Good morning from London. I'm Anna
Edwards alongside Guy Johnson and Tom
McKenzie. We're an hour away from the
opening trade. Here's what you need to
know. Gold hits a record high of $3,500
amid heightened expectations of Fed rate
cuts and concerns over the central
bank's independence. Japan's 10-year
government bonds see their strongest
auction in two years despite market
angst. Nervousness around global long
maturity bonds continues as we enter
traditionally their most difficult
month. Plus, more change at the world's
biggest food company as Nestle sacks its
CEO over a workplace affair just one
year into the job.
Modest gains that came through
yesterday, of course, on European
markets. Today, futures when it comes to
the socks 50 picture looking a little
softer, down by 210 of a percent. So,
looking to to pair the modest gains that
came through yesterday. US of course
closed yesterday for the Labor Day
holidays. Futures right now pointing a
little lower by a tenth of a percent.
There's a little more action when it
comes to the treasury markets before of
course we get on to the commodity space
and metals. In terms of the 10 yet 425
yields currently up three basis point
you're seeing that across the curve. So
a bit of selling pressure coming through
for US treasuries. We look ahead to ISM
manufacturing data out of the US and
particularly prices paid if you have an
eye on inflation. Spot gold just
slightly back below that 3,500 level but
again with the gains up more than 30%
year today. did cross that level for the
first time. As we mentioned, the
headlines on record currently up 6/10 of
a percent. The countdown to the opening
trade starts right now.
Tuesday morning, back to school. If
you're a child, that probably means a
new set of stationary, maybe a new pair
of shoes. If you're in the financial
markets, back to school comes in the
form of a bar of gold. An expensive bar
of gold, it seems.
Yeah, absolutely expensive. Increasingly
expensive. And let's count the reasons
why, shall we? So $3,500 is what it will
now take to buy you uh that troy ounce
of gold. And this is to do with the Fed
conversation because the opportunity
cost of owning gold, of course, is
reduced if Fed rates are cut. But there
are other risks out there as well. Fed
independence, something we've talked
about many, many times. That's pushing
people to consider the yellow metal,
geopolitical threats, all the questions
around tariffs, but also central bank
buying. That's been an ongoing theme for
a long time. The PBOC in particular
stocking up on quite a bit of gold.
The catalysts are there. Then
expectations of course in terms of the
Fed more than 100 basis points as you
push out towards the middle of 2026.
That's by July. To what extent if that
is reframed and that may be dependent on
some of the data we get over the next
week and a half then is that one of the
catalysts that starts to fade for the
yellow metal. We're back above 3,500 at
least we cross that level that's
uncharted territory for gold clearly
because it's a fresh record. How far
above that can you push or do you want
to be moving if you're in the metal
space more to silver which has seen
gains that have outstripped gold at
least year to date 40%.
Absolutely. But is 4,000 next? Is that
the next target? Um I Anna brings up Fed
independence. We talk about the back to
school theme as well. Congress is back
today in the United States. Steven
Mirren's nomination is going through.
That is part of that Fed narrative. What
is happening with Fed independence as
well? The Dalio piece as well this
morning in the FT kind of sums it all up
quite nicely. What is happening with Fed
independence? What's happening uh in
terms of the belief in government?
What's happening with the debt crisis?
All of this stuff coming together to
drive co forward. But it's interesting.
Stocks are at record high and gold at a
record high.
Yes. Which seems weird, doesn't it? I
mean climbing a wall of money would is
is a sort of
a cliche we throw at stocks and that
would seem to be the case.
Wall of money or a wall of worry.
Well well both. Yes, exactly. I mean, if
gold is being pushed higher by both of
those factors, both of the wall and the
and both of those walls, then then no,
then perhaps that's that's interesting,
that dynamic. And you mentioned silver
as well, Tom, which I think is
interesting because of course silver has
all of the things we've just been
talking about the reasons to get into
those precious metals, but also the
industrial applications. And no matter
how much noise we hear from the Trump
administration against sort of clean
energy policies, there is still a huge
amount of demand demand for
electrification of all sorts of things
around the world. And that is pushing up
demand here.
You can actually use it in a material
way versus gold of course in terms of
just wearing it which of course has it
has its attributes. Dalia I mean really
fascinating this conversation with the
FT. I can't remember someone with this
clout in the financial world being this
straightforward in terms of an attack on
a Trump administration describing them
as autocratic and he referenced that
stake in terms of intel as an indicator
of kind of 1930s style government. Now
there are a lot of people who push back
on that and say there are national
security reasons. This is a key sector,
key industry. But to your point about
the debt load, this line stood out to
me. We are facing a debt induced heart
attack in the US in 3 years, give or
take one or two years. So potentially
within three years. Now, he's been
warning about this for a long time.
But you have to fold that into what you
think about in terms of the long end of
the Treasury curve and all the anxiety
and that brings us back to Fed
independence. It brings us back to the
fiscal spend in the US and to what
extent you're going to get a further
selloff in the 30s.
Yeah. Yeah. Exactly. and continuing to
think about the bond markets. We've been
nervous about the long end of the bond
market for a long time. And so I flag
two things which sort of move in
opposite directions. One, September is
difficult for bonds. Has been according
to our data the last 10 years or so. Uh
so that's that's on that's on the sort
of negative side. Um uh but but but on
but on the more positive side we've seen
the Japanese auction, haven't we? Which
has been which has been pretty positive.
And so that's that's that's moving us in
the other direction. Strong bid to cover
3.92, the best since 2023.
We've got a I is there a debt crisis
coming? Is that where the long end is
signaling? Yes, there has been a bid
back into the Japanese bond market,
which is interesting, but yields have
been kind of moving in a direction which
kind of maybe starts to make them
interesting. It's going to be
interesting to see whether or not money
Japanese money comes out of French bonds
and goes into Japanese bonds and I just
I just flag that one in terms of drawing
a line back to Europe as well.
Yes, absolutely. And one of the
distinctions that Ludvik Subbrand, who's
going to be on the program in an hour or
so, is making in his notes is between
we're seeing steepening, but we're
seeing bare steepening and we're seeing
bull steening in different geographies.
And so making that distinction and
exploring what that means and what that
tells us might be quite useful. We'll
we'll do that around
and and Guy, you flagged the back to
school theme and the focus on the US,
but also in the UK as well with a
reinvigorated at least that's what the
prime minister will help
team around him. So he's changed some
key members amongst his team in terms of
advisers on everything from
communications to economics. One of the
key criticisms from some is that that's
fine, but you have to have a prime
minister who actually knows what he
wants to achieve. And until you get that
direction from the top, it's not going
to help if you move the pieces on the
chessboard. But there are some
significant changes and people who bring
deep experience uh to to this team.
Shafi is in at number 10. That is one of
the key names that obviously has been
talked about. Um the UK government's got
to figure out whether or not spending
more equals better better outcomes. And
at the moment that doesn't seem to be
the case. So I think it's going to be
this is going to pile further pressure
onto Rachel Reeves.
Yeah.
In terms of her budget, she looks like
she is struggling massively. And if
number 10 assumes more responsibility on
the economics, that's going to put even
more pressure onto the treasuries.
And does it change the fiscal facts on
the ground as you've been saying? And
and does it do anything about the
political challenges that the government
is now going to be facing from the right
from the from from reform or is it sort
of tangential to that? But you've been
thinking about the back to school theme
with regards to the United States as
well.
Congress is back.
Congress is back. And a lot of things on
President Trump's in his intray, many of
them hangovers from the previous
previous it takes us back previous
semester.
It just takes Well, remember, so
remember that they went early. They went
on holiday early because of the Epstein
concern. That's going to still be there.
So that's going to be an issue. But
actually from kind of our point of view,
from a sort of economics macro point of
view, you got a potential government
shutdown coming up. the debt crisis that
that Dalio is talking about. This is
going to be front and center very very
quickly. Can they avoid a debt crisis?
Can they work with the Democrats? How do
they get round them? There's all kinds
of issues there. You've got various
appointments coming through as well.
What's going to be happening in the
Senate there? That is going to be
something that maybe the Republicans try
and circumvent, get around the the the
Democrats. So, there's there is a lot
going on, but it's going to refocus, I
think, the story back onto the economy.
And I the Fed story is going to be
intermingled with all of that as well.
So, yeah, back to school feeling. It's
interesting. I I I think the French are
coming back early. I don't think the
Germans are back yet. The Brits are
back. So the back to school kind of is
is going to be a little
We could have done this yesterday, but
without the United States, it felt a
little premature, didn't it? Now we feel
we have the full complements of global
markets.
We're a bit like schools are all kind of
coming back at slightly staggered times,
but we're getting we're getting the
idea. I
I think I think the one thing that that
we all need is a new compass. I sense of
direction, I make.
Yeah. Oh, I like that. Yeah. We're going
to get the issue with Bloomberg branding
hopefully.
Yes. Which way does it point?
Opening trade branded compass. There you
are guy on your wish list.
We're going to have one of those. We'll
get one of those. Uh what do we got
coming up on the show? Ella Hos is going
to join us from Newton investment
management fixed income head there.
We'll get her take on what is happening.
We've already indicated Lud Ludvic Subra
Aliant CIO is going to be joining as
well. Sel Michon is going to be joining
us. Goldman Sachs, head of investment
banking for France, Belgium and
Luxembourg. Looking forward to that
conversation as well on your day. But
other things to mark then as we work up
to the trade of course this Tuesday
morning 8 a.m. of course after that 10
a.m. UK time we're going to get that
inflation print out of the euro area
then at a time when we're hearing from
Schnarble of the ECB of course
traditionally on the hawkish end uh
pushing from from views in terms of how
the inflation story is adjusting uh for
the Euro zone. So that data comes out at
10 a.m. UK time 1:45 p.m. uh we're going
to get the ECB's Müller will be speaking
in Slovenia. anything he has to say
about the direction of travel for the
ECB. Is there anything that pulls the
ECB back off the sidelines uh by the end
of this year in terms of further action?
3 p.m. UK time, ISM manufacturing uh
data drops out of the US. We had a guest
on uh yesterday from Deutschbank talking
about uh prices paid being important if
you think about uh inflation risks out
of the US. And at 3 p.m. UK construction
uh spending at a time uh when we're
seeing a little softness in the housing
market here in the UK.
Okay. Yeah. Some of I mean with the
inflation story is going to be part of
the narrative then as you just talked
about Tom I I looked yesterday the
forecast was 2% the target is 2% nothing
to see here it's gone to 2.1 so so there
seems to be some some movement in that
forecast but we're essentially expecting
it to be broadly in line with targets
but is there risk to the upside is
Bernabal is out this morning um
is there downside
I that that's the other concern as well
that you've actually got downside
deflationary risk in the Euro zone
yeah at the same time as maybe the US
has inflation because Chinese goods are
diverting A lot of that seems to have
been intra Asia though so far has it.
