Good morning from London. I'm Anna
Edwards alongside Guy Johnson and Critic
Gupta. We're an hour away from the
opening trade. Here's what you need to
know. Nvidia shares dip in late trade
after the world's biggest company gives
a tepid revenue forecast following two
years of booming AI spending. Bloomberg
learns Mexico plans to raise tariffs on
Chinese imports after months of pressure
from President Trump as the US
administration's influence on global
trade policy grows. Plus, France's prime
minister warns against new elections,
saying he plans to negotiate directly
with lawmakers over next month's
confidence vote.
Let's get a quick check on these markets
here. Your stocks 50 futures virtually
unchanged at the moment, which brings my
focus right down to the bond market on
both sides of the Atlantic. I'm going to
start off within the states where you
are seeing some flattening of the curve
when it comes to the 230s. One eye on
how, of course, the legislation around
the Federal Reserve plays out. That's
going to shift the long end of the
curve. One eye of course on French debt
as well. These are the futures
contracts. Already seeing an early bid
into those, so we'll keep an eye on
that. No readthrough though into Euro
Dollar 116 on that currency pair. The
countdown to the opening trade starts
right now.
Thursday morning. Good morning. I was
expecting more to be honest. I was
expecting some kind of a big reaction
around Nvidia. I'm really struggling
with what we've got this morning. I woke
up first thing. I saw disappointing. I
thought we'd be a big market reaction
coming off that. Nada. Nothing. Barely a
ripple caused by Nvidia overnight. Yes,
the stock is down by 3%. Yes, there's a
few wrinkles in the numbers. Yes, things
are slowing. But if you look at the
stock over the last 10 days, it is
actually over the last 10 days pretty
much unchanged.
So, here we are.
Did Nvidia report numbers last night?
I'm in the forest. I'm I'm listening for
the for the trees who have fallen.
Nothing.
You can't hear anything. Yeah, this is
supposed to be the big market event of
the week. Not just a sales report and an
update from a company, but also a big
macro piece of uh information. It hasn't
quite felt that way looking at markets.
To your point, guy, so the stock, yes,
down after hours three and a half%. So,
let's deal with some of that. NASDAQ
futures are weaker, down by 310 of 1% as
we look ahead to the to the US open and
the impact of this and going through
some of the negatives. I mean, is it
negative that third quarter guidance was
in line? Some people had some really
toppy numbers, but the range of numbers
was enormous. Second quarter numbers,
the smallest increase in two years. So
maybe you can suggest that's a negative.
But it was really hard to predict what
was going to happen in China here. And
that actually takes you into something
of a more positive interpretation from
Bloomberg Intelligence. They're focusing
on the fact that the sales uh and the
estimate guidance, they all exclude the
H20 market in China. They all exclude
that completely. And so perhaps you
could see this as quite conservative
guidance from Nvidia. Uh and it still
only inverted comm has caused the stock
to drop three and a half percent.
Well, the growth rate is still enormous.
Even if it was in line, it's like 50%.
It's enormous still. And there is still
this the whole point of Nvidia is not
even at least it feels like the
transformation isn't just the earnings
of the last quarter. It's what's going
to happen in 10 years time and getting
in on a trend that's going to last some
10 years. The part that stood out to me
was the 15% with Donald Trump or that's
due to the Trump or due to the US
government.
The CFO kind of saying that's not that's
not a thing until it's in writing.
Exactly. There's no paperwork on that.
So, can't do it. We can't do that.
But but but it does mean that in some
ways there's still this market out there
that they can't access
because there's so much uncertainty
around what is happening there.
The the the market rally recently is a
lot of momentum there. Okay. So, this is
this is the dark cloud for me. There's a
lot of momentum in the market at the
moment. Momentum trend following has
been a big trade. That isn't a narrative
that has persisted.
Nvidia's been at the front end of that.
If if that starts to slow, is there a
wider effect? Do other things start to
happen? I.e. if the market doesn't keep
going up, does it go down? Can it can
this market just drift sideways? I can
video over the last 10 days has done
nothing. If you look at the 10day chart,
GIP10 on your Bloomberg, nothing to see
here. Can the market is this a market
that is capable of just going nowhere
for a long period of time? Well, for a
period of time, well, that through the
PCE number on Friday and into a rate
decision by the Federal Reserve,
if you're not going forward, do the
negatives start to weigh more. And I'm
just wondering if that's the kind of
mentality that we might find ourselves
in as we come out of August into
September when you generally have the
kind of recalibration you normally get,
back to school recalibration. It kind of
feels like that's coming towards us
quite rapidly.
The reality check at the end of summer.
uh some would say it's fascinating
because we are talking of course about
what that kind of exposure and ripple
effect and sensitivity to moves in the
long long end of the curve are
specifically we know that techidia Apple
Microsoft are very uh sensitive to that
a lot of which is not just going to be
moved by the Federal Reserve what's
going on there but still a trade
conversation that's happening except
this time not from Washington from other
players that are perhaps using the Trump
playbook to move forward two stories
catching our eyes uh this morning which
is one coming out of Mexico that they're
talking about using tariffs against
China, their second largest trading
partner right after the United States.
Uh and then also the EU when they're
talking about their approach to Russia,
exploring the use of secondary
sanctions. And that's something that the
Trump administration notably has used
when it comes to India, a 50% tariff
rate. And I think the takeaway from
these two stories from a broad
perspective is that the Trump playbook
is now being used by other countries as
well.
Yes, it is. And it's really interesting
to me, is this enthusiasm for the Trump
playbook or is this just trying to get
President Trump on board? Is this just
using tools that will appear to appeal
to him? And it was interesting, one of
the details in the EU story was about
focusing the EU's attention on what
Russia is doing with abducting children
from Ukraine, which is something that
President Trump has talked a lot about.
So, you wonder how longasting this
influence by President Trump is going to
be on the tariff and trade conversation.
But right here and now, it is huge.
Europe has Europe's in a completely
different position though. Europe has a
different trading relationship with
India. It has a different trading
relationship with China. It is it is
certainly something that is more
difficult to enact from a European point
of view. But to your point, how
sustainable this will be remains
uncertain at this point. The kind of the
walk back as well is that the EU still
doesn't have its deal over the line with
the Trump administration. I
this isn't this isn't a done deal. So,
we're still negotiating. This is all
still part of the negotiation process.
It is. And one of our stories just in
the last 24 hours suggested that Europe
is moving towards taking those tariffs
off industrial products. And that is
seen as one way to unlock progress to
those reduced car tariffs and the other
things that were contained within that
transatlantic trade deal.
I wonder what matters more for Europe,
the trade conversation with the states,
the war with Ukraine, or some of the
internal politics.
There's plenty of politics going on. The
Dutch have, we'll get on to the Dutch in
just a minute. France, Beiru was on TV.
Okay, so he's out there. He's talking
about the idea. This is the French prime
minister um who has called a no
confidence vote for the 12th. So, sorry,
for the eth. So, we've still got a
little way to go before we get to that.
And he's talking about talks. There
seems to be three scenarios that are
basically emerging here and it does seem
as if Biru has been caught by surprise
by the reaction to his call for that no
confidence vote. I think he was
expecting particularly the far right to
back him but they haven't. So he's now
in a much more difficult position. So
three scenarios now seem to be emerging.
One of which is which appears to be the
most likely that we find some
alternative to Beirut. Who that is no
idea at this point. There seems to be
lots of different names out there.
Ultimately the name that that is
selected will probably come from that
pack. But whether or not they have more
success remains to be seen. Remember,
this is all about trying to pass a 2026
budget, a slim down 2026 budget. France
has a fiscal problem. So, so that's the
most likely kind of scenario it looks
like at this point. The next one, which
Bayu was arguing against yesterday's
snap elections. Now, this opens up a can
of worms that it gets and it gets quite
difficult. Ultimately, it looks
according to current polling that we
will not change the makeup of the house
were we to have that and we would end up
with stalemates again. But it is
possible that we could end up with one
party doing better and ending up with a
majority. So, so that would be
interesting in terms of the scenario
that generates. However, that opens up a
further scenario which is the third
scenario which the macro that the
basically the wind changes and macro is
forced into a position where he has to
step down and we end up with
presidential
elections. Now, he can't stand again.
So, that's effectively his resignation.
So, that's the kind of the tearing and
the scenarios that we're working with at
the moment. Those likely appears to be
we get another prime minister. But once
you start down the road of early
elections,
yes,
life gets very interesting very quickly.
And I'll throw another short-term
development possibility into the mix of
those longerterm scenarios that could
play out or medium-term scenarios that
could play out. Prime Minister Beu still
thinks that he could win this. He still
thinks that he can talk to the parties
involved. He says that they will realize
that they've gone too far and they'll
change their mind. We will see. They've
all they've all said
the betting odds the betting odds
suggests that his government will fall.
90% at the moment is what is being
and he's and so he's trying to take that
on by crafting a two-stage vote. So
firstly you vote on whether you think
savings are necessary and then secondly
you vote on how those savings should be
achieved. So he's trying to sort of
segment the parties, divide the parties
and to try and get some sort of support.
But you know maybe it's all pointless
maybe we end up in the situations you
describe and certainly the spread has
widened in two weeks from 65 to 82.
82 relative Italy by the way by
comparison is at 87. We're at a scare
we're some at some scary levels here.
So, but to come back the the the
overwhelming expectation and this is why
the spread is widening is that he loses
that vote.
But but the the potential for a much
more dramatic scenario is now emerging
because I think he's miscalculated. I
think he's miscalculated in terms of the
expectation that other parties would
want him to do the dirty work and deal
with the with the budget and they are
saying actually no, we're not going to
do that. And I think this miscalculation
is going to get really interesting over
the next few days in terms of what what
is going to come out of that.
So we will see how European bond markets
open up in 20 minutes time. Go.
Let's talk about what else we've got
coming up. Ben Behringer is going to be
joining us. Quilted Chev's global head
of technology research talking about
what is happening with the Nvidia story.
Marie an Alier Carmenac fixed income
income fund fixed income manager is
going to be joining us. They have a call
of 100 basis points between Germany and
France. Cla Penseri, UBS Wealth
Management CIO, France, joining us later
to talk about what is happening in
Paris. And Mark Dowing is going to be
joining us on OBC Blue Bay Asset
Management Fixed Income CIO over there.
He's got some interesting calls about
the UK.
