[Music]
news makers and market movers.
This is the pulse with Francine Lqua.
Well, good morning everyone and welcome
to the pulse. I'm Francine Lqua here in
London. Now, Chinese President Xi
Jinping has met with Russian President
Vladimir Putin in Beijing ahead of a
major parade to mark 80 years since the
end of World War II. Now, Xi is expected
to speak at the event that will also see
the North Korean leader Kim Jong-un in
attendance. Well, joining us now is
Minman Lo, our China correspondent in
Benin. Minman, thank you for joining us.
So, let's start with that meeting
between Xi and Putin. What exactly was
discussed?
Yeah, it's a very important meeting
because uh first of all, President C
again addressing Putin as his good
friend. President Putin saying that the
relations between the two sides are now
at an unprecedentedly high level. But
what's important is the number of deals
they have signed. Sinua, the Chinese
state news agency, saying that about 20
bilateral agreement documents have been
signed covering areas like artificial
intelligence, education, health, uh many
different sectors, scientific research
as well. But the most important one is
the energy deal between the two sides.
Gasprom, which is Russia's stateowned
oil gas company, agreeing to build this
power of Siberia 2 pipeline to China.
This is something that's been in talks
for many years, but China has for a long
time been reluctant to sign onto this
deal because they didn't see it as, you
know, an urgent need to step up their
gas purchases from Russia. They didn't
want to over rely on a single country.
But this is in some ways a lifeline to
gas from which has seen its profit
really been hit after the Ukraine war.
This gas pipeline will help it recoup at
least a third of the gas pipeline sales
to Europe and redivert it to China. So
certainly a very big deal. Both sides
also agreeing to step up the flow of
natural gas to the through the existing
pipeline as well. Interesting to see
what this means then for any potential
talk between Trump and see of a trade
deal between the two sides because Trump
has been threatening China of more
tariffs if it continues to buy or
increase purchases of Russian oil.
So men North Korea's Kim Jong-un will
also be at the military parade but
India's Modi won't. Do we read anything
into that?
Yeah, I mean for Kim Jong-un it is a
very important meeting for him. One of
the rare opportunities for him to share
the same stage as the big brothers
President Putin presidency. Look at that
image is something that would be very
iconic that I imagine will live on the
internet forever. The three of them
standing above that days of the portrait
of Maong below them on Taman Square. Uh
and it's an important meeting for
President uh for for Kim Jong-un. Just
ahead of this, he visited a new missile
factory in North Korea and unveiled a
new development program for its
intercontinental uh ballistic missile.
And really that is in defiance of the
pressure from US and South Korea to end
its nuclear program. And here he is
going to stand on the same stage as CN
Putin showing that he has friends in
important places even despite some of
these pressures from other western le
nations like the US. But for Modi, it's
an interesting balancing act that he has
here. Right. Yesterday he met with um
with Putin uh and it was a very good
meeting. He said it was an excellent
one. They had discussed a lot of issues
from improvement, increase in trade to
uh to security, cultural issues and all
that. Uh but at the same time, he's not
going to appear tomorrow to be standing
alongside these autocratic leaders. Not
a good look for India, which is one of
the world's largest democracy or at
least it prides itself on that. So, Modi
perhaps hedging his bets a little bit,
wanting to put a bit of distance even as
he tries to cozy himself up to some of
these other countries in the region uh
as he tries to counter the impact of
terrorists from Trump.
Minman, thanks so much. Minlo there, our
China correspondent. Now, US payroll
data on Friday poses a near-term risk
for markets as traders wait to confirm
bets on a Fed rate cut this month. At
the same time, your area inflation data
also on traders radar as they watch for
any potential surprise with policy
makers widely seen keeping rates steady
next week. It comes, of course, has
global longdated bonds come under
pressure, 30-year guilts rising to the
highest level since 1998. Well, joining
us now is David Zhan, head of European
fixed income at Franklin Templeton.
Thank you for joining us, David. I mean,
there's look, there's a lot going on.
kind of looking at the UK actually the
30-year and it's out of control putting
extra pressure on the PM Kirst to to get
his act together.
Well, I think um it's not out of
control. I mean, we're seeing RA yields
rise and that's kind of bit exciting for
uh for the market. I just think that
we're seeing that, you know, yields are
becoming, you know, just gradually going
higher in the UK. They're need to do
something on the fiscal side um to
either raise taxes, cut spending or
both. Um and we're not really seeing
anything about that. We have to wait
till the autumn statement. And so I
think the moves that um Starmer made
yesterday by bringing some different
people into number 10 is kind of making
people question who's actually in charge
of the fiscal side.
So David, I mean, first of all, what do
you expect from the autumn statement
because, you know, the chancellor has a
very narrow path to land the plane and
last time it didn't quite land where it
should have.
Well, I think there will probably be
more of the same. I think they're going
to try to, you know, live up to their
manifesto that they don't want to raise
the three key taxes even though
realistically that's probably what they
need to do. um they need to cut spending
but they probably won't do that because
they don't want to do that. So I think
they'll be looking for little things to
try to um you know move taxes higher but
without breaking out of their promises.
