[Music]
news makers and market movers.
This is the pulse with Francine Laqua.
>> Good morning and welcome to the pulse.
I'm Jamaicheti in Dubai in for Francine
Laqua for the last time this week. Now,
US stock futures sliding after the S&P
500's record streak with investors
awaiting the Fed's favored price gauge
for signals on the path of interest
rates, which is due out later today.
It's forecast to reveal that US
inflation quickened in July. And it
comes as the Fed Governor Christopher
Waller, who's in the running to replace
the chair J. Powell, once again called
for a rate cut next month.
Based on what I know today, I would
support a 25 basis point cut at the
committee's meeting on September 16th
and 17th. While there are signs of a
weakening labor market, I worry that
conditions could deteriorate further and
quite rapidly. And I think it is
important that the FOMC not wait until
such a deterioration is underway and
risk falling behind the curve in setting
appropriate monetary policy.
We're joined now by Karimid, the head of
AMIA investment strategy at Black
Rockck. Karim, good to see you. You
know, when Christopher Waller speaks
now, the market pays a lot more
attention and mainly because he's the
front runner, one of the front runners
to be replacing and succeeding the Fed
chair Jerome Powell next year. So, when
he speaks, it is relevant. To what
extent do you think uh this dovish
repricing of interest rate expectations
is fueling the riskon environment that
we're seeing in the US right now?
>> Thanks for having me Jamanna. I mean
when we look at uh the PCE release
that's coming out later today like you
highlighted I think this will be really
important as a as as we still don't know
the full impact of the tariffs on uh
inflation. the the picture has been
somewhat of a mixed bag when we look at
the CPI releases behind us and now the
uh the PCE. There is some passed through
but we think we need to wait a little
bit longer for later parts of this year
to start to see the fuller impact of uh
trade and and and tariffs. And the point
here that I'm trying to make is that as
we get a bit more sticky inflation into
end of this year and next year, we might
see a bit of a push back on the dovish
market pricing for the Fed through to
end of 2026. So we think, you know, the
two two cuts priced for this year are
look appropriate, but next year look a
bit too dovish.
>> Okay, that's interesting because the
market is pricing in a terminal rate of
around 3% say by the end of 2026. Does
that not tally up with your house view?
>> I think that's where the inflation
volatility piece comes into play and
where we might see some push back in in
market pricing as we get some of those
inflation readings and uh potential uh
uh stickiness. Um so so we're looking at
at you know two more cuts this year but
but next year feels a bit excessive.
On the fixed income side of things, uh
what investors seem to have been doing
the last couple of weeks is positioning
for a more aggressive rate cutting cycle
as we were just talking about, but at
the same time staying clear of the long
end because of concerns about policy
uncertainty, inflation expectations,
fiscal premium, whatever you want to
call it, which means the curve has been
steepening. What is your view on on the
steepener trade in the US right now and
can it continue to have legs?
>> Absolutely. I mean we doubled down on
that conviction. We share that
conviction around the yield curve
steepening view in the US very much
driven by the back end as you say. So
the back end could come under more
pressure, you know, to back up over the
coming months and and year because we we
have fiscal concerns, we have uh uh
supply uh uh concerns and um and also
when we look at the broader flow
picture, we are seeing a bit of a
pullback of buying of long-term
treasuries from international investors,
which we see in the flow data in ETF and
other flow data, which all points to
further um steepening.
Yeah, one of the big events of the week
was Nvidia earnings. We spent all day
analyzing these these results at Netnet.
Many analysts have actually come out and
raised their their price targets for the
stock. Uh but let me just bring it back
to broader equities as a whole because
you know Nvidia singlehandedly
constitutes about 7 8% of the S&P. Do
you think from this point onwards we
could actually start to see a broadening
out of the rally or is it going to say
stay specific to that handful of mega
tech cap stocks mega cap tech stocks
that are driving the performance?
>> This is such an important question and
one that we're really focusing on in our
yearend uh u investment direction. So,
as we look to the last few months of the
year, this final run of the year, and
we're positioning for more of an
unconstrained approach to investing in
US equities for precisely this reason
that that we think that there's more
dispersion to come um in the uh equity
market. We stay risk, we're overweight
US equities, but we think there's more
dispersion to uh to play. Some of this
looks sectoral, so you know, we still
like the tech sector. The earnings
numbers remain strong. um but also
looking at healthcare, looking at
financials. So there's a bit more names
and and in town
>> what about the uh opportunity set in
Europe versus US a couple of months ago
say you know back April May there was a
big drive divers diversification drive
out of the US people looking at
opportunities in European markets
because of the valuation because of
hopes around fiscal spending. Do you
still see that opportunity set right now
in the relative play between Europe and
the US?
