Good morning from London. I'm Anna
Edwards alongside Guy Johnson and
Chrissy Gupta. We're an hour away from
the opening trade. Here's what you need
to know. Donald Trump moves to fire Fed
Governor Lisa Cook over allegations she
falsified mortgage documents, but Cook
refuses to quit challenging the
president's authority to remove her.
Meanwhile, the US president is
threatening fresh tariffs and tech
export restrictions, taking aim at
digital services taxes that he says
discriminate against American tech
giants. Plus, we watch French bond
markets and stocks for a second day
after Prime Minister Franis Beu calls a
confidence vote that could topple the
government as soon as next month.
>> In the meantime, a quick check on these
markets. Risk sentiment starting to look
a little bit soft. The futures picture
certainly weakening down by 3 tons of 1%
on Euro stocks 50 futures. Footsie 100
right on its heels down about the same
margin. We did see a bigger move lower
in the dollar. It seems to be pairing
some of its losses from earlier in the
session. 116 on Euro Dollar 134 on
cable. The countdown to the opening
trade starts right now.
Tuesday morning, the president's going
to fire Lisa Cook. That's the objective.
That's his aim. The markets seem to be
shrugging their shoulders this morning,
which I think is quite curious. You
would have thought this would be a
massive moment for the Fed, for the
government, for the US dollar. None of
it. You've basically got a a a dollar
that has recouped most of the losses
that it saw overnight. You got equity
futures that are going nowhere in a
hurry. Bond markets barely blinking. I'm
quite surprised by all of this this
morning. I this is this feels big. Yeah,
but it isn't.
>> Well, yes, it isn't. But if you squint
the other way, you can see a little bit
of market impact. I mean, the dollar
index is down a tenth of a percent. We
do have a bit of steepening in the
Treasury curve. I take your point. It's
not as extreme as perhaps you might have
expected it to be if this were the first
time we'd heard about this. But maybe
this is because this story has not
played out. This is not the end, is it?
I mean, we've heard from Lisa Cook
overnight. She's put out a statement
herself, fire her legal team, saying
that she disputes disputes President
Trump's authority to fire her. She's not
quitting. She says there's no cause. And
we we all know that if if he wants to
get rid of someone from the Fed, he
needs to have cause. Bloomberg
Intelligence, their litigation team
offering some interesting analysis here,
saying that she can challenge and in
their view, she could win a challenge.
Saying that Trump would need to show
actual wrongdoing without an
investigation. That is very difficult
for him to do. and to get through an
investigation would take a long time.
Possibly missing any February 2026
deadline if that is what he's trying to
do. Reshape uh the Fed ahead of that
2026 uh uh date when a number of terms
of course are up and certain Fed
governors will need replacing. But we do
see to guy's point not extreme market
reaction but maybe a little bit at the
margin.
>> But I think maybe the initial shock is
is still worth mentioning because we are
now seeing a pattern develop when it
comes to how the White House is viewing
the folks at the Federal Reserve. But
maybe because this is yet another data
point and a pattern we already knew was
established, perhaps that's why we're
seeing this pair back. From actual
policy implication, Anna's right. The
the legal implications and the
investigation that the DOJ has opened is
likely to take some time. The DOJ is not
known for a speedy process.
>> The market's assuming that Trump's going
to win though. And we we heard about
Lisa Cook a few days back. Market price
it in. Then we've now got him
effectively pulling the trigger on this.
The market is assuming that ultimately
he will get his way. He will get to
impact the the Fed. I how where we go
from there I think is is a more
interesting debate but we are getting a
big market reaction around this.
>> We're not. But to your point though the
market if the market is assuming that
Trump wins then the market is pricing
higher yields at the longer end and that
can be seen as a reflection of maybe him
having some success or at least
threatening to to have some success over
the Fed and to limit the Fed's
independence.
>> Absolutely. That's something we're going
to talk to our market guests throughout
the hour about in terms of what the
trade actually looks like in terms of
processing this information. We have
another threat coming out on the trade
front when it comes to where Donald
Trump is thinking this time on digital
taxes which I kind of thought was a
closed case. If we had 15% I know I say
that I completely eat my words. We had
15% on the EU established that that was
hitting autos and pharmaceuticals as of
last week and we saw that market
reaction now reopening the story of
digital taxes and we know this has been
a real sticking point not just with the
EU with the UK with Switzerland with
Canada. Carney last week had pulled down
uh some of the digital taxes as an olive
branch to Washington. It's not really uh
getting much reprieve when it comes to
Donald Trump. I had to look up some of
these rates. We're still at about 7% in
some parts of Europe, 3% in France, uh
Spain, 2% right here in the UK. I'm just
not sure anything can be done about it
if this is something that goes through
the courts.
>> Again, is the takeaway here that that
the president wants a trade war? I we we
had a deal. We thought we had a deal.
No, no, no. No, we we don't have a deal.
We're going to start with another
another angle on this
>> and we're effectively going to put
>> everything back on the table because
>> the theory has always been that if if
things are left unresolved then the deal
isn't ultimately done and we're back to
arguing about digital taxes and he's
talking about export restrict. I this is
not a done deal.
>> Yes. Maybe the first eight months, what
are we first eight months or so of the
trade war has been all about goods and
maybe we enter a new front. there's a
new front here around services and
that's that's what President Trump is
opening up. We'll watch European tech
companies as a result of this. Um but
but it's interesting that the Europeans
did say specifically um they spelled out
after the trade deal was arrived at uh
around goods that digital services were
not up for discussion. They were not on
the table and some of our reporting
making the point that there are lots of
things still unresolved about the trade
conversation and maybe Europe is still
keeping this one up its sleeve to play
when it wants something else on drinks
for example which is still unresolved.
as say something that affects the French
market notably.
>> The French market's going to be
interesting today. It was interesting
yesterday. So the sell off in bonds came
late in the day which I thought so so I
think we're we're still factoring some
of that in this morning. So it's going
to be interesting in 24 minutes time to
see exactly what this open is going to
is going to look like. Macron's given
the the green light. Parliament's coming
back early. We're going to have a vote.
Um looks like it's going to be on the
8th. Are we back to French politics
being unstable? What are the
implications of that? He This is about a
a spending build which he's struggling
to get through Beirut.
The market's already pricing France at a
discount to the rest of Europe at this
point in time versus where it was a year
ago. Basically, since the snap election,
we we've been in a position where French
bonds have been gradually weakening
versus their peer group. And certainly
peripheral Europe has had a much better
time of things than the French
government than the French uh bond
market has. But again, where does this
are we heading for at some point a big
blow up? So you've got the UK at the
moment and you've got the French bond
markets. Both of those, every time I
talk to an investor about both of those
two markets that there's this risk
hanging over both of them. The UK could
blow up. You got a fiscal problem
emerging. You could see a trust-like
moment coming through. Are we going to
see another French political moment that
causes constonnation and has a ripple
effect across Europe as well?
>> Right. And of course the the comparison
the market is watching right now when it
comes to France's Italian bonds and
working out whether watching to see
where the French yields go higher than
Italy that seems to be there's eight
basis points as of yesterday's close
between them. So we'll watch in 23
minutes time whether that changes. You
mentioned the bond market sell off came
late in the day. The karant sell off
came late in the day as well and we
ended down 1.6%. So this is something
that is sticking to markets perhaps took
some people by surprise. We have much
more liquidity in markets here in Europe
today. You the UK was out yesterday and
that makes a difference to liquidity
across the region. So we'll watch of
course and as Tom was making the point
at the end of the last hour if all the
parties do what they say they have will
do in terms of voting against Beirut
then he's gone. So we'll have to read
between the detail between the lines get
more nuance explanation from Paris as to
whether that is exactly what's going on.
>> Do you remember how long it took to find
to form the Bayou government to find
somebody that would actually take the
job? Is are there other names being
talked about? I it is a struggle. Are we
heading for snap elections and what are
the implications of snap elections? you
bring Marine Le Pen, what's happening
around her back into the like so much
could erupt in France at that point.
>> Yeah. Or Jordan Bardella if he ends up
taking taking that spot. Uh or or else I
think the other piece of this as well is
that after September 8th, which is the
no confidence vote, the budget was due
to hit parliament. I think October 1st
was supposed to be the date. So you
basically have four weeks in theory to
find an alternative. Uh which as history
suggests doesn't really work. Well, it's
hard to do and the names on the list are
getting shorter and shorter. Um, Robert
Dish is going to join us very shortly.
He'll be interested in all of this from
Yugo Newberger Burman. He's a senior
portfolio manager for multi- sector
fixed income and head of trading for
London. Wow. Kit Jukes, Sockgen, chief
FX strategist. That's easy to read. Uh,
Kieran Ganesh, UBS, Global Wealth
Management, Chief Investment Office,
Multi-asset Strategist. And Ollie
Hansen, Saxo Bank, head of commodity
strategy. Again, quite easy to read. a
pretty a pretty great all-star lineup.
We'll talk about some of the data that
we're watching throughout the day. Of
course, all day though, uh Mark Carney
is in Germany. He's continuing his
European tour there. I think we're
expected to hear from him uh later this
morning. So, we'll keep an eye out on
those comments. We also getting comments
from the ECB's Villoy speaking in
Bordeaux. Those comments hitting the
wire at about 11:45 UK time. And then
the focus shifts over to the states. We
have US durable goods at about 1:30 UK
time. and that conference board consumer
confidence whether or not we see uh you
know people looking through some of the
tariff trade recession uncertainty
>> the indication if you look at the umish
data the indications are maybe actually
the consumer is getting concerned and
you can certainly see that maybe you
could argue in the good good Walmart
numbers that we saw a few days back and
kind of what they're telling us about
what the consumer is doing as well what
else you need to know this Tuesday
morning let me tell you President Trump
has insisted that South Korea stick to
its terms the terms of its recent tariff
agreement including hundreds of billions
of dollars of investment in the United
States despite lobbying efforts uh by
the Korean president during this is
happening during their their first
in-person meeting that has been taking
place at the White House. Uh during the
visit, Trump also said he'd like to meet
the North Korean leader Kim Jong-un this
year. This as South Korea's president
floated the idea of constructing a Trump
Tower in the reclusive country uh if
diplomatic relations improve.
Uh let's talk about what else the
president has been saying. President
Trump says Vladimir Putin's personal
dislike of Ukraine's Vladimir Zalinski
uh is stalling a meeting between the two
leaders. The White House has previously
said it believed Putin agreed to a
meeting with the Ukrainian president and
that uh it we are seeing some planning
underway. Uh but the Kremlin never
confirmed their commitment and no summit
has yet been scheduled.
>> That was not easy for him to go to
Alaska, you know, for him to come here.
But the fact that he uh he showed up on
a very successful day, it was a very
successful day for other things because
you know we're also talking about um
missiles, nuclear, we're talking about a
lot of different things. We're talking
about uh limiting nuclear weapons. We'll
get China into that.
