Trump Threatens 35% Japan Tariffs, ‘Big Beautiful Bill’ Faces Resistance | The Opening Trade 07/02

Trump Threatens 35% Japan Tariffs, ‘Big Beautiful Bill’ Faces Resistance | The Opening Trade 07/02

>> GOOD MORNING FROM LONDON.
WE ARE AN HOUR AWAY FROM THE OPENING TRADE.
HERE’S WHAT YOU NEED TO KNOW. DONALD TRUMP SAYS HIS JULY 9
GLOBAL TARIFF DEADLINE WILL BE EXTENDED.
THIS AS HE RAMPS UP CRITICISM OF TOKYO AND SINCE HE’S
DOUBTFUL A TRADE DEAL WILL BE REACHED WITH JAPAN.
PRESIDENT TRUMP’S MULTI TRILLION DOLLAR TAX BILL
NARROWLY PASSES THE SENATE BUT NOW FACES RESISTANCE IN THE
HOUSE. STARMER WEEKEND. LEGISLATION PASSES PARLIAMENT
BUT ONLY AFTER ITS MAIN PROVISIONS ARE DROPPED, LEAVING
A POTENTIAL 5 BILLION POUND WHOLE IN THE GOVERNMENT
FINANCES. KRITI: LET’S KICK IT OFF WITH WHAT THE
MARKETS ARE DOING, POSITIVITY HERE.
FOR CHANCE OF 1% ON EURO STOXX 50 FUTURES AREA FTSE 100 HIGHER
BY TWO TENTS OF 1%. TAKE A LOOK AT THE 10 YEAR
YIELD. 424. 117, 118 ON EURO-DOLLAR.
LOTS OF GREEN ON THE SCREEN. WE DIVE INTO THE DETAILS.
THE COUNTDOWN TO THE OPENING TRADE STARTS RIGHT NOW. >> NO.
I’M NOT THINKING ABOUT IT. I WILL BE WRITING LETTERS TO A
LOT OF COUNTRIES. I THINK YOU ARE JUST STARTING
TO UNDERSTAND THE PROCESS. WE’VE DEALT WITH THIS.
I’M NOT SURE WE WILL MAKE A DEAL WITH JAPAN. I DOUBT IT.
GUY: THE PRESIDENT SPEAKING ON AIR
FORCE ONE, LOOKING TO MAKE AN EXAMPLE OF JAPAN.
THE QUESTION IS, WHAT DO YOU DO WITH THAT? DO YOU IGNORE IT?
HE CHANGES HIS MIND FAIRLY OFTEN.
THE PROBLEM WITH THAT THEORY IS THAT WE ARE APPROACHING THE
DEADLINE. IT’S COMING TOWARDS US QUITE
RAPIDLY, THE EIGHTH AND NINTH. THAT’S NEXT WEEK.
DO WE NEED TO START TAKING IT MORE SERIOUSLY AND MAY BE PRICE
AND MORE DIFFICULT SCENARIOS? WE ARE NOT DOING THAT QUITE YET.
THERE ARE MOVES IN ASIA BUT NOT BIG ONES. KRITI:
THE MARKETS ARE EVEN BLINKING I. 143 HANDLE.
THE STORY ON MONETARY POLICY. I THINK THIS IS INTERESTING
BECAUSE IT SPEAKS TO THE IDEA OF THE POTENTIAL CALM IN THE
MARKETS DRIVEN BY THE IDEA OF EXTENSIONS IS NOT ON THE TABLE
AT ALL. WE ARE STILL LOOMING TOWARDS IT.
FIVE DAYS AWAY FROM A JULY 9 TARIFF DEADLINE WHICH IS
INTERESTING BECAUSE IS MAKING A COMPLETE 180 ON THE JAPANESE
TRADE DEAL AFTER THE NIPPON STEEL DEAL WAS GREEN LET.
THAT WAS INES ADJUSTER OF GOOD FAITH TOWARDS JAPAN, ONLY TO
HIT ROAD BUMPS. ANNA: PRESIDENT TRUMP SAYS HE LIKES
THE PRIME MINISTER OF JAPAN. NOT SURE HE’S GOING TO GET A
DEAL DONE. YOU COULD TELL A MORE ALARMIST
STORY. LOOK AT WHAT’S HAPPENING TO THE
NIKKEI. THERE IS SOME EVIDENCE THAT
TRUMPS TARIFF RHETORIC IS STILL HAVING AN IMPACT ON MARKETS.
THERE IS THAT. U.S. STOCKS DROPPED AT THE TIME THAT
HE MENTIONED THIS. IT’S CLEAR THAT THIS HAS THE
POWER TO MOVE MARKETS. TO YOUR POINT, MAYBE WE ARE NOT
AT THE ENDGAME. GUY: REMEMBER THE DROP WE SAW WHEN
THE TARIFF STORY KICKED OFF? WE HAD A BIG BOARD.
WE WERE TALKING ABOUT NUMBERS THAT DON’T MAKE ANY SENSE.
MARKETS DROPPED DRAMATICALLY. THIS DOESN’T FEEL LIKE WE ARE
SEEING THAT AT THE MOMENT. WE ARE APPROACHING A DEADLINE
THAT COULD REIMPOSE SOME OF THOSE SAME NUMBERS. ANNA:
YOU’VE HAD INTERESTING CONVERSATIONS ABOUT THE EXTENT
TO WHICH THIS IS NOT PRICED INTO MARKETS.
YESTERDAY, YOU’RE TALKING TO MORGAN STANLEY SAYING, IF THIS
GOES TO 20% IT’S NOT PRICED IN. LATER ON, JP MORGAN GUESS WILL
SAY, HIGH SINGLE DIGIT, LOW TEENS IS WHAT THE MARKET IS
PRICING IN. WE ARE STILL AT A PRICE
DISCOVERY MODE. GUY: WE ARE BROADENING OUT INTO
SMALL CAPS. THE MARKET IS ROTATING INTO A
CYCLICAL TRADE WHICH IS AMAZING. LET’S TALK ABOUT THE BIG
BEAUTIFUL BILL. AND WHERE WE ARE TO GET AGAIN,
THIS IS AMAZING STUFF THAT DOESN’T SEEM TO BE TOUCHING THE
SCIENCE IN TERMS OF WHERE THE MARKET IS RIGHT NOW.
THE VICE PRESIDENT HAS TO BREAK THE TIE IN THE SENATE.
THAT’S AMAZING TO START WITH. IT COMES OUT OF THE SENATE.
IT’S MORE EXPENSIVE. SIGNIFICANTLY MORE EXPENSIVE
COMING OUT OF THE SENATE BUT IT PASSED.
NOW IT HAS TO GO BACK TO THE HOUSE BEFORE THE FOURTH OF JULY
WHICH IS FRIDAY. THE TIMELINE IS QUITE TRUNCATED.
SPEAKER OF THE HOUSE MIKE JOHNSON HAS THREE VOTES TO PLAY
WITH. THEY PROBABLY HAVE LESS THAN
THAT. THE FIRST THING THAT’S GOING TO
HAPPEN LATER TODAY IS IT’S GOING TO GO TO THE RULES
COMMITTEE. THERE’S A BUNCH OF HAWKS ON THE
RULES COMMITTEE. IT MIGHT NOT EVEN MAKE IT BACK
TO THE HOUSE. IT MAY END UP HAVING TO GO BACK
TO THE SENATE OR WE END UP WITH A SITUATION WHERE THE HOUSE AND
THE SENATE HAVE TO COME TOGETHER IN SOME SORT OF
CONFERENCE COMMITTEE TO THRASH OUT THEIR DIFFERENCES, WHICH
LOOKS DIFFICULT AT THIS POINT. THIS IS NOT A DONE DEAL BY ANY
STRETCH OF THE IMAGINATION. IT COULD GET HARDER FROM HERE
BECAUSE THIS THING IS MORE EXPENSIVE. ANNA:
ONLY JUST PAST THE HOUSE AND SENATE. NOW BACK TO THE HOUSE.
WILL IT PASS AGAIN? YOU MENTIONED THE HAWKS.
THERE’S ALSO THE OBJECTIONS ON THE OTHER SIDE OF THE GOP.
THOSE WHO ARE CONCERNED ABOUT THE CUTS TO MEDICAID. KRITI:
IT’S INTERESTING. THEY STARTED TO PUT IN PIECES
OF RURAL HOSPITALS AS ONE EXAMPLE TO ADDRESS THOSE CUTS.
HERE’S WHAT IT DOES AS WELL. LET ME GIVE YOU THE LOCATION —
BULL CASE. INCREASED COSTS OF 7 TRILLION
INSTEAD OF 3 TRILLION. A MASSIVE BUMP. IF YOU LOOK AT THE EXTENSION OF
TAX CUTS, THAT WOULD HAVE HIT THE BOTTOM LINE AND THE
SPENDING THAT CONSUMERS HAVE CONTINUED TO PROVE THAT THEY
ARE WILLING TO DO. THAT EXTENSION IS A POSITIVE.
IT’S ALSO TALKING ABOUT MONEY ALLOCATED TOWARD DEFENSE AND
ALLOCATION AT A TIME WHEN HE WAS TALKING ABOUT FULL —
PULLING FEDERAL CONTRACTS FROM DEFENSE SPENDING AS WELL.
ALTHOUGH NOT SO GREAT FOR BALANCING THE BOOKS OF THE
UNITED STATES, IT IS HELPFUL IN TERMS OF FISCAL STIMULUS WHEN
IT COMES TO VARIOUS SECTORS OF THE ECONOMY. GUY:
THIS IS PEACE AND SIRI. 5, 6, 7% DEFICIT INTO — IN
PEACETIME. ANNA: THE MARKET DOESN’T SEEM TO MIND.
IT MOVED ON ONE MONTH OF JOBS DATA. THAT’S THE MARKET FOCUS.
GUY: THEY KNOCKED POWELL WHICH IS
FASCINATING. HE WAS LIKE, JULY COULD BE ON.
THE MARKET WENT, I DON’T THINK SO. ANNA:
THE THINGS THAT ARE AND ARE NOT MOVING MARKETS IS A THEME WE
WILL RETURN TO. LET’S TALK ABOUT ALLOCATION OF
MONEY. THE U.K. AND THE WELFARE BILL YESTERDAY.
KRITI: VERY SIMILAR CONVERSATION. ANNA:
WE WILL BE WATCHING THE GILT MARKET IN 54 MINUTES TIME.
WE DIDN’T SEE A HUGE AMOUNT OF MOVEMENT IN THE POUNDS. THIS OPENS UP QUESTIONS AROUND
PHYSICAL CREDIBILITY, WHERE THE WHOLE IS FILLED, WHAT KIND OF
TAX RISES WE MIGHT BE TALKING ABOUT LATER THIS YEAR.
HOW DID WE END UP IN SUCH A PROCEDURAL MESS IN THE FIRST
PLACE WHERE CONCESSIONS HAD TO BE MADE SO LATE IN THE DAY?
WILL WE SEE CHANGES TO THE TOP TEAMS? GUY:
THOSE ARE RHETORICAL QUESTIONS. ANYWAY.
RACHEL REESE LOOKS LIKE SHE WILL PUSH TAXES UP.
CAN SHE STAY — CONSIDERING THAT WAS SUCH A BIG MANIFESTO
PLEDGE. CAN THEY DO THAT WITHOUT GETTING RID OF HER?
I THINK THAT’S A QUESTION THAT’S BEING WIDELY DEBATED.
STARMER IS ONE YEAR INTO HIS TERM. IF YOUR TWO DOESN’T LOOK
BETTER, YOU HAVE TO QUESTION HIS CREDIBILITY GOING FORWARD
FROM HERE. THE WHOLE IS BIG. OUR INCOME TAXES GOING TO HAVE
TO GO UP? THAT’S A REALLY TOUGH THING FOR
THEM TO HAVE TO DO. IT LOOKS INCREASINGLY LIKELY,
ONE OF THE BIG LEVERS OF TAXATION ARE GOING TO HAVE TO
BE PULLED HERE. ANNA: THEY MANAGED TO GET THE
INCREASE IN EMPLOYEE NATIONAL INSURANCE THROUGH BY TRYING TO
MAKE THAT STACK UP WITH THE MANIFESTO PLEDGES.
HARDER TO GET THE OTHER TAXES TO STICK TO THAT PLEDGE.
WE’VE ALREADY HAD PRIME MINISTER STARMER CAN SEE THAT
HE WAS REALLY DISTRACTED BY INTERNATIONAL EVENTS OVER THE
LAST 12 MONTHS. PERHAPS HE WILL HAVE TO FOCUS
MORE ON THE DOMESTIC AGENDA. AT LEAST HIS TRADE DEAL IS THE
ONLY ONE THAT HAS BEEN DONE, EVEN IF IT’S DONE… ANNA:
THE MARKET — KRITI: THE MARKET REACTION IS STILL
FASCINATING. ALMOST 138 IF YOU ARE GOING IN
TERMS OF THE DIRECTION. YOU ARE HAVING THE SAME ISSUES
IN THE U.S. AS THE U.K. IN TERMS OF THE ACTUAL PASSING
OF THE BILL IN THE U.K., TAX HIKES. IN THE U.S., TAX CUTS.
BOTH STILL DEALING WITH DEFICITS AND A LACK OF
MARKETING FROM. WE WILL SEE IF THAT CHANGES
TODAY. GUY: DO YOU WANT TO INVEST IN THE
U.K. CONSIDERING THIS? ONE OF OUR NEXT GUESTS DOES. THE CFO OF SANTANDER.
SANTANDER IS GOING TO BE BUYING TSP.
WHY IS THE QUESTION WE WILL BE ASKING OURSELVES AS WE HAVE
THAT INTERVIEW COMING LATER ON. DOES IT STACK UP?
JP MORGAN INVESTMENT HEAD OF STRATEGY WILL BE JOINING US.
MARIO SANTINO, THE BANK OF PORTUGAL GOVERNOR, IS GOING TO
BE JOINING US LATER ON. VERY WINDY THERE TODAY.
MAYBE THERE’S A WEATHER-RELATED THING GOING ON.
WE SHOULD TALK MORE ABOUT THE WEATHER BUT WE WILL SAVE THAT
FOR FRIDAY. IT’S GETTING COOLER. WE ARE ALL HERE FOR THE AIRCON
THIS MORNING. KRITI: WE ALL HAVE LOTS OF THOUGHTS ON
THE HEAT. LOTS GOING ON ON THE AGENDA.
LESS THAN AN HOUR TO THE GUILT OPEN TO GET 10:00 U.K.
TIME, 30 YEAR GUILD OPTION AS WELL.
WE WILL SEE IF THERE’S A READ THROUGH FROM THE EVENTS
BASICALLY OF THE LAST 24 HOURS HERE IN THE U.K.
YOU GET THE GERMAN DAWNED AUCTION.
ARE PEOPLE STILL BUYING DEBT OR THE LONG AND?
WE ARE GOING TO FIND OUT IN TERMS OF EUROPE. U.S. ADP NUMBERS, A PRECURSOR TO
JOBS NUMBERS WE MAY GET DOWN THE PIKE. GUY:
WE WILL GET THEM TOMORROW. QUITE EXCITING.
WAIT TO SEE WHAT HAPPENS THURSDAY. TODAY IS WEDNESDAY.
WHAT ELSE DO YOU NEED TO KNOW THIS WEDNESDAY MORNING?
DONALD TRUMP SAYS ISRAEL HAS AGREED TO CONDITIONS FOR A 60
DAY CEASE-FIRE IN GAZA WHICH WILL BE PRESENTED TO HAMAS.
TRUMP ADDED THAT HE HOPES HAMAS WILL TAKE THE DEAL, WARNING
IT’S NOT — WARNING AT THAT IT DEAL WILL NOT GET BETTER, ONLY
WORSE. THE IS REALLY PRIME MINISTER
BENJAMIN NETANYAHU IS SET TO VISIT THE WHITE HOUSE MONDAY.
THE U.S. HAS STOPPED THE LIVERIES OF
ARTILLERY ROUNDS AND AIR DEFENSES TO UKRAINE AFTER
REVIEW OF MUNITION STOCKPILES. THE WHITE HOUSE SAYS IT FOLLOWS
CONCERNS THAT THE U.S. WEAPON STOCKS HAVE NOW FALLEN
TO LOW. THE DECISION COMES AS UKRAINE
STRUGGLES TO REPELLED RECORD MISSILE AND DRONE STRIKES FROM
RUSSIA. THE FRENCH PRESIDENT EMMANUEL
MACRON AND VLADIMIR PUTIN HAVE AGREED TO COURT MAKE THEIR
APPROACH ON IRAN IN THEIR FIRST PHONE CALL SINCE 2022.
