Good morning from London. I'm Anna
Edwards alongside Guy Johnson. We're an
hour away from the opening trade. Here's
what you need to know. President Xi
Jinping hosts Russia's Vladimir Putin
and Indian leader Narendra Modi
resetting relations for the three
countries facing pressure from the US
administration. The legal fight over
President Trump's global tariffs deepens
after a federal appeals court rules the
levies were issued illegally, extending
the chaos in global trade. And French
Prime Minister Fran Beu acknowledges
that talks with political parties may
fail to save his government from being
ousted. Opposition parties talk down the
prospects for their support.
>> First of September, the American markets
are out for the obviously misnamed Labor
Day. They're on holiday. I just point
that one out. Uh but elsewhere, there's
actually a few interesting things
happening this Monday morning. European
futures are a little bit positive, but
the story's not there. The futures uh
out in Asia because that certainly is
the story being delivered by Alibaba. It
is pointing to a strong future in AI.
That's where the narrative is shifting
at the moment. How does that affect
maybe US tech multiples going forward
from here? Alibaba on the back of its
numbers up by nearly 19% on its Hong
Kong listing. Euro dollar fairly flat,
but we're up. The dollar is generally
down kind of on the back foot. The real
story elsewhere in other markets though
is also in what is happening in gold and
silver. Silver's through 40. Gold is
chasing a fresh record high. We got all
of that to talk about. The countdown to
the opening trade starts right now.
Monday morning, good morning. Lots to
talk about despite the fact that the
American markets aren't with us for
today. They will be back tomorrow as we
work our way towards the end of the week
and of course the AFP number which we're
all on tent hooks waiting for. But the
geopolitical spotlight now turns firmly
to China. It was there yesterday. It's
there today. Over the next few days, it
will be there as well because global
leaders are gathered there. Obviously,
this is not Western leaders. This is
China, India, Pakistan,
Russia, lots of really interesting
countries coming together. In theory,
they all look very united because they
don't like Trump. But are they as united
as they appear?
>> Yes. Nothing like a common challenge to
bring people together. And that seems to
be what's happening here. So this is the
regional security and economic summit as
you say taking place in China. We had
some of those meetings yesterday, some
of them continuing today. So China has
met with uh China has met with India and
India has met with Russia. all of these
meetings carry on but the big picture
around this is as you say the role that
the Trump administration is playing here
even though of course it is not on the
ground but criticizing uh India's
relationship with with Russia in
particular and the fact that there's
that that oil trade that goes on that's
been a big topic and so the extent to
which the Trump administration's
policies are having this sort of
unintended or maybe even intended
consequence is interesting to us
>> I think the nuance is really important
here it's really interesting Narendra
Modi went to Japan before he went to
went to China just to kind of maybe keep
a few balls in the air at the same time
not putting all his eggs in one basket.
How many more of these can I can I
deliver? Um but but I think he's being
really careful and he's also not
sticking around for the military parade.
Yeah.
>> Which is going to be taking place to he
talked to Zilinski as well before
meeting Vladimir which which chimes in
exactly with the theme you're you're
>> so I think he's being quite careful. So
this is my point really about the fact
that this is not all its appears. These
are this is a loose gathering of global
leaders that don't particularly like
Trump but not quite so sure about each
other either. So you just wonder whether
or not actually we read too there's a
danger I think in reading too much into
this.
>> Right. Yes. And in fact maybe they're
just keep maybe they are keeping options
open. Let's transition into the part of
this conversation that takes us into how
the Chinese economy is doing. Had pretty
mixed data out of China over the
weekend. The official PMI looking kind
of sluggish. the more private sector
facing PMI looking more positive. In
fact, beating every estimate out there.
Commodities are responding divergently
to that. We've got copper prices going
higher. We've got steel and alum steel
and iron ore prices coming down. So, it
seems to us we're still struggling to
get a decent reading on what is
happening in China, but we're coming off
a really strong run for the Chinese
equity market. The CSI uh 300 in the
month of August up by 10%.
>> Let's talk about the tech stocks in just
a moment. Just just with the metals a
they've had a good run recently as well.
I think that needs to be borne in mind
too and just keep an eye on the effect
that that could have on the European
miners particularly the London miners
first thing this morning. Um the tech
stock story you bring up what's
happening in equity markets. Bar's up
the Hong Kong listing US listing
obviously closed today. The Hong Kong
listing is up really strongly on the
back of this which I think is
fascinating. This is a stock that trades
on circa 15 times.
>> Amazon which I think is probably the
nearest competitor in in the United
States trades on 34 times. And there's
all this kind of AI story that's
swirling, beginning to bubble up in
China, beginning to gain gain some
traction. Yes, it's not there. Yes, it's
not able to compete directly. Yes. With
the US. Yeah. But a US multiples, do
they really stack up when the rest of
the world is coming for the same
business and is very good generally at
commoditizing it? That's a question that
I think is going to be very pressing is
going to be very pressing going into the
into the end of this year. So Bubba, I
think, is a really interesting trade to
watch out for. Let's talk about another
trade that we're watching out for as
well and that is what is happening with
all this tariff turbulence. The the
headline is US trading partners are
dazed to confused. I'm not sure I really
I'm not that dazed or confused about
what is happening here. Trump the the
liberation day tariffs have been
declared illegal twice now. You you
initially had the um the international
trade court ruling them illegal back in
May. Now, you've had uh a federal
appeals court ruling that they're
illegal as well. Basically, this is this
is the idea that that tariffs are meant
to be the designated area of Congress
and Trump is using emergency legislation
to to get around that.
>> Ultimately though, we're still in the
same place.
>> Yeah.
>> Supreme Court is going to rule at some
point.
>> They don't The US administration doesn't
have to file until October. The tariffs
are still in place. They haven't taken
them away. The court hasn't disbanded
these tariffs. So, they're still in
place. So, they can still collect this.
It's likely the Supreme Court will take
its time maybe to rule on this. So it
could be the beginning of next year
before this changes. So nothing is going
to change between now and probably the
beginning of next year. So they're going
to continue to collect these tariffs.
And ultimately all Trump has got to do
is go to Congress and go, can you pass
this piece of legislation? And they do
that go away.
>> So I suppose our default thought, as
we've seen other legal challenges, is
this is an administration that will find
other ways to get its way get its way to
put its will uh in in in in place in
this particular area of policy. And so
that maybe is is why we are seeing quite
muted response. I thought maybe we would
see some response but not virtually
nothing. I mean if you look at US
futures of course they're closed today
the US equity cash markets but we've got
futures and they're really not really
doing very much down onetenth of a
percent on e- minis. I will just flag
there's a lot going on in Asia and we've
talked about some of the tech rally
there. There's an area of strength there
but there's some weakness in other tech
names coming under pressure. But we
might not be dazing and confused. But to
your point, maybe we are medium-term a
little more confused. Looking at South
Korea, the Cosby and the Japanese Nicke
both of those markets down. And that's
tech readacross from Friday. But is
there also a question about whether
trading partners who don't have trading
deals in place might just kind of slow
walk these things now to see where the
land lies and we we end up in a period
of prolonged uncertainty, I suppose,
around trade.
>> But I think it was already uncertain
anyway. Trump
>> I'm not sure there is a certain place
ever. Trump shifts the goal post on a
daily basis on this whole story as a
result of which did you have any
certainty before? I'm not sure you did.
Do you have any certainty now? You
probably don't. I I don't think it's
changed very much. I think the
expectation was that he was going to
struggle legally with this but would
spin it out and ultimately he can go to
Congress. That is the way of resolving
this. Legislation is the way of
resolving this. Will Congress go along
with that? I don't know. The Supreme
Court thus far has largely sided with
Trump and he's got until October to file
a to file an appeal against this ruling.
>> Yeah. Or to find a different way of
doing it. Yeah.
>> And so the Supreme Court can then take
its time
they stay in place. So nothing's going
to change between now and the end of the
year.
>> Let's talk about France because here is
another story that maybe has not changed
over the weekend, but perhaps notable
for that in itself. if you were looking
for any signs that maybe these
opposition parties were going to come
round to support the prime minister for
any reason whatsoever. You're not seeing
it over the weekend. So the opposition
parties are still talking tough, still
not not saying that they will support
the prime minister. I was drawn to the
socialist words. I mean they they've
both all of the opposition parties have
said look we're agreeing to meet with
Beiru but but some of them are saying
this is just a courtesy. There's nothing
really to talk about and the socialists
saying the only word I'm waiting to hear
from Bayou prime minister of course is
goodbye. And that just sort of
highlights where we are in this in this
conversation. But then there's also this
interesting uh front being opened up
here. If if the French prime minister
feeling under attack, then he's
certainly opening up a new area of of
offense. And that is around Italy and
talking about the Italians enacting what
he calls fiscal dumping. Essentially
objecting to fiscal tools being used as
a as a as a a tool of
>> problems at home. Problems are at home.
Blame somebody else. Okay. Usually quite
a good tactic. Blame blame the Italians.
um for poaching all the high net worth
individuals.
>> That's that's that's obviously the
reason why we've got so many problems at
home. Seems like a fairly uh wellworn
tactic um by by any government if
they've got problems at home. It is
clear that he is going to lose this vote
at this point. So, we're still in this
kind of phase of not really
understanding what comes next.
>> I mean, he still thinks he has a chance,
but I don't know what he thinks he's
going to say this week that will change
turn it around, but he does still think
he has a chance. I mean there's eight
basis points now guy between Italy and
France and I wonder if that's going into
his thinking as to why he lashes out at
lashes out at Mil at Milan and Rome.
Maybe this is maybe this hurts in Paris.
>> I'm sure it does but it doesn't change
the arithmetic that he now faces and it
doesn't change critically the arithmetic
that that Macron faces. So what is
Macron going to do? We're all talking
about Beirut this week but this is this
is a Macron has to decide what he wants
to do next. Does he want to appoint
another prime minister? How does that
change the calculus? Clearly with the
current parliament you are going to
struggle to deliver anything that is
meaningful. Does he have parliamentary
elections parliamentary elections? That
has a huge risk associated with it. Does
he call presidential elections? That's
obviously his resignation and he's gone.
So I I I struggle to see what
>> he sort of ruled out any of those
calling election type activities, hasn't
he? But you know these things have been
a surprise in the past. So we'll wait
and see.
>> I'm surprised that anybody's surprised
that anything is that this is where we
are. This doesn't this doesn't look like
it's changed very much over the
weekends. Alex Yakov, BP Parabar,
markets 360 is going to be joining us
very shortly to talk about all of this.
I'm quite curious to get his take on
kind of what's happening in in China and
we'll get his take on that plus also the
dollar. We need to talk more about that.
Callum Picker is going to join us from
Peele Hunt, chief economist there. Why
is the UK struggling as well and do
portfolio manager Julius Bay will join
us to talk about the markets and Brahman
Maddox is going to join us as well to
talk a little bit later on about what is
happening with the geopolitical
narrative. A firm eye again as to what
is happening out in China this week.