It's interesting. That's where the
president is putting the focus.
Paulstead shares fell to a record low
after the Trump administration block
construction of an almost finished
offshore wind farm, throwing a wrench
into the Danish company's planned $9.4
billion share sale. Allstead's
management will meet with investors and
advisers in London today to reassure
them that the planned rights issue will
go ahead despite the growing crisis.
In some ways also they had made a
massive mistake by basically announcing
the rights issue and leaving a huge gap
between the announcements and the
reality of that. The risk was therefore
that you were going to see more bad news
being priced into the stock that that
was going to get more and more difficult
and we are now seeing that happen.
It is a much more difficult position
that allsteaded now finds itself in
versus where it first announced that
rights issue. Yeah. And you do wonder
how much if the stock was to fall much
further, how viable that rights issue
would actually be.
>> Yeah. And they're going to talk to
investors about that very subject today
and overnight we heard from the Trump
administration then Christy that they
are suspending development of another
wind farm offshore. Now this one is not
80% complete as the Olstead one is and
it's also of less relevance perhaps to
European stocks but still it's part of a
series. This is in Maryland. is
developed by US wind, but it's yet
another of the of the wind farms that
President Trump is taking issue with.
>> Yeah, this is going to be a sector
crucially to watch at the European Open.
Do we see a rebound Orstead shares for
example just given the massive hit that
it took, but also the ripple effect into
the broader uh wind sector? Of course,
is there an Orston specific story or do
you see it show up in the likes of
Vestus and Nordex?
>> Yeah, and also was down 16% yesterday.
Coming up on the program then, Puma
shares make their biggest gains in over
two decades after attracting interest
from the Pino family. Uh we will see
we'll see if the rally continues today.
Uh um we'll get a few more details on
that story. In fact, uh plus credit
remains three times less volatile than
government bonds. We'll dig into the
tightness in the market. Up next,
markets are reacting to Donald Trump's
move to fire the Fed's Lisa Cook. Uh
we'll have the details of that. If you
have any questions, if you want to get
involved, uh have your say on any of
these stories, then please use the
function IB plus BBTV go to get in touch
with the team that puts together the
program. This is Bloomberg
about 43 minutes away from the opening
trade. You are seeing red on the screen
European futures pulling back quite a
bit. Euro stocks 50 futures down by 610
of 1%. We were seeing that pain across
the board. One of that might just be a
risk sentiment story that continues over
on from yesterday. President Trump has
moved to oust Fed Governor Lisa Cook
following allegations that she falsified
mortgage documents. But Cook pushing
back saying she will not resign and the
president has no authority to make her
do so. Her lawyer saying they will take
whatever actions needed to prevent the
move. Bloomberg's Balage Pence joins us
now for the latest. Balage, just walk us
through where we go again from here.
What happens next when it comes to this
dispute?
>> Well, what we've seen is a pretty
dramatic escalation of Donald Trump's
attempt to control uh the Federal
Reserve's policy and the direction of US
interest rates after a pretty prolonged
pressure campaign, a war of words, if
you will, his move to take direct and
quite unprecedented action. Now, of
course, Lisa Cook is pushing back, and
in a pretty fiercely worded statement to
us, she said that she's not stepping
down, and she doesn't think the
president has the authority to fire her.
So, now it's likely that this is going
into litigation. And the litigation is
going to center on the question whether
the president had calls uh to fire Lisa
Cook, whether that was established the
grounds for that firing. And in the
meantime, Lisa Cook says she wants to
stay on the board. She wants to continue
serving. And that will be a different
question that will likely require a
different uh court decision to decide
whether she can do that or not. So
whatever happens, we are in for a period
of uncertainty and more questions pile
up, not the least being the direction of
US interest rates.
>> Yeah, Bales, let's let's linger on that
point, shall we? A moment. What does
this mean for the direction of Fed
policy? I suppose it will it will be
dictated by whether President Trump is
successful and if he is how quickly but
also whether it has some kind of
chilling effect on the rest of the the
FOMC. What are we hearing?
>> That's right. All of those are very
important consideration. I mean look
when we look at September the market
seems quite convinced that there is a
rate cut coming especially after Jackson
Hall. But if we look further out, what
we see in the steepening of the yield
curve, it does suggest that there's a
lot more uncertainty coming in. And if
there's an extra opening on the Fed
board if Donald Trump gets to nominate
one more person, that might just tilt
the balance on that board, four to three
in the more dovish side. And that's
certainly something that the president
would welcome. So you might uh you might
be forgiven uh to assume that if that
does happen, US rates might be heading
lower or more quickly or or headed down
more quickly than previously assumed.
>> Yeah, front end rates. Bel, thank you
very much indeed. Bel Pence joining us.
Bloomberg news desk editor. Thank you
very much. Robert Dishner, senior
portfolio manager for multis seex fixed
income and head of trading for London at
Newberger Burman joining us around the
table this morning. in some ways not
much of a reaction. Is that the right
reaction?
>> It sort of is just because there's a
couple different pushes and polls,
right? We have the France news that that
you were talking about earlier. So, you
have you have the the French elections
on the second side, but also we got that
positive SIBO uh blog post on Friday
suggesting that that the the deficits
might be lower in the US. So, two things
that absent that maybe we would have
seen a bigger market reaction. The other
part of it is the market's also been
trading in a bit of a range. Is this
going really going to happen? Yeah. Or
is it not going to happen? Um and so
you're you're sort of left with a bit of
a risk arb type dynamic in the market
where it doesn't want to get too far
over its skis one way or the other.
>> It seems the market's struggling to push
the 30-year beyond 5% at the moment. I
and I keep looking for catalysts to to
kind of get us there and and each
catalyst we seem to fail. Do you think
we get beyond 5%? If we don't get beyond
5%, do we see a material impact on the
dollar?
>> Right. Well, that's a that a great
question. I mean, we've been struggling
to see the the market break 5% and
that's been a bit of a line in the sand,
particularly for some foreign investors.
We've seen some money money come in when
when rates get that high. Now, if we do
break, what what does it does it go to
five and a half? Where does where does
it where does it end up going to? So,
part of it though is that that yield
curve steepening that that you've been
noting. And frankly, the front end's
been doing some of that heavy lifting
and and that's really on the idea that
we're going to get greater Fed cuts, you
know, in line. We had been September,
December. We're now thinking that that
October's in play as well in terms of in
terms of rate cuts. So, so a lot of that
steeping is really the heavy lifting
coming from the front end where maybe
that that back end does stabilize around
that 495%. Well, a lot of that
steepening or at least there's even the
rise on the back end is coming from
worries about the debt ceiling and and
re rehashing an issue that uh really
spooked the markets as it feels like it
spooks the market every quarter. How do
you price that possibility in when
you've already seen so much volatility
around it as recently as April,
>> right? No, it's uh completely fair. I
mean, look, the long end is, you know,
we've seen risk premium increase in the
long end. So if we take that ACM term
premium that that that that they've come
up and we've seen that consistently rise
over the course of the year. Um the
other part of it what does that do for
the debt stack? But what also we've seen
both the DMO we've seen um you know the
the Fed do we issue less in the long end
to prevent that from from really going
further and then also what tools does
the Fed have in terms of potential
operation twist or those type of things
to prevent an unmoring of the long end.
But in terms of the fiscal again that's
where the news from Friday becomes very
important right you know this blog post
is suggesting that that the deficits
could be what was the number I think
four trillion less you know will could
help you know mitigate some some of that
long end move but yeah I mean these
these constant debt sealing debates are
not helpful for for for rate curves
>> could the debt sealing debate in the
states overshadow the fiscal worries
right here in Europe
>> uh I think they're independent of the
two right I mean I think people are
concerned about what's going to happen
with France Obviously a big debt market.
You know what what is what are rating
implications for that. Um you know you
Bloomberg was reporting earlier uh when
I was up you know some softness in in
French bonds and Asian hours. You know
obviously a big constituent a lot of
foreigners own French bonds. So how do
we how do we think about how all that
that plays together?
>> Yeah it's interesting isn't it? The the
futures picture was suggesting we'd see
a continuation of yesterday with yields
going higher on French debt. Um London
is back in play today and we have
something a little different developing.
European bond markets are open and we
see yields coming down not by a huge
amount but two basis points in France.
So you know maybe that's a sign of some
calmness although I will say that the
German yields are dropping more down
four. So the spread of France over
Germany has increased. So take whichever
sign you want Robert and tell us what
you think about France. Yeah. So, I
mean, France is something that that
we've had concerns on for some time,
right? Even before last year's last
year's events and the fiscal trajectory
in France is just not healthy, right?
Much like the fiscal trajectory in a lot
of other places, including we were
talking earlier the UK, right? How does
that play play itself out? And so, um,
part of what we're probably seeing today
in Boon is that softness in these equity
markets that you mentioned earlier, you
know, a bit of flight to safety, true
AAA's, those type of things.
>> Okay. Okay. So the flight safety play in
European bond markets sort of
outweighing nervousness around debts.
But I mean in terms of the the French
story, what what are you watching for
then? Of course the vote itself, the
vote of no confidence, strike action um
being called for early September as
well. From from what we're hearing, it's
going to be difficult for this prime
minister to stay in his post just as it
was for the last one.
>> Exactly. And really at the end of the
day, what we're looking for is and yes,
all of those things, but what is the
fiscal story at the end of the day? What
does the French fiscal trajectory look
like at the end of the day? And and if
it's okay, then the market will recal
itself. We'll get spreads back down to
that 60 level like we saw a bit earlier
uh uh this year. If not, we're going to
be back to that 80 or remember back in
last summer, people were crawling for
100 or 110. So So we're we're what in
the 70s right now or so
>> the spread from Germany? Yeah. 77.
>> Yeah, exactly. So, you know, we're at
this sort of point where either we're
going to calm down or we're going to
we're potentially going up wider. But,
but again, really at the end of the day,
what happens with the fiscal story?
>> Think people are buying the dip. There's
an opportunity here this morning in
French in EGB's more
>> uh in in in EGBs. Yeah, we're we're
constructive European rates.
>> So, this is an opport so the French
cause a few ripples. This could be an
opportunity.
>> I mean, but but is it cause
opportunities in German rates? Does it
cause opportunity in in um in in Italian
rates, Spanish rates, you know, those
type of things really where's that
opportunity lie? Is it is the
opportunity in SSAs? I'm not such I'm
not so sure that it that it's in French
bonds right now.
>> But if you're if you are looking to
diversify away from the United States,
which some people are, is any dip in
European gubbies if you're a Japanese
Asian investor potentially an
opportunity?