Stronger currency another factor in
terms of the mix were at what 117 that's
going to be a factor as well.
Euro strength and the inflow of goods
from China but but but that that
deflation story that someone flagged has
yet has yet to come through and to your
point Isabel Schneal saying inflation
risks are currently tilted to the
upside.
We'll get an update from uh from our
team in Frankfurt. This is what they're
expecting. Yes. So maybe that's not news
end of the spectrum. What else do you
need to know? This Tuesday morning,
Bloomberg has learned the Revolute has
kicked off a process for employees to
sell their shares in the company at a
$75 billion valuation. That's for the
entire company. We understand the
Londonbased firm and its staff will be
able to sell as much as 20% of their
stakes. The deal cements revolution
status as one of the world's most
valuable fintex comes as expectations
grow that the company is looking at
buying a US bank in order to acquire a
national banking license in America.
It's interesting the regulatory
environment may be a little bit more
positive for that right now. Nestle has
sacked its CEO Laurel Fricks after only
a year in the job. This is due to an
undisclosed workplace affair. The
world's biggest food company has named
uh Philip Navati who heads Nespresso the
brand at the at the company as his
replacements. The change extends a
period of turbulence as the Swiss firm
abruptly fired fired Frix's predecessor
last year. due to poor performance.
Food companies are meant to be kind of
stable and staple and boring, but no.
And Russia's gas giant, Gasprom, has
reportedly signed a legal binding
agreement to build the Power of Siberia
2 gas pipeline uh to China via Mongolia.
Russia's current pipeline to China has a
design capacity of 38 billion cubic
meters a year. According to the Interfax
news agency, the new pipeline is set to
increase annual Russian flow to China by
another 10 billion cubic meters by 2027.
Are these the same molecules that were
going to Europe? They because we had
this YAML pipeline that came out
through Russia into Europe. Are these
the same molecules that then going to be
going over towards China? And if they
are kind of is that a one for one? I
don't think it quite is. But it but but
this obviously solves one of Russia's
biggest problems, which is what do you
do with the the gas that was going to
Europe?
So this 50 billion cubic meters is what
could come through from Siberia to this
new pipeline they've agreed to, which
is on the analysis I've been reading
this morning about half of the amount
that would have been going to Europe. So
it makes up about half of that. So
that's that's significant. This has been
more than a decade in the making.
Russia's been trying to get the Chinese
to agree to this. There have been
concerns on the Chinese side about
construction costs and about the the
cost of the gas uh itself. and they've
had to have buy in of course from
Mongolia as well. So China has dragged
its feet but is now apparently signed on
to this. So not only a significant win
for Russia. You would imagine though
very much on on China's terms as as we
look for the details on this when it was
originally planned these pipelines in
the east and west of Siberia. It was
originally set up to create competition
between Europe and China for for Russian
gas. And of course that competition has
adjusted given that very little is now
going to Europe. Some is still but but
less. So that was the original framing
of these pipelines was to create that
competition. Yeah. For those molecules.
Meanwhile, the the Danish leadership of
the European Union right now trying to
make sure that we move even further away
or the the European Union moves even
further away from from using any Russian
gas. 7:14 here in London. Then coming up
on the program, Deutsche Bank joins the
stocks 50 and Stalantis is out. We'll
check on those stocks at the open.
Sometimes those uh index reshuffles can
have an impact. Plus, Premier League
summer spending hits a record high with
US investors helping push the move.
We'll discuss that later in the program.
Up next, investors pile money into gold
while long maturity bonds enter what is
traditionally their worst month. There's
a lot to talk about in markets. If you
have questions, if you want to have your
say on any of these conversations,
please do. IB plus BBTV go is the
function on the Bloomberg terminal to
get in touch with the team. This is
Bloomberg.
Welcome back. This is the opening trade.
Now, let's focus in on gold. It's hit a
new record as traders ramp up bets that
the Fed will cut rates this month. Let's
get more from Bloomberg's Valerie Titel,
who's back with us this morning. Um, and
and set us up for the month then, Val.
Um, we've got a lot to think about when
it comes to markets.
Yes, we do. And I think the one thing
that gold is telling us is maybe those
deficit concerns come front back and
center. Gold uh breaching new record
highs up to 3500 year to date. It's up
some 35%. Now you can blame perhaps the
dovish shift from the Federal Reserve
causing uh this precious metals boom.
Remember we saw it in silver yesterday.
Or maybe you can say that the bond
market jitters are causing a flight to
safety when it comes to the yellow
metal. But I do want to talk more about
the bond market because September is
such a key month for issuance. Uh not
just corporates but also uh sovereign
issuers. Uh September is a massive month
especially for European uh syndications
as well. And this comes at quite a
sensitive time here Anna. We have uh the
the French government calling a vote of
no confidence uh for next Monday. We
also had the UK's parliament here uh
reshuffling some cabinet members. The
guilt market didn't very much like that
yesterday. We had those 30-year yields
breach new cycle highs. So again, this
test of all this issuance comes as well
as these uh yields beginning to break
out to new cycle highs across Europe. We
have uh perhaps the issuance is getting
kicked off today. Uh Italy announced its
mandate of a seven-year and 30-year
syndication likely to price sometime
today. So this test of government
supply, bond supply might face its first
test with Italy 30-year today.
Okay, perfect setup. Valerie Saitel
joining us on all of the market action
that we are watching as we get back to
school. Eloha is here. Fixed income head
of Newton Investment Management. Lots to
talk about. Firstly, gold. What signal
is gold sending you right now?
Well, precious metals in general have
been sending the signal for some time
this year. I mean obviously very strong
performance across the board and silver
now outperforming gold actually on that
ratio that a lot of metals players
watch. So pretty much a signal of
concerns around debasement of currencies
or inflation containment and the
activity of central banks going forward
particularly major central banks.
There's of course other supply and
demand factors such as um sort of
reserve managers acquiring more precious
metals. All of these are in play. But
really, if you just if you're a Martian
and came to Earth today and saw what's
been happening to precious metals,
what's happening to the long end of the
bunker,
it's really telling you
the first trade a first trade a Martian
might make if he arrived here on Earth
would be to go, "Yeah, I'm gold's
looking good. Sell long bonds is sell
duration. Is that is that the trade the
Martian would make?"
If this Martian was a momentum player,
yes, and you know, I should be sort of
screaming here.
Really getting into the weeds here.
Exactly. as a contrarian player, I
should, you know, be thinking about
taking the other side. But actually,
there are points where you're at such an
important macro cross juncture.
And we are exactly at one of those. And
I think you can kind of see the writing
on the wall. It's difficult to sort of
time exactly when it plays out in, you
know, in tandem.
But I I think personally I think it it
has begun and this is really the time
where we're starting to take quite a bit
of that
right tail if you like on inflation
risk, you know. So um you know, you're
pricing obviously perfection in markets.
We know why, right? So conditions
economically are okay.
Fed's about to cut more. Uh, you know,
things are good, right? We have some
more fiscal juice, you know, the big
beautiful bill in the US. So what's the
problem, right? More to come out of
Germany. So that's why stocks love it.
But on the other hand, if you look at
the bond market, it's it's not sort of
like super concerning yet because we're
not out of these ranges. Certainly not
in US dens.
But if you look at JGBs, you look at
UK30s, actually they've been leading.
Those are the leaders. Germany has
caught up. Okay. and actually what's
happening with France long end is also
concerning us.
So these are the concerns that are
clearly affecting the long end of the
bond market or in some geographies and
then to guy's point earlier can gold and
stocks continue to rise together or are
we at an inflection point in that
relationship as well? Is gold telling us
something about where stocks will head?
Yeah, I mean uh I think bonds probably
are the trigger to watch. I can I I see
the trend certainly I see the trend in
gold and precious as more structural in
nature and this reserve accumulation
matters and I do think we are in a you
know if the long end game is a financial
repression game which probably seems the
more likely outcome with regards to the
debt load we have on the interest rates
we're paying
then certainly the gold trend can
continue over the long run. So let's
park that aside. Now the relationship of
bonds and stocks obviously we know that
correlations there have been positive
since 2021 right since the break when we
shifted to this new regime we would
argue and the higher slightly higher
inflation regime then you know what
happens to bonds matter so if the
sell-off is orderly as we've been seeing
and it's actually driven by sort of
better growth expectations or broad uh
no big concerns if you like then it's
okay but I think if we shift in this
pendulum where um the selloff becomes
more nasty which is the bit that I worry
about if if you like uh when I go to bed
uh that's a different dynamic for
stocks. So I would say probably not just
yet but you know how we digest this
supply how sentiment shifts now and what
happens to those inflation numbers in
the next two to three months I think
will be important.
So if you're worried about bonds if if
if is there a trigger that you have in
mind is it one of the one of the many
auctions that Valerie was talking about
or is that too
too minute a trigger? We've seen some of
those and sort of they've caused
selloffs even in Japan we mentioned
right in the US we've had quite a few
examples where auctions haven't been
well received so the demand just isn't
there in a solid way right uh so we see
the tentative signs triggers can be many
I try to not predict the triggers right
I try to look at you know what what is
the signal rather than the noise and the
signal is quite clear that there is
still at these levels no appetite for
the long end and the risks are actually
even in Europe there's going to be less
appetite going forward for so what stops
that trigger uh you know unless you
actually find an ultimate buyer at the
right price that's it's hard to stop
that.
What what does that mean? How clear and
clean is the steeper trade then given
given that
it's been for for a couple of years
right probably one of the best sharp
ratio trades in fixed income. uh so I
think it's quite populated certainly in
places like the US so I don't want to
lean too much into it but I think
suffice to say is what shifts a
difference in that and I think probably
growth concerns which don't seem to be
at player they don't seem like the high
probability game I think actually the
higher risk here is this sort of fiscal
supply central bank credibility
you know that's what's going to save it
and I think that we're probably just at
the beginning of that so I struggle to
see that um a play at this time
you've noted as well that the dollar has
delinct from from rates. Is that is that
the new normal
for the dollar? Yes, I think we entered
that regime. We talked about this in in
December sort of in our early piece and
yeah, we were looking for this theme as
a a structural play as well. So, I would
argue similar to gold. That's it's the
same story really.
Yesterday, we had a guest who said that
that link would reestablish itself. You
don't see that happening. Instead, you
see it's going to be current account
deficits that are going to weigh.
I I think so. So I think for the dollar
particularly the current account deficit
story is the driver because it's been uh
you know let's think about tariffs uh
the closure of the current account
deficit of the US with the rest of the
world that's playing that's a structural
story.