Let's tell you uh some of the data
points we have on the agenda. Other uh
items to watch. Uh today German
manufacturing PMI will be hitting the
BlueGE terminal. It's a US Labor Day
holiday of course we know. So markets
are closed states side. Tomorrow we get
the US manufacturing PI PMI numbers. We
get Euro area CPI and that's really
where the uh the interest for Europe
will lie. I suppose we get retail sales
on Thursday. We've got on Wednesday a
China military parade. All of this
coming on the back of the uh the
dialogue in that we've been talking
about between China and Russia and India
and others. Thursday we get retail sales
as I mentioned and Friday this is the
big one of course payrolls and we heard
Jamanna at the end of the last hour guy
making the point of course that it was
the revisions to the July number or that
that's that was where a lot of the shock
has been the fact that we thought we had
jobs created and then we realized that
there were a couple of months that
didn't create as many jobs as we'd
anticipated
>> and the next calculus on that comes a
few days later the whisper number is 75
the survey number is 75 I wonder whether
those numbers change a little bit and is
75 actually the right number to keep
things reasonably steady at the moment
anyway payrolls Friday one of the big
events of the week. What else do you
need to know as we start the week this
Monday morning? Norway has picked the UK
to supply warships for its navy in a 10
billion pound deal. It's the Nordic
nation's biggest ever investment in its
defense. Among the NATO members that
border Russia, Norway had also
considered France, Germany, and the US
for the contract. Delivery of the
British Type 26 frigots, which are
specifically designed to detect, track
down, and combat submarines, will start
in 2030. Bloomberg has learned that
OpenAI is seeking to build a massive new
data center in India. The project could
mark a major step forward in Asia for
its Stargate branded AI infrastructure
push. Sources say the company is
currently scouting local partners to set
up a facility with at least 1 gawatt of
capacity. The exact location and
timeline of the project remain unclear.
And Indonesian stocks have tumbled by
the most in nearly 5 months, hit by
growing concerns over political
instability in Southeast Asia's biggest
market. President Prabo Sububano
cancelled a trip to China following the
unrest and demonstrators targeted the
homes of Indonesia's finance minister
and several lawmakers. On Sunday, the
president announced Parliament will
remove hefty lawmaker perks that had
been a source for eye for many protests.
A source of eye for many protests tours
protesters
>> protesters. Yes, indeed. And we see that
playing out on the streets and in the
markets coming up on this program then
the UK's parliament returns from its
summer recess. We discuss challenges
facing the country's economy and more.
Plus, Chinese EV maker BYD reports a 30%
plunge in quarterly profit. More on the
cutthroat battle for EV market share. We
thought they were one of the winners,
but we'll get into that story. Up next,
we will be live from China's summit in
Tanzhin as President Xi Jinping hosts
Russia's Vladimir Putin and the Indian
leader Narendra Modi. More on that
summit coming up. If you have questions,
if you want to get involved in these
conversations, IB plus BBTV go, that is
the function to use on the Bloomberg
terminal. This is Bloomberg.
We should seek common ground while
putting aside differences.
Shared aspirations are the source of
strength and advantage and the will to
seek commonality while showing
differences reflects wisdom and vision.
>> That was of course the Chinese president
Xiinping speaking at the Shanghai
Cooperation Organization Summit which is
taking place just outside Beijing in
Tanzin. Let's bring in Miml who's there
for us now on this summit that is taking
place. I mean in theory these leaders
look unified. They look like they are
standing together and are against Donald
Trump the US president. How unified a
group really is this?
>> Yes. The relevance of the SEO grouping
has been under question for many years
because it started out in 2001 as a
security grouping to rival the likes of
the NATO. But you look at some of its
member countries. India and Pakistan
have conflicts with each other. Iran was
attacked by the US and the SEO during
these instances didn't really you know
do a good job in showing its
effectiveness in intervening in some of
these conflicts. So of course today it
is built as one of the biggest, in fact
the biggest SEO gathering in its
history. Something that China is very
proud of. It's all over Chinese state
media. a platform for presidency to show
that he has this global leadership among
these countries of the global south. uh
and we'll be looking out for the joint
statement if any that comes out of this
and what is the tone that the group
adopts especially in reference to the US
and whether there is any framing of the
conflict the territorial conflicts the
terrorist attacks on India and Pakistan
are they given equal weight the joint
statements and whether there is any
mention of Iran and the conflict in Gaza
as well
>> m switching to markets it looks as if
there's a lot of focus on tech and some
of that tech's getting a negative read
across from US stocks on Friday. Other
tech like Alibaba lifting Chinese stocks
today because of the progress that
Alibaba is making in AI. Talk us through
that.
>> Yes, Alibaba really uh surprised markets
with its earnings report, right? Revenue
surging really supported by its cloud
computing business helping to offset the
price competition and the hit to the
profit in the food delivery front. And
we saw this surge in its stock prices
helping to lift the other chip stocks in
China including SMIC, Huah Hong, and
broadly we continue to see this blazing
rally on Chinese onshore markets.
Markets really shrugging off the weak or
the contraction in the PMI data that we
got uh over the weekend. Uh the private
PMI actually expanded and it shows you
that China is starting to learn to live
with these tariffs. And of course we
have Modi and she meeting over the
weekend suggesting this normalization of
ties as President Modi announced that
both sides will resume direct flights
with each other and some of these Indian
companies with ties to China they could
set to benefit from the improved
relations between China and India as
well.
>> M thank you for the catch up. Thank you
very much indeed for the reporting. Mim
Lo joining us out of Tanjin. Let's carry
on the conversation and connect this
back to the markets that we're going to
spend this week talking to talking
about. Um, Alex Yakov is the head of G10
FX strategy for Europe, uh, BMP markets,
BMP Parabar Markets 360.
Just want to kind of connect what we've
just been hearing about, what's
happening out in Asia, what's happening
in China right now. This gathering of
India, China, Russia. These are the
countries that have talked so much about
ddollarizing,
finding an alternative to the global
dollar system. You spend your life in
this world. Do you see any progress? Is
is there is darization real in any shape
or form?
>> Good morning. Thanks for having me on
again. We've held a bearish view for the
majority of this year on the dollar and
still look for Euro dollar to trade to
120. Yeah.
>> Uh a reduction in dollar exposure from
European investors in particular has
been a core part of that view and that
was the main story for H1. So higher
hedge ratios from European investors in
particular. We think the drivers of
dollar weakness are now shifting
increasingly more towards the Fed with
the Fed more in focus. It's not to say
the hedge ratio story is over by any
means. We think it will continue. But
the Fed is increasingly important for
the dollar and that means the FX rates
correlation which had broken down in the
first half of this year can reestablish
itself. Meaning weeks like this where we
have payrolls are really key for the
dollar. But is but is the euro like
people are talking about migrating away
from the dollar or or focusing back on
on Europe. Is is is the euro an
alternative to the dollar? Like are
there tectonic shifts happening within
FX at the moment or is it just interest
rate differentials still dominate?
Growth rates still dominate. Are these
still the things that drive what we are
seeing in terms of the FX landscape at
the moment?
>> We think it's a bit of both. Yes,
traditional relationships are coming
back, but those tectonic shifts that you
that you mentioned, Guy, are still
there. Um, and within the FX universe,
yes, we think Euro is the most
attractive currency to rotate into.
Importantly, we're not calling for an
asset rotation. We're not calling for US
asset selling, European asset buying
from global investors. We're calling for
a higher hedge ratios from European
investors. So, a reduction in dollar
exposure that way.
>> Okay. So, let's stick with the dollar.
We'll come back to more on the euro in
just a moment because I see that
Christine Lagard is speaking. But but
let let's stick with the with the dollar
and that link between FX rate FX and
rates that you say that correlation is
is sort of coming back. So what would
should be we should be uh we be watching
for it's Monday I can't speak. What
should we be watching for when it comes
to Friday when we get the payrolls data
and we're looking at you know maybe some
more strength in payrolls than we
thought or maybe some weakness and what
is what is the reaction function in the
dollar?
>> So I think the two exactly like you say
Anna are two separate questions. On the
one hand, we look for resilient payroll
print of 90K with unemployment at 42,
but the asymmetry for the dollar we
think is to the downside. So, let me
break that down for you. For starters,
the fundamental picture, as I just
outlined, is already bearish dollars.
But importantly, as labor supply has
been coming off, so too has the break
even rate, so the level of job growth
required to keep the unemployment rate
stable fallen. and that increases the
chance of a soft or negative payroll
print. Now, that negative or soft
payroll print might not raise the
unemployment rate, but it would
optically be sufficient for the dollar
to sell off. And that's kind of what the
asymmetry for payrolls is all about in
FX even though our base case is for a
resilient print.
>> And so, does that mean that the euro
gains as a result?
>> Yes.
>> Yeah, that's the euro. So, and and I'm
I'm watching Christine Lagant speaking
this morning. She's uh speaking on uh on
other media at this point and she's
talking about uh well she she's probably
being asked about France but trying her
best not to mention France by name I
would imagine but she's saying I look
very carefully at spreads uh we need to
see discipline in public finances how
much does any of that conversation
around what's going on in bond markets
around widening spreads for France
around political unrest in France how
much does that cut through to the euro
>> not so much at this stage when we look
at 10year oat asset swaps, they're
already trading above 100 basis points.
So rates markets, as you say, already
discount quite a lot. And parliamentary
elections in France, to the extent that
that's where we arrive, tend to have
only a short-lived impact on the euro.
Last year is a good example of that,
where the euro sold off a little bit
into parliamentary elections, but pretty
much reversed that move straight away
after uh the elections were over. uh
presidential elections would be more
impactful than parliamentary elections,
but that's not something the market is
is talking about at this stage.
>> By the yen into a BOJ rate hike, is it
is that the trade right now? It seems to
be warming up.
>> We think it's that simple. Um the BOJ
will be hiking rates in October and the
Fed will be in easing mode. So, you have
strong monetary policy divergence uh
again and it doesn't seem like the
market expects an imminent LDP election.
Plus, we think positioning in the yen is
lighter than in some other currencies
when we look at our models. So, the
stars are really aligning for a bottom
end of the tight range uh uh a break of
the bottom end of the tight range that
dollen's been in in August.
>> So, so it's domestic drivers then. It's
that BOJ anticipation of of hikes at the
BOJ that you think that drives the end
because others say, you know, look look
elsewhere. Look at the tensions between
the Fed and the US government. look at
what's going on in France and other
areas of political uncertainty that
maybe drive into the yen. I suppose both
could be true.
>> Exactly. I think both are true. I think
the main driver is monetary policy
divergence and all the other factors
that you mention um just add to the to
the bearish dollar story.
