[Music]
news makers and market movers.
This is the pulse with Francine Loqua.
>> Well, good morning again everybody and
welcome to the pulse. I'm Joanna Bersete
in Dubai in for Francine Laqua today.
Now, President Trump has moved to ou the
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 the
action. Bloomberg's Christy Gupta joins
us for the latest. So, I guess Criti,
the question then becomes whether the
president actually has the legal grounds
to force Lisa Cook out of her seat. her
lawyers don't seem to think that he
does.
>> It's a tricky tricky situation and it's
a very high bar, one that is frankly
unprecedented simply because there's
already investigation that's been opened
into this. So there's a couple of
parties here that you need to keep in
mind. So of course Lisa Cook uh the
allegations against her as you pointed
out is that she has for falsified
mortgage documents citing that she has
two houses, one in Michigan, one in
Georgia, and that both are her primary
residence. And that when you say
something has a primary residence in the
states comes with certain tax benefits
depending on where you're located. So
the allegation here is those falsified
mortgage documents actually helped her
uh kind of commit uh something adjacent
to tax fraud. Again the allegations that
being said this is something that
already the federal housing finance
agency has been looking into. The DOJ
has already open an investigation into.
So now that these investigations are up
and running, the bar to single-handedly
fire Lisa Cook only with the power of
the executive office is a tricky one
because you then have to point and kind
of prove that the investigations
themselves are either not doing their
job, have come up short, or that there
was no other recourse. And that's kind
of the the fight that uh Lisa Cook is
racing to have.
>> Yeah. Okay. So, there's, I guess, a
dispute going on around her position on
the board of governors. Uh, but not so
long ago, we had Adriana Kougler also
step down from her seat. So,
potentially, we're looking at one, maybe
even two seats on the board of governors
uh that President Trump may need to
fill. Is this going to have a bearing on
the direction of Fed policy from here?
Well, the thinking is that it would make
it a lot easier for Donald Trump to have
a four-person majority when it comes to
the board of the Federal Reserve.
Remember, it's not just Lisa Cook that
he's got out for. It's Jay Powell as
well, who he has very uh publicly stated
that he wants to replace. Now, this is
going to be significant simply because
you want this kind of easier monetary
policy, but again, that's not a
one-person game. So the thinking is or
at least the approach seems to be that
he can do with the Federal Reserve Board
what he's done with the Supreme Court
which is ultimately pack it with doves
and pack it with people who align with
themselves. Whether that's actually
doable given that some of these terms
end as far or as early as 2026 to 2038
and Lisa Cook's case, that's yet to be
determined.
>> Yeah, really crucial for market
direction from here. Uh Bloomberg's
Christy Gupta, thank you for giving us
the latest. Well, President Trump uh has
other threats as well. He's threatening
new tariffs and export restrictions on
advanced technology and semiconductors
in response to digital services taxes
imposed by other countries. Let's bring
in our chief Asia correspondent now,
Rosen Mat. Good to have you with us. Uh
so maybe let's just start uh with you
know for the region quite a significant
economic threats coming through from
Trump and when he talks about leveling
these extra tariffs or uh imposing
export restrictions at countries that
have applied these digital services acts
uh you know the mind goes straight away
to Europe.
>> Well that's right in fact this could
impact countries around the world. You
can see the impact in fact in markets in
Asia today in Korea and Taiwan. This
concern about yet more penalties on tech
companies you know in the region
restrictions on exports on
semiconductors because he really really
doesn't like digital services taxes. So
what this tells us is two things. One is
that Donald Trump keeps moving the
goalposts on trade. You think you've got
one thing sorted and another thing
immediately crops up. Be it tech, be it
furniture or something else. And the
second thing is he really does zero in
on this digital services tax. He's been
been doing that for many years and he's
had some success. I mean Canada dropped
plans to have such attacks, but there
are these taxes on a couple of dozen
countries around the world. And what
they're struggling to do is is find a
way to to get this, you know, their
hands on some of the income from these
companies that don't have bricks and
mortar operations in their countries,
but they're getting quite a lot of
revenue from those countries, hence
these taxes. And Donald Trump is
obviously turning his eye back to those
taxes and saying, "I'm going to come for
you because of it." The question is, is
it asymmetric response? So, does he come
for tech companies in the same country
as the tax or something different? We
simply just don't know.
Yeah. Yeah. Again, adds to the
uncertainty. But let's talk about maybe
one of the existing trade deals, the the
the one that was inked between US and
South Korea. The new South Korean
president had a meeting with Trump. Uh
it seemed to have gone well, but again,
the uh South Korean president was not
able to extract any further concessions
from the US or improve the terms of that
deal.