SOURCES TOLD BLOOMBERG THAT THE CALL IS PART OF AN EFFORT TO
OUTLINE STRATEGY BY THE MEMBERS OF THE U.N. SECURE TO COUNSEL.
DURING THE CALL, MICRON PUSHED FOR A U.K.
CEASE-FIRE AND PUTIN REJECTED IT, INSISTING ANY DEAL MUST
ADDRESS THE CONFLICT’S ROOT CAUSES. OK. ANNA:
IT’S INTERESTING. MACRON WAS ONE OF THE LAST TO
STOP TALKING TO PUTIN ON THE WAY INTO THE UKRAINE WAR.
NOW HE SEEMS TO BE ONE OF THE EUROPEAN LEADERS WHO IS OK TO
TALK TO HIM. IT’S NOT ABOUT UKRAINE.
IT’S ABOUT AROUND AND THEY SEEM TO HAVE SOME COMMON GREEN —
GROUND TO COME THROUGH. I THINK THAT’S INTERESTING.
THAT WE HAVE A EUROPEAN LEADER OPENING THE DOOR ON THAT TOPIC,
EVEN IF THEY ARE TRYING TO SEGMENT UKRAINE AND KEEP IT
SEPARATE. KRITI: FASCINATING ONE IN TERMS OF THE
GEOPOLITICS. AT ONE POINT ARE THEY SETTING
THE PRESIDENT FOR OTHER EUROPEAN LEADERS?
WILL FREDERICK MERS GET ON THE PHONE TO BOOT? I DON’T KNOW.
ANNA: COMING UP, THE STOCKS TO WATCH
AT THE OPENING INCLUDING SANTANDER.
THE SPANISH LENDER AGREED TO BUY THE U.K.
UNIT TSP FOR 2.7 BILLION POUNDS. WE WILL GET INTO A CONVERSATION ABOUT WHAT IS ATTRACTING THIS
PARTICULAR COMPANY TO BUY THIS U.K. ASSET FROM ANOTHER SPANISH
BANK. ANALYSTS EXPECT TESLA TO DELIVER ANOTHER DOWNBEAT
QUARTERLY CELLS REPORT LATER TODAY AS ELON MUSK TAKES OVER
RESPONSE ABILITY FOR SALES IN EUROPE AND THE UNITED STATES.
THE IMPLICATIONS OF THAT MOVE. UP NEXT, WE ARE JOINED BY THE
GLOBAL HEAD OF AFFECT STRATEGY AT RBC CAPITAL MARKETS.
IS THEIR STRENGTH AND BENEFITED A STRONGER EURO FOR PARTS OF
THE EUROPEAN ECONOMY? THE CONVERSATION SEEMS TO BE
ABOUT WHETHER THIS MIGHT LEAD TO DOWNSIDE RISK ON INFLATION.
WE WILL TALK ABOUT THAT SHORTLY. IF YOU HAVE ANY QUESTIONS FOR
OUR GUEST, PLEASE DO GET IN TOUCH. THIS. >> IN EFFECT, WE WENT ON HOLD
WHEN WE SAW THE SIZE OF THE TARIFFS AND ESSENTIALLY ALL
INFLATION FORECASTS FOR THE UNITED STATES WENT UP
MATERIALLY AS A CONSEQUENCE OF THE TARIFFS.
WE DIDN’T OVERREACT. WE DIDN’T REACT AT ALL.
WE ARE SIMPLY TAKING SOME TIME. AS LONG AS THE U.S.
ECONOMY IS IN SOLID SHAPE, WE THINK THE PRUDENT THING TO DO
IS TO WAIT AND LEARN MORE AND SEE WHAT THOSE EFFECTS MIGHT BE.
AGAIN, THEY HAVEN’T REALLY SHOWN UP.
FOR NOW, WE ARE WAITING. GUY: A COUPLE THINGS TO POINT OUT.
ONE OF WHICH, NO TIE. IT’S HOT IN PORTUGAL.
A LITTLE WINDY TODAY. THAT’S THE WEATHER FORECAST ON
THE TIE STORY. LET’S TALK ABOUT WHAT THE
MARKET REACTED TO WHAT POWELL HAD TO SAY.
THEY IGNORED HIM WHICH I THINK IS INTERESTING.
TRADERS IGNORED HIM. THEY FOCUSED ON THE DATA.
THE CONVERSATION WITH ALL THE CENTRAL BANKERS YESTERDAY WAS
FASCINATING THOUGH. WHAT WE SAW YESTERDAY IN U.S.
MARKETS, I DON’T KNOW. WHAT CAN WE READ INTO IT?
VALUE — VALERIE IS HERE TO ANSWER THAT QUESTION. >> S&P 500 PULLED BACK FROM
RECORD HIGHS. THERE WAS INTERESTING ROTATION
GOING ON UNDER THE HOOD. WE SAW THE SMALL CAPS
OUTPERFORM TECH STOCKS. THE BIGGEST MARGIN GOING BACK
TO APRIL. IT’S NOT SOMETHING WE SEE OFTEN.
MANY NARRATIVES TRYING TO PIECE TOGETHER WHY THIS WAS.
SOME SAYING THAT THE SENATE BILL GETTING PAST. THERE’S A
LOT OF GOVERNMENT SPENDING INVOLVED THAT COULD HELP BOOST
THOSE DOMESTICALLY ORIENTED SMALL-CAP STOCKS.
THERE WAS A BIG RETRACEMENT WHEN IT CAME TO MOMENTUM STOCKS.
MAYBE PEOPLE TAKING TRIPS OFF THE TABLE BEFORE NONFARM
PAYROLLS YESTERDAY. TESLA SINKING 5% WHICH DROVE
DOWN THE MAG SEVEN. THE EQUITY MARKET HAD A HARD
TIME RALLYING IN THE FACE OF THESE TWO-YEAR YIELDS RISING.
WE HIT THE LOWEST IN TWO MONTHS BUT IT WAS THAT HOT JOBS DATA.
JOB OPENINGS DATA EXCEEDED EXPECTATIONS.
MANUFACTURING CAME IN BETTER THAN EXPECTED.
IT WAS REALLY WHAT THE BOND MARKET WAS LOOKING AT, THE DATA
RATHER THAN ANYTHING POWELL SAID.
FRONT-END YIELDS RISING AROUND SIX BASIS POINTS IN THE LAST
TWO SESSIONS. IDEALLY, SHORT-TERM INTEREST
RATES RISING WOULD BE SOMETHING TO SUPPORT THE DOLLAR.
IT DID NOT. WE CONTINUE TO SEE THE U.S.
DOLLAR ON THE BACK FOOT. THE EURO-DOLLAR HAS CLENCHED
NINE STRAIGHT SESSIONS OF GAINS. THE LONGEST WINNING STREAK IN
TWO YEARS. GUY: IT’S AMAZING. HE WOULD HAVE THOUGHT
LOGICALLY, A WEAKER DOLLAR WOULD HELP U.S. TECH.
THEY TRANSLATED YOU — EARNINGS STORY. PERFECT SET UP.
THANK YOU VERY MUCH INDEED. THAT BRINGS US TO A
CONVERSATION WITH THE GLOBAL HEAD OF AFFECT STRATEGY AT RBC
CAPITAL MARKETS. GOOD MORNING. IF YOU GET A STRONG PAYROLL
DOLLAR TO — NUMBER TOMORROW, DO I BUY OR SELL THE DOLLAR? >> IT WON’T CHANGE MUCH IN
TERMS OF THE SHORT-TERM OUTLOOK FOR THE FED.
IF YOU SEE CRACKS IN THE U.S. ECONOMY, I THINK IT FEEDS INTO
THE MOMENTUM AROUND THE FED HAVING TO CUT SOONER THAN
EXPECTED AND WE ARE ON THE WAY TOWARDS A REAL REDUCTION IN
CARRY COST WHICH I THINK WILL PROMPT A FURTHER WAVE OF HEDGES
BEING PUT ON U.S. ASSETS. STRONG NUMBER IS MORE STATUS
QUO. MAY BE ROOM FOR A BIT OF A PULLBACK AS WE WERE
HIGHLIGHTING JUST THERE. WE HAD A STRONG RUN FOR
EURO-DOLLAR OR DOLLAR GENERALLY LOWER FOR THE PAST 10 DAYS.
MAYBE ROOM FOR CONSOLIDATION. GUY:
BIG PICTURE, WHERE ARE WE GOING WITH THE DOLLAR? >> WE HAD A TARGET OF 124 FOR A
WHILE. I THINK IT IS SOMETHING THAT
WILL TAKE TIME TOGETHER. YOU NEED TO SEE THE COST OF
HEDGING ACTUALLY FALLING FOR THE HEDGERS TO MATERIALIZE. WHAT’S INTERESTING, YOU ARE NOT
ACTUALLY SEEING BASES MOVE THAT MUCH TO THE NEGATIVE SIDE WOULD
YOU WOULD EXPECT IF THIS WAS ALL ABOUT HEDGING FLOW.
A LOT OF IT IS ANTICIPATING THE FLOW THAT IS TO COME. ANNA:
EXPLAIN THAT MORE. WHAT ARE WE LOOKING FOR? >> EFFECTIVELY, INVESTORS ARE
ANTICIPATING THE WEAKNESS OF THE DOLLAR.
I SPENT THE LAST WEEK ON THE EAST COAST SINGING CLIENTS
ACROSS NEW YORK, BOSTON, TORONTO, MONTREAL.
EVERYONE DISPARAGING THE DOLLAR. SOMETIMES THE SPEED OF THE MOVE
HAS BEEN SO FAST, THEY HAVEN’T GOTTEN A SHORT DOLLAR LIKE THEY
WOULD LIKE. ANNA: WHERE DOES THAT LEAVE THE EURO?
A LOT OF THE CUTS ARE GOING FROM THE DOLLAR SIDE OF THINGS
TO THE EURO SIDE. A LOT OF THE CONVERSATION HAS
BEEN ABOUT WHETHER THE STRENGTH OF THE EURO HAS BEEN A GOOD
THING AND ALLOWED INFLATION TO COME DOWN A BIT.
NOW ENTIRELY ON TARGET IT WOULD SEEM. DOES THAT SPILL OVER INTO
SOMETHING THAT MIGHT WEAKEN INFLATION?
HOW ARE YOU VIEWING THE EURO? >> WE HAVE STARTED HEARING MORE
COMMENTS FROM CENTRAL OVER THE LAST FEW DAYS.
THE OTHER THING THAT WILL BE ON THEIR RADAR IS IT’S NOT JUST
EURO-DOLLAR. IF YOU LOOK AT EURO RMB, WE’VE
HAD A BIG MOVE. THE RMB HAS BEEN DEPRECIATING
AGAINST ALL OTHER CURRENCIES BY EFFECTIVELY KEEPING PACE WITH
THE U.S. DOLLAR. THAT’S GOING TO BE MORE OF A
PROBLEM IN TERMS OF EUROPEAN EXPORT. KRITI:
YOU MADE A COMMENT ABOUT THE SPEED OF THE MOVE IN TERMS OF
EURO-DOLLAR, THE FACT THAT CLIENTS ARE FEELING UNDER
POSITIONED IN TERMS OF BEING SHORT DOLLAR.
SIX MONTH AGO, WE WERE HAVING A CONVERSATION ABOUT PARITY IF A
TRADE DEAL DOESN’T COME THROUGH BETWEEN U.S. AND EUROPE.
IS THERE A CONCERN THAT YOU COULD SWING BACK IN THE OTHER
DIRECTION IN TERMS OF EURO-DOLLAR’S MOVE TO THE
UPSIDE? COULD YOU WEAKEN A REVERSE THAT
VERY QUICKLY? >> PART OF WHAT WE ARE SEEING
AT THE MOMENT IS A GENUINE SHIFT IN TERMS OF HEDGING
BEHAVIOR. WE LAST SAW IT IN 2020.
THE LAST TIME EURO-DOLLAR SUSTAINABLY TRADED ABOVE ONE TO
RONNIE. IT WAS WHEN THE FED CUT RATES
EFFECTIVELY TO EUROPEAN LEVELS. A BIG WAVE OF HEDGERS BEING PUT
ON. THAT’S WHAT WE ARE SEEING THIS
TIME. UNLESS YOU THINK THE FED IS NOT
GOING TO BE CUTTING RATES AT ALL THROUGH 2026 AND I DON’T
THINK ANYBODY OR FEW PEOPLE HAVE THAT FORECAST. EURO-DOLLAR
IS ON A PATH HIGHER. THE FLIPSIDE THOUGH IS THAT
THERE IS SCOPE THIS TIME AROUND, IF WE GET A READ
ESCALATION INTERIOR OF CONCERNS NEXT WEEK.
IF IT’S NOT BROAD-BASED, IF IT’S NOT TRUMP DOING THIS TO
ALL COUNTRIES, IF IT’S MORE BILATERAL, THOSE PEERS MIGHT
COME UNDER A BIT OF PRESSURE. NOT A CONSENSUS VIEW BUT I
DON’T THINK IT’S A DONE DEAL THAT THE DOLLAR IS LOWER FROM
HERE. ANNA: WHATEVER — KRITI: WHAT ABOUT THE POUND?
FOR THE EURO, YOU CAN MAKE A DECENT CASE ABOUT WHY THERE ARE
FUNDAMENTALS TO SUPPORT THE STRENGTH IN THE EUROPEAN
CURRENCY. WHAT ABOUT THE POUND? >> THE MOVE IS REALLY MORE A
DOLLAR MOVE THAN ANYTHING ELSE. YOU ARE SEEING CABLE HIGHER,
EURO-DOLLAR HIGHER, YOUR — HE DOWN LOWER.
THE MIDDLE OF THE RANGE IN THAT, YOU’VE HAD RELATIVELY
HIGH RATES COMPARED TO THE REST OF JUNE 10 — G10.
THE BANK OF ENGLAND IS CATCHING UP YOUR THERE’S GOOD SCOPE FOR
THEM TO BE DOING MORE INTO THE END OF THE YEAR.
IT DOES UNDERMINE THE POUND A LITTLE BIT.
EURO STERLING HAS HAD A FAIRLY DECENT MOVE HIGHER IN THE LAST
FEW DAYS. GUY: IS THE RISK TO THE UPSIDE OR TO
THE DOWNSIDE? >> GREAT QUESTION.
WHEN YOU SEE THE SPEED OF THE MOVE YOU HAVE OVER THE LAST 10
DAYS, IT FEELS NERVE-RACKING TO SAY ONLY 124.
WHY NOT 130 OR 135? GUY: WE’VE HEARD 150 IS OUR TOP
TARGET. THAT’S QUITE PUNCHY. >> THAT’S EXTREME.
THE CLOSER YOU GET TO THOSE LEVELS, VALUATION IS A NEBULOUS
CONTRACT — CONCEPT. WHEN YOU GET TO THOSE MID 120
LEVELS, IT BECOMES HARDER TO JUSTIFY WHY YOU WOULD WANT TO
BELONG EURO-DOLLAR FROM THERE. WHEN I SPEAK TO INVESTORS, IN
GENERAL THEY SAY IF YOU WANT EXPOSURE TO ATTACK, TO AI, TO
GOOD PRODUCTIVITY GROWTH, YOU STILL HAVE TO HAVE EXPOSURE TO
THE U.S.. SO UNDERLYING IT, THERE’S GOING
TO BE A BID FOR DOLLAR SOMEWHERE ALONG THE WAY.
PROBABLY JUST NOT YET. ANNA: THE YOU ON IS A MANAGED
CURRENCY. WE ARE WATCHING HEADLINES
ACROSS OUR SCREENS IN THE EARLY HOURS AROUND THE HONG KONG
DOLLAR AND WHETHER THE PEG WILL BE MAINTAINED.
ARE YOU CONCERNED ABOUT THE PEG OR MANAGE REGIMES WHERE THINGS
MIGHT BREAK? THE DOLLAR MOVE HAS BEEN QUITE
FAST. >> YEAH. CERTAINLY BEEN A VERY BAD START TO THE YEAR FOR
THE DOLLAR, ONE OF THE WORST EVER.
COMING ON THE BACK OF A DECENT RALLY INTO YEAR-END
POSTELECTION. ON TOP OF THAT, THE DOLLAR IS
COMING FROM VERY ELEVATED LEVELS.
IT’S NOT LIKE WE ARE STRETCHED FROM A BIG PICTURE VALUATION
PERSPECTIVE. THE DOLLAR HAS BEEN VERY RICH
FOR A LONG TIME. U.S. EXCEPTIONALISM WAS THE DOMINANT
NARRATIVE. NOW WE ARE SEEING THAT REPRICED.
