[Music]
It's 5:00 a.m. in New York City. Good
morning. I'm Danny Berer with your
Bloomberg brief. Here's what you need to
know. The Trump Cook showdown. The
president moves to remove Fed Governor
Lisa Cook. Effective immediately. Cook
says she won't quit. Markets move, long
end treasuries sell off, the curve
steepens, and stocks dip. And France in
turmoil. Prime Minister Bau calls for a
confidence vote, adding pressure to
French assets. Now, it is a dip in
stocks. Maybe the remarkable thing is
the lack of severe reaction from these
markets. A second day running now that
we're heading towards a weaker session
after the biggest rally since May on
Friday. We're only lower by about a
tenth of a percent for the S&P and the
NASDAQ. The place perhaps where you're
seeing more of the reaction is on the
long end of the curve. And this has been
a trade that has been running for some
time and you see the pressure tick up.
You get the front end of the curve moves
lower again only by a basis point maybe
with expectation of more dovish policy
if Cook is indeed out or more pressure
from the White House. But look at the
fears starting to be captured on the
long end of this curve. We are up by
nearly 4 and a half basis points at 493
this morning. Is independence
challenged? What happens to the
attractiveness of long-term bonds? The
dollar initially dropped on the news,
but look at what it's doing now. It is a
dollar that is really little change this
morning. In fact, it's basically flat.
George Surveos of Deutsche Bank out with
a note this morning saying that there is
no reasonable reason why we should not
be pricing more risk into the dollar. He
sees a real gap as to what markets are
saying and the risk out there. Speaking
of risks out there and stocks on the
move, let's see what's moving in the
pre-market. With that is Kitty Gupta.
Good morning, Kitty.
>> Good morning, Danny. Well, one of the
stocks on the move is Interactive
Brokers. Higher by about 4% this
morning. Some news there that they are
getting included in the S&P 500 and the
market is buying in. No surprise there.
But then it is of course a summer
Tuesday, we'll call it in August. So the
pickings are slim, which brings me right
back to the story here in Europe. Really
reacting to some policy decisions out of
Washington. It brings me to talk about
SAP, the massive German tech giant right
here, responding to a threat over in the
White House about a digital services
tax. You're seeing green on the screen
because that could actually penalize
American companies, boosting some of the
European giants higher by 610 of 1%
there. And Danny, you said it at the
start, the French turmoil, the political
chaos, that's where that where the a lot
of the pain in Europe is coming from
today. the epicenter BNP Pariba, one of
the main French banks. Of course, not
only are they worried about higher
taxation to make up for the budget,
they're also worried about some of the
bond holdings that a lot of these French
banks have. And you can see emblematic
of the entire French index down almost
6%. Danny
>> Ky, thank you very much for that update.
We'll catch up with you later in the
hour. And in this hour, we have a
wonderful lineup for you to impact all
of the news overnight. will speak with
man groups Ed Cole and Kathy Jones of
Charles Schwab. Now, President Trump,
our top story, has moved to oust Fed
Governor Lisa Cook after allegations of
falsifying mortgage documents. He posted
a letter on Truth Social, writing,
quote, "The Federal Reserve Act provides
that you may be removed at my discretion
for cause. I've determined that there is
sufficient cause to remove you from your
position." Cook responded in a
statement, writing, "President Trump
purported to fire me for cause. When no
cause exists under the law, and he has
no authority to do so, I will not
resign. I will continue to carry out my
duties." Joining us now is Bloomberg's
Michael McKe, who's been up early and
all night tracking this. Mike, thank you
so much for joining. So, what sort of
battle does this now set up?
>> Sets up a major battle. Trump has
declared war on the Federal Reserve
because if he can go after Lisa Cook
this way, he can go after others.
Probably not J. pal because that's been
pushed back uh and the Supreme Court has
weighed in on that. But he could be
looking for dirt on anybody on the Fed
as he tries to turn them over. The thing
is is in his letter to Cook, he cited uh
US code section 242
and that says that each member shall
hold office for a term of 14 years from
the expiration of the term of his
predecessor unless sooner removed for
cause by the president. And this is all
going to turn on the issue of for cause.
First of all, did she do something that
was wrong? And second of all, did she do
it in office, which appears not to be
the case, that would uh essentially,
according to previous uh iterations of
this issue, that would mean that she
could not be fired by the president.