>> Well, that's right. So the underlying
trade deal is is still there and he
didn't get any joy there but he did get
through the meeting and he himself said
that for him that was quite a result. He
said afterward he was a bit worried
about a Volon Zalinski moment which is
of course that famous dust up in the in
the Oval Office earlier in the year
between the leaders of Ukraine and and
Donald Trump and he avoided that. He
said few um he also said that he'd
studied Donald Trump's book the art of
the deal. So he came in quite strong
with the flattery. He was flattering
Donald Trump for his peacekeeping
efforts around the world. Korea's agreed
to buy more planes, more Boeing jets.
They've made agreements on ship
building. So, there's a lot of stuff
there around investment that will
benefit the US. And so, the meeting
seemed to go pretty well all things
considered. Yes, he didn't get any
movement on the tariff rate, but also he
came out of that meeting pretty
unscathed, which was probably a result
in itself. And also there are some of of
these investment deals including on the
ship building side that will benefit
Korean companies. So for for the new
president of South Korea probably the
best result possible.
>> Yeah maybe uh you know the follow-up
books to the art of the deal is going to
be about the art of flattery. Rosalyn
thank you so much for joining us. Our
chief Asia correspondent Rosalyn Mat.
Okay let's return to the markets. I'm
joined now by Christian Miller Glistman
head of asset allocation research at
Goldman Sachs. Good to have you with us
on the show. There's so much to discuss.
Uh but first I want to bring you to
something that you wrote about in in
your research note and you referenced
the fact that uh these markets have been
in a Goldilocks regime because the
markets are pricing in for a more dovish
Fed. So rate cuts are beginning to get
more priced into the curve. But at the
same time the earnings profile out of
American companies remains quite robust
and quite resilient. Do you expect this
Goldilocks regime to continue?
Yeah, know I think we we had this
goldilock summer to some extent uh with
the holidays and it does seem like we're
getting the first shocks to it. I think
you mentioned France, you mentioned Fed
independence concerns. I think we'll
have to deal with the US data as it
comes in. So I think it would be much
tougher to maintain that type of
Goldilocks flavor in markets also
considering how far we've come like
there's been major risk premium
compression. There's been valuation
expansion, volatility reset, re-risking.
So I would say that um not to to kind of
follow the usual seasonality pattern
because September tends to be always
quite weak, but I think it will be quite
a difficult return after the summer
holidays and I'm not sure that we can
sustain that type of goldilocks momentum
we've had.
>> Yeah. So let me ask you about the latest
Fed developments. Uh the Trump
administration or Trump himself meddling
interfering with with the Fed. uh
certainly most most definitely weighing
in on what he thinks the Fed should be
doing. In what way will that extra risk
premium be showing up in financial
assets if at all?
>> Yeah, I mean we already have seen a
significant dobbish repricing from the
Fed. Um I think Jackson Hole if anything
on Friday turned out to be somewhat more
dobbish than some people were fearing.
So from that perspective you got a lot
of relief um with the Fed already
shifting into a more dovish direction.
So now if you kind of see even more
dovish pricing um there is a fear that
uh you you kind of have to rebuild term
premium um and this Fed independence
usually and and at the same time the
fiscal concerns usually turns up in the
back end of the curve in longer dated
bond yields. So what could happen is
actually that even though the front end
comes in, the back end won't and
possibly even moves higher. You get
steeper yield curves and that kind of
mitigates a bit like the positive
impulse you could say from a more dobish
fed.
>> Yeah, we were noting uh earlier on that
230s is at the steepest level it's been
since 2022. So there's certainly a
steepening trend going on. I want to
take you to volatility indicators
though. VIX obviously is a metric that
we watch closely still very low very
subdued levels. Why is the VIX so low
when you consider the upcoming risks
around policy around Fed decision-m
around tariffs around inflation? Why is
the VIX so low?
>> I think there's two problems. Um first
of all you've had this Goldilocks
momentum and the Goldilocks momentum
generally is good for anchoring
volatility. On top of that, you
mentioned it earlier, part of the
Goldilocks momentum has not been that
the economy has been doing really well
because actually labor markets in the US
have been softening. It's really been
earnings and in particular a few very
specific companies, the Magnificent 7,
some of the financials that have been
leading the market higher and that
creates dispersion that actually means
that the correlation between stocks is
very low. So that also anchors uh
volatility. So you have a combination of
both um goldilocks and dispersion um
being very high um correlation being low
between stocks that anchors volatility
and that makes it incredibly expensive
to be long volatility uh strategies
being long the VIX being long options
and and the momentum obviously has been
positive so people have been holding off
from buying hedges but once the momentum
turns that can quickly return uh the
hedging demand so from that perspective
I wouldn't necessarily treat the VIX
levels as forwardlooking at this point.