>> Yeah, and we were tracking this what we
called the repatriation trade. So this
uh theme where European investors were
buying European equities and it has had
a bit of a stop and start in the summer.
So saw some pullback in July. In August
flows started to come back into into
Europe. Some pullback in July with
buying more of of US. But generally
speaking, I would say this theme remains
intact. Now when we look at investing in
European equities, selectivity is the
name of the game here again because um
at a broad level until we see a big
improvement in return on equity in
Europe, we don't see the beta play
coming through. It's more of an active
uh theme for European equities.
And yet if you were positioned say in
European banks this year, you would have
made 40% in aggregate on those
positions. If you were positions in
European defense, you'd be up 70 80%
depending on what you have in your
basket. Is it not time to trim some of
those positions if you've had such a
strong run already?
>> And you hit the nail on its head. So
this is the dispersion theme. So the
biggest dispersion we've seen in Europe
and you spoke about banks and defense is
this dispersion between international
and domestic stocks. So we've had uh uh
40% plus dispersion between the
domestics which include uh stocks like
defense industrials and the
international and part of this is the
euro strength which hurt the earnings of
the international. We think this theme
does have a bit more to run because this
domestic theme in Europe is not is not
over.
Karim, thank you so much. Great to have
you on the show today. Karim Shadid,
head of IMIA investment strategy at
Black Rockck.
Well, Fed Governor Lisa Cook's lawyers
are suggesting a clerical error may be
behind the mortgage dispute which has
seen President Trump attempt to oust
her. She warns the move could cause
irreparable economic harm. Bloomberg's
Rosalyn Mat is with us. Uh so, uh quite
clearly this is a matter for the courts
now. Uh what exactly are Lisa Cook's
lawyers saying?
>> Well, what we're hearing now is in fact
an acknowledgement that maybe there were
dual mortgages taken out on primary
residences. But if so, uh there was no
ill intent. This was simply a clerical
error. Something went wrong in the
paperwork. Something was overlooked, but
it wasn't done with uh with ill intent.
It wasn't done deliberately. And
particularly it wasn't done potentially
to to profit because of course there can
be advantageous financial terms on these
kinds of mortgages in the sense that if
this happened it was simply a slip um
that that that it was not intended to
happen. And that goes to the question
really for for Donald Trump of of for
cause of firing someone for cause like
if someone makes simply a mistake like
this is that enough to warrant their
dismissal especially on mortgages that
were taken out before you came into your
role at the Fed. You can see that's per
potentially the legal argument that's
going to come um from her lawyers as to
say while she's fighting her dismissal.
But what we're going to get today is
that initial hearing about an urgent
injunction which would keep her in place
while the legal proceedings play out.
And that could take quite some time and
go potentially through more than one
court. But you can see essentially the
argument being laid out now is if
something did happen, it was not ill. It
wasn't intended to profit and therefore
it doesn't justify the actions which
have been taken against her.
>> Yeah. And obviously, you know, the her
very seat itself becomes disputed with
this protracted legal legal case. Um,
very clearly unprecedented times with
President Trump being so vocal about
various personnel at at the Fed,
including the Fed chair himself. What
does this all mean? What are the
implications of this meddling on
potentially the US economy and also the
credibility of the Fed as an
institution?
>> Well, that's right. Right. I mean, there
are massive potential ramifications from
all of this, and they could be very long
lasting, some could be brief, and some
could be very extended. I mean, right
now, you're not seeing markets really
freak out over this. Um, they're
relatively calm. Some would say to come
given there's been this decades of
understanding between markets and policy
makers that you leave the Fed alone
because if you don't interfere they can
make their decisions purely based on the
you know the state of the economy before
them in the best interests of the
economy. Um and so markets are
relatively calm about that for now. But
maybe they think that Donald Trump is so
changeable that he will change his mind
again on the Fed. Although he does seem
quite set on reshaping the Fed uh in a
way that he feels might be more
conducive for his views about where he
wants interest rates to be and that's
obviously lower um and does he continue
to pressure the Fed to do so? Does he
try and get more of his own appointees
onto the Fed and those appointees then
would be on the Fed for years. So could
we see a longer term trajectory here?
But you are seeing potentially
fundamental questions about the future
of the Fed and its ability to set
policy.
>> Yeah. Uh not that dissimilar to um
stacking the the courts as well with the
Supreme Court. Uh Bloomberg's Rosen Mat.
Also for any viewers watching, uh the
full article is up. Uh our big take
today, Trump's attacks risk wrecking the
Fed's hard one credibility. That is up
on your screens right now if you want to
read the full article.
All right. Chinese President Xiinping's
closest international allies, including
the leaders of Russia and India, will be
gathering this weekend for China's
biggest diplomatic event of the year.