Absolutely. I'm sure we're going to hit
uh all the bond markets of the world
with him. In the meantime, plenty of
data points to keep an eye on in today's
session. 12:30 p.m. UK time, the ECB
monetary policy count is going to be
hitting the wire. And then for the
afternoon, the focus firmly shifts on
that US data. US GDP numbers plus
jobless claims are coming out at about
1:30 p.m. UK time. The Fed's Waller also
speaking at about 11:00 p.m. UK time. It
feels like maybe we might get another
signal perhaps of when it comes to the
job story. That's going to be uh
crucial, I think, because what matters
right now for the Federal Reserve, I
mean, we know that there's all the
politics. We know there's the pressure.
Uh ultimately, when it comes to the
data, does the jobs data even matter or
is it all about PCE?
Yeah. The inflation story will be the
day after, won't it? What is that
tomorrow? Yeah, it's Thursday. So, yes,
tomorrow. Tomorrow we get back to the
inflation story. So, we'll be Yeah. data
dependent perhaps for the rest of this
week.
Yeah. But the Fed feels like it's going
towards the labor market data, doesn't
it? That certainly was maybe the
emphasis that Pal put on
after everybody else put emphasis on
inflation.
Exactly. What else do you need to know?
This Thursday morning, uh the Dutch
prime minister and his cabinet have
survived a no confidence votes, easing
concerns about a complete collapse of
the country's caretaker government. The
result means attention now shifts to
campaigning for the snap elections,
which will take place on October the
29th. It is hoped that those elections
will produce a more permanent resolution
to the current political crisis. July
new car sales data for Europe has shown
the biggest jump in over a year, 15
months to be precise. According to the
European Automobile Manufacturers
Association, registration climbs 5.9%
from a year earlier, driven, excuse the
pun, by sales of fully electric and
hybrid models. And NATO estimates its
members are on track to spend more than
$1.5 trillion on defense this year. The
alliance has agreed to a new goal of 5%
of GDP to be spent on armed forces by
2035. This includes 3.5% on defense and
1.5% on related matters such as
infrastructure.
Coming up on the program, we'll get back
to some of the corporate uh earning
stories that are still trickling through
this morning. Period's latest sales come
in better than expected, but the company
warns of weaker sales due to the China
US trade friction. We will put that
front and center as these markets open
up in around 45 minutes time. Plus,
we'll also be hearing from Ryan Air CEO
Mike Olyri. He was speaking to Guy just
uh just this week and get his take on
the Boeing 737 delivery plans up next.
Today's top story, of course, Nvidia
earnings. The company's growth slows and
markets have been reacting. We'll get
some analysis. If you want to get
involved in these conversations, IB plus
BBTV go, that's the Bloomberg function
that puts you in touch with the team
that works on this program. This is
Blake Back,
[Music]
you know, the the opportunity for us to
bring Black Wealth uh to uh the China
market uh is a real possibility. And so
we just have to keep advocating uh the
the u uh sensibility of uh and the
importance of uh American tech companies
to be able to to uh lead uh and win the
AI race.
Nvidia CEO Jensen Wong speaking there on
the earnings call last night. Nvidia
reporting a 56% jump in quarterly sales
but shares falling in after hours
trading on the back of a tepid revenue
forecast. Our Tom McKenzie is all over
it. A 56% growth rate is shabby, I
guess, for this market.
Jensen Huang has been driving a McLaren.
Now he's driving a Porsche. If you look
at the quarterly by quarterly sales
pitch, we've gone from growth of around
400% to growth of now what around uh 50%
in in terms of the quarter, a little
over 50%. Sales coming in at 46.7
billion for the most recent quarter and
then projecting sales of over 50 billion
in the current quarter, 54 billion. The
margins were a beat. The revenues came
in slightly higher. the earnings per
share were above the estimates and yet
it's an expectation story once again
that this is a company that clearly has
grown exponentially over the last two
years that growth is slowing but from a
very very high base of course questions
around what happens in China that was
the key s I think the key soundbite from
Jensen Hong there because if they get
the blackwell approval from this US
government and that could come out in
negotiations between China and the US
that could open up a market that Jensen
Hong says could be worth 50 billion US
dollars Something that Anna mentioned
yesterday was the sovereign part of
this. He sees the sovereign demand
doubling as well. So they are trying to
expand their TAM or total addressable
market. Beyond those four or five key
hyperscalers, sovereign is a piece where
they're getting more clarity. China
remains a key area of uncertainty to
them. Of course, Bloomberg intelligence
have said that essentially for them the
H20 is dead in the water. The focus
should be on what happens with this
Blackwell chip for the Chinese market.
Yeah, hence the inventory buildup around
the H20 and we just showed that on the
screen. So thinking about Asia and
thinking about the market reaction, you
know, is what is good for Nvidia and
good for US tech good for macro
sentiment in Asia. I've been wondering
this because of course there's
competitors there are competitors in
China and many of them are being
encouraged by the Chinese government to
to step up
and the market reaction has been more
pronounced in China than there has so
far across global equities. less of a
move in terms of a catalyst that we may
have thought and may have expected from
Nvidia because probably they landed in
line with the estimates and yes growth
is slowing a little bit but from very
high levels. You have seen the domestic
competitors in China performing very
well. Cameracon is a standout this week
came through with record earnings,
record first half half earnings. This is
a company that set up in 2019. They are
trying to build out are building out
chips that specifically target
inference. So when you're using the
actual models themselves to ask
questions and do tasks for you, that's
where their chips come into play. They
do not yet meet the capabilities of
Nvidia chips, but they're closing the
gap and the stock is up 123% year-to-
date. At one point this week, Camcon was
the most valuable domestically listed
company in China. So that that domestic
players are benefiting as the Chinese
government says steer away from Nvidia
at least for now and focus on our own
in-house capability.
So the macro signal in Asia might not be
the macro signal we get in in the rest
of the world. and NASDAQ futures down by
310 of 1%.
Hardly a big move though. I this is this
is one of the big kind of moments in the
reporting season.
The NASDAQ's fairly budget. Tom Guff,
thank you very much indeed. Tom McKenzie
on what we saw out of the Nvidia numbers
yesterday. Uh Ben Barhinger, global head
of technology research and investment
strategist at Quilted Chevot joining us
now. Ben, I just talk us through your
reaction. I I've seen the word
disappointing. I've seen the word
uninspiring.
What word would you describe these
numbers as? Yeah, I I think they're
straight down the middle, but it's not
what people are used to, right? So,
people normally expect one to two
billion of beat from Nvidia. This is
more like a billion. So, it's it beating
uh sellside consensus, but it's bang in
line with buyside consensus. Gross
margins ticking up a little bit and
they're guiding to 75 the the year end.
Remember, you know, semiconductor stocks
always trade on better gross margins.
So, that's a a positive I would add. And
then the guidance is very interesting
because they've guided at 54 at the
midpoint. Um but that doesn't include
any China sales, right? And then they
talked about on the call uh between two
and five billion potentially of China
sales. So that does if you want to play
exchina, it's a miss. If you want to
include China or some potential China
sales, then that then it's probably in
line or slight beat. So I think that's
the nuance that people are are going
for. As you say, 3% after hours feels
about right. As you said earlier, the
stock hasn't run hard into the numbers,
but obviously on on a you know, compared
to last quarter, um it it's up quite
very significant.
Should I as an investor in Nvidia park
China? Should I just I should I just put
it to one side? The the addressable
market, the opportunity elsewhere is
absolutely enormous. Clearly, the
Chinese have a different view. They want
to go a different way. Does it matter?
I mean, look, in 2024, what was China?
About 13% of revenues. Now it's most
people have taken it completely out of
their numbers and it's now an adback. So
you know at maximum it's probably going
to be 15 maybe 20%. So it's not
immaterial but I think you know there
are a lot of other big drivers for
Nvidia uh going forward you know agentic
AI sovereign uh AI the enterprise
adoption physical AI so that's you know
robotics and and autonomous driving as
well. So there's there's a lot driving
here, but I think people like to focus
on China because of the uh the comments
out of China around uh not encouraging
adoption of Nvidia, also the 15% license
fee uh that Trump wants to charge Nvidia
and AMD. So it's a it's a good, you
know, sort of focal point and it's
certainly one of the deltas around the
around the news. But I tend to agree
with you. What we're really focused on
is the global demand for AI. China's a
big market. You know, there's a lot of
AI scientists there. So, it is one they
want to get right, but it's not the
whole story.
It's not the whole story. And Ben,
thinking about the rest of the story, of
course, we started with hyperscalers.
Now, we're witnessing enterprises more
broadly spending money on this stuff.
We're also seeing sovereigns piling in.
And as you mentioned, physical is the is
another way, the actual physical sort of
manifestation of AI with robots and the
like. So, what makes you what what do
you think is going to be the big driver?
Are we still in a period where
enterprise and hyperscalers drive things
or do we step into a new phase where
sovereign starts to drive? What's going
to be in the driving seat?
Look, the one thing I focus on is still
the capex from the big hyperscalers,
right? And that is going to now grow
this year by about 50%. And next year,
that's the real number I look at 2026
capex growth should be about 15%. and
and those numbers have come up from 33
in this year and nine next year. So
that's to me that's been the real driver
of the the sort of AI trade. Now
obviously
um the signals from Jensen are that he
wants to broaden his his demand picture.
He just can't can't focus on the big
four hyperscalers. Um so yeah, sovereign
I think is increasingly going to come
through the numbers. He's talked about
that being 20 billion of revenues uh
this year. So that's going to going to
be a big driver and then robotics I
think you know further down the line
also enterprise is very interesting you
know you've um some of the software
companies haven't seen great adoption of
their AI but you are seeing it in
results from companies like MongoDB um
and Palanteer that there is demand from
enterprises for AI services. So I think
that broadening is is the way that that
I would think about it. But hypers scale
capex is still the the one data point I
really focus on of this story.
So Ben Ben that's the that's the Nvidia
specific story and I and I we all know
that you know Nvidia owns 95% of this
market. The other 5% comes from AMD and
and a handful of others. Talk to us
about the ripple effect here. If you see
decelerating growth from Nvidia, does
that set the tone for its other
admittedly smaller competitors?