Now, we have this Supreme Court uh
decision that has sort of set the Fed
aside. So, nobody quite knows how this
is going to play out, but it's going to
take a while and it's going to take a
toll.
>> If it takes a while and a toll, what
does that toll look like? What does it
look like to have this cloud hanging
over the Federal Reserve?
>> Well, if the president were successful,
you would probably see a much bigger
selloff and a much bigger move in the
markets. But we're already seeing the
precursor to that with the curve
steepening. Uh, you've got people
betting that the Fed is going to cut
rates because Powell basically said that
last week. But now there's a danger of
inflation if they cut too much and and
bond investors are afraid of that and we
could see a major drop in equity markets
if this carries through. I think at the
at the moment the view is this is not
good but they don't think Trump can get
away with it. But if it were to
metastasize in that way then it could
have a much bigger impact. Can we talk
about general uh uh uh independence of
the Fed and sort of the fragility they
might have to move to Trump? A lot has
been made about the Federal Reserve
presidents and that they still have a
vote on this board on this FOMC. So
maybe the Fed is more immune even if you
do get a replacement for Cook. Could
that come under threat?
>> That could come under threat. I raised
this about a year ago and everybody
laughed at me. But here's this here's a
tinfoil hat scenario. All of the Fed
bank presidents are appointed to
five-year terms, which are renewed every
two years, and that's coming up in
February. So, if Trump got four people
on the board, which he could do by
getting rid of Cook, and now he's got uh
Myron coming in, uh then in theory,
those four people could vote as a
majority to dismiss all of the Fed bank
presidents. Now, they're not appointed
by the president of the United States or
the executive authority. they're
appointed by local uh boards of
directors, but in theory then he could
influence the selection and get a board
that would basically do whatever he
wanted. That's a stretch. Each step of
that is a stretch, but that's something
that was laughable that has now come
into possibility.
>> Yeah, to be fair, we thought firing or
attempting to fire the governor or uh
the Fed chair himself would be
laughable, too. And here we are. So,
Mike, thank you so much for that update.
That is Bloomberg's Mike McKe. Let's get
the view of Wall Street now. Joining us
is Ed Cole, head of multistrategy
equities at Man Group. Ed, can we start
with just the lack of reaction in
markets? You have an equity market
that's slightly dipped. Sure, it is a
yield curve that is steepening. It is a
dollar that is barely moved. Is enough
risk currently priced into the market
that you could get real ruptures of Fed
independence?
I think it's probably so I suppose the
starting point is that this is a
direction of travel that's been
reasonably clear for some time now.
Obviously there's an escalation
overnight which changes the intensity uh
of it. But I think the way that markets
stand at the moment is on an
understanding that the Fed is moving
towards a more dovish stance. um markets
are kind of sort of serially monogamous.
I think actually I may have heard that
on your show Danny, but in other words,
we're focused on one thing at a time.
And what we're focused on at the moment
is that the economy appears to be
slowing that at Jackson Hole last week.
Pal moved to a certainly more doubbish
stance than I was expecting, I think,
from the market reaction, a more
doubbish stance than than market
participants in general were expecting.
Um, and it's really kind of brought into
view a rate cut in September that's now
pretty much crystallized into the way
that futures are priced. And I think
that ultimately the direction of travel
right now is to think about the fact
that nominal rates are going lower, real
rates are probably going a bit lower as
well. Um, and for the next 3 weeks,
let's call it into FOMC and uh option
expiry. For me, the direction of travel
is most likely that markets grind
higher. Um, ultimately, of course, Fed
independence, central bank independence
more broadly, this is not just a Fed
thing, has been an incredibly important
cornerstone in
um maintaining expectations about policy
and and anchoring inflation. And I think
that's important. uh we can see you know
evidence in country where in countries
where central banks are completely
reliant on government where things don't
turn out particularly well for policy
setting expectations or inflation but I
think we're quite a long way from that
and we have to be clear that all the
candidates that are being talked about
at the moment are um credible in their
own right and are financial market
people or economists um they are leaning
more doubish so I think that's probably
what the market will be focusing on in
the near term The dollar's interesting.
