Stellantis Takes $2.7 Billion Hit, Yen Gains After Japan Election | The Opening Trade 07/21

Stellantis Takes $2.7 Billion Hit, Yen Gains After Japan Election | The Opening Trade 07/21

GUY: GOOD MORNING. I’M GUY JOHNSON, LIZZY BURDEN
IS HERE, SO WHAT DO YOU NEED TO KNOW? COMPLICATED TRADE TALKS WITH EU
OFFICIALS PREPARING FOR A NO DEAL SCENARIO WITH WASHINGTON
AND WE TALKED TO THE CEOS OF DEUTSCHE BANK AND SIEMENS FOR
THEIR TAKE ON THE TRADE STORY AND PLANS TO INVEST BILLIONS OF
EUROS IN GERMANY. LIZZY: HAPPY MORNING, MONDAY MORNING. WE’VE GOT THE ECB MEETING ON
THURSDAY, INCHING CLOSER TO THE AUGUST 1 TARIFFS DEADLINE WITH
EUROPEAN STOCKS DECLINING ON FRIDAY. U.S. STOCKS HOVER AROUND RECORD
HIGHS, BUT WE WANT TO SEE MARKET REACTION TO THE YEN. THE COUNTDOWN TO THE OPEN
STARTS NOW. GUY: WHAT I WANT TO TALK ABOUT WAS A
SENSATIONAL PERFORMANCE OVER THE WEEKEND AND I DON’T KNOW WHETHER TO START WITH JAPAN,
THE ECB, OR THE EU NOT GETTING A DEAL WITH THE U.S. AND WE ARE LIEKLY TO — LIKELY
TO SEE TARIFFS IMPOSED. ENVOYS MAY MEET THIS WEEK.
LIZZY: THEY ARE PREPARING FOR THE NO
DEAL SCENARIO, BUT WHAT WILL THEY DO? ONE OPTION IS A RETALIATION. IT SPEAKS TO DIVISIONS WITHIN
THE EU WITH SOME MEMBERS WANTING TO AND OTHERS NOT. SOME WILL ACCEPT HIGHER TARIFFS
WITH EXEMPTIONS. GUY: PEOPLE WILL NOT BE GETTING THE
CARVE OUTS THEY WERE HOPING FOR. IT FEELS GERMANY IS FOLDING TO
THE IDEA EUROPE WILL TAKE A FIRM STANCE. LIZZY: I WONDERED IF TRUMP WAS SERIOUS
IN THE RUN UP TO AUGUST 1ST AND NOW IT LOOKS LIKE THE THREAT
PUSHED A DEAL FURTHER AWAY. GUY: THE ANTI-COERSION TOOL, HOW
SERIOUSLY SHOULD WE TAKE THAT ? U.S.
NEWSPAPERS ARE TALKING ABOUT IT AND THE U.S.
ARE AWARE JUDGING BY THE MEDIA OF WHAT THE EU COULD DO. LIZZY: TRADE UNDERPINS THE AGEND A AND
IF YOU TURN TO JAPAN, ISHIBA HAS LOST THE LOWER HOUSE AND
THE MAJORITY IN THE UPPER HOUSE, HOW MUCH DOES THIS
WEAKEN JAPAN? SCOTT BESSENT SMELLED WEAKNESS. HE SAYS THEY COULD GET A GOOD
DEAL. HAS HE SMELT BLOOD? GUY: MAYBE, IT WILL TAKE AWHILE TO
FIGURE OUT AND COULD LEAD TO HIGHER SPENDING. CLEARLY THE POPULACE IS ANNOYED
AND THE RICE STORY IS MAKING HEADLINES, SO WHAT IS THE
EFFECT AND DOES JAPAN NEED A MOMENT BEFORE THE TRADE DEAL TO
UNDERSTAND WHAT IT COULD MEAN? EVERYTHING IS MOVING TOWARD
HIGHER AND NOT LOWER TARIFFS AND YOU ARE GOINF T– GOING TO SEE HIGHER GOVERNMENT SPENDING
— HOW DOES THE BOND MARKET IN JAPAN RESPOND AND WILL THE BOJ
RAISE RATES? MORE UNCERTAINTY IN A WORLD
THAT IS HARD TO NAVIGATE. YOU BUY THE YEN, IT FEELS
COUNTER-INTUITIVE, BUT THAT’S WHAT MARKETS ARE DOING. LIZZY: YOU TURN TO THE CENTRAL BANKS,
WE HAVE GERMAN INVESTMENT ALLIANCE SUMMIT KEY INTERVIEWS,
THEN U.S. HOME SALES, THEN GERMNAY’S MERZ, THEN GLOBAL PMI’S AND THE
ECB DECISION. FINALLY, UK RETAIL SALES DATA.
BUT ON THURSDAY, WE DON’T EXPECT A MOVE BECAUSE OF THE
TRADE AND TARIFFS. WILL THIS BE A PAUSE OR END TO
CUTS? GUY: THE EXPECTATION IS ONE MORE CUT
BY THE END OF THE YEAR? LIZZY: YES. GUY: IF — IF THE DATA IS DOVISH,
HOW DOES THE EURO RESPOND? IT HAS BEEN TEMPERED BY THE
DOLLAR, BUT COULD THAT STORY TURN AROUND? RATE DIFFERENTIALS COULD MATTER
AGIAN. LIZZY: HAVE TO BE DOVISH OR IT WILL
LOOK LIKE THE END OF CUTS. THE VICE PRESIDENT OF THE ECB
SAYS IF WE GO HIGHER, WE HAVE TROUBLE, BUT WE HAVE RISKS TO
CORE INFLATION, SO IT IS A BALANCE OF TARIFFS AND SPENDING.
GUY: THE EU AND CHINA MEETING WILL BE FUN TO WATCH BECAUSE THEY
HAVE PRESSURE ON BOTH SIDES. LIZZY:
THIS COULD CREATE HEADACHES. GUY: A STEEPER CURVE? WE WILL FIND OUT. THE LOMBARD CIO WILL JOIN US
AND THE ALLIANZ CIO. OLLIE CROOK WILL INTERVIEW THE
CEOS FROM DEUTSCHE BANK AND SIEMENS
AND I’M LOOKING FORWARD TO THEIR TAKES. LIZZY: DOZENS OF COMPANIES WILL INVEST
INTO GERMANY AND THIS IS A KEY MEETING. WHAT ELSE YOU NEED TO KNOW,
ISRAEL WARNED IT WILL MOVE INTO A TOWN IN THE HEART OF GAZA. THE MILITARY TOLD PALESTINIANS
TO EVACUATE TO THE SOUTH AND A TOTAL OF ALMOST 1000
PALESTINIANS HAVE BEEN KILLED WAITING FOR AID INCLUDING 67
PEOPLE YESTERDAY. ELSEWHERE THE WASHINGTON POST
REPORTS A CHINESE-AMERICAN EMPLOYEE OF THE COMMERCE
DEPARTMENT OF THE U.S. IS BARRED FROM LEAVING CHINA
SINCE APRIL. HE WAS DETAINED WHEN HE ARRIVED
IN CHENGDU. THE MAN IS BEING HELD BECAUSE
HIS CASE IS LINKED TO HARMFUL ACTIONS. THE ALASKA AIR GROUND STOP HAS
BEEN CANCELED AFTER A TEMPORARY GROUNDING OF ALL PLANES. IT IS THE SECOND TIME IN JUST
OVER ONE YEAR ALASKA AIR HAS HAD TO GROUND THEIR FLEET. GUY:
RYANAIR NET INCOME MORE THAN DOUBLED. A STRONG SUMMER. THE CFO JOINED US AND WE WILL
HEAR FROM HIM AGAIN. EARNINGS SEASON WRAPS UP ON
BOTH SIDES OF THE ATLANTIC. UP NEXT, THE BOND MARKET WITH
TRADERS HAVING THEIR EYES ON THE ECB THIS WEEK.