>> Yeah, it's a good point because if you
do want to hedge your portfolio, let's
say you're concerned about what's going
to happen in the next couple months,
typically these hedging trades tend to
be quite negative carry, punitive for
your portfolio. Are there any hedges out
there that you would recommend to
clients to start considering that aren't
as punitive or aren't as negatively
carrying?
Yeah, I mean we've written quite a bit
about this Goldilocks regime and to
break out of that often takes a bit. So
like a few weeks ago we were we were
saying don't fight the Goldilocks regime
by essentially being uh kind of long
volatility buying puts. But potentially
what could make sense is to replace
existing cash equity holdings with call
options. um which means that you retain
the upside optionality but you're a bit
more protected to the downside and
you're also taking advantage of the
cheap volatility or you have to look at
spreads um you can look at put spreads
credit spreads uh like payer spreads um
but I think you have to be a bit more
focused on mitigating negative carry and
obviously when you're in a goldilocks
regime what we always say the first line
of defense is diversification so rather
than hedging maybe it makes sense to add
selective defensive exposures within
equity which have been majorly lagging
um like low volatility stocks,
infrastructure stocks have been majorly
lagging. So you might be able to
diversify some of the equity risk
without actually introducing negative
carry.
>> Yeah.
So that on that point of
diversification, I remember back in
April when the US exceptionalism thesis
was being tested, people started pouring
money back into European equities. And
of course, you fast forward to today and
you're getting this massive sell-off in
in French assets that's uh reverberating
across the whole continent. you see the
growth profile, growth projections for
Europe also being trimmed down as well.
Uh is there any merit in still hanging
on to that trade and being overweight to
European equities versus US or has it
run its course?
>> I think the international
diversification theme is not just about
Europe. I mean think about what happened
in China in the last few weeks. China
equities have done fantastic. Um so I
think you want to think about
international diversification as a as a
global theme and I think that will stay
with us. I think in the coming months in
the coming years people will try to deal
with US asset dominance in their
portfolios and not just equities but
also bonds. But to your question now I
think we're dealing with a difficult
return um after the summer holidays for
Europe because you on the one hand you
you you kind of have the French
elections and on the other hand
positioning has somewhat picked up quite
a bit. The leadership within Europe
however has not been that that bad in
the sense that it's been like stories
that have been fundamentally backed. Um
so banks for example um so we we just
need to see if the French situation
really escalates. Our expectation would
be that the government holds together.
There might be a new uh kind of
caretaker coming in but if there's new
elections of course that would be a
major shock to European risk right now.
Yeah, I guess you know final quick
question for me from me is uh is the
most important event this week not the
Fed, not inflation data but actually
Nvidia earnings tomorrow because that's
going to determine the trajectory of US
equities from this point onwards given
how important and how much leadership
Nvidia has these days.
>> No, I think you're right. I think all
the Magnificent 7 matter a lot and the
market has definitely over the summer
since the Q2 earning season has
increased excitement um around AI again.
So if you see any sign in the Nvidia
earnings that this excitement um is
unfounded, it could definitely add to
the pressure considering how much
positioning we have and I think the
hurdle rate is high. I would say once
you are in these kind of clusters um I
think you really need to deliver
something in those earnings that that
convinces the market that it can
extrapolate a negative factor um that's
something that that will will hurt the
stock for multiple quarters because it's
a compounder um so so I I I think the
hurler rate is quite high but but I
agree um any type of magnificent 7
earnings considering the the narrow
leadership the concentration on those
stocks is is a is a real event that that
might actually rival a lot of the policy
events that we are we are having.
>> Christian Miller Glistman, head of asset
allocation research at Goldman Sachs.
Thank you so much for joining us. Uh and
just a quick line coming through. Abu
Dhabi's Lunate has taken a stake in
Brevan. They've committed $2 billion. It
marks a major milestone for Brevin
Howard, which opened an office at ADGM
in 2023 and continues to grow and now
have received this $2 billion commitment
in a newly created investment platform
in the Emirates. So that is uh some
hedge fund news coming through from Abu
Dhabi and of course I'm over here in
Dubai. All right, coming up, French
Prime Minister Franuis Beeru calls a
confidence vote in his government over
planned budget cuts and tax raises.
Details next. This is Bloomberg.
French Prime Minister France Beeru has
called a confidence vote over his budget
proposals that could topple France's
government next month. The move prompted
a sell-off in French assets as investors
hedged for more political uncertainty.
Three political parties immediately said
they would vote against the motion, but
Beeru said the vote must take place as
he tries to make cuts. Let's get more
with Bloomberg's Kolene Konan in Paris.