Um, it's definitely interesting that we
had, you know, very little reaction
lower in the dollar. I actually think,
you know, that kind of flipping
expectations on on their head from where
they were 6 months ago, we came into the
eight months ago. Gosh, time flies. We
came into the year with outright
consensus that the dollar was going to
be strong. That was wrong. We're now at
a point where the consensus and all the
positioning suggests that there is
maximum bearishness on the dollar
tactically and structurally. And I tend
to think actually we need to start
thinking a little bit about when um when
that may go the other way and the re
lack of reaction in the dollar overnight
to me suggests that actually there's
little impetus for the dollar to go a
lot lower in the near term
>> and a lot to unpack there. By the way, I
should just say the serial monogamous
comment comes from Mark McCormack at TD.
So he definitely gets credit for that
one. But let's say we're in a scenario
where sure this is a Fed that is skewing
more dovish. What happens if we get data
over the next month between unemployment
and CPI which shows an economy running
hot which shows a rebound in jobs and
you get a Fed that maybe does still cut.
What happens to example for the long end
of the curve? Just how crucial is that
data and vulnerable is a market to data
that shows something different from what
we've gotten over the past month?
I think it would have to be really quite
hot. I think when you look at you unpack
what pal said last week, he definitely
was talking about risks being on the
downside. So I think you know anything
that represents a kind of small beat in
payrolls doesn't change the dial. You'd
have to really have a a series of data,
not just one data point, but all of the
labor market data together that makes
the Fed think that actually there's an
inflection again. Um and that's probably
not the direction of travel. If that
happens, so say a large beat in uh or
you know unemployment doesn't move um
average hourly earnings continue to
inlect back up again non-farm payrolls
beats materially revisions meet
materially lots of you know a kind of uh
coordination of things that suggest that
the um that the the reading that PAL
reflected last week is wrong then I
think it's bad news for risk assets
because ultimately we've been in a in an
environment certainly over the last few
weeks uh where bad news has been good
news. That's kind of what happened on
Friday with uh with PAL speech at
Jackson Hole. He he very clearly pointed
towards downside risk to the economy and
the market ripped on it. And not only
did the market rip on it, but the
rotation inside it was definitely
towards weaker quality stocks, more
cyclicals, lagards, highly shorted
names. So there was a um you know there
was a very clear vote in favor of bad
news being good news last week which has
been accumulation of of I think the kind
of price action over the last month or
so. So anything that puts rate cuts off
the agenda now ultimately I think is bad
news for risk assets. Um I guess what
I'm thinking as a central scenario uh
and they're always dangerous things
because markets tend to sniff out um
complacency and and and uh and punish
it. But my tendency is to think that you
know the data at the moment has been
soft for a while. The Fed has told us
the direction they intend to move in. My
expectation is probably that into
September 17th and then OPEX the next
day um that markets grind higher and
that the leadership shows us more of
what we saw at the end of last week. So
more leadership by cyclicals, perhaps
lower quality stocks, more
underperformance by tech. Um, you know,
I'm reminded, Danny, that I think it was
on on on a on a on a show with you maybe
in fourth quarter last year when we were
talking about um tech stocks that that
actually this topping in tech has been
going on for quite a long time now. It
was June July last year that
semiconductors which were obviously the
leading group um previously that semis
have actually peaked in relative terms
in June July last year. Um some signs
now that broader tech may be doing the
same thing. I think this is all part of
a much much longer topping process in
technology. We won't maybe even know
it's happened for another year or two
hence. Um but I think we're seeing more
signs of rotation into different groups
and and that my expectation is that
continues for the next few weeks.
>> God, fourth quarter last year that that
actually feels like centuries ago in a
first half of the year that's felt like
a decade itself. Ed, we're going to have
to leave it there. Thoughtful as always.
Thank you so much for joining Ed Cole of
Man Group. Now, let's get you some other
top stories that are trending on the
terminal this morning. France's
government is at risk of a new collapse
following last year's political turmoil.
French Prime Minister France has called
for a confidence vote that could topple
the government as soon as next month.
France's CAC 40 tumbled 2% that is the
most in 3 weeks. India plans to trim
purchases of Russian oil. Indian
refiners are expected to buy around 1
and a half million barrels a day, down
from an average of 1.8 8 million
barrels. The move comes a day ahead of
higher tariffs taking effect on Indian
imports to the US. And the Trump
administration is looking to stop the
development of another offshore wind
farm. This time it's a $6 billion
project planned near Maryland by the
company US Wind. The move is the latest
escalation of the president's war on the
clean energy source. Coming up, China
sends a key negotiator to Washington
while Trump floats a 200% retaliatory
tariff on the Asian nation. We're going
to have your trade update. That's coming
up next on your brief.