OUR NEXT GUEST BELIEVES WE ARE HEADING FOR STEEPER CURVES. ANY QUESTIONS FOR US, IB+TV
TV IS THE FUNCTION ON YOUR BLOOMBERG.
THIS IS BLOOMBERG. >> WELCOME BACK, MONDAY MORNING.
STELLANTIS DROPPED EARNINGS.
THIS COMPANY SUSPENDED GUIDANCE AND ARE NOW TRYING TO MAYBE TO TRY AND MAYBE ADDRESS A GAP IN
EXPACTATIONS AND WHAT THEY ARE SEEING. THE NET PRE-TAX CHARGE THEY ARE
TAKING IS SUBSTANTIAL AND WILL IMPACT, UH, EXPACTATIONS.
LET ME GO BACK TO THE PAGE I NEED. THE MARKET ANTICIPATED A PROFIT AND IS NOW ANTICIPATING A LOSS,
SO WE WILL SEE HOW THE MARKET REACTS, BUT IT LOOKS LIKE A GAP.
LIZZY: WE WILL KEEP OUR EYES ON THAT AND THE RESULTS OF THE JAPANESE
ELECTION, BUT IT IS MARINE DAY WITH THE PRIME MINISTER ISHIBA
INSISTING HE WILL STAY ON, BUT WE CAN LOOK WITH VALERIE TYTEL
ON THE YEN REACTION. VAL: THERE COULD BE TWO THINKINGS,
THE MARKET EXPECTED WORSE AND THE MARKET IS HAPPY ISHIBA IS
STAYING ON. BUT THERE WILL BE SOME RISKS AS
THE LAST THREE PM’S DID STAND DOWN AFTER SUCH RESUTLS, BUT
THE MARKET SEEMS HAPPY AND YEN IS STRONGER.
THE ECB MEETING, THE ONE THING THAT IS DIFFERENT IN THE
RENEWED TARIFFS THREAT FROM THE U.S. CHRISTINE LAGARDE SAID RISK WAS
TILTED TO THE DOWNSIDE, SO DOES SHE AMP THAT UP? LASTLY IN THE EU, BANKS REPORT AT THE TAIL END OF THE WEEK AND
THEN LLOYD’S AND NATWEST, GUY. GUY: THAT GIVES US AN IDEAR OF WHAT
IS HAPPENING AND HOW DOES FIXED INCOME RELATE TO THIS? A FUND MANAGER IS JOINING ME. ON JAPAN, WE HAVE THE LDP LOSES ES IT’S MAJORITY WITHOUT A BIG
REACTION, WHY? >> ISHIBA’S SAYING HE WANT TO STAY IN POWER, BUT STILL, WE
DON’T KNOW HOW, YOU KNOW, THE REST OF THE LDP LEADERS WILL REACT, SO MARKET IS TRYING TO
EXTRACT INFO ON HOW IT WILL GO AND THE YEN WEAKENED BEFORE THE
ELECTION — MAYBE THE MARKET EXPECTED THE WORST. GUY:
DO YOU THINK IT COULD IMPACT HOW THE BOJ REACTS?
PEOPLE ARE UPSET WITH INFLATION, COULD THAT IMPEDE
THE BOJ’S PATH TO RAISE RATES? >> YES, I THINK IT COULD.
BEFORE THE ELECTION, WE HAVE LOT OF INFLATION IN JAPAN.
IN ANOTHER COUNTRY, PERHAPS IT WILL BE TOO LATE. USUALLY, THE BOJ SHOULD HAVE
HIKED RATES DUE TO INFLATION AND FISCAL WILL BE ON THE TOP
OF THE AGENDA, HOW THEY WILL HELP AND FORCE THE BOJ TO HIKE
RATES. THE MARKET IS LOOKING AT THE
BOJ AS TOO LATE IN THE CYCLE. LIZZY: I JUST WONDER, ISHIBA HAS LOST
HIS GRIP ON BOTH HOUSES IN JAPAN WITH PRESSURE ON FISCAL
LOOSENING, HOW WILL THE JGB AUCTION GO? >> IT IS DIFFICULT TO POINT ONE
AUCTION AS YOU COULD HAVE THE BOJ TRYING TO BUY TO CALM DOWN
THE MARKET — IF THE BOJ DON’T HIKE, IF THE BOJ IS LATE, YOU
WOULD PROBABLY HAVE BAD AUCTION. THEY KNOW THERE IS SOME NOISE,
EVEN HELPING THE MARKET TO DIGEST THIS ONE. LIZZY: I WONDER, IS THE CURVE
STEEPENER TRADE THE BEST DEFENSE WHEN THE U.S.
IS FUNDING SPENDING WITH BILLS? >> UM, UH, AGAIN, IT IS A QUESTION OF INFLATION,
INTEREST, BECAUSE IT’S NOT JUST PEOPLE SAYING THE THIRTY YEARS,
IT IS PEOPLE LOSING THE LONG PART OF THE CURVE AND EVEN U.S.
GOVERNMENT WILL REDUCE THE WEIGHTED AVERAGE OF THEIR DEBT,
YOU HAVE LESS INTEREST IN THE BUYERS. I’M TOO OLD AND MY KIDS ARE TOO
YOUNG TO INVEST IN 30 YEAR BONDS, I DON’T KNOW WHO HAS
INTEREST ON THE 30 YEAR. SO YOU COULD HAVE STEEPENING
BECAUSE PEOPLE ARE NO MORE INTERESTED IN BUYING OR SELLING.