KRITI: VERY QUICKLY, SHOULD WE BE
TRADING FX ON TRADE HEADLINES OR’S MONETARY POLICY STILL IN
THE DRIVER’S SEAT? >> GREAT QUESTION.
ONE OF THE THINGS THAT WAS REALLY STRIKING ABOUT MY
CONVERSATIONS LAST WEEK IS HOW LOW ON THE AGENDA TARIFFS AND
GENERAL TRADE CONCERNS WERE FOR INVESTORS.
AT THE SAME TIME, I CAN’T HELP FEELING THAT AS WE GET TO NEXT
WEEK, IF TRUMP DOES FOLLOW THROUGH WITH THE RECENT
THREATS, — AND THAT IS NOT THE EXPECTATION.
EVERYONE HAS COME TO THE IDEA THAT HE BACKS DOWN.
IF HE DOES FOLLOW THROUGH ON CERTAIN INDIVIDUAL COUNTRIES,
THAT WILL HAVE AN IMPACT ON THE CURRENCY MARKET. KRITI:
ALL RIGHT. WALKING US THROUGH HER CALLS ON
THE EURO AND THE POUND AS WELL AMONG OTHERS.
WE THINK YOU SO MUCH. COMING UP, SANTANDER AGREEING
TO BUY TSP FROM SABAH DOW IN A DEAL WORTH 2.7 BILLION POUNDS.
WE GET INTO THE MERITS OF THE DEAL AND PERHAPS THE CONCERNS
AROUND IT WITH THE SANTANDER CFL ON THE PROGRAM NEXT.
IN THE MEANTIME, FUTURES POINTING HIGHER.
WE ARE 30 MINUTES AWAY FROM THE OPENING TRADE. STICK WITH US.
THIS IS BLOOMBERG. ANNA:
WELCOME BACK TO THE PROGRAM. 30 MINUTES UNTIL THE START OF
TRADING FOR THIS WEDNESDAY THE SECOND OF JULY.
FUTURES PICTURE FOR EUROPE ARE EXPECTED TO GO HIGHER DESPITE
THE FACT THAT WE HEARD FROM PRESIDENT TRUMP ABOUT NOT
GIVING EXTENSIONS AROUND THE JULY 9 DEADLINE WHEN IT COMES
TO TEARS. THAT DOESN’T SEEM TO BE
WORRYING MARKETS OVERLY. IT WORRIED THE JAPANESE MARKET.
BUT IN EUROPE WE SEE RESILIENCE. U.S.
FUTURES UP BY .3% THIS HOUR. A QUICK LOOK AT THE BOND
MARKETS. WE ARE WATCHING — AGAIN, THERE
WASN’T TOO MUCH READ ACROSS FROM THE U.S. FISCAL STORY.
THAT BILL GOES BACK TO THE HOUSE SO WE CONTINUE TO WATCH
THE TWIST AND TURNS OF U.S. POLITICS. ON TO WHAT’S HAPPENING IN THE
BANKING SECTOR. BANCO SANTANDER HAS AGREED TO
BUY TSP FROM ITS SPANISH RIVAL SABADELL THE DEAL WORTH 2.6
BILLION POUNDS. IT WILL MAKE IT THE THIRD
LARGEST LENDER BY SOME MEASURES. WE ARE JOINED BY THE
SANTANDER’S CFO, A REAL PLEASURE TO HAVE YOU ON THE
PROGRAM. THANK YOU VERY MUCH FOR BEING
WITH US. THIS DEAL CAN BE SEEN AS QUITE
AN EXPRESSION OF CONFIDENCE IN THE U.K., IN THE U.K. ECONOMY.
A LOT OF BUSINESSES HAVE BEEN SPEAKING OUT AGAINST RECENT TAX
RISES ON EMPLOYING STAFF AND VARIOUS OTHER MANAGERS.
HOW OPTIMISTIC ARE YOU FEELING ABOUT THE U.K.
AS A RESULT OF THIS DEAL? >> GOOD MORNING, THANK YOU FOR
HAVING ME ON THE PROGRAM AGAIN. WE ALREADY HAVE A VERY
SIGNIFICANT PROCESS IN THE U.K. IT’S OUR LARGEST BALANCE SHEET
AND ALL OF THE COUNTRIES WE OPERATE.
WE OPERATE THE LARGEST BALANCE SHEET IN THE U.K.
WE MOSTLY DUAL MORTGAGES, AND THIS WILL HELP US ACCELERATE
THE PROGRAM. AND SERVE OUR CUSTOMERS BETTER. OBVIOUSLY WE LIKE THE U.K., WE
LIKE THE REGIME IN THE U.K. IT’S THE SECOND LARGEST
FINANCIAL MARKET IN THE WORLD. WE WANT TO HAVE A SIGNIFICANT
— IN THIS MARKET. IN: WHAT HAPPENS TO TSP BRAND OR
HOW QUICKLY DO YOU REMOVE IT? YOUR BUSINESS HAS A LOT OF
HISTORY AROUND BUSINESSES GOING BACK YEARS, TAKING THOSE OVER
AND REBRANDING THEM TO SANTANDER.
IS THAT GOING TO BE THE SAME PATH THAT WE TAKE HERE? >> WE DO THIS FOR THE CUSTOMERS.
WE BELIEVE TSP CUSTOMERS, NOW WE HAVE ACCESS TO MORE
BRANCHES, BETTER TECHNOLOGY, WE THINK THIS IS GOING TO BE A
BETTER VALUE PROPOSITION FOR THEM.
THE TRANSACTION IS GOING TO TAKE A FEW MONTHS, PROBABLY
INTO THE FIRST QUARTER OF NEXT YEAR TO BE FINALLY APPROVED IF
IT’S TO GO THROUGH DIFFERENT LEVELS OF APPROVAL.
SO IT’S GOING TO TAKE A WHILE BEFORE WE ACTUALLY TAKE CONTROL
OF THE ASSET. AND THEN WE WILL DECIDE WHAT TO
DO. BUT THE TSP BRAND IS A VERY IMPORTANT BRAND.
IT HAS A LOT OF VALUE. IT HAS BEEN IN THE MARKET FOR
OVER 200 YEARS. WE BELIEVE IT’S A BRAND WITH A
LOT OF VALUE. BUT IT WILL TAKE TIME BEFORE WE
TAKE CONTROL. KRITI: IT’S KRITI IN LONDON, TALK TO
US ABOUT WHEN YOU — I APPRECIATE THAT YOU HAVE A
LITTLE VISIBILITY AT THE MOMENT UNTIL THE DEAL CLOSES, BUT
THERE’S A QUESTION AROUND THE MATH OF TSP AND THAT THE VALUE
THAT THE DEAL IS CLOSING AT IS TOO EXPENSIVE.
AND THAT THE ONLY WAY THAT WORKS IS IF THERE ARE MASSIVE
JOB CUTS TO MAINTAIN THE COSTS. IS THAT SOMETHING SENT END AIR
IS CONSIDERING IN TERMS OF MOVING FORWARD WITH TSP? >> I THINK THE MAIN REASON WHY
THE NUMBERS WORK IS BECAUSE, YES, WE CAN OPERATE THE
COMBINED ENTITIES WITH A LOWER COST SPACE, BUT MOST OF THESE
SAVINGS REALLY COME FROM PROJECTS THAT TSP IS STARTING
TO RAMP UP THAT WE WILL NOT NEED TO DO WHEN THE TWO BANKS
MERGE, INVESTMENTS IN DIGITAL MEANS, AND TUNNELS, ETC.
THAT WE ARE DOING AT SENT IN DARE.
SO YES, THERE WILL BE SAVINGS, YES, WE THINK THE SAVINGS WILL
HELP US OFFER BETTER PRODUCTS, LOWER COSTS TO THEIR CUSTOMERS,
BUT NOT ALL OF THESE LOWER COSTS WILL COME FROM JOB CUTS
OR BRANCH CLOSURES. CLEARLY CUSTOMERS NOW BANK IN A DIFFERENT WAY, BUT USING MORE
DIGITAL CHANNELS TO RELATE TO THE BANKS.
THAT IS A REALITY WE REALLY NEED TO ADJUST TO. KRITI:
CAN YOU JUST GIVE US A LITTLE BIT OF BACKGROUND,
INTERNATIONAL AUDIENCE A LITTLE BIT OF BACKGROUND ON HOW THIS
DEAL CAME ABOUT. THERE ARE PLENTY OF REPORTS
THAT BARCLAYS WAS IN THE RUNNING TO TAKE OVER TSP.
THERE’S BEEN LOTS OF SPECULATION THAT SABADELL HAS
BEEN TRYING TO OFFLOAD TSP AS IT FIGHTS A TAKEOVER BATTLE IN
TERMS OF BBVA, WHERE DID SANTANDER START IN TERMS OF
GETTING INTEREST FROM TSP? >> WE LOOKED AT TSP 10 YEARS AGO WHEN LLOYD’S DECIDED TO
SPLIT OUT. WE HAD INTEREST ACCORDING TO
ASSETS BUT THE PROCESS WAS VERY LONG.
IT WAS A VERY LENGTHY PROCESS, SO THIS WAS AN ASSET THAT WE
KNOW WE LIKE, THAT WE KNOW, AND WHEN THEY DECIDED TO RUN A
PROCESS BECAUSE THIS OBVIOUSLY FITS WITH OUR CAPITAL HIERARCHY
IN TERMS OF ALTERNATE POSITIONS, AND AS WE SAID IN
THE PAST U.K. IS IMPORTANT FOR US BECAUSE
IT’S A STABLE MARKET, WE HAVE A LOW RISK BUSINESS.
TSP HAS A SIMILAR BUSINESS TO WHAT WE HAVE.
IT’S VERY COMPLEMENTARY. AND FINANCIALLY, IT WORKS VERY,
VERY WELL. SO THAT’S WHEN WE DECIDED TO
LOOK AT TSP AGAIN. GUY: GOOD MORNING, WHY IS THE U.K.
THE RIGHT PLACE FOR YOU TO PUT YOUR MONEY TO WORK IN?
MY UNDERSTANDING IS THIS IS ONE OF YOUR LOWEST PROFITABILITY
JURISDICTIONS. WHERE ARE YOU PUTTING MONEY TO
WORK IN LATIN AMERICA OR OTHER AREAS AROUND THE WORLD THAT ARE
GOING TO GENERATE A HIGHER RATE OF RETURN FOR YOUR INVESTORS?
LIKE THE U.K. IS REALLY IMPORTANT BECAUSE IT
HELPS US STABILIZE OUR COST OF CAPITAL, ARE RISK RETURN PROFIT.
WE HAVE A LOW RISK BUSINESS IN THE U.K.
IT’S A STABLE RETURN IN A STRONG CURRENCY.
SO THIS HELPS US STABILIZE THE VOLATILITY OF OUR RETURNS THAT
COME IN DEVELOPING ECONOMIES. WE HAVE A PLAN PRIOR TO THE
ACQUISITION, WE HAD A PLAN TO INCREASE OUR PROFITABILITY IN
THE U.K. FIRM CURRENTLY 11% BY AROUND 1%
PER YEAR IN THE NEXT THREE YEARS. THIS WOULD HELP US ACCELERATE
THE IMPROVEMENT IN PROFITABILITY.
WE THINK WE CAN REACH 16% WITH RETURN OF EQUITY IN THE U.K.
IN STERLING IN THE NEXT THREE YEARS.
THE TRANSACTION THAT HAS A RETURN ON CAPITAL INVESTED OF
AROUND 20% OR HIGHER. AND IT WILL BE FROM YEAR ONE.
SO WE THINK FINANCIALLY, NOT ONLY STRATEGICALLY IT MAKES
SENSE, BUT ALSO FINANCIALLY IS A VERY STRONG TRANSACTION. GUY:
IT’S INTERESTING YOU’RE TALKING ABOUT THE FACT THAT IT’S IN
STERLING, THE CURRENCY MATTERS IN ALL OF THIS.
THAT I HEAR YOU CORRECTLY A MOMENT AGO WHEN YOU SAID YOU’RE
GETTING ACCESS TO BETTER TECHNOLOGY FROM TSP?
THAT DOESN’T SEEM TO BE THE EXPERIENCE OF A LOT OF PEOPLE. >> WHAT I MEAN IS THAT WE ARE
DOING THIS BECAUSE WE THINK WE ARE A BETTER HOLDER OF THE
ASSET. WE CAN NOW OFFER OUR TECHNOLOGY
TO TSP CUSTOMERS, THEN WE HAVE ACCESS TO OUR BIGGEST, BIGGER
NETWORK, SO THEY WILL HAVE A MORE PHYSICAL DIGITAL
TECHNOLOGY. THAT’S WHAT I MEANT. GUY:
ARE YOU GOING TO GET RID OF THE TSP TECHNOLOGY BASE? BECAUSE IT’S HISTORICALLY BEEN
CHALLENGING. WAKES WE ARE GOING TO MIGRATE
OUR OWN TECHNOLOGY, YES. ANNA: CAN I ASK ABOUT YOUR U.S.
EXPECTATION. THAT’S AN IMPORTANT PART OF
YOUR BUSINESS IN THE UNITED STATES AND I WONDER IF YOU ARE
MINDED TO INCREASE EXPOSURE, I KNOW THAT’S BEEN A PLAN FOR A
WHILE, IS THAT EFFECTIVE IN ANY WAY BY YOUR PLANS ELSEWHERE? >> IN THE U.K.
WE HAVE OUR OWN BUSINESS AS USUAL STRATEGY.
WE LAUNCHED OUR NATIVE DIGITAL BANK, OPEN BANK IN OCTOBER.
WE ALREADY HAVE OVER $5 BILLION IN DEPOSITS FROM OVER 100,000
CUSTOMERS. WE ARE INTEGRATING IN THE
DIFFERENT UNITS THAT WE HAVE IN THE U.S.
SO WE ARE NOT LOOKING AT DOING M&A IN THE U.S.
AT THE MOMENT WE ARE LOOKING AT DEVELOPING OUR OWN STRATEGY
WITH A GRADUALLY INTEGRATING IN THE DIFFERENT BUSINESSES THAT
WE HAVE IN THE U.S. KRITI: STICKING WITH THE THEME OF M&A,
LET’S CIRCLE BACK TO SPAIN. THERE HAS BEEN A QUESTION IN
THE LAST WEEK, ESPECIALLY AFTER THE CONCERNS AROUND BANKING
REGULATION, BANKING REGULATION BETWEEN BBV AND SABADELL OF
WHETHER OR NOT THE SPANISH GOVERNMENT IS AMENABLE TO
BANKING CONSOLIDATION AND M&A WITHIN SPAIN ITSELF.
YOUR THOUGHTS. >> I THINK THIS IS FOR THEM TO
DECIDE. AT THE END THESE ARE TWO
PRIVATE COMPANIES, THIS IS NORMAL COURSE OF BUSINESS IN
THE LIFE OF COMPANIES AND IT’S FOUR AT THE SHAREHOLDERS AND
THE SHAREHOLDERS ARE FREE TO DECIDE WHAT TO DO IN THIS CASE.
GUY: FINAL, QUICK QUESTION. DO YOU THINK THIS TRANSACTION
IS GOING TO MAKE IT HARDER FOR BBVA TO TAKE OVER SABADELL?
AND IF SO, IS THAT PART OF YOUR CALCULATION IN MAKING THIS
ACQUISITION? >> NO, THAT’S NOT WHAT WE THINK
ABOUT — WE ARE NEUTRAL IN THAT SENSE.
AGAIN, THIS IS AN ASSET THAT’S AVAILABLE IN ONE OF OUR CORE
MARKETS. WE HAVE THE DUTY FOR SHAREHOLDERS TO LOOK AT
ATTAINABLE ACQUISITIONS OF THE MARKET WITH WHICH REACT OPERATE.
THIS TRANSACTION WILL MAKE OUR PRESENCE IN THE U.K. BETTER.
WE WOULD BE BETTER POSITIONED TO SERVE OUR CUSTOMERS AND TSP
CUSTOMERS BETTER. WE WILL BE ABLE TO MAKE GREATER
RETURNS IN THE U.K. SO IF THIS HAS ANY IMPACT IN
THAT SENSE, WE ARE COMPLETELY NEUTRAL. KRITI: JOSE GARCIA JOINING US THIS
MORNING TO TALK ABOUT SANTA AND TEARS LATEST ACQUISITION.
A DEAL EXPECTED TO CLOSE IN EARLY 2026.
WE THANK YOU SO MUCH. IT’S FASCINATING WAY SAYING.
REALLY DOUBLING DOWN ON HIS EXPOSURE TO THE U.K.