>> Exactly. I mean because our view is that
look growth in in Europe
>> may not really be there right I mean we
just had the German GDP restated right
to to a bit of a negative level so so
are we going to actually get the growth
that the ECB is forecasting and might
the ECB have to act one or two more
times um you know over the course of the
next 6 months or so in order to support
that growth.
>> All right, Robert Dishner, senior
portfolio manager for multis sector
London over at Newberger Burman. Uh
walking us through those dynamics as we
speak. I was just doing a little bit of
digging, guys, uh, on this. We're now at
a spread, as Anna was mentioning, with
this open, about 77 basis points. That
is the highest going back to April 22nd,
was definitely not the highest that
we've seen in the last year. So, I don't
know how much of a freakout this really
is.
>> Yeah. Well, and and certainly bond
yields are moving in a different
direction to what the spread story is
telling us, aren't they? Yields coming
down actually here in Europe this
morning, but not by much. Down a basis
point. We'll wait and see how the French
story plays out as we work our way
towards the market open. Coming up,
we'll stick with France. Prime Minister
France Beer Ruth called a confidence
vote that may topple France's government
as soon as next month. How will stocks
respond in half an hour? We'll continue
to monitor what's going on in the bond
markets and the euro. This is Bloomberg
Tuesday morning. How you doing? 30
minutes of the start of equity trading
here in Europe. We've already got the
bond market open. A few surprises maybe
coming through there. We'll get to that
in just a second. Let me show you what
the futures p picture looks like. Uh you
are negative. So it's interesting here.
So what you've got this morning is bond
markets actually not doing very much.
And in some ways actually the French
bond market looking much more positive.
But what you do have is CAC futures down
and they sold off pretty hard into the
close yesterday. You you're getting a
ripple effect across the rest of Europe
as well. Some of this is Lisa Cook, some
of this is French politics. It's hard to
determine which is which, but the
aggregate is basically the picture you
see in front of you.
>> Let's take a look at the bond market as
well. The futures uh market very much
pricing it in. The bond market, dare I
say, feels a little bit steady. We'll
see how long that actually continues.
We're looking at three and a half% on
the French tenure as well. It was that
spread widening yesterday that we saw
between the French and German debt
that's going to keep us on our toes. We
also have our eye on the French and
Italian spread as well. Nevertheless, it
comes down to, as Guy was saying, the
politics over in Paris. Prime Minister
Francois Beiru has called a confidence
as soon as next month. Three political
parties immediately saying they would
vote against the motion.
>> This is why I asked the president to
reconvene parliament in an extraordinary
session on Monday, September 8th. I will
engage the government's responsibility
on that day with a general policy
statement in accordance with our
constitution. This general policy speech
will pose the central question whether
the danger to the nation is serious,
whether there is an emergency or not in
order to choose a path to regain control
of our public finances.
>> Bloomer's Caroline Conan is all over the
story, joins us from Paris this morning.
Carolene, just walk us through the steps
from here. How likely is it that come
September 9th, let's say, Francois Beeru
is no longer the prime minister of
France?
>> The chances are pretty high, Criti. Uh
if you just do the math, technically uh
the national rally of Marin Lupin and
the far left of Jean
immediately said last night after the
prime minister's speech that they will
vote against the prime minister. The
socialists however with the first
secretary Olivia for were a bit more
vague last night on the 8:00 news Olivia
for said uh that in the current state of
the budget he cannot support Franu
cannot vote for the confidence of
Franceu. However, the socialists have
also said uh that they will present an
alternative budget over the next few
days. We'll see if this slightly moves
the needles. At the moment, the market
seems to be price pricing that Franu
will indeed fall on September 8, 8
months after his predecessor Michel Bar
also collapsed last Dece December over
the previous budget. So clearly this is
the headline of every French paper this
morning. like the crisis. Franu is
provoking this confidence vote by
himself, anticipating the social anger
and the general strike that was planned
on September 10, anticipating possible
over votes of confidence on this budget
that were supposed to be uh planned for
October. So perhaps provoking his own
fall.
>> Karolene, thank you very much. Carolene
Kan with the latest on France. So the
French story clear to see in European
futures with the catarand uh futures
picture looking distinctly negative this
morning a little more muted in bond
markets today than yesterday as been
saying the euro then what's at stake in
FX markets let's talk about FX now Kit
Jukes joins us chief FX strategist at so
general kit good morning to you so what
is at stake for the euro here because
okay it's France it's not the whole euro
zone but you know all other things being
equal you might expect this story maybe
to put some downward pressure on the on
the currency but then we have the Cook
story putting a bit of downward pressure
on the dollar. What matters in all of
this for the euro?
>> Um I I felt over the course of of the
summer that what matters in FX is what's
going on in the United States to a
degree that is unprecedented. Um, so we
can throw other things at it and I and I
can question that a little bit, but I've
never I can't remember a market where it
was so sort of onedimensional in the
sense of US economy, US rates, US
politics, all of it is so um uncertain,
up in the air and important that that it
that it kind of, you know, everything
else is a it's definitely secondary.
Now, you know, and I and I think to be
fair to this story in a sense, you know,
kind of you could have another election
tomorrow in France. will get another
coalition government gets formed that's
not really very stable that doesn't have
a commanding majority and can't do much.
So, um the only thing that could happen
in France, I guess, is that you could
get to a situation where you you could
get some um sensible policies or some
forward-looking policies in place to to
to to generate some growth to sort out
policies to sort out
>> that that could happen
but but not very likely not alternative
is the status
>> quo. So, so we a a uniquely US-dinated
market is the way that you you would
describe things right now. But sticking
with this French theme, what would make
it cut through? I mean, if we saw a
spike up in French yields, uh, you know,
the spread with the bund, you know,
jumping again or if we saw it go
substantially over Italy, I mean, this
is such a turnabout for the Euro zone,
is that going to cut through at the sort
of big picture level?
>> I don't think it cuts through much in
FX. I think it is a big story in the
bond market. clearly, you know, people
people trade the the BTP OAT spread, the
French French Italian spread and and
they will continue to do so. They'll
continue to argue, I think quite a lot
of people that that, you know, um
Spain's finances are as good as France's
and and so on. So, so I think all those
arguments continue and and and get fed
by this and and it is important for
Europe um economically in the sense of
what you know we we have this attempt at
fiscal stimulus. I mean coming from the
obviously getting rid of the debt break
in Germany and then the need for for um
defense spending having a no government
weak government very weak coalition
government in France doesn't help but I
think that's the status quo I don't
think this changes that doesn't make it
worse
>> Trump wants to fire Lisa Cook
>> apparently
>> I'm not seeing a massive reaction to
that
>> no I think a lot of it was in the price
that he's trying to
>> also the status quo that that he's
effectively going to win and reshape the
Fed. Do we get lower rates? Is that
already in the price?
>> Some some of it is. I
I look, we we assume that they're going
to issue mostly short-term debt, not
long-term debt. Yep.
>> Um kind of we've taken that one on
board. We assume that their fiscal
positions pretty scary and and I assume
that that Donald Trump wants a weaker
dollar. I mean, he really wants a weaker
dollar and he's going to get a weaker
dollar because he's doing quite a lot of
things that help. H I don't think he can
get it that much weaker because I'd have
to buy something else on the other side.
Right. Um I I had this nagging thing
always at the back of my mind that when
I started work in 1984, the dollar went
extremely high. Yes.
>> And then in 8 856 it seven. It went all
the way down without a recession or
anything else because everybody
eventually just got out of their long
positions. Um that that's the only way
the dollar goes down a lot. I think Euro
dollar in the mid120s back where we were
at the high um when we uh after the Fed
cut rates aggressively in 2020 that's
sort of imaginable um 130 seems to me um
very painful. It also can't happen too
fast because the disinflation it gives
other people is quite painful.
>> This is just a slow grind lower that
>> it's a annoyingly sort of uneven one. In
other words, there'll be days when EUR
dollar goes up three figures and
everyone says your forecasts are too low
and and then it goes back down two and
they're too high and yeah, that's what
life's going to be like.
>> You need to take a step back and look at
the long-term trend and
>> you have to.
>> Okay.
>> How much of the X date matters in all of
this or is this purely about monetary
policy?
Uh it's not just about monetary policy,
but you know I I think um I I mean I've
had a sense for the last few months that
because of all the uncertainty in
markets that we're almost trading growth
expectations that we've gone backwards,
you know, if you can't rely on anything
else if you don't know what's risk on
means for currencies or anything else.
You go back and say who's got the best
growth outlook and who's got the worst
growth. I'll have the I'll have the
currency of the best growth outlook.
>> America,
>> that's why the dollar's so high. But is
it getting better their growth outlook
or is it getting worse? So that that's
you know is it you tell us.
>> I think their inflation growth trade-off
has deteriorated enough that the economy
is going to slow and and I think this is
what we'll find out most in the next
couple weeks. The the the most perverse
reaction in markets and it's it's a
normal reaction to me is any any spike
in inflation in the US is very dangerous
for growth. You know, round about now,
there's a lot of American parents
turning up in a mall looking to buy
their kids a new laptop uh and and
looking at the price or or whatever else
they're buying. If they find that
sufficiently painful that they spend
less in real terms, the American economy
is going to slow.
>> But is that net positive for the dollar?
>> No, that would be net negative for the
dollar. As simple as I think. But why
when historically when you do start to
see growth slowdowns even in the United
States or even the fears of a recession
kind of sink back in you've seen
strength of the dollar
>> because the $61 trillion of US assets
everyone else has bought on the dream
and the realization and the confidence
that US assets are going to perform that
bond yields are higher equity
performance is better everything is
better about the US is being already
undermined by the clear sense that
President Trump wants a weaker dollar
and if you're looking at it and thinking
can I have a weak ing economy and and
these equity valuations and I I know
equity analysts who think we can because
of where where where that that that
strength in the equity market comes from
but I think that starts to hurt the
dollar and Friday seems like a long time
ago now kit doesn't it seems like so
much has happened just just since last
night in terms of President Trump's
agenda and lots more news but Friday of
course we saw the comments from Jerome
Powell that caught the market
wrongfooted a little bit about what he
saw as the downside risk despite some
people had said the minutes had a sort
of hawk feel to them, a focus on
inflation. A lot of the other Fed
commentary had been focus on inflation.
Should we have been as surprised as we
were, do you think, about what Powell
had to say? Because this will come back
when we get ne the next data.
>> Um, I was certainly surprised. I thought
that it looked, you know, when they set
out the agenda for for Jackson Hole, all
about the labor market, all about, in
other words, a labor market where we
know we have aging populations, we know
we have um
an unemployment rate that's being held
down even as employment gets weaker. All
of that says more and more difficult
inflation growth tradeoff. Oh, we can't
cut rates too fast because, you know,
we've got upside risks to inflation. So,
>> so that sounded like an inflation
focused conversation
>> just from just from the papers that were
going to be presented and then he stands
up at the beginning of his thing and he
kind of, you know, gives the game away
before we go through any of the the
material.