GUY: I,UH, I,UH, HOW FAR ARE WE FROM
THE END OF THE PROCESS? >> I’M JUST SAYING THIS IS A
CHEAP HEDGE AND VERY CONSENSUAL, NOT VERY NEW. IT IS TOO BIG AND THE GAME THAT
WE ARE IN THE MIDDLE OF THE PROCESS, WE COULD HAVE MORE
STEEPENING. GUY: WILL THAT BECOME THE NEW NORMAL
FOR A TIME? THERE WILL BE LONG TERM AFFECTS
IN THE U.S. IN THE MORTGAGE MARKET AND
OTHERS AS WELL. >> IT HAS SOME IMPACT, I’M NOT SURE THE MORTGAGE IS ONLY THE 30 YEAR BUT LET’S SAY THE
CENTRAL BANK WILL CUT — I DON’T KNOW WHEN, BUT THE NEXT
MOVE FOR THE FED IS CUTTING RATES WHEN INFLATION IS ABOVE
TARGET WITH CURVE STEEPENING, NOT JUST IN U.S., YOU HAVE
FISCAL PLUS INFLATION FEARS GOING INTO THE CURVE. LIZZY: WHAT IS DRIVING THE 2 YEAR
YIELD MOVES? IS IT THE FED OR THE DATA OR
THE DOVISH SPEAK? >> KIND OF ALL TOGETHER. YES, THE FED STORY IS IMPORTANT
EVEN THOUGH POWELL WILL LEAVE. IF THE BOARD ISN’T CHANGED, I
DOUBT IT WILL CHANGE THE STORY OF THE NEXT MOVE. LIZZY: YEAH. YEAH. >> IT IS A WEIGHT ON THE LONG
PART OF THE CURVE. LIZZY: ALL RIGHT, FIXED INCOME MANAGER
WE THANK YOU. TO GERMANY NEXT, THIS IS
BLOOMBERG. >> 30 MINUTES TO GO UNTIL THE
OPENING TRADE, WE HAVE THE ECB ON DECK WITH A QUIET START AS
WE WORK OUT WHICH DIRECTION WE ARE HEADING IN, BUT YOU HAVE TO
FOLD IN JAPAN, A LOT GOING ON. LIZZY: WE ARE FOCUSED ON GERMANY, THE
10 YEAR LOOKS LIKE THERE WILL BE NO U.S.
AND EU TRADE DEAL AND WE HAVE OLLIE SITTING WITH GERMAN CEOS.
GUY: THAT IS LOOKING LIKE IT WILL BE
HARDER AND HARDER TO GET CARVEOUTS, SO HOW DO YOU TAKE
ADVANTAGE OF THIS IN GERMANY? LET’S HAND IT OVER TO OLLIE.
OLLIE: THE NEW CHANCELLOR MADE A
CENTRAL PROMISE TO TURN THE ECONOMY AROUND, UNLEASHING ONE
TRILLION EUROS IN FINANCING, SO WHAT REFORMS ARE NEEDED TO MAKE
A MEANINGFUL RE-ORDERING OF THE ECONOMY. WE HAVE SEIMENS LEAD THE WAY AND
DEUTSCHE BANK, THE BIGGEST LENDER IN THE BIGGEST ECONOMY.
CHRISTIAN AND ROLAND, THANK YOU FOR JOINING US. YOU ARE MEETING WITH THE
CHANCELLOR ON THE MADE IN GERMANY INITIATIVE, WHAT DO YOU
HOPE IT CAN DELIVER? >> THANK YOU FOR THE INVITATION.
WE STRIVE TO FINALLY HAS GROWTH AND COMPETITION IN GERMANY AND
EUROPE. GROWTH IN GERMANY IS GOOD FOR
EUROPE AND IT CANNOT ONLY BE STIMULATED BY THE GOVERNMENT,
SO A SMALL GROUP WAS IN A COUPLE OF MONTHS SAYING WE ALSO WANT TO SHOW WHAT POTENTIAL
GERMANY HAS AND I THINK IT IS AN IMPRESSIVE WITH 61 COMPANIES
AND MORE TO COME. IT SHOWS WE HAVE A CHANCE.
OLLIE: WE ARE IN THE AGE OF LARGE
PLEDGES TO GOVERNMENT SPENDING SO I WOULD LIKE TO GET AN IDEA
FROM SIEMENS, HOW MUCH OF THAT MONEY IS COMING FROM SIEMENS
AND WHAT ARE SIEMENS TARGETS? >> THERE ARE 631 BILLION EUROS WE ARE TALKING ABOUT, IT IS
COMPANIES AND SMALL AND MEDIUM ENTERPRISES, THEY ARE GEARED TO
PUT CAPITAL INTO THE COUNTRY. YOU NEED STRUCTURAL CHANGES. SO WE HAVE IDENTIFIED NINE
ACTION FIELDS, THEY ARE IN SYNC WITH THE REVENUE AND COALITION
CONTRACT AND SIEMENS IS INVESTING IN MANUFACTURING AND
INNOVATION. THE INDUSTRIAL LEADERS DRIVING
DIGITALIZATION. WE ARE ABOUT TO DEPLOY CAPITAL
AS WE SPEAK IN BERLIN. IT IS COMPLETELY NEW,
LEVERAGING ALSO OF THEIR CAPITAL. FULLY DIGITAL, LIVING AND
WORKING AT THE SAME TIME AND SO ON WITH MORE THAN 15 PROJECTS
WERE COMPANIES SAY THIS IS WHAT I USE THE CAPITAL. >> ZOOMING OUT AND LOOKING INTO
5-10 YOU SHOULD NOW, TRYING TO IMAGINE IF THIS IS SUCCESSFUL,
WHAT DOES THE ECONOMY LOOK LIKE AND HOW DIFFERENT IS IT FROM
TRADITIONAL IDEAS ABOUT THE GERMAN ECONOMY? VERY ENERGY DEPENDANT. >> HARD TO ZOOM OUT FIVE OR TEN
YEARS, BUT HISTORY TELLS YOU WHAT IS POSSIBLE.
WHEN I STARTED BANKING IN THE AREA I STARTED, THIS WAS A
LOCATION DOMINATED BY TEXTILE AND PRINTING.
IT COMPLETELY CHANGED AND I THINK ABOUT HOW THEY APPLY AI
FOR INDUSTRIAL PROCESSES, GERMANY CAN BE A TECH-LED
COUNTRY. WE HAVE NOT TALKED ABOUT
SUSTAINABILITY, BUT GERMANY HAS THE LEADING TECH TO EXPORT AND
GERMANY WILL ALWAYS BE AN EXPORT COUNTRY. YOU NEED UP TO DATE, SO WE HAVE TO INVEST. THIRD POINT COULD BE
DEFENSE, I’M GLAD WE ARE UPSIZING TO DEFEND OUR
CONTINENT AND THESE WILL DO WELL FOR FUTURE TECH, SO YOU
CAN START A NEW INDUSTRY AND WE WILL SEE FURTHER DEVELOPMENT,
BUT TECH, AI AND SUSTAINABILITY WILL BE SOMETHING WHERE GERMANY
WILL LEAD. >> ROLAND, YOU ARE DOING
EXACTLY THAT, SO HOW DO YOU PRAISE GERMANY’S ADVANTAGES?