The Shanghai Cooperation Organization
Leader Summit will be followed next week
by military parade in Beijing with
guests including Vladimir Putin and
North Korean leader Kim Jong-un.
Bloomberg senior executive editor John
Louu joins us from the Chinese capital.
John, good to have you with us. Uh,
well, it's quite the guest list for the
summit this weekend. And I also noticed
the Iranian President Pesh Kan is going
to be there as well. Um what are we
expecting out of this summit?
>> Well, I think we should expect to see
lots of smiling faces, lots of
handshakes, uh lots of effort to show
that these are uh nations, these are
heads of state that are here to support
one another. Uh that these are friends.
I think we will also hear uh lots of
talk about uh the right of developing
countries, the global south to choose
their own economic models to choose
their own forms of government. Uh you
will hear uh they have the right to buy
energy from who they want. Uh and I
think you will hear a lot of bristling
and complaining about American tariffs,
American sanctions, American projections
of uh military power. uh and you will
hear lots of talk about how everyone at
this meeting is on the same page. And
while many of them have very similar uh
uh interests, I I think it's also
important to note that some of these
countries have very uh important
differences as well. So for example,
India and Pakistan will both be at the
SEO summit this weekend and they are you
know very very long rivals. uh even
India and China where you see this
warming of the relationship that that is
really just an attempt to move the
relationship from outright confrontation
to normaly.
>> Yeah, I noted that it was a a rick
summit, not a brick summit because
you've got Russia, India, China, but no
Brazil there. Uh what do you think the
messaging is going to be from those
three countries in particular to
President Trump?
Uh well, I think you know Mr. Putin has
a very clear interest. He these are his
two biggest customers when it comes to
energy, China and India. And he wants to
make sure that they will continue to be
his customers. They will knock uh back
down to American pressure and they will
continue to buy uh Russian oil and gas
and fund Russia's war effort. Uh you
also have uh President Erdogan from
Turkey at the SEO. So he is Turkey is
the third biggest buyer of uh Russian
oil and so that that I think will be
very important and I think it'll be
important for uh President Xi and Prime
Minister Modi to show that they are
standing up even whatever President
Trump is saying they are making the best
decisions for their people and their
countries and I think that will be the
message they want projected to the
global audience.
>> Yeah. Well, Bloomberg senior executive
editor John Louu in Beijing. And
obviously speaking of energy, energy
critical. We're going to be talking more
about that in the next segment as US
investments in clean energy plunge.
We'll explore what that means for the
energy transition. That's next. This is
Bloomberg.
Global investment for new renewable
energy developments reached a record
$386 billion during the first half of
the year. That is up 10% from the
previous year. The data comes from a
report by Bloomberg Nef which also shows
committed spending in the US has dropped
36% in the same period. Meanwhile,
Goldman Sachs is forecasting a $620
billion reduction in US government
spending on green energy by the end of
2032. We're joined now by Mikuel de
Laavinia, head of EMIA natural resources
research at Goldman Sachs. Good to have
you with us. Some really big themes to
discuss here. Maybe let's just start
with some of the takeaways from that
report. And you know maybe my first
question should be about how the change
in the US administration Trump
administration's approach to clean
energy clean energy initiatives is
affecting the landscape for renewables.
One of the big stories of course over
the last couple of days has been uh
Trump also looking to close some of
those offshore wind farms. So how is
this all reverberating in the renewables
landscape?
>> I I think the the US energy revolution
continues at full pace. On one side,
there's no doubt that hydrocarbon demand
keeps growing, especially for natural
gas, which is a big winner in the US,
but I also think we shouldn't
underestimate the renewable growth. Um
the uh that effectively the incentives
have been extended all the way to 2030.
So solar will continue to grow, onshore
wind will continue to grow, batteries
for gre and grid investment will
continue to grow. The only exception is
offshore wind, which to be fair is so
high on the cost curve of the US power
generation that it probably makes
economic sense for the moment to set it
aside. But the revolution in renewables
in the US continues and so does shale
and that is what I think remains one of
the key competitive advantages of the US
economy.
One of the arguments that I've heard uh
against that is that it's difficult to
keep scaling and building up businesses
without the right incentives in place.
And if your business model is solely
reliant on having those credits or those
incentives, then the second that they're
removed, it becomes nonviable. What's
your what's your response to that?
I think that's a very fair comment, but
the solar incentives have been extended
for every project that starts production
in the next year and comes on stream by
2030. So I actually think we have the
visibility over pretty much five years
for these investments and after that if
the cost improvement continues in solar
many of these projects may be economic
even without the incentives. The key is
to have the demand and the demand is
there driven by AI and by industrial
growth and um reassuring of industry in
the US and I think together with gas um
to guarantee the seasonality and
intermittency and also uh industrial
scale storage I think actually the US
power system is going to be one of the
most exciting investment opportunity in
the coming decade.