>> But everything I read over the weekend
suggested that actually
>> on second look the speech was no way as
clear. The market kind of saw what it
wanted, got felt it got what it wanted
and therefore reacted
>> got the headline it wanted.
>> Yeah. But is the reality is
>> okay there's two bits I mean the first
bit so he he presumably had that one
whatever is that one paragraph in there
>> knowing what how I would react you know
because we're all simple people. Um the
second thing to your point that I think
is more important is we've still got the
ISM data to come. We've still got the
payrolls to come. Frankly if payrolls
are at 300,000 none of this matters. If
they're north of 75,000 and CPI and and
PC is hot, does does it matter? Is it
anything that blows off the the the
market off 25 basis points
>> in September?
>> Yeah. Something significant. So
200,000,000. It's got to be big enough
to we you know, we're going to work it
through with what happens to the
revisions, the revisions, and we're
going to have we're going to have a
terribly tough time working it out. But
yes, if if you if you get a sense that
that last peril number isn't the sign of
a clear downward trend, um because you
you you know that there's inflation
coming through from the tariffs, you
don't really know exactly when, but we
know it's coming.
>> That's clear enough.
>> But does 25 basis points really move the
dial that much?
>> Not from where we are now because we've
gone, you know, we've priced it in with
with massive confidence. So not doing 25
>> would have more impact
>> would have more impact from where we are
now. I I think that's that that's the
only way to think about it.
>> All right, Kit Jukes, chief FX
strategist over at Stockgen, joining us
around the table to walk us through
these dynamics. We thank you so much.
Coming up on the program, we switch
focus right back to the equity market.
We're going to continue to track Orstead
with management set to meet with
advisers today to reassure them on a
planned rights issue despite President
Trump cancelling a wind farm. That was
about 80% completion. That your other
stocks to watch next. Stick with us.
This is Bloomberg.
Welcome back everybody. 7:46 here in
London. Tuesday the 26th of August.
Let's look at the futures picture. And
the French politics story is evident
across this futures uh story right now.
We see the catar futures picture in
France is negative down by 1.3%. That
follows on from some a drop in the catar
just yesterday. So we were down 1.4% by
the close. All of that came late in the
day and we have some more of that to
look ahead to as we continue to be
concerned about what's going on with
French politics. Uh and certainly it's
cutting through on stocks even if it's
not on the euro and to some degree we
see calm in bond markets. We have plenty
of other news to talk about whether it's
the Fed, whether it's the latest on
trade policy. Let's go to Criti because
I think it's the uh the trade angles
that have caught Crity's eye this
morning. They absolutely have. I mean,
we've been talking about this for
months, but there is one deadline
everyone needs to be aware of today that
I think is maybe uh fell below the radar
and that is going to be India. The
tariff deadline hitting in today. uh the
50% that is expected to at least address
or attempted to address uh some of the
issues when it comes to India's
dependence on Russia. I'm going to show
you the dependence in just a second, but
we'll start off Oh, well, here it is.
Let's start off with the pie chart when
it comes to show just how many oil
imports have come from Russia into
India. And this part is really crucial
here because it shows just how
interrelated the two economies are. 39%
of their oil dependency from one of the
world's largest importers coming from
Russia. Compare that to his reliance on
the US only 4% despite the US being the
largest oil exporter in the world. Now
when it comes to what the impact is on
the tariff front 50% rate as I said
applying odd midnight from the United
States to Indian exports there are key
markets that this hits and some of them
are ones that are kind of unexpected.
We'll flip the boards in just a moment
and show you. Shrimp is top of the
radar. Shrimp is one of the largest
exports for India into the United States
and that is something that's going to
hit the bottom line of the United
States. Another one is fabric. Gold is
of course a crucial market as well. Gold
and jewelry major exports coming out of
India. And rugs as well. So if you're
redoing your house in the states and you
are looking for an Indian imported rug,
things are about to get a lot more
expensive. But for the markets, this is
the terminal chart that matters. It's
all about the equity story, especially
if you're talking about a weaker dollar.
Does that incentivize you to get into
emerging market assets? Well, according
to this chart, India is not the place to
outperform. In fact, it's had its worst
underperformance relative to the
emerging markets complex going all the
way back to 1995, even 1993. That was a
stock market scandal in 93. In '95,
global recessionary fears really taking
down that market. It's been 30 years,
Anna, and we are now seeing that same
level of underperformance. Okay, we'll
certainly be focused on India and see
how that that move by the Trump
administration then that seems as if it
kicks in five uh around midnight Eastern
time tomorrow morning tonight in Europe.
We'll continue to watch that of course
and see how that one develops. Um let's
uh get some perspective on these markets
on the big picture around what's
happening here. Markets live executive
editor Mark Cubmore joins us now and and
Mark uh good to speak to you. We started
this program with some weakness in the
dollar. That seems to have paired even
just in the last 50 minutes or so and
Guy was making the point at the top of
the program that maybe the market's not
reacting all that much. Certainly FX
markets not reacting very much to the to
the Lisa Cook story. Is that because we
knew it was coming? Maybe bond markets
are reacting a little bit more. What's
your takeaway so far?
>> Good morning, Annie. You're right.
Markets are largely shrugging this off.
Initially, they did react to the
headlines. The reason we've kind of
erased those moves is because uh first
of all, we got the report that Lisa Cook
will challenge the the kind of decision
and the evidence is very much they'll
likely win. Trump has no just cause for
allegations of fraud. They're not yet
proven. Now, even if they're they're
proven, then he can remove Lisa Cook,
but that will take some time. So, it's
likely if Lisa Cook sues to reinstate
her job, she will win that fight, which
means Trump's not going to get the
change in the Fed in any immediate
basis. Which means that from the Fed's
point of view, it's the status quo. So
you shouldn't get any direct impact on
the front end yields in the dollar.
However, you've got to make an
assumption now. Does Trump kind of go,
okay, I was wrong and back down and
forget the story. That's not been his
motto's operandi so far. So you've got
to assume that he's going to double down
on his public attack on Fed
independence, Fed credibility, and that
is an undermining of US institutions. So
it's not a set binary moment just yet,
but it's yet another blow and a big
blow. It's a really clear kind of
politicized move here because doesn't
have just cause. It's not a legal
process here, an attack on US
institutional credibility. So that is
ultimately bad for long-end yields. Uh
sorry, bad for long- end bonds, which
will see long- end yields rise. It'll be
bad for US stocks. It'll be bad for the
dollar. It's not yet a tipping point,
but there will come one because this is
another negative for US assets.
>> Is the trade war restarting as well,
Mark? I we've just been talking about
India. We can come to that as well in
more detail in a moment. But we're now
talking about digital taxes once again.
You got all kinds of other issues being
thrown around. Are we back to having to
price in trade deals that we thought
were done? Maybe not being done.
>> I don't think the trade war ever really
went away. I'm not sure war is really
the white right um kind of word for it.
It's it's a kind of it's an a US attack
on the global trade system which the the
global trading system is so far being
relatively resilient to. Uh are they
going to continue suffering more
attacks? Almost certainly. I mean Trump
even you know before this one was
talking about his semiconductor chips
are coming in another two weeks. He's
always constantly promised uh maturity
for these threats. So of course we know
that trade is going to continue being
problem and it's going to continue
costing businesses and consumers and
affecting global growth.
Mark, in our last uh 40 seconds or so,
there has been a question of seasonality
in September. Historically, the market
always tanks. The equity market always
tanks in September. What do you think
could be the potential catalyst or the
straw that breaks the camel's back here?
>> We have a lot of catalyst, don't we?
We've got Nvidia earnings. We've got
inflation data. There's core PC, but I
think at the CPI one's even more
important. We almost know it's going to
be higher. It's going to undermine the
idea that the Fed's going to cut, which
is what everyone's betting on at the
moment. We've got jobs data to come.
Now, it's an interesting one, the jobs
data, because it comes really weak.
People will get really worried at the US
economy and say, "Okay, those rate cuts
that are already priced are going to
come, but maybe we've got a recession
coming." If it comes in strong, well,
then it completely undermines those rate
cuts. So, either way, it seems like
lose-lose for stocks. Plenty of
catalysts, negative catalysts on the
horizon the weeks ahead.
>> There's the Mark Cudmore we know, uh,
the bearish Mark Cudmore. Bloombergs
live executive editor Mark Cudmore
joining the program this morning. We
thank you so much. to more analysis from
him and the team. MLIB go is the
function on your terminal. Let's go from
the macro to the micro hit stocks to
watch with Luis Moon. Luis,
>> morning Chrissy, the key one we're
really focusing on this morning is tech
stocks over in Europe. So, there's news
overnight that Trump said he might
impose additional tariffs on tech stocks
and semiconductor stocks in uh in
Europe. So he said as you can see this
quote here will impose some additional
additional tariffs on exports and this
is if uh comp if countries don't make
kind of remedies. This is uh in in
response to some digital services taxes
from European nations. So the key ones
we're really focusing on are the likes
of Infinian ASM Micro SAP. You can see
it's been a bit of a mixed picture so
far this year. They've had a lot to deal
with. A lot of geopolitical news to
grapple with. So, we'll have to see if
and how this impacts at the open. The
next key one that we're really focusing
on is Orid. This is a bit of a kind of
follow-on day two story. We had news
over the weekend that Trump was
cancelling a wind farm off the coast of
the US that's owned by Orid and they saw
their stock their stock plummet
yesterday, down 16% to a record low
yesterday in the session. They are
trying to reinsure investors. However,
today they're meeting with investors
ahead of a planned stock sale. That's
for about $9 billion. They're they're
really trying to reassure. Um and you
can see here there's a note from D&B
Carnegie saying that they they need a
lot less uncertainty to reassure. So
we'll see if this boost stock open. And
then finally, just a quick one on
defense companies. Uh we're focusing on
German company Tusen Crop. Uh meeting
with Mark Carney today as Canada ramps
up its defense spending.
>> Luis, thank you very much. Our equity
news reporter Louise Moon with the
latest on those stocks to watch. We'll
be watching Puma after the stock posted
the biggest gain in over two decades.
The Pino family perhaps looking to sell
some of its stake. That and the stocks
open next
Tuesday morning. Good morning. London's
back today. So that's going to add some
volume into the system that wasn't there
yesterday. some liquidity that maybe we
need. Yesterday's session in Europe,
well, the French story certainly
percolating at the back end of the
session. That is going to be a story
this morning. You've also got the the
situation in the United States. That's
going to be a story. So, this was the
rolloff that we saw at the back end of
the European session on France. That was
the rolloff that we saw at the back end
of the US session maybe on a little bit
of Lisa Cook. It's interesting that
equity markets seem to be where the
epicenter of the action is for both of
these two stories, not the bond market,
Christy, which I think is interesting.