So President Trump's right to try and
tackle that. I would never question
President Trump. I will
I mean if you want dollar stability I
suppose if that's your aim then he's
right to
I mean I mean I guess you know if the
policy goal is to call close the current
account deficit I think the other side
of that equation is going to be a weaker
dollar right so if you want a weaker
dollar you know you're probably doing a
lot of the things to achieve it so that
would be the conclusion
I wonder what currency Martians spend in
Martian economics I feel like there's a
book coming from guy
this is a whole sideshow I feel this is
a podcast surely
intergalactic economics by galactic
how long how long could we extend this
Martian reference. I think we could make
it 2 hours.
Oh, I'm I'm well up for that.
Should we save the viewer from that
state?
Guy Johnson coming back to us after the
break with more Martian economics. Ella
Husher, thank you very much indeed with
views of course on how to position, what
to think about in terms of the fixed
income markets, more broadly the US
dollar as well. Newton Investment
Management with that analysis and market
insights. Thank you. Coming up, we are
going to bring you the latest on Xi
Jinping's meeting with Vladimir Putin in
Beijing and specifically that gas
pipeline deal. That is next. This is
Right, the action is not in stocks. This
is what we can establish from from the
futures board here for Europe. Uh so
futures are pretty flat. Not really
telling us very much. US futures, I can
tell you also flat to negative. NASDAQ
futures down a tenth of a percent and
and that's really why we've been talking
about gold a lot this morning, haven't
we? But asking whether we get clues
about stocks from what's going on with
gold, no is the answer from Eloha. But
we do get clues from the bond market,
she said as to the the precarious
position.
Name the opening trade. We can maybe
focus on the equity market, but actually
the opening trade for the bond market is
kind of right now. I know that the UK
comes a little bit later, but European
bonds are open and yields are higher.
Um, it's interesting that France is is
up by 2.6, six, but by no means sort of
uh out of the pack in terms of where it
stands right now. Expectations grow
maybe of a French uh parliamentary
election. That certainly seems to be the
uh the story coming out of France this
morning. But yeah, European bonds are
higher at the 10-year tenor as you can
see, but not by much. Okay, let's switch
focus to geopolitics then with Chinese
President Xiinping holding bilateral
talks with Russian President Vladimir
Putin in Beijing.
welcoming Putin by calling him an old
friend, highlighting the nation's close
ties and a significant deal as well in
terms of Russia and China signing off on
a legally binding agreement to build the
power of Siberia to gas pipeline.
Significant in terms of the commodity
trade between Russia and China. Let's
bring in China's correspondent Min Lo
who joins us now for the latest on this.
Minman talk us about the significance of
this deal and what it tells us about the
relationship between between Russia and
China. They have been pushing the
Russians for this pipeline for for about
a decade.
Yes, it's a really really big big
through as you said talks had been going
on for years and actually China had in
the past been quite reluctant to sign on
to this deal because it didn't see it as
an urgent need to step up its gas
purchases from Russia. It didn't want to
over rely on a single country as well.
But now Gasprom, the Russian stateowned
uh oil and gas company has inked this
deal to build the power of Siberia 2
pipeline which will allow it to divert a
lot of the gas pipeline sales that he
used to sell to Europe to China. It
would allow it to recoup at least a
third of those sales in the past and
it's really an economic lifeline in some
ways for Gasprom which has seen its
profits plunge after the Ukraine war. Uh
and really interesting that this is
coming just as Trump has been exerting
this pressure on China not to buy more
uh Russian oil and interesting to watch
what sort of repercussions would this
would have uh going forward in terms of
any US China discussion of a potential
trade deal going forward.
Okay. So this coming out of this
relationship these meetings between the
Chinese and the Russians at this event.
Uh now North Korea also in attendance
and North Korea's Kim Jong-un will be at
the military parade that is taking place
at this uh at this uh this this uh
conference but India's Modi won't be
there. I mean do we read into that that
he wants to stay as a democratic leader
he wants to stay one step removed?
Yeah, definitely Anna. I mean, think
about the optics of Kim Jong-un ci and
Modi and Putin standing together. That
really doesn't look good for Modi to be
standing alongside some of these
autocratic leaders given that India
prides itself as the world's largest
democracy. Although over the weekend and
on Monday, he did have these meeting
with President C and Modi uh and uh
President Putin as well and he does seem
to be leaning very closely to uh Putin,
right? We're signing all these uh
deepening ties on many different
sectors. Uh but he seems to be hedging
his relations a little bit. On the one
hand, he wants to, you know, still
negotiate for lower trade tariffs from
the US. And on the other hand, while
he's leaning towards some of these other
countries, he's still maintaining a
little bit of a distance, that strategic
autonomy at play here. But for Kim
Jong-un, a very different story. This is
a very very rare display of uh him
coming onto the world stage uh alongside
C and Putin. Uh and it's really a show
of unity challenging this western le
international order. Interesting as well
that uh that uh Kim visited a missile
factory in North Korea just ahead of
this trip. He also visited a chemical
materials research institution under the
country's missile program unveiled a new
development plan for intercontinental uh
ballistic missiles. It's really in
defiance of both South Korea and US
which has been pressuring the country to
end its nuclear program and in some ways
a sn.
So we've had we've also had handholding.
We've had ride sharing or actually in
this case probably limo sharing. Uh
Vladimir Putin seems to have learned a
lesson from Donald Trump. You could
argue that Alaska trip we saw Trump and
Putin sharing a limo and and Putin now
seems to be extending that story to
Modi. Is that is that indicative? Is
that something that we should read into
this or is this just now state craft
that that everybody holds hands and gets
into the same car?
Definitely a bit of state craft at play,
but strategic as well because it allows
him to have private time with Modi
without a lot of aids around, right?
Because he brought his presidential
vehicle all the way from Russia to China
and brought Modi out for a spin. It was
a 15 minutes ride to get from the SEO
summit venue to the venue of their
bilateral meeting. But the two men,
according to sources, continued to sit
in the car for another 45 minutes,
turning it into an informal 1-hour
meeting, which Modi said was excellent.
They discussed everything from deepening
of ties in trade, in fertilizers, in
space, security, culture and he invited
Poinova to visit India as well. So yes,
you know, a lot of opportunity for the
two sides to discuss things in depth. Uh
and it is also uh again a slap in the
face for President Trump as China's as
India's oil minister also defended its
actions saying that its buying of
Russian oil is not breaking any rules as
well. Um and interesting as well because
uh Russia was showcasing its own luxury
limousine at a time when China typically
would ferry around uh state leaders and
political uh guests to the country in
their own homegrown domestically made
hongi cars. Hongchi meaning red flag in
China. But uh Putin as usual typically
when he goes on overseas visit he always
brings his own presidential vehicle with
him.
Okay Men, thank you very much. Mlo in
Tanzin talking us through all of the
developments there from that Shanghai
Cooperation Organization, all of the
leaders in attendance and the
relationships between them. Now, whilst
Russia, President Putin was in
attendance over at that Shanghai
Cooperation Organization event, a plane
carrying the European Commission
President Ersand was disrupted by what
authorities suspect was Russian signals
interference. The GPS jamming incident
affected the plane's navigation system
as it landed in Bulgaria, but it landed
safely by using alternative navigation
aids. I think that means paper maps.
Bloomberg's Oliver Crook is in Berlin
for us. Is is this action from from the
Kremlin? They've been asked in the past
and we've had mixed responses as to as
to what they admit to doing in this
field. Then Oliver,
yeah, I mean, this is sort of the
classically from the Russian playbook.
Again, we do not know with 100%
certainty that this was the Russians or
that Ursuland Lion's plane was
particularly targeted. That being said,
according to the Bulgarian authorities
who have quite a bit of experience on
this, they say that they um by all
indications that it was a deliberate
effort um by the Russians. And as you
say there, Anna, you know, they had to
use according to the Financial Times, um
you know, paper maps to land this plane.
I'm glad, you know, somebody could still
read paper maps. Um but you know 85% of
planes they say over Bulgaria are
experiencing some kind of GPS jamming or
some kind of interference. That being
said also according to the Financial
Times all the other sort of planes that
were in the same vicinity did not
experience um the same experience. So
again when we think about the context of
what this trip was going on you see the
pictures there powerful images of Ursula
Vanderline walking in Poland with Donald
Tusk. This was a sort of defense tour of
Eastern Europe. She was visiting you
know ammunition factories in Bulgaria.
This was all part of this idea of trying
to build out defense in the context of
this moment where Donald Trump is
attempting to push Vladimir Putin to the
table. Not clear whether or not that's
actually um working um at this at this
stage, but also their military buildout
on the eastern flank of NATO. And also,
of course, the potential for security
guarantees, which have been discussions
about possibly if ever there is a
ceasefire and a peace in Ukraine,
potentially western troops stationed
there. We should say again one more time
the broader context of all this going on
is precisely what Minman was just
talking about where you have these big
sort of events where Modi is going into
China for the first time in seven years.
Modi is holding hands with Putin. He's
uh you know Putin and she have a meeting
today in which there's a readout saying
that basically the basis for the future
of the Russian and Chinese relationship
should be these large um infrastructure
projects that they're working on and we
get sort of a green light on that. This
is all sort of morking to the detriment
of the Europeans who would have hoped to
potentially exploit some of the uh light
that exists between India and China and
certainly uh between Russia and China
and that is definitely not going their
way. So again once more spectators on
the sidelines of geopolitics all of
which Donald Trump makes a lot more
difficult for these Europeans their
traditional ally basically not there to
sort of speak with one voice with them.
And Ollie, on the energy front, we've
had that news, of course, out of China
that they've signed this deal around a
second pipeline from Siberia, shipping
Russian gas into China. Meanwhile,
Europe looking to to close the loopholes
in terms of Russian gas that continues
to flow into Europe. What what are they
looking at doing? How how realistic is
that?
Yeah. So, what the Europeans are already
planning to do is to fully phase out
Russian gas by 2027 within two years. We
should say that they're going to be, you
know, an incremental step next year to
get that done. There are a couple carves
out for Hungary and Slovakia sort of as
landlocked nations, but as we know,
they're also not entirely on board with
the isolation um of Russia. So, there's
some some uh carveouts there. What
they're looking to do, and this is under
the Danish presidency, they hold the EU
presidency until the end of the year, is
to basically change the language around
which some of this uh gas gets uh
shipped in to Europe to make sure it's
not coming from Russia. There is this
massive pipeline, Turk stream, that goes
through Turkey. And basically what the
beds are trying to propose and for the
Europeans to adopt is to basically
presume that any gas that goes through
the Turkream pipeline comes from Russia
unless it can be explicitly proven
otherwise that it does not uh come from
there in order to again try to constrict
the amount of Russian gas that is coming
in to the European Union. You know, all
of that being said, you know, there are
still plenty of buyers, right, for this
Russian gas. As we were just talking
about for the last few minutes, the
Chinese now, you know, uh,
greenlighting, uh, and they're beginning
to build this pipeline from Russia into
China. Plenty of buyers for Russian gas
and of course the Europeans trying to
get more and more of that gas
potentially from the United States in
the form of LNG. But again, the gas
diplomacy is a sort of, you know, a
major element of the discussions around
Russia. We saw also the gas price in
Europe falling over the last couple of
weeks in the hope that there could be
some kind of ceasefire. That is now
turning around with some of that
optimism drawing up. We're
going to leave it there, Ollie. Grace
up. Thank you very much indeed. Welcome
back. Good to see you. Um Ollie Crook on
what is happening in Europe. Let's um
segment that a little bit and talk about
what is happening in Spain right now. Uh
the Spanish Prime Minister Pedra Sanchez
has committed to complete his term even
if his government's allies in parliament
reject his latest budget proposal. For
more now, let's talk to Bloomberg's
Rodrigo Oreoa.