>> Okay, Alex, thank you very much. Thank
you for joining us. Alex Yov, head of
G10 FX strategy for Europe at BMP
Parabar Markets 360. is going to be a
busy week for Alex and anybody in FX of
course with the payroll data breaking on
Friday. Before that we get inflation
data out of the Euro zone. Just
expecting that to come in at 2% so as it
was and as it is targeted that'll be the
conversation uh tomorrow perhaps. Coming
up on the program we'll focus in on the
UK. Parliament returns from recess.
We'll discuss the challenges facing
Prime Minister K Dharma. Uh Peel Hunt
economist Callum Pickering joins us. uh
challenges for K sama challenges for his
chancellor as well in terms of that
budget that is coming up and a lot of
expectation around tax hikes. Is that
overdone? Should we be expecting that to
come to pass? We will talk about the UK
next. This is Bloomberg.
Welcome back. 30 minutes until the start
of equity trading for Europe. Not for
the United States, of course. It's Labor
Day holiday there. So, we will be uh
without probably some volume as a
result. But the futures picture looks
like this. Pretty flat for London. Uh
we'll talk about the UK and the broader
macro context in just a moment. The CAC
40 futures suggesting a little bit of
upside continuing perhaps to rebound a
little from what we saw last week. Of
course, we have negativity around tech
stocks in the US on Friday and into the
Asia session as well, but maybe that
doesn't cut through much here in Europe.
We could see weakness, as Guy was
mentioning at the top of the program, in
London as a result of the weakness in
the iron ore price, but then copper is
higher. So, mixed picture there. Let's
talk about the bond markets. We're
watching to see what happens of course
again because of uh the political
uncertainty in France, not because
there's a huge amount of news flow, but
just because that is where the market is
uh is paying attention right now in
terms of European bonds. And we're at
3.53% on the French 10-year yield right
now.
>> Is summer over? Kind of feels like it
will be tomorrow. The Americans will be
back. Labor Day holiday behind us. And
today here in the UK, Parliament returns
from its summer recess. Prime Minister
Kia Starmer is facing multiple domestic
challenges after a summer which has seen
asylum protests, tumbling government
poll ratings, and fresh surges in
inflation. Joining us to wrap all this
good news together is Bloomberg's Alex
Morgan. Now what?
>> Yeah. Well, uh, Guy, where to start?
Let's start with a poll, shall we? A
poll of polls looking across, um, a
composite poll that Bloomberg's put
together looking across the main
pollsters, and this puts the Reform
Party well out ahead on 28%.
Labor trailing on 20%, the Conservatives
on 18%. Now, that that that chart, if
you like, is the backdrop to the start
of this new parliamentary session. You
can see there that now we're looking at
there Yuggov a survey looking at uh
Kstarma's favorability ratings. Now
Labour really going to be wanting to
sort of play the long game here. Four
years until a general election must be
called a lot of what Labour promised at
the last election making people feel
better off. You know they've had a lot
of headwinds on that front. So you can
imagine the governing the governing
Labour party wanting to sort of push
this along. Over the summer though
reform have been almost every single
week out with another press conference.
Najafra Faraj I think it's fair to say
has been setting the political weather
on the issue of immigration and asylum
across the summer and that is a hot
button issue for uh politics in the UK
certainly for voters. We're looking
ahead to the autumn as well. It's going
to be a very interesting parliamentary
session. We've got all the parliamentary
uh party conferences coming up. We've
got starting off with reform with record
turnout from business leaders there.
Then of course moving through to Labour,
Liberal Democrats and finally the
Conservatives. Now for the conservatives
of course who were in power for 14 years
I think it's f fair to say their
challenge for this parliamentary session
is getting heard really I mean I've
talked to you there about reform on 28
in the poll this poll of polls labor on
20% conservatives on 18 chem not the
lead of the conservatives really trying
to make sure now that she can get heard
Najra Farage sort of parked his tanks on
the conservatives lawn on some key
topics and all of this of course coming
as well at the time we'll be having the
autumn budget from Rachel Reeves I know
we're going to go into that uh in just a
moment talking about the economic
pressures on the government at a time
when Kstarma over the summer had
defended Labour's stewardship of the
economy saying that he'd overseen uh a
rise in wages and of course the bank of
England having done interest rate cuts
that of course uh is coming at a time
when we have seen a rise in consumer
prices the bank of England expecting
inflation to peak at 4% albeit coming
down slightly after that so what are the
challenges guy I think the challenges
for the Labour party are regaining a
sort of front foot in the conversation
on a whole number of issues immigration
of course is a real big one but Then of
course you'll be having the economic
picture, the forecast and then the
budget as well. So it is a busy old
time. Party conferences and Donald Trump
appearing for his state visit. Sort of
nestled in the middle of all that.
>> Nestled.
>> That's how we're going to describe it.
He's going to be nestled.
>> Sounds cozy. Alex, thanks very much.
Alex Morgan there with a rundown of some
of the challenges facing the UK
administration. Let's stick with that
theme. Callum Pickering joins us, chief
economist at Peele Hunt. So Callum, no
doubt there are challenges. We'll spend
a lot of what is it two months talking
about the run-up to the budget. So there
we are. What a thing to look forward to.
So we've got all of that ahead of us and
no doubt there is a big fiscal
challenge. But if we step back, what is
the story that you're telling around the
UK? Because we've emphasized some of the
negatives, but I know that the GDP
prints earlier on this year actually
came in a bit higher than had been
anticipated by some. So what's the story
you're telling?
>> Well, look, clearly there's a great deal
of pessimism and a lot of it is
justified without question. The UK has
made for a decade a succession of policy
mistakes which have cost growth,
productivity, profits, and wages. No
question. Then let's look at the data.
Data for the first half of the year.
Real GDP growth 2.2% annualized. That's
pretty good by G7 standards. That's
pretty good. Only the US beats the UK in
that respect. Recent PMIs 53 composite.
That's not bad by any stretch.
Inflation's a little bit high. No
question. That's partly a policy
mistake, but it also reflects decent
domestic demand. People are willing to
spend. And then across the private
sector, actually the situation is not
bad. Banks are overc capitalized.
Businesses have never had more cash in
their balance sheets. And investments
growing. Corporate debt levels are low.
You make the same argument for
households. And what people forget is
just now we're facing the tightest part
of the monetary policy cycle. So from
here, actually, monetary policy gets
substantially easier because of the
interest rate cuts that we've had. And
so you look at the underlying data and
you say actually this is an economy
that's not doing great by UK standards
but it's actually not all that bad. And
then you say well what happens next? And
that's where you get panic.
>> Yeah. And that's where you get to the
difficulty I suppose because even if the
G even if the growth story has not been
as bad as it could have been over the
last 6 months or so that's not good
enough I assume to fix the fiscal
headwinds that Rachel Ree is facing.
>> Well we so we need a sense of
perspective when it comes to the fiscal
headwinds. So, so a few things that I
think are misunderstood. First is
borrowing so far this year completely in
line with the OBL's forecast. You can
look at that data online. We've not had
any borrowing surprises. Second thing is
borrowing costs 10 years today roughly
where they were in March. The third year
is higher by about 30 basis points. But
when you bake all of that in, that's
probably 56 billion extra. And then the
question is what does the OBR do with
the forecast? The danger is that the OBR
downgrades the longer end of the
forecast. It's expecting about 1.71%.
>> Some punchy productivity expectations,
right?
>> It does, but actually in the first half
of the year, actually, basically for the
past two years, the UK's been growing
around the long end of the forecast. So,
since November 23, UK annualized
growth's been around 1.8%. That's
roughly what the OBRs. So, okay. Do you
make that argument? And then for this
year, don't forget the OBR forecast 1%
growth.
>> So, the IMF likely to get to 1.3 1.4.
What's that? Sorry.
>> The IMF's not required. Yeah, I'm
certainly not required in the UK's case.
The situation is that that's hyperbole
without
>> So why is the hyper what like why why is
this happening? If the numbers you talk
about are accurate because I'm I'm
looking I'm also looking at bond yields.
The UK is in a completely different
position to its nearest peer group in
terms of the yields that it's being
charged right now. Why doesn't the
market see what you're saying?
>> The market does see what I say. The UK's
bond yield is consistent with long-term
expectations for growth inflation plus
some term premier and then you have some
structural factors. So let's take the
the UK 10ear rate. What are we trading
at today? 4.7%.
>> 4.7.
>> Bank of England's inflation targets 2%.
>> Yep.
>> Normal economic growth in the UK, let's
call it 1.7 1.8%. Maybe you want to add
50 basis points of term premium in
there. Okay, that's getting you to what?
four, five, something like that. Maybe
you're 20 basis points higher reflecting
um less liquidity at the long end. The
fact that it's the smallest pool of debt
among all reserve currencies, there's no
natural buyer in the case that there is
in Japan and the UK's followed bad
economic policies which have produced
too much inflation, but that's likely to
be temporary. Fast forward a year from
now once inflation has probably got a
two handle and a lot of this at the long
end of the curve will have come out. We
don't have a lack of demand for our
debt. We just don't like the price that
we're paying for it. The price that
we're paying for it is due to the policy
mistakes which are twofold to too much
inflation, too much hits to supply side.
And then when it comes to the specific
issue of fiscal policy, Labour's
fundamental problem is that it's said
half of spending we failed to touch
welfare. Half we can't because it's
protected. It's NHS and all the rest of
it. And then twothirds of the tax base,
income tax, VAT, and employment
insurance. We're not going to touch
this. And so they've painted themselves
into a corner.
>> How does Rachel Reese get her out get
ourselves out of it though? Get us out
of it. Get us out of it.
>> They can't do anything without paying a
significant political price at this
point. What matters for fiscal policy is
not real growth, but nominal growth
actually. And if you look at on that
metric, the UK has got sufficient
nominal growth to balance a budget.
Let's say 2% real plus let's say three
and a half.
>> Uh you could raise income taxes by a
penny on the 21 there because they said
they went.
>> Well, exactly. So that's the political
cost, but the economics of that actually
would be fairly straightforward. Right?
UK households h UK households for the
most part are not lacking funds. They're
lacking the confidence to spend the
funds that they have. Real wage growth
has been bit north of 3% for the past
two years. Inflation adjusted savings
rates 10.5% in the recent quarter. We
are an economy that's afraid. Just just
you think guilts are a massive buyer
right now.
I think guilts are probably 20 or 30
basis points too high across the curve
and I think in a year's time
>> as as an economist maybe you don't have
>> no no
you think they're miss if you think if
you you just added up the arithmetic on
it if inflation comes down
>> yes
>> you take that component out of the
arithmetic you just gave us then then
guilts are coming down a long way
>> if you have confidence that inflation is
coming down of course the risk is that
you have inflationary policy choices at
the current budget this idea of a
premium is is actually right. What I'm
saying to you is based on fundamentals,
UK guilts look too high. If you look at
the policy choices that government might
make, then the premium might be
justified.
>> Callum, it's great to see you.
>> It's always good to chat. Thank you so
much.