ROLAND: SO LET’S TAKE AI TECH AS ONE OF THOSE FUNDAMENTALLY CHANGING
EVERYTHING. WHAT YOU NEED IS BETTER DATA AN
D WE ARE SITTING ON MASSIVE DATA. THEY ARE CREATING DATA FROM
BUILDING, MAKING AND ENGINEERING, SO IF WE PUT THAT INTO MODELS WITH AGENTS ON OUR
BEHALF, MANAGING ACTUALLY LINES OR PLANTS TOGETHER WITH PEOPLE
TRAINED ON AI TO USE THIS TECH. THE COMBO OF THIS WITH THE DATA
AND KNOW-HOW, WE NEED LESS REGULATION TO RELEASE POWER AND
SPEED, SO WE HAVE TO CHANGE A COUPLE THINGS. OLLIE: THE ROADMAP TO GETTING THERE, WHAT HAVE YOU BEEN ENCOURAGED
BY AND WHAT REFORMS DO YOU WANT TO SEE? >> WE HAVE NINE FIELDS IN SYNC
WITH THE GOVERNMENT ANYHOW. INNOVATIONS, LABOR MARKET, WE
NEED THE BEST TALENT AND TO DEPLOY THE WORKING FORCES. ANOTHER IS INVESTMENT CLIMATE
WITH INCENTIVES TO DEPLOY MONEY. WE TALK ABOUT LESS
REGULATIONS, FASTER DECISIONS. IT DOESN’T HELP UNLESS YOU CAN
DEPLOY CAPTIAL. L —
CAPITAL, JUST TO LAY OUT SOME OF THOSE AREAS.
IT IS ABOUT DOING IT. OLLIE:
WE HAVE HEARD ABOUT CUTTING RED TAPE FOR DECADES.
CONCRETELY WHAT WOULD YOU LIKE TO SEE? YOU HAVE SPOKEN TO EVERY
BASICALLY BUSINESS, WHAT ARE THREE THINGS TO PUT INTO PLACE
TO ENCOURAGE COMPANIES TO INVEST? CHRISTIAN: THE MAIN COMPLAINTS ARE
REGULATION, BUREAUCRACY AND SPEED. IT’S NOT ONLY GERMANY, ALSO
EUROPE WITH LEADERSHIP AND STRONGER GOVERNMENT. NUMBER TWO IS THE ENERGY CRISIS
AND THE GOVERNMENT IS GOING IN THE RIGHT DIRECTION AND THIS IS
THE BACK. THE GOVERNMENT HAD A GOOD START
AND I DO BELIEVE IT IS IMPORTANT THAT WE HAVE SECURE A
SYSTEM IN 10 OR 15 YEARS TIME, THAT IS THE KEY TO SUCCESS AND MORE INVESTMENTS WILL GO INTO
OUR ECONOMY IS WHAT WE NEED. I THINK MORE FOREIGN
INVESTMENTS WILL RUN INTO GERMANY IF WE FOCUS ON THAT.
OLLIE: HE SAID GERMANY WILL REMAIN AN
EXPORT ECONOMY AND THAT IS BEING CHALLENGED BY THE U.S.
BUT I WOULD LIKE TO KNOW HOW CLIENTS ARE WEIGHING THE
OPTIMISM WITH THE RISKS FROM THE U.S.?
WHAT IS WAITING FOR BUSINESSES? >> IT IS ABOUT DIVERSIFICATION
AS WE LEARNED THROUGH COVID ALREADY. NOT ONLY SUPPLY CHAINS BUT ALSO COMPANIES LOOKING INTO MORE
AGREEMENTS BUT I HEARING NO ONE TALKING ABOUT FOCUSING ON
GERMANY ONLY BECAUSE IT’S TOO SMALL AND WE NEED A STRONGER
EUROPEAN MARKET. THE STRONGER WE ARE, THE BETTER
IT IS VERSUS THE U.S. AND THE STRONGER YOU MAKE
YOURSELF, THE BETTER YOUR STARTING POSITION IS BUT I
BELIEVE MOST COMPANIES ARE NOT TRENDING AWAY FROM
GLOBALIZATION, THEY DO NOT WANT TO BE TOO DEPENDENT ON ANY
COUNTRY. OLLIE: WE WILL GET TARIFFS OF 10-30%
IN THE NEXT TWO WEEKS, HOW ARE YOU APPRAISING THAT RISK? ROLAND:
THERE HAS BEEN HIRED TARIFFS VIS-À-VIS THE UNITED STATES, WE
DON’T WANT THAT BECAUSE FREE TRADE STIMULATES ECONOMIES SO
THAT WOULD DRIVE INFLATION BUT ONE RELEVANT POINT WE HAVE TO
STOP UNCERTAINTY. THE DEAL SHOULD BE THE DEAL AND
THEN YOU CAN DEPLOY CAPITAL. HOPEFULLY THEY ARE NOT GOING TO
HIGH. IF WE MAKE FREE TRADE
AGREEMENTS IN YEARS AND NOT DECADES THAT IS RELEVANT
BECAUSE WHAT WOULD YOU DO IF YOU HAVE LARGE ECONOMIES? WE HAVE THE ASIAN REGION,
MIDDLE EAST, SOUTH AMERICA. I’M NOT SAYING THE UNITED
STATES IS IRRELEVANT, THEY ARE THE MOST RELEVANT.
BUT THERE ARE OPPORTUNITIES. >> TALKING ABOUT INVESTMENTS OVER THE LAST YEAR OR TWO, 5
BILLION WORTH OF DEALS ON AI, DO YOU NOT SEE THOSE
OPPORTUNITIES IN EUROPE OR ARE THE COMPANY’S NOT THERE? ROLAND: THERE IS A 10 BILLION INVESTMENT IN ARTERIAL
INVESTMENT SOFTWARE AND THE PHARMACEUTICAL MARKET. IF YOU LOOK FOR SOFTWARE ASSETS
YOU END UP IN THE U.S.. THERE ARE SMALLER EUROPEAN
COMPANIES. LOOKING INTO COMPANIES THERE,
DAY CREATE DATA AND IF YOU LOOK SIEMENS HAS INVESTED 25 BILLION
OVER 40 OR 50 YEARS IN SOFTWARE FROM THE UNITED STATES. >> WE’VE BEEN TALKING ABOUT
PRESERVING COMPANIES AND I WANT TO UNDERSTAND WHEN YOU LOOK AT
DEUTSCHE BANK AT THE END OF A LONG TURNAROUND, IS THIS A
MOMENT FOR DEUTSCHE BANK TO BECOME MORE AGGRESSIVELY
EXPANSIVE ACROSS BORDERS? WHAT DO YOU WANT DEUTSCHE
BANK’S ROLE TO BE? >> GEOPOLITICAL AND ECONOMIC
UNCERTAINTIES, THERE WAS ONE TREND WHICH WAS THE SAME ACROSS
THE WORLD, STRONG AND CAPABLE U.S. BANKS BUT IN GEOPOLITICAL UNCERTAINTIES THEY WANT A
CAPABLE GLOBAL EUROPEAN PLAYER AND THERE ARE NOT MANY LEFT.