Why are we having problems passing the
budget in Spain? And can Sanchez really
survive such a failure?
So this is the most fragmented
parliament Spain has seen in its modern
history to till at least the 30s. And
learning how to navigate that has been
extremely difficult. Sanchez's party has
to negotiate with roughly eight parties
in parliament to pass budgets. And the
problem there is that most of those are
left leftwing, some of them really far
to the left of the socialist government.
But there are also two pro business ones
specifically the Catalan separatist
group uh Junes which has kind of found
found its mojo by humiliating and
pushing Sanchez in every negotiation to
get something for themselves. And this
has made passing any kind of law very
difficult. Specifically with the budget,
that is even harder because obviously
some of the parties want very pro-social
policies and spending plans while the
progovernment uh the pro business one
doesn't. And so you have this kind of
back and forth and what Sanchez has
found is that in 2024 and 2025 he was
able to continue governing with the
budget from 23. Now the big issue here
are two. One is the the big issues here
are two. One is that in 2017 before he
became prime minister, Sanchez was very
clear in criticizing his predecessor
that um a government has to have a
budget because a budget is the pillar of
your government and without that you
shouldn't govern and you should step
down. So he said that before he was
prime minister and he has kind of
changed his stance now. The second um
the second main issue is that over the
last year a lot of pressure has been
building up as some of his closest
collaborators and even his wife have
found themselves targeted in criminal
investigations involving uh influence
pedling corruption and different issues.
Now, some some viewers might be thinking
we're talking about France here,
thinking about European governments that
can't pass budgets, but the the read
across is limited, of course, because
the backstory, the economic growth story
out of Spain is is much stronger,
Rodrigo, but but talk to us about the
possibility of a snap election in Spain.
We're talking about that as a a vague
possibility in France, but is that a
possibility in Spain? So you're right
that the the economic growth gives him a
certain power because there's different
issues that allow him to keep on
spending without having to cut spending.
Mainly that he has higher tax revenues.
Now uh as as the economy grows. Now on
the specific question you're asking, the
Spanish system is slightly different
from other European countries in the
sense that to remove a prime minister
through a confidence vote, you have to
already have somebody who can replace
him. So you would never have a situation
where he gets kicked out and then
parliament has to come up with a with an
air. Um and that is what gives prime
ministers in Spain an advantage and why
there's only been one successful case in
which a prime minister was removed by um
um by a confidence vote and that was
specifically Sanchez who led that one.
That's how Sanchez came to power through
a confidence vote. So that is what makes
it very different. Could he call a snap
election? He could. He could say okay
look I'm tired of this. I want to go
home or I want you guys to give me
confidence. But right now there doesn't
seem to be any incentives. Going back to
what I was saying about the pressure
around the criminal cases, he he would
not have a clear path to win an
election. So he would rather stay until
his term ends in 27.
Okay, Rodrigo, thank you very much for
the updates. Bloomberg's Rodrigo Ora
joining us there with the story out of
Spain. Coming up on the program, we'll
pivot toward some of the stocks that
could be in focus this morning. uh
including we're watching luxury stocks
today after HSBC shifted its call on the
sector. We've got that and your other
stocks to watch. That's next. This is
Welcome back to the opening trade. Let's
talk about the markets in three minutes.
Bloomberg's Moana is here to do just
that for us. Good morning to you, Moana.
Let's start with FX then. In fact, we
might get a little further than FX this
morning because there's quite a lot
going on, isn't there? Let's start with
the euro. Uh we've heard from Isabelle
Schnabble at the ECB talking about
inflation risks. We get inflation data a
little bit later out this morning. Uh
but what what are you seeing in the euro
that's of interest? Well, I think what's
interesting is the fact that it's really
seen through a lot of these potential
threats to its strength. It's still
trading near 2021 levels. Um, you've got
this um extreme political uncertainty in
France, you know, with a possible
government collapse next week. Um,
you've got the farright sort of pushing
for elections and you've also got things
like the Spanish budget that you were
just talking about coming into play as
well. you there's a lot of concern there
and yet really we've seen it holding at
these like very high levels throughout
um whilst you've also but the same time
you've seen the longer dated bond yields
you know elevated so that risk is priced
in but not in the euro um and I think
that in itself is quite interesting
particularly you look at compared to
last year when we had the French
political crisis you know we saw the
euro sinking quite dramatically against
the dollar also against the pound in
Um, and actually it's holding up there
too this time. And I think really a lot
of that just comes down to the dollar
weakness and it's holding up against the
pound as well. Still above 86 p. And
that also signifies that it's not about
the euro. It's not about sterling. It
it's all about the dollar weakness which
we've seen um you know really persistent
for the last five days. It's up a bit
today as the US comes back from holiday
but again it's been falling for the last
five days and considerably throughout
the year. So, does that continue? Like
the the US is kind of back to school
today. Feels like there's a lot going
on. You've got a lot of politics
happening. You've got an awful lot of
economics happening. We've got payrolls
coming up later on this week. I are we
in the position where dollar weakness is
going to persist. I the the if you look
at Euro dollar doesn't feel like a euro
story at all as you say.
Yeah. And I think there are some key
catalysts coming up for the dollar. I
think as things stand that expectation
that the Fed is going to cut interest
rates which has been under quite a lot
of pressure to do so um is fairly it's
priced in it's very highly expected.
Yeah. of course that this key payrolls
data this week. We've also got inflation
coming up. You know, if they show a a
hoster in inflation um environment or a
stronger labor market than being
expected, that could shift the picture
slightly, that could make the euro and
other currencies a bit more vulnerable
and shift the picture for the for the
dollar. But essentially with that sort
of macro uncertainty, lower rate
environment very likely, it does seem to
support the dollar weakening going
forward.
What is what is dollar erosion doing to
the gold story? Well, we just saw gold
um exceed its April records. Again,
April being a really interesting time
because that's when all of the sort of
tariff turmoil kicked off and we saw
gold ascend. Um at the same time as
well, we were seeing that dollar
weakness then. Um it's it's continuing
to move upwards as people move to
precious metals. There is a real sort of
sell the US um story emerging there. Um
but again that could be potentially um
disrupted if we do see um sort of weaker
US economic data coming through at all
um you know in the next couple of weeks.
So I think that's really going to be the
key thing to watch for for the um you
know precious metals market as well.
Okay. It brings us back to the data of
course non-farm payrolls on Friday
inflation next Thursday. Bloomberg's
Moana Conium thank you. Let's get your
stocks to watch this Tuesday then and
bring in Chloe Melly. Chloe what do you
have your eye on?
Good morning Tom. So, let's definitely
keep an eye on Nestle today after the
CEO was dismissed for having an
undisclosed workplace affair. And that's
a CEO that was in place for just a year.
Obviously, any big change at the top
like this creates a lot of uncertainty
around the direction of the company. And
this could add further pressure on
shares that have already been having
quite a tough 2025 so far. Obviously,
the reaction this morning will really
depend on how the market feels about the
new CEO, which was the head of
Nespresso. Bloomberg Intelligence Duncan
Fox said that the new CEO was was
potentially a positive influence on
future growth and the fact that he is
young and will probably have a long
tenure means also that he could provide
that sort of much needed stability for
Nestle. Moving on to the luxury sector
where we've got a trio of new ratings
from HSBC, we have got LVMH and Caring
with Jones Gucci um being upgraded to a
buy while is being cut to a hold. This
is quite interesting given Hermes having
acquired that status as the luxury
company that is expected to be best
placed to weather the storm that is
facing the luxury sector because as we
can see here has been outperforming for
a while but that performance has
narrowed. Moving on to SMA Solar. SMA
Solar is a company over in Germany in
that solar energy space and it has uh it
has cut its guidance issued a massive
profit warning last night. So this could
dent the performance uh which has
already which has actually been quite
resilient. the shares are up. Um but
that that that guidance could could that
performance. Um the margins will
probably remain under pressure. There's
also pricing pressure that is being uh
highlighted by analysts. So definitely
one to keep an eye on today as well.
Okay, Chloe, thank you very much. Chloe
Melly with the latest on some of the
stocks in focus. Uh yesterday we saw
strong performance for industrial goods
and services and that was supported by
the defense space and we were asking at
this time do we need to keep an eye on
defense names because of thoughts about
what might happen in Ukraine? And once
again, we see headlines suggesting that
Keev is under attack from Russian
drones. And so, you know, this could be
another day where we uh see some of the
losses in the defense sector walked
back.
And this is at a time, of course, when
we're looking ahead to that summit on
Thursday that will be hosted by
President Mron that will include
Ukraine's president as well as they try
to put pressure on Trump to think about
those additional sanctions to try and
pressure Russia.
Back to school. American markets are
back. Going to see a different session
maybe unfolding today. The opening trade
is coming up next. Fairly flat open in
prospect, but maybe things get exciting
later. This is Bloomberg
Tuesday morning. Good morning. So, I
took a look at the S&P futures chart for
the last couple of days. Decided it was
far too boring. basically it does
nothing and is unchanged. Uh so decided
that actually from a viewers point of
view we should ignore that. Instead I'm
going to show you gold just for
excitement. Um the fact that it's at a
fresh record. Uh the fact that we've
pushed through uh these levels through
3500. Are we going to 4,000? And that's
the story of the morning. We faded a
little bit. I know. But nevertheless, I
still think it's more exciting than
Tom's futures board.
I contend differently cuz look at these
European 50 futures guy. Brace yourself
because we are set for a you know a flat
open. uh footsy 100 futures pointing a
little uh softer here in the UK by a
tenth of a percent. Maybe the excitement
is in France. The cat current pointing
high by a tenth of a percent. The
political risk and uncertainty of course
continues as we lead up to September the
8th. The far right is building out
potential gains as well according to
Bloomberg reporter. Anna, what are you
looking at in terms of stocks to watch?
