the public and so
doing that balance I would say it's not
a done deal in terms of what we do at
the next meeting um but a range of of
poss disabilities is on the table and
we're going to get more data between now
and then.
>> Definitely. And everybody out there
listening, um that's good advice. Wait,
don't bet yet. Uh is it more likely that
we see a rapid rise in unemployment
because that tends to be what happens
when it starts to go up or a more
long-term but steady rise in inflation?
Uh that would lead to inflation
expectations becoming on board? Well, so
from my perspective, the the risks on
the two sides have come into rough
balance. And so that's a really complex
context for monetary policy when you you
could see the unemployment rate rising
and you could see higher inflation. Um,
you know, my baseline is not one that is
as concerned about inflation
expectations rising at the moment.
Earlier in the year, I had more concerns
about that. I would say that at the
moment, monetary policy is kind of
modestly restrictive. That's actually
appropriate for a period when inflation
is elevated. We haven't brought back
price stability at which I am more than
I'm totally committed to. But at the
same time, there are those risks with
the slower employment growth that could
lead infl uh unemployment rates to rise
and balancing those risks. So I think at
the moment where we are is appropriate,
but if we start to see worsening labor
market risks relative to inflation and
starting to dial back the restrictedness
would become appropriate.
>> Boston Fed President Susan Collins there
talking to our very own Michael McKe and
Lisa Brahm over in Jackson Hole. I think
it's really interesting what she's
talking about there because one of the
key concerns of that extra 25, the extra
50 that Lisa was kind of proddding about
was that does that actually help perhaps
the masses actually needed. Yes, it
spurs massive economic rallies, but does
it show up in the likes of real the real
economy, small businesses, and even
small caps?
>> And she talks about the fact that those
two sides of the mandate for her are
very finely balanced between the labor
market of course and inflation. Let's
get a view now in terms of how monetary
policy is filtering through to some of
the equity story, particularly the small
caps. We've heard from European central
bankers as well. Yokim Naggle saying he
sees a very high bar for further cuts
from the ECB with rates of course at
around 2% and they're meeting that 2%
inflation goal of course the ECB unlike
the Federal Reserve. In terms of the
small caps, there's been a lot of focus
on the MDAX over in Germany with those
fund flows. Of course, in terms of
defense stocks, let's get a view right
now. Alcen Asset Management delivering
incredible returns. Nicholas Wleski,
founder of Alen Asset Management, joins
us for a view specifically on on those
small caps. And Nicholas, the fund is
outperformed. I guess a question for for
our audience is given where monetary
policy settings are right now in in
Europe and the US. Is is the door still
open for further exposure to the
European small cap story or is that
starting to close? Good morning.
Good morning and thank you very much for
hosting me this morning. Yes, I think uh
the European small caps have done very
well so far this year, but it um I think
this um outperformance has legs. Um
first of all, you have um robust
earnings growth for the uh European
small cap index around 13%. And if you
are a good selector should do uh better
than that. Sorry for the noise. Second,
we have um very attractive uh
valuations. We have um uh European small
caps trading as you show on your graph
um at a significant discount uh one of
the largest ever. It's um it's been um
um it was a bit higher at the beginning
of the year but still very significant.
Third, we have a strong resilience uh
because only 11 to 12% of revenues on
small caps are exposed to the US whether
compared to around 24% for large caps
and um you have an increasing uh fiscal
spending uh notably in Germany with um
the 500 billion fund. You have the ECB
cutting rates and most central banks
around the world probably cutting rates.
You can see as well that the rally um uh
technically has been um healthy. It's
broad based with more than half of uh
micro and small caps trading above their
100 day moving average. Um you've seen
inflows coming back uh for the first
time in um in a very long time and um
and um and I think that's um that's very
um very encouraging.
What assumptions, Nicholas, are you
making about the fundamentals of the
Euro zone economy into 2026 with that
positive view on European small caps?
I we we don't we don't have to uh to be
very aggressive. We take the consensus
view uh for very minor growth uh
supported by interest rate cuts and
these um these stimulus programs and
that should be enough. That should be
enough. you you have to remember that uh
the activity has been very slow for
three to four years. So all these
companies have been uh very cautious on
uh on cost uh on managing their margins
and we see rising backlogs.
>> Nicholas it's created in London. One of
the cases against betting on small caps
right now is simply that if there is a
persistent tariff threat on either side
of the Atlantic, it's the bigger
companies with larger liquidity
profiles, larger cash cushions that can
weather the storm better. Is that
something that the small cap space is
prepared for?
Well, we focus on a lot of small caps
that are investing um that are, you
know, focused domestically uh in uh in
defense, in construction, in uh in real
estate, in um um in financials. And so,
I think these small caps are very much
um um um um protected from this uh from
this war. Of course, there are some
small caps because it's a diverse
universe that will be exposed to US
tariffs. um could be you know in luxury
and could be in spirits could be in
capital goods but uh um we are uh we are
we're away from most of these stocks.
>> So Nicholas and you make the point that
a lot of the bull case for small caps
rests on that fiscal spend that's coming
from Germany the broader Europe European
story as well. There is a question
however specifically in the defense
sector which you just outlined as well
that perhaps that fiscal spend doesn't
come through in its entirety. Is that
possibility priced into the market?
>> Well, um the market has been um has been
um bious so far. Uh we um we we shall
see. I think the market is uh uh
anticipating um a rise in fiscal
spending for the next two to three
years. Um and we we shall see this um
essentially in 26. We haven't seen much
in 25 because it takes time for these uh
measures uh um to go through uh
parliaments uh to be voted into laws and
so on and to and to be implemented. Uh
so we expect that to to happen in in
2026
>> and that ties in of course to what we're
seeing on defense Nicholas which is a
sector that I know you favor. Where
where within the defense basket do you
want to be positioned right now?
>> Well, I think you you want to be uh
diversified. Um uh initially we wanted
to be more exposed to um you know things
like ammunitions and um and uh hardware.
Uh we still want that, but we want to be
maybe more to to some more long-term uh
beneficiaries.
um companies that will benefit from the
switch to drones to um artificial
intelligence
um uh to the you know the war of robots
we're we're going into um and I think
there are some companies that will uh
will benefit from those trends.
>> Nicholas, I want to take a kind of
massive zoom out if I can. Where are to
the clients you're speaking with, the
money that you're managing, the
investments that you're making, do you
see or do you feel like you're in the
consensus here that that fund flows,
global fund flows favor small caps right
now?
>> I don't know if global global fund flows
favor small caps. Uh what we have seen
for us and a few others in Europe is
that for 15 years we only had flows. uh
investors were favoring u various asset
classes and um even in the last three
years they were favoring uh ETFs when
they were uh investing in Europe. Uh so
in active fund managers uh we've seen
flows only this year really coming back.
Um so I think it's the first time in um
in 15 years. So I think there's u uh
there's a lot more room to go and uh
coinciding with uh the picture I've uh
I've showed you the fact that the small
caps are cheap trade at low multiples
they have strong backlogs rising EPS I I
don't see that as I'm feel very
comfortable
>> we look forward to seeing if that bet
ultimately pays off. Nicholas Wesleski
will leave the conversation there.
Founder over at Alcen Asset Management
joining us this morning. We thank you so
much for your time. Less than 20 minutes
away from the opening trade, we're going
to keep an eye on one stock. Trump
knocking the wind out of Orstead sales.