I guess the question that I've been
asking is why is he calling this
confident vote given he's unlikely to be
successful and given his approval
ratings are the lowest of any prime
minister in Macron's term as president
>> and that's a very good question Jumanna
in fact uh he's trying to anticipate the
social anger that was supposed to start
a couple of days later on September 10
because a few far-left groups have told
on social networks to totally block the
country from September 10. Even the
finance minister Rumba was saying on the
radio this morning this idea of trying
to block the country perhaps a new kind
of yellow vest movement is very toxic.
So that's why Franu tried to anticipate
this social anger. He knew he would face
some votes of no confidence anyway on
his budget later in September and in
October. So he's trying to move ahead by
by testing the waters before, but it is
a very very risky move. And in fact,
last night, immediately after uh he said
he would call this vote of no confidence
for September 8, we heard from the
national and the far-left wing saying
they will vote against Franceu. The
socialists were a bit more vague, saying
they will present an alternative budget
over the next few days, but at this
stage it is unthinkable. So they will
also give their confidence to Franceu.
So at this moment in time uh the chances
of a government collapse on September 8
are very high.
A
>> and yet it's been such an arduous
process even selecting the prime
minister to begin with. Uh at what point
do you think President Mron will have no
choice but to call yet another round of
of parliamentary elections?
President Mron has repeatedly said that
he will not resign and in fact even the
national rally of Marin Nepen has said
that her goal is not for Mron to resign
but at the moment she's calling for new
snap elections. As you know the snap
elections were in July 2024. So
technically it's been more than one
year. Technically Mron could possibly
call new snap elections if he wanted.
Now the question is what will be the
market reactions to that if that
happened at the moment we've seen since
last night the reaction on the French
assets the CAC 40 down again this
morning down one and a half% yesterday
at the close and of course the pressure
on the French bond market with the
spreads widening
with the German bonds and in fact we
could technically see uh the yields
going higher than Italy according
According to the finance minister, if we
face another political chaos in France
in a couple of weeks time,
yep, Bloomberg's Caroline Kunan,
certainly a market uh a big market
reaction today we're seeing in French
assets across the board. Thank you so
much for the overview there. Now, the
Trump administration is working to halt
development of another offshore wind
project, this time near Maryland. It's
the latest escalation in the president's
war on wind power and it comes after
officials on Friday ordered work to stop
on an offshore wind farm by Denmark's
Orchard that is 80% complete. Let's get
more with our energy and climate change
reporter Will Matthysse. Uh Will, uh so
Trump in the past has characterized wind
turbines as birds killing eyes. I guess
the bigger question is why is he so
against wind farms in particular? It
can't just be on aesthetic grounds.
I mean, it's hard to say exactly why.
He's long hated uh wind farms,
particularly offshore wind farms. He was
uh lobbying against one that was built
off the coast of his golf course in
Scotland, uh saying, you know, it looked
bad and he maybe still thinks they look
bad. And he also says that he doesn't
like the economics of it. He'd rather
gas plants. and his administration has
been favoring gas and coal um and trying
to stop the expansion of wind.
>> Meanwhile, yesterday we were talking
about the other uh company that he set
his sight on Orstead uh and again you
know uh interfering there with their own
offshore plans in the US. Uh but the
company has come out and said that they
still plan to go ahead with this $9.4
billion share sale trying to reinsure
investors. But of course, we had that
major pullback yesterday of almost 20%
in the stock price.
>> Yeah. I mean, the management of ORS is
here in London today. They're scheduled
to be in in Frankfurt later this week.
They've said they are going ahead with
plans to do this share sale and their
biggest investor, the Danish state, says
they are still backing it. Think it's
the right plan. So, we'll see uh what
the investor appetite is given this huge
uncertainty for them with, you know,
this one offshore project in the US
that's already been stopped and they
have another one that could be stopped
as well if the Trump administration
decided to do that.
>> Yeah, Bloomberg's Will Meats, thank you
so much for the latest on Trump and
WinForms. Also making news, Elon Musk is
suing Apple and Open AAI, accusing the
two companies of thwarting competition
from other chatbot makers seeking
billions of dollars in damages. The
lawsuit argues that Apple's decision to
integrate OpenAI into the iPhone's
operating system inhibits rivalry and AI
innovation as well as harming consumers
by depriving them of choice. Open AAI
says the move is consistent with Mus
quote ongoing pattern of harassment. The
case sets up a high stakes showdown
between the richest person on the planet
and one of the world's most valuable
companies. And coming up, we speak to
geopolitical strategist Cena Forom about
what's holding up a meeting between
Vladimir Putin and Ukraine's Vadimir
Zalinski. That's coming up in the next
section. This is Bloomberg.