SPECIFICALLY AT A TIME WHEN A LOT OF PEOPLE ARE SAYING, MAY
BE SENT IN DARE’S LOOKING ELSEWHERE AND HE SAYING, WE CAN
CONSOLIDATE, OFFER BETTER TECHNOLOGY AND THIS WORKS, IN
HIS WORDS, TO THE CUSTOMERS FAVOR. GUY:
HE KEPT POINTING OUT IT’S IN STERLING.
IS THE CURRENCY PART OF THIS TRANSACTION THEREFORE THERE IS
AN EXPECTATION THAT STERLING IS GOING TO BE A SOLID CURRENCY
POTENTIALLY. ANNA: HE SAID IN A STRONG CURRENCY.
IT WAS PART OF THE CONVERSATION OR A WIDER ANSWER AROUND RISK
AND STABILIZING RETURNS. SO YES, IT’S PART OF THAT
NARRATIVE, BUT PRETTY POSITIVE ON THE U.K.. GUY:
THE TECHNOLOGY INTEGRATION WILL BE INTERESTING. ANNA:
IT’S BEEN SOME HISTORY. WE WILL CONTINUE TO MONITOR
THAT. WE WATCHED THE SPANISH BANKING
NAMES TRADE AT THE START OF TRADE THIS MORNING.
COMING UP NEXT, SIMILARLY FOR THE RENEWABLES ENERGY AS A TAX
IS THREATENING SOLAR AND WIND STRICT OUT OF THE U.S.
MAKE A BILL PASSED LAST NIGHT. YOUR STOCKS TO WATCH NEXT.
THIS IS BLOOMBERG. ♪ >> WE ARE DETERMINED TO
CONTINUE TO BE DATA-DEPENDENT TO DECIDE MEETING BY MEETING
AND TO NOT COMMIT TO ANY PARTICULAR RATE PATH. >> WE ARE GOING MEETING BY
MEETING. I MENTIONED HOW I’M THINKING
ABOUT THAT BUT I WOULDN’T TAKE ANY MEANING OFF THE TABLE OR
PUT IT DIRECTLY ON THE TABLE. IT WILL DEPEND ON HOW THE DATA
EVOLVES. I IMAGINE A MAJORITY OF US
FEEL, IN THE REMAINING FOUR MEETINGS OF THE YEAR TO
CONTINUE TO PRODUCE RATES AGAIN. GREXIT WILL DEPEND ON THE
RELATIVE STRENGTH OF THE THREE INFLATION DYNAMICS AND WE NEED
SOME MORE INFORMATION TO DETERMINE THAT. >> WE ARE GOING TO HAVE TO SEE
THOSE COME THROUGH AND TO ENTERPRISES.
I THINK WE STILL GOT TO SEE THE EVIDENCE IN PRIZES, BUT THAT
BACKGROUND CONTEXT ALLOWS ME TO SAY, I THINK THE DIRECTION
CONTINUES IN INTEREST RATES CONTINUE TO BE DOWNWARDS. >> WE CUT 100 BP FROM LAST
OCTOBER AND WE CONTINUE TO BE IN THE EASING CYCLE, EVEN OUR
GROWTH RATE. FINANCIAL STABILITY RISK HAS
BEEN RISING, SO WE ARE KEEPING AND I ON THE FINANCIAL
STABILITY RISK IN DECIDING THE PACE AND THE TIMING OF THE
FURTHER CUTS. ANNA: SOME OF THE WORLD’S TOP CENTRAL
BANKERS SEEK DOES SPEAKING TO FRANCINE LAQUA IN PORTUGAL AT
THE ECB FORUM IN SINTRA. WRESTLING WITH A HOST OF
UNCERTAINTY TOPICS THERE. U.S. DEBT LEVELS AND DEBT ISSUANCE
ANOTHER TOPIC OF UNCERTAINTY THAT I KNOW HAS CAUGHT YOUR EYE.
KRITI: IT HAS TO EVERYBODY. WE KNOW THERE IS A NEXT DATE
LOOMING, WE DON’T KNOW WHEN IT IS.
LATEST JP MORGAN ANALYSIS AS A WILL HAPPEN IN LATE AUGUST,
EARLY SEPTEMBER. IT’S GETTING PUSHED BACK BUT I
THINK THIS IS THE CHART I WANT EVERYONE TO PAY ATTENTION TO.
YOU HAVE TO ZOOM IN SO MAYBE THE CAMERAMAN CAN FOLLOW ME
CLOSELY. THIS WHITE LINE IS THE DEBT
CEILING FROM THE CONGRESSIONAL LIMIT.
THIS BLUE GOT IT PIECE THAT CLOSE THIS LINES IS THE ACTUAL
PUBLIC SPENDING. THE REASON I BRING THESE TWO
TOGETHER IS THERE IS A QUESTION AND HAS BEEN AROUND ABOUT WHEN
THOSE ITERATIONS ARE, WHEN THE SPENDING ABILITY ACTUALLY GOES
ABOVE THE DEBT CEILING. THE REASON IS THAT THE DEBT
CEILING ASK A CONGRESSIONAL LIMIT THAT DOESN’T HAVE TO DO
DIRECTLY WITH GOVERNMENT SPENDING, IT HAS TO DO WITH HOW
MUCH THE TREASURY CAN BORROW. THAT’S WHERE THE KEY PIECE IS.
IN RECENT YEARS THAT INCREASE OVER THAT WHITE LINE HAS COME
UP MORE AND MORE AND IT’S LARGELY BECAUSE OF THOSE
INTEREST PAYMENTS. THAT’S WHERE I WANT TO BRING
YOU THE NEXT CHARTS. THE MAJORITY OF THE PUBLIC
DEBT, OF THE DEFICIT STORY IS AN INTEREST PAYMENT, 13% OF U.S.
BUDGET COSTS ARE NOW ONLY FOR DEBT SERVICING.
THIS IS A KEY PIECE OF THE CONVERSATION.
AS WE GET CLOSER AND CLOSER TO THE X DATE, WHATEVER IT MAY BE,
A.K.A. WHEN THE U.S. GOVERNMENT DOES RUN OUT OF
MONEY, THERE IS A QUESTION OF WHETHER OR NOT THE BOND MARKET
IS GOING TO REACT. I COULD TELL YOU RIGHT NOW, THE
BOND MARKET IS NOT PAYING ATTENTION TO THIS CHART, WILL
IT IN LATE SUMMER? ANNA: LET’S THINK ABOUT THAT AND GO
TO OUR MARKETS LIVE EXECUTIVE EDITOR MARK CUDMORE WHO IS WITH
US THIS MORNING FROM DUBLIN. GOOD MORNING TO YOU.
LET ME ASK YOU ABOUT WHAT THE MARKET IS THINKING ABOUT THE
BUDGET PROCESS IN THE UNITED STATES.
FOR A LONG TIME WE TALKED ABOUT THIS AND SOME ARE CONCERNED
ABOUT WHAT THIS DOES TO MEDICARE, WHAT THIS DOES THE
DEBT LEVELS IN THE UNITED STATES.
FROM A MARKET PERSPECTIVE. BUT IS THAT WHAT’S DRIVING
MARKET THINKING RIGHT NOW? WHAT ARE YOU WATCHING AS THIS
GOES ONCE AGAIN TO THE HOUSE? MARK:
I THINK THE INTERPRETATION FOR MARKETS AT THE MOMENT IS
PROBABLY MISSING THE SUBTLETY AND JUST GOING TO SPILL, IF IT
IS PAST AS IT IS CURRENTLY PRESENTED, IS A MASSIVE NET
INJECTION OF MONEY INTO THE ECONOMY.
AND IN THE CLASSIC EQUATION FOR GDP, THAT MAKES IT IMPOSSIBLE
THAT WE HAVE A PARTICULARLY HARSH GROWTH SLOWED DOWN AND
SHOULD BOOST GROWTH. THAT IS THERE POSITIVE FOR
STOCKS. THERE WILL BE CONCERNS ABOUT
WHAT HAPPENS ON THE DEBT SIDE BUT WE ARE NOT PLAYING THAT
DYNAMIC. OBVIOUSLY THERE’S STILL A RISK
OF THE BILL DOESN’T PASS AND I THINK THIS IS A MARKET THAT IS
TRADING ASSUMING IT WILL ULTIMATELY BE PASSED.
THAT IS THE GREAT BASE CASE BUT THE PROBABILITY OF FAILURE OR
AN EXTENDED DELAY BEYOND THE HOLIDAY IS MAY BE LARGER THAN
IS PRICED IN AT THE MARKET IN A MOMENT.
WE SEE A STOCK MARKET TRADING POSITIVELY.
EVEN THOUGH THE STOCKS FELL IN THE U.S., SMALL CAPS RALLY AND
THAT’S A BROADENING END OF THE RALLY THAT’S GOING TO
PROCYCLICAL NAMES, TO THE IDEA WE HAVE TO GET ON BOARD THE
OPTIMISTIC BULLISH STORY ACROSS THE BOARD. GUY:
GOOD MORNING, WE HAVE BEEN THROUGH 118 EURO-DOLLAR THREE
TIMES I THINK OVER THE LAST 24 HOURS. WHAT STOPS THIS TRADE, WHAT
DELIVERS A DOLLAR BOUNCE? ARE WE GETTING TO THE POINT
WHERE WE ARE OVERSOLD ON THE DOLLAR, IS THERE ANYTHING THAT
CHANGES THE TREND WE ARE WATCHING, AND IF NOT, HOW FAR
CAN IT GO? MARK: LONGER TERM, NOTHING WILL
CHANGE THIS TREND FOR A COUPLE OF YEARS.
DOLLAR HAS A LONG WAY FURTHER TO FALL. 10%, 15% FURTHER. EURO-DOLLAR GOING TO 130 BEFORE
106 A FEW MONTHS AGO. THAT’S PROBABLY JUST AN EASY
CONSERVATIVE TARGET. COULD GO TO 140, COULD GO
HIGHER. DOLLAR IS A LONG WAY TO FALL.
WHAT WILL CAUSE A BOUNCE AND A SHORT-TERM BOUNCE, AT SOME
POINT THEY WILL POSITION SQUEEZE.
POSITIONING HAS CHANGED RAPIDLY FROM SHORT-TERM PLAYERS.
THEY HAVE GONE FROM BEING REALLY LONG DOES SHORT.
THEY ARE NOT EXTREME SURE. THE PACE OF CHANGE MEANS A LOT
OF PEOPLE GOT INTO THE TRADE LATE SO THERE’S FRAGILE HANDS
IF WE HAVE A CATALYST FOR A SQUEEZE HE COULD GO MORE
PAINFULLY. BUT ANY OF THOSE POSITIONING
SQUEEZES WILL ONLY BE SHORT-TERM AND ULTIMATELY THE
DOLLAR IS A LONG-TERM DEPRECIATION TREND. KRITI: IS THERE A LINE IN THE SAND OF
WHEN WE MIGHT EXPECT THAT POSITIONING SQUEEZE? MARK: NO, I PROBABLY DID FULLY ANSWER
GUYS QUESTION. WHAT IS THE CATALYST. I THINK
IT’S A RISK OFF EVENT. SO IT COULD BE SOMETHING AS
SOON A THE TAX BILL FAILING, OR IT COULD BE THE TRADE DEADLINE
NEXT WEEK. WE’VE GOT A LOT OF OBVIOUS
DEADLINES. WE HAVE THE MACRO DATA TOMORROW.
A WEEK FULL OF CATALYST. IF IT CATALYST CAUSES A BIG RISK OFF,
THAT WILL CAUSE PEOPLE TO DELEVERAGE, IT IT MIGHT GET A
BIT OF MOMENTUM THAT COULD RUN FOR A COUPLE OF PERCENT, BUT
THAT’S ALL IT WOULD BE. KRITI: BLOOMBERG’S MARKETS LIVE MARK
CUDMORE JOINING THE PROGRAM. MORE UP-TO-DATE ANALYSIS FROM
THE TEAM. MLIV IS A FUNCTION ON THE
TERMINAL PEERLESS GO FROM THE MACRO TO THE MICRO AND GET OUR
STOCKS TO WATCH HER JOE EASTON. GO: WATCHING RENEWABLE ENERGY
STOCKS IN EUROPE AFTER ANOTHER TWEET TO THE BIG BEAUTIFUL BILL
IN THE U.S. NOW THE LATEST VERSION FROM THE
SENATE STRIPS OUT A TAX THAT WAS GOING TO PUT A LEVY ON
COMPONENTS THAT IT MADE FROM CHINA AND USED IN PROJECTS IN
THE U.S. RENEWABLE ENERGY PROJECTS
GETTING THAT RELIEF, THE ONES USING CHINESE COMPONENTS.
THIS IS A BIG RELIEF ACCORDING TO JP MORGAN ALICE, WHICH HAS A
NOSE OUT TODAY AND POTENTIALLY WE SEE THAT FEEDING THROUGH
INTO THE MARKET, INTO THE SHARE PRICES.
KEEP AN EYE, AS WELL AS OR INSTEAD, ALSO LISTED IN
COPENHAGEN. IN NORDICS AND SMA SOLAR IN THE SOLAR SPACE.
WIND AND SOLAR POTENTIALLY GOING TO BENEFIT FROM THIS
LATEST VERSION OF THE BILL. THEN WE ARE LOOKING AT SPANISH
BANKS FOLLOWING THIS DEAL BETWEEN SENT AND THEIR NTSB AS
YOU GUYS WERE DISCUSSING EARLIER ON THE SHOW WITH THE
SANTANDER’S CFO. IT NOW THIS MEANS THAT
SANTANDER WILL TAKE ON AROUND 218 MORE BRANCHES IN THE U.K.
SERVING MORE THAN 25 MILLION PEOPLE IN THE COUNTRY.
WE CAN SEE SABADELL STOCK HAS OUTPERFORMED GIVEN WE HAVE THAT
BIG INTEREST FROM BBVA IN TERMS OF THE FULL TAKEOVER.
POTENTIALLY WE MIGHT SEE A GET ANOTHER BOOST TODAY.
PERCENT IN DARE, THIS QUOTE FROM CITIGROUP DID CATCH MY EYE
SAYING THAT IT IS SURPRISING THAT SANTANDER CHOSE TO USE THE
MONEY THEY MADE FROM SELLING A BIT OF THEIR STAKE IN A POLISH
BANK TO BUY A UNIT OF SABADELL, TSP, WHICH IS UNDERPERFORMING.
THEY THINK IT SURPRISING THEY ARE USING CASH TO BUY A
BUSINESS THAT IS IN PERFORMING WELL.
WE WAIT TO SEE IF SANTANDER SHARES REACT NEGATIVELY.
FINALLY, AIRBUS SLIGHTLY MISSING ON ITS LATEST ORDERS
GETTING AROUND 60 PLANE ORDERS. IT DOES LOOK ON TRACK TO MISS
ITS FULL-YEAR TARGET. THERE IS MORE TO COME LATER IN
THE YEAR. WE WILL SEE IF IT TRIM SOME OF
THIS OUTPERFORMANCE VERSUS BOEING.
ANALYSTS ARE REALLY POSITIVE ON THIS ONE STILL PURE WE WAIT TO
SEE IF AIRBUS REACTS TO THIS LATER TODAY. ANNA:
THANK YOU VERY MUCH, ARE EQUITIES REPORTED JOE EASTON.
THOSE SOLAR NAMES HAVE BEEN ON A BLUSTERY RIDE IF THAT’S THE
APPROPRIATE — GUY: THAT’S A WIN, YOU CAN’T USE
BLUSTERY, WIND AND SOLAR. ANNA: I COULDN’T THINK OF A SOLAR ONE.
AT SPANISH BANKS WE WATCH ALL OF THOSE.
WE WATCH GILT MARKETS AS THEY OPEN AFTER YESTERDAY’S VOTE.
THIS IS BLOOMBERG. GUY: WEDNESDAY MORNING.
MIGHT GO A LITTLE HIGHER THIS MORNING IN TERMS OF EUROPEAN
EQUITIES. ONE OF THE REASONS COULD BE
THAT THE U.S. RALLIED A LITTLE BIT.
SOME DID IT YESTERDAY SUGGESTING THE U.S.
ECONOMY IS NOT IN THAT BAD SHAPE.
WE ALSO HAD JAY POWELL TALK ABOUT THE IDEA THAT JULY COULD
BE ON THE TABLE BUT IT MIGHT NOT BE.
THE MARKETS TOOK SOME CHIPS OFF THE TABLE WHEN IT COMES TO JULY.
NOT SURE IF THERE’S MUCH OF A TAKEAWAY FOR EUROPE.
AN INTERESTING ROTATION VAL HAS BEEN TALKING ABOUT OUT OF TECH
AND INTO SOME OF THE SMALL CAPS. KRITI:
SOME GREEN ON THE SCREEN WHEN IT COMES TO THE FUTURES PICTURE.