Um I mean look AMD has its CPU business
where it's still taking a lot of share
from Intel. Um so and it also has you
know a gaming business and it also has
um this former XYlinks business the FPGA
business which is more networking. So,
but most people investing in AMD are
investing for them to become a good
second source uh to Nvidia and that's
really going to happen with the um uh
MI400 MI450 uh which was expecting you
know in the next sort of 12 months. Um
others you know we've got Broadcom um in
in a week or so we've got Marll tomorrow
as well. You know those are all sort of
tied up in in the trade. Um, I would
just say on the custom AS6 story, you
know, sort of Broadcom and and Marll,
um, Jensen made some comments about this
last night. You know, the way I think
about GPUs versus AS6 is as long as
models keep evolving and there's more
innovation and flexibility that's
required in in model innovation, GPUs
will still remain the dominant uh sort
of uh infrastructure. Um, as people
start to do more inference and
application specific things, they'll use
more AS6, but AS6 are difficult to get
right.
All right, Ben Behringer, global head
technology research and investment
strategist over at Quilter Chevat. We
thank you so much for your time this
morning. The analysis here is
interesting though because these numbers
are still strong and I the ripple effect
is is kind of there. He was talking
about the market share with Intel. He's
talking about the the the read through
into the likes of AMD. Are we just
waiting for another data point?
Always. That's what we do, isn't it?
Yes.
Sure. But to like to call the end of
this Nvidia moment.
Do we feel like we're we're at the end
of the video?
I'm posing the question.
I think Well, a 3% drop doesn't doesn't
feel like the end of March, does it? On
August 28th,
I think I think the stock would have
would have sold off kind of regardless.
There's been a very strong run to these
numbers.
They're just not in control of the China
story, are they?
Not over the last few days. But but put
the Chinese story to one side.
Everything else looks like it's still
progressing. Though we were talking
yesterday about the fact that maybe the
hyperscalers are going to struggle to
continue to deliver the kind of margins
that they are operating with currently.
And if that's the case, can they carry
on?
Absolutely. Let's talk about another
source of potential volatility at least
for Europe. If it's not coming out of
the states, it might just be coming out
of France. We're going to talk about
those dynamics next. This is Bloomberg.
30 minutes away from the start of the
opening trade. On the surface, things
seem kind of fine. The CAC 40 futures
especially higher by about two ten of 1%
and the stock 50 futures higher by the
same margin. But that's simply just a
small maybe dead cat bounce from from
yesterday's session. I think that's
what's to be determined. A
very small cat it appears bouncing. Um
let's talk about what's happening in the
bond markets uh and figure out what is
going on there. Round and round we go
with the French to Neons. Uh as you can
see we are a little bit bid in terms of
the bond market as well. Not much action
here as well. Uh we are waiting what
happens in France to decide kind of what
direction maybe actually equities and
bonds go in next. Uh we'll see what the
politics looks like in terms of the way
that we're going to develop there. I he
was on TV yesterday. Beu I'm not sure
we've made much progress. Expectations
rise that we will have a new French
prime minister at some point soon.
Yes, absolutely. And the French bond
market was alert to this possibility
yesterday and we saw this widening of
the spread. We're at 80 basis points
between the French and German 10-year
bonds. It's gone yeah went above 80 at
one point as the French prime minister
Beirut calls for talks with lawmakers
and warns against snap elections.
Joining us now for some analysis is
Marie Alier, fixed income fund manager
over at Carmenac. Um, Marian, good to
speak to you. We're just showing the
spread between O80s, French debt, and
German buns, and it has been widening.
It got to over 80 basis points, of
course. Is this what something you would
describe as a quiet widening, Marie
Anne, or is this threatening to become
something a little noisier?
Well, for the moment, it's still a quiet
widening. we we had during you know the
June July uh quite a a huge uh
tightening of spread as you can show on
the graph. So part of that is just you
know the the payback of of the carry
summer as we we like to say in the uh
bond fixed income market. So um for the
moment there is nothing uh you know very
um worrying about uh every spread are
still tight and yield because we are
talking about spread but which is more
important for the countries the absolute
level of yield and for the moment we are
not at level that are um especially
worrying for us.
Yeah. So 3.49% 49% on the French 10year
and of course on the corporate side of
things we've been talking about quite uh
tight spreads for for much of Europe in
recent weeks. What is your base case
assumption though Marie an and do we see
this calm continue or this quiet
widening continue if we do see the prime
minister lose that no confidence vote?
I think everybody is quite convinced
that um that he will lose the confidence
vote. So the market is already prepared
to you know a new government even a new
snap election um you know it's something
that the market is already priced um
for. So I don't think that I don't see
the trigger to push the spread you know
20 or 25 basis point wider in the next
weeks or something like that unless we
have an unexpected event of course but I
think you know even the downgrade by
rating agencies even a new prime
minister it's something that the market
um has has already incorporated in the
price so we will have this widening
because we will have more supply and so
on. But I struggle to see what will be
the trigger to push the spread at 100
basis point or even above this level in
the next um weeks let's say like this.
Mariani in London play doomsday with me
for a moment in terms of what a lot of
markets are calling the worst case
scenario which is pulling forward a
presidential election that is expected
to happen in 2027. What is that market
reaction? Even if the odds are small,
what might that look like?
Um,
again, for the moment, the the fact is
that the country is very divided and
it's very hard to see a majority
emerging from any election will it be a
presidential election or or you know a
parliament election. So we what we are
expecting and what we are seeing is that
we will continue to this you know
deterioration of fiscal um policy but we
are not at a point where I think the the
the system will crack. Not yet. uh and
the market again look at uh what what
the result of people that uh were
shorting you know Italy when Italy was
the hot spot in the country or even
Greece, Portugal and so on you know you
know that at the end of the day if the
euros and the ECB is still in place it
will be difficult to uh to make the
system crack. So yes, you can bet
against France, but at one point you
will say, "Okay, it's still a single A
or double A minus or single A plus
countries.
What is the risk?" M
Marian, when we saw the no confidence
vote for Michelle Barier in December of
last year, the spread hit almost 90 and
at one point the yield had overtaken
that of Spain. I believe still trading
higher than that of Spain. We are now
looking at a French yield that is
looking likely to overtake that of
Italy. Walk us through whether
peripheral credit is still the
alternative in this environment.
Um I think the corporate credit is still
the alternative. uh bunt you know when
we look at the spread um don't since
December last year we had the mers plan
also saying that Germany will spend more
um and maybe if you look at the spread
of oat versus swap and espe especially
versus ET we are already at the widest
level that we were uh last year. So
compared to Germany which seems to be a
bit below the spread of 2024 but
compared to swep to swap we are above
this level. So again there is already a
lot incorporating the spread of France.
I think all the other credit uh are
corporate credit. Uh Italy, Spain are
alternative but they are still for Italy
for example tripleB uh rating countries
not single not yet.
Marian, what would it take for what what
would politics need to look like for for
OATS to become a big buy? I is there
anything? Yeah, precisely. I what could
happen here?
Um
it's a it's a good question and I have
absolutely no answer to give you. I'm
sorry. Um I don't see you know um a maj
what we need is a majority at least to
have a clear uh way of what will be the
next policy uh in term of fiscal in term
of you know reduction of deficit or
increasing deficit I don't know at least
to judge if you know um the country is
in a good or in a bad place for the
moment what we have is deadlock you know
it's politics are just unable to uh to
present a plan and to be able to to so
I I I'm sorry I have no answer to be a
big buy. I think um we need a
providential uh people and we don't have
it for the moment.
I'm I'm starting to hear talk as well
about changing the electoral system to
allow maybe clearer majorities to
emerge. Do you think how would the
market react to that? the idea that
actually maybe you need some sort of
refer referendum on proportional
representation, you need to change the
way that France elects. Is are you
hearing anything about that? Is could
that be something that would be seen as
positive because it would at least give
maybe whoever is in charge a freer hand
to act.
You know what is strange is that usually
our system with a majority to um to run
with a a clear majority as bring clear
majority in parliament as opposed to a
to countries where you have proportional
like Italy or Germany where you have
already you know a lot of coalition and
if I remember well the projection that
have been made um for the last election
on you know proportional the result
won't have been very different from what
we had. So I'm not even sure that with a
proportional we have we will have a
clear majority. What we lack in France
is the uh you know coalition
you know environment where
party are able to find compromise. We
don't have this culture in France. It's
the German the the Italian culture. Uh
it's not the French one. So maybe what
we need is, you know, smartest uh
politics uh at the ed of the uh of the
country.
Smarter politics. Wow, that sounds like
that's that's a challenge. Rian Alier,
thank you very much indeed. Rian Alier,
fixed income manager joining us from
Carmenac. Uh coming up, we're going to
be tracking shares of one French
company, Pen Ricard, the spirits maker
warning of weak sales. Uh we'll talk
about that and what else is happening
out there this morning. plenty of stocks
to focus on despite it being the back
end of August. This is Bloomberg.
43 minutes past the hour, 60 minutes to
go until the session starts here in
Europe. One thing we're going to have to
price in is quite a big drop yesterday
in Ryanire's stock. It dropped sharply
late trade yesterday. This after CEO
Michael Olirri gave an update on summer
demand. Investors had clearly been
hoping for more than the five to six%
recovery in fairs this summer that
Michael talked about in a press
conference in London yesterday just
around the corner from here. I caught up
with him after the presser and to be
honest he sounded pretty optimistic that
the airline could still do better in the
full year than market expectations.
I think we're reasonably optimistic. I
mean I'm not sure the market is right
but we've had constrained grow capacity
growth this year. So Boeing have left us
short of aircraft. Certainly this summer
trading has been strong. Forward bookies
are about 1% ahead of where they were
this time last year. Last year fairs
were down about 7%. It looks like we'll
get back most of that 7% fair decline
this year. Not all, but I'd be
reasonably hope we get most of it back
to
where's the market looking wrong?
I I think there's more growth available
in the marketplace.
So the market is is
fairs are recovering this year because
capacity is constrained. Uh but people
there's certainly strong demand for air
travel certainly from the UK to Europe.
Um if I had more aircraft I think I'd be
able to deliver more growth.
Okay. You are going to get more
aircraft. You're going to get them from
from Boeing. You're getting 737s earlier
than anticipated 25 of them beginning in
October rather than 6 months later.
Does that mean you increase your
passenger targets?
Uh not in the UK. Uh because of
anywhere. Oh yeah. Yeah. Yeah. I mean
we're growing very strongly. I've
already
you going to raise passenger numbers
because of those aircraft coming.
Exactly. I mean we will grow with this
year we'll do about 26 million
passengers in the year to March 26. Next
year to year to summer 26 we'll grow to
about 215 million passengers. So
is that brought forward? It's only bring
forward.
No getting the aircraft.