So between finding savings and raising
raising taxes I mean is there a danger
like what do bond speculators or or
I think bonders continue to go up in
yield. I don't think they believe that
this is actually going to fix it by
trying to put these band-aids on it. I
think it's going to be more we need to
do see a more radical cut in spending
and a broader tax increase in order to
bring the budget into balance and if
that doesn't happen bond market will
just continue to see yields move higher.
At what point does it become very
uncomfortable for the government?
I think it's already starting to become
uncomfortable but I think that um you
know we've always talked about 6% on the
um 30-year which you know a while ago
didn't seem that far seem a long way
away but we're getting quite close now.
So I think above six is when people
start to question is this actually a
viable.
So what do you think? I mean do you
think we'll touch six in the short term?
And I think with by the end of the year
we'll be above six. Yeah.
And and what happens again because it's
also psychological level. Yeah.
Are we going to see radical reform for
the government or do people just get you
know come out of the UK?
Well I think it's going to be it's up to
um the government what they decide to do
and I think they're going to continue to
try to just um plug along and not really
address the problems. But if the yields
get too high, eventually they will have
to do something much more substantial
which will include spending cuts.
Yeah. And I know it's not radical, but
still I mean, you know, when you look at
these moves, the you know, the yield
climbed to the highest level since 1998.
I mean, it's not nothing.
No, absolutely not. I guess what I'm
saying is it's it's quite orderly like
we're moving, you know, 5 10 basis
points a day. It's not like we're seeing
big gaps. It's orderly. And I think
that's what, you know, like the Bank of
England would be saying, well, it's
being very orderly, so we don't need to
do anything.
How do you see France?
Well, France is another country. It's
having its own issues. Um, we see that
the government is going to fall probably
next Monday when they have the no
confidence vote. Seems pretty certain
that that won't stick. Um, and then
really becomes what happens next. Are
they going to um just uh appoint another
PM? That's possible. Do they go to
elections? That's possible, but I think
we'll get back a very similar parliament
to what we have now. So, that doesn't
really fix anything. Um, what we really
need to have is to have new
parliamentary elections and presidential
elections. But again, Macron isn't going
to step down. His term ends in 27. I see
no reason why he should step down 18
months early. So, I think that they will
just continue in this kind of stumbling
down the road. But, you know, the credit
of France is still good credit. I mean,
it's going to be, you know, it's a
double A minus. It's probably going to
be a single A after the credit rating
agencies go through their um moves. But
I think from that perspective, it's
still a very solid country within the
EU. So, it has the backing of the EU,
which I think is also quite important.
David, I mean overall it does feel like
the bond market is playing a bigger
role. Like as far as I can remember,
it's always the bond market that, you
know, got rid of governments that
weren't doing the right things in their
eyes. I mean, have they become more more
powerful now?
Well, I think the bond markets have
always been something that people have
um looked to for information. Um I think
that they given that we're no longer in
a QE era where all yields are
suppressed, I do think you can have much
more um push from the bond market of we
want radical change.
Is there anything that you buy right now
in Europe?
Um we actually like the kind of 5-year
part of the curve. Um in most countries
like Spain or Germany, we think those
offer good value. Um but overall we're
short duration. We believe yields in
Europe are going to continue to rise.
Treasuries, what do you do with
treasuries? Well, treasuries are a
tricky one because I think that um you
know, you have a central bank that um
you know, they've kind of said they're
going to cut that later this month, but
that's all down to the data. So, we'll
see what happens there. Um but I don't
think they're going to go through a lot
of cuts. I mean, they may cut 5075, but
we're not seeing, you know, the markets
pricing, I think, 150. We don't see that
degree of cuts coming because inflation
is still very much, you know, um being
sticky in the US. David, I mean there
was a lot of talk about, you know, an
auction in the US going badly at some
point and and and it being the day of
reckoning and that would definitely be
disorderly. At the same time, you know,
the president is using a lot of these
tariffs as a way to
to pay for what he's trying to do, for
example, with the big beautiful bill.
So, does it even out?
Well, I think that's one of the things
that we have to see how much money
actually comes in from the tariffs
because so far we've seen tariff
receipts go up massively. I mean,
compared to anything we've seen in the
past and that does actually help the
fiscal balance of the US. It's not
enough probably, but I think that that
could actually make your budget deficit
not look quite as bad. And so maybe
people will be more relaxed about it.
Japan,
uh, Japan, I think we see yields
continue to rise there. We've seen the
long end move up massively. I think the
one area that people aren't as focused
on on Japan is that Japan is actually
one of the big investors in global bond
markets um, by investing outside of
Japan. And now that their 30-year is,
you know, three plus, you know, and the
curve is so steep, it actually doesn't
make as much sense for them to move
marginal new money out into the US or
into Europe. They may stay more at home,
which also will have an impact, I think,
on other bond markets.
So, given all of these complexities, is
there one thing that you're selling
right now?
Uh, the long end of the curve. We still
think the long Yeah. And Europe, we're
short and guilts, we're short. We think
the long end of the curve should
continue to rise. Uh, because we have
big fiscal deficits that need to be
funded. Um and how is that going to be
done? It's going to be have to be termed
out because still overall yields are
relatively okay um for all these
countries.