Okay, let's talk about energy demand.
The other big uh I would say market
event this week was Nvidia results. And
one of the really interesting things
that came from uh the earnings call was
the CEO talking about trillions of
dollars of AI infrastructure spend over
the next decade. How is that going to
translate to future energy demand? And
where are those incremental sources of
energy going to come from to power up
all these data centers?
>> Good question. We've got US demand that
for a decade was flat. That is going
back to a growth of about 2% peranom out
of which between one/ird and half will
be driven by data centers and artificial
intelligence. This is an extraordinary
change. Where does this new power come
from? Clearly it will come from
renewables mostly solar but that's
intermittent. Then it will need to be
balanced with more investment in the
grid digitalization of the grid. It will
need to come with storage. So grids
scale batteries with more gas fired
power generation and we go back to the
structural gas growth story we are going
to see pretty much for the next two
three decades. And finally nuclear there
will be a big revival of nuclear.
Nuclear is a key technology that can
guarantee and underpin this demand
growth with grid reliability.
>> That was going to be my next question. I
wanted to ask you about nuclear because
I feel like there has been a bit of
resurgence of interest and you know I'm
I'm here in in Dubai and I know that in
the UAE they're investing a lot in
nuclear infrastructure to help power
some of those data centers. But do you
think these nuclear facilities can be
built up in time? It takes a lot of time
and they're very expensive, very costly
to get up and running.
>> It will not be built up in time. So it
will take about a decade for the new
nuclear plants to really be up and
running in large scale. That's why in
the meantime gas and solar and to be
fair a longer life for coal will be
absolutely necessary to fuel the growth.
But longer term to start to invest in
nuclear now is absolutely key. And
there's also a new emerging technology
that is starting to get good funding
which is fusion which again would not to
be ready before 2030 but could become an
important part of the solution as we
start to look at the next decade. In
energy you always need to plan early.
Yes, we need a solution for the next
five years, but we also need to think
about the power mix in the 2030s and
nuclear for sure and fusion most likely
will be an important part of it as the
UAE shows that is always one of the most
advanced countries in terms of thinking
about the energy system.
>> Yeah. Um I'm sure they would love to
hear that. Uh let me just round up by
asking you about obviously you know the
hydrocarbon percentage of of the overall
power mix. It's something like 80% still
today. How do you see that evolving over
the next decade?
>> The percentage of hydrocarbons will
start to decline because without any
doubt um solar especially will take
market share and longer term I think
nuclear may also gain market share but
it will remain a very important part of
the mix and in absolute it will grow. So
we see a growing role especially for
natural gas and although we see coal
retirements we think the coal
retirements are going to be much slower
than anything we have witnessed over the
last five years.
>> Yeah. So interesting. Uh well perhaps uh
a point of optimism especially your
outlook va the renewables opportunity
set still in in the US. Mikuel de la
head of IMIA natural resources research
from Goldman Sachs. Thank you so much
for joining us and let's just do a quick
recap of how some of these European
markets are fairing today. We are
slipping a little bit in trading. As you
can see, stock 600 down about half a
percent. The DAX also down half a
percent. Keeping a close eye on the
inflation data as it comes due. We've
already had Spain and uh France which
have surprised to the downside and some
of the regional numbers from Germany are
pouring through. Keep an eye out on that
1 p.m. CPI print for Germany as a whole.
Speaking of Germany, coming up, German
Chancellor Friedick Mirthth says a
meeting between Zalinski and Putin is
unlikely to materialize. More next. This
is Bloomberg.
Good morning and welcome to the pulse.
I'm Jan Versi in Dubai and these are
your top stories. Stock flip after
another Wall Street record as traders
countdown to today's key US inflation
data. Fed Governor Chris Waller restates
his call for lower interest rates.
Lisa Cook sues to block President
Trump's attempts to fire her from the
Fed. Her lawyers say the alleged
mortgage fraud was an unintentional
clerical error.
And here in Europe, French and Spanish
inflation undersshoot estimates, but
data suggests Euro area price growth
will not deviate much from the ECB's 2%
target.
And German Chancellor Fredick Meritt
says a meeting between Ukrainian
President Vladimir Zalinski and Russia's
Vladimir Putin is unlikely to
materialize despite it being touted by
the US President Donald Trump. Now, the
White House had previously said Putin
agreed to a meeting, but the Kremlin
never confirmed their commitments.
Joining me now is Bloomberg's Greg
Sullivan. So, uh, what do we read in
some comments? How likely is it really
that Putin and Zilinski meet?
>> Well, on one hand, these comments are
not really that surprising. We know that
Ukrainian President Vladimir Zalinski
has called for a meeting with his
Russian counterpart to try to work out a
peace agreement. We also know that
President Trump has backed that idea and
called for it as well. But so far, Putin
has largely just ignored those calls.