Well, I do have some stocks that could
be on the move and Nestle is one of
those. Of course, the CEO only in post
for one year. that stock could be weaker
because he has been ousted because of a
personal relationship that he had. The
new CEO says he's embracing the current
strategy, but that does still add up to
uncertainty according to analysts who
are commenting this morning. Medio
banker will watch that as well. The M&A
story within Italy within the banking
space still in focus. Montipasi
increasing their bid for Medio Banker
adding cash adding 750 million euros
worth of cash to that bid. So that's an
ongoing watch for us. uh the luxury
sector in focus as well and guy you were
flagging this caring LVMH both of those
receiving an upgrade from HSBC uh and
with that in mind you know how that rubs
up against French politics where we'd
seen uh some movement into these more
globally focused less French domestic
stocks guy
keep an eye on that one certainly HBC
out with an interesting note on that
sector okay here we go it's going to be
exciting the Americans are back to see
some fireworks today uh as the session
resumes that basically the summer is
over summer is done We're done with
summer. Rained yesterday. The Footsie
100 is doing nothing. Uh you've got the
IBEX doing absolutely nothing this
morning. So, we start September on the
first kind of full day, I would argue,
with not much action, but I think it's
coming. There's a lot happening later on
this week. Congress is back. You've got
non-farm payrolls coming up. We've even
got some inflation data out of the Euro
zone a little bit later on just to g
things up. There are some single stock
stories out there. It's going to be
interesting to see how the market takes
the nest news uh this morning. That
certainly may be a factor when the SMI
finally gets around to opening in just a
couple of minutes time. But at the
moment, we are largely unchanged.
Interestingly enough, it is the Karant
that is on the front foot this morning.
It is up by 3/10en of 1%. The footsy is
down by 210 of 1%. The stock 600 is down
by 210 of 1% and the Spanish despite the
political turmoil are doing absolutely
nothing. We await the DAX and we await
the Smi, Tom. But what have you got from
a sector?
I tell you what, before we get to the
sectors, here is some excitement. A
redhead crossing the terminal right now.
The UK 30 yield climbing to 5.6. 66%.
That is the highest since 1998.
The highest since 1998 at the long end
of the guilt curve with yields there now
at 5.66%. Okay, we'll get to that story
uh shortly and I'll paint that for you.
But across your sectors, you are seeing
most sectors in negative territory. Food
and beverage leading losses with losses
of 1.5 uh%. That is the biggest loss
across your sectors so far. The gain is
coming through consumer products up just
610%. Autos and gains of 510. banks a
little gain there of 2/10en of a percent
but again most sectors bar what around
eight uh are in negative territory uh so
far in the session tech also a little
softer by 510 of a percent within that
story
yeah food beverage and tobacco is the
weakest performing sector and Nestle is
in the mix there Nestle is the worst
performing sector on the stock in that
sector on the stock 600 so that is down
by just over 3% and all of this because
they've changed their CEO he was only in
the job for a year this personal
relationship he got into uh the the
board found fault with and so as a
result he is out and a new CEO coming in
there. So that's certainly weighing on
that particular sector. Uh to your point
Tom yeah twothirds of sectors in
negative territory only one/3 going
higher and the overall picture is really
quite flat for the stocks 600 isn't it
or down emphasis on the downside perhaps
then now so the footsy 100 down by two
ten of 1% and the stock 600 down by
2/10en of a percent.
Um upgrades and downgrades appear to be
having actually the biggest factor this
morning. So you look at the top of the
stock 600 from a points point of view.
Schneider Electric is the biggest gainer
from a points point of view. Upgraded
this morning by Deutsche Bank. Price
target 240 there. So little bit of
headroom still on that one. And LVMH uh
also the second biggest points gainer.
Those two stocks. Schneider's up by
nearly 3%. LVMH is up by 2.44. We wonder
why the French are outperforming. It's
nothing to do with politics. It's
nothing to do with anything else. It's a
couple of big upgrades seem to be the
big story there.
Luxury giving a lift to the caton there
to your point. Let's get more analysis
across these markets and bring in Ludic
Subhanah Aliance CIO and chief
economist. Uh Ludovic, great great
always to speak to you. Uh can we start
with guilts and and the and the the
redhead that's just crossed the terminal
in terms of the 30 year at 5.66 uh%.
What what do you what do you take from
that move?
I think I think the the Thank you first
for having me. I I think the situation
in the UK is quite uh dangerous at the
moment because of the return of the bond
vigilantes. I would say what is striking
is the fact that it took so long to
factor in this return of inflation into
the guilt. Uh now the situation is
indeed that uh I think forward guidance
on the fiscal side will be needed. I
think I hope that the bank of England
will also make sure that they
communicate well the pauses that is the
long pause that is about to come. But to
be fair I think it needs a bit more than
this. So what I'm looking for right now
is a way to reassure the markets on the
fact that the situation especially on
the headroom on the fiscal side the
so-called 10 billion of missed fiscal
space is something that can be
circumvented. So I hope that racial risk
actually communicates some messages on
this
and if you got that message Ludvik from
from the chancellor come that October
budget would would would this level look
attractive to you 5.6% or or above 5.6%
6%. Does that start to look attractive?
It is very attractive for a re-entry
point for guilt. Yes, let's be let's be
serious. Yes, it's very attractive.
Okay. And sticking with this theme then
Ludovvic, good morning. I mean the an
alternative view might be to say look
we've seen global yields going up in
lots of different geographies maybe for
different reasons and maybe that's worth
unpacking whether the UK is different to
the others but I look at Treasury yields
they're going higher. I mean are we sure
that these are domestic drivers pushing
guilt yields higher?
I think it's a mix, right? It's a mix of
fiscal dominance. I mean, most countries
have been trying to fight the debt
overhang and not being extremely clear
on the path of their central banks. It's
a mix also of international factors. I
think the uncertainty and the trade war
has been creeping into uh the cost of
financing for governments. Uh the
situation is very different from the US
to Japan to the UK to France. Let's be
very clear. There are some local
political crisis. There are some double
whammy on the twin deficits. That's the
case I think for the UK. There is also
the situation in Japan which is very
peculiar after it's a regime change
almost right and and to be fair the the
the guilt for example is also affected
by what's happening in Japan. So the
term premium effect internationally is
creeping into what's happening in the
Euro zone and what's happening in the
UK. But I would say what is fascinating
to me is the fact that uh it is creating
a big wall for central banks to pause
very fast at a moment where they haven't
reached their terminal rate and I think
that's a big warning sign for everybody
to understand that the wage inflation
pressure especially that we've seen in
the UK the trade situation which of
course is a long you know it's a longdue
topic when it comes to the UK because it
roots back to to the Brexit and the uh
trade friction that have been built in
to the UK economy are something that is
to be paid by government when they go to
look for financing. What is unfortunate
I would say is the fact that Yeah. Go
ahead. Sorry.
No, I was going to say so you think the
Bank of England should worry more about
inflation and and therefore signal a
long pause. Is that that your suggestion
a little bit? And what what should the
chancellor be saying at this point then?
What kind of fiscal reassurance, fiscal
guidance would you like to hear?
I would say on the on the UK the problem
is less on the on the tax side, but it's
more on the spending side. I think there
is not enough uh you know consistency
and I'm talking as a French right where
you know the the our prime minister is
trying to find 44 billion so it's a bit
the pot calling the kettle black so I'm
sorry about this but I would say that
for the auto budget I would be looking
for more reassuring figures when it
comes to the spending the spending
nature of the of the government budget
for the for the UK right that that would
be where I would be looking for uh some
reassurance there I think there are some
cuts that are needed right not on social
security in the case of the UK but more
on the general government budget
Is this why gold's up? Ludic, why is
gold up? What signal do I take from gold
being at record highs?
Yeah, I I don't know. For me, gold is
always for weddings. So maybe there are
more weddings out there. Uh but more
seriously, I would say financial stress
is everywhere. Look, I mean there is
there are flashing signs of recessions
in the US. We may not we may want to
look the other way, but there is a weak
job reports. Uh there is also this, you
know, political cut that may be coming
our way from the Fed. that's something
that will certainly create some form of
tension on what is you know the right
price for the 10-year US um and so
somehow I think people are looking for
an alternative and there is a long
movement of the dollar demise and I
would say you know I I would hope for
the euro to be even more up than this
but gold is up also because central bank
reserves especially in the emerging
markets are piling up you know gold yes
there is a there is something happening
on the trust on the machine uh in the US
and especially uh the monetary guidance
that the Fed may be giving in the next,
you know, 18 months or so for sure.
Ludick, what do you think of stocks
right now? Are stocks right to go up
because of inflation? And you could
argue that there's a hedge built into
stocks for inflation. That's one
argument. But stocks seem to go up
because the economy is doing well and
they seem to go up because the economy
is not doing well and the Fed's going to
cut rates. I are stocks ignoring too
much right now in terms of the risks.
It the stock situation is for me a story
of the cash that is available for
companies and the fact that they haven't
distributed everything to the
shareholders yet and so the shareholder
are ready to expect for even more uh in
terms of returns from from the stocks.
And so this is this goes back to the
2020 money that we've been giving all
these companies by pausing the economy
and flooding markets with public
spending and from uh debt monetization
and and monetary supply and I think
we're still paying the price now. I mean
when when you look at the deficit that
is piling up in my country for example
it's exactly the mirror picture of the
savings that has been built up by
families and companies in my country. So
I would say you were mentioning the
French stocks going up. I would say I
would be also very bullish French stocks
right now mostly because most of the
companies you've been naming this
morning are still full of cash and so
the shareholders are still waiting for
this cash to be given back to them. So
that that's we're still in you know in
the absorption of a major shock that was
COVID. This is something that is still I
think explaining what you just mentioned
which is the fact that stocks go up when
things go well and so stocks go up when
things don't go well which is quite you
know dramatic a smoothing of the cycle
and uh this is the the structural break
that we've been living through and then
there is also the fact that I would say
the trade trade tensions are coming down
slightly and some of these companies
that are listed they are benefiting a
bit from this trade truth which is maybe
not in the case of India maybe not in
the case of some countries but we can
see that we are converging to somewhere
where there is less less uncertainty and
less volatility when it comes to the
trade tensions. So that's something I
would say stock market likes because
some of these companies are extremely
exposed internationally.
So Ludvik, you you would buy the dip on
on French stocks. Would you would you
buy the dip on on French bonds?