So interesting. David, thank you so much
for coming on. David Zander, head of
European fixed income at Franklin
Templeton. Now Nestle has sacked its
chief executive Lauron Frerier after
only one year in the job due to an
undisclosed workplace affair. The Swiss
food giant named Philip Navatil who
heads the Nespresso coffee brand as his
replacement. Well, we reached out for
Freche for a comment, but now let's
bring in Jennifer Kreery, our global
business reporter. Jennifer, thank you
for joining us. I mean, this took many,
many people by surprise. What more do we
know about the decision to fire Fre?
So, we know a few things. So, we know
that there was an internal investigation
from the company and this was after the
matter was raised to the company via an
internal platform called Speak Up.
the company didn't f couldn't
substantiate the allegations after that
and so they brought in an external
council to conduct another investigation
and that is the result that we see
today. So Lauren FS uh had an
undisclosed relationship with with a
colleague um and uh and you know this is
a company that's known for its
conservative culture and the chair has
said that this is against Nestle's
values and to really drive that point
home um he won't receive an exit
package. I think reality is here this is
not an uncommon uh situation for
companies. We see CEOs being ousted
because of these unsubstant um uh
undisclosed relationships uh before the
most prominent example I think is in
2019 when McDonald's CEO Steve
Easterbrook uh left the company after uh
an undisclosed relationship with a
colleague and most recently earlier this
year Cole's CEO was also uh ousted after
directing millions of dollars of
business to a romantic partner. So not
an uncommon scenario and this is the
outcome that we see today. So what are
the challenges for for his replacement?
Yeah, I mean it's it's the same
challenges um to be honest. So it's
really trying to boost that share price
that we know has been sluggish for for
many years now. It's it's down almost
20% over the past 12 months. Um and one
of the big challenges will be tariffs of
course we know that particularly with
their US products. Nestle uh said that
the majority of them uh the products are
made um domestically with the with the
exception of Nespresso capsules that are
made in Switzerland and now subject to
those 39% tariffs. Interestingly now um
uh the new CEO Philipe Nabretil um he uh
headed the Nespresso division so
hopefully he can bring expertise now to
that. Um uh what's something that's very
interesting as well I think is important
to highlight is that Natal is a very
young CEO so he's he's under the age of
50 and so investors can be um looking to
see you know whether or not he has a
particularly long tenure going forward
very young under 50 you've cheered
everyone up who's watching Jennifer
thank you so much Jennifer Greer there
our global business reporter on this
pretty extraordinary extraordinary story
from Nestle now coming up we're live at
the Goldman Sachs CME credit and
leveraged finance conference. We'll
discuss credit risks, M&A, and much more
with Christina Munz, Goldman's global
head of credit and asset finance. That's
next. And this is Bloomberg.
I do think uh France remains an
attractive uh investment uh area for a
variety of reasons. Um despite the
political turmoil and the 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.
Well, that was Sadin Masha, head of
investment banking for France at Goldman
Sachs, speaking to us at the Goldman
Sachs, the MBA credit and leverage
finance conference. Now, let's return to
the conference and US companies are
poised to boost their debt levels to
help fund a $1 trillion wave of
acquisitions, a reversal after years of
scaling back their borrowings. Now, the
Fed moving closer to a renewed round of
rate cutting with executives gaining
more confidence that stock market
volatility has eased. Now that's
improving conditions to make
acquisitions. Well, I'm delighted to be
joined by Christina Minis, a global head
of credit and asset finance and head of
global acquisition finance at Goldman
Sachs. Christina, as always, thank you
so much for joining us. So, what are the
most important and appealing
opportunities in credit right now?
Well, first of all, Francine, thank you
for having us. This is a very exciting
time for us. It's our 15th year doing
this conference, our most successful
conference with over 1,600 people
registered. So, thank you for being
here. In terms of credit, some of the
main themes that we continue to see,
we're excited about remain investing in
technology and what's going on broadly
in digital infrastructure and
infrastructure at large. There's a
significant need for capital deployment
over the next decade. And we believe the
the private credit markets are very well
set up to support that as long as um
private credit continues to grow.
So when do you see a meaningful return
in M&A?
So Selene, I think my partner was on
earlier, a couple of statistics. The
first half, global M&A was actually up
40 um uh 40%. Now it was slightly softer
in Europe. But what's interesting about
M&A today, um we've seen about 34% of
that volume driven by um our sponsor
community. that's off of a 40% kind of
historical number. So I do believe the
return of sponsors into the market in a
meaningful way is going to be super
important and we've started to see see
signs of that in the US. Just last week
there was a very large take private
announced um and so we're quite
optimistic that sponsors are going to be
very active coming into the end of the
year and into 26.
Um Christina I mean GS has been involved
in private credit you know for quite
some time. The broadly syndicated market
is coming in at pretty tight spreads.
What role do you see for private credit?
Can it actually remain competitive?
Yeah, I continue to believe very
strongly that both markets are going to
coexist and are very important to each
each market. So there will be many use
cases where private credit steps forward
and really can help clients access
capital. And then to your point in
strong markets with very strong credits,
the broadly syndicated markets are far
more competitive in terms of pricing. So
both markets will grow and I think
there's a very strong indication that
that's going to support our client
franchise. And again at Goldman Sachs
because we have one of the largest asset
managers and as you mentioned we've been
in private credit for over 30 years were
quite supportive of both markets and we
think um there's a lot of opportunity
for investors in both.