Uh, the Kremlin has shown little
interest or little intent to actually
meet with Zalinski. We've heard from
this foreign secretary Sergey Lavrov
that such a meeting would take a lot of
planning and agenda and there should be
agreements at hand and so far none of
that is ready. So it's pretty clear that
Putin does not want this meeting. It
would probably delay it if it looked
likely. Um we heard from President Trump
earlier who said that it was Putin's
personal dislike of Zalinski that was
probably holding this meeting up. So
again, these comments are not really
that surprising. Now, Trump has warned
that if the fighting continues with or
without a meeting, uh, he would wage an
economic war and there would be serious
consequences for Russia, but so far that
doesn't even look likely to happen as
Russia launched a major, uh, drone and
missile barrage against Ke. Very deadly.
>> Yeah, overnight. Yeah. Um, one of the
most deadly this year. Uh, but but let's
also talk about perhaps some progress on
the Ukraine US side of things.
Zalinski's chief of staff is set to meet
the US envoy Steve Witoff in New York
today. So what will be some of the
talking points there?
>> Uh that's right. Zalinski's chief of
staff is one of Ukraine's chief
negotiators. He will be in uh the US. Um
again, one of the major topics of
discussion will likely be security
guarantees if the war does come to an
end. What kind of security architecture
will be in place to make sure that it
doesn't restart down the road? Ukraine
has been pretty adamant that security
guarantees have to be at the center of
any kind of negotiated peace. Uh so
that's likely to be on the agenda as
well as continued support or how what
comes next in the war or uh the
Ukrainians will be looking to try to
maintain any kind of level of US support
in their fight against Russia. Uh we're
also likely to see the Ukrainians push
for sanctions. Zilinsky has frequently
called for sanctions. Trump has been
reluctant to impose them and so far
hasn't. Again, this meeting is coming in
the wake of that uh Putin Trump summit
in Alaska. So the Ukrainians will be
keen to keep Trump at least open to
their positions and potentially
supportive of them.
>> Bloomberg's Greg Sullivan, thanks for
the setup. I'm going to continue the
conversation. Joining me now is
Elizabeth Bra, senior fellow at the
Atlantic Council. Uh Elizabeth, you
know, throughout the course of this
week, we spoken to several analysts. Uh
their impressions of the Alaska Summit
and then Zalinski's visit to the White
House and what came out of that. And I I
will say that most people are pretty
pessimistic that this summit is actually
going to lead to any progress on peace
talks or a potential ceasefire. Do you
share that view?
>> So what needs to happen first is for for
President Putin and President Silinski
to meet without such a meeting with some
sort of outcome. uh any any other talk
is really any other conversations,
discussion, negotiations um uh are
really u almost futile because it
without Russia deciding that it's it's
going to to stop uh fighting in Ukraine
and without Ukraine agreeing to uh
whatever terms may be proposed and and
uh negotiating with Russia to come to a
conclusion without that nothing else is
is really nothing else really matters.
So uh western countries, western allies
of Ukraine can uh can help try to speed
that process along. But if Putin says
no, then uh we continue seeing this war
in Ukraine uh and uh increasingly deadly
as we've seen in recent days.
>> Yeah. Yeah. So the attacks on Kever are
continuing. Uh let me just ask you about
the European response to all of this
because I guess one of the more positive
developments has been that European
nations alongside the UK with the prime
minister Kir Thurmer have been showing a
somewhat unified front. The EU leaders
traveled with Zalinski to the White
House a couple of weeks ago in in a show
of support for him. Can this unity hold
up do you think amongst European
countries?
Uh it is extraordinary to see this unit.
It has held up now for uh three and a
half years, more than three and a half
years of war in Ukraine and under very
difficult circumstances. European
countries have had to make very painful
adjustments. They've had to uh they have
willingly given enormous uh military uh
amounts of military equipment, enormous
uh amounts of uh financial support
Ukraine and also received uh a
considerable number of Ukrainian
refugees and even so that unity has held
up. I think that's that's something to
to it's worth noting now that they meet
again to try to try to figure out what
else they can do and that unity is not
to be taken for granted. Let's uh hope
it holds up. But uh they have the
European leaders so far have done well.
>> Yeah. You know, I bring it up in the
context of uh the you know, the very
famous uh and outspoken these days Mario
Draghi. He gave a speech a week ago
where he warned that Europe is merely a
spectator at risk of irrelevance. and
he's saying that 2025 could be
remembered as the year of Europe's
illusion of importance being evaporated
because of the diminished geopolitical
clout that they have on a range of
issues not not just Ukraine. Do you
think that that criticism is is valid
from Draggy's perspective?