Ah French bonds is a is a is a difficult
one. I would say I would uh French bonds
I think the re-entry points for us would
be closer to 90 beeps for the spreads
for the bund. So, I would say that we're
still at the place where we don't find
the OATS to be that attractive. I I I
don't we're a long-term investor. Look,
so my job is not to create
self-fulfilling prophecies on the on the
selloffs of the of the OATS, right? I'm
here for the long run. And you know,
I've seen the mess that has been the
communication last week. And you know,
you have that also in the UK with the
IMF. I mean, people talk and know
nothing about how the IMF works or how
they've never even bought or sold a bond
for the for for their life, right? So I
I'm I'm someone that tries to look
through the situation, but in the case
of France, I would say the political
risk creeps into uh the the the French
spread. There would be maybe a re-entry
point because there is a point where
would look a bit more attractive. And so
yes, I would buy the dip because I'm not
that worried about a French default. I'm
I'm from my country, I would say also
applies to the UK. So this is a moment
of of uh uh trans channel um you know,
friendship. I think we have an issue of
uh being um you know I would say
executing what we have to do when it
comes to good fiscal discipline and also
making sure that we are reassuring on
you know the the the strength of our
countries and I would say right now it
looks a bit erratic that's that's the
issue so there is no big risk out there
it's a more of a boiling of the frog and
so I would say as a long-term investor
you need to look through these type of
episodes
and thinking about the long end of
global bond markets then Ludvic as we
have been doing just there are how
concerned are you about Fed
independence. You suggest in your notes
that actually this be slightly
self-correcting because of the political
risk of running higher inflation. Is is
that what you think we shouldn't
necessarily overplay the risks then
around inflation and around the the long
end of bond markets?
Look, the the US is in a is in a big
hole, right? I mean for me the the first
issue is indeed I do believe that we
haven't seen yet the inflation come back
because of the trade tension and we
haven't seen for sure the inflation come
back because of the fiscal profigacy so
I would say that's why I expect yield in
the US to go even higher than this you
know and 10 year will be crossing 5% I
would say in the next six months or so
my major concern is of course the fact
that the Fed will be acting on the
shorter end of the curve if they deliver
what looks like a very political cut but
that would mean an even stronger
steepness of the curve because people
will be demanding even more on the
longer end. And so that's where the
backlash is stemming from. If we really
have a decision of the Fed that is due
to casting to the cast more than to the
numbers which was supposed to be this
data guidance, this data drive, we have
an issue because there will be a way
that it bites back at the end because
there will be a form of okay, what is it
that the Fed is really doing? Is it a
very politicized Fed now? And does it
mean that we can trust that the level of
interest rates is the right one for the
price of money? And I would say right
now I wouldn't cut if I were the
chairman of the Fed. I wouldn't cut for
the next six months for sure. I mean the
the US is still overheating slightly. So
there is no room to cut for me. And even
this week job report it's about supply.
It's not about demand. So for me there
is you know I understand the recession
risk and I understand how chairman
Powell looks at this stuff but I I think
the Feds should sit this one out which
doesn't look like they will. Yeah.
Yeah. Be interesting to see how the
market would react. Sto market will
react to a 5% on US 10s and b the fed
not cutting. Ludic great to catch up.
Always a pleasure. Thank you very much
indeed. Ludicr CIO and chief economist
joining us from Alian. Quick look at the
call six. See what's happening there.
Schneider's up on an upgrade. LVMH is up
on an upgrade. Ryal is ticking a little
bit higher. Tech is still weak which is
interesting. Nestle though the real
story on the right hand side down by
3.3%. Losing another CEO. Let's find out
what else is going on. Clay Ellis here
with the details. Good morning guy.
Let's start with luxury. So we can see
some green in luxury this morning for
both LVMH and Carring are up on the back
of that upgrade from HSBC. They both got
upgraded to a buy rating. Obviously the
luxury sector has been dealing with
tariff uncertainty and weak consumer
sentiment but it seems that it is
potentially turning a corner and that is
driving those shares up this morning.
Moving on to Schneider Electric, a
provider of electrical equipment and
cooling equipment to data centers. And
that particular end market has really
been driving performance for Schneider.
And it has been upgraded by Deutsche
Bank to a buy. That means that currently
it has absolutely no sale ratings, only
a lot of buyers and a few holds as well.
And that is driving the shares almost 2%
this morning. Moving on to British
American Tobacco, BAT. Um that this time
this is a downgrade. And this is it is
down 2% this morning but it got
downgraded by RBC. RBC said that profit
expectations for its new category
businesses were seriously overblown and
that is obviously a big problem
considering that those new categories
away from cigarettes are really part of
it of its strategy a key part of it
strategy moving forward. And finally
let's end with partners a private equity
firm based in Switzerland. It reported a
big rise in profit and that is off the
back of a massive increase in
performance fees and that is really
driving the stock this morning. We're up
4.3% for partners. Thanks so much.
Thanks Chloe. Chloe from our equities
team of course. Chloe Melly with a look
at some of the stocks on the move. Well,
bond markets on the move certainly FX as
a result on the move as well. We'll
continue to return to those themes as we
were just discussing with Ludovic
Subbrand a moment ago. But in terms of
the stocks that we're watching, Nestle
as guy was saying is certainly in focus.
So, coming up on the program, Nestle's
board names a new CEO after the former
CEO breached the firm's code of business
conduct. More on that next. This is
Welcome back. You're watching the
opening trade. We are 90 minutes into
the session. Actually, at a headline
level, things are starting to get a
little bit more interesting in terms of
what you're seeing uh on the screen
right now. You've got the stock 600 uh
down by 4/10 of 1%. The DAX is down by
710. What is interesting is the CAC is
outperforming on a couple of upgrades.
The Footsie is down as well. There's a
kind of mechanical process that's
happening right now as well with the
pound. You want to keep an eye on that.
The pound's getting dropped pretty hard
right now on the back of the 30-year
move. Switzerland's interesting, too.
There's there's no lack of excitement on
a single stock level this morning.
Actually, Nestle lower, the world's
biggest food company, sacking its CEO,
Lauren Frics, after he's only been in
the job for a year. This apparently due
to an undisclosed workplace affair.
Nestle has named um Philip Navati as
Navatil, sorry, who heads the Nespresso
coffee brand as his replacement. Allegra
Canelli joins us now from Zurich. What
do we know about the decision to get rid
of Mr. Fricks?
Hi Guy. Yes, as you said, he was
dismissed after only a year on the job
um after a non-disclosed romantic
relationship um with a direct
subordinate. uh we know that that person
has now left the company um and that
this um violated Nestle's code of
conduct and that the company is also
known for its conservative corporate
culture. So they took this matter very
seriously. Um we also know that FX even
after about 40 years in the company will
not receive an exit package. Um
so yeah.
Okay. So that's the the nature of his
departure. What about the challenges
that his replacement is going to face
Philipe Navatil? Um I was interested to
think about the tariff story and how
that impacts. We'll come to that in a
moment. But what about the other
challenges?
Yes. So this comes at a quite quite a
sensitive juncture for Nestle. uh in its
latest results um it posted weaker than
expected uh volumes but also due to
disappointments in China um and its
health science division. Um management
also guided for weaker margins uh in the
second half of the year and um risks to
the downside include as you said weaker
demand maybe as an indirect uh impact
from tariffs uh continued cost headwinds
as well and um yeah Nestle is taking a
hit on this news and uh over over his
tenure it's uh it's performed quite
badly. It's down around 17% uh until
yesterday's close and um it's still very
much a show me story for investors.
Okay. Yes, I was reading that the
Nespresso capsules manufactured very
much outside the United States and so
that's one area where the tariffs could
hit. Thank you very much Algra
Bloomberg's Algra Catelli with the
latest there. Let's pivot to other
corporate news flow and Deutsche Bank
shares have regained their spot in the
Euro stocks 50 7 years after being cast
out of the Euro area's main stock
benchmark. For more, we're joined by
Boom Bank's Yan Patrick Barnett from
Frankfurt. It's been a long journey back
then, JP, how has Deutsch Bank pulled
that off?
Yeah, absolutely. And it's an amazing
turnaround for the for the company,
especially if you keep in mind where the
share price was like 7 years ago,
trading around€5. We are now back above
30. Uh and also if you keep in mind that
when credit risk got in trouble,
Deutsche Bank was kind of the next in
line seen by many people of a bank being
uh as a as a potential major issue. Uh
but ever since they installed Christian
Sing as the CEO, he made the right
decisions. He he improved the the bank's
reputation both domestic and
international. He focused on the bank's
strength. Uh and so he did everything
right. Uh the the investor sentiment has
fully turned. Um, of course, he got also
a little bit of help by the end of
negative rates and let's say broadly
speaking that the economy was was
holding up and we never had a major
credit event or any deep recession. Uh,
but overall I think it's just like a a
great turnaround story and sometimes I
feel like the management is not getting
enough credit for for pulling this off.
Is the inclusion now changing a lot for
the share price? Probably not, but it's
just a very sweet sweet icing on the
cake.
Okay, the turnaround story being
rewarded for for for Deutsche Bank. So
Deutsch Deutsche and Seams in Stalantis
and Nokia out. Talk us through some of
the other moves then Yan.
Uh yeah I feel it's a little bit of a
reflection of what's what's happening
over the over the past year. We have
Seammen's energy like kind of a second
line beneficiary of the AI trade when it
comes to like installing the
infrastructure of energy that's needed
for all those uh data centers. uh and
then you have Stalantis uh and Nokia on
the other hand and also the third change
that happened where organics is
replacing Panoric Car where you see the
issues of the tariff war and the trade
war that is happening and these
companies feel the heat already in their
margins in their earnings and then
Stalantis of course I mean like
automakers in Europe really have a hard
time and sometimes it feels like they
are the new banks because nobody likes
their business model they're struggling
from competition from price pressures
from supply chain issues and now the
trade war on top of that Um, so I'm not
even sure if this is the last time that
we talk about like a European car maker
falling out of the club of Europe's most
valuable companies. So it's not a great
spot for them to be in right now.
Okay, this could be the canary in the
coal mine. Maybe more to come in terms
of automakers and their travails on that
front. Yan Patrick Barnett, thank you
very much. Indeed, the upside of course
for Deutsche Bank being included in that
benchmark guy.
Tony Blair was prime minister in 1998.
That was the last time. One year in that
was the last time we had guilt yields
where they are now. this morning. Yeah.
Um we haven't been this high this
century. These are fairly significant
kind of moments, you could argue for the
UK bond market right now. The pounds
getting dropped pretty hard this morning
uh on the back of this move that we are
seeing. And the budget still feels like
a long way away.
That's two months. We can't have this
conversation for two months. That is too
dangerous for UK assets. But it's it's
it's dangerous if there's nothing more
to say about UK assets in a two-month
period. There needs to be a different
narrative. I mean, maybe that's part of
what the uh the reshuffleling of of
people was about yesterday attempting to
create a guy was celebrating his 40th
birthday. I was in Magaloo for Mayora
aged 18. You pull up a 12-mon chart of
the 30 year right now and you're seeing
a 100 more than 100 basis point move 1%
move over the last 12 months on the UK
30 year. The bond vigilantes this
morning sharpening their teeth. Rachel
Re focus. They've had the reshuffle,
but they need an answer. They need some
clarity in terms of how to fill what
potentially a 50 billion
saying they need we need some fiscal
forward guidance and that means running
the budget slightly.