I mean there there's some when you look
at the financing in the leverage credit
you know space there has been some some
quirky moves certainly when it comes to
the junior portions of it do you see
that as as a quirk can we see more of
those moves
I think there's still credit dispersion
and I think you still see some
interesting opportunities in the triple
C part of the market whereas the single
B and double B market is really rallied
to you know all-time tights and so I
wouldn't call it quirkiness it's just an
opportunity for investment for those
that really want to go down the risk uh
the risk uh profile.
Where do you see secondary trading in
the private credit space heading?
You know, I think there's it's going to
continue to be a topic for conversation.
There are many um people that believe
it's going to be very very very publicly
traded. There are those that believe it
will not be publicly traded. It probably
lands somewhere in between. It's a
significant market and over time I think
players will want to look for some some
secondary liquidity. So, I'm kind of in
the middle and I think it's actually a
constructive development if we see some
liquidity in that market.
Christina, overall, how do you see these
markets actually changing in the next,
you know, 12 to 24 months given
everything that we're seeing, but also
reshaping of the global economy?
So, I think we are all pretty much set
that we're going to have Fed easing and
so that's going to have a, you know, an
impact on spreads, but all in yields I
think are going to be very attractive. I
think the macro setup is actually
relatively constructive. I think there's
some concerns about the the consumer and
potentially the impact of tariffs and
what that might do to earnings, but that
certainly hasn't cropped up yet in any
results. And so overall, I think credit
is going to continue to be a very
important attractive asset class and I
think the deal industry is going to
continue to pick up. Now, we've been
talking about that for a number of years
now, Francine, the return of M&A, but I
would I I I think what we see in terms
of corporate boardrooms and sponsor
willingness to transact is really is
really picking up. So, we're quite
optimistic about the end of 25 going
into and and into 26.
And Christina, is this opportunistic M&A
because valuations are good or because
there's a genuine appetite for some of
these companies to become bigger?
I think it's a combination, Francine. I
think you see um certain companies that
are taking advantage of, you know, great
credit markets and going after
acquisitions that have been potentially
off the table in the past. And so we've
seen some very interesting strategic M&A
pickup. I think we've seen um sponsored
portfolio companies probably spend a
little bit more time around dividend
recaps and now maybe it's time to think
about actually monetization of the
entire asset. And then I also think um
you know what's going on in
infrastructure is is really incredible
which is going to drive significant
financing um driven by what's going on
in AI, computing, data centers, etc. And
so I think the Goldman Sachs research
that just came out for 2027 has a $300
billion number in data centers. We're
pretty excited that we've got a very
strong market share in that financing.
We've got number one CNBS market share.
Um and we've also got involved in almost
40% of the transactions that have been
done around data centers. And so while
that's not necessarily M&A driven per
se, there's a significant amount of
capital raising that's going to be
required over the next, you know,
decade.
And Christina, maybe final question on
Europe. Are you optimistic about what
Europe can offer both in the M&A but in
the credit space in the next few years?
Quite optimistic. And I think one
dynamic back to infra for a second that
is unique in Europe or more unique in
Europe is that with Basel the Basel
rules just coming out a lot of the
infrastructure financing historically
has been handled by banks and I think
with the stricter capital regulations
it's going to push more of that
financing need into the capital markets
which again I think is going to be a
very attractive opportunity both for our
issuing clients and our investing
clients.
Christina as always thank you so much
for joining us. That was Christina Munz,
a global head of credit and asset
finance, head of global acquisition
finance at Goldman Sachs. Now coming up,
President Trump proclaims India is
offering to lower its tariffs to
nothing. We'll get the details next.
Also, quick check on the markets because
there's a lot moving not only in futures
in the US, but that UK 30-year bond
yield climbed to the highest since 1998.
I mean, the other thing we're talking
about is of course um when you look at
pound, that's also moving. Economists
predicting the UK will soon need to
raise taxes to keep on the right side of
the government's self-imposed fiscal
rules due to concerns over basically the
fiscal outlook and the structurally
higher inflation. You can see uh
sterling 13404. You can see the dollar
index 1,27
and then look the big one we always look
at the US 10-year yield at 42731.
This is Bloomberg.
Good morning everyone and welcome to the
pulse. and Francqua here in London and
these are your top stories. China's Xi
Jinping welcomes old friend Vladimir
Putin to Beijing as North Korean leader
Kim Jong-un arrives to join his two
allies at a military parade. The UK
30-year guilt yields rise to the highest
level this century while the pound
extends its decline against the dollar
piling more pressure on the Chancellor
Rachel Reeves as she prepares her autumn
budget. Plus, major shakeup at Nestle,
the world's largest food company, ousts
its chief executive over a workplace
affair just one year into the job. Now,
President Trump says India is offering
to lower its tariffs after the US
slapped a 50% levy on a wide range of
imports, punishing India for its
continued purchases of Russian oil.
Well, we're now joined by Ros Mat, our
chief Asia correspondent. Ros, thank you
for joining us. So, has India actually
corroborated this?