It is valid in the world in which we now
live. The world has changed
dramatically. uh if you look at the
world uh three four years ago um the it
was set up to function according to to
various rules and European countries
were u key uh key observers of those
rules and under those rules uh they were
also quite powerful because if everybody
follows the rules then it you don't need
to be the world's most powerful country
to to be successful or to have a say.
The world has changed since then. uh
immeasurably and and that's why they
they look weak because they are set up
for a world that that seems to be uh
deteriorating or vanishing uh almost on
a on a daily basis.
>> Yeah. What about the EU US trade deal?
uh you know at the time it felt like a
major breakthrough but of course Vender
Lion went back and uh the deal itself
received so much criticism from leaders
around the continent. What is that going
to do to this homogenity that they're
looking for especially when it comes to
these transatlantic relations because
each one of these countries has
different economic imperatives of what
they're trying to achieve.
Each one of these countries does have
different priorities and it's it is
amazing I have to say that they came
together to to find uh a common line and
not just a common line agreement on
details that they could all support in
this trade deal with the United States
considering that they all stand to
suffer uh to different extent to a
different extent from uh the the this
this new arrangement but they found uh
agreement they managed to to negotiate
an agreement amongst themselves that uh
that line could then take to Washington
and negotiate on that basis. Um
I think what what what we're seeing is a
is a clash between uh that um trade uh
those trade tensions between the United
States and the European Union on one
hand and then uh the the security policy
aspect, the defense aspect on the other
hand where European countries uh
including the EU try to be as supportive
as they can of the United States because
it is a key ally at least uh formally
and hopefully also in practice, but they
are worried that that that practice may
look different. So they have tried to be
as supportive as they can even as these
trade tensions linger and and cause
acrimony at home.
>> How are you thinking about the French
political stalemate at the moment? We
know that a confidence vote is coming
up. The current government is is likely
to to once again get dissolved. Maybe
we're back to the status quo of having
to reappoint another prime minister. But
of course, this is one of Europe's
largest economies. With all of that
going on, does it not hold back the rest
of the European block? Because France
and French leadership will be so focused
on domestic political matters that it
will be difficult to focus on more
broader European ambitions.
It is uh interesting and and and
extraordinary to see France when I think
those of us who were alive maybe a few
years ago most of us will remember the
the constant turbulence in Italy. Now
Italy looks stable. It has governments
that that stay in power for a few years
and get things done in France. That's
not so much the case. And it's uh it is
fascinating to watch today this very day
uh the governments uh of France and
Germany are meeting ministers from
France and Germany are meeting the
Germans are meeting with their French
colleagues knowing that in a few days
time they may no longer be in office.
They will most likely not be in office.
It is uh it is um
a bit of a concern to the rest of Europe
or to to the to the strength of Europe
because the EU and wider the wider
Europe need uh need France to be strong,
need France to be to be able to
articulate uh policies and that's hard
when when you don't have a stable
government.
>> Yeah. Elizabeth Fra, thank you so much
for joining us on the show today. Senior
fellow at the Atlantic Council. Well,
speaking of France, as we were just
talking about, it's grappling with
political turmoil as Prime Minister
Franuis Beeru faces a makeorb breakak
confidence vote next month. He's set to
negotiate directly with lawmakers next
week. Now, earlier this week, the
so-called French risk age hit a
seven-month high with France's benchmark
bond yield premium over Germany topping
80 basis points. Now, Bloomberg's Julian
Pontus is in Paris. Uh well, you know,
we're looking at markets and sort of
tracking all these market indicators to
get a feel for how investors are
thinking about the confidence vote. Some
stabilization coming through in the last
24 hours, but does that does that
necessarily bode well for Beirut's
chances at this confidence vote?
>> Uh in a nutshell, absolutely not. I
think uh what the market has priced is
that he will fail uh and he will be
toppled on September the 8th. And that's
the market pricing that you have. And
it's actually not that dramatic when you
look at it. We're back at 80 as you said
basis point. Uh which was more or less
the level of the political crisis when
you get a little spike. Um the the the
French stock market has was hit like 3%
on the first two days. Now it's
stabilizing again. Uh some people, you
know, are looking to buy the dip. Some
people are thinking, you know, well, if
he appoints another prime minister, if
the budget can be rolled over into 2026,
there are some scenarios or where, you
know, uh, everybody lives. There are
other scenarios though after the vote
where you could have uh, snap elections.
You could have even some people are
talking about M resigning. Obviously,
it's not uh what people expect, but it's
a possibility. you can't rule out at at
100%. But um it's I would say people
have priced uh markets have priced the
current
the the level of political risk that
there is and it's still at a moderate
level. I mean there's a lot of room for
things to get worse.
>> Yeah. Okay. Well, that's not not a great
uh greatly positive note to leave it on.