THAT IS THE RULE WE CAN PLAY AND WANT TO PLAY BECAUSE IT IS
EASIER TO DO FROM A COUNTRY WHICH IS ON THE RIGHT PATH AND
PULLING EUROPE. THE ONLY GERMANY AND EUROPE BUT ALSO DEUTSCHE BANK AS A CHANCE
TO CONTRIBUTE TO CLIENT GROWTH AROUND THE WORLD. DIVERSIFICATION NOT ONLY TO
RELY ON ONE BANK BUT MANY BANKS HAS NEVER BEEN BIGGER THAN NOW.
OLLIE: IS THE BUYING EUROPE TRAPPED
AND LASTING THING FROM INVESTORS, WANTING TO MAKE
MEANINGFUL COMMITMENT TO EUROPE AND WHAT DOES THAT LOOK LIKE? >> FOR THE FIRST TIME WE SEE
REALLOCATION FROM FUNDS INTO EUROPE WITH HUGE INTEREST,
INVESTORS WANT TO UNDERSTAND GERMANY AND EUROPE AND IN ALMOST SIX MONTHS AGO MOST
INVESTORS SAID GERMAN COMPANIES NEED TO
DO MACRO IMPROVEMENTS AND THAT IS WHAT WE WANT. THE GOVERNMENT STOOD UP WITH
THE FISCAL REFORM AND IF WE DO SOMETHING MARCHING IN PARALLEL
I BELIEVE WITH FURTHER REFORMS TO COME, THE TREND OF
REALLOCATING FUNDS WILL NOT STOP. IF WE JUST RELY ON DEBT THAT DOES NOT HELP, WE NEED REFORMS.
OLLIE: EUROPE DOES NOT WANT TO BECOME
THE U.S. BY FROM WHAT WE’VE SEEN FROM
TRUMP AND THE U.S., WHAT CAN EUROPE LEARN WITHOUT
SACRIFICING? >> WE HAVE TO HOLD ON ARE
VALUES THAT BROUGHT US WHERE WE ARE, THEY ARE GOOD. YOU HAVE TO MAKE STRUCTURAL
REFORMS WHICH REQUIRE COURAGE AND SOLUTION ORIENTATION, BUT
ALSO BOLD MOVES. YOU CANNOT JUST TAKE ONE ACT
WHICH IS MIS-CONSTRUCTED. SO WE HAVE TO THINK ABOUT HOW
TO ACCELERATE ECONOMIC DEVELOPMENT AND INNOVATION,
MAKING BOLD DECISIONS FAST. >> THANK YOU FOR YOUR TIME
CHRISTIAN IN ROLAND. MADE IN GERMANY, MORE THAN 600
BILLION EUROS FROM A DOZEN DIFFERENT COMPANIES ACROSS
GERMANY AND THEY WILL BE MEETING UP A LITTLE LATER THIS
AFTERNOON. THIS IS BLOOMBERG. ♪ GUY: WELCOME BACK, LOTS TO
THINK ABOUT WITH TRADE FRONT AND CENTER AND EUROPEAN STOCKS
ARE FLAT. ROLAND AND CHRISTIAN TALKED
ABOUT GERMANY AND BOLD DECISIONS WHEN FACING A TRADE
WAR. EUROPE NEEDS TO BE READY. LIZZY: KEY VOICES LOBBYING FOR A DEAL,
IT DOESN’T LOOK LIKE WE WILL GET ONE, BUT THIS IS THE FOCUS
NOW. GUY: ROLAND SAID WE NEED CERTAINTY,
THAT IS NICE. IT DOES NOT FEEL LIKE WHAT WE
HAVE RIGHT NOW. ♪ TOM: MONDAY MORNING.
CONSIDERING ALL THE THINGS THAT ARE ABOUT TO HAPPEN, ALL
POTENTIAL RISKS THAT LIE OUT THERE.
THIS IS A MARKET SHRUGGING HIS SHOULDERS AND SAYING, MEH,
NOTHING TO SEE HERE, MOVE ON. NOTHING TO ACTION, NOTHING TO
TRADE ON. THIS IS FRIDAY’S TRADE.
WE TRADE LOWER IN TERMS OF THE EUROPEAN NARRATIVE.
EUROPEAN MARKETS DRIFTING SIDEWAYS. U.S.
MARKETS DRIFTING FOR MOST OF THE SESSION.
MONDAY MORNING FEELS VERY SIMILAR TO THAT.
WE WILL SEE WHAT THE FUTURE’S PICTURE LOOKS LIKE.
THERE ARE SOME BIG CORPORATE STORIES.
STELLANTIS IS ONE WE WILL TALK ABOUT, BUT THERE’S OTHERS AS
WELL. BUT THIS MARKET IS UNFAZED BY
ANYTHING. HOW DOES EUROPE RESPOND TO
AUGUST 1 APPROACHING? IT COULD BE A FAIRLY FEROCIOUS
FIGHT. FTSE FUTURES, ABSOLUTELY UNCHANGED. WE WILL WATCH WITH LSC GROUP
THIS MORNING. BUT WE ARE UNMOVED.
WHAT IS IT THAT SHAKES THIS MARKET? I DON’T KNOW.
BUT THIS WEEK IS LITTERED WITH EVENTS THAT COULD POTENTIALLY
PROVIDE SOME SORT OF CATALYST. LIZZY:
YOU TALKED ABOUT STELLANTIS. LET’S GO THERE FIRST. THEY
RECORDED A 2.3 MILLION EUROS NET LOSS IN THE FIRST HALF.
ANALYSTS WERE EXPECTING A PROFIT.
THEY HAVE TRIED TO GET AHEAD OF IT AND EXPLAIN IT.
THEY HAD PUT IT DOWN TO RESTRUCTURING AND THE IMPACT OF
TARIFFS. IF WE STAY IN TRANSPORT, WE ARE
ALSO HAVING RESULTS FROM RYANAIR .
THE CFO SAYING THINGS ARE MOVING IN THE RIGHT DIRECTION.
THEN A BIT OF M&A. CAREEFOUR WORKING WITH
ROTHSCHILD. WE LOOK AT THAT AS WE HEAD TO
THE OPEN. GUY: LET’S GET YOU INTO THE OPEN.
DO NOT EXPECT FIREWORKS, DO NOT EXPECT LIGHTNING TO STRIKE
BECAUSE YOU ARE EXPECTING A MARKET THAT IS EXPECTING TO BE
UNMOVED, AND THAT IS EXACTLY WHAT WE ARE GETTING.
FTSE 100 BARELY BUDGING. IN AND OUT OF POSITIVE
TERRITORY. I EXPECT HE WILL SEE SIMILAR
STORIES AROUND EUROPE THIS MORNING.
THE STOXX 600, WE WILL GET MORE CLARITY ON WHAT IS HAPPENING
THERE. THERE IS THE IBEX, BARELY BUDGING.