Well, no, India has not corrupted. So
it's interesting to see that you India
has not said very much about this at
all. So is this Donald Trump front
running an announcement again he's done
that before with India. We've seen he
announced a ceasefire between India and
Pakistan instead of India announcing it.
Um so India's very quiet on this or is
this Trump trying to open the door
somehow to India? Is this a gesture in a
way you know him saying that India is
claiming this on trade? Is this him
trying to get a conversation going again
about trade? uh because of course
tensions have been high between the
countries over trade over India's
purchases of Russian energy. Is this
maybe the first sign that Trump is
willing to also renegotiate these 50%
tariffs that he's put on Indian goods? I
mean obviously there's an incentive here
to find a solution. It's a significant
impact on the Indian economy but also
you know Narendra Modi the prime
minister has to come off strong to his
people. So can the first gesture in this
case come from Donald Trump? interesting
to see what happens next but for now no
particular word from India on it.
Uh and Ross at the same time the
Brazilian president you know convening a
virtual meeting of BRICS countries next
Monday to discuss discuss trade policies
from Donald Trump is this you know a
countermeasure to what Trump is doing.
Well it's interesting to see that this
they're having this BRICS virtual
meeting right after of course the
Shanghai cor cooperation organization
meeting in China. another grouping
really of the global south and perhaps
it's to get a bit of a readout from that
meeting. Um it's also to show again that
these groupings from the global south
are rising in influence and and and
wanting to have a seat at the table and
the bricks is certainly very much a part
of that because it's also a grouping
that's caught Donald Trump's eye. Uh, of
course the Brazilian leader says it's
not about trying to take an anti-US
stance, but Brazil and the US have been
particularly tense when it comes to
trade, but it's probably about just
showing again these countries are
grouping together increasingly without
the US and they're wanting to show that
clout in all kinds of different ways.
So, it's probably more a telegraphing
exercise than anything else.
Ross, thank you so much as always. Ross
Mat there with the very latest on India
and the very latest on Brazil, our chief
Asia correspondent. Now, European Union
countries are also looking to plug any
remaining loopholes to ensure that
Russian gas will not be mixed into the
block supplies once a ban takes effect
by the end of 2027. Now, the change
would require importers to provide
evidence to prove that the gas has not
been produced in Russia. Our very own
Oliver Crook is in Berlin. Ali, good
morning. So, the EU's looking to fight
back against Russia more generally by
closing loopholes for Russian gas flows.
Is that really possible?
Yeah, and we know how difficult that's
been, Francine, even on LG, the LG
tackers, the Russian shadow fleet and
crude oil and getting them basically off
the high seas. It's been something
that's been very challenging for the
Europeans to do. What they're trying to
do now is to exert the control where
they believe that they can, and that is
through the pipelines that still flow uh
natural gas into the European Union,
namely Turkstream, which is the uh the
large pipeline that goes through Turkey
um and delivering a lot of gas primarily
historically from Russia. Now, what the
Danish presidency of the EU, they're now
holding the presidency until the end of
the year, are hoping to do is to
basically change the language so that in
the future when Europe bans the gas
fully from Russia from 2027, that there
can't be any sort of circumventing where
you basically have these uh gas flows
that go through a third country, then
they go into Europe, but actually their
original providence is Russia. So what
the Danes would like to do and like to
see is an adoption of language that
basically says that any gas that flows
through the Turk stream pipeline we will
presume originated from Russia unless
there is an explicit proof that has not
come from that. And again this is the
Europeans and their effort to exert
control where they can over this Russian
gas story. That being said, Francine, we
watched the news wires just a couple
hours ago. The Russians are now going to
be building this new pipeline to bring
their natural gas into China. So, you
know, there is no sort of shortage at
the moment for Russian gas buyers,
particularly uh India and China, though
the Europeans are trying to again close
off the avenues that exist still that
they control.
Investigations oi continue into the
alleged Russian jamming attack on the
plane carrying of course European
Commission President Ursuland Lion. Do
we think this is you know basically
Kremlin intimidation?
That certainly is the takeaway from the
Bulgarian authorities who basically said
that every indication that they had was
that this was the Russians and the the
targeting the plane and jamming the GPS.
That being said, Francine, about 85% of
flights that fly over Bulgaria
experienced some kind of interference,
but some of the more in-depth reporting
around this has said that basically many
of the other planes that were in the air
around um hers did not have that
experience. And as a consequence,
Francine, they had to land the plane
using just paper maps. I'm glad at least
pilots still know how to uh read paper
maps in this day and age. But that comes
in the broader context of what we see
there uh Francine which is Vanderline
doing that massive tour around Poland
around Bulgaria visiting sort of
ammunition factory and all about
military buildout on the eastern flank
of NATO to defend against Russia. And
the broader context here is of course
what we've been seeing across the world
where Vladimir Putin is invited to
Alaska on the red carpet. He's seen
there in China holding hands with Modi.