>> Thanks. It's Yeah, fantastic. Callum
Pickering, chief economist at Peele
Hunt. Thank you very much indeed. Coming
up, we'll continue tracking defense
stocks after Germany's chancellor says
he sees the war in Ukraine dragging on
with no clear end in sight. We'll talk
about that and all the other stocks you
need to be watching this quiet Monday
morning. I'm joking. There's lots going
on out there. This is Bloomberg
1st of September. Good morning. 15
minutes until the opening trade here in
Europe. European futures broadly
positive this morning. Not up by much.
You're going to see a light volume
session with the US out for the day. It
is the misnamed Labor Day holiday coming
up a little bit later on in the United
States. I guess it's already started.
Let's turn to what we're seeing on the
tariff narrative because this is front
and center as well this morning. US
trade partners have been left scratching
their heads a little after President
Trump's global tariffs were found to be
illegal uh by the US appeals court
Friday. For more on this story, we're
joined by our trades Brenda Murray in
London. Good morning. Morning.
>> Did this change anything?
>> It changed the dynamics of uh of the e
the economic impact of these tariffs in
a couple of different ways. If you're a
company and you were paying these
tariffs, you are now left with many more
months of uncertainty trying to figure
out should you restock your inventories,
should you wait and see or should you uh
you know should you rush to uh to to to
refill your inventories. And for the
countries that President Trump has been
negotiating with, uh, suddenly you've
got a few more cards in your hand that
you can play against him if in fact the
court does strike these tariffs down. He
has plenty of other mechanisms to use
tariffs.
>> It's not going away. Uh, the tariffs
will still be with us. Uh, but there
will be different kinds of tariffs.
They'll be more targeted than the
blanket tariffs that he's that he's
imposed through this uh, liberation.
>> This is about the liberation day
tariffs, isn't it?
>> Exactly. Exactly. Yeah. Yes. About about
liberation day tariffs and about some
others it would seem as well, but a bit
unclear as to some of the details to
which it would apply to. Um so Brendan,
do we assume then that if he can't do it
this way, if the president can't do it
this way, he'll find another way to to
generate tariff revenue if at the end of
the day that is that is the goal because
market response is very muted today. I
mean, I know it's a public holiday in
the States, so you might expect that.
And we don't have bond markets open, so
we can't see what's happening there.
But, you know, it's possible that the
long end of the bond curve could get
very nervous about not getting that
tariff revenue. Um, and but US futures
are flat. Uh, and there's no sense of
panic there.
>> We've heard the Trump administration say
that they have a plan B for this. It's
this these other tariffs, uh, the 232
tariffs. They've had the 301's in place
on China, uh, for several years now.
They can go very broad with those 232
tariffs. this the the pharmaceutical
tariffs, the chips tariffs, the copper
tariffs, the lumber tariffs, all these
other sectoral tariffs that they can use
uh and they can use them very broadly.
They can hit all sorts of things with uh
with with uh tariffs on semiconductors.
Everything we you know every piece of
consumer electronic has, you know, chips
in them. Uh and and and the same holds
true with pharmaceuticals. So, uh they
they're they can go pretty broad with
these tariffs. uh if if these liberation
day uh duties do get struck down, they
can still generate plenty of revenue.
Maybe not as much as the three or400
billion dollars a year that they think
they're going to get uh going forward
from reciprocal tariffs, but uh but
they're they're they can definitely um
pay for some of uh the tax cuts, the
spending uh that they've they've
implemented with those other uh more
legally tested uh
>> so other governments shouldn't assume
they're going to get a refund anytime
soon.
>> I wouldn't uh I I wouldn't think that.
and and the Trump administration has
said publicly uh our trading partners
know that if these other tariffs go away
that we still have uh some leverage
through these other uh 232 tariffs to
hit them with.
>> Okay. Uh Brendan, thank you very much.
Bloomberg's trade zar Brendan Mari
that's a great title. Let's talk about
the markets. Joining us now Bloomberg's
Men Conium with uh the latest on where
markets might head from here. And big
picture I suppose we're kind of in
limbo. US futures are pretty flat.
European futures look kind of mixed but
Asia's been weak as a result of selling
of tech stocks apart from Alibaba but
there's a lot of mixed signals going
into today's European session I suppose
Moana.
>> Yeah well we are definitely seeing um a
bit of a route there um coming over from
Friday um with the with the AI stocks
leading in the US and we're seeing that
um coming through in Asia this morning
um as well. Um I think one of the things
I've been looking at is that I think
that's going to be quite good for the
Footsie 100 because um we saw them
actually have a a pretty rough week
actually last week, but it's um they
outperformed European stocks. You know,
they dropped 1.4%. That was their worst
week since April, but it wasn't nearly
as bad as what we saw in Europe and in
the US. And actually um with this sort
of flight from risk that we're seeing
spread around with the uncertainty um
the UK's kind of uh consumer heavy
defensive heavy um stocks are likely to
benefit more um as well as this big rise
in gold and a lot of that uncertainty
that we're seeing particularly from the
US Fed. You know what's happening with
these tariff policies helping precious
metals which again um helps some of
those Footsie 100 listed um precious
metal miners. Um so you know after a
difficult week this week I think things
have really aligned for it to perhaps do
a little bit better um this week and
perhaps return to that ascent we'd seen
to consecutive record highs earlier.
>> We're just waiting for payrolls. Is that
is that what we're doing all week?
>> There is certainly that uncertainty and
that overhang and actually things are
also quite stagnant. I think um I think
when you're looking at the fixed income
market in particular, we've seen yields
um particularly longdated yields really
rising across the board. Um and so I
mean you know one of the things we've
been talking about is is France um you
know elevated political uncertainty
there but we're also seeing it in the
guilt market because um there's a lot of
uncertainty about what's coming up in
auton's budget but that's quite a way
away so there's generally a sense that a
lot of these catalysts are a little
further out and of course as you say
with the US we're waiting for payrolls
there's so much uncertainty about what's
happening with the Federal Reserve and
you know also with tariff policies um
that I think everybody's kind of in wait
and see mode, but at the same time,
nothing's really alleviating that
elevated risk profile.
>> Mena, we were just talking about how
it's a long time to wait until the
budgets. Good two months, isn't it now?
I mean, it might be roughly until we get
We don't know the date exactly, I think.
>> So, we got two months of waiting to find
out whether we get tax rises in the UK.
It feels like the narrative can't just
be that for two months.
>> No, absolutely. I think one of the
things we'll be watching closely though
is actually what the Bank of England
does this month. um you know they the
prospects of them cutting rates has been
um significantly reduced. Actually they
sounded a bit more hawkish in their last
meeting. Markets are now pricing in less
than a 30% chance of a rate cut. Um but
whatever is going to help that um bond
market um heightened risk um you know
could only really come from the Bank of
England because I think there's so much
uncertainty with regards to what's in
this budget and actually even though
usually um talks of tax cuts would be
beneficial perhaps and reassure the bond
market. I think when they seem so kind
of wide ranging that's actually creating
more anxiety just about the e economic
state that's faced by the government.
>> Well great stuff. Thank you very much
indeed. Bloomber's Mo Cunningham joining
us. Remember, you can follow all the
thoughts of the whole team. MLIVgo is
the function on your Bloomberg. Uh let's
turn to the stocks that we're going to
be watching this Monday session. Defense
stocks firmly in focus. Chloe Melly has
the details.
>> Good morning guys. So yeah, let's keep
an eye on defense stocks today and that
is after German Chancellor Friedrich M
said that he expects kind of no end in
sight for the war in Ukraine at this
point and he expects it to drag on. So
this could potentially lift the shares
of some of those key defense names.
Obviously Rhineta which has been having
a fantastic last 12 months with shares
more up more than 200% but also Italy's
Leonardo Francis Talis and the UK's BAE
systems. An additional boost for BAE is
that Norway picked the UK as a supplier
of warships and that is a 10 billion
pound deal. So we could see an
additional boost there for BAE and that
obviously deepens the cooperation
between Norway and the UK. Moving on to
Astroenica in the pharmaceutical space.
So Astrazenica said that it's a
hypertension pill reduces blood pressure
by more than twice as much as standard
treatment. And this particular drug is
particularly important because it could
potentially deliver $5 billion a year in
sales. And we have already seen
Astroenica outperform its peers GSK and
Rash. Um it's it's outperformed it
started outperforming around this
summer. We can see it there. So, this
could potentially widen the gap a little
bit further for Astra. Staying in the UK
and moving on to Tesco, uh, we've got a
new price target, a raised price target
from JP Morgan for Tesco. It placed it
on positive catalyst watch. It said that
the momentum looks really solid. The
growth outlook looks good. Um, so we
could see an extension of that good
performance that we've seen over the
last year with shares up more almost 19%
and overall analysts are quite positive
about about Tesco. We have got 11 buys,
just two sells. Uh so definitely a stock
to watch.
>> Chloe, thank you. Our equities reporter
Khloe Melly with the stocks that she is
watching this morning. 753 here in
London. So we got a few minutes then
until the start of the European equity
trading session. And I guess other
things we are watching along with the
things that we were just hearing about
there from Chloe. Uh the mining stocks,
we put those in focus all morning,
haven't we? With the weakness we're
seeing in iron or steel prices coming
through the Asia session. Interesting
posit. And a lot of that to do with um
um stock piles apparently. uh and some
of the data looking conflicted out of
China. But then on the other other side,
copper is actually trading higher. So
we'll watch to see how the miners deal
with that.
>> Gold as well. Gold, silver stocks could
be in focus as well this morning. Looks
like we're going to have a fresh run at
record. Silver's through 40. Gold looks
like it's going to target that as well.
The defense sector is in focus as well.
The other kind of element that we just
didn't talk about with the defense
sector is VDL's
got some fairly precise plans according
to the FT in terms of troop deployments
into Ukraine and that's being seen as a
positive for European defense talks. as
the plans advance and it becomes clearer
what could happen, you start to get an
idea of how you would maybe price some
of this stuff.
>> Yeah, some of those some of the defense
talks retreated quite a bit, didn't
they, on expectations that we were going
to get closer to peace in Ukraine and
that has remained elusive and we haven't
got any sign of a meeting between
Presidents Putin and Zilinski and so we
we wait and backtrack some of those
earlier moves.
>> Do you see tech stocks continuing to
sell off? Some of that would have been
captured Friday here in Europe. So names
like ASML would have captured some of
the weakness we saw back end of the
session Friday in the US. Does that
continue therefore into Monday? We
certainly seen it in Asia, but I don't
think the effect is going to be as
dramatic maybe this Monday morning here
in Europe. So that's how we are setting
up for this Monday session. Remember the
United States is out. It is a Labor Day
holiday over in the United States. We've
got 5 minutes to the opening trade. It's
likely to be there for a quiet one from
a volume point of view. There's going to
be some stock stories though uh to focus
on. Anyway, the open is next. This is
Blueber.