MAYBE A BIT OF A CATCH-UP TRADE. HIGHER BY .4%.
THE FTSE 100 ON THE BACK FOOT. FUTURES HIGHER BY .5%.
THE FRENCH INDEX WAS THE UNDERPERFORMER YESTERDAY. ANNA:
EUROPEAN FUTURES POINTING HIGHER.
LET’S LOOK AT INDIVIDUAL NAMES AND SECTORS.
WE START WITH RENEWABLES. THE WIND AND SD BUSINESSES THAT
HAVE BEEN IN FOCUS AND COULD GO HIGHER AS A PARTICULAR PART OF
ONE TAX BEING REMOVED FROM THE LATEST VERSION OF THE BUDGET.
SANTANDER IN FOCUS. I HAVE AGREED TO PURCHASE FROM
RIVAL SPANISH BANK SABADELL. WE WILL SEE IF THAT STICKS FOR
THE SPANISH BANKING BUSINESS. AIRBUS IN FOCUS.
DELIVERING ABOUT 60 PLANES IN JUNE WHICH TAKES THEM TO
SLIGHTLY MORE THAN 300 AND THE FIRST SIX MONTHS, WELL SHORT OF
HALFWAY TO 820, THEIR TARGET FOR THE FULL YEAR. GUY:
ALWAYS A CHALLENGING TARGET AND IT ALWAYS GETS PUSHED TOWARDS
THE END OF THE YEAR AND THAT IS WHEN THE CATCH-UP HAPPENS.
WE WILL SHOW YOU WHAT’S HAPPENING IN EUROPE.
WE ARE ANTICIPATING A POSITIVE START TO THE DATE.
A LITTLE TICK HIGHER. SINGLE STOCKS THAT ARE QUITE
INTERESTING TODAY, MAY BE MORE INTERESTING THAN THE INDEX
GLOBAL STORY BUT THE STOXX 600 ALSO UP.
MAKE IT A LITTLE BIT MORE OUT OF THE CAC 40 THIS MORNING SO
WE WILL SEE WHAT THAT MARKET DELIVERS THIS MORNING.
THERE ARE SIGNIFICANT CATALYSTS EMERGING.
PAYROLLS TOMORROW WILL BE THE BIG STORY.
WE HAVE THE TRADE NARRATIVE EMERGING AS WELL.
WE DON’T KNOW WHAT WILL HAPPEN WITH THE BIG, BEAUTIFUL BILL.
A LOT OF THINGS OUT THERE FOR THE MARKET TO THINK ABOUT.
STEADY AS SHE GOES IS THE NARRATIVE.
LITTLE CREEP HIGHER BUT STEADY AS SHE GOES.
WHAT IS THE SECTOR STORY? KRITI:
THEY WERE SEEING A LITTLE BIT ABOUT PERFORMANCE IN THE
BANKING SECTOR. I THINK THAT’S INTERESTING
BECAUSE THEY ARE KEY ONES IN SPAIN WE HAVE OUR EYES ON.
GREEN ON THE SCREEN ACROSS THE BOARD BROADLY BUT THE BANKING
SECTOR IS CATCHING MY EYE. I WANT TO GET TO SPAIN IN A
MOMENT BUT THE BIGGEST CONTRIBUTOR IS ACTUALLY HSBC.
BARCLAYS AND BBVA AND SANTANDER IN THERE.
IN ADDITION TO THE BANKING SECTOR SPECIFICALLY, IT SEEMS
TO BE A LITTLE BIT OF A CYCLICAL TILT. ANNA: SABADELL, THE SALE OF THE TSP
BUSINESS. SABADELL UP BY 2.3% THIS
MORNING SO IT SEEMS LIKE WE ARE SEEING IT STICK TO THAT SIDE OF
THE TRADE. SANTANDER UP BY 1.5%. SEEMS TO BE ABOUT SOMETHING
BIGGER THAN JUST SPANISH BANKING IN BOTH SIDES OF THE
DEAL. VERY FEW BANKS IN EUROPE ARE IN
NEGATIVE TERRITORY. THE BEST PERFORMING SECTOR
ALONG WITH ENERGY. MOST SECTORS IN POSITIVE
TERRITORY. ONLY PERSONAL CONSUMER,
DISCRETIONARY, GROCERY STORES IS THE ONLY SECTOR MOVING LOWER.
GUY: THE GILT MARKET DISTRACTS ME.
WE ARE SEEING A LITTLE BIT OF A PICKUP AND YIELDS BUT IT DOES
NOT LOOK EXTRAORDINARY. IT LOOKS PRETTY MUCH IN LINE
WITH WHAT WE HAVE SEEN ACROSS EUROPE. U.S.
10 YEAR NOW YIELDING 4.46. UP BY 1.3.
ITALY UP, PRETTY MUCH IN LINE WITH THAT.
IT DOES NOT LOOK LIKE IT IS OUT OF KILTER WITH WHAT WE ARE
SEEING ELSEWHERE IN TERMS OF THE MOVES WE ARE GETTING
DESPITE THE FACT THAT U.K. HAS A BIGGERH O — HOLE IN ITS
BUDGET. THIS MAY END UP COSTING MONEY.
ANNA: 5 BILLION FROM YESTERDAY. ALREADY HAD THE BACKTRACKING ON
THE OTHER WAY THEY WERE TRYING TO GET TISCALI IN LINE.
— FISCALLY IN LINE. U.K.
WEALTH OR CONCESSION COSTS WILL BE SET UP IN THE BUDGET
ACCORDING TO THE U.K. CABINET MINISTER.
SPEAKING ELSEWHERE THIS MORNING, IT WILL HAVE FINANCIAL
CONSEQUENCES. TO YOUR POINT, THIS DOES NOT
SEEM TO BE WHAT IS DRIVING GILT MARKETS TODAY.
PERHAPS OTHER GLOBAL TRENDS. KRITI:
LET’S TALK ABOUT THE FACT WE ARE BARRELING TOWARDS THE JULY
9 TRADE DEADLINE. IS THAT SOMETHING THAT IS
PRICED INTO THESE MARKETS? WE SPOKE WITH THE EUROPEAN
CHIEF EQUITY STRATEGIST AT MORGAN STANLEY ABOUT THE RANGE
OF OUTCOMES FOR EUROPEAN EQUITIES OFF OF THOSE U.S.
TARIFFS. TAKE A LISTEN TO WHAT SHE HAD
TO SAY. >> 20% IS NOT PRICED IN.
WE HAVE A SCENARIO WHERE ON JULY 9, WE GO BACK TO 20%.
THEORETICALLY, THAT COULD CAUSE MORE THAN 10% DOWNSIDE TO THE
EUROPEAN EQUITIES INDEX. I THINK GIVEN THE MARKET HAS
GOTTEN USED TO THINGS COMING INTO PLAY AND BEING TAKEN OFF,
PROBABLY INVESTORS WILL NOT PRICED THAT 10% DOWNSIDE FULLY.
IT WOULD BE MORE LIKE 3% TO 5% DOWNSIDE RISK. KRITI: JOINING US IS ERIC, EMEA HEAD
OF INVESTMENT STRATEGY AT J.P. MORGAN PRIVATE BANK.
GOOD MORNING AND THANK YOU FOR JOINING US.
WE HEARD MARINO TALK ABOUT THIS IDEA THAT 10% IS PRICED IN, 20%
IS NOT. IS THERE A MAGIC NUMBER THAT IS
EQUITY MARKET IS LOOKING AT WHEN IT COMES TO TARIFFS FROM
THE STATES? ERIC: WE LARGELY AGREE WITH THAT KIND
OF RANGE ASSESSMENT. AN EXPECTATION THAT THE
ULTIMATE LANDING ZONE FOR TARIFFS IS IN THAT LOW DOUBLE
DIGIT TYPE OF AREA IS SOMETHING THAT THE MARKET SEEMS
COMFORTABLE WITH, HAS ITS HEAD AROUND AND WOULD ULTIMATELY BE
PALATABLE AND ACCEPTABLE. WE GOT TO THAT HIGH
DOUBLE-DIGIT TYPE OF ZONE, MAY THE 20% HANDLE , THE MARKET
WILL TAKE IT MORE. POORLY WE HAVE A DEGREE OF
OPTIMISM THAT SOME COMMON GROUND AND SOME ECONOMIES ARE
SHOWING DYNAMISM AND FLEX ABILITY TO MAKE THEIR WAY
THROUGH THIS ADJUSTMENT PERIOD. KRITI: COUNTRY TARIFFS.
LET’S TALK ABOUT SECTORIAL TARIFFS.
IS THAT SOMETHING THAT MARKET SHOULD BE PRICING IN NOW? ERIK:
IT SEEMS AS THOUGH IT IS. IF WE LANDED IN ULTIMATE ACROSS
THE BOARD RATE THAT IS NOT DISRUPTIVE ENOUGH FOR GLOBAL
TRADE AND THEN WE HAVE THESE DIFFERENT TARGETED SECTORS,
THAT AGAIN SEEMS TO BE IN A PLACE THAT THE MARKET IS
THINKING ABOUT WHAT THIS MEANS ON A GO FORWARD BASIS.
THERE’S A DEGREE OF REFLEXIVITY TO THE WAY IN WHICH GLOBAL
TRADE IS OCCURRING RIGHT NOW. IF YOU TAKE A LOOK AT CHINA,
THERE SEEMS TO BE A DEGREE OF PIVOTING HAPPENING TO DIFFERENT
COUNTRIES. GOODS ARE STILL MAKING THEIR
WAY AROUND THE WORLD. GROWTH HAS PROVED TO BE PRETTY
RESILIENT AS WE LOOK FORWARD. GUY:
ARE YOUR CUSTOMERS COMFORTABLE BEING RISK ON AT THE MOMENT?
ERIK: I AM GLAD YOU MENTIONED THAT
WORD BECAUSE THE TITLE OF OUR MIDYEAR OUTLOOK WAS COMFORTABLY
UNCOMFORTABLE. WE THOUGHT IT WAS KIND OF
CLEVER. WE DO THINK IT IS REQUIRING OR
THE MARKET CIRCUMSTANCES ARE REQUIRING A RECOGNITION THAT
THIS IS AN OUTSIDE THE BOX TYPE OF YEAR SO FAR IN 2025.
IF YOU LOOK THROUGH A LOT OF THESE GEOPOLITICAL EVENTS,
POLICY EVENTS AND SO FORTH, THE REALITY IS PLAIN OLD FASHION
EARNINGS AND ECONOMIC GROWTH HAVE BEEN CONTINUING TO COME
THROUGH. AT THE END OF THE DAY, EARNINGS
IS WHAT IT IS ALL ABOUT AND WE REMAIN CONSTRUCTIVE. GUY:
IS THERE A DIFFERENT VIEW FOR YOUR U.S.
CUSTOMERS VERSUS INTERNATIONAL CUSTOMERS?
DO THEY SHARE THE SAME VIEWS AT THE MOMENT? THERE IS TALK OF THE FACT
INTERNATIONAL INVESTORS ARE PUTTING MONEY TO WORK IN THE
U.S. IS THERE INDIFFERENCE IN THE
WAY THEY ARE APPROACHING HOW THEY ARE INVESTING? ERIK: THE BIGGEST DIFFERENCE IS
PROBABLY THE DEGREE TO SENSITIVITY TO FX OR LACK
THEREOF. OUR CLIENTS IN THE U.S. TEND TO BE A LITTLE MORE U.S.
DOLLAR AND U.S. ASSET CENTRIC OVERALL.
HERE IN THE REGION, THERE’S A BIT OF A DEBATE GOING ON
INTERMENTS — IN TERMS OF HOW MUCH I WANT TO BE ALLOCATED
RELATIVE TO ROW, REST OF WORLD. THEY ARE TWO WAYS TO LOOK AT
THIS. A, THE VIEWPOINT THAT YOU SELL
THE U.S. TO INVEST INTERNATIONALLY. B WOULD BE YOU STICK Y WITH A
WELL PERFORMING ASSETS WHICH WE THINK THERE ARE A LOT OF GOOD
REASONS THEY WILL CONTINUE TO DO WELL AND YOU ADD INCREMENTAL
INTERNATIONAL EXPOSURE. WHAT YOU ACCOMPLISH IS A
GREATER DEGREE OF INTERNATIONAL DIVERSIFICATION AND YOU ALSO
LOWER YOUR PERCENTAGE CONCENTRATION IN THE U.S.
WE THINK THAT IS THE RIGHT APPROACH, VERSION B.
ADD INTERNATIONAL. ANNA: BUT STICKING WITH SOME OF THE
THINGS IN THE U.S. THAT YOU LIKE.
THAT TAKES US INTO THE SECOND HALF OF THE YEAR BECAUSE IT WAS
THE FIRST TRADING DAY OF THE SECOND HALF YESTERDAY.
WE SAW SOME INTERESTING THINGS. PEOPLE TAKING PROFITS ON THE
THINGS THAT HAD DONE WELL IN THE FIRST HALF.
IS THAT GOING TO BE A THEME WE CONTINUE TO SEE?
SMALL CAPS WERE DOING WELL YESTERDAY.
ONLY ONE SESSION AND WE HAD SOME INTERESTING JOLTS DATA.
WHAT ARE YOUR EXPECTATIONS FOR THE REST OF THE YEAR?
DOES IT LOOK LIKE THE FIRST HALF OR DIFFERENT? ERIK:
I’M SKEPTICAL THEY CAN BE QUITE AS EVENTFUL AS THE FIRST HALF
OF THE YEAR BUT I SUPPOSE TIME WILL TELL. YOU MENTIONED JOLTS.
I THINK THE NEXT THREE LABOR MARKET REPORTS IN THE U.S.
IN PARTICULAR ARE GOING TO REALLY MATTER. THE U.S.
LABOR MARKET REPORT ALWAYS MATTERS, BUT IN THE NEXT
QUARTER OR SO, IT WILL BE MORE IN THIS TARIFF DIGESTING
PERIOD, SO I THINK IT WILL HAVE AN EVEN MORE KEEN EYE BY MARKET
PARTICIPANTS AND THE FED AS WELL.
IN TERMS OF INVESTMENTS AND SECTORS, WE CONTINUE TO LEAN
INTO AND FAVOR FINANCIALS, TECH, AND UTILITIES IN THE U.S.
ONE OF MY FAVORITE STATS ABOUT THE AI THEME AT THE MOMENT IS
THIS INCREDIBLE INCREASE IN THE RATE OF ADOPTION OF AI.
IT WAS ESSENTIALLY 4.5% OF U.S. FIRMS UTILIZING AI.
THAT HAS GONE UP TO ABOUT 9%. THAT IS 2X IN SIX MONTHS.
THE RATE IS INCREASING IN ITS DEGREE OF INCREASING AS WE GO
FORWARD. THE CURVE IS KIND OF BENDING SO
TO SPEAK AND INFLECTING HIGHER. WE THINK THAT IS POWERFUL FOR
THE TECH SECTOR. ANNA: STILL AI ENTHUSIASM IN THE
UNITED STATES. DEFENSE ENTHUSIASM IN EUROPE? .
THAT HAS BEENA BIG TALKING POINTI’M INTERESTED IN ON HOW
CLIENTS ARE THINKING ABOUT EXPOSURE TO DEFENSE. ERIK:
WE LIKE IT. WE HAVE BEEN A BOARD THAT THE
MEN CONTINUE TO HAVE THAT VIEWPOINT.
IT IS VERY NOTEWORTHY AND IMPRESSIVELY DECISIVE, THIS
INCREASE IN NATO COMMITMENTS IN THE REGION.
WE REALLY LIKE SEEING THAT SENSE OF URGENCY OUT OF
EUROPEAN LEADERS, EITHER ON DEFENSE, ELEMENTS OF THE DRAGHI
REPORT RECOMMENDATIONS, INFRASTRUCTURE, INVESTING FOR
FUTURE GROWTH. THERE’S A GREATER DEGREE OF
TANGIBLE OPTIMISM IN THE REGION AND WE THINK THERE IS GOOD AND
VALID REASONS FOR THAT. KRITI: ONE OF THE MAJOR BULL CASES FOR
EUROPE WHICH IS THAT THIS MARKET HAS SEEN A LOT OF
BUYBACKS, A LOT OF SHAREHOLDER RETURNS SPECIFICALLY FOR THE
FINANCIAL SECTOR. WHAT DOES THAT COME TO AN END?
IF YOU START TO SEE THIS IDEA OF TARIFFS WAYING OR
RECESSIONARY IMPACT OR WHATEVER THE FISCAL ISSUES, A PULLBACK
IN SOME OF THE SHAREHOLDER RETURNS, WHAT IS THE CANARY IN
THE COAL MINE FOR THAT? ERIK: THE BUYBACK THEME IS CERTAINLY
HELPFUL AND WE HAVE MORE INFORMATION ON THAT IN THE LAST
24 HOURS. IT IS A THEME WE THINK IS
LIKELY TO PERSIST BOTH IN THE U.S. AND ELSEWHERE.