We discuss latest hitting the renewable
firm in our stocks to watch and perhaps
a ripple effect from that policy
decision. Stick with us. This is
When I appeared at this podium one year
ago, the economy was at an inflection
point. This year, the economy has faced
new challenges. Significantly higher
tariffs across our trading partners are
remaking the global trading system.
Tighter immigration policy has led to an
abrupt slowdown in labor force growth.
There is significant uncertainty about
where all of these policies will
eventually settle. While the labor
market appears to be in balance, it is a
curious kind of balance that results
from a marked slowing in both the supply
of and demand for workers. The effects
of tariffs on consumer prices are now
clearly visible. We expect those effects
to accumulate over coming months with
policy in restrictive territory. The
baseline outlook and the shifting
balance of risks may warrant adjusting
our policy stance.
Fed Chair Jay Powell, they're talking
about the many cases, the many new
factors they now have to consider when
it comes to the US fiscal policy and
immigration policy coming from the Trump
administration. How that reads into
their monetary policy stance, something
that is widely being interpreted by the
markets as a new and fresh openness uh
to a cut as early as September. So, what
are the market implications here? And I
thought this was really interesting over
the weekend seeing a lot of the analysis
and the fallout from Jackson Hole.
simply this idea of whether or not the
bond market is actually taking that in
in full stride. This equity market
rally. They're throwing a party. The
bond market seems to still be fairly
rangebound. But for me, this is the
chart that caught my eye over the
weekend. Uh point out by Yens Nordvik
over at Exxanti Data that the
correlation between the dollar and
treasuries is starting to build back up.
And this is something that was out of
sync for a while. You had the US 10-year
in a range about 420 to 460 and kind of
staying within that range as the dollar
continued to weaken and weaken and
weaken and you can kind of see that
dynamic in these lines here. They were
really starting to trade together tick
by tick as they do historically and that
correlation did kind of break down until
the last couple of months really
liberation day I have to say after
liberation day that started to come up
but only became statistically
significant recently. We're not about
0.6 when it comes to that correlation. I
think that's really really crucial when
it comes to whether or not the dollar is
taking its cue from what the bond market
is pricing in because you start to think
about more rate cuts. Does that actually
eliminate any case for more dollar
bullishness? And that's going to be
really key when it comes to this idea of
whether these cross asset correlations
are indeed actually correlated the way
that they have historically been or this
is just a completely new world and a
completely new dynamic. I want to get a
true expert's opinion on this. Marcus
Live executive editor Mark Cudmore is
joining the program for a traditional 3
minutes. Mark, your take on that? We've
talked about rates and the dollar kind
of pulling apart for quite some time.
They start to be coming back or they
seem to be coming back together. What do
you think the reasoning for that is?
>> Yeah, I think we had a temporary
dislocation earlier this year. We
obviously had quite a unique
environment. Suddenly, trade policy
became the most important driver of
global markets, which is not something
that I remember kind of seeing before.
And it wasn't just a one-off shift
because obviously it was it was extended
periods of uncertainty. The uncertainty
hasn't fully gone gone away. We've gone
past the worst of it. So, I think there
was a a big dislocation between FX and
rates temporarily, and I think rates is
reasserting its role uh as being one of
the most important drivers. I wouldn't
want to emphasize that it's going to
completely dominate the story. I think
the fact is we're seeing ongoing
undermining of US uh institutional
credibility and I think that given that
the world is still structurally exposed
to the dollar. I'm not talking about
short-term money which is short the
dollar. I'm talking the long-term
exposure to the dollar. I think that'll
continue to weigh on the dollar over the
coming years. It's an expensive currency
with a current account problem and a
fiscal problem. And those twin deficits
will weigh in it over the coming years
as institutional credibility continues
to get undermined.
So those credibility risks are still
there particularly when you push out to
2026. Mark, what do you make of exactly
what we heard from from JPAL and the
equity market reaction as well? Strength
of course in the US session looks like
it's fading a little bit today. Is this
a market that's expecting one and done
in September or is there something else
at play?
So I think Powell, if you read his
comments from, you know, if you came in
from outer space and did not have the
prior pricing, you'd go, "These are
pretty neutral comments. We may warrant
a shift in in adjustment in policy." Um,
I I think that in the context that we
are pricing most of a rate cut going
into the speech, it was it was correctly
taken as dovish because he didn't push
back on the pricing. Here was a chance
to kind of go, "Whoa, whoa, whoa. people
have got carried away for the rate cut
meeting for the rate the policy meeting
in a few weeks time maybe that's a
fraudian slip uh and therefore he
validated uh pricing for a rate cut and
therefore it was a dovish shift now
what's interesting today is we're not
seeing any follow-through price action I
think the price action is actually very
disappointing which is getting a little
bit of a new narrative out there in the
market I think the narrative is coming
from the price action kind of going you
know what it's no real different from a
week ago we knew that a week ago it was
really the data in the coming weeks that
were going to decide things uh and it
now we still know for that today. The
slight shift and there has been a
genuine shift is a week ago it was I
will cut rates if the the the data
really validates that decision. Now it's
I'm going to cut rates unless the data
prevents me from doing so.
>> Well, speaking of the data, we have
jobless claims on Thursday. We have
USPCE on Friday. Does that move the dial
at all?
>> Yeah, look, I think I think inflation in
the coming weeks is very important. And
I think the more important is the CPI
one actually in in two weeks time. I
think non-farm payrolls given the large
revisions we had before really
important. We've got some more
adjustments coming up uh kind of
long-term adjustments coming up. So yeah
look I I think non-farm perils and CPI
are more important but obviously yes
even this week matters and Nvidia price
action is going to matter as well after
probably strong earnings.
>> Okay those earnings dropping late on
Wednesday. Bloomberg markets live
executive editor Mark Cudmore thank you
for the analysis. Of course, you
remember you can get up to date takes
and insight from Mark and the rest of
the team. Just go to MLIVM live go on
your terminal. Let's get some stocks to
watch right now with Louise Moon. Louise
standing by. What are you watching for?
>> Morning Tom. So the big story that we're
watching for this morning is Trump and
Wind, which Trump and Wind, which seems
to kind of never go away. And the main
one we're really looking at is the
Danish wind company Astid. So the the
news over the weekend is that Trump is
planning to halt work on one of Osid's
wind farms off the coast of America.
It's been in crisis mode essentially
since Trump came into office. So when he
first came in, shares slumped um again
in in around June when there was a a
change to tax policies and we're we're
expecting this could you know happen
again this morning down in pre-trading
uh in pre-trading this morning. Uh as
well as that on the back of that kind of
that news uh one company also cut its
rating on Austard. So if you take a look
at there at the analyst ratings most are
holding a few cutting and and even less
uh buying. So um cut by Clarkson's down
this morning. So that's the main one
that we're watching for. The next one
we're watching for this morning is JD
Pete the Amsterdam listed firm. They're
being bought by Dr. Pepper for $18
billion. If you look at their their
share price, they've been on a real tear
this morning. So, a good deal for Dr.