Yeah. No I mean we're taking the
aircraft early to if you like to kind of
to secure that growth for next summer.
The only area where we can deploy those
25 extra aircraft will be this
Christmas. So there'll be a lot of
additional flights in most of our
markets including even the in the UK at
Christmas. But other than that, no.
We'll sit them on the ground until we
get
You bring them in early because you're
worried about tariffs.
We're bringing we were we're bringing
them in early because we're worried
about tariffs, but also we're worried
something else might go wrong with
Boeing. So get them in early if Boeing.
It's a good sign that Boeing able to
deliver these aircraft early. We want to
take them early. So at least we've
guaranteed we have them for summer.
So your confidence in Boeing is still
not that high. You're still worried that
that things could go wrong.
We should always be worried. you know
the experience with Boeing but I mean I
the very fact that Boeing are able to
deliver these aircraft four or five
months early is a good sign that the
manufacturing process is going well I
think Stephanie Pope doing a good job in
Seattle and the quality of the aircraft
we're getting the fuse lag out of
witchah the aircraft out of Seattle has
immeasurably improved in the last 12 18
months
Scott Besson US Treasury secretary he's
just been on television
and he's criticized Boeing for
delivering a massive buyback rather than
investing in R&D do you have some
sympathy for that
I don't really I mean if Scott Bessant
wants you what he should be doing is
supporting Boeing. You know, one of the
reasons Boeing can't make more aircraft
is the FAA won't approve the increase in
the production rate from 38 to 42. Uh we
still need to get the Max 7, Max 10
certified. You know, so Scott Bessent
should let Secretary Transport Secretary
Duffy deal with Boeing, get the
increase, get the production rate up and
certify the Max 7 and Max 10.
And actually, Michael's fairly confident
that that rate increase is coming and
probably will come later on this year.
He he wouldn't be concerned though. He
told me yesterday uh if the US
government were to take a stake in
Boeing, remember there's some talk that
actually that could come. Boeing is a
defense company. There's some talk that
that could happen. Um Michael told me
yesterday that so that move that we saw
yesterday in Ryan Air dragging the
entire sector down. EasyJet, IG,
Lufanza, all down on the move yesterday,
back end of the session on the back of
those comments that we had coming
through from Michael.
Yeah, and clearly the the subject of
tariffs uh on aircraft is part of the
thinking, something that is on the radar
for those in the aviation sector. And
Chrissy has been thinking about the
wider news flow surrounding tariffs this
morning.
I absolutely have. I mean, this one's
fascinating as well because we're
hearing so much of the tariff
conversation, the trade conversation
emanating from the United States. You
heard it there on that Ryan Air
conversation. Looks like now other
countries are using the same playbook.
What the motivation for that can is a
different conversation, but I just want
to walk you through some of the numbers
between now Mexico and China. This is
crucial here because of course China is
Mexico's number two trading partner
competing with the states in terms of a
lot of different products. In fact, this
chart I think tells you everything. The
fact that Mexico is even considering the
idea of putting tariffs on imports
coming in from China. Look at this.
their second largest trading partner
that is going to have a massive impact
in terms of their trade flows because
their next third one is South Korea and
by a massively massive margin. Let's
dive into a little bit more of what
those imports actually entail and
basically how this why this is so
important as of right now. So I want to
bring you a chart here that shows the
exports coming from China into Mexico
and why this has become a bigger talking
point when it comes to Mexican
parliament and has to do with a similar
theme we see here right here in Europe
which is over capacity. You can see
going all the way back to the early
2000s, it has been a steady increase in
trade kind of in line with global
growth. But since the onset of COVID and
since that massive rebound, that export
story has steepened and steepened in a
really big way to certain key sectors.
And this is the same sectors that the
United States and Europe are worried
about as well. This is the part that I'm
going to show you in terms of what
actually makes up that trade
relationship. Cars, smartphones, and
computers are a big big part of that,
especially when it comes to the
manufacturing story. Because at the
moment, American, arguably even some
European companies, car companies
specifically, have manufacturing plants
in Europe with final assembly,
specifically the states. That happened
across the border. China is different.
China does not have that same assembly
plant structure, Anna, from China into
Mexico. They manufacture them in China
and import them in Mexico. And the
argument to impose these kind of tariffs
to the tune of 20% especially on the EV
sector is to fight that kind of over
capacity. A theme we're very familiar
with right here in Europe. Okay. So
that's the trade story and there are
plenty of threats to that trade story
this morning then Christy, aren't there?
Let's widen the lens and think about
where we head as we get closer to the
European market open. Paul Dobson joins
us. Bloomberg's executive editor for
Asia Markets. Uh Paul the thing we can't
ignore of course is the Nvidia earnings.
I say that but the after hours move
wasn't huge. NASDAQ futures actually
pairing earlier losses as we get closer
to the European open here. So, how do
you put the Nvidia story in context for
us?
Yeah, good morning Anna. Uh, I think
yeah, it's a really interesting question
and and and way to look at it is the
idea that Asia's markets really didn't
respond all that much at all to what we
saw with Nvidia. Remember, we build this
as a really big risk event. implied
volatility was suggesting there could be
really major swings uh either way based
on what the earnings showed and uh
indeed it did drop quite a long way
around 3% in after hours trading in the
US but the knock-on impact uh for for
broader markets doesn't seem to have
been all of that great I think there's a
couple of things to think about one the
earnings really weren't all that bad
there's some uncertainties in there and
that's part of what what made them look
a little bit weaker the fact that they
excluded China from there altogether and
two um you know even then uh the the
size of their earnings is still pretty
phenomenal all else being considered. Uh
I think that Asia's markets had an extra
fill it because a bit worried about what
it can do in China that is opening space
for the Chinese technology companies to
also uh come in and so they had another
good day but all in all the market was
happy enough with that and focusing on
other things
other things. What's happening in
Japanese bonds Paul?
Yeah. Uh so um we we know the Japanese
bonds have been under pressure
particularly at the long end of the
yield curve uh for some time. People
worried about inflation risk. Today it
was the front end of the yield curve an
auction of 2-year uh notes that really
didn't go very well. The weakest demand
in 16 years when you're looking at the
bid cover ratio and I think that that
tells you a couple of things. One just
in general appetite for JGBs is very
weak and subdued at the moment. And two
people are getting ready for the central
bank to raise interest rates. One of the
BJ members was talking today sounded a
little bit more hawkish than the market
might have expected. Uh so we're getting
ready for the BJ to hike. Remember the
rest of the world obviously going in a
different direction at the moment, but
if that's going to happen, you're going
to want higher yield in order to own
those bonds. And so the risk now is that
that ricochets again back across to the
far end of the yield curve. We've been
talking to international investors who
thought that that would be a good option
given the extra pickup they could get
with currency hedges as well, but they
keep getting uh thwarted and uh all of
the all of the profits from that trade
are getting wiped out because the yields
keep on going higher as well. So,
troubling times there for the JGB
market.
Paul, let's continue the story in Asia
specifically. Walk us through the Indian
market here. We now have 50% tariffs on
India. We have concerns and threats
about secondary sanctions not just from
the states but from Europe now as well.
What is the thinking?
Yeah, we don't talk a lot about India uh
in this slot but I think a good moment
to do it given that the fact that we're
getting hit by those extra tariffs on
India right now but what we've been
worried about has been the weakness in
the bond market again over there as
well. Uh we have state uh states looking
to fund uh and the government as well um
sort of putting a lot of stress on
demand outlook. Today we reported that
the central bank was paying attention to
it and that seems to have stopped the
sell off just for an hour.
All right, Paul Dobson, Bloomberg's
executive editor for Asia Markets,
walking us through some of those
dynamics. We thank you so much. You get
more analysis from him and the team
MLIVgo is the function on your terminal.
Let's go from the macro to the micro.
Get our stocks to watch with Luis Moon.
Luis,
morning. So, we're back to talking about
chip stocks. obviously had Nvidia
earnings overnight came in largely
underwhelming that seems to have been
kind of brushed aside in Asian markets,
but we'll be seeing how this plays out
in European markets this morning. So,
the main ones would be uh chip uh chip
stocks in Europe. So, Infinian, ASM, ST
Micro, they've had a bit of a mixed
month so far. ASM underperforming
slightly, so we'll have to see how that
um opens this morning. And then on the
other on the other side, we've also got
some Nvidia suppliers that we'll be
watching as well. So that's the likes of
Siltronic and BE Semiconductor
Industries both down quite heavily year
to date. So we'll have to see how that
impacts following um Indivia's earnings
overnight. Now the next one we're we're
moving on to alcohol per Ricard. They
had their earnings this morning. Now
well if we if we move on uh flip the
next slide. So they had their fourth
quarter earnings which came in in quite
flat but this was this was relatively
expected but they're warning um of US
and China sales to really weigh on
things going in. And if you look at
their fourth quarter that already is
kind of weighing on the stock they're
down almost 23% so far this year but
analysts interesting link are saying
that this has kind of been pricing
already so could open slightly higher
this morning. And then finally, delivery
hero. They met estimates um but uh
analysts are still quite strong on that
despite some cuts. So we'll have to see
how that opens. Louise, thank you very
much. Equities reporter Louise Moon. Uh
big picture, Nvidia reported NASDAQ
futures only down onetenth of a percent
now. We'll be back with the European
open next. This is Blink.
Thursday morning, we priced an Invidia,
but not much. We're not seeing much of a
reaction in global markets to that
Nvidia story. Yesterday was all about
the anticipation of the Nvidia story
going into the numbers that we got, but
actually there wasn't much there either.
Europe basically just drifted sideways.
There's a few political stories we need
to factor into our thinking on this side
of the Atlantic, a few corporate
stories. US markets actually hit record
fresh record highs yesterday, but
overnight obviously we faded that a
little bit, but that's kind of where we
went out. That's where we closed in the
states a little bit to price in on the
upside, which is maybe why Crita has
positive futures first thing this
A little bit of a catch-up trade maybe,
maybe the fact it's just Thursday, it's
the last day or last few days of August.
You're also going to be seeing a little
bit of a rebalancing trade. Plus, of
course, catching up to maybe bouncing
back from yesterday's red on the screen.
Nevertheless, I think the key key
takeaway is the futures over in France
higher by 510 of 1% Anna, but we'll see
how that shakes out as we get a couple
of French stocks in the mix. Yeah,
absolutely. That'll be interesting,
won't it? If we do see a little more
positivity around France, especially as
we have seen recently bond yields, that
spread widening just a little bit. Let's
have a look at some of the sectors and
stocks in focus as we head towards the
open then. Chip stocks certainly in
focus. Not sure exactly how but in focus
after the Nvidia numbers that stock was
down three and a half% after hours.