Good morning and welcome to the pulse.
I'm Jamaichi in Dubai and these are your
top stories. President Trump moves to ou
Fed Governor Lisa Cook over allegations
she falsified mortgage documents, but
Cook refuses to quit.
Digital tax backlash. Trump threatens
fresh tariffs and export restrictions on
advanced technology, blaming digital
services taxes he says discriminate
against US tech giants. Plus, French
assets sell off as Prime Minister
Franuis Beru's decision to call a
confidence vote continues to ripple
through markets.
Now, President Trump says Vladimir
Putin's personal dislike of Ukraine's
Vladimir Zalinski 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 planning was
underway, 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.
>> Joining me now is Tina Forom, founder
and geopolitical strategist for Fordom
Global Foresight. Uh really good to have
you with us, Tina. It's amazing how
quickly the news flow just moves on. A
week ago, the most important thing
happening was this Alaska summit. Uh,
and we got a full spectacle. We got
quite literally a red carpet carpet for
President Putin being rolled out. You
had Zalinsky visit the Oval Office. He
was wearing a suit. The EU leaders came
along. So, the full spectacle. But I
guess the question is, has there been
any significant progress in terms of
taking us one step closer towards a a
peace deal?
Well, you're right to use the word
spectacle, Jima. Um, it it really was
just full of international relations and
diplomatic signals. Um, the the, you
know, the the team visit to the White
House by the seven European leaders, you
know, biggest in a hundred years, the
red carpet rolled out in Anchorage and
everything else. We are back to square
one. However, apart from one very
important distinction, which is that
Vladimir Putin has come in from the cold
and has been rehabilitated
um if he if he ever was on the on the
wrong side of things um with President
Trump uh without having to budge or make
any concessions. But this puts the peace
process in a very awkward position.
What do you think an eventual peace
settlement might look like? I mean, we
know that President Trump is very
focused on getting this across the line.
We can question his motivations. Maybe
it's because he wants to get the Nobel
Peace Prize, but for whatever it is,
he's very focused on getting this done.
What do you think a potential settlement
could look like?
>> Well, I I think that um President Trump
is quite sincere. I mean, he talks
repeatedly about wanting to stop the
killing. Um and of course I think he's
sincere in wanting the Nobel Peace
Prize. Only four US presidents have ever
received it. So um he is committing a
great deal of of his political capital
to bringing these leaders together. But
there are limits to what leader level
meetings can accomplish. Even the Korean
War armistice required, you know, two
years of technical meetings. And so what
we don't see is very much muscle being
um brought into making all of that
happen. But can we get anywhere without
this trilateral that President uh Trump
wants? I mean, there's a lot to be said
to Trump's willingness to kind of, you
know, cast aside diplomatic conventions
and and stop tolerating the layers and
layers of of, you know, bureaucracy that
usually um are involved in these kinds
of negotiations. But it's not right to
say that Putin won't meet Zelinski
because he doesn't like him. um it is
more to do with the fact that he doesn't
want to be seen in a lineup with a
leader that he regards as illegitimate.
Now, why is he illegitimate in in
Putin's eyes? Because Russia and Putin
in particular do not regard Ukraine as a
real country, a sovereign country. And
that's why we are in this place to begin
with.
>> Yeah. you know, in the absence of moving
along with these discussions, do you
think that President Trump's patience
will actually run thin and he will end
up following through on some of those
threats that impose extra sanctions on
on Russia and Russian exports?
>> So, Trump does lose patience and becomes
frustrated and and that could really be,
you know, brought in as a a meaningful
stick. Um he certainly provided Russia
with a lot of possible carrots,
cooperation in the Arctic um and uh
other kinds of of business deals. But
this is where I think what we are
observing both with the behavior of
Russia and also with Israel is
geopolitical impunity. Both Netanyahu
and Putin are not concerned about the
kinds of punishments or penalties they
might receive from the United States.
And my argument is they are both going
to push for as much advantage as
possible during this window. And it's
easier to ask for forgiveness than
permission.
>> Yeah. Since you bring up Israel, let me
just bring you to some developments in
in this part of the world. uh the
Lebanese government's decision to disarm
Hezbollah. Yesterday, we got some
comments from the Israeli prime minister
saying that they support this decision.
It's quote a momentous decision from
from their perspective and that they
would think about withdrawing from
southern Lebanon so long as the
government follows through. How
significant do you think this is, Tina?