Pepper. Their coffee business has been
struggling. Um, and JDP has been
outperforming. It's been doing really
well, as you can see from their share
price. They're also expecting to do even
better going forward. So, they're
forecasting about a 1 to 3% growth going
forward. That's in profit and also in
adjusted EBITS. So, positive news for
both Dr. Pepper and JD. They're also up
in pre-market trading this morning. And
then finally, just the last one that
we're really focusing on, a quick a
quick note on two German lenders. So,
Uni Credit has boosted its stake in
Commerce Bank to 26%. Takes its overall
equity raise stakes to about 29%. Um,
both have been, if you look at a
comparison of both their share market,
their share price over the past year or
so, both been doing well. This was
expected, so we expect minimal reaction
this morning, but positive news uh for
Uni Credit there. Luis Moon walking us
through some of the stocks to watch. We
thank you so much. Of course, it is a
bank holiday here in the UK. So, the
Footsie is not trading. US Treasuries
are not trading and guilts are of course
not trading, but the rest of the
European market is open, although
perhaps going to see quite a bit of
light volume and light liquidity. We
should remind our audience though, Tom,
that the market did rally on Friday,
kind of following the lead of the states
as well. So, it's only natural to see a
little bit of a pullback when it comes
to the futures picture this morning.
within the context of course that you
had five straight days of losses for the
S&P 500 making up for some of that of
course on that rally that you point to
on Friday the NASDAQ performing very
well the Russell 2000 as well the small
caps rallying almost 4% but to Mark's
point we're not seeing a big pickup in
terms of the European equity story on
the back of this so it seems that there
is caution there in terms of the steps
ahead we look for the next data and then
where we go beyond September
>> absolutely and I think you in the last
hour had made the point that September
seasonality is going to be a massive
risk that perhaps the market is bracing
for the last few years 2024 aside have
not been a pleasant experience for
traders who have been pricing in some
sort of bullishness in September. So, do
we get that reality check as soon as
next month? That's something to be
discussing the next couple of weeks.
Coming up though, it is the opening
trade 5 minutes away. Futures, as we
said, taking a little bit of a breather
across Europe. It's a holiday right here
in the UK. Stick with us. Lots of
individual stories to dissect though.
This is Bloomberg.
A few minutes to go until the opening
trade. Now, the UK markets are closed
today, but the European markets are very
much open. And I think it's important to
look at the last 24 hours in trading
before we dive into the next 24. This is
how we ended Friday. This white line of
course is the stock 600. And you can see
them following that rally that really
got spurred by the dovish pivot or at
least what everyone interpreted as a
dovish pivot out of J. Powell over at
Jackson Hole. And the market stayed in
the green at least when it comes to
Europe and of course in the states which
means we're maybe set up for a little
bit of a pullback. You can see that in
the futures picture already despite the
fact that of course the UK market is
closed. It's an August Monday. It's a
summer August Monday in Europe. So,
light volume, light liquidity, and yet
the markets are pulling back, especially
when you go look at the DAX, Tom, down
about 610 of 1%. The underperformer of
the morning, at least going into the
trade, seems to be Germany.
>> Some of the individual stocks that we
can expect to possibly be on the move in
focus for us right now, wind stocks in
focus. this on the news that the Trump
administration has paused work on a key
project of course in that country
focusing onstead pre-market you're
looking a print of losses potentially
around 12% for also so that company is
in focus to some deal making involving
JD Pets of course listed over in the
Netherlands uh this is a bid by curig
Dr. Pepper worth about 18.4 4 billion.
So Pete, of course, good move on the
back of that story. And Ecuador on the
news that it's made a oil and gas
discovery uh near uh the Framlin field
in the North Sea. So watch Equinor as
well on that story, Chrissy.
>> Yeah, it's a fascinating one because
there's a lot of individual stories, a
lot of deal making that's happening
underneath the surface. Does it get
priced into this market though? We have
Unicret and Commerce Bank to watch as
well as we start to see a larger stake
getting built up into Commerce Bank. Do
we see that bubble up to the top?
Especially for a DAX that is so weak
this morning going into the futures
picture. Light volume, light liquidity
going to permeate this trading day.
Let's get these markets open. Of course,
a UK bank holiday right here uh in
London. So, worth keeping in mind that
of course you don't have the UK traders
at their desk, but the stock 600 we are
still properly waiting to actually open.
And again, light volume, light liquidity
seems to be the name of the day and
taking a little bit of time, I say,
after a little to actually open up. The
stock 600 taking a little bit of a a uh
I won't I'm not going to call it a
beating, but perhaps not a massively
positive open. The IBC's down about
4/10en of 1%. I think we can call that a
beating as well. Perhaps setting the
tone for some weakness across the
European markets. The footsy down about
4/10en of 1% as well. And the Kekron
down about 3/10en of 1%. I think the big
one that we're going to be waiting for,
of course, is the DAX. We'll let that
for a few minutes kind of bubble up to
the surface because going into futures
trading, Tom, that's where the pain
point was.
>> Yeah, look, counterintuitive trades on
some respects given that the markets had
not arguably been positioned for a
pivot, a doubbish pivot if that is how
we characterize it from Fed chair J Pal
of course on Friday. And yet you had
European equities close to and notching
up fresh record highs last week. So that
is part of the context. Maybe a bit of
profit taking and waiting for the next
catalyst. In terms of your sector moves
then right now you're seeing travel and
media the two sectors ekking out very
slim gains so far on the Monday session.
The downside the pressure coming through
for construction utilities and telecoms
right now losses around 4/10en of a
percent for those sectors every sector
in negative territory then apart from
travel and leisure and media. Travel and
leisure up just at 2/10en of a percent
critique.
>> Yeah it's a fascinating one that we are
actually seeing some spots of green
though. Sure there are places of relief
perhaps in this market when you look at
the individual movers right off the bat
again light volume like light light
liquidity is something we have to
preface in everything here nova Nordisk
is part of the members that are showing
a little bit of green on the screen
higher by 710 of 1% it is your biggest
index contributor to the upside but I
think that kind of movers screen on uh
movers graphic on your screen shows just
how maybe light volume and light
liquidity this actually is as well I
want to talk about seammens here because
that's where you are seeing quite a bit
of of pain in terms of the weight on the
stock 600. Seammen's energy down about
1% and again we are still waiting for
the DAX to open but this is perhaps one
of the stories uh that could be weighing
on the index as a whole.
>> We're watching for the wind companies of
course and you're seeing a print coming
through for Vestas down 3.8% again on
the news that the Trump administration
has paused the buildout of one of the
key wind turbine uh projects led
bystead. We're still waiting for a print
on Allstead and we know of course it'
been called lower by almost 12% but you
are seeing some of its counterparts
under pressure on the back of that
story. Some of the gainers coming
through right now we talked about Novo
but also uh delivery hero gaining uh
2.5%.
Uh that is one of the gainers across
your sectors. It's still just travel and
leisure and media that is eating out
gains. Of course the footsy 100 is
closed for the bank holiday but you're
seeing pressure over in France. car
currently down 4/10 and some heavier
selling as Christy was mentioning over
in Germany with the DAX down 510.
>> We're certainly going to watch and see
if some of this price action sustains.
In the meantime, let's get a true expert
joining us our program this morning.
Valerie Noel, head of trading over at
Seas Group joins the program. Valerie,
Tom and I have been debating this
concept of now that we've seen the
markets maybe embrace where Jay Powell's
dovish pivot is or maybe even feel a
little validated from him acknowledging
the possibility of a cut as soon as
September. Where does this market go
next? Is it all down from here whether
or not we get a rate cut in place? Your
view?
>> Well, I think uh first of all, thank you
for having me. Uh it's true that the
rebound was very powerful in US. You
know, 800 point for the Dow Jones, four
4% for the Russell 2000. But I think
it's more a relief rally um than you
know real pivot. I think people um need
to be in cautious mode until the next
Fed meeting. Um the Fed's going to watch
very carefully the the inflation data
and the job reports. So that's going to
be the the next step.