He's having a bilateral today with Xi
and we'll be attending a military parade
with the North Korean leader um and in
China tomorrow. This is all very sort of
disconcerting, very uncomfortable for
the Europeans. The next flash point we
need to be very careful about. We need
to watch Francine. There are two terms
I'm going to familiarize you with. It's
the quadriga um and the zapad. These are
two military exercises that are going
simultaneously. one led by the Germans
with the Latafians and the Finns to
basically demonstrate how they would
defend theoretically the Baltic Sea um
if there were some kind of attack that
will be going on in midepptember while
at the same time joint Russian and
Bellarussian military exercises over
Bellarus that'll have about 13,000
Russian troops about 30,000 troops
within Russia also supporting that
exercise. So both of these happening at
the very same time, Francine, and
there's been a lot of warnings from the
Germans, the head of the military that
there shouldn't be any escalation from
the Russians, and that this is really
for the Germans to deter and to suggest
basically how they would defend against
Russian aggression, but that would be
another sort of area where you could see
some sort of fireworks over the next
couple of weeks. We're expecting both of
those drills to begin uh in
midepptember.
Ollie, thanks so much, Oliver Crook
there in Berlin. Now, France's far-right
national rally says it's ready for fresh
elections as a country girds for the
current government's likely collapse.
Now, the prime minister, France, is
holding talks with rival parties in a
bid to survive a no confidence motion
set for next Monday. Now, for more,
let's bring in Alan Katz, our Paris
bureau chief. Alan, so good to see you,
even if it's another government crisis.
What do we expect from the meeting going
on right now with the national rally?
uh in a word or two words I guess not
much. Um the national rally has been
super clear that they have no plans uh
to come to any form of agreement with
Bahu. They're really only even going to
this meeting they said out of you know
courtesy for Republican institutions. Um
and they plan to vote against this
confidence motion on Monday. Now it
looked quite looks quite likely that
that will be forced to resign on Monday.
Uh the question then come is what comes
after as you said that the national
rally says they're preparing for
elections. President Maul uh who will
have the decision afterwards whether he
wants to appoint a new prime minister or
he could dissolve parliament and call
elections but certainly for the moment
many people expect him to try to find a
new prime minister to name rather than
calling elections and certainly that
that's not calling elections is not his
first choice uh even if maybe he is
forced to do that down the road. I mean
if you were to call elections do you
have any polls what would actually
happen and Alan at the same time is
there any chance that Bou could survive
this
so I guess to answer the second part
first it's politics right so the answer
is is there any chance there's there's
always a chance in politics you never
know really how things are going going
to play out now every opposition party
has said we are going to vote against
this confidence motion and the way these
motions work as opposed to a no
confidence motion in French, as you
know, has two different words, so it's
easier to tell the difference. In
English, it's a little bit hard to to
understand the difference. But the way
it works is you have to get a majority
of those people actually voting to
support your motion for it to pass. Um,
without some of these opposition
parties, namely the National Rally or
the Socialist or some other relatively
large opposition party by who seems to
have very little chance of getting this
passed. But that said, you know, parties
can change their mind. They can change
their mind at the last minute and and so
maybe he could survive. It seems
unlikely, but it's it's always possible.
uh in terms of what then uh happens in
terms of who might win an election.
Again, just to to repeat, MON doesn't
have to call election. He can just name
a new prime minister. If he were to call
an election, as you know, Francine
France has a two round uh electoral
system, so it's really hard to predict
who would win, but we do have some polls
on who might come in first in the first
round of voting. That doesn't mean that
they would win, but in terms of the
first round, the national rally would is
looks to get around 31 31 12% of the
votes in the first round. That
definitely puts them well ahead of any
other group uh in France. Does that mean
they would get a majority? No. Um you
know, again, it's very hard to predict
sort of the eventual outcome because of
this complicated two- round system. Uh
but they they are the leading party were
it to come to an election.
Thank you so much, Alan. As always, Alan
Katz. There are Paris bureau chief of
course bracing for a big day next
Monday. Now, the Spanish prime minister
has said that he will complete his term
even if his latest budget proposal is
rejected. The minority government of
Pedro Sanchez has struggled to pass
major legislation over the past two
years and has rolled over its 2023
spending plan. In an interview with the
Spanish television, Sanchez dismissed a
suggestion that he will call snap
elections. And the UK Prime Minister
Kier Starmer has announced a raft of
changes to his team at Downing Street in
a bid to reset his government. It comes
amid growing criticism over the Labor
government's handling of asylum issues.
Well, with us now is Ruth David, our
London bureau chief. Ruth, so so good
speak to you. I mean, look, the
reshuffle is, I guess, you know, we
start September, it's like back to
school, but what does it mean for for
the prime minister standing?
There seems to be a sense that the prime
minister is trying to rest control or
for Downing Street to have more say in
what the Treasury does. And you know, if
you've seen the government ministers out
this morning, I bet Cooper was doing the
rounds to talk about the asylum policy
and where the government stands on
immigration. And the question that she
got was does this mean that Rachel
Reeves role is being undermined because
the prime minister has created this new
role of chief secretary and brought in
Darren Jones who was working very
closely with Rachel Reeves. He's got in
Minu Shafi who you know from her tenure
at Colombia but who's also a former Bank
of England deputy governor and there
seems to be a definite sense that he
wants to take back control of that
economic narrative for the UK and it
couldn't have come at a more opportune
time because look at how UK government
debt is doing right now right yields are
at the highest in 27 years on long-term
government debt Some of that, of course,
has to do with a global move higher in
bond yields, but it has to do with
concerns among investors about what this
government is doing on public spending
and the government deficit.