Uh just in terms of the the near term
though in the runup to that confidence
vote, are we expecting more turbulence
or is the outcome already priced in do
you think over the next week and that he
they probably will fail uh and at that
point then it becomes a matter of
whether elections are hold or whether
they can appoint a new prime minister.
>> Yeah, as I said I think uh markets are
pricing uh Beirut to to to fail. If you
look at betting websites, it's over 90%
95%. Uh when you look at the the seats
uh at the National Assembly, there's
really it's really hard to see any way
for him to pull this off. Uh so I think
markets are pricing that at the moment.
Um and probably they're hoping that M
will appoint a new center right center
left PM and that this will continue. Uh
I would expect uh probably some more
turbulence if uh snap elections are
announced after the vote.
>> Yeah. Okay. Well, we're going to keep a
close eye on that uh risk age as we've
called it, the difference between the
10-year French yield and German bond
yield. We got up to 80 basis points.
We've now recuperated some of it, but
still back at the highs uh not seen
since earlier this year. Well, moving to
the UK now. A think tank says the UK
could raise more than 32 billion pounds
over five years by imposing a windfall
tax on commercial lenders. The proposal
from the left-leaning Institute for
Public Policy Research says the
government should recover the profits
banks are making from taxpayers on
deposits held at the Bank of England. It
says high street lenders have enjoyed a
quote staggering state subsidy on the
Bank of England's QE program in recent
years. So this is a look at some of the
key UK banks this morning. Really
adverse reaction to this news that has
come out. And of course I should just
say this is a think tank proposal. Uh we
have to wait and see what what is
unveiled at the autumn budget. But still
adverse reaction. You've got Barclay's
down 3% west down more than 4.4%.
Now sticking to the UK lobbyists are
lining up to attend Reform UK's annual
conference next week. According to data
obtained exclusively by Bloomberg, 20%
of public affairs executives are
planning to head to the populist parties
event. It is a sign that corporate
Britain is increasingly taking Nigel
Farage and the Reform UK party seriously
as an electoral force. Bloomberg's James
Wilcox has more. I've got to say it's an
amazing evolution for the Reform Party
since its inception uh put together as
sort of a a fringe group and now you see
it becoming more and more mainstream uh
racing ahead in the polls. What do what
does our own research say about
lobbyists inclination to participate in
this conference next week and why are
they doing it?
So two years ago 4% of the people we
surveyed who are public and lobbying
executives who are the kind of people
who are influencing businesses working
inside finance healthcare education they
went to the reform 2 years ago 4%. Last
year 12% this year in a survey that
we've exclusively obtained alongside
opinion and the charter institute for
public relations that's now 20%. that is
pretty much level pegging with the
Conservatives and far beyond minor
parties like the Lib Dems or the Greens
or the Scottish National Party. It
suggests that reform are establishing
themselves in the first time in the UK's
past 100 years as a third party in the
mainstream. Now, I spoke to Opinium's
head of public affairs, James Crouch. He
told me business are now taking reform
seriously.
>> Reform is doing well in the polls. uh
organizations want to understand
basically what it really thinks where
it's headed because um I think a lot of
people would say they don't really know
um there's also a lot of scope to kind
of influence that direction as well far
more than a governing parties conference
an opposition parties conference is a
great opportunity for organizations to
get involved try and influence the
direction of policy and and and its
priorities.
Now that doesn't mean it's a dead set
that reform would be say the next
government. James told me that actually
local elections are still the big de
facto next year to see if they are
serious. But the words use of businesses
are dipping a toe and are curious to see
if reform are a party that can be
lobbied.
>> Yeah. Well, here's the thing. Uh as it
stands, the Reform Party only has four
MPs in the UK Parliament. Therefore, why
such a big interest in trying to uh you
know work more closely with them and
attend the conference next week?
>> I mean it speaks to that IPR report you
just mentioned there earlier. Jamanna
business are casting around to see which
political parties in the UK are
genuinely the party of business. Now
Labour as the government has caused a
lot of fears in the business community
that they have a big fiscal hole to fill
this autumn. There are all sorts of
think tank proposals around taxes they
could raise. Winfull charges on banks
are one. Gambling taxes are another
that's been raised and another potential
wealth tax. And so meanwhile with reform
being the highest polling party in terms
of popularity in the UK, that may not
hold till the next election which could
be as late as 2029. But certainly it's
worth seeing to see what kind of
policies a reform government
theoretically could give to business. M
yeah uh the polling numbers are really
quite staggering. Uh and just to point
out for those not closely watching it
that reform uh polling they're polling
ahead of the Labor Party right now. So
it's really quite fascinating. Thanks
for walking us through it. James
Bloomberg's James Walcock.
Well coming up Chinese e-commerce giant
Alibaba will report first quarter
earnings later today. We'll have the
details next. This is Bloomberg.