Well, as we Valerie, I'm just going to
put you on pause for one second. Just
recognize the fact that Orstead is open
and down really suffering down about
17%. A lot of that coming out of a
policy change over in the states when it
comes to their offshore wind policy.
Valerie, let me put that question to you
though when it comes to actually
interpreting policy decisions out of the
United States. We spent a good chunk of
this year talking about trade policy. Is
that still going to permeate the
conversation into the back half of this
year?
>> Well, we can really see um that every
time Donald Trump open his mouth there
is um something happened for the market
and uh we we still have these
uncertaintities on every sector and I
think we need to take one by one
everything will happen and I think the
market's going to it's going to move
around all the news we can hear uh
everywhere.
Valerie, as we think about the Fed and
what we've been hearing from J Pal and
the changes that the Trump
administration wants to make to this
institution, do you want to start to
price for a more dovish and a more
pliant Federal Reserve in 2026?
>> Well, I think you know for the Fed, they
got it's between inflation and the job
there is this thin balance. Um, you
know, they got this dual mandate. Um,
employment for the moment is weakening,
job creation creation is is slowing. So
the the Fed must act um before the labor
market deteriorate too too quickly. So
it's going to be I think as Joe Powell
said it's going to be step by step. Uh
he really want to be independent. He say
very uh loud. So it's its own process
but I think um it's a very difficult
time for them for the moment between
between the inflation and you know the
consumer need to need to spend money in
US but um we also have the tariff. So I
think there is a lot of challenge for
the administration of Trump.
>> Sure. I mean that that the here and the
here and now and the focus clearly is on
on the balance between the labor market
and inflation. But we've seen every
institution in the US be molded and
shaped to some extent by this president
by President Trump and his
administration. And it's hard to imagine
a world in which the Fed does not feel
that impact. And so I'm really trying to
get at whether or not 2026 really
rewrites the script in terms of this
central bank for investors.
Yes, I mean also there going to be the
change of power next year. So for sure
they got a lot a lot of pressure. Um I
think Christine Lagard was saying this
weekend that independent of of um
central bank is very very important and
um but I mean who knows? Um I believe
that next year yeah probably um you know
the administration of Trump will try to
involve it more and more and more on the
on the Fed. But um you know I think the
independent uh it's very important
everywhere in the world actually not
only in in United States but uh maybe
more in the United States than in Europe
for the moment.
>> Valerie you mentioned Christine Lagard
so it's only natural to dive into or
zoom into Europe a little bit more. It
feels like the bullcase of the last six
months at least when it comes to Europe
has one been US exceptionalism and the
perceived end of it. And the second
factor has been this massive expected
defense ramp up ramp up in fiscal spend.
If we do start to see a ceasefire or
signs of a ceasefire in Ukraine, which
admittedly feels far off at the moment,
or we even see some of these defense
contracts ultimately leaking to the
United States, how bullish can people
really be on Europe?
>> Yes. Well, um you know, even if also the
Fed's going to start to to lower the
rate is going to be uh for Europe and
well, you know, Switzerland, it can be
it can be also good for all our
exporter. But um I think we have this
productivity gap with United States. So
I think you cannot avoid uh US at all.
Actually at the bank we really like US
uh but you need to be diversified and I
think that's the word uh when you manage
portfolio you need to be diversified not
only US but Europe, Asia, China we are
also very positive on on the China
emerging markets and uh I think you the
big word is to be diversified and pick
up the the right sector.
>> Valerie, does the currency component
matter anymore? It feels like the dollar
has resumed its slide. I'm looking at
your dollar of 117 this morning. If we
can see continued weakness in the
dollar, is that a sign for global
investors to buy America or sell
America?
>> To keep America for sure. Uh but I think
uh you know for exporter for for Europe
it's it's also good. The demand will be
here but in another way you know you're
going to face this FX um um um um yeah
not issue but it's take it or leave it.
you you have a better demand, but then
you need to match with with your own
currency. So, I don't think it's a um
it's one one country or one um currency
um to the another one. I think you
really have to be diversified. Uh the
dollars is where it is. You know, it's
been really really down the first part
of the year. We had little rebound I
would say last week or 10 years ago due
more by edging position than uh than
having a bet of the dollars coming up.
And then obviously is the if the Fed's
going to lower the rate uh you're going
to have pressure on the US dollar.
>> How do you think about Nvidia's
earnings, Valerie? How are you
positioning around that? Is that the
next risk event for the for these
markets? Do you see that as the next as
the next catalyst? Are you convinced
that the AI theme has further to run in
the US?
>> Yeah, definitely. It's definitely the
the next catalyst, the catalyst of this
week, I have to say. So, it's Wednesday.
Um I think everyone is waiting. I don't
think you need to really avoid um you
know max even if the result are not what
what we expect. Um but maybe uh you know
what we do at bank seats it's maybe
watching a little bit more the S&P equal
weight than the S&P where the the
concentration of the max is very very
high and yes it's going to be definitely
um a very very strong um news for for
this week.
You touched on China, which I thought
was interesting because we had a piece
on the Bloomberg terminal today talking
about concerns around a bubble in China.
The Shanghai comp of course is up around
20% since April about a trillion dollars
in market cap being added across Chinese
equities and yet the fundamentals of
China remain strained. How do you play
that story? Do you want exposure to a
shares, eight shares or in fact
companies and corporates have exposure
to the Chinese market? How are you
thinking about playing?
>> We try to sorry um we try to avoid stock
picking. uh we like to trade via ETF or
fund uh quite diversified um same on
emerging market but uh for the moment we
still a little bit overweight on a on a
China and emerging market.
>> All right. Uh Valerie, talk to us a
little bit then about where the risk
event actually is. I mean we're talking
about Nvidia. I know we're talking about
these macro trends, but for you what is
the market underpricing right now and
not paying attention to?
>> Uh the overconfidence. I think the
market is reacting very very quick on on
on a lot of things and also you know
we've seen all these retail investor
they they put money since um in the last
16 week they they put one billion inflow
every day uh during 14 weeks so it's
just last last week uh they pulled out
140 million I think it was last last
Tuesday but just to show that the the
market is full of liquidity and I think
one of the risk is that if the liquidity
is going back what's really is going to
happen and we are coming in September
September in seasonality on average
normally the S&P loss 1% and normally
the the volatility is increased by 25%
in September so let's see if this year
it's going to be the same but I think
one of the risk is the this liquidity
who fuel this market uh what's going to
happen if the liquidity is going to go
down um it's going to go down
>> all right Valerie Noel head of trading
overseas group joining us this morning
for her insight ites. We thank you so
much. Let's get take a quick check at
some of the heavyweights that drive
Europe the European trade. The core six
of course the guy Johnson core six I
think fair to call it. Nova Norris is
going to be the highlight here down
about onetenth of 1%. It was higher and
it was your biggest index contributor to
the upside. So the fact that those have
gains have been paired fairly quickly in
just 12 minutes into trading I think is
fairly notable. Ryan Mattel fascinating
higher by 7/10en of 1%. ASML also
getting a little bit of a bid higher by
1 onetenth of 1% but the rest of this
market taking a breather. Let's get a
check of some of the individual stocks
also on the move. Luis Moon has that for
us this morning. Luis, hi Christie. So
wind is really being hammered across
Europe. So down in the red, we've got
Aust
and Vestas over 3% also in the red.