Yeah, it certainly does feel like it's a
general movement, but actually extra
pressure like the cherry on top for the
UK just because they're they're worried
that he's not 100% in control. What do
we know about Nigel Farage? How big of a
threat is he? So I think there is
definitely a sense that the narrative
over the summer over the months of
discontent and on wei that you felt in
the UK in the summer Nigel Faraj managed
to control it right I mean he came out
with all of this talk about when I come
to power which is we're talking 5 years
down the line right 2029 at the latest I
will deport 600,000 immigrants now those
numbers take on more significance
because the number of immigrants coming
through the small boats from France is
at the highest this year, right? 29,000.
We're looking at all these asylum hotels
in different councils becoming kind of
these points of little fires everywhere.
And that discontent that people not in
London maybe, but in the rest of the UK
are feeling. He seems to be effectively
tapping into it. Just look at the
opinion polls, right? Since April, he
has maintained that lead over Labor and
he seems to be controlling the narrative
in a more forceful way for better or
worse than Kamar is. Is there a danger
that actually labor I mean a lot of
people are not quite sure what labor
stands for right now that you know Nigel
Farage's popularity drives basically
Starmer's policies to the right and and
is is that why we're seeing so much
being talked about in immigration?
I think there is some risk of that. I
think there is absolutely some risk of
that. I think there is a sense that
Stama is caught between, you know, on
one hand wanting to tell the UK public
that I see your concerns. I mean, you
know, we're talking about public
spending has always been an issue with
the councils and now you have asylum
hotels and now you have the council
saying we don't have the resources for
this. But on the other hand, it is also
the wealthy in the UK. We have been
writing all year round about how the
wealthy are being driven out of the UK
because of these tax increases. You
know, there were all these trial
balloons being floated in the UK press
over the summer about do they increase
taxes on banks, do they increase taxes
on landlords and just look I think it'll
be very interesting to see reforms
party conference later this week because
the understanding that we have is that a
lot more lobbyists a lot more business
firms representatives are going to be in
attendance. So it seems like business
feels like well the you know the winds
of change are moving in this direction
and maybe they feel a bit discontent
with what the UK government is doing for
them. We've been writing so much about
what Astra said about investing in the
UK about other companies moving their
listings to New York about the IPO
market struggling. So this sense of
discontent is not just the UK public,
right? It's also the investors, the
markets, companies, even banks maybe.
So Ruth, overall, I mean, I don't know
how you would describe I mean, I guess
the the autumn budget is going to be
extremely difficult, right, to to to get
it right because of all these nuances.
So a lot of the pressure will will
really be on that and it'll move bonds
and actually investors like will it will
be a red flashing point for them.
100%. I mean, and you saw that moves
that Rachel Reeves made earlier in the
year, right? When you talk about welfare
cards and the winter fuel payments and
all, all of those she had to push back
on. I think there is now also a question
of when this government says something,
will they follow through with it? Right.
So, Reeves is in a really hard spot.
Ruth, thank you so much Ruth. David
there, our London bureau chief, the very
latest on the UK. Now coming up, a
fintech revolute launches a secondary
share sale at a valuation of $75
billion. We'll discuss that and of
course other news from the banking
sector next. This is Bloomberg.
Welcome back everyone. The conversations
that matter, the insights you need. This
is the pulse and I'm Francine Lacqua
here in London. Now, Euro area headline
inflation expected to tick up a touch in
August with the jump mostly explained by
base effects in energy prices. Now, to
get a preview of what's to come, let's
get straight to Zoe, our economics
editor in Frankfurt. Zoe, uh, thank you
so much. I do feel like it's back to
school week. walk us through the
expectations for this important
inflation print.
Yes, that's right. We get the inflation
print at the top of the hour and it's
expected to see a slight uptick to 2.1%.
So that is the August reading. In July,
we had a reading of 2% which we know is
bang in line with the ECB's target for
inflation. um 2.1 isn't really something
to get very upset about and especially
with these base effects, but still it
does support those people on the
governing council who say actually we
don't need to do any more rate cuts
either this year and definitely not next
week but maybe not this year at all.
So what are the expectations for ECB
cuts? Markets and economists are
divided. It's not the first time so this
happens but it's it's still by quite a
lot.
Yeah. So um markets obviously have the
option of being more nimble and being
able to change their mind without
looking being embarrassed whereas
economists once they make a call there
does need to be a major shift typically
for them to change their call. So
economists think there'll be one more
cut and that likely in December. Markets
say it's possible that there'll be no
cuts at all this year. And we've had
some speakers this morning. Um, one of
them, um, Isabel Schnabble, who's now
probably the most pronounced hawk on the
governing council, also said, "The ECB
is in a comfortable position. No more
cuts needed." On the other hand, we had
one of the more dovish central bankers,
the Lithuanian central bank chief,
that's Gdim Shimus, and he said that
it's more likely than not that there
will be another cut. um October could um
be discussed and he made some cryptic
comment with um Santa Claus might come
with scissors which could be understood
that the December we would see a rate
cut.