Yeah, I mean the pain continues when it
comes to the equity market. We'll dive
into the bond market shortly. But the
pain point this morning that's dragging
down the entire index as you showed on
your chart there was the CAC 40 futures
down already 1.4% and the market hasn't
even opened yet. The footsy 100 also on
the back foot down about 6/10en of 1%
but this is the index that's the best
performing on the continent and it's
also down 610 of 1%.
>> Yeah. we look for some general weakness,
risk off being driven by the French
story, uh all being driven by the Lisa
Cook story and the Fed with all of that
will have an impact on sentiment at
least going into the European session.
In terms of some of the sectors and
stocks we're watching, chip stocks
certainly in focus, anything techreated.
Uh we are of course seeing the and this
is just a sort of sentiment read across
from what President Trump has been
talking about. He threatened more
tariffs against uh European tech
exports. He's threatened export controls
on US high-tech equipment as a result of
digital services taxes and other things
he doesn't like about the way that the
rest of the world deals with US big
tech. Commerce Bank in focus. It's down
over 4% uh or the expectation is it will
be weaker as it is cut by Bank of
America and Allstead in focus for a
second day on those wind projects. Guy
>> absolutely meeting in London today. Big
meeting in London today for Allstead
with investors. Okay, here we go. Time
for Tuesday's session. There is a lot to
think about particularly in equities
maybe less so in the bull market but
actually equity markets are where the
reaction appears to be coming through.
We're going to wait and see what the
catirant does in just a second. The
expectation is it is going to be
negative. The footsy 100 uh in some ways
at the moment feels like an area an
oasis maybe of calm. How long does that
last for given what is happening in
British politics right now? We we'll
park that one and deal with it another
day. Stock 600 is down by 3/10en of 1%.
The IBEX is down by 7/10en of 1%. So
you're certainly seeing European equity
markets taking it on the chin this
morning. Could take a while to get the
CAC open. We saw a big move down at the
back end of the session yesterday. The
expectation as Anna and Critia have been
saying is that that will continue this
morning. Could take a while to get that
market open. The DAX could take a little
while to get going as well this morning.
But but if I look at the right hand side
of the screen and I look at where the
IBEX is this morning. So the Spanish
market is down by 9/10en of 1%. What
does that say potentially about those
other two markets? France in particular.
What are we seeing in sectors? Criti.
>> Well, when you look at these market
moves, I mean the pain is very clear
that already from the get-go, you are
seeing a lot of pressure when it comes
to French stocks. From an index
contribution perspective, it's a lot of
the banks actually. It's AXA, it's BNP.
No surprise there. If you're worried
about the bond market, if you're worried
about the deficit, that's going to show
up in the banks. We've seen this before.
On the plus side though, on the upside I
should say, commodities, basic resources
seems to be having a good day and one of
the only sectors to do so.
>> Absolutely. Literally the only sector
now as we're sort of settling. Oh no,
energy also. So energy and basic
resources going a little uh firmer as
you suggest Criti. Uh to your point
about a continuation, another day of
weakness over in France. We see that
certainly in the construction sector. Uh
so FAR is down by 6.6%,
Vansi is down by nearly 5%, Sango Ban
down by more than 3%. Uh so there was a
big focus yesterday in in the French
market when we saw that sell off on the
cataron on some of those construction
names and that continues to be the case
this morning. So another day of weakness
on French construction and yeah as you
say not much going higher this morning
from a tech from a sector perspective
still just basic resources and energy on
the front.
>> I think it's interesting so ASML is an
interesting one here. So the the
Americans are threatening chip export,
excuse me, restrictions on the back of
the digital services tax.
>> Yeah.
>> The key piece
kind of in all of this and Nvidia relies
on it is the high-end kit that ASML
manufactures. It'll be interesting to
see where were we to see some of those
restrictions being put in place what
would happen maybe to export
restrictions on the kit that ASML makes.
>> Those a lot of that goes to Taiwan which
is obviously where Nvidia makes a lot of
it chips as well. I just put that on.
ASML going higher this morning up by
4/10en of 1%.
>> Yeah, it's no surprise that the banks
are where the weakness is. I B parabar
is down by four 4.6% at the moment. I
the French banks have had a great run,
>> great run and any kind of any kind of
opportunity maybe therefore to top slice
a portfolio and take some of that
profit. It would be easy to make that
decision I think first thing this
morning. So no real surprise there. But
as you say there is the connection with
the bond market. They do hold
>> and the French Yeah. And the French
insurer is also weak with that in mind.
So AX are down by four and a half%. Uh
just just one of them, but I see others
in the mix as well. So it seems that
Yeah. And we don't have the cataron open
right now, do we? Uh the DAX has just
opened. It's down 710 of a percent. The
cat car yet to open this morning. A
second day of focus on those political
troubles for the prime minister.
>> Are they struggling to get open this
morning
>> which I think says everything given it's
the last week of of August and things
should be light. Things shouldn't be
people shouldn't be at their desk. it
should be easier to open these markets
and and we haven't uh quite gotten there
yet. So, we're going to continue to
digest into the uh nitty-gritty of the
makeup of these markets. Stockg is is is
doing some of the the uh heavy
>> they can't they can't get it open. They
can't get So gen open, which I think is
really interesting.
>> Well, there you go. I mean, it tells you
everything that the banks is, as you
said, the epicenter of of the question.
Let's get a market perspective if we can
this morning. Karen Ganesha, multiasset
strategist over at UBS Global Wealth
Management's chief investment office
joins us this morning. A pleasure to
have you on the program. Thank you so
much for your time. We're expecting a
lot of pain once we get the French
market open when it comes to pricing in
some of the politics. Yet again, Karen,
talk to us a little bit about how the
politics should be playing into how
we're viewing not just French stocks,
but the broader European complex.
I I think it's important to look at
where we've come from because it has
been such a strong rally so far year to
date um on some of the relief perhaps
around some of the tariffs around the
tech boom um around again maybe some
relief around some of the um better
performance than expected from the
economy and we do think that at this
point you know markets are pricing in a
lot of good news and are vulnerable to
this type of political shock so you know
what we're seeing um in France with you
know potentially some concerns that then
arise around French debt you know what
we're seeing with some of the political
interference with the Fed in in the US.
We think that some of this political
risk isn't really priced in at this
point. So investors should prepare in
the shorter term um for some increased
volatility resulting from this.
>> But Karen, we were kind of scratching
our heads as well that we're not seeing
as much of a reaction in the bond market
as we are seeing in the stock market
yesterday and today as well. Is the
equity market going to be the epicenter
of the pain point here or are we
expecting some sort of bond market
freakout for lack of a better term as
we've seen in previous iterations of of
the French political situation?
>> I mean I think the bond market in some
ways might have been a bit ahead of the
game here. If you look at a lot of the
European bond yields, you know, they are
trading towards the upper end of their
their recent uh their recent levels. So
I think the bond market may have already
been anticipating a bit more of this
concern around deficits, a bit more
concern around, you know, where is
inflation going to shake out? Have
central banks perhaps uh cut rates too
quickly. So I think that that was maybe
a bit more already in the price whereas
equities of course have been on this
very strong run and really haven't been
pricing in a lot in the way of political
risk.
>> So So what's the best opportunity that
you're looking at Kan? There seems to be
a lot of uncertainty in markets right
now whether it's the Fed conversation
and the shape of the Fed policy makers
um coming off Jackson Hole on Friday. A
lot of people caught off guard there
about what to expect from interest
rates. Then we've got the French
politics bit of nervousness being
created there. Where are you as we head
towards the end of the year? I think we
can ask that towards the end of August.
Where are you looking at the best
opportunities?
>> Yes. So we're really getting ready to
buy the dip in in equities. We think
that the medium and longerterm prospects
are very strong. AI is a big part of
that story. Um, we also think that the
US economy is going to have a soft
landing. So, we think that with that and
with rate cuts coming from the Fed, the
longer term opportunity is going to be
good. It's just that given the strength
that we've seen recently, it does seem
that the market is primed for something
of a short-term pullback. So, you know,
we're looking at stocks in AI, companies
exposed to electrification, companies
exposed to health care, you know,
waiting for dips, you know, in those
areas that might come from political
shocks or other things and then getting
ready to, you know, increase allocations
um into that because we think the
longerterm prospects are are strong. So,
buying the dips and equities would be
our biggest call heading into the end of
the year.
>> Are wealth management customers, are
they very attuned to Fed independence?
Is this a story that cuts through in the
client conversations that that are being
had?
>> Sure, certainly. I mean, many of our
clients are are experienced with
investing all over the world and they've
sort of seen instances either in
different countries or in the past where
central bank independence has been um
interfered with and that's obviously had
some some quite significant results. I
mean I think in in the case of the Fed
and of course there is you know much
more overt political interference than
we've had um at least in recent years
but you know this is an institution that
is sort of used to dealing with a degree
of political interference and we think
that ultimately the Fed is going to
remain datadriven even if they have got
this uh noise in the background for us
we think that means 100 basis points of
rate cuts in the next year because the
economy is slowing um but we you know we
don't think the political interference
is going to materially change you know
where the Fed ends up with interest
rates in a couple of years time.
>> Kieran, you think equities are going
higher. Is that multiple expansion? You
just said that you think the US economy
is going to be slowing or is it actually
companies delivering better profits and
better numbers?
>> It's it's better profits. I mean, we saw
this in the last earnings season, the US
especially seeing very very strong um
earnings growth, better than
expectations. Um and you've got a bit of
a dichotomy with the broader economy
because of course a lot of the driver of
that growth is coming from um AI which
is playing an increasing role in the
economy but is isn't the whole thing at
this point but 20% earnings growth and
from US tech we're looking for 18% next
year you know that's a big share of the
index and that has a big tailwind on US
stocks so we think um you know earnings
expansion is really the the main driver
of the upside that we foresee over the
next year for uh equities US equities in
particular
Do you think multiples go any higher or
do you do you think that they kind of
come down from here?
>> I think it is going to be challenging
for multiples to move much higher. We're
in the 99th percentile now for for US
equities. So I don't think it would be
reasonable to be expecting to see
multiples um move higher and over the
coming years they are going to have to
come down and we think earnings growth
will will help that. Um of course the
Fed cutting interest rates should mean
that the multiples are are quite well
supported. We don't typically see very
big contractions in multiples unless you
start having tighter monetary policies.
So, you know, we think that broadly
multiples stay roughly where they are
and then it's earnings growth that
really drives the further upside for
stocks from here.
>> Does the currency depreciation over in
the states have any impact on fund flow
or or is this still a sell America
environment?