That's obviously after the Trump
administration cancelled one of Os's
wind farms off the US coast. Next up,
we're looking at JD Pete, Amsterdam
listed company. They're being bought for
about $18 billion by Dr. Pepper, up over
17% on that news. So, stock really
soaring, adding to gains that we've seen
so far this year already. Next up, we've
got the Swedish manufacturer T. They um
they've down almost 5% into the red this
morning. That's after they've been
downgraded to a sell from a hold. And
then finally, we're looking at Delivery
Hero. They are we'll have a look at
their price right now up over 2% into
the green. That's after that's ahead of
their earnings. Their earnings are are
in a couple of days on August 28th. So
some profit uh taking there.
>> Luis Moon, thank you very much indeed
from some of the stocks on the move.
Some big moves as well coming through
the deal making around GDPs as Louise
was saying and of course Allstead and
the policy uncertainty around renewables
out of the US taking a big hit to the
wind makers as well. Well, the wind
stocks of course on the back of that
story as Louise uh was saying. Uh so
Criti, we are broadly across uh the
benchmarks seeing a little bit of
softness with with the point as you've
made and you've stressed that there are
going to be slimmer volumes in the
session today given of course that the
UK is closed uh for for a bank holiday.
Nonetheless, it may be surprising to
some that European stocks are down 3/10
of a percent across the benchmark.
>> Yeah, it's fascinating as well because I
wonder how much of this just bracing for
the real action which is later this
week. It's coming from Nvidia earnings.
coming from the PCE data as well.
Perhaps that's why you see a little bit
of taking cash off the table ahead of
that seasonality we're expecting uh next
month.
>> Yeah. Is this a market that still wants
confirmation, wants the data to really
align with the gap that's been opened up
now by JPAL to really lock in as markets
price in 85% chance of a september cut.
Two cuts still being fully priced uh by
the end of of this year. Uh the ECB and
officials there particularly in the
hawkish end have suggested that they are
in no mood uh to cut again. The bar is
very high. European stocks currently a
little softer by 3/10. US futures S&P
eam uh 210 but after the rally of course
on Friday. Coming up the Trump
administration has halted work on
Allstead's offshore wind farm off the
coast of Rhode Island as Louise was
saying in another blow to the green
energy industry. We'll get more details.
It's been a turbulent time for Allstead.
Stay with us. This is Bloomberg.
Welcome back to the opening trade. About
18 minutes into today's session and
we're starting to see a little bit of a
weak risk picture. The stock 600 down
about 3/10en of 1%. The DAX is your
notable underperformer down to the tune
of about half a percent. The Karan down
about the same margin. Let's go to one
of the major stock movers that we've got
this morning. Shares of Orststead taking
a beating this morning, down some 17% at
the open. This all comes as the Trump
administration orders a halt to work on
Orstad's offshore wind farm off the
coast of Rhode Island in another blow to
the green energy industry. Let's talk
more about this. Christian Weinberg,
Bloomberg's breaking news editor, joins
us from Copenhagen. Christian, we thank
you so much for your time this morning.
Can you just walk us through what it
actually means for Orstead and the
industry?
>> Well, as you say, it's another blow for
the industry. There's been a lot of uh
bad news for the industry for a long
time. And uh this shows also how um to
what extent that the industry is still
vulnerable to uh the Trump
administration's opposition to wind
turbines. There had been some some hope
that uh the industry would be shielded
from the worst of this opposition uh by
at the local state level uh but this uh
presidential stop order shows that uh
Donald Trump will will go far in his
crusade against the the industry.
>> Yeah. I mean investors in this stock
have have had a wild ride, haven't they?
they've been whipsawed because there
were the tax changes that were seen as
beneficial to Allstead and you saw a
rally on the back of that after of
course the concerns about the Trump
administration now are reminded that
Trump administration has really very
little time for this renewable energy.
Uh all also confirming its commitment
with this planned rights issue that was
that was another element of course that
moved the stock pretty heavily a week or
so ago. What what do we know about the
confirmation today then?
Yes, this is a key for us to to to raise
money to to to bolster its balance sheet
and this this was as you said about two
weeks ago that they announced that they
would sell about 9 billion dollars worth
of shares and rights issue. Uh they're
saying today that they're they're
committing to go ahead with that plan
and crucial for them is that the Danish
state has has pledged that they they
should go ahead. The Danish state owns
50% instead. So so that's crucial for
now. The only thing is that with the
share price falling another what is it
16 or 17% today that rights issue is
going to be a lot more tricky than it
already was.
>> Christian how much should we be reading
into the broader renewable industry from
what's going on with Orstead right now.
Is this a company specific issue or is
this something that could be the canary
in the coal mine for Vestus and others?
Well, I'm I'm I'm sure that investors um
the turbine producer investors in in
their stock, they're also concerned this
morning. The shares also falling. This
will obviously have a ripple effect. Uh
there's also hope that the project will
still go ahead and that this is just a
bump in the road, but there are a lot of
bump bumps in the road for the industry
right now. Uh the Nordic region in in
Europe here is particularly hit because
uh because the region is home to a lot
of companies. some of them have have
gone gone under. You you might remember
Northwalt, the Swedish battery maker for
example, also part of the green
transition industry. So there's been a
lot of bumps in the road. Uh there's
also a lot of support though, a lot of
money uh flowing into green assets in
the past years. So uh but but it is a
challenging time for the industry.
>> Okay, Kristen Weinberg, Bloomberg's
breaking news editor. Thank you very
much indeed as we continue to monitor of
course the share price action for
Allstead and other players within the
wind space. Allstead currently down
15.6%
to a different story and very different
outcome right now because JDP is soaring
on the back of news that curid Dr.
Pepper is said to be close to a deal to
acquire the Dutch company coffee company
of course for about $18 billion that
stock up 17% right now as you can see.
Sources say a deal could be announced as
soon as today. Let's talk to Bloomberg
reporter Charlotte Hughes Morgan for the
details. Charlotte, what do we know
about this potential deal?
>> That's right. Well, in fact, I can tell
you that the deal has in fact been
confirmed. So, today um this morning, we
just had a release through um and Kurig
Dr. Peppa have um made an offer for JD
Pete. Um the offer values um the coffee
company which builds itself as the
world's largest pure play coffee company
um at 15.7 billion euros. that is around
$18 billion um dollars and this is a
really transformational deal for Curry
Dr. Pepper. In the release they say once
this acquisition has gone through there
are plans to separate um the company
into two publicly listed companies
traded in the US. So you'd have on the
one side a global coffee company focused
just on coffee with that addition of JD
Pete's kind of global coffee portfolio
and then on the other hand you'll have a
soft drinks company. So just focused on
non-alcoholic beverages including
obviously curry Dr. Peppers very popular
Dr. Pepper brand. So you're going to
have this huge transformation in the
company following um the closure of this
deal which is expected to close in the
first half of um 2026.
Well, Charlotte, can you just explain to
our global audience the logic of
restructuring the company to do that?
Why pursue that now?
>> It's a good question. And so, for
context, in 2018, you had a merger
between Kurig, the coffee um companies,
coffee side of the business, and Dr.
Pepper, which is obviously focused on
that soft drinks um unit. Um and since
then, the soft drink side of the
business has really been outperforming.