IT IS THE OLD-FASHIONED SUPPLY AND DEMAND TYPE OF SUPPORT
STRUCTURE. WE THINK THAT WILL CONTINUE TO
BE A FACTOR MARKETS AS WE LOOK AHEAD.
FROM A DEBT STANDPOINT, IT IS A LITTLE BIT REMARKABLE AND
IMPRESSIVE HOW RESILIENT AND COMFORTABLE GLOBAL MARKETS HAVE
SHOWN WITH THESE EVER-EXPANDING LEVELS OF GOVERNMENT DEBT. U.K.
GILT YIELDS ARE DONE NOTABLY FROM WHERE THEY WERE A COUPLE
MONTHS AGO. THE U.S. 10 YEAR YIELD IS ALSO DOWN
NOTABLY, CLOSER TO 4.25%. IT WAS ABOUT 4.6% AMIDST ALL
THAT UNCERTAINTY EARLIER IN THE YEAR.
SO, IF WE GET ENOUGH GROWTH, IT IS REMARKABLE HOW MUCH GROWTH
CAN PAPER OVER OR COVER UP A LOT OF THESE DEBT CONCERNS.
THAT IS LARGELY THE THEME WE ARE SEEING.
COMFORT IN THE BOND MARKET. GUY: GREAT TO SEE YOU.
THANK YOU FOR COMING TO SEE US, ERIK.
LET’S TAKE A LOOK AT THE EQUITY MARKETS NOW AND SEE WHAT’S
HAPPENING. WE WILL START WITH THE CALL.
THIS IS THE PICTURE, BROADLY BID. FERRARI IS A LITTLE SOFT.
LVMH IS QUITE STRONG. CAC HAVING A SLIGHTLY BETTER
DAY BROADLY WITH LUXURY BACK ON THE FRONT FOOT.
WHAT ALSO RE-WATCHING? JOE EASTON IS HERE. JOE:
TAKE A LOOK AT THIS, DOWN ALMOST 14% AT THE OPEN OF
TRADING FOR THE U.K. BAKERY COMPANY.
THEY ARE SAYING THEY HAVE BEEN HIT BY WARMER WEATHER WHICH
KIND OF MAKES SENSE. YOU DON’T WANT A SAUSAGE ROLL
AND HOT CHOCOLATE IN THIS KIND OF HEAT THE PAST COUPLE OF DAYS.
THAT IS THE REASON WHY THEY ARE LOWERING THEIR GUIDANCE IN AN
UNSCHEDULED STATEMENT TO THE MARKET THIS MORNING.
ANALYST BECOMING VERY BEARISH. REDUCING THEIR ESTIMATES FOR
THE COMPANY. ONE OF THESE HIGHFLYING U.K.
STOCKS HIT BY THE WARMER WEATHER, POTENTIALLY SOME
EASING IN THE GENERAL CONSUMER SENTIMENT, WEIGHING ON THAT ONE.
A BIG MOVER IN THE U.K.. IN TERMS OF OTHER BIG U.K. MOVERS, WE’VE GOT BYTES
TECHNOLOGY DOWN 25%. THIS IS THE CLOUT AND
CYBERSECURITY FIRM. THE STATEMENT FROM THEM ALSO
WEIGHING ON. SOFTWARE — TAKING A BITE OF
THAT ONE. THE PRODUCER PUT ME UP ITS OF
PUTTING THAT INTO THAT. BYTES TECHNOLOGY DOWN PRETTY
SHARPLY. BIG LOSS ON THAT ONE. OF MOVING OVER TO THE ONES THAT
HAVE HAD A LITTLE MORE TIME TO PREPARE FOR, THE RENEWABLES
GAINING TODAY, INCLUDING THIS UPDATE FROM THE SENATE BILL OF
THE U.S. AND THE BIG BEAUTIFUL BILL,
STRIPPING OUT THIS PROVISION THAT WAS GOING TO TAX PROJECTS
THAT WERE USING CHINESE COMPONENTS IN THE RENEWABLE
SPACE. GETTING 9%, ONE OF THE BEST
PERFORMERS ON THE STOXX 600 TODAY.
NORD TEXT AND EDP COME ALL OF THE RENEWABLE STOCKS MOVING
HIGHER GIVEN THE UPDATE ON THE BIG BEAUTIFUL BILL.
IN TERMS OF SPANISH BANKS, WE HAVE THE DEAL COMING THROUGH.
SANTANDER BUYING PSB FROM SABADELL.
UNEXPECTED IN TERMS OF BOTH THE PRICE AND THE ACTUAL BID BUT
TAKEN RELATIVELY POSITIVELY AT THE OPEN.
SABADELL COMING UP 3% AT THE MOMENT.
SANTANDER VERY SLIGHTLY AS WELL. SANTANDER WILL BE SERVING MORE
THAN 25 MILLION PEOPLE IN THE U.K.. THE COUPLE OF M&A STORIES.
OVER IN THE NORDIC MARKET, THIS IS AN INVESTMENT SERVICES FIRM.
THERE IS A REPORT AND LOCAL MEDIA ABOUT POTENTIALLY A
TAKEOVER FOR THE FIRM. THIS IS A VERSION OF THE U.K.
BUT OVER IN SWEDEN. THAT IS UP SHARPLY.
FINALLY, A PRICE ON THE TAKEOVER BY KKR FOR SPECTRIS.
WE ARE SEEING THE STOCK COMING UP VERY SLIGHTLY, EVEN ABOVE
THAT AT THE MOMENT. THE YOU U.K. INDUSTRIAL FIRM.
ANNA: JOE EASTON FROM THE EQUITIES
TEAM, THANK YOU FOR THE UPDATE. QUITE A LOT OF MOVERS THIS
MORNING INCLUDING THE SPANISH BANKING SECTOR. SANTANDER AGREES TO BUY TSP
FROM SABADELL. WE WILL DIVE INTO THE DETAILS
OF THE DEAL. THAT CONVERSATION IS NEXT.
THIS IS BLOOMBERG. >> THE U.K.
IS REALLY IMPORTANT BECAUSE IT HELPS STABILIZE OUR CAPITAL,
ARE RISK RETURN PROFIT. WE HAVE A LOW RISK BUSINESS IN
THE U.K. IT IS STABLE RETURNS IN STRONG
CURRENCY. THIS HELPS STABILIZE OUR
RETURNS THAT COME IN DEVELOPING ECONOMIES. KRITI:
THAT WAS THE SANTANDER CFO SPEAKING WITH BLOOMBERG EARLIER.
LET’S GET MORE INSIGHT ON THE MERITS, MAYBE NOT SO MUCH THE
MERITS — TOM METCALF JOINING US AROUND THE TABLE.
THIS DEAL HAS LEFT ALL OF US SCRATCHING OUR HEADS A LITTLE
BIT. THIS FEELS LIKE A VERY EXPENSIVE DEAL FOR VERY LITTLE.
WHAT IS SANTANDER GETTING OUT OF THIS? TOM: THEY ARE PAYING WAY OVER BOOK
VALUE FOR IT WHICH IS QUITE UNUSUAL FOR U.K. BANKING.
BASICALLY, A VERY BIG BOOK WHICH IS NOW VERY LOW RISK.
LOOKING AT IT FROM A GROUP POINT OF VIEW, THEY HAVE THIS
TECH SYSTEM THAT THINK THINK IT WILL INTEGRATE TSB QUITE EASILY
AND GIVES THEM SKILL IN THE U.S. MARKET.
FOR ME, THIS IS SENT 10 THEY’RE COMING OUT, DESPITE RUMORS THEY
WOULD LOOK AT THEIR U.K. OPERATIONS, NOW GOING ALL IN IN
THE U.K. ANNA: THEY CLEARLY SEE THE U.K.
MORTGAGE MARKET WHICH IS WHAT THEY DO A LOT OF AND WILL
CONTINUE TO DO AS PRETTY LOW RISK BECAUSE THEY SAY THIS
HELPS THEIR RISK PROFILE. IT SITS ALONGSIDE WHAT THEY ARE
DOING IN EMERGING MARKETS AND HELPS BALANCE THE RISK PROFILE
FOR THE BUSINESS. TOM: EXACTLY. THEY WILL GO FROM ABOUT 10% OF
THE MARKET TO ABOUT 12%. IT IS DEFINITELY A BUSINESS
LOOKING TO GET FURTHER INTO IT. IT IS ONE OF THOSE THAT THEY
THINK THERE WON’T BE TOO MANY PAINFUL POSITIONS — REVISIONS.
IT IS JUST RELIABLE EARNINGS. IN OF THE MARKETS, THEY ARE
MUCH MORE VOLATILE. GUY: IF YOU ARE A SHAREHOLDER, DO
YOU WANT BORING? IS THAT GOOD NEWS FOR YOUR VIEW
OF WHERE THIS BUSINESS IS GOING? COULD THIS MONEY HAVE BEEN USED
ELSEWHERE, RETURN TO SHAREHOLDERS?
WHY ARE THEY PAYING OVER FOR THIS BUSINESS?
THERE ARE SO MANY QUESTIONS ABOUT THIS TRANSACTION.
IT IS SO SURPRISING THAT SANTANDER MADE A DECISION TO
INVEST IN A MARKET THAT SOME PEOPLE WERE QUESTIONING THEY
WILL CONTINUE TO BE IN. NOT PUTTING MONEY INTO HIGH
RETURNING AREAS OF THE BUSINESS AND NOT RETURNING MONEY TO
SHAREHOLDERS. DO YOU THINK THAT SHAREHOLDERS
WILL BE SURPRISED BY THIS NEWS? TOM:
SOME ANALYSTS ARE SAYING THIS LOOKS QUITE INTERESTING,
SURPRISING. SHARES ARE UP SLIGHTLY.
I THINK BORING IS CERTAINLY GOOD FOR ANY COMPANY BUT
PARTICULARLY BANKS WE DON’T WANT SURPRISES SHOCKS FROM THE
INVESTMENT BANKING SIDE OR CAPITAL MARKET SIDE.
WHAT IT DOES DO IS CLARIFY THE STRATEGY.
WHETHER THERE MIGHT BE SOME CONFUSION ABOUT SOME OF THE
U.K., IT IS CLEAR THEY ARE NOT. IT IS ONE OF THEIR TENT POLES.
PERHAPS WITH THAT FOCUS, THEY CAN GET THE RETURNS THERE.
THEY ARE SAYING THEY WILL. THE IDEA OF SCALE AND BANKING,
IF YOU WILL BE IN THE U.K., GET BIGGER BECAUSE WHAT YOU DON’T
WANT TO BE IS ON THE SMALLER SIDE. KRITI:
THERE’S A LOT OF SPECULATION NOT JUST FROM MEDIA BY THE
ANALYST COMMUNITY AT OF WEALTH THAT THIS IS SOMETHING — AS
WELL THAT THIS IS SOMETHING THAT ENDANGERS THE BBVA
TAKEOVER BY SABADELL. WHERE ARE WE ON THAT
CONSOLIDATION TIMELINE? IT IS A DEAL LIKE THIS MAKING
IT HARDER FOR CONSOLIDATION NOT JUST IN SPAIN, BUT IN EUROPE
ACROSS THE BOARD? TOM: THIS IS THE OTHER FASCINATING
PART. BBVA TRYING TO BY SABADELL WHICH JUST SOLD TSB WHILE UNDER
A AN OFFER. SABADELL WILL HAVE THIS DUTY OF
PASSIVITY. WITH THAT MEANS FOR THE TSB
DEAL, THEY HAVE TO GO TO THEIR OWN SHAREHOLDERS AND MAKE SURE
THEY GET APPROVED AND DID A GOOD JOB OF PUSHING THIS SALE.
$2.6 BILLION WILL GO BACK TO SHAREHOLDERS.
THAT IS THE MOST INTERESTING THING.
CAN BBVA DO ANYTHING TO DISRUPT THIS?
WHAT WOULD BBVA DO IF THEY OWN SABADELL?
THEY WOULD PROBABLY WANT TO SELL TSB ANYWAY.
THAT IS SOMETHING WE ARE LOOKING INTO.
WHERE DOES THIS LEAVE BBVA? CAN THEY DO ANYTHING TO
INTERVENE? WHAT DOES IT MEAN FOR A DEAL
WHERE THEY ORIGINALLY BID FOR SABADELL WITH TSB? ANNA:
AND SABADELL SAYING THE TWO DID NOT HAVE ANYTHING TO DO WITH
EACH OTHER. WE WILL LOOK FORWARD TO YOUR
FOR THE REPORTING. TOM METCALF ON THE LATEST ON
THE BANKING SECTOR. GUY: LET’S TURN OUR ATTENTION TO
WHAT’S HAPPENING IN THE AUTO SPACE.
ELON MUSK OVERSIGHT FOLLOWING THE DEPARTURE OF ONE OF HIS
LONGTIME DEPUTIES. THIS AS THE EV MAKER DELIVERY
ARE SUPPOSED TO CLIMB WITH SALES FIGURES DUE LATER TODAY.
IT LET’S BRING IN CRAIG TRUDELL. IS THIS A GOOD IDEA? MUSK, ONE OF THE REASON WHY
SALES ARE DOWN IS BECAUSE OF TESLA’S ASSOCIATION WITH MUSK.
IS HE BEING FORCED TO DO THIS AND IS A GOING TO HAVE A
POSITIVE IMPACT? CRAIG: IT IS PROBABLY — I MAY QUOTE
TAYLOR SWIFT TOO MUCH — GUY: YOU CAN NEVER DO THAT. CRAIG: I’M THE PROBLEM, IT’S ME, THIS
MAY APPLY. IF MUSK IS OUT THE BIGGEST
CULPRIT, HE IS UP THERE ON THE LIST. THERE WAS A LOT OF
QUESTIONING EARLY THIS YEAR ABOUT HOW MUCH IS IT HIM VERSUS
THE FACT THEY WERE CHANGING OVER THE MODEL Y, THEIR MOST
IMPORTANT VEHICLE, THAT WAS DISRUPTING PRODUCTION ACROSS
THE WORLD FOR THE COUNTRY. WE DIDN’T NEED TO SEE SALES
PLAY OUT FOR A FEW MONTHS TO SEE WITH THAT IN THE FOLD, WILL
THIS COMPANY RECOVER? WHAT WE HAVE SEEN IN EUROPE THE
LAST FEW MONTHS IS IT HAS NOT. MUSK HAS TAKEN EXTREMELY
POLARIZING STANCES ON ANYTHING AND EVERYTHING ON A DAY-TO-DAY
BASIS AND THAT INCLUDES HERE IN EUROPE. ANNA:
HE RECENTLY PUSHED BACK AT THAT SUGGESTION.
WE FLAGGED THE DAMAGE HAS POLITICAL STUNTS HAVE SEEM TO
DO IN HIS SALES BUT HE SAYS I DO BETTER ON THE RIGHT.
IS THERE ANY VALIDITY TO THAT? CRAIG:
I GUESS WE HAVE TO TAKE HIM AT HIS WORD FOR THAT. IN THE U.S. MARKET, I THINK ONE OF THE
THINGS THAT HE MAY HAVE AN ISSUE WITH NOW IS HE’S
ALIENATING TRUMP FANS BY GOING AFTER THE PRESIDENT IN AN
EMPHATIC WAY. IT MAY BE THE CASE THAT PEOPLE
ARE WILLING TO OVERLOOK THAT AND MAY AGREE WITH HIM THAT IT
IS NOT SUCH A GOOD IDEA TO ADD TRILLIONS OF DOLLARS TO THE
NATIONAL DEBT. BUT IN EUROPE, I THINK IT IS
ABSOLUTELY THE CASE THAT HE IS STILL VIEWED AS SORT OF PART OF
THIS TRUMP MOVEMENT. TRUMP IS NOT PARTICULARLY
POPULAR IN A LOT OF MAJOR COUNTRIES IN EUROPE THAT
HAPPENED TO BUY A LOT OF ELECTRIC VEHICLES.
IT HAS ALSO BEEN THE CASE THAT WE HAVE SEEN THIS REGION GET A
LOT MORE COMPETITIVE IN THE ELECTRIC VEHICLE SPACE BECAUSE
OF THE CHINESE COMPETITION DESPITE TARIFFS. ANNA: HE COMMENTED SPECIFICALLY ON
EUROPEAN POLITICS AS WELL. THE THINGS HE HAS SAID IN
EUROPE. KRITI: A QUESTION ON SUPPLY CHAINS.