Yeah. So, I think that uh rhetoric and
that sort of notion has has died down a
little bit in the past few weeks as
people have just been reassessing how
far has the dollar fallen. But we do
think that the general trend is going to
be for more overseas investors to be
thinking a bit more carefully about
dollar exposure and also hedging their
exposure to US equities. You know, we've
had for many many years people have been
very comfortable to hold dollar
exposure. It's been a safe haven. It's
had decent interest rates. Um now some
of those things getting questioned the
interest rates coming down. So you know
what we're speaking about with clients
you know particularly you know in in
Asia is around you know how can they get
that US equity exposure so they're still
exposed to that growth play um but also
you know think about how to hedge that
currency risk into things which are
perhaps more suitable for their own
personal situations.
>> Karen I I know we we asked a little bit
about your views on France earlier on in
the conversation but just to dwell on
that for a moment because that is really
where we're seeing weakness today. So
we're down by 1.8% on the cat cararons.
Some of the big names in French banking
losing ground. BMP Paribar and Sockjen
both down by more than 5.9%. AXA down by
6 and a half%. Um is this is this
threatening to become something that
starts to dominate the European equity
conversation. Karen?
>> Yeah. Well, I mean I think if you've got
uncertainty in in the French bond
market, uncertainty about the deficit,
that's obviously going to start to have
um a big impact. You know what we've
been speaking with clients about is
really looking at investment grade
corporates as a as a preference over
over sovereigns. You know, particularly
in parts of of Europe, we think that
generally they're going to have more
stable um credit profiles, perhaps a bit
less exposed to some of the um political
concerns. And then within Europe, we've
also been looking at um allocating a bit
more towards German bonds rather than
French bonds. Again, more limited uh
concerns around the um the deficits and
the fiscal situation. So, you know,
certainly something which, you know, can
have a big impact on broader markets,
but we do think that there are, you
know, ways that investors can sort of
mitigate some of the risks that may come
around specific countries fiscal
situations.
>> Karen, what is the most recommend
diversifier right now? Is it gold? Is it
bonds? Is it crypto? What are you
recommending to your clients?
>> We think gold is still still the right
place to be. Um, we think that with
rising debt, these concerns in France,
we've obviously had the concerns in in
the US, got some fears about, you know,
where is inflation going to shake out in
in the US. We've got the Fed cutting
interest rates. We've got the dollar
weakening. You know, all of that still
speaks very well in favor of gold and
it's really proven its worth over the
course of the past uh past year or so.
So, we think that gold is a still an
effective diversifier. Um and
five to seveny year. Um the spreads are
>> but yields an in absolute term.
>> We're going to leave that
we're going to leave it at gold. That
seems to be where we're going to park
that one. Uh there's some technical
issues obviously with Kieran's line. Um
thank you very much indeed Kieran Ganesh
multiasset strategist at UBS Global
Wealth Management Chief Investment
Office. Let's look at the core six.
Figure out what is happening there. The
French market is certainly the epicenter
of the action this morning and as you
can see LVMH is only down by 4/10en of
1%. Uh but elsewhere you've got
Schneider down by nearly 2%. The market
over the last two days, Monday, Tuesday
is now down by 3.6%.
Let's talk more about what is happening
out there. Luis Moon's here with the
details.
>> We're starting off with Austed today
trying to reassure investors today ahead
of a stock sale. shares up just over 1%
so slightly into the green having lost
16% to a record low. So pairings uh
getting some gains um after yesterday's
fall. Next up we're looking at defense.
The key ones today are SAR and Tusen
Crop. Both down into the red despite
Mark Carney visiting uh the German the
German uh defense company's factory
today and potentially winning some
contracts with Canada. but both down
into the red. Uh choosing crop down over
1%, sub just slightly down into the red.
Uh next up we've got Kingfisher down
3.7%. That's after it was cut to a hold
uh at Deutschbank. So not uh good good
news for the stock weighing on King
Fisher, the UK listed company today. Um
next up after Kingfisher, we'll we'll
move on to the next slide. We're taking
a look at assoc associated British
Foods, AB Foods, owner of Primark,
Sugar, Big Sugar Unit, um, and a host of
other businesses down almost 4% today.
They've been, uh, cut to a sell by
Deutsch Bank. Also, that's on, uh, being
undervalued. Uh, next up also, we're
looking at Commerce Bank, the German
bank, also down into the red, over 5%
into the red this morning. Also cut to
an underperform. That's um, from the
Bank of America. Uh next up we're
looking at Pummer down 2% into the red
this morning. Their owner is evaluating
options potentially a sales that's
weighing on their stock this morning.
And finally moving to BAT British
American Tobacco. They unexpectedly
announced their CFO is leaving and
that's weighing on the stock this
morning almost 2% into the red. Thanks
Louise. Luis move from our equities team
with some of those individual movers. a
sort of layer on top of that of course
the polit the risk we now see in French
markets and it's worth emphasizing the
selling we're seeing on the kakaron for
a second day we were down by over 1%
yesterday on French uh stocks and we
continue to see weakness more weakness
in fact today the kakaron was down by
more than 2% it's paired those losses a
little down by 1.9 but this is a fast
developing story and something that's
turning out to be quite substantial the
weakness coming through then as we've
been saying it this morning in the
banking sector in the insurance sector
luxury with its international exposure.
It's not higher but it's proving an area
of resilience perhaps in the in the
French market relatively speaking.
>> Yeah, these are some massive moves moves
that are not matched in the bond market
and I think this is pretty crucial
perhaps just simply because we did see
that reaction in yesterday's session but
I'm looking at the French bond market
here uh and just you know a classic
vanilla tenure. We're still at three and
a half%. You look at the spread relative
to Germany or Italy. Again, this is not
matching the level of of panic we've
seen in previous iterations of no
confidence votes, of regime change, of
new leadership, or even new budget
proposals. I think we saw a bigger
reaction uh when Beiru suggested two
days off in off of the the French
calendar,
>> which is still part of the conversation,
isn't it? Still one of the things that's
being debated and and pushed for by his
his government.
>> I think you need to take a step back
though when we think about the French
banks. Yes, Sockgen is down and down
hard this morning. The CAC is down by
1.9%. I so gen
came in at the beginning of the year at
27. We're trading even after the drop
that we've seen over the last couple of
days at 52. It hit a high of 58. This is
a stock that has absolutely rocketed
this year as has the the whole of the
European banking sector which has been
the key driver of European performance.
So we are coming off we're coming off a
very strong move. Yeah. In French banks.
>> Yeah. To your point, Criti, if we do see
this calmness persist in government bond
markets, and that's probably a dangerous
thing to say, we do see some money going
into German buns this morning, which
suggests that there is some risk uh risk
aversion out there and some move into
into some of the uh the more more haven
uh haven bond markets. But if we do see
that if we see that stability continue,
does that uh put a lid on the losses we
see over in France in the banking sector
that that sort of loop?
>> You would have thought yes. So French
bonds are st French bonds are stable,
the bank should be stable. The other
thing as well is all of the
conversations we had with the with the
CEOs, CFOs of these French banks, what
ca what stood out? Trading.
>> Yeah,
>> trading was really strong as a profit
driver for these businesses. What are we
getting today?
>> Nice trading environment, bit of
volatility. Lots of things can happen as
a result of which maybe that feeds back
into some good numbers. Yes, they're
going to take a hit maybe uh on other
areas, but but trading this looks this
looks like volatility to me. This looks
like this looks like a good environment.
>> We'll see how long it lasts. the French
market. Then the Kakaram down by 1.8%
right now. Coming up on the program,
shares of Orstead, as we were hearing
earlier on, hit a record low yesterday
after the Trump administration halted
work on the Danish firm's offshore wind
farm. This conversation is still live
though because nowad is going to be
meeting its investors and trying to
explain what it wants to do with the
money it's trying to get from them. Uh
so we will be uh focused on that
conversation next. This is Bloomberg.
tilting at windmills attacking an
imaginary foe that doesn't really
matter. Shares in Olstead are sharply
lower once again. The Danish firm stock
hitting a record low yesterday. this
work on the company's offshore wind farm
in the United States. Christian Weinberg
joins us now. Bloomberg's breaking news
editor to talk about this. Got a big
meeting today. All's in town here in
London trying to reassure shareholders
ahead of a $9.4 billion share sale,
which looks like it's getting harder and
harder to make the maths work on. What
do we think is going to be said today?
>> Good morning. Yes, I think that that's
that's a very good question because one
thing that you want when you when you
buy shares is you want visibility and
that's the one thing that isn't really
to give the the potential investors
visibility because no one really knows
where this will land yet with the US
wind wind project. So so that's a
massive challenge for a management to
reassure investors to go into this
project long term.
Christian, the Trump administration's
reversed course in other wind projects
now outside of just Orstead. Is this
beginning or the beginning of a a longer
term trend that affects the entire
renewable energy sector?
>> Well, I mean there are also bright spots
here. I mean there you you saw how how
Equinor, the Norwegian energy company,
they were able to kind of overturn
opposition from the US administration on
their wind project earlier this year. So
it seems like there is also the option
of of of of getting getting these these
decisions overturned and and this is
actually where there's some good news
for for spec specifically because uh
Equinor owns a 10% stake in insta and
has told that they would help the
company and share their learnings um in
on how to get a decision overturned that
might help us with their revolution win
project.
Christian, thank you very much.
Christian Brienberg, Bloomberg's
breaking news editor. We continue to
watch the uh wind sector then as a
result of all of that complicated uh uh
those complicated decisions and that
push from the Trump administration.
Let's focus in on France though because
once again this is an area of weakness
for European equities. We're now down by
2.1% on the catarand and some of the
weakness coming through ongen down by 7%
BMP Parabell down by seven AXA down by
over five credit agricult. get to our
French equity markets reporter Julian
Ponthus who has an update for us. And a
lot of this seems to be sticking to the
banking sector, the insurance sector. Uh
Julian, even though bond markets on day
two seem to be a little more calm,
what's happening here? What's the what's
the headline?
>> Uh there was still a big jump uh in in
the in the yield of French um government
bonds and it's usually uh the financial
space which takes the the first hit. Um
now if you look at the broader SBF 120
which is a bit equivalent to the Footsie
250 uh domestic companies they're
getting hit as well. Uh I think anything
that's linked to financial so um the
French uh government bonds or the
domestic economy is getting hit.
Basically it's it's um a comeback of the
political risk that was always there in
the background since uh Mua dissolved
the national assembly but it's making um
a comeback a very sudden comeback I
think that took a lot of investor by
surprise but it's the usual suspects
that are getting hit. I think investor
are selling first then we'll ask
questions later but that being said
there's nothing in the short term that
could bring some relief. um the vote uh
in in parliament will will come uh in
September and and so in between then
it's a bit it's a tough one for
investors.
>> Okay, Julian, is the market pricing
another French government i.e. Macron
just gets another prime minister or is
the market now pricing the possibility
of early elections?