Consumer demand remains really strong,
but the coffee side of Curry Dr. Pepper
has struggled. Um, it's faced increased
competition. Um, coffee companies around
the world, and this includes JD Pete,
have really been grappling with record
um, coffee bean inflation. So, the price
of coffee has really been kind of going
through the roof. That's obviously
squeezed margins at coffee companies
around the world. Um and finally more
recently you have the impact of tariffs
which are obviously kind of increasing
the price of importing coffee into the
US. So the coffee side of the business
really been kind of struggling to
compete. There's lots of competition in
that market in the US. And so the
rationale behind this deal is basically
to add JD Pete's huge geographical
footprint. I mean they own brands like
Lore, they own the Pete's coffee brands,
they own Jacobs Eggbert. to add that to
the coffee side of the business, make
that into the world's kind of global
coffee player. Meanwhile, you have the
soft drinks part of the business and
that can really be, you know, unleashed
to soar without the kind of coffee uh
unit addition. So, the rationale is
really to kind of capitalize on the
strength in um the uh soft uh soft
drinks growth whilst making this kind of
coffee whale if you like of a company.
>> Coffee coffee whale of a company. One of
the stats that jumped out for me, 132
billion cups annually is what they claim
to serve uh JDE pets. So you're talking
through the restructuring there,
Charlotte. What what does it mean then
for for for JDE Pets?
>> Definitely. I mean, this is a really
interesting company. I it's Amsterdam
listed, but it builds itself, as I said,
world's biggest pure play coffee
company. Um, and in November, they had a
new CEO announced, Raphael Olivera, and
the shares have really been on a on
quite a tear since he joined. He pledged
to streamline the operations. He
divested some of the less um strongly
performing um parts of the business and
the tea side of things. And he's pledged
to kind of focus on the on the um key
brands. So, Jacobs and also the Pete's
coffee chain. So, really kind of focus
on optimizing the strength in their in
their markets. Um and before that
actually the the kind of the company was
was struggling you know IPOed in 2020 to
great fanfare. um raised you know a huge
amount 2.5 billion I think it was um on
its listing day really enormous listing
um but since then it struggled to m
maintain momentum so hopefully I think
the rationale is to kind of boost JD
pets by you know combining it with um
Kurig and hopefully this will create
this kind of global coffee company
>> all right Charlotte Hughes Morgan
walking us through the biggest deal of
the morning I think fair to say we thank
you so much coming up on the program
Right back to the commentary from
Jackson Hole. ECB's Nogle saying there's
a high bar for another rate cut. We're
going to get back to that conversation
next. This is Bloomberg.
Welcome back to the opening trade. 30
minutes into today's session, we are
seeing red on the screen. The
underperformer of course is going to be
in Germany. Sema's energy and SAP really
not helping the story for the DAX. But
you're seeing that weakness across the
board. A couple of deals to keep in mind
as well. We're looking at JD Pets. We're
looking at the curig Dr. Pepper bid
there. We have Orstead and some policy
changes there which has kind of been the
weight on the market this morning. But
the rest seems to be light volume, light
liquidity, maybe a pullback from the
rally, Tom, we saw on Friday.
>> Here's what else you need to know this
morning then as we look at that pullback
in terms of some of the geopolitics and
some of the questions around the tech
space. US President Donald Trump has
sealed a deal that has given the US
government a nearly 10% stake in Intel.
The move comes as the US administration
seeks to reinvigorate the company and
boost domestic chip manufacturing.
Canadian Prime Minister Mark Carney
visited Kev on Ukraine's Independence
Day, pledging support for as long as it
takes. Speaking alongside President
Vladimir Zalinski, Carnit said peace
with Russia must come through strength
and did not rule out providing Canadian
peacekeepers. Canada also announced over
$1.4 billion in military and
reconstruction aid. The Federal
Reserve's Jackson Hole Symposium was a
tense affair with chair drone pow
signaling an interest rate cut as soon
as the next policy meeting in September
despite clear divisions among policy
makers. The chairman noted the economy
has handed Fed officials a challenging
situation.
>> It's about balancing
really matters for for the public. And
so doing that balance, I would say it's
not a done deal in terms of what we do
at the next meeting. Um but a range of
of possibilities is on the table and
That's certainly one view from Susan
Collins, plenty of others across uh the
conversation with Bloomberg television
and radio on Friday in in Jackson Hole.
It's fascinating because you are seeing
that range of outcomes really widen. I'm
starting in a little bit of deja vu from
the conversation you have here even in
the UK or in Europe where not everyone's
on the same page when it comes to how
easy it is to interpret some of the
inflationary concerns.
>> And JPAL did leave himself some
optionality. I don't think you can read
into the statement and the speech that
he gave and think that if the data
doesn't align with the view that they
have the space to go in September that
he doesn't have the option possibly to
pause. Markets though are pricing in
more than 80% chance that they do go in
September. Our M live team Mark Cudmore
in fact Mark Crrenfield was saying you
should assume it's essentially locked in
at this point. We do have more deta
details in terms of the data coming
through though the PC gauge of course on
Friday and what we have on the labor
front US jobless claims and he talked
about the labor market being curious as
well in the US with softer demand for
workers but also weaker supply as well.
>> Are the markets doing the heavy lifting
here as as the Fed stays on the
sidelines? Are the markets driving the
charge? And I feel like I'm having a
little deja vu from conversations in
2022 where the markets started pricing
in hikes far before the Federal Reserve
did. But I am curious if that's what's
happening in terms of the real economy
effect that you're starting to see with
all these cuts kind of priced into the
market.
>> There was a read across as well. Of
course, in terms of what we heard from
central bank governors from other parts
of the world. We heard from Governor Aa
over in Japan. They have a very
different set of problems. Of course, an
expectation that maybe they go again
with a hike possibly in October. But we
also heard from the ECB ECB officials
Christristine Lagard giving a giving an
interview interestingly to US media. But
also Yokim Nagle clearly historically
traditionally on the hawkish end of the
spectrum.
>> Absolutely. And he stated that the
European Central Bank would actually
perhaps need a significant shift in
economic outlook to lowering borrowing
costs. Again, a complete 180 from the
governor. The governor, the president of
Bundesbank spoke to us on Eurozone
policies over at Jackson Hole. Take a
listen to what he had to say.
>> Germany has the capability to adapt to
different situation. I think the world
is changing. We are not happy with with
the current situation. So the trade
conflict and everything is definitely
not helpful. But at the end we showed in
the past our let me say strength to come
back and have a strong
>> post Trump. Can you and France and the
other leaders of Europe reaffirm that
growth that you that spirit of growth
that you had?
>> I guess we do something in the moment.
Uh we are going in the direction that
you alluded to. We have structural
reforms. We will do a lot of spending in
in new investments over the next year.
So I think we do a lot of things in the
moment and I can guarantee you that
there is a strong coalition on the
European side. Germany, France, this
axis is working again and so I'm really
confident that we can achieve a lot.
>> Given the fact that you could see some
sort of mild recession in Germany, are
you open to cutting interest rates
further after getting to 2% which is
sort of balanced? Is it appropriate to
become a little bit more accommodative?
>> Maybe a mild recession for this year.
Yes, this is true. But maybe we have
also to think about that next year
economic growth, there's a high
probability that economic growth is
coming back. When it comes to interest
rate policy, I believe that we are in a
kind of equilibrium. We have a 2%. We
are on our target. This is good news.
Interest rates are at 2%. So this is an
equilibrium. So I do not see so many
arguments. That brings me to the point
that we should do that that we should do
more here. So it it's something so I
believe that u inflation is not the
point anymore.
>> Inflation is not the point anymore that
now it's potentially
>> we are on our target
>> but this is the issue. If inflation is
not the issue at what point do you see
risk of disinflation given the fact that
the euro has been strengthening right
that's importing disinflation. you have
the potential for uh Chinese uh goods to
be coming into the European region.