I would say you economically with China
now getting much better. Uh they have to
give us magnets. If they don't give us
magnets, then then we have to charge
them 200% tariff or something, you know.
But we're not going to have a problem, I
don't think, with that. It'll take us
probably a year to have them. We we're
heavy into the world of magnets.
>> US China trade was on the agenda, as you
saw there in the Oval Office during
President Trump's meeting with South
Korea's president. Now, China is also
sending a key trade negotiator to
Washington to meet with US trade
representative Jameson Greer this week.
Joining us now is Bloomberg's Brendan
Murray, who leads our global trade
coverage. Brendan, what does it suggest
that we have Chinese officials in DC
continuing talks?
>> Yeah, I think it suggests that the the
series of talks that we had seen
happening uh once every couple of months
really needs more regular maintenance
than that. It's uh they're essentially
ongoing discussions uh over the issues
as President Trump said uh between
magnets and and what the US has to offer
in terms of high-tech gear and things
like jet engines. So uh the the the
threat of escalation is always there as
the president said with you know 200%
tariffs if China doesn't come up with
its magnets but this is essentially the
tugof-war that we're going to see going
back and forth uh essentially week in
and week out over the next several
months. Treasury Secretary Bessant said
that his next meeting with his Chinese
counterparts is sometime in November.
So, you know, we're looking at heading
into the fall uh with uh the, you know,
the constant threat of of an escalation
between the US and China always there.
Uh it's stable at the moment. Um but uh
but it's uh it's definitely could shift
to be volatile if things don't go either
way for for either side. Well, speaking
of things shifting, even if you do have
a framework in place, we had the
president also yesterday putting on
truth social vowing to export curbs and
tariffs on nations with digital services
taxes on American companies. He didn't
specifically call out Europe, but surely
Brendan, this was thought of in with
Europe in mind by the president.
>> Absolutely. the the US and and and the
the Europeans put out their joint
statement uh after several weeks of
negotiations recently and they in it
they said that they uh that that digital
services were not going to be involved
in these negotiations. So uh the
Europeans have drawn a red line around
their digital uh taxes and regulations
and said that those are not up for
negotiations in any trade agreement.
Well, President Trump uh in his social
media post seemed to suggest that he
wants them to be in there. So, uh we
could be headed for another period of
volatility with uh between Brussels and
Washington on those matters. Uh the
digital services issue is is really the
next frontier of trade wars. This is
where uh you know you could see uh t
taxes or some sorts of fees on on things
like social media accounts, advertising
downloads, uh all of that sort of stuff.
Every all everything we're seeing in the
goods trade war, you know, we could see
come to the uh to the to the to the
internet uh and and and with all the
fragmentation and extra costs that are
associated with with trade wars. All
right, Brendan, thank you very much.
That is Bloomberg's Brendan Murray. Now,
coming up on the show, the governor of
Illinois, Pritsker, vowing to oppose
President Trump's plan to deploy a
National Guard to Chicago. A look at
that and what else is making headlines
in your front page news next on
Bloomberg.
Welcome back to Bloomberg Brief. I'm
Danny Burgerer in New York. By the way,
we were just discussing about Chinese
officials coming to the US as part of a
negotiation just pointing out a US
Treasury spokesperson pushing back
against just how level those
conversations might be, saying that they
don't expect for the Chinese official to
be meeting with Bessant or agreer and
not part of any formal negotiating
session. Elsewhere, let's take a look at
what's making uh headlines on your front
pages this morning. First up, the New
York Times and most US front pages,
leading with President Trump's
unprecedented move to fire Fed Governor
Lisa Cook. Cook has vowed to fight the
dismissal and has questioned the
president's authority. Elsewhere, the
Washington Post on their front page
reporting that the House Oversight
Committee has subpoenaed Jeffrey
Epstein's estate. The committee
requested Epstein's birthday book, which
was compiled by Galain Maxwell for his
50th birthday, among other materials.
And on the Wall Street Journal,
Chicago's plan to challenge President
Trump's plan to deploy the National
Guard to the city. Governor Pritsker
called the move unconstitutional
and unamerican.