>> I think we're in between. Uh I don't
think they're pricing another election
at the moment. Um, I just spoke to an
investor who told me like his belief is
that we could get a status quo like we
had with Barney and Beiru and then get
another like center right center left
person to keep trying to get the
government rolling. So, we're not in a
position where, you know, people are
going to price oh maybe a farright
government coming in after elections,
but we're getting there. what people are
really focusing on is the the spread uh
with Germany. Uh France is is getting
close to to that of Italy and that would
be really a big milestone and um I think
that would mark um for investor the sign
that you know there's a big change in in
political risk assessment in France.
>> Okay, that that certainly would change
the the arithmetic fairly quickly.
Pontthus. Thank you very much indeed.
Um, what do we need to talk about? We
also need to talk about what is going on
elsewhere. Do you hide out in gold in
all this instability I think is one key
question. We were hearing that a little
bit earlier on on the program. Holly
South Hansen, head of commodity strategy
at Saxo Bank is going to be joining us.
We'll talk about the Fed. We'll talk
about the gold story. We'll talk about
what's happening with the dollar. All of
that is coming up as we watch the French
market continue to struggle. This is
Bloomberg.
Welcome back to the opening trade. 30
minutes into today's session. If you
were expecting some positivity, turn the
other way. way you were seeing red
across the screen. Yesterday's selloff
continues and it is really permeating
and snowballing in France down 2.2% over
in the Karan but really bleeding into
the rest of the continent as well. Your
best performer this morning is going to
be the Footsie 100 and guy it's down
7/10en of 1%.
>> Yeah, it's a relative trade. Uh it is
still down but it's still doing better
than everybody else which I think is
interesting. Which takes us on to what
we're talking about here. You you've
only got um 70 members of the stock 600
that are higher. 524 are lower. Last
time I checked, every single stock in
the Cirons was down. Whether or not that
continues to be the case, we'll wait and
watch. Volume's actually okay. Volume's
picking back up. You would have thought
this would be a light week. London was
out Monday. You got Labor Day coming up.
You would have thought this be a light
light week, but there's a lot going on
out there. Let me just highlight maybe
some of the reasons why the Footsie 100
is outperforming. It's got a few of
these miners
52- week high. Actually, it's only been
over the last two or three months that
this stock has started to really gain
some traction. And you can see that off
the April lows, we picked up really
sharply. But this stock is trading at a
52- week high. This is a copper story.
This is to a certain extent a China
story. Maybe a bet on the stimulus
narrative coming out of of it as well.
We'll talk about gold in just a moment.
Are hard assets where you want to be?
And maybe that's one of the arguments
around Anttoagasta right now. That's the
stock story. There's a lot going on out
there. There's a plenty of factors this
market needs to know about. Anna, Anna,
what are we watching? Yeah, let's get up
to date on some of the other news
stories that are certainly influencing
markets overnight and into this morning.
President Trump has moved to oust Fed
Governor Lisa Cook following allegations
that she falsified mortgage documents,
but Cook is pushing back, saying she
will not resign and the president has no
authority to make her. Her lawyer says
they will take whatever actions are
needed to prevent President Trump's uh
move. US President Donald Trump is
threatening to impose fresh tariffs and
export restrictions on advanced
technology and semiconductors in
retaliation against other nations
digital services taxes. Trump posted on
social media that the measures are quote
designed to harm or discriminate against
American technology and give a pass to
China's largest tech companies. Over in
France, Prime Minister Franis Beeru has
called a confidence vote over his budget
proposals that could topple France's
governments next month. The vote is an
effort to consolidate support after push
back against 44 billion euros of
spending cuts and tax increases that he
considers vital to avert disaster for
France's public finances. And this
French story certainly gripping equity
markets even if it's not necessarily
dominating all other assets then this
morning and I was trying to think what's
different today versus yesterday because
we got this at the end of trading.
Yesterday we heard uh from Beirut that
he was going to call this confidence
vote. But what has changed is what we've
heard from all these opposition parties.
The fact that they have already declared
that they will vote against him and so
his position looks increasingly
perilous. Of course we have many days to
play out. A lot of politics no doubt
will play out and we'll get an update
from our colleague Carolene Konan on the
politics shortly but that seems to be
where the market is focused and as a
result we see another day of negativity
for European stocks.
>> A massive day of negativity. It feels
like though the summer has been a
positive one for Europe. the first I
want to say eight months of the year
have been a positive one for Europe. So
is this a moment also to take some of
the cash off of the table. The other
piece of this though guy is simply that
not only is this a as Anna suggested
kind of a no-brainer and then now that
all these oppositions are saying we
actually don't want Francois Beu but
four just four weeks after that no
confidence September 8th you have a
budget due in parliament.
>> The question and this was a question we
asked Julian Pontis a few minutes ago is
are we past pricing just a new
government? Are we pricing now the
possibility of early elections? And that
will be something that we're going to
have to watch out for as well. We're
also getting some live pictures right
now. Mark Carney, Friedick Mets, the
German Chancellor, the Canadian Prime
Minister just starting a press
conference uh in Germany. It's going to
be interesting to hear what they have to
say. Uh it's interesting that Carney
once again is in town. Obviously Mertz
is going to be speaking in German. I'm
assuming that Carney won't be speaking
in French and he'll be speaking in
English. Uh so maybe we will listen to
in on just a moment. But it's
interesting that the relationship
between Canada and the and the Europeans
seems to be going from strength to
strength right now.
>> Well, and and it does link a little into
what we're seeing, the nervousness about
the French fiscal situation because one
of the many reason France has an issue
with f its French uh fiscal backdrop is
to do with the increasing pressures to
spend more on defense and we know that
that's going to be part of the
conversation with Mark Carney in Europe
and certainly in Germany. He's talking
about defense in shopping around for
submarines. understand but that that
that defense story is one of the reasons
why we're so nervous about some of the
the European fiscal stories
>> defense intelligence um aligned foreign
policy is going to be a key piece of
this as well especially ahead of the UN
meetings uh in September some of the
policy decisions the French uh the
British and the Canadians have chosen to
make there's also that key piece of do
you have a united front on the trade
front with states
>> we we're getting very excited about
European fiscal expansion and basically
what we mean is German fiscal expansion
is does one is are the French going to
in some ways counter that slow it down
in aggregate when we think about what is
happening in the European economy this
is still a huge economy that is that is
struggling on the defense side can it
fund its defense spending can it fund I
does it have to have higher taxes is
that a drag you do wonder kind of what
the offset is between Friedick Mertz's
free spending which I'm not sure is
going to be delivered upon in its
entirety and what is happening in France
at the moment
>> yeah and and and France previously when
we covered this story I remember France
looking to share what it does have. So,
it doesn't have uh headroom to borrow a
whole lot more and increase its defense
spending, but it has a nuclear deterrent
and that is something that in a European
context it might be able to to start
conversations with others about. But
yeah, fisc fisc economics.
>> No.
>> Anyway, let's carry on the conversation
and look at where else you could be
parking your money this morning. uh if
you worry about what is happening at the
Fed, if you worry about uh what is going
to be going on in the United States
potentially driving higher inflation, if
you worry about instability, political
instability here in Europe, is gold the
place you want to be parking your money.
Uh Ollie Hansen, Saxo Bank's head of
commodity strategy joins us now to
answer that very question. If you think
about what is happening in the world,
good morning, by the way, do all roads
point to gold? Gold has had a great run.
Is what we're seeing on our screens this
morning only going to encourage more
people to put more money to work in the
precious metal space?
>> Well, good morning guy. It looks it
looks that way. We have seen demand for
ETFs uh picking up in the last few
months while gold has actually been
trading sideways. We we a bit of a in
stuck in a bit of a holding pattern
here. $200 range with the uh with the
top around 3450. uh the news overnight,
especially with the Fed independence
being at risk is is is not having the uh
is not driving it to to towards that
level yet. I think for that to happen,
we simply need to see lower funding
costs. We need to see rates coming down
in the US. And obviously with what's
happening right now in the at the Fed,
it could indicate that that that time is
coming soon and perhaps faster than what
the market's pricing in.
>> Is it just hard assets more broadly? If
you assume that that we're going to be
seeing interest rates being driven lower
a and at a time when potentially
inflation is going higher, is it is it
gold or is it just a whole range of
assets? H what what is the what does the
portfolio look like? If you think that
that is the operating environment that
we're heading into?
Well, in an environment where where
we're seeing rates coming down, then
obviously if you combine that with with
with hard assets where supply is
relatively tight, then then obviously
you have a quite a strong story for for
higher prices. And uh we're seeing that
obviously in the gold market. We're
seeing that in silver as well, probably
more so than gold in in terms of supply.
But also some of the industrial metals
uh copper is always uh one that that
attracts a lot of attention. It's also
just in a holding pattern right now. But
uh if we are moving to in that direction
then hard asset with with tight supply
as funding rates come down they are the
ones to to look out for.
>> Okay. And with tight supply you you
mentioned there Ollle good morning. So
that puts it in a different camp to some
of the other commodities that you follow
and I'm thinking of oil here where the
focus has been on increasing supply of
course from OPEC plus. Uh but I want to
ask you about what you're watching on
the oil story when it comes to India,
its relationship with Russia, th this
policy of secondary tariffs as they as
they've been described by some that the
Trump administration is looking to put
on India. How much is that capable of
reshaping energy markets?
Well, it will have an impact if if they
are putting these uh additional tariffs
in place and India starts to botch, then
then there could be uh there could be
some some some tightness coming from
that front. But at the same time, we
have to remember that the the 2.5
million barrels that OP plus the eight
members agreed to this year, uh we only
seen part of that hit the market yet.
So, we they're still holding back some
some still have uh still have some some
have been overproducing and they're
compensating for that right now. but
also others including Saudi Arabia, they
they are obviously just watching what
the demand situation looks like. So I
think even if we should see some uh some
some some tighter supplies coming out of
Russia than the the overall market I
think it has got enough supply to to
mitigate that but obviously it will
change some of the the trading patterns
and the the the routes that we we see
oil being shipped around the world but I
think there is ample supplies and that's
why as well if you look at Brent we have
been traveling higher now for the past
few days and once again as we approach
70 in Brent 65 in W's high it looks like
we are we're heading a little bit of a
not a brick war, but at least some
resistance there.