>> Well, I was surprised to to see those
words, you know, being attributed to to
Netanyahu in the first place. Um but I I
won't take them seriously. It may be the
kind of statement that can be made on
the expectation that it won't actually
happen. Um but but we have to remain
hopeful, don't we? Or we we we we
wouldn't be able to get out of bed in
the morning that that progress can be
made here. And if Lebanon is serious
about disarming Hezbollah, um that would
be a plus. But there is there is nothing
there are no constraints that require
Netanyahu at the moment to do anything.
>> How closely linked do you think what
eventually ends up happening with
Hezbala disarmament is to the Iran file
and the Iran portfolio? Because again I
I spoke about this at the beginning of
the interview. the news flow moves very
quickly and people have sort of moved
away from the Iran Israel war and the
fact that US actually got involved in
that war. Do you see that portfolio that
file regaining attention and momentum
once again with the Trump
administration?
>> I mean Trump's sort of got foreign
policy ADHD, hasn't he? So at the moment
he's all about the Fed. We we just had
the Jackson Hole meetings. um he is
committed, it seems, to really testing
the limits of executive authority um in
the United States. Uh but he may very
well come back to to Iran. Um I think in
very long horizons, right, to you know,
bring in the name of your show, but uh
um conflicts end when one side gives up.
Um and there is a great deal of
strategic patience uh between all the
actors in in the Middle East conflict.
They are in this for the long haul. And
so when I was thinking about Hisbala and
um incentives and uh the you know the
kind of comparative decline of Iran's
power um I thought actually of of uh of
Ireland and the peace process there. And
that's a great example of of a peace
process that involved a great deal of
political capital from all sides
committed to making it happen after a
very long period of time and a and a you
know a high toll um both in in in blood
and in treasure. And the question
becomes then have we reached that point?
Um, as you know better than anyone, um,
the, you know, Hezbollah has caused a
great deal of pain for the people of of
Lebanon and yet it still retains
domestic support. So, you know, who who
is going to make that call and what do
they get in exchange? So, conflict
resolution is slow, painful,
surrender first and technical details
negotiated
over years. We have to be open to signs
of hope. I think this is is a good one.
But, you know, show show me.
>> Yeah. Tina, always good to talk to you
and thank you for the horizon's punt
pun. I appreciate it. Tina Forom, uh,
Forom Global Foresight, a geopolitical
strategist and founder.
Now, President Trump says the US has
more leverage over China on trade than
the other way around. He cited airplane
parts as a key item Washington has to
counter Beijing's restrictions on rare
earths. Meanwhile, the Wall Street
Journal reports a senior Chinese trade
negotiator is heading to Washington this
week for what could be the first round
of negotiations in the US capital. The
report comes as both sides extend their
pause on higher tariffs through to early
November.
And the EU finally agreed a trade deal
with the US in late July under which
most European products sold in the US
will be subject to a 15% tariff. That
rate has given European businesses some
sense of predictability. But there's
still many challenges. Let's get more
with Bloomberg Charlotte Hughes Morgan
in Amsterdam. So you've been having
conversations to many of these European
companies. I would have thought that
maybe with some clarity uh around the
trade deal and what the tariff is that
these companies would be feeling better
about their prospects. what is in the
mood?
>> I mean, I think there is an element of
relief among some of these um business
leaders that we spoke to around Europe.
We spoke to people across sectors,
across countries, but I think it's more
realistic to say that there's gloomy
resignation. I mean, so many of the
people we spoke to said, you know, this
is at least we know what the rate is
now. It's 15%. But it's not ideal. I
mean, there are still so many difficult
decisions that these businesses are
having to make. decisions around
pricing, how much of the tariff costs to
pass on to their customers, long-term
investment decisions, and there is still
lingering uncertainty and kind of
caution among these business leaders.
You know, will Trump stick to the 15%
rate? There's been so much back and
forth. There have been promises of
exemptions for for certain sectors. So,
there is still uncertainty even though
we have that 15% rate. And we've got to
remember, I mean, so many of these
companies have spent years building up
their partnerships with US customers.
Their supply chains are really complex.
Um, and so it's really, it's a real
headache for a lot of these business
leaders.
>> Yeah. I guess for many of these
businesses, they have the choice of
either swallowing the extra cost,
passing on to consumers, or finding
different markets to sell their products
into. How are these businesses adapting?
So, it's a really good question and it's
a really complicated one to answer. It
often depends on the sector, but I think
a lot of the people we interviewed said
pricing is key. You know, how much can
they pass on of these extra tariff costs
to their to their US customers before
those customers look for alternative
sourcing and how much as a business can
they realistically absorb and continue
to function. And I mean these are the
questions that are that you know these
these businesses are facing every day.
And I think we we've had a mixture of
responses. I mean some um German
companies we spoke to said actually okay
we're going to commit to the US. We're
going to spend a lot of time a lot of
money building up our operations there.