Now, as we head to break, a quick look
at your markets this morning, which
especially the dollar, little bothered
by the recent developments out of DC. We
were just speaking with Ed Cole of Man
Group, who said this has been the
direction of travel. Yes, it is an
escalation, but it doesn't change what
the markets are interpreting, and that
is the net outcome of this is more
dovish policy. Coming up, we're going to
discuss just that, that clash between
President Trump and Fed Governor Lisa
Cook. We'll speak with Kathy Jones of
Charles Schwab on where she sees this
bond market going as the long end comes
under pressure. 530's yield curve now
the steepest since 2021. More on that
coming up on your brief.
This particular case of Lisa Cook really
surrounds the integrity of the uh Fed's
uh staff reputation.
>> Clearly a very different playbook that
this administration is running with.
>> The surprising part of the story is that
Lisa Cook herself didn't resign. It's
not just about monetary policy.
>> Paul being too late. Uh well, he cher
Paul already put that aside by saying
we're ready to move. Uh so there's
really no reason for President Trump to
just fire Lisa Cook just to get his way.
>> What that should mean is higher term
premium. Donald Trump wants a weaker
dollar. I mean, he really wants a weaker
dollar and he's going to get a weaker
dollar. Another example of the
heightened uncertainty uh which is now
something of a structural feature uh
which is going to persist for years to
come. All of it is so um uncertain up in
the air.
>> It's 5:30 a.m. in New York City. Good
morning. I'm Danny Burgerer with your
know this Tuesday. The Trump Cook
showdown. The president moves to remove
Fed Governor Lisa Cook effective
immediately. Cook says she won't quit.
Markets move, long treasury sell off.
The curve twist steepens and stocks dip.
And France in turmoil. Prime Minister
Bau calls for a confidence vote, adding
pressure to French assets. Equities
futures weaker this morning, but just
barely. It's incredible to see that the
market reaction, the initial gut punch
of Trump moving to fire Lisa Cook has
really started to eb. S&P and NASDAQ
down by less than onetenth of a percent.
It would add to a one day of selling
that we saw yesterday. The more
interesting move perhaps is in this bond
market where you get a 2-year yield that
has been moving lower since the
announcement by one basis point and a
long end of the curve which is under
pressure. 10 years up by 2 and a half,
30 years up by four basis points this
morning. A 530's steepest since 2021 and
a dollar which much like equities is
barely moved. George Sorve of Deutsa
Bank saying that we can find no
convincing argument as to why the market
should not be pricing more risk in.
Let's see what some of the stocks in the
pre-market are doing first though. With
that is Bloomberg's Pretty Gupta. Good
morning, Critty.
>> Good morning, Danny. One of the big ones
we've got our eye on is Interactive
Brokers this morning. Higher by 4.4%
after the announced inclusion that is
going to be part of the S&P 500
replacing Walgreens. Investors getting
in on that trade early, higher by about
4.3%. Another stock we've got our eye on
is Boeing. It's actually in the green
today. We know Boeing has been quite
under quite a bit of pressure. This time
it seems to be coming off of the back of
announcement and meeting I should say
between the presidents of South Korea
and of course Donald Trump as well. A
big big deal announcement coming after
that Korean Air to buy 50 billion
dollars of Boeing jets. Also looking at
investments and orders from other
defense companies as well. But Boeing
really emblematic of that defense bid
higher by 510en of 1% this morning. And
then Gilead Sciences is another one
we've got our eye on. They've gotten
marketing approval for their HIV drug
from the European Commission. It's
enough to boost the stock. There's some
questions about how quickly that
approval would come. It is higher,
Danny, by 510 of 1%.
>> Great. Thank you very much for your work
this morning. Now, elsewhere, President
Trump wants Fed Governor Lisa Cook
removed after allegations of falsifying
mortgage documents. He posted a letter
on Truth Social, writing, quote, "I have
determined that there is sufficient
cause to remove you from your position."
Cook responding in a statement writing,
"President Trump reported to fire me for
cause when no cause exists under the law
and he has no authority to do so. I will
not resign. I will continue to carry out
my duties." Joining us now is
Bloomberg's Michael McKe. And Mike,
these are just allegations at the
moment. There's no official cases or
anything being brought up. So, what
happens now?
>> That's a good question. Uh it appears
that what's going to happen now is Lisa
Cook is probably going to have to file
for an injunction in federal court to
get the president's uh attempt to fire
her stopped. There's a good chance she
could get it, although we have seen the
Supreme Court give uh both sides of the
story. deference to Donald Trump in most
cases, but carving out an exception for
the Fed because the Federal Reserve Act
says they can be fired only for cause,
which generally means inefficiency,
neglect of duty, or uh malfeasants in
office. And the supposed mortgage fraud
took place before she was nominated to
the Fed. So, it looks like uh as a
lawyer would say, prim uh she has a
case. So, it's going to be something
that's fought out in the courts. And in
the meantime, it's something that the
markets should be more worried about, I
think.