Monday, the 1st of September. Good
morning. European markets are about to
open. They won't be opening with US
markets. They're closed for the day.
It's the Labor Day holiday over in the
United States. Expect light volume as a
result. Let's talk about Friday though
because Friday was interesting and it is
going to see some carry through maybe a
little bit into the Monday session. This
was the sell-off first thing. The blue
line here is the sell-off we saw in the
United States. Tech leading that. Asia's
responded to that this morning, but
Europe had largely already priced some
of that in. We saw it before the end of
the session. So, some of that is already
in the price this morning. So, think
about therefore the effect being a
little bit more muted into names like
ASML. Keep an eye on the defense stocks.
We're going to talk about those in just
a moment. This is how it's all shaping
out into f into futures. Uh it's going
to be interesting to see kind of that
defense stock story maybe coming
through. Not seeing much of it in the
London market this morning. Miners are
going to be in focus there. You're not
seeing much of it in Euro stocks 50
futures either. Where you are seeing an
interesting trade though this morning is
in CAC futures rising a little bit but
not by much. And again this is going to
be a week in which we're going to see
political turmoil over in France once
again dominating the agenda. Does it
move markets? Remains to be seen.
>> Yeah, absolutely. plenty of political
volatility whether that's translated
into market volatility. Let's have a
look at where we are then on some of the
sectors and stocks that we're watching
this morning. Guy as you mentioned
defense is on the list but let's start
with farmer. Uh we've had some
interesting uh readouts from various
drugs that are being tested right now.
Novantis is leivo and astr hypertension
pill yielding positive results. On the
other hand buyers very gat failing to
hit primary goals. So we'll keep all of
those in focus. uh defense talks as you
mentioned watching for Europe's plans
with regards to Ukraine watching BAE and
other UK uh defense names on the back of
that Norway news and also allstead
pledging to take up its rights in that
rights issue from the wind uh turbine
maker guy.
>> Okay, here we go. Time for Monday's
session. September session is underway.
Here we go. Let's give you some numbers.
Time for the opening trade. This is what
the picture looks like this Monday
morning. Footsie 100 out of the gate.
Flats a pancake. Uh nothing to be seen
here. Uh we'll wait and see whether or
not we get a little bit of traction but
so far not much traction to be had. Keep
an eye on what is happening in the
farmer space, the defense space. Keep an
eye on what is happening with some of
these tech names as well this morning.
Uh broadly the mining sector could be of
interest too though maybe a little bit
more uh divergent in terms of the miners
in the gold sector, silver sector and
maybe in the iron or sector going
different ways. The IBEX is up by 210 of
1%. The CAD expected outperforming uh
initially but actually you can see the
footsy 100 climbing now. So actually not
outperforming. So, we're up by a
circular 3/10en of 1% on both of those
two markets. We'll wait for the DAX to
get going in just a moment, the SMI as
well. In the meantime, Anna is going to
break it down from a sector point of
view.
>> Yeah, absolutely. And I'm pleased that
one of our colleagues decided to focus
in on farmer this morning because that
does seem to be one of the areas that
we're seeing some strength. So,
healthcare stocks up by half a percent
this morning. And we talked about some
of the positive uh results that we were
seeing some from various trials. So, we
see Astroenica, for example, up by
9/10en of 1%. So, that's in the mix. We
also see the grocery uh story and I know
Chloe was talking about Tesco and we see
that stock up by 2.7%. So there's some
positivity around the grocery businesses
boosted the price target for Tesco
boosted at JP Morgan. So that's
something we are watching with regards
to that sector. The banking sector not
doing too badly. Um technology pretty
muted and you were right guy to suggest
that this was you know largely in the
price from Friday because some of those
big tech names in Europe were down by
more than 2%. So, it's interesting in
itself that we're not seeing a bounce
back from any of that selling. We're
sort of living with those levels, but
we're pretty flat now on technology,
feeling that we may have priced in the
negativity around Nvidia that we saw on
Friday during Friday's session over in
the United States. Now, basic resources,
another one that we discussed earlier on
in the program. Guy, we see Rio Tinto
down around a percent, Anglo-American
also weaker. Not everything is down and
some of the copper mining businesses are
doing well, but that iron or price
weighing on some in the sector. So Rio
in theory, you think about Rio, you
think about a copper producer, but it is
down. Uh, in fact, it's the biggest
points drag when it comes to the mining
sector of this morning. It's down 1%. So
the the story when it comes to what is
going on with the iron or clearly a drag
there. It's interesting. Some of the
luxury names are also fairly soft this
morning. It's I wonder whether that's a
read across again into what we're seeing
in terms of the Chinese PMI data. So
LVMH is down by 3/10en of 1%. Rewire is
down by 210 of 1%. Now, those aren't big
percentage moves, but in terms of the
points drag, they're fairly high into
the stock 600 this morning. So, that's
where you're certainly seeing some
losses coming through. Um, so it's
interesting. Tech is actually in terms
of points still quite a drag. ASML is
still the biggest points drag this
morning. Okay. Uh, down by circle 1%.
>> And you mentioned precious metals
earlier. We see some positivity coming
through there. We're up by actually 2%
on the silver price overnight. And that
is having an impact on some of the
miners. So, we got these two different
stories or at least three different
stories. Fresno, which operates silver
and gold mines. That's one business
that's going higher. That's up by 2.7%
today.
>> I wonder if that's I don't know. I maybe
I'm stretching here. I wonder with
whether that's having an effect in on
LVMH this morning and reach more in
terms of maybe the hard jewelry side of
the business, um hard luxury side of the
business, whether there's an effect
there as these prices go higher, whether
or not that's something they can pass
through to to their customers. I don't
know. I maybe maybe I'm I I'm stretching
a little bit, but defense names
certainly are well bid. BA systems rolls
Ry Metal all trading strongly this
>> yeah and most sectors in positive
territory even if we haven't got much
volume probably because it is a US
public holiday let us bring into the
conversation ando portfolio manager at
Julius Bear very nice to have you with
us thank you for coming in let's start
with the big picture then around these
markets at this point we're moving into
September which is usually historically
pretty tough month for stocks are you
expecting it to be a tough month for
stocks we might get a rate cut in the
mix
>> yeah Good morning Anna. Good morning guy
and good morning everyone. Um September
tends to be you know a volatile month
for the market seasonally speaking. Um
that said you take a step back the
backdrop for stocks have been very good.
So in terms of the micro economy we've
avoided the worst case scenarios in
terms of the the fallout from the
tariffs. Um we in terms of the policy
environment we are seeing more rate cuts
coming out the of the US that Federal
Reserve pivot. So that backdrop for the
stock market is very positive. We just
came on the back of the earning season.
That's also been quite positive for the
largest weight in the stock market in
the US as well.
>> Do you expect volatility then uh in
these markets? Because actually VIX has
not been above I think it's above you
know rarely spotted above 20 over the
past 3 months. We've we seem to not be
assuming that we're going to see much
volatility in these markets. Is that a
safe assumption going into September do
you think? Yeah, there is a sense of um
complacency I guess um in terms of that
volatility um figure that you just
mentioned. Um in terms of positioning,
we're still quite riskone. So we are
overweight equities. We added in June
and July on the back of that changing
backdrop that we're seeing just the
economy improving um the soft data
improving as well as the earning season
signaling still quite strong momentum so
far.
>> Payrolls are coming up on Friday. M
>> you get a big how important is a rate
cut at this point for equity markets to
keep moving to the upside because I'm
struggling to see where the kind of the
next catalyst obviously comes from and
maybe rate cuts are it if you get a big
payroll number say you get 150k coming
through on the payroll number
>> what will it where's the number that
takes
September to zero in terms of
expectations kind of where's the number
if you get north of 100 do we do I take
it down from being 25 to maybe 15 basis
points being priced what kind How strong
does that number need to be to disabuse
us of the idea that the Fed should be
cutting interest rates? And if so, how
big a reaction do you get in equities if
that were to be taken away? I all of
this is hypothetical, but it's it's a
Monday morning and I kind of feels like
a long way away.
>> You know, the idea of the rate cut, it's
pretty well entrenched at this point. I
think it will take a lot for the market
to give up on hopes of rate cuts. Um,
this year we expect three more rate
cuts. I think that's pretty close to
consensus. So if we do get that pricing
out of the dovish Fed, I think the
market would not take it very well. But
at the same time, I think it would take
a lot. And if you think of the Federal
Reserve in the committee, they are very
sensitive to any changes in the labor
market. It's not just the unemployment
rate, it's the hiring intentions.
They're looking at the broad set of
indices.
>> Do you like US markets at these kinds of
multiples? Actually, I was pretty
shocked the first thing this morning. I
labor day in the States, but the
journal, the first thing I read online
this morning, US markets hit.com era
multiples. I is are these kinds of
headlines okay? Can we live with these
kinds of headlines? Are we are we okay
with these kinds of multiples? I know
it's very concentrated and I know
earnings are holding up at the moment
but but are we okay with these
multiples? There's definitely a sense of
you know this wall of worry the
valuation debate coming back for the
market in the US especially I guess if
you look at the top heavy the top
heaviness of the index and where the
multiples are for those big stocks and
the rest of the ind indices um you have
extreme valuations more so in the rest
of the indices so in the S&P 493 if you
like um so you have to be more careful
in terms of your selection here because
in in the top seven stock In the largest
stocks, the growth is still there. The
quality, the story, the long-term
secular story is still there. So, you
want to pick and choose and where you
want to take more of a validation risk
and for longerterm growth.
>> We ask how important rate cuts are to
stocks. We could also ask how important
are rate cuts to precious metals and the
gains they've been making of late
because we were used to talking about
them in a geopolitical context and
depending on the metal and industrial
context. Uh but but now there seems to
be a lot of people tying this to the Fed
and talking about you know the go gold
gold gold and silver going higher as a
result of our expectations of rate cuts.
You're overweight gold. I think is that
a trade you're happy to stick with?
>> We're still we're still overweight gold.
Uh gold has defied expectations because
it's only recently that we are hearing
more about these rate cuts. Rates have
been quite high year to date but but yet
gold has still worked on the back of the
backdrop of uncertainty, the backdrop of
tariffs. So I think there are multiple
elements that could still play in favor
for gold. You know that that story
around dolization, that story of
diversification away from US assets and
US denominated assets into real assets
like gold and precious metals. I think
that story still has legs and therefore
we still overweight the precious metal.
>> So that's the precious metals narrative.
I mean everything we've talked about
seems quite calm. Is that is that right?
Should we be going into the rest of the
year thinking about a calm market
backdrop? I think you know news news can
come at us fast. We we know this
>> your volatility has been low but if you
look at the market narrative you've had
periods of scare here and there the
label report was a source of fear for
the market and video earnings last week
was a source of fear for the market so
you have periods of of scare although
it's a wall of worry and I think the
strong backdrop around the economy the
strong back of the policy pivot I think
could be interesting for markets still
>> do I look elsewhere Chinese markets are
absolutely on a tear at the moment the
the the AI story is beginning to gain
traction like barbas I just had an
amazing session.