NASDAQ futures though fairly contained
down a tenth of a percent and Asia seem
to try and look through these uh Nvidia
numbers. So we'll see how that plays out
for chips. Per week are certainly in
focus expecting sales to decline this
autumn or fall if you prefer due to
trade friction in China and the United
States. And then delivery hero this has
been up and down and all over the place
in the pre-market. investors trying to
balance a solid set of results and
upgraded revenue guidance, but there was
a cut to the earnings outlook uh because
of FX headwind. So, we'll keep all that
in focus. Guy
feels like a single stock story morning
or does it really? We're about to find
out. Uh let's see if French politics,
Nvidia, which I consider a macro moment,
uh are all going to be the bigger
drivers here. 4100's out of the gate.
Nothing to see here barely budging in
terms of uh its performance. We wait
really for the cataron to see how it
trades. But there are stocks like Perau
that you want to watch out for right now
and see how it does. Stock 600 really
just reflecting the footsie right now.
The IBEX is up by 210 of 1%. Again,
nothing really to see here uh in terms
of the story. Uh the CAC is going to be
the narrative here. We're going to watch
and see how that reacts. But then you
need to segment. Is it actually a
corporate story uh in the form of what's
happening with Perno or is it a bigger
story? Are people buying back into the
banks? Are we seeing a little bit of
calm maybe returning to that market? It
doesn't feel that the French market is
in reality much further forward. We we
still have to wait uh until the 8th of
September before we actually get the
next clear and obvious catalyst in terms
of what we're watching. The Karant is up
by 410 of 1%. We'll wait and see what
the DAX does. Actually, there's some
fairly positive data out on autos today
uh which may be factored into its
numbers as well this morning. Cry the
sector story. Well, it feels like it is
more of a regional story to your point
rather than a sector story because the
buy the return or the bounceback I
should say you're seeing this morning
even on the stock 600 level is largely
driven by French stock. So a lot of the
ones have been hit in the last couple of
days off that political turmoil they're
the ones that are driving the trade. For
example, Schneider Electric, uh Airbus,
for example, uh even LVMH, BNP, a lot of
the French stocks that are starting to
see perhaps a little bit of or have seen
a little bit of pain are the ones moving
to to the upside. From a sector basis
though it's a broad rally. Healthc care
though is your only downside factor.
Yeah. So again yesterday we had not huge
moves in the overall markets but most
sectors moving higher at this stage at
the stage of the trading day and we see
the same again don't we criti to your
point healthcare is the only sector
that's negative and even then not by
much. Industrial goods and services is
the best performing sector this morning.
In fact no now it's autos uh autos and
auto parts. So we have been covering the
uh story around a bounce back in uh
certainly plug-in EVs in Europe and
sales there coming in pretty strong.
Those registration car registration
numbers looking pretty decent. But
actually it's some of the suppliers to
that sector that are doing better this
morning. So con uh continental and
stellant is up by 1.4%.
Po's up by 4%. So maybe that's a a kind
of factor into the French thinking as
well. If you take a look at the kakarant
this week, so you get the the big gap
lower coming into the 26th that that
morning,
we are still down quite heavily on the
last three days, four days, let's call
it, we're still down by 2.4% on the
French market. So we've had a very small
recovery off the lows that we hit at the
beginning of the session on the 26th.
26th we didn't do very much. 27th we've
done very very little as a tiny gap
higher first thing this morning, but
we're still down quite heavily. And
maybe actually Perno is one of the
stocks that's driving us high. You can
see the reaction in Dagio and some of
the other names around Europe on that
sector story as well.
What's French for dead cat bounce? We're
going to have to look that up and and
and translate.
That's one of those one of those things
that you shouldn't translate directly, I
suspect.
Uh and we should also just mention very
quickly ASML is also uh a little bit
lower, only down by two ten of 1%, but
given the rally that you're seeing,
that's fairly broad this morning. Uh
that is one to note. Perhaps a little
bit of an Nvidia read through as well.
But as we were just talking about, it
feels like France is the focus at least
for the next few weeks. We've got the
perfect market guests to talk about it.
Claudia Penseri, CIO of France at UBS
Wealth Management joins the program this
morning. Claudia, it does feel like this
week the trade in terms of the upside
and the downside when it comes to the
broader European sector has been driven
by the political situation in France.
Talk to us a little bit about just how
much we can expect that to be the driver
in the next couple of weeks.
Good morning and thank you for having me
back. I think we still have uh some
downside but the market is already
priced quite a lot especially when I
think about the bond market. I have to
admit that there are a few element which
are impacting the French situation. Of
course the macropolitical situation is
key but also uh the companies in the kak
have been impacted by tariff and then by
the strong euro. So there are three
different sector which are pushing the
French stock and lagging for instance
the German one. When I think about the
French situation I mean we will have a
volatility until the 8th of September
and then depending on the vote the
situation may change. If we find by
surprise that we have a confident v, we
may have a a push back a a a good
movement on on the companies within the
kak but probably also some easing on the
spread side. That say the situation the
public situation is not an easy one.
Deficit remain very high. We need to
find a negotiation across different
parties which also mean that 40 billion
budget plan is at risk. We may probably
have 22 billion 25 billion which is good
enough I think to go through uh the
parliament by the end of the year but
also good enough for the European
Commission and as you know that France
is part of the EDP procedure
Claudia in previous iterations of of
this political chaos and we've seen
several iterations of it going dating
back to uh I want to say the summer of
of 2024 December 2024, certainly earlier
this year as well. We've seen a stronger
reaction in the bond market that it
feels like the stock market takes its
queue from it. It feels like these
moves, although negative, aren't as
volatile as they have been in previous
iterations. Walk us through the maybe
correlation that we should be seeing
from the French bond market versus the
French stock market.
I mean it's normal when you have a rise
in bond spread you also have a high
correlation with financial sector we
have seen the financial sector uh over
the last few days been under pressure
the cost of credit is greased and if you
have higher cost of credit you have more
refinancing cost not on this only on the
sovereign side but also on the credit
side that said there are plenty of
companies which are not linked to
economic growth in France so if we think
about exporter exporter to US exporter
to China and not link to domestic vis
that companies may resume some
performance where uh I will say
visibility will get better it's true the
market reaction has been strong over the
last three days but once again I think
we don't need to have for the time being
let's say until 2027 40 billion budget
cut uh the debt situation remain
critical we have a deficit which is
close to 5% this deficit will not
improve if we have a huge fiscal
tightening but for the European
Commission having between 6 and8 of
deficit improvement is good enough and
then we need a new PM a new PM which
could negotiate across the different
parties to find the possibility to have
this 22 25 billion by the end of the
There is still time to put the budget
into the process and being voted until
the end of the year. I think the market
will react well. If we are in the
situation, then a new PM is named and
this PM will be able to present the
budget by the end of October to the
National Assembly.
Okay. Yeah. We'll see if any new prime
minister, should they appear, will have
any better luck than than Beirut at
getting these things through. Let's move
on to the tech story, uh, Claudia,
because we had Nvidia numbers out
overnight and I know that you are keen
on large tech, big tech over in the
United States. So, as somebody who is
leaning into the tech theme, still
thinks there's something to play for
there. How do you interpret the Nvidia
numbers? NASDAQ futures are now almost
flat.
It's quite interesting because we are
always very excited about the Nvidia
results because it's one of the biggest
stocks and the US market is so
concentrated. The video has also been
one of the most volatileized stock over
the last year. Every every time we have
results we have a huge uh change in in
the stock price. Now the AI story is
still in tapex
which is which has been spending. There
are doubt we or concern around
monetization monetization of the capex
spending also concern about the return
on capital employed but the trend is
there when we look at the revenues are
still up very strongly the growth is
changing but you can't have two years in
a row with growth improving when the
number of growth are above 100%. So is
also a question of base effect
geopolitical and the the trade concern I
put some volatility as well are impacted
results but overall I think yesterday
results are good enough to keep the
trend going.
Okay, good enough to keep the trend
going. Cl heard a pretty negative
interpretation from one investor about
the threat that AI poses to software as
a service. Um do do you share that
negativity? Do you fear that other big
players in the US tech space might come
under pressure from competition if
they're providing software competition
with Aentic AI?
So I think there is competition rising.
The positive element I want to highlight
is that the penetration rate is
increasing. The patronation rate
increasing mean also that adoption will
be higher. more adoption you have and
more revenue you have. Uh we need to be
selective of course the market is up
quite a lot since April 2nd. Uh there is
over the last two year and a half
performance or AI stocks has been
impressive. So there is more selection
to do because valuation are stretched.
But I will not be uh too concerned about
the fact that earnings source is still
there and I will be more pointing out
that penetration rate rising is also
mean more volume more volume is revenue.
So even if you are losing a bit of
pricing power the volume should should
offset the price the price pressure.
Claudia good morning it's Guy. I'm
curious to get your take on whether or
not you buy the United States or you buy
Europe. Are the catalysts for European
outperformance of the United States now
behind us? What do you what are you
advising your clients?
So we are neutral on both region but uh
I have to say we are still very positive
about US. So we have seen at the
beginning of the year US underperforming
concern link to the level of interest
rate. We are now expecting 100 basis
point of rate cut in US which to support
multiples probably multiples of those
sector which are uh supported by falling
uh bond deal. We also expect bond deal
falling in the coming few months. So the
big difference I think is the
differentiation in monetary policy
between US and Europe. Europe is close
to the end of his monetary policy cycle.
We still have 25 basis point rate cut
but US is still 100 basis point rate cut
and this should continue to support the
market. We probably more selective than
before on both region we continue to be
positive on tech but not only on tech
financial financial should benefit from
the uh deregulation as well.
Aren't multiples already very very high
in America?
multiples are high but uh we need to
think about concentration index
concentration the level of valuation is
mostly driven by few stocks when you
break down the index and valuation
across sector you still find value
across pharma I was mentioning financial
industrial so when you look the overall
index the S&P for instance valuation are
above 22 times but when you look and you
break down and you exclude tech stocks
and uh the the biggest stocks within the
index valuation is more reasonable
around 19 times. So diversification
matter a lot and diversification also
mean that the portfolio construction
need to be uh done thinking about
earnings growth but also trying to pick
those stocks which will be growing uh
benefiting from rate cuts but also where
valuation appealing and I was mentioning
few sector before on which we are
positive.