Just become better politicians and learn
how to play the game a little bit
better. I just wonder whether that's the
kind of the initial kind of story that
we should be watching out for. Actually,
I think before that comes, I wonder
whether the Bank of England will start
rethinking or will have to start
rethinking what it's doing in terms of
guilt sales, particularly at the long
end, whether or not actually that is the
first thing that maybe happens around
all of this and maybe that provides some
initial stabilization to get us through
maybe those couple of months that you're
talking about
because there's a process underway,
isn't there, the Bank of England to
rethink that and whether or not that
comes in September, September the 18th
of the Bank of England in terms of where
they start to reduce that issuance at
the long end and whether there's some
polit is there political pressure
And we were talking at the end of last
week, weren't we, about the uh, you
know, obsessing about the French spread,
but actually looking at the 10-year
guilt yield versus the French 10year.
You know, things not looking too too bad
for the French in that context by that
uh cross channel comparison. We'll talk
about France shortly. Coming up,
France's farright national rally says
it's ready for fresh elections as the
country prepares for the current
government's likely collapse. That's
what the uh uh that party has been
calling for for a while. We'll get the
update next. This is Bloomberg.
This is the opening trade. We are 30
minutes into today's session. So, the
modest gains that came through yesterday
have evaporated across the benchmark
European stock 600. You're currently
looking at losses of 4/10en of a
percent. Heavier selling over in
Germany. The DAX down 7/10. Bit of
upside though over in France. The cat up
210 of a percent. There's been some
upgrades for the luxury space. So the
likes of Elmes and Carring are gaining.
LVMH and Caring are gaining on the back
of that. The 3100 here in the UK though
down 29 points down 3/10en of a percent
with the focus as well on the guilt
market. So the UK with a selloff at the
long end. Guy
absolutely you do wonder whether kind of
the guilt market is going to force the
equity market to rethink what it's doing
right now. Let's talk about the
internals. Uh 144 up, 441 down. Yeah,
the downs definitely have it this
morning. uh in terms of where the weight
is. Actually, volume hasn't picked up.
We're waiting for the Americans to come
back. Has the kind of back to school
vibe this week. We need to get volume
moving a little bit to the upside. Want
to talk about some of the 52- week lows
today. Taylor Wimpy, take a look at
this. Looks like it's going to be out of
the footsy 100. Looks like we are seeing
interest rates going to stay higher in
the UK. That could be a story as well
that's going to weigh on the house
builders. You've got labor costs still
fairly high. There's lots of things
working against the house building
sector right now. And Taylor Wimpy is an
example of that. The chart certainly
telling the story. This is a stock at a
52- week low this morning down by 42 and
a half percent over the last year. Anna,
yeah, stocks catching some jitters then
today, guy. Perhaps from what's
happening in the bond markets and that
takes us to some of the other stories
that we need to know about this morning.
Gold hitting a record high as the
prospect of Federal Reserve rate cuts
and growing concerns over central banks
f uh that central bank's future gave
fresh legs to the rally. The precious
metal has gained more than 30% this
year, making it one of the best
performing major commodities. Monte
Deepipasi added as much as 750 million
euros in cash to its bid for Medio
Banker and lowered the acceptance
threshold, closing in on a plan to
create Italy's third largest bank. And
France's uh France's farright national
rally says it's ready for fresh
elections as the country prepares for
the current government's likely
collapse. Marine Le Pen, the party's
most prominent figure, and the party's
president, Jordan Bardella, are sitting
down with the prime minister, Fran
Beeru, this morning as he hold talks
with rival parties in a bid to survive
next week's no confidence motion. Um, so
so team, this is all about Tom, this is
a story we've been watching for some
time. Of course, with regards to France,
we've been thinking about the bond
markets and how wide the spread gets
here on these various outcomes and
whether we go over 100 basis points in
terms of spread against bonds uh is is
certainly in focus for markets. If we
are thinking about a some kind of
election scenario, a snap election, but
but I mean the prime minister and the
president have ruled that out at this
point. Yeah, the National Rally
according to Bloomberg's reporting from
the team over in Paris, of course,
Jordan Bardella, they are looking to lay
the groundwork for a potential snap
election. That is not consensus right
now, but it seems the far right looking
to capitalize on this, of course, and
they have said very clearly they're not
going to give their support to the
French prime minister and neither will
other members on the left as well. And
that is September the 8th. Talking about
the spreads, Ludvic Subra of Alios
talking to us earlier saying that a 90
basis point spread over the German
equivalent for France would be a buying
opportunity for him. Right now, the
French 10year is yielding 357. But to
your point with the comparison with the
UK, that looks pretty benign compared to
478 right now.
The story the story is in the UK's day,
which is kind of not what anybody
expected, but we're kind of that's where
the narrative is right now. But these
two countries look like they've got very
similar issues in terms of what is
happening. Uh certainly from a markets
point of view. Selim Michelle is the
head of investment banking for France,
Belgium and Luxembourg at Goldman Sachs
and joins us now uh joining us from the
Goldman Sachs leverage Finance
Conference which is taking place in
London. Selene, good morning. Thank you
very much indeed for your time. French
assets have taken a fairly big hit
recently. Do we buy at these kinds of
levels or do you think actually maybe
there's more still to come? What are you
seeing in France? Is France a good asset
right now, but just with bad politics or
does the bad politics make the assets
bad as well?
Well, good morning and thanks for having
me. Um, I do think uh France remains an
attractive uh investment uh area for a
variety of reasons. Um despite the
political turmoil and a vote of no
confidence uh on the 8th of of September
um domestic stocks have reacted uh well
to the current uncertainty. Um and I
think the country has a lot of uh
positives. Um so I I would just say you
know uh eight of the top 20 market caps
in Europe are French you know ranging
from NVMH to Airbus. We have a very
strong uh uh banking system. Uh so we as
as a firm we remain very very committed
to the region. You know we as you know
have opened an office uh and moved uh
400 people on the ground and uh we see
also a pickup in activity u you know in
the M&A uh market in uh yeah
in in H2. So um I remain quite positive
despite uh the u headlines.
Yeah, it the headlines do make it
difficult, I would have to admit. Sim,
what are you hearing from your
customers? I This is Goldman Sachs. You
talked to some of the biggest names out
there. What are you hearing back? What
What's the vibe at the conference? What
are you hearing on either side of the
the channel at the moment about what
business is telling you about how they
are feeling?
Yeah. So look, I'm here at the uh
leverage finance conference. It's of
it's our 15th edition and uh investors
are very committed. You know, we we're
going to welcome shortly more than uh
1,500
uh uh people. There are 72 issuers uh
present this year and the markets the
debt to credit markets have never been
that open. So if you want to finance a
very large transaction, the money is
there, it's available. uh there's no
reason uh why not the market wouldn't be
uh uh functioning. So the the political
uncertainty is obviously a concern but
it's not a showstopper for anyone who
wants to uh do something big in the
current M&A market whether it's on the
corporate side or the LBO uh side. The
sponsor activity has been a little
slower uh this year but corporates are
very very active.
So so the good morning to you Seline. So
you you don't think the pol the politics
really puts a a a dampener on those
kinds of deals because if you're
thinking about some of the deals that
people are waiting to see maybe private
equity spending more money in France or
maybe deals within the telecom sector
all of these might rely on a positive or
benign political backdrop.
Yeah. Um well I I think I think the the
the the I I think we will the the
investors will proceed because um we've
seen four different prime ministers over
the last 18 months. Um and I I think
investors particularly financial
sponsors need to deploy money within a
period of like uh five years after
raising their funds. So in in France
alone we expect about uh something like
20 billion of new transactions coming to
market. I know the first half of the
year has been dominated by uh
refinancings, demand and extends uh
dividend recaps more than new
transactions, but we think that it's
about to change. We see more IPOs coming
uh in September. Uh you've probably seen
u SMG, the the Swiss uh online um uh uh
retailer digital company being uh IP ITF
this morning. Um Stada has also traded.
So uh I'm positive about the outlook for
the next uh 3 to 6 months.
Yeah. Is there a move we're seeing in
some parts of Europe, Selene, a move
toward take privates? Are are you seeing
that in France or is it all about the
M&A? Is it all about sorry the IPOs for
you?
So the the tech private activity depends
very much on the legislation. France has
not been the most active country for uh
public to private deals. uh the UK has
been much more um active. Uh so but what
we've seen a few um what I expect uh
will dominate the deal flow in the next
uh quarter is really large exits from
financial sponsors that need to return
liquidity to their LPs. Uh we've seen a
a unfortunately a drop in fundraisings
over the last uh few years and in order
to for fundraising to go back up LPS
need to see some capital back. So that's
going to put pressure to rotate some
assets like we've seen in startup.
Um going back Selene, good morning to to
to your point about the headcount that
you've built out in in France and of
course we saw that accelerated after
Brexit. Is there is there any sense
given the political turmoil? Is there
any sense of regret amongst other firms,
yours or others? You've repeated that
that France remains a good investment
destination, but are you getting any
sense from other firms that maybe
there's there's a bit of a pullback?
there's a bit of regret about about
putting so much headcount into France or
or or do the plans remain on track?
Yeah, I don't see any regrets. This is a
question I get very often. But uh again,
the structure of the market needs to be
taken into account. You know, France is
a country where, you know, you have
energy independence. You know, nuclear
infrastructure is a very important
infrastructure in Europe. you have very
very large global corporates um that are
active across uh across the world. The
the country is very protected from the
impact of US tariffs. Um and uh there's
a diversity of clients that is uh
unmatched in the rest of Europe, you
know, ranging from Sanui in healthcare
to uh Schneider in electrical equipment.
uh not to mention you know the big
luxury and beauty uh giants that are
carrying Hermes, LVMH, L'Oreal. So
there's no scenario where you can ignore
that market and that's for the upper end
of the corporate side. But is there's
also a very very active ecosystem of
mid-market companies. 90% of the GDP
growth comes from uh small to mid-market
companies uh that create employment that
create uh innovation uh we are blessed
to have also a number of unicorns in
France ranging from like Dr. to back
market so
and choose France or government has has
pushed a very pro business agenda so
that's why I remain quite long uh the
French economy I don't think anyone can
ignore this market in today's world
yeah and you you point to some some real
and objective strengths there on on
September the 8th though uh Seline what
would be the best outcome for the for
the markets do you think
you mean in terms of uh outcome for the
vote of no confidence at the end of of
the week.
Yes.
Or the end of this week.
Exactly.