>> Do I look elsewhere
>> outside of the US?
>> Yeah. How how like do I where am I look
where are you looking right now? Where
am I going to get my alpha? Is is the
outperformance going to come in the
states or is it going to come from
different markets?
>> I think we've been diversifying
portfolios away from that US stronghold
of secular themes that we like. We've
added to China early this year on the
back of that pivot in fiscal policy.
more of a stimulative stance from the
government, more friendliness to the
private sector. So that's earlier this
year. More recently, we've also added to
India. Y
>> that secular story of growing
demographic, a very strong domestic
economy, less reliance on external
factors, which means they're more
insulated from tariffs relatively
speaking. So outside of the US there are
opportunities.
>> Are you adding sorry just are you adding
more to those positions? Do you do you
still like those trends? I guess China.
>> Do you want to play in this recent bout
of enthusiasm particularly from domestic
investors in China
>> at the point of um adding to China it
was still at quite low valuations. So we
think it's a trading market. We think of
the Chinese market now similar to Japan
in the late 808 1980s trading in a
range. So every bounce and rallies we
need to understand the momentum and the
underlying drivers.
>> Thanks very much Ando portfolio manager
at Julius Bear. Thank you for joining us
as we work our way guy towards payrolls.
That's going to be the big event of the
week of course. But in the meantime, uh
it's a quiet day in terms of the the
volumes no doubt because we don't have
the United States. How how
>> there's things there's things to talk
about. I'm not going to completely
dismiss today. I I appreciate that there
are markets that are closed elsewhere
around the world, but there is there's
some interesting things happening. Corix
looks like this. Rhyal is one of the
names that stands out. ASML, there is
still some weakness there. And that is
just from a points point of view adding
a little bit to the downside around
Europe this morning. Uh but as Anna says
it is a fairly quiet session. Farmers
looking good, defense is looking good,
tech is looking less good. Let's stick
into the details of all of that with
Khloe Malle.
>> Good morning guys. So yeah, as you said
quite positive movements in defense
today. That's on the back of German
Chancellor Friedick M saying that he
sees at the moment no end to and no end
inside to the war in Ukraine. but then
also Vonlayan laying out precise plans
according to the EFT uh for potential
military deployments in Ukraine. All of
that is feeding into quite positive
story for that space this morning. BAE
is also up the most out of all those
four and that is also because it's
benefiting from that uh from Norway
picking the UK as a supplier of of
warships and that is a 10 billion pound
deal. So it's also benefiting from that
as well. Uh moving on to the mining
sector and there um it is down a little
bit. We are seeing a little bit of
weakness for Riotinto and
Anglo-American. Fresno is doing a bit
better. Um this is on the back of iron
ore falling. The inventories of steel
are accumulating in China. Some of the
economic data out of China is not doing
too well and that is dragging down the
shares of those of those miners this
morning. Moving on to Tesco. Tesco is
up. it is up uh almost 2% and that is on
the back of JP Morgan um raising its
price target for Tesco on the back of a
good growth outlook. So that is uh that
is quite a positive morning for the
retailer this morning. And finally let's
end on Team Viewer. Team Viewer is a
software company out in Germany and it
got raised to a buy rating by Bank of
America and that is really uh really
driving the shares this morning were up
almost 8% for team viewer.
>> Chloe, thank you. Chloe Melly from our
equities team with a look at some of
those stocks on the move. Uh we are
going to talk about some of these
sectors in focus next. Certainly the
farmer sector in focus for us today. Uh
we're also going to be thinking about
the wind generation sector with the
rights issue at allstead. Uh all of that
in conversation next. This is main
Welcome back to the opening trade. 16
minutes into Monday's session, the 1st
of September, the first trading day of a
new month. And we have European equity
markets actually on the front foot. So
trying to brush off some of that
negativity around the technology sector
on Friday. Uh there is still some of
that in there, but finding other reasons
to go higher this morning. And so across
the board, we seem to be up by around
3/10en of 1% certainly on the major
markets this morning. Let's focus in on
the wind generation, electricity
generation sector. Norwegian energy
company Ecuinor says it intends to
subscribe for new shares in the wind
developer or the first major investor
after the Danish government to back the
sale. Joining us now is Bloomberg's
Savvas with details of this and I
suppose Ecuador's participation here is
important because it is I think the
second largest shareholder in Austri.
Yes, this is very good news for us that
today. Um, as you say, Ecuino is the
second largest shareholder after the
Danish state which has already been out
saying that it wanted to support the the
the rights issues. But but of course
there's been a lot of um uncertainty as
to to what extent um other shareholders
would would want to participate um given
all the headwinds that that URA is
facing. So a big vote of confidence. Um
Ecuin holds 10% um of EST and they will
continue after after as well. Um very
good news for ASEAD.
S the the the team the investor
relations team the management team has
been speaking to investors in London the
other day trying to reassure everybody
that actually the situation has
stabilized. Do we do we have any read on
how effective that effort has been? What
are investors asking and do do we know
whether or not they've been satisfied
with the answers they're getting?
>> Um I I think um I mean I guess um
Equinox's move today um indicates that
have had some success in in convincing
uh investors that that um this this is a
rights insurance that they should be
supporting. Of course, we still don't
know how the rest of the shareholders
feel about this, but but they may gain a
bit more confidence also from now seeing
Ecuad Equinors move today. Now on Friday
um uh US would hold an extraordinary
general meeting um and and and there
they will shareholders will vote as to
whether USA can go ahead with the rights
issuance and then we'll know more
details and and and we'll find out
really how how shareholders the rest of
the shareholders feel about this
>> and and I mean thinking about the bigger
picture headwinds if that's the right
phrase to use when it comes to this
sector Sana I mean President Trump does
not like wind farm We know this and
that's really the big problem for the
sector and the big problem for Aust. But
there's still been quite a lot of
volatility based on whether the latest
reading is slightly more or less
negative than had previously been
expected. So, so what is the base case
sort of situation over in the US?
Um, I think certainly there's still a
lot of uncertainties for us and a lot of
headwinds in the US, in the UK and and
whether or not they will manage those
headwinds is is still probably too early
to say, but I'd say from the news this
morning, uh, Equinox certainly big
Norwegian energy company, they have um
shown or they have communicated that
they believe in in the green transation.
they believe in instead and and that
will will be able to come out on on top
and and so that's certainly a a a big um
yeah a big move today
son thanks very much indeed for the
reporting son of we'll look forward to
that uh meeting coming up towards the
back end of the week get a better read
on what is happening with the investor
relations story s ofas on what is
happening with allstead and I I I'm
still stunned that announced the rights
issue and then left this enormous period
of time
>> between announcing it and executing upon
it and they've just left themselves wide
open for the kind of volatility that
Trump can create and the problems that
he can generate and and you've seen that
large. Why? Why that decision seems so
mistimed now? Announce it, get it done,
get it done quickly seems to have been
the message here,
>> right? And in the meantime, as you point
out, President Trump has been active,
has been cancelling wind farms or his
team has been canceling wind farms uh in
various locations as we talked about
over the last couple of couple of
months. It is still interesting though
how you know very negative expectations
around this sector at the time of the
election and inauguration. And everybody
knew how President Trump was very anti
the sector and yet we still managed to
create quite a lot of volatility in the
share prices within within it uh based
on some of the latest reporting you know
whether whether whether some of these
fields get a stay of execution turns out
to be a positive
>> but and you've just left yourselves so
vulnerable to that with the kind of
timing. So just a kind of does seem as
if it's been a very strange decision.
Let's talk about one area that we are
certainly more positive on this morning.
The Astroenica shares rising after the
drug maker said its experimental
hypertension drug, its next generation
one is reducing blood pressure in
patients by more than twice as much as
standard treatments. This is a large
latestage study that has been conducted
here. Uh Bloomberg healthc care reporter
Sonia Vint joining us now. Can you just
tell us a little bit more about this?
The this seems like a very big step
forward in the treatment of
hypertension, a high blood pressure.
when do we when can we be potentially
seeing this drug coming through and what
could it mean in terms of the scale of
sales that we're talking about?
>> Yes. So, um Astroynica really just
cleared a pivotal trial for this drug.
Um it aims to file by the end of the
year. So, that means that the drug could
launch in the market um in 2026 if all
goes well. Um and what the drug does is
that it blocks certain hormones um that
allows it to lower the blood pressure in
patients. And um what's really
significant here is that it also works
in patients who are usually resistant to
drugs. So one in 10 patients are
drugresistant um for hypertensions. So
this drug works there which is a huge
win for Astroenica and it also helps it
to expand beyond its oncology pipeline
and push into the market for
cardiovascular drugs and bulk up its um
portfolio there.
Yeah, blood pressure medication, you
know, clearly a really big market of
course, Sonia, but also a very
competitive market, a crowded field
perhaps, you know, Rosh in this space.
Um, other US farmer companies also
developing blood pressure shots. Is
there room for all of them?
>> Well, um, so you mentioned the one from
Rush. Um, and that one would be a twice
a year shot. So that would be a huge
advantage because the main important
thing for drugs is that patients
actually take them in order for them to
work. and many patients struggle with
taking pills on a daily basis. So, um
the shot from rush could be a really
interesting medicine. Um but the trial
is really huge. So, it's more than
10,000 people and it will go until 2030.
So, it's really early days for um that
medicine there and we need to wait for
that data to come out. So, Astroenica
could move way earlier. It could launch
the market um 2026 as I mentioned
before. So that would be an advantage.
Um and when we look at the similar
medicine from mineralis um which works
similarly to the one from Astroenica
there they have a similar risk benefit
profile. So that's also that's um
something that analysts mention and so
they think that investors really want to
wait until next year when the drug is
launched on the market to see if the
expectations really live up to the
performance on on the market.
How does this fit into the wider
cardiovascular story that Astra is
generating at the moment? Is this
something that is going to work in
conjunction with other therapies? This
is an area that the company clearly has
been focusing on.
>> Yes, exactly. Yeah. So, Astroenica, it
has a a really good um kind of like um
footprint in the oncology um space. So
this drug is part like a key part of its
efforts to bulk up its um portfolio of
um drugs in the cardiovascular space and
um hypertension is a really common issue
and it's a risk factor like the leading
risk factor for death from heart
disease. So there's really a big market
potential here and to treat also a wide
group of patients.
>> Sonia, thank you very much. Thanks for
joining us Sonia Vind with the latest on
the farmer sector and actually the
farmer sector doing really well today
guy. It's the best performing sector in
the on the stock 600 but at the other
end of the spectrum we've got weakness
coming through in the mining stocks. Uh
but but it's a host of different reasons
really driving uh that mining story. So
on the one hand you've got iron ore
prices which are weaker. Uh so iron ore
is down by 2% mix signals coming out of
China perhaps. We had the official PMI
and the private sector PMI telling us
different things about where we are
versus expectations there in China. So
that's part of the narrative. But then
on the more positive side of things,
we've got the likes of Fresno trading
really strongly. Uh that's more precious
metals related. And we've got gold
prices, silver prices, in particular,
silver prices in fact, going higher
because the more we expect the Fed to
cut rates, the lower is the opportunity
cost of holding other things such as
precious metals.