So essentially you know Trump Trump plan
is work Trump's plan is working in that
um instance. Others say look no that's
too expensive for us. We need to commit
to having operations in Europe and we'll
continue to export to the US and we just
need to work out how much our end
customers are are willing to pay and
obviously goes without saying that then
trickles uh down to the US US consumer
the end consumer and those prices will
have to rise um but it's not something
European leaders want to do but it is
just the nature of the way the modern
you know supply chains are set up.
>> Yeah. Well, how to bring it all the way
back to the beginning of our show
talking about the Fed and Fed
decision-making with those higher
prices? Bloomberg's Charlotte Hughes
Morgan in Amsterdam. Thank you so much.
Now, let's turn to the credit market.
Spreads may be seeing record tightness
and are priced to perfection, but could
credit market investors be too
complacent about potential risks? For
more, we're joined by Mahesh Balingham,
a global head of credit strategy at
Bloomberg Intelligence. Mahash, taking a
look at how some of these IG high yield
spreads are trading. You have to go all
the way back in some cases as far as
1995 to get to this level of spread
tightness. Why is credit trading so
tight given how many uncertainties exist
in the global economy right now?
>> Right. You're right when you say that
you know for example US credit is
trading at you know 1995 levels and
slightly uh okay picked up uh European
credit is trading you know near 2007
tights. Asia credit in raw terms is
actually tighter than both of us. Uh so
the thing is yes credit is tight. Credit
is rich once you normalize it by
volatility.
But the point is why has it that why has
that sustained? One reason is that
credit fundamentals have held up very
well. Now you you've been through tariff
season but through tariff season you
credit earnings more importantly credit
uh ratios you know in credit we are not
obsessed with you know the upside but
more importantly we need uh companies to
pay down and you've seen you know
leverage ratio interest coverage ratio
uh you know debt to equity all of those
uh hold up but then there is a second
reason which is the chart you see on the
screen which is in terms of the
alternative credit clearly beats uh the
the the main alternative which is rates.
As you can see, credit has been since
post pandemic it is a one is one/ird
volatility or rather rates are three
times as volatile as credit. So if you
are investing in fixed income credit has
to be your dominant you know riskreward
uh profile asset. It's sort of been the
safe haven.
Yeah. So all adjusted returns are are
are are there uh preferential to other
fixed income instruments. Uh but look
looking ahead
>> in an environment where US growth has
started to falter and even you know you
had the Fed chair uh reference it last
week
>> what does credit do? It will be
difficult to sustain this level of
tightness in an environment where the
global macro backdrop is weakening.
>> Yeah. Uh so of course the lower parts of
the credit spectrum are very sensitive
to let's say a recession and so on. We
are less sensitive to inflation but more
sensitive to grow to uh a recession
because you know creditworthiness drops.
As of now it is okay but we need to keep
an eye on what is happening to
particularly the US and European growth
rates. Also we are sensitive to what is
happening to you know uh governments and
their policies and so on. So for example
today highly topical uh we have the
French issue and as a result credit
given that it is very tight was went
wider by about two base points on main
and about eight eight base points on
crossover. Yes compared to what has been
happening in other asset classes this
may not be a lot but the point is there
is room to give given how tight spreads
are.
>> Yeah that's a good place to leave it.
Mash Bingham global head of strategy for
Bloomberg Intelligence. Thank you so
much for bringing us your report. Now,
coming up, Fed Governor Lisa Cook says
she will not quit after President Trump
moves to fire her. We'll look at the
market implications next. This is
Bloomberg.
UK grocery prices edged up in August as
bad weather and poor harvest exacerbated
the strain of higher operating costs
hitting supermarkets. The British Retail
Consortium says food inflation rose to
4.2% from a year earlier. That is the
highest level since early January 2024.
Joining me now is Charles Allen, global
retail research analyst at Bloomberg
Intelligence. So 4.2% food inflation. Uh
these figures paint a very difficult
picture for the UK food markets here.
>> Yeah, good morning. Um I think it's
worth remembering that food inflation is
never actually that bad for the
retailers. They continue to get cash in
through the door and so on, but it is
bad for their consumers. And in
particular, it encourages consumers to
spend less on other things because if
all your extra you have to spend extra
on food, you have less to spend
elsewhere. So that's
>> right. Discretionary versus
non-discretionary. Yeah.
>> Yes. Exactly. I mean and I I think what
we you know there have been fears of a
UK price war. Um and we saw in the
earnings which you can see in the chart
there that the the earnings estimates
fell off very very sharply in March on
those fears of the price war but as
inflation has picked up subsequently
they haven't really dropped again and I
think that we can you know people are
more confident that any cost increases
can be absorbed by the extra revenue
everyone is getting.