THE CAC IS NOT EXPECTED TO DO MUCH. THE DAX COULD BE MORE
INTERESTING. I THINK THERE ARE SOME STORIES
WORTH WATCHING. WE’VE GOT STELLANTIS.
YOU HAVE VOLKSWAGEN THIS WEEK. WE WILL SEE NUMBERS OUT FROM
THE GERMAN GIANTS. WHAT DOES IT TAKE TO MOVE THESE
MARKETS? WHAT IS IT GOING TO TAKE THIS
WEEK? THE EARNINGS STORY IS ONE YOU
WILL WANT TO PAY ATTENTION TO AS WELL, BUT WE ARE COUNTING
DOWN. THE DRUMBEAT ON TRADE IS BECOMING MORE AUDIBLE, AND YOU
WONDER WHETHER OR NOT WE WILL BE FOCUSING ON THAT NARRATIVE
MUCH MORE. BUT FIRST THING MONDAY MORNING,
THERE IS NOTHING TO SEE HERE. SINGLE STOCKS MAKING THE SECTOR
STORY MORE INTERESTING. LIZZY: STELLANTIS DOWN MORE THAN 2% ON
THE NEWS, RECORDING A LOSS IN THE FIRST HALF AFTER THE
EXPECTATION THERE WOULD BE A PROFIT. THOSE SHARES CURRENTLY
STRUGGLING. WE ARE WAITING FOR THE
INDIVIDUAL NAMES TO OPEN. THE FT HAVING REPORTED IT IS
PULLING A CHINA PRODUCTION EXIT BECAUSE OF CRAZY DOWN CYCLE
THAT THEY HAVE BEEN FACING. THOSE SHARES ACTUALLY
RECOVERING NICELY OFF THE BACK OF THAT CHANGE OF DIRECTION FOR
THEM. WE WAIT FOR CARREFOUR TO OPEN
AND RYANAIR. SICK CHARLIE, YOU HAVE JUST
OVER HALF IN POSITIVE TERRITORY. BASIC RESOURCES LEADING THE
GAINS. ALSO AT THE BOTTOM, BECAUSE OF
THIS WEIGHT FROM STELLANTIS, THAT SECTOR DOWN 0.6%.
SOME OF THE OTHER WINNERS, TRAVEL AND LEISURE, REAL
ESTATE, MEDIA. BUT NONE OF THESE MOVES
PARTICULARLY BIG IN EITHER DIRECTION. GUY:
MATERIALS STOCKS ARE UP. THERE IS A STORY MOVING OUT OF
CHINA ABOUT MOVING THE IRON ORE TRADE, WHICH IS WHAT IS
HAPPENING WITH THOSE MINING STOCKS.
MAYBE THERE IS SOMETHING OF A NARRATIVE TO WATCH THERE.
THE MARKETS ARE NOT RESPONDING A GREAT DEAL TO THIS NEWS.
YOU WOULD THINK YOU WOULD GET A BIGGER REACTION.
THAT IS NOT WHAT WE ARE GETTING THIS MORNING. LIZZY:
WHEN YOU SAY IT IS DOWN TO THE RESTRUCTURING, MAY BE AN
INDIVIDUAL STORY RATHER THAN THE TARIFF STORY.
LET’S NOT OVERSTATE THE IMPACT OF THE TARIFFS AND WHETHER IT
WILL BE A CONTINUING THEME ACROSS THE SECTOR.
BUT LET’S GET MORE ANALYSIS WITH OUR GUEST, CIO AT LOMBARD.
GREAT TO HAVE YOU BACK ON THE OPENING TRADE. GUY: THAT IS A BAD THING.
WE WILL COME BACK. LIZZY: WE WERE TALKING ABOUT HOW WE
WERE WAITING FOR SOMETHING TO HAPPEN.
IS THIS A LITTLE WE ARE SEEING IN MARKETS — IS THIS A WALL WE
ARE SEEING IN MARKETS? IS IT NOT THE PROSPECT OF RATE
PUTS IN THE PIPELINE? BUT YOU STILL HAVE THIS
CONTINUED THREAT TO POWELL. SURELY THAT WILL CONTINUE. GUY:
IF YOU NEED TO COME TO THIS MARKET AND LOOK AT THE RISKS
THAT EXIST AND SAY, ARE WE GETTING A MARKET REACTION TO
THIS? IN ISOLATION, YOU SAY, THESE
ARE BIG STORIES. BUT NOTHING MOVES THE MARKET
RIGHT NOW. NOTHING SEEMS TO PROVIDE A
REASON, A DOWNDRAFT, A SIGNIFICANT UPDRAFT. THERE IS NOTHING HERE THAT IS
EXCITING THE MARKET ENOUGH TO GET IT MOVING.
I AM LOOKING AT THESE MARKETS THINKING HOW ON EARTH ARE SOME
OF THESE STORIES NOT HAVING A BIGGER EFFECT THAT WE ARE
SEEING RIGHT NOW? WHY IS VOLATILITY BEING CRUSHED?
WHY ARE EQUITY MARKETS DOING WHAT THEY ARE DOING?
BUY IT IS THE BOND MARKET DOING WHAT IT IS DOING?
I AM STRUGGLING TO UNDERSTAND WHY THE MARKET IS SO UNMOVED.
IS IT THE RIGHT REACTION? THE DATA IS TELLING US THAT IS
WHAT WE SHOULD BE DOING RIGHT NOW?
OR ARE WE SO IMMUNE TO THESE RISKS, WE ARE PUNCHDRUNK IN
TERMS OF WHERE WE SIT, IN TERMS OF HOW BIG A HIT IT WOULD TAKE
TO ACTUALLY MOVE THINGS? LIZZY: LET’S ASK THE TRUE EXPERT.
CAN YOU HEAR ME? LIZZY: YES, I CAN.
GOOD MORNING TO YOU. LIZZY: VERY GOOD.
GUY WANTS TO KNOW WHAT WILL LIFT THE LID ON THESE MARKETS.
YOU SAY THE S&P IS TREADING WATER AT THE MOMENT.
AS A REMOVAL OF THE TARIFF UNCERTAINTY TO GET EXCITEMENT,
TO LIFT THE STOCKS HIGHER? >> IT COULD BE BOTH WAYS,
BECAUSE AUGUST 1 COULD VERY WELL SEE TARIFFS COME INTO
EFFECT. RIGHT NOW, THE MARKET IS BEHAVING A LITTLE BIT
COMPLACENT WITH COMPLACENCY, JUST IMAGINING THAT AUGUST 1
WOULD PERHAPS LEAD TO THE NEXT TARIFF, AND SO FORTH.
I THINK THE MARKET AT THE MOMENT IS A BIT OBLIVIOUS TO
THE POTENTIAL THAT WE MAY BE WAKING UP AND SEEING SOME OF
THESE TARIFFS COME INTO EFFECT. SO, I THINK THERE’S BOTH WAYS A
POSSIBILITY. EITHER SOME YIELDS THAT HAVE
COME INTO EFFECT BEFORE, AUGUST 1, THE THREAT, OR THE RIVERS.