>> Yeah, we'll wait for the data Friday to
see whether or not the Fed does cut
rates. Obviously, the expectation is
that it will be in September. Um I I
want to go back to the top end of the
Footsie 100. Actually, Astra is doing
very well, but BA Systems is also doing
very well. Uh, the reason for it is is
well, there's a multiple number of
reasons. One of which is the fact that
we've got this big Norwegian defense
order coming through for ships. They're
going to be buying frigots out of the
UK. You've also had Ursula Leon talking
about fairly concrete plans about troop
deployments in Ukraine. That seems to be
helping the situation out as well. So,
names like Rolls-Royce are doing very
well today. BA systems is doing well
elsewhere on the continent. Uh, you've
got names like Ryal also trading
strongly as The defense story front and
center this morning along with some of
these farmer names that are doing well
as well.
>> Coming up on the program, we'll talk
global geopolitics. We'll be joined by
Brahman Maddox, chief executive of
Chattam House, China's she and India's
Modi rebuild ties. We've seen Modi also
meeting with President Putin of Russia.
Uh we'll put all of that in focus. Is
this is it simple a story as this new
alliance builds in the face of threats
from President Trump's administration or
is there more complexity behind the
scenes? We'll talk about that next. This
is Bloomberg.
This is the opening trade. It's
September, everybody. 30 minutes into uh
today's session. 30 minutes into trading
in September. And so far so good. I've
read a lot of stories about how negative
September can be for stocks.
Historically it has been so uh but today
so far only half an hour in it's not
negative at all. We're up by half a
percent on the DAX on the cat carons. Uh
the stocks Europe 600 up by 4/10en of
1%. We are without the United States of
course they are on their Labor Day
holiday so volumes no doubt are a little
lighter than usual and we've got some
big data points sky coming up at the end
of the week. No doubt uh payrolls will
be uh front and center and if we take
the first half of September we also
include in that time frame a rate
decision by the Federal Reserve which
will no doubt be pivotable. So there's a
pivotal. So there's a lot at stake
during September.
>> Weirdly, actually volume isn't as bad as
I thought it would be. In as much as
volume's been pretty terrible over the
last few weeks, that continues today.
We're down by, let's call it a third in
terms of where we should be versus the
100 day average. But actually, I've seen
worse numbers than this over the last
few days. So maybe the 1 of September,
the Labor Day holiday not having that
big an effect. In terms of the
internals, the market's definitely
higher. 444 up other than 33 down. So
that's definitely front foot territory
when it comes to equity markets. In
terms of the 52- week highs, if you want
to play the gold and silver story, well,
there's a number of ways you can do it.
One of which is you can buy lumps of the
stuff. Obviously, a lot of people have
been doing that, but you can also buy
some of the assets that surround it, and
one of the miners that digs the stuff
out of the ground is Fresno, and it has
been on quite the tear of late. As you
can see, this is a stock on a one-year
basis that is up by 235%. Uh, today it
has hit a fresh 52- week high. Uh, and
there's talk of fresh highs in silver.
Silver's through 40. We've also got gold
potentially getting kind of pulled along
with that trade and potentially hitting
fresh record highs as well. And one of
the ways of playing it thus far has been
with for NEO. And as I say, Anna, that
stock at a 52-W week high today.
>> Yeah, certainly a multi-dimensional
trade around basic resources this
morning, isn't it? Let's take stock of
some of the other news headlines that
you need to know about this morning. US
trade partners have been left perhaps
confused after President Trump's global
tariffs were found to be illegal by a US
appeals court on Friday. The 7 to4
decision by a panel of judges in
Washington was a major setback for
President Trump, but the ruling leaves
the levies intact for now while the case
proceeds. The French Prime Minister,
France Beeru, is striking a combative
tone in his effort to gain support for
next Monday's confidence vote. He told
French TV that quote, "Compromise is a
beautiful thing, but I'm not sure it's
possible." The remarks follow comments
by several opposition leaders over the
weekend that appeared to sweep aside any
chance of their support. Chinese
President Xi Jinping says the Shanghai
Cooperation Organization is taking uh
taking on greater responsibility in
driving shared developments as global
uncertainty continues to rise. She made
the remarks as he welcomed international
leaders including India's Narendra Modi
and Russia's Vladimir Putin to the
summit in Tian Jin. And it is this
summit guy that is on our minds as we
take stock of the geo uh political
shifting tectonic plates this morning.
>> Absolutely. Let's continue with our
coverage of the summit that is taking
place in Tanzin. President Xi talking
about seeking quote commonality as he
looks to build bridges with neighbors
across countries in Asia.
seek commonality while shelving
>> Milo in Tanzin for us to cover this
event. We've obviously seen some fairly
significant meetings taking place over
the last few hours as the day has
progressed in China. What else is on the
schedule? What else are we looking for
to come out of this event?
>> Yeah, first of all, we had President C
speaking this morning talking about
opposing this cold war mentality. He
didn't name drop the US, but it was
clearly a veiled swipe at the US. But
what we're watching most closely today
is the Modi Putin meeting. It just
ended. We don't have the readout yet,
but we have the opening statements from
Modi. He said that Russia and India had
a very special privileged relationship
that has withtood the test of difficult
times and so far it seems India remains
very defiant in the face of those
additional 25% tariffs that US has
imposed on India in punishment for its
purchases of Russian oil. Uh India's
largest stateowned oil company saying
today that it will continue to buy every
drop of Russian oil available as long as
it remains economical. uh India's oil
minister as well hitting back against
Peter Navaro's uh criticism that India
is this laundromat for the Kremlin
saying that it's buying off of Russian
oil so far has been uh within
international rules it's in line with or
it's at least below that price cap that
has been imposed by the G7 to limit uh
Russian oil revenue and so it looks like
we have to thank President Trump for
providing this dipl diplomatic opening
for India to continue to tilt towards
other partners in the region C and
Putin. And one of the more iconic images
that have come out of this summit so far
is that image of Putin, C and Modi
laughing together. Modi Modi and Putin
as well embracing each other. They took
the same car to the venue of the
bilateral meeting. Really giving them a
bit of private time to speak together
with each other without a lot of aids
around.
>> Yes. I mean, President Trump's presence
at the meeting even though he is not
physically there clearly clearly an
interesting one to think about. Min now
over the weekend we also saw that
meeting a bilateral meeting between
President Xi and the Indian Prime
Minister Narendra Modi. Um these two uh
nations have been far apart for some
years diplomatically but again we're
seeing a coming together perhaps.
>> Yes, President Modi announcing that the
two sides will be resuming direct
flights with each other at some point.
But again bear in mind this is something
the two sides had pledged since the
start of this year since January. But
progress has been slow. But there are
signs of this normalization of relations
and the tone suddenly has improved very
markedly from 2020 when the two sides
were engaging in deadly border clashes
uh along the Himalayan border and the
tone the rhetoric from the Chinese
foreign ministry. Uh one of the most
common metaphors they're using now is to
describe the relation as this uh dragon
and the elephant tangoing together. So a
very positive tone here. China certainly
has been the one to court India amid
this backdrop of their mutual uh mission
to counter the tariff impact. But Modi
is walking a very fine balancing act
because he is one of the few leaders
present at the SEO meeting that will be
notably absent from the military parade
happening a couple of days from now. So
he will not be standing on the days
above the portrait of Maong alongside
President Putin uh Kim Jong-un and
President C. Think about that optics.
It's not going to look good for Modi
given India prides itself as one of the
world's largest democracy for him to be
standing alongside some of these
autocratic leaders. So he's uh hedging
his risk against that souring relations
with the US but not exactly diving into
the embrace of China as well.
>> Mman thank you very much Mim Lo joining
us there from Tian. Let's stick with
this theme of global geopolitics and
bring in Braman Maddox, director and
chief executive at Chattam House.
Bromeman, nice to have you and your
perspective on the program today. So,
we're watching closely the developments
of this Shanghai Cooperation Summit and
clearly all of the attention on big
superpowers coming closer together as
they all face uh a shifting policy
environment to put it politely from the
United States and challenges and threats
perhaps from the United States. Is that
too simplistic an interpretation or are
we really seeing yes these powers being
pushed together by a rivalry with the
US?
>> It's not too simplistic. It may be too
polite. Um, I think it is one of the
most self-destructive things that the US
has done under the Trump administration
of putting these tariffs on India while
having as a policy combating China's
rise in military rise in its own region
because what it has done very abruptly
and we've just heard a description of
how the relationship between China and
India has suddenly warmed up. That is in
response I think to the chill that India
is feeling from Washington. And so India
which has always tried to stay
non-aligned that has been its policy is
looking for other friends and alliances
and has made a point of going to China
of having these um top level
conversations and a few wrinkles in
that. India's Modi has said he's not
going to go on the victory day parade.
So there's some things still keeping his
distance and there are a lot of things
that India and China still do not agree
about. But what the Trump administration
with its tariffs has done is create a
lot more warmth between India and China
that were rivals until very recently.
>> Yeah. I mean what are the limits to how
warm that relationship can become though
Brahman because as you point out they
don't see eye to eye on everything.
>> They really don't uh including on the
borders uh where they've managed to talk
uh themselves down from the friction
that was there a few years ago of border
clashes but uh it still is a kind of
running sword. You also have the
commercial um uh unease uh India really
trying very actively until all these
tariffs came in to persuade companies to
move out of China because of the risk
there and move into India. Apple was one
of the the big ones, but obviously its
card isn't as strong as it was if
suddenly it's going to be hit with
tariffs as well. But it has been a rival
of China in that respect. And then um
India is um alert to and not comfortable
with China's increasing military power
in in the region um and in the seas
around there. So there are lots of
points of potential tension. I don't
think they're be going to become warm
friends, but they may become quite
calculating allies.
>> Okay. Calculating allies. How does that
actually translate into policy and
action, Bronwin? Because this feels a
lot to me like optics. There's some nice
pictures being taken. Uh clearly some
handshakes are being made. It all looks
great. But in reality, as you say, it's
much more difficult to translate this
into something concrete. So what
actually does anything come out of what
we are watching in Tanzhin at the
moment?
>> Well, I think it does and the the
practical thing um the first practical
thing is India continuing to buy Russian
oil in great quantities and so siding
itself pretty firmly. Um not just with
China but with Russia over that. Um and
then we'll have to see what happens on
on um um on weapons and other other
trade deals. You're absolutely right
about the optics, but optics are not
nothing. China has been reaching whether
through the bricks or now the Shanghai
cooperation organization to find
congenial clubs of countries which um
even if it doesn't say its manifesto is
anti-NATO or antithe.