Well, best outcome is stability. I mean,
for anyone to make a strategic decision
or, you know, a long-term investment
decision, you need stability. So, in an
ideal scenario, you want France to
continue to reform itself. You know, we
have a very uh big amount of deficit.
you know we ranked number three in the s
size of deficit in Europe. So uh a real
a real effort needs to be made on uh
public spending. Um we need efficiency
gains as well uh to be to remain
credible visav our European uh partners.
So but but stability is really
important. So um the best outcome for
the markets uh is really you know no
change of government and continuity in
uh the effort that the Frana Bayu uh
government has started in order to
resolve uh the public uh deficit and uh
and hopefully you know pass the 44
billion of savings that have been
announced. um difficult to predict what
will happen because you know the center
right and uh the current government have
only 220 seats at parliament. So they
don't have the majority. They need other
political parties to rally and align
with that strategy. Um and that's a
question a question mark on whether you
know uh they will be u successful but
continuity is very important for these
uh investment and uh strategic
decisions. So that that should be the
best outcome.
Okay.
Okay. Silly measure on the needs for
stability and the prospects of maybe a
pickup in deal activity in the second
half out of France. Goldman Sachs, head
of investment banking France. Thank you
for your time. Coming up, Euro area
headline inflation forecast to edge
slightly higher in August. We'll find
out what it means for the ECB next.
We'll also of course bring you back to
what's happening in the guilt markets
and the bond markets generally sovereign
bonds selling off pretty aggressively.
That is the story of the markets right
now. Stay with us. This is Bloom.
46 minutes into the session this Tuesday
morning and equities are beginning to
feel the sort of sense of gravity that
are being felt elsewhere in markets. Uh
you're seeing pain in the pound. this
morning pain in the guilt market that's
manifesting itself now in the footsie
100 which is dropping fairly hard uh
you've got actually the French market
which has been in positive territory on
some upgrades this morning names like
Schneider and LVMH also now into
negative territory back to school with a
bang it seems this morning maybe for
European equity markets and bond markets
and foreign exchange markets gold is
apparently still looking good um so we
can at least park that one for the time
being but yeah it's not looking not
looking good unlike what is happening in
the in the in the football
UK assets UK assets. Oh, come on. You
got
UK assets selling off money moving into
English football.
Yeah,
because you got some
Tom's an Arsenal fan. I think we should
just we just need to set expectations
here and talk about what is happening
and not spend too much time on the
Liverpool.
Not spend not spend too much time on
Liverpool and that free kick. But
Liverpool led it in terms of the the
Isak acquisition. English Premier League
absolutely smashing all expectations in
terms of the transfer window. more than
three billion has been spent. That is
more than the German league, the French
league, the Italian league and the
Spanish league
put together in terms of this Tom. But
do you want to talk about spending
Liverpool spending for
leave me alone? Liverpool spending uh45
million pounds. So that's almost double
what Chelsea have spent 28 which is not
small 285
285 million and and to your point this
is compared to all the European leagues
combined is is is more than all that.
The vast numbers then highlighting why
the Premier League continues to attract
overseas investors. And speaking to
Bloomberg last month, Sulford City
co-owner and of course Manchester United
legend Gary Neville told us the American
buyers in particular see big
opportunities.
I think when you talk about American
ownership specifically, I think they see
real value uh in English football clubs
because of the cost of buying sort of
franchises and and sports projects over
in the US. So I think when they look at
actually sort of uh English football and
the reach of English football globally
is enormous um and they look at the
price tags that are associated with
clubs and think actually it's really
good value and presents good growth
opportunities in the future.
I think Garren Neville was getting at
something as well which yes the English
Premier League is firing on all
cylinders but this is also going back to
that front page of the economist a few
weeks ago poundland. It's cheap. M it's
cheap and there are also nice cash flows
here. So I can make another point around
private credit where there are cash
flows in the future and that's what
transfer fees are because they're not
all paid on the day that the transfer
happens. I read with interest these
these these these fees come later
del into sport here. This is
these these fees come later and this
creates an opportunity in credit
markets. So which I think is a nice
Bloomberg angle on this story. Apollo
where yeah there were there were various
there were various players in this
market um get providing access access to
lowerc cost credit as a result of these
future cash flows.
Apollo to launch a $5 billion sports
investment vehicle as well. That's
another story that brings it back to
markets just to make everybody feel
comfortable.
Okay. Now I'll make everybody feel much
more comfortable and tell you what's on
the daybook today. Euro area inflation.
Uh that's coming up at 10 a.m. UK time.
Uh we're going to hear from the ECB a
little bit later on. We get ISM
manufacturing data. uh construction
spending data as well. Uh Euro Euro area
headline inflation is expected to tick
up a touch in August with a jump mostly
explained by base effects in energy
prices. Let's get a preview of what's to
come with Bloomberg's Alex Vber who's
with us this morning. So Alex, set us up
for this inflation print. I was looking
at the the Waco function on the
Bloomberg terminal tells me that we're
still in having that conversation about
the ECB achieving its target. So 2%
roughly is what we're going to get
today.
Exactly. So the consensus estimate at
the moment is for a slight uptick to
2.1%.
But does seem to be a close call. We
also have a bunch of estimates on a
terminal uh that predict a stable
reading of 2%. Neither of those outcomes
is going to change the narrative a whole
lot, which is that inflation is probably
going to hover around that 2% threshold
for the coming months before dipping
below that early next year. So for the
moment, the ECB sees itself in a very
comfortable spot. Um some of the
components could tell an interesting
story. We services inflation has played
an important role um recently because of
uh wage pressures that could keep
inflation stubborn in that part of the
economy. But overall ECB officials have
also been really confident on that front
that this whole inflation shock of
recent years has worked its way through
the system already.
Why does some people therefore some
economists still believe that rate cuts
are possible from the ECB? How divided
is opinion?
So the issue here is that the ECB
predicts um a dip below the 2% target
early next year. And what the ECB also
needs to avoid is a situation like we
had before co that inflation becomes
persistently too low. So at some point
if it looks like this dip below 2% could
be longer than expected or deeper than
expected then officials could be tempted
to go for a cut to really make sure that
inflation comes back to 2% and that we
don't get into a situation where um
companies consumers start expecting
lower inflation because that could
become kind of self-fulfilling and then
you find yourself in a situation where
you have to talk about even more rate
cuts and even QE or something like That
Alex, thanks for the setup. We'll look
for that data a little bit later on.
Alex Bever joining us out of Frankfurt.
Pounds down this morning. Guilts are
guilt yields are up. Crisis territory.
Are we there yet? Valerie Titel joining
us around the desk. How we feeling?
Another bond crisis on our hands. It
seems like the bond market is facing a
September test and failing on September
2nd. We are having quite a substantial
move in the long end yields. It's not
impacting just Europe. You know, you see
it also in the Treasury market. 30-year
yields in the Treasury market very close
to 5% uh as I speak. But really, this
was all kicked off by the UK. It seems
like the market is re-evaluating this
government reshuffle as something that's
very very negative uh for UK assets. But
the price action is completely bad. I
mean, you saw the guilt open at 8 a.m.
and then cable dumping by nearly 1% in a
matter of 20 minutes after. that is not
some kind of price action that brings
you any comfort uh to the UK market.
Wow. What what what puts a cap on this
then at this point with the yields up
five basis points on the 30 right now.
A very good question. I think obviously
uh the bond market is hoping for some
reigning in of government spending
that's already proved very difficult for
the UK and it's now looking at other
markets that are suffering. You know, we
had a headline that she's number two
over in Japan is stepping down. More
political instability out in Asia. We
know that the bond vigilantes have been
all over JGBs. Then you have to tie in
uh the French situation as well. We
could have a government collapse less
than a week away with that no confidence
vote on Monday. This is not good news
for the beginning of the month of
September.
Makes the holiday feel like a long time
ago.
It does. It really does. I mean, I I did
not think today was going to be as
interesting as it is, but I'm sitting
here sweating looking at the price
action of the long end of the curve.
Yeah. The French 30-year yield rising
above four and a half% for the first
time since 2011.
That's not a good year to be comparing
things with.
It's actually my first year on the
trading floor, Anna. I learned a lot of
things.
You would have learned a lot of things
about European debt during that period.
Of course, the problems with European
debt are not in the places that they
were in 2011, but still that this is a
market. This is a bond market that is
nervous across Europe, but it might, you
know, maybe it starts in maybe it starts
in the UK, maybe it starts in France. I
mean, it's just it's just it's just in a
lot of Europe right now. certainly in
those two geographies.
And perhaps that's what gold was trying
to tell us earlier this morning. We hit
fresh record highs for gold above 3500.
And perhaps it's not because of those
Fed cuts. Perhaps it's more because of
deficit concerns really coming.
If you read the DIO piece this morning
that you're all over,
you're very nervous. And this is having
a huge impact on FX. We shouldn't like
the pound is down is is down by 1%. The
euro is also slumping now. And that's
been quite resilient to any concern
around bond markets, hasn't it, with the
French drama. That's down half a
percent. And the yen is down a whole
percent against the dollar.
What happens if we get through 5% on a
US 10 year and stay there and move
beyond?
The dollar becomes a haven.
Yeah. But what do equities do? Is that
is that because everybody's been waiting
for something that cracks equities.
Yeah. I know you guys were spoken to in
the previous hour. She says the bond
market is going to be the thing that
that is going to rock this equity market
rally. We know that the Trump
administration is at least sensitive to
uh long-end yields reaching 5%. that was
made very obvious a few months ago. I I
don't know what the next step in that
story is.
The Fed doesn't control the front end.
Exactly. The Fed does not control the
longevity curve that is very much to do
with supply and demand. And they've
already passed this spending bill which
entails more government spending, more
bond issuance to come.
And there's a theme out there. There's a
view being pushed by some don't worry
too much about Fed independence because
the markets will be the guardrails in
terms of the freakout. And that is
happening now. So is this the guardrail
moment? If we get above 5% on the 10ens
and more than that of course on the 30s,
is that where the Trump administration
wakes up and thinks we are going too
hard on this Fed?
Well, I think look, you can also view it
from a different viewpoint tying in Ray
Dallio's warning on debt is that perhaps
we're just entering a new paradigm where
government debt is so large that you
need to have the central bank and the
Treasury working together. Look at how
it's happened here in the UK. You have
the UK government wanting uh to cut
spending and then uh the the the central
bank undoing it all in one blip.
That is that is an interesting
conversation. We will continue that one
tomorrow. No doubt. Valerie, thank you
very much. Bloom be Valerie Tyel. That
is it for the opening trade. The pulse
is up next. I'll be taking you through
these negative stock markets. We're down
by 7/10en of 1% on the stock 600. A lot
of action in bond markets. Yields are
higher. Currencies lower against the
dollar. This is Blingberg.