ONE OF THE BIG QUESTIONS OF TESLA DURING COVID WAS YOU
BUILD YOUR FACTORIES IN BERLIN OR SHANGHAI, CLOSER TO THE
SUPPLY CHAIN. DO YOU THINK THAT STRATEGY
CHANGES AS WE ARE TALKING ABOUT SALES DECLINING? CRAIG:
THERE’S A REAL QUESTION FOR ME OF TESLA HAS BUILT THIS MASSIVE
PLANT IN GERMANY, HAD PLANS TO EXPAND IT.
DO THEY STEP BACK FROM THOSE PLANS GIVEN THE WEAKNESS IN THE
MARKET? DO WE START TO SEE SOME TAKING
OFF OF SHIFTS, MORE DOWNTIME IN THE FACTORY?
RIGHT NOW, WE ARE NOT SEEING THE DEGREE OF SALES THERE.
IT DOES RAISE QUESTIONS ABOUT HOW MUCH SUPPLIERS ARE REALLY
CONCERNED. WHEN THE COMPANY DOES SET UP
NEW FACTORIES, AS IS THE CASE WITH THE REST OF THE INDUSTRY,
THEY WANT TO LOCALIZE THE SUPPLY CHAIN. KRITI:
SOMETHING WE WILL KEEP A CLOSE EYE ON. CRAIG TRUDELL WALKING US
THROUGH THE TESLA STORY AND HOW IT INTERACTS WITH EUROPE.
COMING UP, WE GO TO THE ECB FORUM WHERE THE BANK OF
PORTUGAL GOVERNOR JOINS FRANCINE LACQUA. >> THE U.S. FISCAL PATH IS NOT A
SUSTAINABLE ONE. THE LEVEL OF THE DEBT IS
SUSTAINABLE BUT THE PATH IS NOT AND WE NEED TO ADDRESS THAT
SOONER OR LATER. SOONER IS BETTER THAN LATER.
THAT IS WHAT I SAID LAST YEAR. GUY: THAT IS THE FED CHAIR JAY
POWELL SPEAKING TO FRANCINE LACQUA IN PORTUGAL AT THE ECB
FORUM. TODAY, SHE GOT ANOTHER GREAT
GUEST. FRANCINE COME OVER TO YOU. FRANCINE: THANK YOU SO MUCH AND GOOD
MORNING FROM PORTUGAL WHERE WE HAD A GOOD CONVERSATION ON
INFLATION AND TARIFFS AND WHAT COMES NEXT.
I AM JOINED BY THE GOVERNOR OF THE BANK OF PORTUGAL, MARIO
CENTENO. IS THERE A NEED FOR A CUT THIS
YEAR FROM THE ECB? MARIO: IT IS STILL IN THE MIDDLE OF
THE YEAR SO WE HAVE PLENTY OF DATA TO GET. WE REMAIN CAUTIOUS AND FOLLOWING ALL POSSIBLE NUMBERS
AND EVALUATION FROM WHAT’S GOING ON.
WE JUST GOT 2% INFLATION IN JUNE WHICH IS PRECISELY ON
TARGET. THIS IS VERY GOOD NEWS FOR US.
THE ECONOMY IN THE FIRST QUARTER ALSO SHOWED STRENGTHS
IN EUROPE. WE NEED TO SEE IF IT KEEPS THAT
PROFILE OVER THE COURSE OF THE YEAR.
THAT WILL BE GREAT NEWS FOR US. I’M WORRIED WITH INVESTMENT
BECAUSE WE NEED A PICKUP IN INVESTMENT IN EUROPE TO SUSTAIN
PRECISELY THIS GROWTH RATE THAT WE WANT TO ACHIEVE. FRANCINE:
ARE YOU WORRIED YOU ARE NOT GETTING ENOUGH INVESTMENT?
DO YOU HAVE THE NUMBERS THAT MAKE YOU WORRY OR IS THIS
BECAUSE OF THE TARIFFS? MARIO: THE PROFILE FOR INVESTMENT IN THE EURO AREA IS IMPACTED BY
THE CYCLE OF MONETARY POLICY RATES. SO, IT IS ACTUALLY WHAT
RESPONDS MORE FORCEFUL. IT IS UNDERSTANDABLE IN THAT
SENSE. IT IS TAKING TOO LONG FOR IT TO
RECOVER. OF COURSE, UNCERTAINTY DOES NOT
HELP EITHER. SOURCES OF UNCERTAINTY THAT
ALSO DETER INVESTMENT. SO, WE NEED TO MOVE AWAY FROM
THIS. GIVE CERTAINTY TO INVESTORS.
TRADE DEALS WILL BE GREAT BUT THAT IS FOR THE EUROPEAN
COMMISSION TO DISCUSS. IF SOMETHING ON THAT OCCURS, I
THINK WE WILL — FRANCINE: INFLATION IS VERY MUCH IMPACTED
BY CURRENCY. WE SPOKE TO THE VICE PRESIDENT
YESTERDAY. HE WAS SAYING 1.20 FOR THE EURO
IS PROBLEMATIC. DO YOU AGREE? MARIO:
WE NEED TO THINK ABOUT THE EXCHANGE RATE AS A MARKET
OUTCOME. MARKETS ADJUST IF THERE IS SOME
DEVELOPMENT THAT IT IS NOT SUSTAINABLE.
I’M SURE THAT WILL SHOW UP IN THE NUMBERS. WE NEED TO THINK ABOUT THE
CURRENT NUMBER, THE CURRENT PERSPECTIVES FOR EXCHANGE RATE
AS INFLECTING — REFLECTING STRENGTHS OF THE EURO, WHAT’S
GOING ON GLOBALLY. WE ARE ALSO PUSHING A LOT TO
INCREASE THE INTERNATIONAL ROLE OF THE EURO DEBT.
IT WILL BRING MORE INVESTORS TO EUROPE.
IT WILL INCREASE THE INTEREST IN THE EURO, SO THAT IS GOOD.
FRANCINE: HOW DO YOU THINK ABOUT INTEREST
RATE CUTS? GIVEN WHERE WE THINK WE ARE ON
THE NEUTRAL RATE, IF YOU CUT FURTHER, THEN IT WILL BECOME
STIMULATIVE. SHOULD THAT BE A CONCERN GIVEN
ALL THE UNCERTAINTIES, THE OIL PRICE, INFLATION, TARIFFS AND
TRADE? MARIO: THERE IS A RANGE OF ESTIMATES
FOR THE NEUTRAL. NEUTRAL MEANS THAT EVERYTHING
ELSE IS ALSO IN EQUILIBRIUM, IF I MAY SAY. IT MEANS THAT WE ARE AT OUR
POTENTIAL IN TERMS OF GROWTH. THE LABOR MARKET IS ALSO IN
EQUILIBRIUM. WE ARE NOT THERE YET IN TERMS
OF GROWTH. FOR THE SYSTEM, FOR EVERYTHING
IN INTEREST RATES, IT WOULD BE AN IMPORTANT CONCEPT.
AND WE HAVE A HISTORY IN EUROPE A VERY LOW INFLATION.
I DID SEE THE FUNDAMENTALS FOR THAT TO BE CHANGED AS MUCH AS
WE CAN COMFORTABLY. BUT, THIS DOES NOT MEAN THAT WE
NEED TO RUSH INTO THAT. WE NEED TO SEE DATA.
WE NEED TO LOOK AT WHAT ARE THE DEVELOPMENTS. THE SECOND QUARTER WILL BE VERY
IMPORTANT BECAUSE IF IT CONFIRMS THE FIRST QUARTER NUMBER, IF WE GO AND TUMBLE A
BIT IN TERMS OF GROWTH, THAT ALWAYS CONCERNS ABOUT HOW
SUSTAINABLE THE 2% INFLATION IS. FRANCINE:
SHOULD WE WORRY ABOUT THE INFLATION NUMBERS GOING DOWN?
YOU ARE WORRIED ABOUT THEM GOING DOWN RATHER THAN GOING UP?
MARIO: YES. THAT IS ACTUALLY THE PROFILE FOR INFLATION, OUR FORECAST. WE
BEGIN WITH A LOW NUMBER. BASE EFFECT ON THAT.
IT IS ALSO THE RECENT HISTORY OF EUROPE, IT IS NOT ONE OF
HIGH INFLATION, HIGH PRESSURE ON THAT.
WE NEED TO BE CAUTIOUS ABOUT ITS. FRANCINE:
DO YOU BELIEVE THE EURO CAN PLAY A MUCH BIGGER ROLE IN THIS
CHALLENGED GLOBAL DOLLAR RESERVE CURRENCY, LIKE
CHRISTINE LAGARDE WANTS EUROPE TO PLAY? MARIO:
THAT IS A LONG TERM APPROACH THAT WE TALKED ABOUT 5, 6, 7
YEARS AGO. IT IS NATURAL TO HAVE THEM AS
AN INSTITUTIONAL ENVIRONMENT OF THE EURO STRENGTHENS.
IT HAS BEEN THE CASE FOR 10 YEARS. EUROPE PLAYS A MORE COMPATIBLE
ROLE IN THE WORLD, WITH ITS HISTORY, WITH ITS REACH TO THE
GLOBAL ECONOMY. I THINK IT IS REALLY IMPORTANT
FOR US TO WORK TOWARDS THAT GOAL.
AND WE HAVE BEEN DOING THAT. WE HAVE BEEN STRENGTHENING THE
INSTITUTION AND THE INSTITUTIONS IN EUROPE. ALSO, FISCALLY, WE HAVE BEEN
MAKING DECISIONS THAT ARE REALLY BOLD IN TERMS OF
CREATING A UNION THAT IS ALSO FISCALLY MORE STRONGER AND
WORKING TOGETHER. THAT IS GOOD. FRANCINE:
WHEN YOU LOOK AT THE TRADE NEGOTIATIONS, IT WILL ALL COME
TO A CRUNCH THE NEXT COUPLE OF DAYS, DOES IT ALTER THE ECONOMY
IN EUROPE? DOES IT ALSO DECIDE WHETHER THE
EURO CAN BECOME A GLOBAL RESERVE CURRENCY? MARIO: IT WILL HAVE A BIG IMPACT IN
REDUCING UNCERTAINTY. HAVING A DEAL THERE WITH CLEAR
— GIVES CLARITY TO CONSUMERS, INVESTORS, FIRMS AND PRODUCERS.
THAT IS THE MAIN GOAL OF IT. THE LAST THING WE WERE ASKING
FOR TO HAPPEN, BUT ONCE WE HAVE TO ENGAGE ON THAT, THE BEST THING IS TO SETTLE A DEAL AND
TELL PEOPLE THIS IS WHAT WE HAVE TO WORK. FRANCINE:
IF THAT HAPPENS, DO YOU THINK WE GET SOME KIND OF DEAL OR
DOES IT GET PUSHED BACK? MARIO: I AM NOT INVOLVED IN THE
NEGOTIATION SO I WILL NOT COMMENT ON THAT.
PUT PRESSURE ON THOSE THAT ARE AT THE TABLE BECAUSE THOSE ARE
NOT EASY NEGOTIATIONS. IT IS REALLY IMPORTANT TO REACH
A DEAL AND TO SEND THAT MESSAGE. LOOK, THIS IS WHAT WE HAVE WITH
US, SO LET’S WORK WITH IT. IF IT’S IMPORTANT FOR THE
CONTINUATION OF THIS PROCESS OF EUROPE GAINING MORE RELEVANCE
INTERNATIONALLY, I AM SURE IT IS.
EUROPE IS A VERY OPEN ECONOMY. IT IS ESSENTIALLY THE MOST OPEN
ECONOMY AND THE LARGEST ECONOMIES IN THE WORLD.
MORE THAN CHINA, MORE THAN THE U.S. WE DEVELOP OURSELVES IN THIS
GLOBAL ECONOMY AND WE DON’T WANT IT TO GO BACK. FRANCINE:
DOES IT IMPACT — WHAT WE KNOW SO FAR OF THE TARIFFS AND I
KNOW THERE’S A DELAY IN SOME OF THE CONCERNS, I GUESS BEING
FILTERED IN THE DATA, IS IT BAD FOR GROWTH, INFLATION?
WHAT ARE THE SECOND AFFECTS? MARIO:
IT IS CERTAINLY BAD FOR GROWTH BECAUSE IT IS A TAX.
WE KNOW WHAT TAX IS TO ECONOMIES.
WE WILL HAVE A SMALLER ECONOMY AFTER A TARIFF THAT WE USED TO
HAVE. THAT IS ALMOST CLEAR FOR EVERYONE ON THE TABLE. IT DEPENDS ON THE DEGREE OF
RETALIATION THAT EUROPE HAS. IT CAN BE DEFLATIONARY FOR
EUROPE. FRANCINE: YOUR TERM IS COMING TO AN AND
VERY SHORTLY. WILL YOU SERVE A SECOND TERM?
MARIO: THAT IS A DECISION SOMEONE ELSE
HAS TO TAKE. I’M COMFORTABLE IN MY POSITION.
FRANCINE: IF THEY OFFER YOU TO TAKE IT?
MARIO: YES. FRANCINE: THANK YOU FOR YOUR TIME,
GOVERNOR. THAT WAS MARIO CENTENO, THE
GOVERNOR OF THE BANK OF PORTUGAL. BACK TO YOU. KRITI:
FRANCINE LACQUA, THANK YOU VERY MUCH.
WE HAVE MORE INTERVIEWS TODAY, INCLUDING A CONVERSATION WITH
THE BANK OF ENGLAND MEMBER ALAN TAYLOR. GUY:
I HOPE THE WIND DIES DOWN. COMING UP, TALKING ABOUT MAYBE
AN ILL WIND THIS TIME. KEIR STARMER ABANDONING HIS
WELFARE REFORMS IN A POTENTIAL 5 BILLION POUND HOLE IN THE
GOVERNMENT’S FINANCES. WE BREAK DOWN THE IMPLICATIONS
NEXT. THIS IS BLOOMBERG. >> THE LEVEL OF HOUSEHOLD AND
CORPORATE DEBT AND THE U.K. ECONOMY IS ACTUALLY LOWER THAN
WE EXPECTED IT TO BE, BUT BASED ON PAST EXPERIENCE.
AGAIN, THAT FEEDS THROUGH INTO HOW RESTRICTIVE POLICY IS WITH
GIVEN INTEREST RATES. IT IS SOMEWHAT LESS RESTRICTIVE
THAN IT WOULD HAVE BEEN HISTORICALLY. ANNA:
BANK OF ENGLAND GOVERNOR ANDREW BAILEY SPEAKING AT THE ECB
FORUM ON CENTRAL BANKING IN PORTUGAL.
A COMPANY — ACCOMPANIED BY MANY OTHER VOICES BUT IT WAS
INTERESTING WHAT HE HAD TO SAY ABOUT HIGH INTEREST RATES, NOT
HAVING THE IMPACT THEY PREVIOUSLY WOULD HAVE HAD
BECAUSE OF LOWER DEBT LEVELS AMONG INDIVIDUALS AND
COMPANIES, NOT GOVERNMENTS. GUY: INDIVIDUAL COMPANIES DON’T HAVE
A LOT OF DEBT. THEIR BUCKETS ARE RELATIVELY
FULL. THE GOVERNMENT’S BUCKET IS RELATIVELY EMPTY.
HOW DO YOU FEEL THE BUCKET? TAX RISES. ANNA:
LET’S STAY WITH THE U.K. WHERE KEIR STARMER DRAMATICALLY
ABANDON THE DRAMATIC WELFARE REFORMS TO AVOID A
PARLIAMENTARY DEFEAT. IT MOVES THE AUTHORITY BADLY
DAMAGED AND HIS GOVERNMENT FACING A WIDENING FISCAL HOLE. >> OUR PLANS WILL CREATE A FAIR
SOCIETY, ONE WHERE PEOPLE CAN WORK AND GET THE HELP THEY NEED.
WHERE WE PROTECT THOSE THAT CANNOT. >> THIS IS A RUSH ATTEMPT TO
PLUG THE CHANCELLOR’S FISCAL HOLE.
IT IS NOT DRIVEN BY PRINCIPAL BUT BY PANIC. ANNA:
A FLAVOR OF THE DRAMA IN THE HOUSE YESTERDAY.
LET’S BRING INTO THE CONVERSATION RUTH DAVID AND
ROSA PRINCE. GOOD TO HAVE YOU BOTH AROUND
THE DESK TO ESTABLISH WHAT HAPPENED YESTERDAY NEARLY A
YEAR INTO THE KEIR STARMER ADMINISTRATION.