So I think we have to see but you know
it's not nothing.
>> What's the object? Okay, so they're
reaching for this greater group. They
want to have warmer relationships with
some of these countries. What is the
objective of that? What does China want
out of this in terms of furthering its
cause?
>> That is a very very good question and um
I think it is hard to define beyond
saying more influence more ability to
tilt the world its way. uh it has railed
for a long time against the the rule the
rules-based international order very
much crafted by the US particularly
after the second world war and it has
been um delighted in a way to see the US
stepping back from that and has been
making rhetorical um hey with with with
that uh saying well look uh we'll have a
different rules-based order but it
hasn't yet been as emphatic as it might
in actually trying to shape that its way
seems to be doing through alliances
rather than um try to hammer out new
rules. So I think we have to we have to
see what comes. Um but
it it is um it has found good use of
those alliances in the past to extend
its own trade, its own military
influence.
>> Okay. So we'll watch how China uh tries
to increase and extend that influence.
In the meantime, how should Europe
respond? I'm thinking here about the
European Union and what it's witnessing
and how it thinks about its own
interests, but also the UK and the the
wider European family.
Um I think Europe needs to keep up its
ties with India. This is a complex world
we're in. And the fact that um one
country has moved away from the US
doesn't mean it has to move um away from
Europe at this point. Europe needs those
trading ties, particularly the the the
UK, which has just done a trade deal
with India. So I think that will
continue. You do have the thorny
question of Russian oil in there, but of
course Europe um still takes some
Russian gas. Um but you know that does
have an impact on the Ukraine war. But I
think you know Europe can also send a
message to Washington of be careful with
this relationship because um it is
really um can destabilize a lot of
things if India more decisively moves in
the Chinese direction.
>> Brahman always great to catch up and get
your insight. Thank you very much indeed
for bringing it to us. Brahma Maddox,
director and chief executive of Chattam
House. Thank you very much indeed.
Coming up we're going to stay with the
political theme. The French prime
minister admits he may fail to reach a
compromise ahead of a confidence vote
later this week. The latest on efforts
to save his government from being
ousted. That's next. This is Bloomberg.
Welcome back to the opening trade. 8:47
in London and it is the 1st of September
and we have green on the screen. So far
so good for what is typically a volatile
and negative month for stocks. So we've
got European stocks on the front foot up
by around 4/10en of 1%. Will it last?
We've seen pressure on French stocks as
a result of political turmoil in recent
days. So let's go to that story next.
The French Prime Minister, France Beeru,
has told reporters he had he he wasn't
sure that a compromise would be possible
in talks with opposition parties this
week. Those remarks coming a week before
legislators hold a confidence vote in
the government that he is currently
running, of course, for more. Let's
bring in Bloomberg's Paris Bureau Chief
Alan Katz. And still the prime minister,
Alan, good morning to you. Still the
prime minister says he can see a way
through this. He can see a way that he
can get support. Most other commentators
and investors tell us they can't see a
way that the prime minister can survive.
What are you hearing in Paris?
>> Well, I think BU is certainly being more
optimistic than just about anybody else
uh who is looking at this. Now, that
said, it's politics, so you you know,
never say never. Uh things have been
known to change and as he points out, a
week is a long time uh in politics. So,
I suppose the answer is you never know.
But it really does look quite likely
that he will uh be forced to resign. uh
a week from today uh when he holds this
confidence vote. The other parties,
particularly the both the socialist
party and the the farright national
rally party over the weekend said they
absolutely would not support him, that
they'd vote against his confidence
motion. And without either one of those
parties uh changing around and at least
be willing to abstain, it seems that he
would have very little chance of uh of
surviving that motion.
>> So, who's next? What's next?
>> Well, that's that's the million-dollar
question. I mean, you know, sort of
formally that's easy to answer, but in
terms of actually figuring out who the
people are or how it would be
structured, that's much harder. So, the
way it works is that uh if he loses the
confidence motion, uh then by who will
be forced to offer his resignation to uh
President Emanuel Mong um Mong can then
either name a new prime minister and
that person could even include though
that seems unlikely, but he can name any
person he wants as prime minister. Um
but again that person sort of in the
longer term over the course of the next
several months would need to be able to
sort of cal you know cobble together
enough support to be able to pass the
one really must pass bill in France
which is the budget. Uh and that's
really not obvious who that person would
be. The other alternative or there's
actually a couple of other alternatives
that that Mong has. He could dissolve
parliament like he did in in June 2024
and call new elections. Now that went
pretty badly for his party and its
allies a year ago. So, would he really
want to do that again? That it appears
unlikely, but you never know. Uh, the
last possibility is that Mong could of
course resign himself and force
presidential elections. Now, he
absolutely categorically refused uh
ruled that out just on Friday. So, that
appears to be off the table. Uh, so it
would really be the first two options
and the most likely appears to be naming
a new prime minister. But again, finding
that person is really quite difficult.
>> Yeah. Will they have any better chance
than than the current prime minister of
course is the question. And so in
amongst all of that it seems that France
is now or the prime minister Franu is
upset with Italy about poaching of high
netw worth individuals and other uh
policies that he deems to be fiscal
dumping. Take us behind this one then
Alan.
>> So that was a funny a funny little
moment actually in this interview last
night. Uh there were actually there were
four reporters, TV reporters
interviewing by who at the same time and
there were actually the question was
about uh the way that the wealthy were
fleeing the UK in the in the uh in the
wake of the UK raising t getting rid of
the nondom status and and raising taxes
on them. Uh and then Bahu said, "Oh,
actually the UK is not really the issue.
It's really Italy or it's other
countries that are engaged in in fiscal
optimization or or fiscal dumpings," he
said. And they used Italy as an example
of that, but it really was in many ways
it was a throw
Allen. I think we've lost Allan, which
is very unfortunate. He was in full
flow. Um and it's quite an interesting
little aside to an interview that we've
just had um with the leadership in
France and just trying to get an idea of
exactly kind of who people are pointing
fingers at. Anyway, Alan Catz, our Paris
bureau chief, he will return at some
point. He's going to be a busy man uh
over the next few days and weeks. Uh
let's stay with Europe and kind of stick
with what we've been talking about.
Suzanne Lynch is our Brussels bureau
chief and joins us now um to talk about
the broader European picture and why
Europe is struggling at this point
particularly when it comes to responding
of course to President Trump. Um and
we've been debating this a great deal
Suzanne recently and trying to
understand kind of where we go next and
the question we keep asking is is Europe
playing this correctly? Are we do we
have enlightened sort of policy here?
I.e. play up to Trump's weaknesses,
effectively his desire to be flattered
in order to get deals done or are we
just basically bending at the knee of
the new kind of the new king of
Washington?
>> Yeah, it's an interesting one. Um I
think uh there is definitely a sense
here that the Mark Rut approach people
may remember um his coing up to Donald
Trump at the NATO summit at the end of
June and his daddy comments. Well, in
some ways this did work. Uh the NATO
summit went very well with with Trump.
European allies committed to the 5% of
GDP spending on defense and Donald Trump
committed to keeping the United States
committed to NATO. So that was a a good
result. We saw it too over the last
couple of weeks when the Europeans got
that last minute meeting in the White
House with President Zilinsky and Trump.
Now, we're still waiting to hear what
comes from that ultimately, but it was
um a a good coup for the Europeans in in
the sense that two days earlier, Donald
Trump had been meeting with Vladimir
Putin on his own in Alaska and the
Europeans were nowhere at the table. So,
that kind of flattery um did work in
that the Europeans got back at the
table. Um, but you're right in the sense
that I think, you know, it's very much
back to school here today, September the
1st, h here in Brussels, and all the
European officials are back at their
desk, and it's been something of a
bruising few months for Europe. Um, they
have had to accept this trade deal with
a ceiling of tariffs of 15% from the US.
A lot of countries saying that's not
good enough. And on Ukraine, they've had
to push themselves into the
conversation. They have not naturally
been at the table. So I do think um that
there is a bit of soularching now as
this new term begins here.
>> Suzanne. Yes. And with that in mind as
as uh policy initiatives from the US
administration come fast at Europe, they
might want to respond quickly and as
foreign policy uh priorities keep
shifting and and the world uh the world
moves quickly, they might want to act
more quickly when it comes to foreign
policy. And I know that our reporting is
suggesting that that's going to be
something that Europe can do. What have
we learned?
>> Yeah, we had some reports over the
weekend. European foreign ministers were
meeting in Copenhagen for a kind of
informal meeting. But uh the issue is
that the way the EU works because it's a
collection of 27 countries. It's
sometimes hard to move forward with
decisions and some very significant
decisions when it comes to foreign
policy. For example, tax is another
example. You need the unanimous
agreement of all 27 countries and that
can stop a decision being made. So there
was a proposal that we reported on from
the Danish presidency. They're the in
the rotating chair of the EU council at
the moment and they're talking about
making changes to the system that that
in some cases this requirement for
unonymity is abolished. So I think what
everyone think is thinking here is
Hungary. The Hungarian government have
been blocking different measures
particularly on Ukraine for a year or
two now. For example, they've talked
about blocking Ukraine's uh bid to join
the EU ultimately. So, this is becoming
a problem when it comes to everything
from sanctions policy to a kind of
joined up thinking of defense. So, I
think the European uh policy makers and
officials are trying to to look at ways
around this issue.
>> Suzanne, just very briefly, I we're all
excited about this new newsletter that's
going to be coming from Brussels.
Talk to me about what we're getting.
>> Yeah, this is our Brussels. Yeah, our
Brussels edition newsletter. So, people
may be familiar with it, but we're
relaunching it today. Um, so each
weekday afternoon for European readers,
h this will be in your inbox and it's
just really bringing you the latest news
from Europe as we've just been speaking
about there. H Brussels is increasingly
significant when it comes to
geopolitics, economics, finance. So uh
this newsletter anchored by myself will
be giving you a snapshot every day of
what's happening in Brussels as well as
pointing readers uh to some of our uh
the latest news from across Europe and
in Brussels as well as interviews across
h our platforms but very much trying to
present and give that snapshot into
what's happening here in Brussels each
day.
Suzanne, thank you very much. Suzanne
Lynch, our Brussels bureau chief,
helping us take stock of where Brussels
is on foreign policy, on its
relationship with the United States and
beyond. Um, and and we'll look for that
newsletter. And guy, we're just getting
some confirmation really of the PMI
picture for manufacturing around Europe.
Uh, the German number stands out as a
little bit weaker than have been
anticipated. The French PMI number
actually coming in in expansion
territory, better than have been
anticipated. The euro up 310 of a
percent on a weak dollar.
>> Yes, it was up pretty much already.
Anyway, that wraps things up with some
interesting data. The pulse is coming up
next. Plenty of great coverage coming up
and we'll continue the coverage
throughout the day despite the Americans
being out for the session. This is
Blueberry.