>> Yeah. Okay. So, have supermarket
strategies been hit by this trend or
have they been able to pass on these
costs to consumers?
>> Well, yes. I mean, that's one reason why
inflation is is continues to go up. But
I think what we've particularly seen um
is that obviously there's a change in
the mix. You have to continue to have a
very strong focus on value. Um and we
see that with things like Aldi price
match and a lot of promotional activity
mostly funded by suppliers. But in
addition to that there are be consumers
do take treats from stores. So some of
the topof the range um lines have also
done well because people are not eating
out so they treat themselves to
something from the supermarket. So,
focus on value, but also making sure
that consumers have treats when they
want them.
>> Sounds like my kids are trying to get
treats, extract treats when they want
them.
>> Charles Allen, global retail research
analyst at Bloomberg Intelligence. Thank
you so much.
>> Well, let's get more on one of today's
top stories. President Trump moving to
fire the Fed Governor Lisa Cook and an
escalation of his attack on the central
bank. Cook has disputed Trump's
authority and is refusing to quit. We're
joined now by Morm Konam, a co-editor of
Bloomberg's Markets Today blog. So,
we're seeing a bit of an impact across
US assets today. A dip in the USD uh US
Treasury, the curve is steepening.
Equity futures slightly in the red. Do
we expect this to continue?
Well, yeah. I think the the key thing is
what that move really means in terms of
the US president's sort of intentions
for the Federal Reserve. And he he's
made it very clear that he wants to see
them taking a more doubbish approach to
monetary policy. And so if that is the
ultimate consequence of this, um that's
what we're seeing reflected in in the
Treasury market today. We're seeing
yields actually falling slightly over a
shorter end of the curve. Um but at a
longer end of the tur curve they are
elevated because of course more cuts
longer term could feed into inflation
expectations and that's something the
market seems to be sounding a sort of
voice of concern about. Um and I don't
think that anything um is going to
particularly change that today. um
particularly as we're also seeing it
carried across in other regions although
there are also um localized um issues
going on there such as in France that's
affecting you know European yields um
and so I think overall you know we're
seeing the dollar weakening and that
also does um support other currencies um
and so it's a very just riskoff um
picture today broadly overall
>> yeah it is it is riskoff and you bring
up France and keeping a close eye on the
on the price action today you've got the
Kahon down 1.7%. You've got 10ear French
German spreads back up to 78 basis
points. So almost back to where we were
uh in April. Uh how is the political
uncertainty expected to hang over some
of the French assets that I just
referenced now in the coming weeks?
>> Well, as you mentioned, you know, the um
you know, French stock exchange is the
weakest at the moment in Europe is
dragging down um stocks across Europe
and particularly in the financial
sector. So you know banks like um so
general and um credit alcohol are are
lagging the stock 600 um and that is you
know with we're seeing those um uh
yields higher um and you know that has
implications for the cost of borrowing
um so that's not going to be good for
financial stocks like across the region
um and we're also seeing those you know
those divergences between between
countries and we're seeing in the UK as
well though and again there's a little
bit of catchup perhaps from what
happened in Europe what's happening in
Europe. Um, but there are also concerns
about the UK's fiscal situation ahead of
the autumn budget. And we're seeing um
the yield curve here actually, you know,
at it at its widest, I think, in in
about um eight years. So there's there's
quite a bit of concern and fiber in the
market um across the region, you know,
as well as in the US. Um, so I I'm not
sure that specifically, you know, the
French situation is is impacting, you
know, all stocks, but it it is certainly
um hurting those the most today.
>> Yeah. Just a quick one on on euro. It's
holding up despite these uncertainties
and perhaps because markets are not
expecting any further imminent easing
from the ECB.
>> Yes, the euro euro is holding up. I
think we had expected there to be some
weakness. Um, it has seen a bit of
recovery. I think um you know the
interest rate cut um picture going
forward um you know is going to be key
there. Um I think against the pound it
is a little bit weaker this morning. Um
the pound's got a few things going on
for it today. Um and of course we've got
to really look at though that in the
context of the dollar. Um so the euro is
probably benefiting from some of that
dollar weakness as is the pound. Um you
know rather than it being anything
specific about the um euro itself this
morning.
Yeah, makes sense. Today is a day of
dollar assets being sold off as we spoke
about. Mirana Konam, a co-editor of
Bloomberg's Markets Today blog. Thank
you so much. Uh well, that wraps up this
edition of the pulse. Up next is
Bloomberg brief. Stay with the channel.
This is Bloomberg.