I mean that's what I mean the Santa
Claus comment I have to say got a lot of
investors bewildered. Um what I mean
what are you expecting in in terms of
data points or actually some of the ones
that have been most vocal Zoe what are
you expecting in the next couple of
weeks that could be a gamecher
so obviously those PMI numbers always
are a bit interesting PMIs aren't that
reliable an indicator but what does um
influ what they do show are trend
changes and now I know France has been
in the headlines a lot in France we
actually saw a revision yesterday and
saw that um manufacturing that factory
gauge actually was above 50 for the
first time in ages. So there's growth
again in France and overall those growth
numbers are something that given
inflation is so steady right now growth
could be the thing that even though it's
not the mandate that the ECB that ECB
policy makers look at more carefully now
Zoe thanks so much as ever Zoe Vice
there our economics editor in Frankfurt.
Now, Bloomberg has learned that Revolute
has kicked off a process for employees
to sell their shares in the company at a
$75 billion valuation. Now, we
understand that staff at the Londonbased
firm will be able to sell as much as 20%
of their stakes. The deal really cements
Revolute's status as one of the world's
most valuable fintex. Now, let's get
more on this story and other news from
our the banking world with Paul Davies
from Bloomberg Opinion. Paul, thank you
so much for joining us. Now, this
brought me back to your piece back in
June where you talk about three big
fintexs, Revolute, Clara, and Monzo that
will all public, you know, probably go
go public in the next year or two. And
Revolute is is expensive, but it's
coming up trumps.
Yeah. No, it is. I mean, it's like this
is a huge valuation like more than uh we
were thinking about even when I wrote
that piece just a couple of months ago.
I mean, $75 billion is about 19 times
last year's revenue. Uh I mean so
Revolute is one of the faster growing
out of the out of the fintech
particularly in the UK. Um and it has a
more diverse source of revenue than than
many of these others. Um and it also has
better profit margins. But even if it
grows another 50% you know this year
that's still like 13 times uh it its
revenue. So it's a huge valuation.
Well I mean I guess the concern for
these fintexs right is that you grow you
grow you have a customer base. But then
how do you turn that into into money? So
is it offering more services? And then
is it a problem of trust? Is it a
problem of actually banking licenses?
I think that I mean I think there's two
routes that Revolute is pursuing and
like many others. Uh one is you know the
core thing is to try and get your
clients to treat you as their main bank
where you have your salary paid in and
you pay all your bills from and all that
sort of stuff. you know, the the the um
the the jury is out really whether
that's working for any of these uh
companies yet. And then the other route
is just to keep expanding into new
markets. And you know, we've had news
stories about how Revolute is looking to
acquire maybe a small bank in the US to
get a banking license there to help, you
know, a expand its services and b to
make it a more familiar name so that you
know possibly it can list there in the
future. So I mean when you look at you
know the banking world in general are
the big banks threatened by some of
these fintexs or could we see you know
M&A and when you look at M&A in general
for example in Italy. How does how does
that fit in with fintex?
Uh well so I mean with the fintex first
I mean with some of these companies it's
getting a bit late. I mean Revolute now
at 75 billion is worth more than
Barclays is worth even though Barclays
makes you know way more uh revenue like
$39 billion of revenue compared to
Revolute. uh there's a lot of the
services that they do that the banks can
just you know do themselves uh they can
you know mimic them and copy them and
some of the big US banks are doing very
well at doing that and some of the UK
banks are doing that as well but then in
terms of you know other M&A it's kind of
it's it's much more traditional and as
you say you mentioned Montipashi we've
had a kind of an increase in the offer
there for Media Banker this morning
they're obviously struggling to get
enough you know buy in get enough you
know shares tendered to make that even
with their kind of relatively low hurdle
of 35% to take to facto control. So,
we'll see. We've got another week to see
if shareholders are going to go for that
deal or not with the extra little bit of
cash.
Okay, we're all a bit obsessed with
Italian banking, but I also need to work
on my fantasy football Premier League.
So, let's move on to uh Paul's other
love football. English Premier League
clubs have smashed the summer transfer
record, spending more than3 billion
pounds on new players. A record 125
million pound move took Alexander Isaac
from News Castle to Liverpool, capping a
window that saw Liverpool spend £415
million, the most ever by a single club.
Now, the vast numbers highlight why the
Premier League continues to attract
overseas investors. Speaking on the
Pulse last month, Gary Neville, the
Salford City co-owner and menu legend,
told us 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.
three billion pounds, right, in in new
players. That's a lot of money, Paul.
It's a huge amount. It's like 50% more,
I think, than this time last year. Um,
but you got to look at it in terms of
like the revenue growth of all of these
clubs. We've got more clubs in the
Champions League this season than
before. 6.6 billion pounds of revenue
across these clubs, I think, for this
season just finished, rising to possibly
6.9 billion for the season coming.
That's from Deote Football Finance
numbers. So, you know, there's a lot of
money flowing through these businesses.
Okay, fantasy football. Your number one
player.
My number one player has to be uh
Mohamed Cudis from Tottenham Hospital.
There you go. You've heard it here
first. Of course, this is not investment
advice and we can't guarantee you you
have a good fantasy football Premier
League uh team. Up next, a Bloomberg
brief. They'll talk about treasuries and
of course guilts. Not sure about
football. This is Bloomberg.