[Applause]
Well, some breaking news just in.
Thailand's constitutional court removed
the prime minister, Patang Shinat, for
an ethics violation. The second leader
has ousted in just over a year in a move
that intensified months of political
turmoil. The nine member court said
Pataran violated constitutional
provisions on ethical standards in a
leak call with former Cambodian leader
Hansen about a border dispute. Judges
said while she wasn't found lacking in
integrity, her remarks undermined the
pride of premiership and the nation. So
just adds to the political instability
in Thailand at the moment.
Now, US trade provision dating back to
the 1930s, which eventually cleared the
way for almost 1.4 billion small parcels
each year came to an end at midnight New
York time. The dimminimous tariff
exemption allowed packages worth up to
$800 to enter the US tariff-free. The
Congressional Budget Office estimates
the move will raise more than $23
billion in additional tariff revenue for
the government over the next decade. And
Denmark is cutting its forecast for 2025
economic growth by more than half amid
weaker prospects for pharmaceutical
giant Novo Nordisk. According to
government documents seen by Bloomberg,
GDP is expected to expand 1.4% this
year. That is down from the government
estimate in May of 3%. The government
cited US tariff increases and a weakened
outlook for the pharmaceutical industry
as drivers for the revision.
Chinese e-commerce giant Alibaba is set
to report first quarter earnings later
today. It comes after an intense price
war in China's food delivery sector,
which is hitting the country's
e-commerce companies, forcing analysts
and investors to slash their share price
targets. For more, I'm joined now by
Robert Lee, senior analyst for Bloomberg
Intelligence. Uh well, yesterday, was it
the day before? We were talking about
Mettoan and the downward move uh that
that was posing to the uh Hong Kong
indices. uh what is that likely to do in
terms of expectations for Alibaba today?
This price war rages on.
>> Yes, exactly right. And I think two
things are going to be in focus for the
results. One is the margins for obvious
reasons. We got price war in the
mainstream e-commerce sector and as you
just referred to and for those who don't
know it, Mtoan is the leading food
delivery company in China. extensive uh
market share across the whole you know
vast nation and as you can probably
appreciate food delivery though is not a
particularly high margin business it's a
scale and a volume business so JD.com
and uh Alibaba have been making strong
inroads there but the question is at
what cost so um they've clearly been
undercutting the pricing of their main
rival uh and I think that raises a major
question mark on the level of margin
that we see from Alibaba so the other
thing as well there's been a lot of
government subsidies. The government has
done everything it can to underpin and
support consumption within the country
given the economic headwinds and the
tariff uncertainty. So again, somebody's
ultimately got to pay for those
subsidies. And that raises an additional
question on margins. And then thirdly,
within their AI business or their cloud
business that services external AI
customers, uh, if you remember last
quarter, they actually missed margins on
there because like many subsectors
within tech in China, the competition is
is cutthroat. It really is um, you know,
very very extreme. So I think there's a
a third area of margin risk there.
>> Yeah. And how is it fairing so far
versus some of those competitors that we
have up on the screen right now? The
likes of JD.com, Tencent, and others.
>> Sorry, I'm really sorry. I I lost. Can
you repeat that question? I seem to have
lost.
>> Of course, I've just asked you how it's
how it's fairing versus its competition
right now.
>> In terms of e-commerce, I think I mean
Alibaba is the incumbent and obviously
it needs to defend its position. Taking
a step back though, we've seen a number
of strategic changes with Alibaba. If
you remember, within the last two years,
they actually put forward a plan uh to
disagregate the business and maybe spin
various uh parts of it off to try and
realize value in recognition uh or in
response to very uh strong shareholder
pressure uh to realize more value
because this is a business which has
been under sustained pressure for a
number of years. They lended a complete
uh about turn on that plan. um and they
have doubled down on their efforts to
both defend their existing market share
and make inroads in new markets. But
again, if that comes through cost
cutting with the impact on margins as I
mentioned earlier.
>> Yeah, Robert, always good to chat to
you. It's been a busy week. Uh Robert
Lee, Bloomberg Intelligence, senior
analyst. Well, listen to this story.
Popart's new mini Labua dolls have sold
out across China after their release
across online retail channels in the
country yesterday. The toys went on sale
at 10 p.m. local time and all available
inventory was gone before some could
even load the purchase page fully. The
frenzy lends weight to the brand's
staying power. PopMart stock is up some
260% this year. So, one for the Lebu
lovers out there, and I know there are a
lot of them over here in Dubai. All
right, on Monday, our Brussels
newsletter gets a fresh look with Bureau
Chief Susan Lynch at the helm. So, make
sure you sign up for that at
bloomberg.com/newsletters.
You do not want to miss. All right, up
next, Bloomberg Brief. This is