>> What happens though, where you have next
year, if this is still playing out and
you have a new chief over at the Fed who
maybe is more sympathetic to Trump and
does want Lisa Cook gone, if she gets
pressure from the top, does that change
things? Does her potentially having
Powell's backing right now be part of
the reason why she's more protected?
Well, I don't know if she's protected in
the sense that if she actually did
something wrong, and you were right,
this is only allegations at this point.
There have been has been no proof, then
she probably would have to resign. We
don't know yet. If she did not do
something wrong or can make that case,
uh, she'll stay on. The question is
then, how much personally can she take?
The Fed can't defend her because this is
supposedly out of her personal life. So,
they can't spend taxpayer dollars in
defending her. they may get involved in
a amicus brief or something like that
because the Fed's independence is at
stake, but it's a big burden she's going
to have to shoulder on her own.
>> Certainly, Mike, thank you so much for
your work on this this morning. I know
this isn't going anywhere. We'll have
Mike throughout programming. That is
Bloomberg's Michael McKe. Joining us now
is Kathy Jones, chief fixed income
strategist at Charles Schwab. Kathy, it
is so wonderful to speak with you this
morning. And perhaps because it feels
like this is only a Treasury market
that's responding. It's not a dollar or
stocks that are really responding to the
recent developments with Trump moving to
fire Lisa Cook. How much does it change
the attractiveness of long-term bonds of
US treasuries with yet again another Fed
official under threat?
>> Yeah, I think it is um negative for the
long end of the curve. At a minimum,
even if you don't believe anything's
going to come of this, that there won't
be any changes at the Fed in the near
term, what it implies is the risk
premium for holding long-term treasuries
needs to go even higher. It's already
been rising, and we've seen long-term
yields moving up around the globe. So it
isn't just the US, but in the US that
curve steepening that we've already seen
uh will probably continue and and be
greater because there's just much more
uncertainty about what it means to be
holding long-term treasuries. You know,
independence of the Fed um has been um
you know, something that has been a
cornerstone for a long time of uh the
Treasury market. and anything that kind
of implies that that may not be the case
going forward is negative for the long
end of the curve and um actually for the
dollar as well. I'm a little surprised
the dollar bounced back, but I think
that's because the market doesn't really
fully believe this is actually going to
happen. And there's the question, Kathy,
and it's probably worth unpacking,
whether direct control of the Federal
Reserve would even accomplish Trump's
aims given what you're saying, given
that the market reaction as we're seeing
right now is one of a steeper yield
curve, a borrowing cost on the long end
rising. Kathy, is there a scenario where
you could see the Fed further out if
that's happening, halting QT, or even
resuming QE?
Well, I I could presume if there were
enough people at the Fed who um believe
that the goal of the Fed should be to
lower long-term rates, then they could
take actions uh like QE. I I think they
want to halt QT anyway. But, um yeah,
they could do yeah, various moves. we
had the postworld war II Fed Treasury
agreement that held down interest rates
uh after the war. Uh you could see
something like that if the goal of the
Fed was to hold down long-term interest
rates and we know that the
administration would like that because
they want to see the housing market
rebound. But to do it at a time when
inflation is above target and actually
edging higher really risks having um
having the market rebel and and having
investors pull back and just say, you
know, we don't want to own these
treasuries because inflation's too big a
threat. And if the central bank can't be
independent, then that typically will
send long-term rates higher. So, you
know, some action by the Fed to halt
that uh would presumably hold them down,
but it would be a really volatile
situation.
>> Kathy, do you expect that that
volatility in the Treasury market could
act as a check on President Trump? April
2nd, it was an equity market that sold
off, seeming to get him to back off from
some of the most harsh rhetoric on
trade, which maybe has started to come
back. Is this a bond market that can
continue to check President Trump,
especially when it comes to his moves at
the Federal Reserve?