Got great to catch up. Thank you very
much indeed for your insight. Cladio
Penseri, CIO France at UBS Wealth
Management. Core 6 looks like this this
morning. Uh it's interesting actually in
the French market. It's been banks and
some of the industrials that driven the
market so far this year. Names like LVMH
have actually underperformed but it is
up this morning as you can see as the
French market comes back. That stock is
up by 1 and a half%. Schneider up by 610
of 1%. Chips are a little softer this
morning but not by much. Defense is
doing not very much. And to Claudia's
points, look at what's happening in the
farmer sector up by 1.21. 21 uh on Nova
Nordisk. What else should we be
watching? Car sector firmly in focus
this morning after the data we've seen
overnight. Luis Moon has the details.
It is indeed. So, we're really keeping
an eye on cars. That's after sales hit a
15-month high in Europe. A lot of demand
for electric vehicles there. So, the key
ones we're looking at Volkswagen,
Mercedes, Stalantis, all into the green,
up over 1%, Stellantis actually up 2.5%.
So, that's really boosting the car
market. this morning. The next one we're
looking at is Pinard Ricard. Obviously
had their earnings this morning as well.
Now they're warning about the outlook
mostly to do with US tariffs and China
doesn't seem to be weighing on the stock
however up almost 5% into the green.
LVMH could also be exposed also to the
US and China quite heavily. Also not
really weighing on them into the green
this morning despite that news. Moving
on to the food sector, we've got
Delivery Hero. They also had their
results this morning. first half matched
estimates um but they did trim their
fullear guidance not seeming to weigh on
the market also up almost 4% into the
green. Now, moving on to the energy
sector, we've got DRA in the UK. So,
some surprised news this morning that
the FCA is investigating DRA. That's
into some of their reporting, some of
their historical statements in the past
few years. Really weighing in on their
stock down 7% into the red. They were
down about 12. So, they've they've
they've kind of moved higher slightly
from that, but still strongly down into
the red. And then lastly, sticking with
renewables, we're on to it's been a big
week for Alstead. first had a wind farm
canceled off the US. Then trying to
convince investors and now slightly into
the green this morning. That's after
they've been raised to a buy. So, so
some positive news to uh come into the
end of the week for them. Okay, Louise,
thank you very much. L from our equities
scene. Yeah, just feel like a market
that just seems to want to go higher
this morning. Certainly the cat on up by
7 cents of 1%. Not so NASDAQ futures
pretty flat. Coming up on the program,
we'll bring you more analysis and market
reaction to those Nvidia earnings.
That's coming up next. This is bring
back.
The opportunity ahead is immense.
Blackwell and Ruben AI factory platforms
will be scaling into the three to4
trillion dollar global AI factory
buildout through the end of the decade.
So I think the, you know, the the
opportunity for us to bring Blackwell uh
to uh the China market uh is a real
possibility. And so we just have to keep
advocating uh the the u uh sensibility
of uh and the importance of uh American
tech companies to be able to to uh lead
uh and win the AI race.
Nvidia CEO Joseph Wang speaking on the
earnings call after we saw numbers
posted yesterday. Nvidia reported a 56%
jump in quarterly sales shares down in
after hours. I it's had a great run
recently. You need to factor that into
your thinking. Tepid forecast maybe. Is
this company though operating off a
bigger base so the percentages actually
don't need to be as big going forward?
Let's uh figure out exactly how we
should be reading these numbers.
Peterstrom Bloomberg's Peter joining us
around the table. I I read this the boom
is over. Oh, it's it's like things are
slowing. Finally, we're starting to Is
that really the narrative here? Because
these numbers still look pretty solid to
me.
Yeah, 56% growth uh is very very strong
when you're building off of a base of
$30 billion. They went up to $46.7
billion. But I'd say the rules are a
little bit different when you're the
most valuable company in the world.
Nvidia now worth $4.4 billion. First
company to ever get there. Stocks up
a,000% over the past three years in
particular. So the rules are a little
bit different. There were a few areas of
concern in the in the uh earnings
report. First of all, in the data center
business, which is really their growth
business, revenue came in at 41.1
billion. Expectations were at $41.3
billion. So just a little bit higher,
but they didn't quite get there. So that
that was one area. Also, the forecast
for the next quarter was a little bit
lighter than some people had
anticipated. It was $54 billion. Some
analysts had uh estimates as high as $60
billion, even beyond that. And then
China is a little bit of a mess right
now. They're trying to figure out
exactly what they can sell into China.
The US government has sort of changed
its rules. They were a they first had
the H20 chips blocked. Then they were
allowed to sell the H20 chips into
China. Now Beijing is telling its
companies, you shouldn't buy these
chips. So they said on the earnings call
that they've stopped producing the H20
chips for the China market. They're not
sure whether they're going to be able to
sell anything. In the last quarter, they
didn't sell anything at all. in their
forecast for the next quarter. They
don't have anything included in there,
but they say perhaps if the rules
change, they could sell two to five
billion dollars. So, it's kind of a
mess. They're trying to sort it out,
but it's still a key market for them.
So, why is there not a bigger reaction?
Well, ch yeah, China's very important to
them. They are getting tons of growth
out of the US hyperscalers. Of course,
those companies are still buying the
bulk of this business, but the confusion
around China is pretty substantial at
that at this point. uh with the H20
chips. They had the ban, then they were
allowed to go forward. Beijing is now
telling their companies not to buy the
H20 chips. In the meantime, the Trump
administration said you can sell if you
give us 15% of your revenue. Now, the
company kind of admitted yesterday that
even they don't know exactly what that
means. They say that the Trump
administration hasn't come forward with
any formal kind of proposal. The CFO
gave us an interview afterwards where
they detailed this and they Nvidia can't
hand over 15% of their revenue to the
Trump administration without some formal
documents about what that means. They
said they're facing the danger of
litigation if there isn't a formal
formalized agreement worked out here.
Yeah. They need their accounting system
needs to know how to code that payment
to a government.
Exactly. Exactly. What about the
competition they're getting from China
then Peter? Are they are they facing
serious competition? If the Chinese are
leaning on uh companies in China and
saying don't buy H20s, buy something
more domestically made, what are they up
against?
Right. It's a very good question. I'm
very I'm very happy that you raised
this. Uh right now, China does not have
any companies that can compete with
Nvidia in terms of the AI chips needed
especially for training. And they talk
about uh AI chips in two different
categories. What's used for training and
then what's used for running the actual
models. especially in terms of training.
There's no competition for Nvidia, but
Beijing and all the companies in China
are very determined to develop
alternatives. Huawei is at the top of
that list. They have a chip on the
market right now, the Ascend chip, which
is quite good. And there was a a little
noticed earnings report yesterday from a
company called Cavern, another company
that's designing chips just like Nvidia
that are supposed to be used in the AI
market. Their revenue was up 44fold in
the last quarter. A booming. Now,
they're much smaller than Nvidia, of
course, but I think it's a sign that
Beijing is is telling the domestic
companies to try to buy domestic
whenever they're able to do that. I
think that's a sign of concern for
Nvidia, and that's why they want to be
able to sell into the China market.
Jensen Wong said uh after the in the in
the after the earnings yesterday during
a conference call, they'd like to be
able to sell their highest end chips,
the Blackwell chips into China in
addition to the H20 chips.
The conversation no doubt they need to,
you know, that that will continue with
the White House. Peter, thank you very
much. Be both Peter Elstrom on the tech
beat. Let us talk about what's going on
in uh consumerf facing products. Uh Pono
recal shares are moving higher even
after the company said it expects sales
to decline in the beginning of uh the
next financial year as the French
spirits maker continues to grapple with
guess what trade fraction between China
and the United States. This is something
of a theme this morning. We're joined
now by Bloom's global business reporter
Jennifer Kre who's on top of this story.
So what are the key takeaways Jennifer
from the from the results here? Yeah.
So, uh, organic sales were fairly flat
in Q4 and that was actually better than
what analysts were expecting. They're
expecting a fall of8%.
Folio Profit also beat analyst estimates
slightly. So, uh, the company's doing a
bit better. Um, so a lot of that
strength is in France and Spain, but if
you look at some of the weaker regions,
there's China of course, which which
isn't surprising. Um, organic sales were
down 21% and that's because of, you
know, softer demand with the consumer
over there. um but also the kind of
lingering impact of tariffs and also
that anti-dumping probe by China um also
weakness in the US. So they were down at
6% there. I think what was very
interesting was there was a a line about
uh when management said there's gradual
improvement in the outlook for global
travel retail with the resumption of
duty-free um uh spending but that won't
come into effect until Q2. So a bright
spot on the horizon but still some
challenges uh at the moment. One of the
challenges has got to be they don't know
what they're doing with tariffs. Like
the deal with the US isn't done. We
don't we don't know what actually the
details of that are going to look like.
Spirits could still be included. They
may not be included. We don't know. So
how big a challenge is this? And how are
they dealing with that uncertainty?
Yeah. So a lot of that tariff impact is
of course impacting its US uh sales. So
down 6% as I mentioned. Um and and
that's really impacting distributor
inventory levels. No distributor wants
to have excess inventory but a lot of
that uncertainty means it's very hard
for them to to plan ahead. So that is
the main impact. Previously, management
did say that they're looking at
mitigation measures. So targeted price
increases, uh cost savings, more
efficient uh promotions. The analyst
call is ongoing at the moment. So
certainly investors will be listening in
for any additional color on tariff
mitigation measures.
Great stuff. Thank you very much indeed.
Interesting to see what's happening at
the stock this morning. Up really quite
strongly on the back of what has been
reported. Our global business reporter
Jennifer Crearyy. Thank you. Um what are
we going to do next? We're going to talk
about what is happening in the UK.
focused on France and let's talk about
what is happening here in London. Mark
Dowing, fixed income CIO at RBC Blue Bay
Asset Management is going to be joining
us about the prospects of the pound
having a another Liz Truss style
tantrum. We actually spoke or the
Oddlots team spoke to Liz Truss. So,
we'll get her take on all of this as
well uh as we introduce Mark, but he
certainly is a little concerned around
what is happening with the pound right
now. We'll get to Mark in a moment. This
is Bloomberg.