Cheap Chinese cars, that's sort of the
cliche that could lower prices. At what
point are you going to be fighting
disinflation again?
>> Well, it's definitely not time for
complacency. So, taking for example um
service inflation is still very high.
It's above 3%. So, we have to we have to
have this wait and see attitude. So this
meeting to meeting approach is I guess
the best way to do monetary policy in
the euro system. When it comes to our
September meeting, we will get new data,
new new projection and then we will see.
But at the moment if I take all the
numbers that I know PMI numbers I think
not giving me enough arguments to to
change the to change the price.
>> How high is the bar to cut?
>> I think the bar is high and so it needs
a lot to convince me to change monetary
policy.
ECB governor and Bundesbach President
Yokim Nagel speaking to Bloomberg's Tom
Keen and Lisa Abramovich. So Jerome Pal
of course sending the US bond market up
on Friday by telegraphing the Federal
Reserve could resume reducing interest
rates as soon as next month.
>> The stability of the unemployment rate
Let's bring in Ven Ram, cross asset
stratus for our markets live team. Ven,
do the markets have clarity in terms of
where this Fed goes beyond September?
>> Morning Tom. I do think that the Powell
was pretty unequivocal. So yes, the
answer to your question is yes, the
markets certainly have a sense of where
where the Fed is going and I think that
you know what power messaged to on
Friday was that look the Fed is prepared
to cut rates because they think that it
is pretty restrictive and given the July
inflation print for unemployment. I
think that the Fed wants to pivot again
just as it did at Jackson Hole last
year. So I think that what that means is
two rate cuts for for the remainder of
the year. But what the markets are not
clear about is what happens in 2026 when
we get a new Fed chief and possibly one
who is going to be a lot more doubbish.
And we heard from James Bullard that
they could get 100 basis points. So the
markets are thinking that look we get
two rate cuts this year and 80 basis
points of rate cuts next year. And I
think that the markets are clearly
underpricing the risk that the Fed could
take rates a lot lower than where where
it is indicated by the U where is
indicated by the neutral rate by the end
of next year.
>> Well, then what does the pricing around
disinflation in 2026 actually look like
then? If the market is this split on the
risks going into next year, what are
they pricing?
Well, I think that there is a bit of
mispricing in the steepness of the curve
criti because I think that you know as
as I was mentioning that there there is
a lot of risk that the Fed will go a lot
faster next year in terms of rate cuts
and that will keep the front end send
the front end rallying. we've got the um
two stance curve basically at 50 bo 50
basis points now and I think that that
that curve has room to steepen because
on the one hand there's got this
inflation you've you've got this
inflation that is kind of sticky around
250 we are we are well past the world
where it's going to go back to 2%
anytime soon so I think in a world where
inflation is sticky and the Fed keeps
cutting rates willy-nilly I think what
you get is a steeper yield curve and
that's what the markets are missing at
the moment.
>> What does that steeper yield curve mean
for the US dollar then? Are we back in
an environment where we're selling the
dollar?
>> Well, I think that the you know the the
pronounced selling of the dollar is kind
of over and I was looking at my model
this morning and real based on real
interest rate differentials between the
major economies and what it shows is the
dollar is kind of converging back to
where it ought to be trading. It is
still trading at a discount to fair
value, but the deviation from fair value
is not as sharp as it used to be. And I
think that the markets are thinking that
look, the US dollar can still weaken,
but the the margin of deviation from the
fair value has narrowed and that shows
that the markets are just hedging the
risk of a weaker US dollar that they are
not thinking that the US dollar is going
out of fashion and that's the key
takeaway for the markets.
All right, Ven Rum, cross asset
strategist for Bloomberg's Markets Live
team. We thank you so much. Giving us
his analysis of course this morning on
the back of what we learned in Jackson
Hole. We thank you so much. I'll shift
the focus here to what's going on in
Europe and more specifically in
Brussels. European Commission President
Ursa Vanderion has defended the block's
trade deal with the United States,
arguing that it brings stability and
avoids escalating tensions with a key
ally. Joining us now is Bloomberg's
Brussels Bureau Chief Suzanne Lynch.
Suzanne Bunner line is still being
forced to defend this agreement. I
thought we were we were all in the clear
that stability was a good thing. Just
walk us through the criticism she's
getting.
Yes. I mean the very fact that she was
moved to publish this in a German
newspaper over the weekend is
significant. Germany one of the biggest
exporters to the United States in Europe
and a lot of unease there in that
country about the terms of that deal and
particularly what it means for the car
industry. So yes, I mean the European
Union had struck this uh verbal
agreement with Donald Trump in Scotland
back on July 27th. Um and then last week
we saw finally a a five-page document, a
joint agreement setting out on paper uh
the terms of that agreement. Now there
are still some unfinished business if
you like in that agreement, most notably
on cars. So that higher rate, that 27.5%
that's been charged, that tariff on
European cars going into the United
States, that is still in place until the
European Union introduces its own
legislation um to cut tariffs coming in
from the United States. That hasn't
happened yet. EU officials are saying
it's confident by the they're confident
that by the end of the month they will
and then that will be backdated till the
1st of August. But in the meantime,
those European car exporters are still
paying that higher, much higher tariff
that's costing hundreds of millions of
euros uh each week, each day uh here in
Europe. Um but as we heard there from
European Commission President Vander
Line, she believes this was the best
deal that could be done and that was her
setting out her stall over the weekend.
And Suzanne, given the criticism then
that you've outlined from from some
national uh politicians across the Euro
zone to to this deal, how likely it is
or is it that it's act that it's finally
it's it's got to get passed? It's got to
be rubber stamped or at least it's it's
got to go through the voting process
within parliament within EU parliaments
is is there a risk that the actual deal
gets gets derailed?
>> Yeah, I mean you're right. It's very
complicated when it comes to the
European Union because it's not one
country. It's a collection of 27
countries. Now, trade is the competence
of the European Commission. It is
negotiating if you like on behalf of all
the countries. But yes, there are some
hurdles. But in saying that, I think
people are very confident that this will
get through uh the systems and it's just
a matter of you know dotting the eyes
and crossing the tees. And the European
Union did get some concession in that
the Trump administration agreed that
they would drop the tariffs after the
commission presents the legislation, not
until every other step is finished. So
that will happen quite quickly. So
they're quite happy about that. In
saying that, I think there is a concern
in Brussels and all over the world about
the terms of these agreements that the
United States is is signing up for. So
for example, you know, some of the
language there we see like you know the
European Union should be covered by the
15% rate for example when it comes to
pharma uh and semiconductors. I mean the
Europeans are very happy with that. Of
course, they they are very they're
pointing out uh that Donald Trump has
has threatened all kinds of things on
pharma imports into the United States,
but under this agreement at least, it's
saying that the European Union will be
protected from that and this will fall
under the 15% ceiling. Um but yes, I
think there's going to be still a bit of
uncertainty until this actually gets
through that system and that these uh
new tariff regimes are in place. And of
course, there are other unknowns there.
For example, on steel and aluminum,
still not a deal on that. the Europeans
will probably be be part of a broader uh
strategy on steel and aluminum looking
at the issue of over capacity along with
the United States. So those uh
conversations are still ongoing as is
wine and spirits. Wine the wine sector
was not included in this deal. France
and Italy are not happy about that. The
European Union said last week it will
continue to lobby for something on that.