>> Yeah, I think the administration has
shown that it's sensitive to to movement
in the market and I'd have to assume
that if Treasury yields rose pretty
sharply at the long end that that would
have a negative effect on equities as
well. And so I I think it could prove to
be a limiting factor to the extent that
the administration is sensitive to what
happens in the markets. And look, it
backfires, right? If your goal is to get
long-term rates down to stimulate
housing activity and you take actions
that cause them to go up because you
raise uncertainty or questions about Fed
independence and its ability to control
inflation, it's actually back it could
backfire um against the administration's
stated goals. It's probably worth
pointing out, Kathy, that it's not just
the US, which is feeling that funding
pressure. It's globally. It's in Japan,
where 30-year yields are reaching
historic levels. In the UK, in Germany,
also looking at yields pushing higher.
In France, where there's political
turmoil over a prime minister that's
holding a no confidence vote over trying
to do more tightening, it's something
that's deeply unpopular. To what degree
globally is fiscal dominance the story
of the back half of 2025?
>> Yeah, we really thought that this would
be more like a 2026 issue than a 2025
issue, but it's coming up very quickly.
And you're right, this is a global
phenomenon. It's sort of different
reasons in different countries, but
fiscal policy is kind of the driver
behind it all. And we are in a period
when most major um developed market
countries are running high fiscal
deficits and and those are getting
higher and um the bond markets around
the globe are saying hey you know we we
need more risk premium to hold these
bonds over the long run because if
fiscal dominance really happens um then
we're going to see higher inflation and
that's going to erode the value of
long-term bonds and I think the markets
starting to push back. Uh I don't think
we're there yet in terms of a a real
major reaction in most markets. Japan is
repricing for reality after years and
years of um holding down those yields.
But elsewhere, I think the market's just
beginning to price that in. If this
turmoil continues and the uncertainty
continues about fiscal policy, then I
could see those yields rising even
further. Kathy, I think though a lot of
people would look at the situation right
now and say it's something akin to a
frog in a boiling pot of water that we
keep getting these developments and the
reaction while happening is somewhat
muted. So what is the bar? You say we're
not there yet for the market really to
experience ruptures. What if what is the
bar if it is not attempting to fire a
governor of the Federal Reserve?
Yeah, you know, I think that the the
line that would be crossed is if um it
were successful, if it were seen as
successful of eroding the Fed's
independence to the point where we
suddenly started to see um aggressive
rate cuts coming through and that would
spur, you know, more inflation concerns.
I think one of the things we have going
for us in the United States and most of
the developed world, keep in mind unlike
some emerging market countries that
faced these pressures in the past, um we
have a capacity to pay our debt. So
we're a very wealthy country. We have a
lot of assets. We have a growing
economy. It's not the the capacity to
service our debt. It's the willingness
to do so in a responsible way. And so
there is a distinction there between
developed markets and say you know much
less developed markets that we've seen
have these troubles in the past. So um I
think the market's depending on that.
It's depending on the rule of law. It's
depending on a continuation of the
tradition that we've had for many years
of central banks being able to manage
the inflation pressures without
interference.
>> Kathy, thank you so much for joining us
this morning. Really wonderful to get
your thoughts. Kathy Jones of Charles
Schwab. Coming up on the show, Chinese
trade negotiators head to Washington.
We're going to have more on that story
coming up next on Bloomberg.
magnets and then then we have to charge
them 200% tariff or something, you know,
but we're not going to have a problem, I
probably a year to have them. We're
we're heavy into the world of magnets.
>> Sino American trade back in the
spotlight after reports that China is
sending one of its key trade negotiators
to Washington. The US has denied the
trip is part of any formal trade talks.
Back with us is Bloomberg's Brendan
Murray who tracks global trade for us.
So Brendan, what do we understand about
what this visit from Chinese officials
actually entails?
>> Yeah, the administration is really
trying to downplay this as anything
other than a routine uh conversation
uh to maintain the relationship. this
isn't uh they're saying this official
won't meet with uh you know some of the
more highranking uh members of the US
trade negotiating team. So uh this isn't
the kind of uh situation or meeting that
would that could make or break uh the
stability that that exists in the
relationship at this point. That said,
you know, they could the the Chinese
could be uh you know, wanting to course
correct for a few things that they see
as unfair uh to their economy. Uh the
President Trump met yesterday with his
South Korean counterpart. Uh there was
some ship building uh there was some
deal around ship building and that could
only be aimed at ch China's dominance in
ship building. So there's a bit of uh
you know there's a bit of hostility when
it comes to those sorts of things when
the US goes around and and cuts these
other deals uh that would undercut uh
the ch China's dominance in some of
these industries. So, uh, but we don't
know a whole lot about what exactly is
on the agenda for this officials
meeting. We just know that it's it's
it's not, uh, it's not part of the the
the formal negotiating process.