I GUESS WE GET QUITE IMMUNE TO HECTIC SCENES IN THE HOUSE OF
COMMONS BUT THIS WAS A REAL CLIMBED DOWN BY THE GOVERNMENT
THAT KEIR STARMER HAD TO STRIP OUT THE GUTS OF THIS BILL TO
ALLOW SOME OF IT TO PASS. RUTH: ABSOLUTELY.
THE CONSERVATIVE PARTY, ONE OF THE SPOKESPEOPLE SAID THIS
GOVERNMENT LOST ITS ECONOMIC CREDIBILITY WHICH IS DEMING
WORDS COMING FROM AN OPPOSITION PARTY THAT WENT THROUGH THE LIZ
TRUSS REGIME. TODAY, THE MARKETS HAVE BEEN
MUTED SO THEY HAVE NOT RESPONDED THAT DRAMATICALLY.
THE QUESTION IS IF THEY LOST THEIR ECONOMIC AND FISCAL
CREDIBILITY, WHERE DO THEY GET THE MONEY THAT IS NEEDED?
THEY GAVE AWAY 5 BILLION YESTERDAY AND THAT IS ON TOP OF
WHAT THEY HAD GIVEN AWAY WITH THE FUEL CUTS FOR PENSIONERS
THAT THEY ROLLED BACK ON. THERE IS ALSO A SENSE THAT IF
THIS GOVERNMENT TAKES ANY DECISION THAT IS FISCALLY
PRUDENT OR THAT REQUIRES SLIGHTLY TOUGHER MEASURES AND
THERE IS OPPOSITION, THEY WILL BACKTRACK.
WHAT IS THAT STEP BETWEEN BEING A LEADER WHO LISTENS TO YOUR
PARTY AND BEING A LEADER WHO IS SEEN AS WEAK? ANNA:
YES, HOW DO YOU MAKE DIFFICULT DECISIONS AND GET THE PARTY TO
COME ALONG WITH YOU AT A TIME WHERE THERE ARE NO EASY CHOICES?
GUY: SECOND YEAR WILL BE QUITE INTERESTING.
I THINK THE CHALLENGES WILL GET GREATER IN THE SECOND YEAR.
ROSA, WHAT DO THEY DO NEXT? THE QUESTION EVERYONE IS ASKING
IS HOW HIGH OUR TAXES GOING TO HAVE TO GO?
WHICH TAXES ARE THEY GOING TO HAVE TO PULL SOME OF THE BIG
LEVERS? SOME OF THE THINGS THEY PROMISE
THEY WOULDN’T DO. ROSA: THE GOVERNMENT’S SORT OF ATTACK
DOG, BIG DEFENDER OF KEIR STARMER.
HE HAS SAID THIS MORNING THAT THEY WILL STICK TO THE
MANIFESTO COMMITMENTS. IF YOU REMEMBER, THERE WHERE
THESE WEASEL WORDS THAT WITH NOT RAISE TAXES ON TO WORKING
PEOPLE WHICH WAS TAKEN TO HIS MEAN INCOME TAX, VAT.
THAT IS NOT LEAVE THEM WITH VERY MUCH.
WHAT THEY SEEM TO BE DOING IS BOXING THEMSELVES IN AGAIN
WHICH HAS BEEN THE PROBLEM OF THIS WHOLE YEAR WHERE THEY SAY
WE ARE NOT GOING TO DO THAT AND THEN WHAT ARE YOU GOING TO DO?
ANNA: THE OPPOSITION PARTY WILL SAY
THEY HAVE LOST FISCAL CREDIBILITY.
WE REMEMBER THE LIZ TRUSS DAYS. PLENTY OF VIEWS ABOUT WHEN OR
NOT FISCAL CREDIBILITY IS LOST. THE GOVERNMENT WILL STILL SAY
THEY CLING TO THEIR FISCAL RULES UNLESS THEY CHANGE SOME
OF THOSE. THE MARKET IS PRETTY CALM.
DOES THAT TELL US ANYTHING ABOUT THE MARKETS JUDGMENT?
OR THE MARKET IS THINKING ABOUT OTHER THINGS LIKE THE U.S.
MARKET, STRONG EURO, OTHER THINGS THAT ARE NOT NECESSARILY
DOMESTIC? RUTH: I THINK THERE IS DEFINITELY THE
LATTER. THIS REVERSAL HAS NOT HAD SO
MUCH OF AN IMMEDIATE BIG BANG EFFECT THAT THE MARKET SHOULD
BE TAKING INTO CONSIDERATION. YOU ARE SAYING OK, LET’S MOVE
IT ALONG TO THE BUDGET IN THE FALL AND SEE WHAT THAT BRINGS. MAYBE FIND A WAY TO INCREASE
BORROWING WHICH I KNOW SHE SAID SHE WOULDN’T DO.
THE TOLL ON THE GOVERNMENT IS CHANGING. GUY:
DOES THIS IMPLY ISSUE THE RIGHT PERSON FOR THE JOB?
IN ORDER TO MAKE THE CHANGES THAT ARE GOING TO BE NECESSARY,
I WERE GOING TO HAVE TO SEE A NEW CHANCELLOR?
AND WILL NUMBER 10 ALSO TAKE GREATER CONTROL OVER THE LEVERS
OF POWER AT THE TREASURY? THE TREASURY FEELS LIKE IT
PULLED A LOT OF LEVERS OVER THE LAST 12 MONTHS. DOES STARMER NEED TO GET A GRIP
ON THAT AND IS A NEW TRANSLATOR REQUIRED — NEW CHANCELLOR
REQUIRED? RUTH: IT IS DEFINITELY BEING ASKED.
LIZ KENDALL WAS ASKED IF HER POSITION IS STILL TENABLE AND
SHE SAID THEY MADE THE RIGHT CALL BY LISTENING TO THE CENTER.
WHILE EVERYONE WAS FOCUSED ON IT, THERE WAS ANOTHER BIG BIT
OF NEWS THAT ASTRAZENECA MIGHT BE LOOKING AT MOVING ITS
LISTING TO THE U.S. THAT IS IMPORTANT BECAUSE IN
TERMS OF U.K. NATIONAL CHAMPIONS, IT IS NOT
GET BIGGER THAN THAT. IF THEY ARE SAYING WE WANT TO
MOVE OUR LISTING OUT, DESPITE ALL THE GOVERNMENT HAS BEEN
SAYING THEY WILL DO ON THE FINANCIAL MARKET, THAT IS A
DEFINITE VOTE OF NO-CONFIDENCE. THE FACT THEY HAVE NOT SAID
ANYTHING TO THAT STORY YET IS NOT A GREAT SIGN.
IT JUST ADDS TO THE TICKER OF BAD NEWS FOR THE GOVERNMENT
THIS WEEK. KRITI: ROSA, I FEEL LIKE THE U.K.
HAS NOT RECOVERED FROM THE ARM LISTING GOING TO NEW YORK.
HOW BRUTAL WOULD IT ASTRAZENECA LOSS BE? ROSA: ABSOLUTELY.
THEY ARE TRYING TO TALK UP THE U.K.
AND SAY IT IS A GREAT PLACE TO INVEST, GREAT PLACE TO RUN A
BUSINESS. SOMETHING LIKE THAT JUST HAS
MORE THAN 1000 COMMENTS FROM MINISTERS. I PERSONALLY DON’T THINK KEIR
STARMER CAN AFFORD ACTUALLY TO SORT OF THROW AWAY RACHEL
REEVES’ CAREER BECAUSE HE SO TIGHTLY BOUND UP WITH HER,
PARTICULARLY IN THE RUN-UP TO THE ELECTION.
I THINK IT WOULD BE A SELF-INFLICTED LOW IF HE TRIED
TO BLAME THIS MESS ON HER. THE TWO BIG THINGS SHE HAS DONE
WRONG WHERE THE INITIAL DECISION TO TRY TO WITHDRAW THE
WINTER FUEL BENEFIT WHICH CAME OUT OF THE BLUE, KIND OF SET
THE TONE FOR THE WHOLE GOVERNMENT.
AND THEN THESE CUT TO DISABLED VETERANS — BENEFITS WHICH DID
NOT HAVE MUCH THOUGHT BEHIND THEM.
THEY WERE REALLY JUST TO SAVE SOME MONEY RATHER THAN HAVE A
WHOLE BODY OF WORK OF WELFARE REFORM WHICH I THINK WAS
NECESSARY. LABOUR MP’S ARE ANGRY WITH
RACHEL REEVES. I DON’T THINK KEIR STARMER WILL
CUT HER LOOSE. I THINK THERE MAY BE THEY WILL
BE FIGURES INSIDE NUMBER 10 THAT ARE WORRIED ABOUT THEIR
JOBS. ANNA: THERE COULD BE OTHER HEADS THAT
ROLL. YOU MENTIONED THE WINTER FUEL
DEBACLE. THIS WAS ONE BILLION POUNDS,
MORE THAN ONE BILLION POUNDS BUT THAT IS NOT ENORMOUS ON A
GLOBAL STAGE BUT IT STAYED IN THE NEWS HEADLINES FOR SUCH A
LONG TIME. MANY THINGS TO LEARN ON
COMMUNICATION. AS WE APPROACH ONE YEAR, WHAT
ELSE DO THEY NEED TO LEARN? DO THEY NEED TO LEARN THE PRIME
MINISTER MAY NEED TO DO WELL ON THE GLOBAL STAGE BUT ALSO STAY
ENGAGED AT HOME? ROSA: KEIR STARMER MADE A SERIES OF
INTERVIEWS, SAYING IT WAS A BIT DISTRACTED BY WHAT’S GOING ON
ON THE WORLD STAGE. HE WAS AT THE NATO SUMMIT, G7.
IT IS NOT REALLY GOOD ENOUGH. ONE OF THE THINGS YOU NEED TO
BE ABLE TO DO AS PRIME MINISTER IS JUGGLE, MULTITASKING IS THE
NAME OF THE GAME. IT IS WHY THE ROLE OF PRIME
MINISTER WAS INVENTED. WHILE WE DON’T HAVE INDIVIDUAL
DEPARTMENTS RUNNING DIFFERENT SECTIONS OF THE STATE.
THAT IS SOMETHING HE NEEDS TO DO.
I THINK HE HAS BRUTALLY LEARNED HE HAS TO HAVE BETTER RELATIONS
WITH HIS OWN MP’S. AT THE MOMENT, THEY ARE RUNNING
FISCAL POLICY WHICH IS NOT A GOOD PLACE TO BE IN.
SOME MP’S COMPLAIN THEY NEVER MET HIM WHICH IS EXTRAORDINARY.
THERE ARE LABOUR MP’S WHO HAVE NEVER MET THE PRIME MINISTER.
THAT’S GOING TO CHANGE. I THINK THERE’LL WILL BE SOME
INVITATIONS ENTER NUMBER 10. HIS COMMUNICATION IS NOT VERY
GOOD AS AN OPERATION. THEY DON’T SEEM TO KEEP THE
PUBLIC ALONG WITH WHAT THEY ARE THINKING AND DOING. GUY:
THANK YOU VERY MUCH. RUTH DAVID AND ROSA PRINCE.
LET’S TALK ABOUT WHAT WE ARE SEEING WITH THE GILT MARKET
RIGHT NOW AND FIGURE IT NOT — FIGURE OUT IF IT IS STANDING
OUT. WE PROBABLY EASY DOES IT. WE ARE SEEING BOND MARKET
SELLING OFF OF THE U.K. DOES NOT STAND OUT PARTICULARLY
IN THAT REGARD. KRITI: IT DOESN’T BUT THE CURRENCY
KIND OF DOES. WHEN YOU LOOK AT THE POUND, YOU
ARE LOOKING AT A 1.37 HANDLE. THE MORE EXCITING RALLY THAT WE
SEE IN THE MOMENT IS THE EURO-DOLLAR. WE ARE NOW AT A 1.17 HANDLE.
VALERIE TYTEL, HOW EXCITED SHOULD WE BE ABOUT THE ZERO
WINNING STREAK? VALERIE: THE LONGEST WINNING STREAK IN
20 YEARS FOR EURO-DOLLAR. YESTERDAY, AND REACHED A NEW
HIGH FOR THE YEAR SO THERE IS BREAKOUT CURRENTLY HAPPENING IN
FX. THIS DOLLAR MOVE IS REALLY RATTLING NOT JUST CURRENCIES IN
EUROPE. ALSO LOOK AT CURRENCIES IN ASIA.
EVEN THE TAIWANESE DOLLAR BREACHING NEW LEVELS THIS
MORNING. DOLLARS SWISS AS WELL, THAT HAD
A NEW LOW THAT IT HAS NOT SEEN SINCE 2015.
WE HAVE SOME SWISS CPI DATA TOMORROW MORNING. IF THERE’S A BIG MESS TO THE
DOWNSIDE, YOU CAN SEE THE CUT. ANNA: TWO YEAR YIELDS, ARE YOU
THINKING ABOUT THE UNITED STATES I WAS INTERESTED THAT
THE JOLTS MARKET CAPTURED THEIR ATTENTION.
IT IS ALL ABOUT JOBS DATA. IT IS HARDER FOR POWELL TO WAIT
AND SEE. VALERIE: I THOUGHT IT WAS AN OUTSIZE
REACTION TO THE JOLTS DATA. IT IS ONE MONTH DELAYED, IT IS
MAY. IT IS GOING TO BE DATA FOR JUNE. EYES LOOKING FORWARD. FRIDAY’S PRINT MEANS A LOT MORE
IN TERMS OF WHERE TO NEXT FOR THE LABOR MARKET.
YOU ARE GETTING A LOT OF QUESTIONS OF WHAT KIND OF PRINT
WOULD TURN AROUND THIS DOLLAR WEAKNESS.
FRANKLY, I DON’T THINK THERE’S A PRINT THAT WOULD TURN AROUND
DOLLAR WEAKNESS. ON A STRONG PRINT, THE MARKETS
WILL SHRUG IT OFF AND SAY LABOR MARKET WEAKNESS HAS NOT HIT YET.
IT WILL HIT AT THE END OF THE SUMMER.
POWELL HAS TALKED A LOT ABOUT THAT.
ON EIGHT WEAK RATE, WE WILL PRICE AND MORE OF THE FED CUT
IN JULY. IF WE GET A WEAK ENOUGH PRINT
TO MOVE THAT SUBSTANTIALLY HIGHER, THAT OPENS UP ANOTHER
WAVE OF DOLLAR WEAKNESS AS WE CONTINUE TO THINK ABOUT WHERE
THE FED COULD CUT TWO BY THE END OF THE YEAR IF THE LABOR
MARKET DETERIORATES SIGNIFICANTLY. GUY:
SURVEY NUMBERS, 110. VALERIE:
OUR BLOOMBERG ECONOMIST ALWAYS HITS IT ON THE NAIL SO SHE IS
GOING FOR A SLIGHTLY HOTTER PRINT THAN CONSENSUS. GUY:
IT WILL BE TOMORROW, NOT FRIDAY. HOLIDAY IN THE U.S.
CAUSING THAT. THAT WRAPS THINGS UP FOR THIS
SHOW. THE OPENING TRADE. “THE PULSE” IS UP NEXT.

resident Donald Trump threatened Japan with tariffs of up to 35% as he ramped up tensions for a third straight day, fueling fears of a worst-case scenario among market players.

Japan should be forced to “pay 30%, 35% or whatever the number is that we determine, because we also have a very big trade deficit with Japan,” Trump said, again flagging the possibility that across-the-board tariffs could go much higher than the 24% initially penciled in for July 9.

Trump’s multitrillion-dollar tax bill is running into Republican resistance in the House as moderate and ultraconservative GOP lawmakers threaten to defy the president. House lawmakers vote Wednesday on the Senate version of the bill, which squeaked through that chamber on Vice President JD Vance’s tie-breaking vote.

Chapters:
00:00:00 – The Opening Trade
00:02:00 – Trump Tariff Deadline
00:04:45 – Trump Tax Bill
00:07:21 – Starmer Welfare Cuts
00:10:19 – Israel Agrees to Gaza Ceasefire
00:10:41 – US Halts Ukraine Weapon Deliveries
00:11:06 – Macron, Putin Speak on Iran
00:13:40 – Fed: Wait on Rates
00:14:53 – Russell 2000 Gains on Tax Bill
00:25:20 – Santander Buys TSB Bank
00:28:44 – Santander CFO Jose Garcia Cantera
00:40:31 – US Dollar Depreciation
00:44:58 – Airbus Delivers 60 Planes
00:47:16 – Stocks to Watch: Renewables, Santander
01:04:49 – Santander Stock
01:08:01 – Musk’s Tesla Europe Takeover
01:12:46 – Bank of Portugal Governor Mario Centeno
01:23:17 – Household Debt: Bank of England’s Bailey
01:26:47 – Stmarer Welfare Cuts
——–
More on Bloomberg Television and Markets

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