>> So, there's lots of supply. Uh supplies
are not tight, but but but these
policies on secondary tariffs could
reshape uh trading patterns a little
bit. Does that mean we are you watching
where the US sends its energy, its
commodities to O, because maybe that is
what uh White House policy is all about,
trying to export more uh more energy
assets.
that will obviously be a major focus and
uh one that can uh can soothe the uh soo
the white house if we if we are if we
are seeing seeing a pick up in in demand
for for the energy and and and it's
interesting to note right now that the
WI crude price is actually well it's
it's it's still obviously trailing Brend
which it should but at the same time
it's also where the speculators actually
are holding the least optimism about
higher prices and uh and that's I think
it's probably also part of the story
right now simply because we are in a
holding pattern we in rangebound market
which means that some of the speculative
interest from time to time will have an
in have an an impact on the market and
do we just right now seeing a a first
ever record a first ever short position
being held by money managers in WTI and
that is with the markets obviously going
up for a few days that is supporting an
extension to that move which I think is
now potentially starting to run out of
steam
>> it's Katie in in London I want to pick
up on the point that Anna made when it
comes to the ripple effects of India she
was uh uh talking about it from an
energy perspective. I'm curious about
the metals perspective. India is both a
big importer and exporter of gold and
jewelry. As we talk about 50% tariffs
getting uh slapped onto India as of
midnight tonight, what is the ripple
effect into this market or is this
something that's already priced in?
>> I think I think it's mostly an energy
story. uh obviously India is a is a
major um major trade as you say in in
precious metals but it's that the trade
with us mostly one that's going through
Europe I would say and and that's really
where we see the Swiss has been stuck in
between Iraq and a hard place because
such a big part of their their sale or
export to us is gold and we have to
remember they're not actually making all
that money they're only making a small
small margin for refining that gold so I
think this is the gold story is still uh
when it comes to trade and tariffs is
still one primarily one between Europe
and the to us.
>> Well, I'm so glad you brought up the
Swiss story because I'm curious, even
though some of those at least considered
tariffs or rumored tariffs were
ultimately pulled back and rescended by
by the Trump administration or I should
say quashed, it did certainly have a a
impact on the gold market. Do you
foresee that market getting tested again
now that we've seen it happen once?
I certainly don't hope so because it's
just creating a lot of uncertainty in
the market and uh and and when you when
you have these barriers suddenly coming
up we saw that obviously with the copper
story and we all know how that ended uh
it's been uh it's it's it's not good for
a market and especially with with the
gold when it is a key part of central
bank's reserve and and and and is
treated in a different way and than any
other commodity which is primarily just
used for for for demand towards
production and so on. So I think with
that in mind the the I think even the US
administration got a bit surprised about
the impact uh that that these
announcement had. So uh so good that
they were were removed but uh we don't
need that those kind of obstructions in
in a market that needs to be be
depending on free flowing and this kind
of triangular route between Switzerland,
London and New York.
>> Well, coming back to guy's point at the
start of the segment he made the point
that gold is the ultimate hedge right
now. or at least it seems to be from
every market voice that we speak to. So,
how do you hedge the possibility that
the hedge itself could be under tariff
pressure, supply chain pressure, etc.
now that again this has been put into
the ether?
Well, I think the the the the market is
is really um there is obviously risk
that the market is is is uh too too
one-sided at this point, but uh but I
think also we have seen for a while now
that even though there were there are
obstacles being put in the way that the
these these have been been relatively
shortlived. So I think right now we the
the the market's just basically getting
ready or getting used to these higher
levels is also central banks and uh once
we see the breakout then then we will
see that move higher. Um but we need to
take out 3450 first.
>> All right Ola Hansen Saxo Bank's head of
commodity strategy. We thank you so much
for your time walking us around the
world when it comes to that commodity
story. In the meantime had a press
conference from two world leaders.
>> Mark is currently speaking. He's talking
about critical minerals, which I think
is really interesting. Canada's got a
lot of them, the kind of minerals that
that Europe needs, the United States
needs, that China and Russia are
currently supplying. Are we going to see
a shift in that? The problem with this
is that yes, Canada's got a lot of this
stuff, but it takes a long time. We are
learning that refining rare earths is a
very complicated process. China has
spent a long time building up uh this
core competency and now has key strength
in that and is leveraging that key
strength. So yes, we can talk about the
fact that that Canada has these
resources. Making them viable and
deliverable in the near term is
something that that presents a a massive
challenge.
>> Yeah, we're talking here about a host of
a host of metals. He's talking about
nickel, cobalt, graphite, rare earths,
um things that Canada can help Europe
secure in the face of uh its previous
supply chains. No, not quickly.
>> And that's the problem. China spent 20
30 years building up its its competency
in this space and it's this is dirty
hard difficult to do a and and China has
got the lead and therefore has has the
whip hand on this in terms of
controlling these markets which I think
is really important right now and in
some ways holding the European defense
industry American defense industry
American technology industry hostage as
a result of that.
>> Absolutely. We're going to continue to
monitor that press conference um and of
course the relationship between these
two countries as they speak in Germany.
Coming up on the program though, taking
a little bit of a different angle. We're
going to take a look at the state of the
credit market in tight of record
tightness when it comes to those
spreads. Stick with us. This is
Welcome back. 8:49 here in London. This
is the opening trade. Uh our
conversation is very much dominated by
French equity markets down by 1.8% today
on the back of political risk. But let's
talk about other risks that might or
might not be out there. Let's turn to
the credit markets. Spreads may be
seeing record tightness and a price to
perfection, but there are always risks.
Could credit investors be too
complacent? For more, we're joined now
by Mahesh Bimmelingum, who's global head
of credit strategy at Bloomberg
Intelligence. Mahesh, it is very nice to
see you on set with us this morning. Can
I ask you about then what you're seeing
in credit markets? Are you concerned
that things are overvalued given how
tight spreads are?
>> Yes, I mean credit is definitely at I
mean if you look at US credit, it's like
at a 30-year tights. If you look at
European credit, we are at post 2007
tights. Uh Asia is tighter than us in
terms of raw terms. So yes, credit is
tight. If you look at it on a volatility
adjusted basis, credit is rich. Uh is it
two standard deviations rich where we
call for a turn? It's pretty close. Uh
so on all those measures, yes, it is it
is rich. But it is justified. You know
if you look at if you look at how
fundamentals are fundamentals have held
up through tariffs all credit ratios
held up profit margins held or improved
leverage ratios in control uh despite
very high interest rates coverage in
control. Uh so corporates have been
quite disciplined unlike the alternative
which is my main thesis.
>> Okay the by that you seem to get
governments.
>> So credit looks better than gubbies.
>> Oh definitely. So I think I've g I mean
there should a chart should pop up which
clearly shows that credit is at least
three times less volatile than gis I
mean so so much for the risk-free right
the risk-free is at least three times on
average
>> and depending on when you look at it
it's even four times more volatile and
think about it would you lend to a
company which makes a loss every year
and is forecasted to make a greater loss
every year going forward which is
>> So would you lend to that or would you
lend to
>> So that's the driver into into credit.
>> Sure. But Mahesh that's been the case
for a very long time. That's been the
case since 2011 in the states. So why do
you feel like the market is right this
time around for that perception?
>> I think we have a much bigger serious
issue now. I mean yes the Euro zone
crisis was separate. It's very Europe
specific. But now we have a worldwide
issue uh particularly in the west where
you got like demographics going the
wrong way, government deficits are only
going to get worse particularly in uh
economies where you got like large
welfare states and so on. So as politics
tries to make that difficult choice,
you're going to have increasing deficits
particularly in countries where they
can't print right
like the the Americans can but the
European countries cannot
>> so compared to European gies European
credit for example looks a much less
volatile asset class. Well, maybe I mean
Germany's busy talking about buying more
submarine uh sorry, Germany's busy
talking about uh
about supplying defense to Canada this
morning. We're watching pictures of that
coming in right now. So maybe John
Germany argues that it that it that it
it can spend on it side.
>> That's one exception.
>> That's one exception. But is it all rosy
or are there things to be concerned
about? I was reading a story just at the
end of last week about risks piling up
in private credit markets. Is that the
area to worry about? I think I think
that's a very good question because
public market you can track you can
follow and you can see that you know
default rates are very low still credits
are getting upgraded there are a lot
more credits going from high yield to
investment grade so all of that is fine
so where is the problem the problem is
in all these credits that cannot finance
in public markets going into private
markets
>> we're just moving the problem
>> yeah and the thing is you can't track it
So the thing is the next domino in
credit markets to fall will be in
private credit where you might get much
higher default rates than what you are
seeing in in the public markets. Public
markets default rates are true two and
>> isolate any potential risk though to the
private market so it doesn't have a
systemic ripple.
>> Why why is it not have a systemic
>> I'm asking that's the argument that's
the argument private credit bulls are
making.
>> Correct. So the so the logic is that
in terms of size particularly in Europe
private credit is small in the US like
it's about I mean we don't have accurate
numbers for this in the US it is about
like a trillion but compared to public
markets is still small
>> all right Mahesh bolingum global head of
credit strategy for Bloomberg
intelligence joining the program this
morning we thank you so much he was
talking about the crisis in gies let's
go to one of them right here in Europe
prime minister Francois Beu has called a
confidence vote that may topple France's
government as soon as next month. Now,
the move prompted a sell-off in French
assets as investors hedged for even more
political uncertainty. Three political
vote against the motion. Bloomer's
Karolene Conan covering the story for us
in Paris. Karolene, the prime minister
has admitted this is a risky move, could
cause more instability. What do we know?
>> He's testing the waters, but these are
clearly very dangerous waters. is trying
to anticipate the social anger by
calling this vote of no confidence on
September 8th, which is 2 days before
some far-left groups have called for a
general strike in France, threatening to
block the entire country on September
10. the entire summer. Franu made a
point about not taking any summer
vacation, trying to explain his budget,
trying to explain why it's important for
France to save 44 billion euros in the
next budget. But this doesn't really
seem to have paid off. And last night
immediately after his uh press
conference the national rally of
Marinopen and the far left immediately
said they will not support Franceu for
this vote of confidence. The socialists
were a bit more vague and in fact this
is what the government was hoping for
when we spoke for example with the
finance minister Eric Lumbar in July
when this budget was initially proposed.
There are probably more possibilities to
reach an approval with the Socialist
Party. They are still a party in the
opposition, but they allowed the budget
to pass for 2025 and if we have a fair
discussion with them and we will have a
fair discussion with the Socialist
Party, hopefully they can support the
government for for the budget. But
again, we will talk to all parties and
we hope to have a wider support.
>> But now the socialists are saying they
might not support the confidence of
Franceu. So chances of a government
collapse on September 8 are very high.
>> Yeah. And then what comes after that I
guess is the critical question.
Caroline, thank you very much indeed.
Caroline Kunan, are we heading towards
fresh elections or do we just get
another government? I think is the
question. The market's kind of beginning
to work its way through on this one. I
busy morning. Much more busy than maybe
we anticipated. Is tomorrow about this
or is tomorrow about Nvidia? That is the
key question,
>> right? Well, Nvidia is still some time
away, isn't it? Because after the market
on Wednesday, so maybe we have another
day to talk about Cook and France.
>> The party continues. That does it for
the opening trade. The pulse is up next.
We'll have it all covered. Stick with
us. This is Bloomberg.