>> Well, speaking of continued
negotiations, even when there has been a
framework in place, we had the president
also vowing on social media vowing to
place export curves and tariffs on
nations with digital service taxes on
American tech companies. Brendan, it
would seem that Europe and their tech
regulation, they've always spoken about
it in a way of sovereignty, that this is
something deeply important to them. Is
it likely that Europe might budge on
this, much like Canada did when there
were trade negotiations underway?
Uh it doesn't sound like it from the
rhetoric uh out of Brussels that this
has always been an issue that they say
is our our domestic regulation and this
is this is how we uh we we oversee
companies that operate within our
jurisdictions and it's always been uh
according to the Europeans off the table
and in any sort of trade negotiation.
Now they they've reached this joint
statement that they issued last week. uh
it essentially said we'll we'll agree to
uh co coordinate on digital services but
it made no commitments on either side
and the Europeans would say uh that that
uh the Trump administr the Trump
administration got nothing on digital
trade uh digital services regulation out
of this out of this framework. So, uh,
it seems to be another area where, uh,
that could be could get volatile if, uh,
President Trump takes it a step further
and and beyond the threat of export
controls or or some sorts of, uh,
tariffs, uh, and actually puts those
into effect.
>> All right, Brendan, thank you very much
for your coverage this morning. That is
Bloomberg's Brendan Murray. Now over in
France, Prime Minister Francois Bau has
called for his own confidence vote.
>> 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
>> on that French asset selling off this
morning. Joining us now from Paris is
Bloomberg's Carolene Konan. Karolene,
what prompted this vote of no
confidence?
you know uh the prime minister Franceu
uh has been working on this budget uh
for a while. He presented it in July and
he said he didn't take any summer
vacation precisely to try and explain
why it's important to save 44 billion
euros in this next budget to restore the
French public finances. Uh he even made
some little videos on Facebook and
YouTube over the summer but that doesn't
seem to have paid off. He has a massive
unpopularity. He's actually the least
popular prime minister of Emanuel Macron
since 2017. And his proposal for example
of scrapping two bank holidays in order
to bring in 5 billion euros is very very
unpopular. So uh he knew he was going to
face many votes of no confidence on this
budget. he uh trying to anticipate uh
all these votes of no confidence, trying
to anticipate also the social anger
because there is a general strike uh
that is planned a couple days later on
September 10. So two days after he's
calling this vote of no confidence. Uh
but at the moment it is a very very
risky move because uh the socialist the
national rally of Marinopen and the
far-left have all said that at this
stage in the current uh proposals of
this budget they will vote against
Franu. So we are likely seeing another
French government collapse 8 months
after the collapse of his predecessor
Michel Bar in December. It's such
important context and a previous prime
minister that only lasted for 90 days.
Karolene, what happens if we do get a
loss to this no confidence vote? What
were the consequences of that beach to
your point with a government that has
now felt like it's been in constant
turmoil?
>> That's right. And in fact, Emanuel
Macron could possibly call new
legislative elections because it's been
more than one year since the last snap
elections in July of 2024, which
basically created this whole uncertainty
by creating a hung parliament fragmented
into three blocks with no one having a
majority making it very difficult for
any prime minister to pass a budget. So
uh the likelihood is that Emanuel Macron
will remain president and probably name
a new prime minister but many have also
starting to call for Macron himself uh
to resign.
>> All right, Carolene, thank you very much
for that update. That is Bloomberg's
Carolene Kanan. Coming up, we're going
to set you up for your trading day with
some economic data on deck. Kitty Gupta
will have that for you. You are watching
Bloomberg Brief.
This is Bloomberg Brief. I'm Ki Gupta in
London. Let's take a look at what's
coming up ahead today. Plenty of data.
US durable goods orders coming in after
8:30 a.m. Eastern time. And then the
focus on the conference board. Consumer
confidence numbers hitting at about 1000
a.m. US time. plus an auction $60
billion worth of two-year notes this
afternoon as we see that curves steepen.
A couple of micro movers to keep an eye
on as well. Boeing up on news that
Korean Air ordered around 100 planes
worth interactive brokers taking a bid
for getting uh included in the S&P 500.
Generrack Holdings taking a hit as well.
This is Bloomberg.