LIZZY: LET’S LOOK AT IT THE OTHER WAY.
LET’S SAY AUGUST 1 IS A CLIFF EDGE FOR STOCKS.
WE ARE LOOKING AT THE S&P. HOW FAST GOOD THAT UNRAVEL?
HOW FAST GOOD THAT DROPPED TO 6200, 6000 EVEN? >> THESE MOMENTS WHEN ALSO
VALUATIONS SEEM TO BE HIGH, AND WE ARE AT THE START OF THE
EARNINGS SEASON, AND THE FIRST BATCH OF EARNINGS HAVE NOT BEEN
BACK. WE COULD EASILY GET TO A 5%
HERE IF THERE IS REALLY MAJOR NEGATIVE SUPPLIES. I THINK THE SAFEST ASSUMPTION
IS TO VIEW THE VOLATILITY CURRENTLY THAT MAKES UP 16 AS
REALLY LOW, BUT THAT WOULD PROBABLY BE LIFTED HIGHER
RELATIVELY FAST. WE SAW THAT WHENEVER THERE WERE MAJOR
SURPRISES. GUY: BUT WE ARE NOT GETTING IT.
GOOD MORNING. AND THE LIST OF THINGS OUT
THERE THAT COULD UPSET THIS MARKET IS LONG, YET THE RATE
TRADE EVERY TIME SEEMS TO BE TO BET OWN RISK.
I’M JUST WONDERING WHETHER OR NOT — HOW BIG THE SHOCK NEEDS
TO BE TO CHANGE THE MARKET SENTIMENT.
THE SENTIMENT CONTINUES TO BE, MAY BE MORE WITH RETAIL AND
LESS INSTITUTIONAL, BUT THE TRADES CONTINUE TO BE BUY DIPS.
ANY DIP THAT IS OUT THERE, YOU SHOULD BUY IT.
OTHER ANY CHANGES TO THAT IN THE NEAR TERM? >> FOR AS LONG AS THERE IS NO
REAL MATERIAL RECESSION THAT WOULD PUT US ON A COMPLETELY
DIFFERENT PATH, I THINK YOU ARE RIGHT. THE MARKET IS GOING TO BE
BIASED TOWARDS USING THE OPPORTUNITIES OF SETBACKS THAT
COULD BE TRANSITORY, THAT COULD BE GIVEN BY ANYTHING.
WHEN VALUATIONS ARE REALLY LOFTY, SUCH AS THEY ARE IN
CERTAIN SECTORS IN THE U.S., IT DOESN’T TAKE MUCH TO GET A
SENTIMENT CHANGE HERE. BUT WHAT WE ARE GOING TO SEE IS
A BIAS TO BUY THE DIP. ALSO HISTORICALLY, IT HAS BEEN
THE CASE THAT WHEN THE MARKET IS SELLING OFF BY 10%, FOR
EXAMPLE, YOU COULD BLINDLY GO IN AND BENEFIT FROM IT BY
TAKING AN ENTRY INTO THE MARKET. I THINK THIS BIAS WILL REMAIN
FOR AS LONG AS THERE IS NO RECESSION PROBABILITY THAT IS
MATERIAL IN 2025, AND THAT IS ALSO OUR BASE ASSUMPTION. GUY:
IS THIS THE LAST SET OF EARNINGS THAT ARE GOING TO BE
OK, THAT AREN’T GOING TO BE AFFECTED BY THE TARIFF
NARRATIVE? I AM SEEING A FEW HINTS HERE
AND THERE AND COMMENTS COMING THROUGH FROM SOME COMPANIES
TALKING ABOUT TARIFFS, BUT IT DOES NOT SEEM TO BE MATERIAL
YET. IS THIS THE LAST TIME I CAN EXPECT THAT TO BE TRUE? >> I THINK STARTING THE THIRD
QUARTER, WE ARE GOING TO SEE BOTH.
AN IMPACT ON EARNINGS THAT IS GRADUALLY GOING TO SHOW, BUT
ALSO AN IMPACT ON THE REAL ECONOMY. SO FAR, YOU COULD ARGUE BOTH ON
THE RESULTS OF COMPANIES AS WELL AS ON THE DATA, THE U.S.
ECONOMY AND THE GLOBAL ECONOMY BY AND LARGE, WE HAVE NOT SEEN
SO MUCH EFFECT OF THE TARIFF THREAT.
BUT THAT IS ALSO VERY WELL EXPLAINABLE. THERE HAS BEEN A TARIFF PAUSE,
SO NONE OF THESE REALLY UNRAVELING TARIFFS HAVE COME
INTO EFFECT. SECONDLY, AS A PRECAUTION, A
LOT OF THESE COMPANIES HAVE BUILT THEIR INVENTORIES AHEAD
OF ANY TARIFF COMING INTO EFFECT.
SO, ONCE THE FIRST ONES ARE LIKELY TO COME INTO EFFECT
AUGUST 1, WHICH IS A VERY REASONABLE ASSUMPTION TO HAVE,
THEN WE ARE ALSO LIKELY TO SEE IN THE TWO QUARTERS THAT FOLLOW
EFFECTS ON BOTH, RESULTS OF COMPANIES AS WELL AS THE REAL
ECONOMY. LIZZY: YOU SEE THREE FED RATE CUTS
THIS YEAR. IF YOU DON’T SEE THOSE EFFECTS
SHOWING UP IN EARNINGS IN THE ECO-DATA, IS IT REALLY POSSIBLE
WE WILL GET THOSE RATE CUTS SO SOON?
BY THE SEPTEMBER MEETING, FOR EXAMPLE.
SURELY THE FED WON’T BE ABLE TO SETTLE THIS DEBATE THAT IS
DIVIDING THE ROOM RIGHT NOW ON WHETHER INFLECTION — INFLATION
WILL BE TRUMPS. THERE IS A STOCK. >> WE HAVE THE ASSUMPTION THERE
WOULD BE TO CUTS IN 2025. MOST LIKELY SEPTEMBER, THEN
LATER IN THE YEAR. THE REASON IS, FIRST OF ALL, WE
SHOULD BE SEEING THE NEGATIVE IMPACT NOT SO MUCH OFF TARIFFS,
BUT OFF THE UNCERTAINTY ON CAPEX PLANS, THEN ON THE U.S.
ECONOMY. WE ARE ONLY EXPECTING HALF AS
MUCH AS WHAT THE U.S. ECONOMY IS GROWING AT POTENTIAL.
WE ARE EXPECTING 1.2% GROWTH IN REAL TERMS IN THE U.S.
THAT SHOULD GIVE THE FED SOME ROOM TO CUT INTEREST RATES,
ESPECIALLY IF THOSE TARIFFS WOULD ACT AS THEY TYPICALLY DO
WHEN YOU HAVE A PLAN TO INCREASE. THIS IS SOMETHING MOST
ECONOMIES ARE MUCH MORE FAMILIAR WITH.