Welcome back to the opening trade. 30
minutes into today's session. Green on
the screen across Europe, notably in
France. It's higher by 910 and 1% on the
CA run and that is driving the market
higher. Your underperformer right now is
the footsy 100. It is flat on the day
but remember throughout the entire week
it dynamic has been the opposite. It's
been the footsy 100 that's kind of come
above the freight. It's been the kakaron
that's dragged the market down. Is this
just the last couple of days of August
guy?
Exactly. And and I think if this was
September I would take the chart you've
got in front of you a little bit more
seriously, the numbers you've got in
front of you a little bit more
seriously. But it's not. We're in the
end of August. Volume is epically light
out there today. Uh as you can see here,
we're way way down on where we would
normally be. Um in in terms of the
numbers higher, 448 up, 130 down. I
again I wouldn't read too much into
that. I I went looking for 52- week
highs and lows. Couldn't find any lows.
Found a few highs. Um but there are
there aren't many. Fresno is one that
stands out to me this morning. uh this
gold miner, silver miner is actually
continues to be on something of a tear.
But it feels like in some ways this is a
macro story as much as anything else,
but this is this stock on a one-year
basis up by 223% an impressive
performance. One way maybe you're
playing that precious metal story, Anna.
Yes, absolutely. So, keep an eye on
that. But let's get an update on some of
the big picture stories that we're
following then this morning. And we'll
start with the tech space. Of course,
Nvidia has issued a tepid. been
described as tepid by some revenue
forecast for the current period,
signaling that growth is decelerating
after a staggering two-year boom in AI
spending. Sales at the world's most
valuable company will be roughly $54
billion in the fiscal third quarter that
matched average estimates, but some
analysts had projected more than $60
billion. Blueberg has learned that the
Mexican government plans to increase
tariffs on China as part of its 2026
budget proposal next month, satisfying a
long-standing demand of US President
Trump. This comes as the EU is quickly
working to pass legislation this week to
remove all tariffs on US industrial
goods. A move needed to get Trump to
lower duties on the block's automobile
exports. And the French Prime Minister
Franis Beu says he will negotiate
directly with lawmakers next week and
has warned against new elections as he
battles to stop France's parliament from
forcing him to resign. Beu's surprise
decision to hold a confidence vote on
September the 8th has pushed France back
to the brink of political crisis and we
still seem to be criti then in this
political crisis. We haven't moved the
story on a great deal. still France Raou
uh well the the thinking we've got from
a lot of our guests this morning is that
he'll probably be forced out by this
vote in early September unless there is
any complete vault fast from any of the
rival parties and yet we see yields in
Europe go lower as if the market is
quite relaxed in the very short term
about what is happening here I imagine
the bond market is perhaps doing what
the stock market is which is just
retracing some of the moves from earlier
this week I'm looking at a spread
between Oats and Boons right now of just
shy of about 80 uh the last time we were
at these levels. By the way, I should
say the initial snap uh elections or
when MCron kind of threw the markets
into turmoil in the summer of 2024, we
hit 82. It was that giant kind of spike
that we saw, it went up to almost 90 in
December of 2024 and we've retraced. Do
we get to 100? Carmenac said we're going
to get to 100.
We might get to 100. I it depends on
what the the political story looks like
over the next few days, but the base
case still seems to be we get a new
prime minister. If we don't get a new
prime minister, we do get snap
elections. that snap election doesn't
resolve very much in terms of the the
formats of the house. So, do we make any
progress? I'm not entirely sure where
the catalyst for that comes from. Do the
French feel like they want to cut
spending right now? I'm not entirely
sure that they do.
Yes. And this is proving to be a
challenge, isn't it, across various
parts of Europe when when governments go
to their parliaments and ask them to
vote on spending cuts and it proves
difficult. We've seen that certainly in
a UK context. Let's think about the UK
right now. Now, the former UK Prime
Minister Liz Truss says the Bank of
England needs to be accountable to
politicians, adding that she is
sympathetic to Donald Trump's approach
to the Fed. Uh, speaking on Bloomberg's
OddLots podcast, Liz Truss also weighed
in on the state of the UK economy and
why she is concerned.
Last year, I thought we were headed for
an IMF bailout uh, as Britain
experienced in the 1970s. I think that's
even truer now than it was a year ago.
And we're in an economic doom loop of
higher taxes, lower growth,
higher debt, and it's very difficult now
to see the political way out of that.
You can listen to that full interview
with the former UK Prime Minister Liz
Truss on Bloomberg's OddLots podcast
with uh Joe Weisenthal and Tracy Aloway.
Now, our next guest says the pound is
vulnerable to another Liz uh trust style
tantrum because of rising political and
fiscal risks. Mark Dowing, fixed income
CIO of RBC Blue Bay Asset Management,
joins us now. Mark, very good morning to
you. Thank you for joining us. So, so
what is the epicenter of your concern
around the UK? What is the what is the
big issue? It's all fiscal fiscal
headwinds, I suppose.
It's it's very much the the the fiscal
situation. Uh we're in a a moment uh
right now where as yields move higher on
guilts uh that's just adding to the
fiscal black hole that we're seeing in
the UK. Uh and frankly many of the
measures taken by the Labor government
thus far just raising taxes have made
the problem worse not better. Uh if you
think about raising NI charges all
that's done is drive up inflation. It's
hurt growth. It's ended up making the
the deficit worse. um going after
non-doms, going after uh private
schools, it's it's not really helping
the situation. And so without any clear
sense that uh welfare spending, runaway
welfare spending is going to get
tackled, uh I'd have a real concern that
at some point markets are going to lose
trust and confidence in the policies of
this Labor government.
Okay. Okay. and and and you know we we
hear that kind of view fairly often uh
on the program but just to give a
different perspective to take a
different different slant at this I was
listening to the uh fick focus podcast
from Bloomberg yesterday and and
Bloomberg economist Dan Hansen making a
few points about the way that the UK
economy has positively surprised first
half growth actually coming in better
than expected the services side of the
economy the PMI numbers there looking
better and actually the narrative you
hear a lot on maybe social media and
elsewhere about a sort of perma cost of
living crisis being overdone on that
real wages actually over five years have
actually increased which is kind of
staggering given the inflation that we
saw. So is it is it for certain that
things are really deteriorating on the
on the sort of basic economic front in
the UK?
Well, I think frankly we we we are in a
country where we're experiencing very
weak growth. I mean we're not in
recession. Uh but growth is weak. We
we're we're struggling to grow the
economy. there is next to no
productivity growth in the economy and
and that means where wages go up uh that
just adds back to inflation, doesn't it?
So from that point of view, I I do feel
that we're facing some pretty grave
economic challenges. At the same time,
you add on to this this sort of concern
around a building debt crisis. Uh and
it's really going to take some deaf
policy, I think, to actually avert some
of these scenarios that good old Liz
Truss was just speaking about just a
moment ago. I mean, blind me, she's
bearish, isn't she? I mean, I thought I
was quite bearish on the UK, but she's
really
Well, it's not really that much of a
surprise when, you know, the Labour
Party is in charge and and she's a
previous government, is it? I suppose we
should we I should make the obvious
point.
Uh, I I suppose not. I'm sure it was
nothing to do with her. But the one
thing that you would say, which is
obviously um one of the challenges that
Labour faces is because we've had this
history under Liz Truss of this guilt
market tantrum effectively that that
does make the UK something of a canary
in the coal mine when it comes to these
government bond uh debt worries, right?
It's happened here before and so it's
more likely to happen here again maybe
than it is in other countries perhaps.
What happens in the budget, the upcoming
budget? So in the budget it seems to be
uh at the moment all about sort of
adding tax rises and I I think that
there is market react to that.
So my concern here is that markets will
look at plans to raise taxes and they'll
say look you're still not addressing the
problem. The problem is uh welfare
spending. If you keep on increasing the
tax burden on the working population
ultimately uh this is only going to sort
of damage growth prospects and hurt
wealth creation. it's not going to be
benefiting economic growth. It's almost
like the reverse of the Laffer curve
effect that we see in the US where they
seem to be getting away with cutting
taxes uh and that doesn't hurt the
deficit at all. Uh in in the UK we're
we're sort of raising taxation and it
has very little benefit. You've got to
tackle spending
politically very difficult. How high do
you think guilt yields need to get
before it becomes less politically hard
to do? I there there is a crisis. we
need to cut spending. Does the yields
need to go significantly higher from
here in order to generate that kind of a
political response?
So, I think I mean that's a that's an
interesting question. I'd say that over
the course of the summer we've seen this
uh steady move up in guilt yields. It's
almost like witnessing a bit of a
slowmoving car crash at the moment. Uh
but um in as much as we're talking about
this fiscal black hole, at some point
you'll cross over an event horizon where
that move in in yields will become
self-feeding. It will become self
accelerating. from that.
So I reckon if you see tenure yields
move um through 5% I think that that
would be a real trigger. When you start
looking at debt sustainability analysis
and you're looking at numbers above five
then you've really got a lot to worry
about.
Change the political narrative.
I think that that can end up forcing a
change in the political narrative. I
don't think politicians want to change
TAC. They may well be forced to do so.
you said that so RBC Blue Bay is is has
a short position on the pound right now
and you made the point earlier that the
UK is a canary in the coal mine for
other economies with debt crisis. Why is
the UK worse off than its counterparts
in France, in Italy, in Spain or
arguably even the states?
Well, I I I think that is is a good
question that you you hit on there. I
mean the the UK in a sense is being held
to task more perhaps by markets than
some of those other countries. Uh I
think it's partly because we've got this
precedent of what has happened here
before. If it's happened before, it can
happen again. Uh I think secondly, when
it comes to the United States, although
they've got runaway uh deficits, they've
got a relatively strong economy at the
same time. uh and from that perspective
uh also being the world's reserve
currency they can kind of get away with
it at least for the time being. I think
in France you do have a building problem
and and and actually over the course of
the next couple of months look I think
we're going to go to new elections in
France. I don't think that Muan can
stick in another tech technocrat. I
don't think that's going to be credible
and and I do think that again there'll
be a moment in France where France as a
society needs to face up to the fact
that they're trying to live beyond their
means. They get the joke in Italy. The
spread has conditioned them in Italy,
which is why Italy is fundamentally, I'd
say, a better credit than France these
days.
The term IMF bailout has been thrown a
lot around a lot this week. First from
we heard from list trust on our oddlots
podcast using the term and referencing
it. Uh we heard Eric Lombard talking
about it in in France. Now, I think it's
a little bit of an ext uh an
exaggeration that, you know, the UK or
France may need an IMF bailout, but talk
to a little about us about what they
might need. If we're talking about the
idea of us getting to these dire levels,
do we need to start talking about ECB
intervention? Do we need to be talking
about excess liquidity in in some of the
corporate markets? How should we be
thinking about some of the plumbing
around this?