So let's see if they do get that over
the coming weeks and months.
Suzanne, speaking of some of the push
back and criticism that Ursula
Vanderline is facing, Mario Draghy, a
very prominent voice of course here in
Europe and around the world, making his
kind of feelings quite clear about not
only the trade deal, but the European
defense ramp up that's largely getting
leaked to the United States, which is
again something he warned about in his
in the Draggy report. Just how much
weight do those comments have?
I mean the comments of Mario Draggy are
are important. Former Italian prime
minister, former governor of the
European Central Bank and he has long
been warning about the fundamental
structural issues facing the European
economy. This issue about
competitiveness um and this issue of
lack of a firepower if you like when it
comes to the EU's industrial policy and
innovation. Now crucial to this is the
long uh weighted capital markets union.
this idea that the European Union needs
to integrate more in terms of capital
markets in terms of banking union as
well. Um but to be quite honest I mean
that has not been a focus for the
European Union over the last 6 months.
This has been a European Union in
something of a crisis mode as it
responds uh to some of the policy
developments coming from Donald Trump
notably on trade and secondly of course
on defense. Now the European Commission
here would say look it's doing a lot
more on defense. it announced this 150
billion loan program known as safe and a
number of countries um more around 20 or
so countries have applied to participate
in that. So it says it's already um
making efforts on those fronts but
ultimately a lot of those decisions on
defense etc will come down to individual
member states individual count's budgets
and as we know a lot of those budgets
are under pressure. So the big question
is how they're going to finance this.
How are they going to continue financing
this need uh for more spending on
defense
>> stuck between a rock and a hard place.
Bloomer Suzan Lynch, we thank you so
much walking us through the dynamics in
Brussels. We appreciate your time this
morning. In the meantime, let's get a
quick check on two of the major stocks
that we are watching. I'll start with
the Dub Downer stock and that is Orstead
down about 16% in intraday trading. This
comes after a policy decision out of the
United States. Donald Trump halting a
wind project in Rhode Island for Orstead
that neared completion to the tune about
80%
and this of course comes after Orstead's
already been facing quite a bit of
pressure. The selloff continues down by
16% this morning.
>> Can I give you an interesting fact about
JD Peaks before we check the share
price? Will you see the share price?
Look, it's soaring uh 17 and a half%. JD
Peaks historically goes all the way back
to 1753.
>> Oh,
>> 1753. It's a global coffee chain
operates in about 100 different
countries. This is a takeover deal. Then
it is Dr. Pepper coming in with an offer
18 billion. It's been confirmed. 18
billion US about 15.7 billion uh euros
then is going to be 3185
per share and JDP of course soaring on
the back of that news up 17.4%. It's all
part of a big revamp around the coffee
business and the drinks business of
curig Dr. Pepper which has been
struggling. So buy JDPs for 18 the
equivalent of 18 billion US dollars.
>> Talk about a sugar rush or a caffeine
rush if you will. Coming up on the
program, we're going to talk about the
other stock that may be getting a lot of
momentum this week. And that of course
is Nvidia. Those earnings coming up on
Wednesday. We're going to dive into
what's next, what to watch, and what the
ripple effects of this world's largest
company actually is. Stick with us. This
is Bloomberg.
Welcome back. US President Donald Trump
has sealed a deal that has given the US
boost domestic chip manufacturing. Let's
get the details and bring in Bloomberg's
Rob Lee. Rob, tell us about the shape of
this deal, what do we know in terms of
the government's stake in Intel now
being confirmed.
>> Okay. um in monetary terms the amount of
money being injected or what has been
injected by the US government or I
should say in terms of external share
purchases approximately matches uh what
was promised by the Biden administr
administration under the chips act. So
first of all I think that's quite an
interesting observation. So in theory,
assuming this this helps uh Intel on its
journey to turn around over the medium
term, at least the US taxpayer stands to
get some sort of financial return
assuming this turnaround plan happens.
But I suppose what it does prove from an
Intel perspective and to the market as a
whole is this is a an endorsement uh you
know strong uh signal of the the backing
endorsement uh in Intel from the US
government and really signifying that
this company is too big to fail which is
an expression for those with long enough
uh memory is something probably we
haven't heard since the financial crisis
of 2008 but looking forward obviously
the CEO of the company has a humongous
task ahead of him uh in terms of
restructuring the company and also
putting it back on the growth path. And
just very quickly quoting some numbers
for you, not even looking at this year's
earnings forecast, but into next year's
consensus is downgraded or downwardly
revised the earnings estimates for Intel
by 83% since the beginning of January.
So the earnings outlook for the business
has deteriorated significantly uh year
to date.
All right, Robert Lee, we'll leave the
conversation there on intel. We thank
you so much. Senior analyst over at
Bloomberg Intelligence. I want to stick
with the chip space, but maybe broaden
it out to the geopolitics as well. South
Korea's president is set to meet with
the US president in Washington later on
later on today. Ahead of his trip, he
met with Japan's prime minister as the
leaders seek stronger cooperation with
the United States. Let's get more from
Bloomberg's East Asia government editor,
John Herskovich. Uh John, just walk us
through what we can expect from this
visit.
Uh, sure. So, it's um Lee Jam Young
first visit to Washington to meet Trump.
Only been in office a few months. We're
going to see things that include the uh
trade tariffs that have been put on his
country quite similar to Japan. He
talked about those tariffs when he
visited Japan ahead of the trip to the
US. And also, we're going to see things
like North Korea and China be part of
this. Um, North Korea always has a way
of making its making a way into these
sorts of meetings. The US has talked
about strategic flexibility. This term
refers to allowing the US troops who are
stationed in South Korea be deployed in
case there's a contingency in Taiwan.
There are other things that are going on
as well from ship building to autom. But
it's um high stakes. Trump is asking a
lot and it's very difficult to manage
what Trump may be thinking. So Lee Jung,
Lee Jim Young's first trip to meet Trump
and he has a lot that he has to be
concerned about.
>> John Herskov, Bloomer's East Asia
government editor, giving us a preview
of this highstakes meeting. We thank you
so much for your time this morning. It's
fascinating there, Tom. He was talking
about the shipping industry, the defense
industry, really creating a unified
front in the Pacific as these trade
negotiations with China are ongoing as
well. One piece that he didn't quite
mention was the chip sector. South Korea
has this massive burgeoning chip sector.
We know that Intel, we know that Nvidia
are dealing with these geopolitics as
well. I wonder how much of that gets uh
some feedback, some commentary on not
just from the meeting today, but Nvidia
earnings on Wednesday
>> and and to what extent, you know, you
may be thinking if you're an executive
of Samsung and a recipient of some of
the chips act funding, whether you're
thinking about a Trump administration
that's just taken a 10% stake in Intel
and what that means for your prospects.
The other takeaway, of course, is that
Japan and South Korea are coming closer.
China and India trying to repair their
relationship and that is a clear
takeaway from a Trump administration
that has of course upended some of the
geopolitical narrative that we've been
so used to.
>> Yeah, the economic lines certainly being
drawn. You have to kind of overlay with
all the geopolitics. The Russia exposure
seems to be a key question coming
between all the four countries uh that
you just mentioned. When you look at
these markets, it is a riskoff day, but
light volume, light liquidity permeating
throughout today's session. We'll see if
it picks back up later in the week with
Nvidia earnings and some of that data
throughout the rest of the week. Jobless
claims, European inflation, PCE, we've
got it all for you. Stick with us. The
pulse is up next. This is Bloomberg.