So, I I I think that uh what you need to
see, for example, in the UK, you need
the Bank of England to stop QT right
now. You also need the DMO to stop
issuing longdated government bonds. Uh
effectively stop the pressure on the
long end of the market. Buy the
government a bit of time. Uh help
improve the the market technical would
be one thing that I would say here. The
other thing that that you you kind of
need to see uh though is is um is a
sense in which policy is doing the right
thing. You you need to get the markets
on side and and get the markets trusting
you in terms of your fiscal plans. uh
and uh as we saw in in April, if if
markets start to lose confidence in a
sovereign, they they start to lose
confidence in product credibility, then
markets will go on the attack. And so
when it comes to somewhere like Europe,
uh look, it's a a different situation.
But you you've you've got plenty that
you can do and the ECB, I'm sure, will
be ready to support France. And and
ultimately at the moment it's it's a bit
of a a short story in France cuz a
parliamentary election I don't think can
see the spread go much beyond 100 basis
points even in a bad outcome. This is
more of a prelude to what happens in 27
and the presidential campaign. I'd
suggest
and Mark you sound like you'd be quite
relaxed about 100 basis points. So
that's that that's not a big drama then
for European government bond markets.
That would be fairly muted would it? I
mean how would you characterize that?
It's still relatively muted. Uh bear in
mind that of course European yields are
2% below where UK yields are. So even if
there is a spread of 100 basis points in
France, France is still looking at much
lower borrowing costs than we have in
the UK. In the UK, we also have a
situation where inflation is too high.
It's going to be difficult, I'd suggest,
for the Bank of England to cut rates
further. Whereas in the context of the
Euro zone, inflation just isn't a
problem in the same sort of way. So I
don't think markets would get overly
stressed about France being at 100 basis
points. We've seen those sorts of
spreads before on many other sovereigns.
I think it would be more if we were uh
continuing to move beyond that point.
But I think that that would be more
something that we could see if we
started fearing um either Milanchon or
Le Pen in the Lay.
What does the scenario look like in the
UK? Let's just return to what is what is
happening here. Say the government did
cut spending. What would be the reaction
do you think within the public sector?
Would we see mass strikes? Are we
heading back to a kind of 79 type
scenario? Is that possible here? We've
also got the more recent experience of
austerity in the UK. We we we saw what
that did to the growth numbers and I
wonder how the bond market will react to
weaker growth numbers that will be
generated by such austerity. What are
the implications of doing these things?
So, so here I I mean the the the thing
that I'd suggest guy is that actually if
you're tackling welfare spending uh and
targeting your spend towards those who
need it most in society, that's kind of
what you need to be addressing at this
particular point. We can't have a
situation where um people left, right,
and center are saying, "I'm going to
drop out the workforce and claim a PIP."
Uh I I was chatting to a young lad last
week who said, "I'm quitting my job.
I've looked online and I can see how I
can get a PIP claim." uh and I'll be
better off for doing that. Disability.
You you kind of need to see uh an end to
this sort of uh narrative. And I don't
think that the the unions will will be
up in arms and complaining about the
fact that uh people can abuse schemes
like Motability to buy their latest
Mercedes-Benz and the rest of it. Of
course, we want welfare spending
targeted to those who need it. Um but
you can tackle spending in this way, I
would say, without actually doing things
that will hurt the unions. Well, I I
think you you I'd like to see um um a
reduction of 10 billion in in spending
coming through those sorts of plans
and that will be rewarded how in the
bond market.
Uh yields rally and as yields rally uh
that helps close the uh the black hole.
I think there are there are other things
you can do as well. I mean I'd
so the way to close the back hole is to
is to reduce interest payments
is to reduce interest payments. I mean
when you've got a situation where you've
got debt to GDP 100% or more uh and
you're funding that with a a 4% interest
charge or 5% interest charge obviously
interest rate expense becomes uh
effectively the biggest item on the
government budget and and this is
something that the US gets the US is
sort of overtly saying you know what we
want to bring down rates if we can get
rates down we'll get our deficit down
and and this is how we'll be sustainable
again and uh and so that's uh that's
fundamentally what We need to end up
seeing
interesting times ahead
or some tariff revenue maybe for the UK.
That's what we should
when we do tariffs.
When's Scott Wesson ready?
Mark Daddy, nice to see you.
Thank you very much indeed. Mark Daddy,
fixed income, CIO of RBC Blue Bay Asset
Management. Uh coming up, we're going to
talk about what is going on between
India and China. Xi Jinping secret
letter helps ties uh between India and
China. Both nations looking to boost
trade, counter the impact of Trump's
tariffs. We'll talk about it next. This
Everybody in America loses because of
what India is doing. Con consumers and
businesses and everything lose and
workers lose because India's high
tariffs cost us jobs and factories and
income and higher wages and then the
taxpayers lose because we got to fund
Mod's war.
White House trade adviser Peter Navaro
there speaking on the dynamics with
India. Washington is not happy with New
Delhi but maybe that's creating an
opening for Beijing. Their quiet
outreach in New Delhi earlier this year
is now paying off. A personal letter
from Xi Jinping to India's president
marked the start of efforts to repair
relations after years of tensions.
Roslin Matson Bloomberg's chief Asia
correspondent that is actually here in
town for us is all over this. Just this
has been a tenuous relationship between
two of the world's largest economies
frankly I think the second and the
fifth. Walk us through what we know
about one this relationship and two this
dynamic. Well, as you say, it's a
relationship that has had many ups and
many downs. Um, and has periods where
they have drawn closer, but then many
periods where they've drawn further
apart and a lot of underlying tensions
there in the relationship over border,
over trade, you name it. But it does
seem as though they now have, you know,
a common motivation here and that is the
US and Donald Trump's behavior around
trade and particularly lately, you know,
really zeroing on on India and
criticizing India for buying energy uh
from Russia, which he says is supporting
its war against Ukraine. And so what we
had is Cinping, we know, sending a
letter back in March uh to the Indian
president uh suggesting some outreach.
that kind of sat for a few months but
then when things really started to
deteriorate between the US and India we
suddenly had uh the prime minister
Narendra Modi saying hang on yes let's
open some doors here so we've had a lot
of back channel delicate careful
conversations going on moving towards
the point that in a matter of days you
know the Indian prime minister is going
to be visiting China um as part of a
broader meeting with a bunch of other
countries but you know it does show that
the catalyst for all of this has really
been uh the tensions that have escalated
between the US and India.
It's nothing like a common enemy to
bring people together. Donald Trump.
Well, that's right. It's interesting.
Did did Donald Trump actually intend
this to happen or was it an unintended
consequence of it? I mean, he's really
gone hard on India and that's put Modi
in a difficult spot at home. He has to
show that he's tough and he's standing
up. And you know, maybe Donald Trump
didn't think that these two countries
with their long history of tensions
would go this far. Maybe he didn't think
that they would be ruthlessly pragmatic.
Enormous countries.
And and basically you're forcing them
together. That changes the dynamic quite
significantly particularly in Asia.
It does. And the question is does it
last? I mean that will be one
interesting thing to see because again
there are a lot of things that are under
under this relationship that aren't
great. I mean you've got China's support
for Pakistan
for one thing. You've got their
long-running border disputes which
bubble up every couple of years, get
contained, bubble up again. I mean,
there are really deep riffs in this
relationship. They're drawn together now
by mutual interest. But if that mutual
interest parts, do they part again?
Okay, Rosen, thank you very much. Sher
Ros Matson, Bloomberg's chief Asia
correspondent in London for us. Another
point of tension we've been keeping our
eye across is French politics and what's
happening in the European government
bond market. As a result, Franis Beeru
says he will negotiate directly with
lawmakers next week and warned against
new elections as he battles to stop
France's parliament from forcing him to
resign as prime minister. Let's bring in
Bloom's Caroline Conan. Um so, so Beiru,
does he still think he can survive? We
spoke to a couple of guests earlier on
in the program who don't think that he
survives as prime minister, Carolene,
but he seems to be uh convinced that
there is a path for his survival. he
still believes he can actually make it
through September 8 and this confidence
vote even though he acknowledged last
night on the 8:00 news of TF1 that
mathematically uh at this stage he
cannot make it but he's persuaded he can
convince some opposition parties
including the socialist next week
through discussions about the budget
that the debt issue is the most
important for France and that they
should support him on this confidence
vote he said he can actually negotiate
on every single issue, including
scrapping two bank holidays, including
taxing the highest earners, including
this proposal of freezing welfare and
pensions for the 2026 budget. So, we'll
see how these talks go with opposition
parties all through next week. We'll see
how the socialists react to that. But
you know even within Macron's camp we
start hearing voices talking about new
snap legislative elections for example
yesterday from the former prime minister
Edoar Philip who said this new snap
legislative elections may be the only
way out even though Franceu said last
night that he believes this will not
create any more stability for France.
Um I've been down to where the French
president has his summer place down in
Camelot. Near camels. It's lovely.
You have nice place to meet for Mertz.
Yeah, it's very nice. Um what are they
going to be talking about down there?
Mertz and Macron.
Well, in fact, it's very rare. Last time
Mron invited a German chancellor. There
was 2020 Angular Merkel. They're going
to talk of course about uh defense,
security, trade, and one of your
favorite subject guy uh the European
fighter jet. The next generation, the
FCAST Deso Aviation, the French company
has said they want 80% of the workshare.
Germany doesn't agree with it. It's a
joint venture with Airbus and the
Spanish Indra. They're probably going to
be uh that's probably going to be the
elephant in the room and they may make
some progress on the workshare at this
cabinet meeting.
All right, Bloomberg's Caroline Conan
walking us through the dynamics between
France and Germany. We'll keep an eye
out for the headlines during I believe
that dinner tonight and of course the
official summit tomorrow. We thank you
so much. In the meantime, the next 24
hours, jobs data, some GDP data, an ECB
monetary account.
Yeah. So exciting.
All of that. All of that. Well, I think
what you need to know is NASDAQ futures
are doing nothing. There you go. It's
amazing.
Yes, we had we had Nvidia reported did
and nobody noticed it seems.
We're really giving our viewers their
run for their money.
French beaches. Anyway, uh Gopan is
going to be joining us very very shortly
here on Blueberg television. Look
forward to that conversation. This is
Bloomberg.