WHAT IT DOES IS IT TRANSITORY REALLY PUSHES UP THE PRICE OF
CERTAIN GOODS THAT ARE AFFECTED, BUT THERE ARE OTHER
PRICE CATEGORIES COMING DOWN BECAUSE OF THE GROWTH.
TYPICALLY THIS IS A CASE FOR SERVICES. AND AT THE END OF THESE THINGS
MOVING OUTCOME ON LONG-TERM INFLATION EXPECTATIONS ARE
REMAINING UNCHANGED. SO, THE FED SHOULD BE IN A VERY
GOOD POSITION TO HIKE INTEREST RATES.
— TO CUT INTEREST RATES. GUY: WHAT ARE THE CHANCES OF A
SIGNIFICANT DOWNDRAFT IN ENERGY PRICES?
AND HOW DOES THAT FEED INTO THE BROADER NARRATIVE THAT WE ARE
TALKING ABOUT HERE IN TERMS OF THE INFLATION PICTURE COMING? >> WE HAVE BEEN EXPECTING THAT
THOSE ENERGY PRICES WOULD BE LOWER THAN WHAT THEY ARE NOW.
THE REASON WE HAVE SEEN PRICES MOVE UP AGAIN FROM THAT PATH ON
WHICH WE WERE ENGAGED IN THE FIRST HALF HAS BEEN THE
GEOPOLITICAL TROUBLE IN THE MIDDLE EAST THAT HAVE IN
PARTICULAR AN EFFECT ON TRADE OF ENERGY GOODS. AND THEREFORE, ENERGY PRICES
GOT TEMPORARILY MOVED UP AGAIN AND AWAY FROM THAT PATH LOWER.
FOR US, THE PROBABILITY IS VERY GOOD THAT WE RECEIVE LOWER
ENERGY PRICES, NUMBER ONE, ON HIGHER SUPPLY OF ENERGY GOODS,
IN PARTICULAR OF OIL, AND NUMBER TWO, AT SLOWER ECONOMY.
GUY: IT WILL BE FASCINATING TO SEE
HOW THAT FEEDS INTO THE EUROPEAN ECONOMY.
THANK YOU VERY MUCH INDEED. A QUICK LOOK AT THE CORE SIX TO
FIGURE OUT WHAT IS HAPPENING THERE, THEN WE WILL MOVE ONTO
THE MAIN EVENT, WHICH IS THE AIRLINE SECTOR.
A MIXED PICTURE THIS MORNING. NO REAL STANDOUT STORIES WORTH
FOCUSING ON. THERE IS A STORY THIS MORNING
AND THE AIRLINE SECTOR. LET’S FIND OUT WHAT IS GOING ON.
>> LET’S START WITH AIRLINE’S THIS MORNING.
WE GOT REALLY GOOD NUMBERS FROM RYANAIR.
IT’S PROFIT DOUBLED IN THE FISCAL FIRST QUARTER.
IT REALLY BENEFITED FROM THE RECOVERY IN FARES FROM STRONG
TRAVEL DEMAND. AND ALSO BECAUSE THERE IS AN
EASING OF THE DELAYS ASSOCIATED WITH AIRCRAFT DELIVERIES.
THAT IS PUSHING UP THIS STOCK, 5% THIS MORNING.
ALSO DRIVING UP EASYJET AND WIZZ AIR, THE OTHER NAMES IN
THAT LOW COST BUDGET AIRLINE SPACE.
MOVING ONTO A LITTLE BIT OF A PAUSE — LESS POSITIVE STORY,
IN THE AUTO SECTOR THIS MORNING, STELLANTIS RECOVERED A
2.3 BILLION EURO LOSS COMPARED TO EXPECTATIONS OF A PROFIT.
A LOT OF THAT HAS TO DO WITH TARIFFS, AND IT IS REALLY
DRAGGING DOWN THE STOCK, BUT PERHAPS NOT AS MUCH AS WE
THOUGHT IT WOULD, DOWN ABOUT 2%. A LOT OF THESE ISSUES ARE
COMPANY SPECIFIC RATHER THAN A SECTOR STORY.
SO IT IS DRAGGING DOWN THESE NAMES IN THE CAR SECTOR, BUT
NOT MUCH. WE HAVE VOLKSWAGEN AND BMW DOWN
A LITTLE BIT THIS MORNING, BUT RENAULT IS QUITE RESILIENT.
NEXT, WE HAVE THE MINING SECTOR. IRON ORE IS SURGING HIGHER AND
THAT IS DRIVING THE STOCK IN RIO TINTO AND GLENCORE THIS
MORNING, UP 2.3% AND 2.8%. FINALLY, WE HAVE SOMETHING IN
THE REAL ESTATE SECTOR. IN FRANCE, A REAL ESTATE
COMPANY RAISED ITS PROFIT FORECAST THIS MORNING.
IT IS BENEFITING FROM A STRONG RESIDENTIAL MARKET.
IN GERMANY, IT ALSO SAID THERE WAS A STABILIZING ENVIRONMENT
IN THE OFFICE SECTOR, WHICH IS INTERESTING KNOWING THE
WEAKNESS THERE HAS BEEN RECENTLY IN THAT MARKET.
THE FORECAST IS PUTTING UP THE STOCK 2.4% THIS MORNING. LIZZY:
THANK YOU. CHLOE MELEY WITH OUR MOVERS.
WE WILL DIVE INTO THE RYANAIR STORY EVEN MORE NEXT.
EUROPE’S BIGGEST AIRLINE REPORTING A DOUBLING OF NET
INCOME IN THE FIRST QUARTER. WE WILL WORK OUT WHAT IS
DRIVING THAT VERY STRONG LOOKING FOR THE HOLIDAY MONTHS
NEXT. THIS IS BLOOMBERG. >> WE ARE SEEING NO SOFTNESS
AND PEOPLE WANTING TO TRAVEL. WE HAD LIMITED GROWTH THIS YEAR.
WE ARE ONLY GROWING BY 3%. THAT IS 206 MILLION PASSENGERS.
BUT DEMAND IS EXCEPTIONALLY HIGH. GUY:
THAT IS RYANAIR’S CFO SPEAKING TO US EARLIER.
EUROPE’S BIGGEST LOW-COST CARRIER REPORTING DOUBLE NET
INCOME. IT IS GETTING MORE PLANES THAN
IT WANTS OUT OF BOEING. THINGS MOVING IN THE RIGHT
DIRECTION. YOU CAN SEE WHAT THE STOCK
REACTION IS. LET’S GET OUR AEROSPACE AND
AVIATION DEFENSE COVERAGE TALK ABOUT HOW THIS IS
HAVING AN IMPACT. BIG MARKET REACTION TO THE
RYANAIR NUMBERS. IT ALL LOOKS PRETTY GOOD.
IT DOES SEEM AS IF THE AIRLINE IS EXECUTING PRETTY WELL RIGHT
NOW, IN A MARKET THAT SEEMS FAIRLY FAVORABLE WITH MAY BE
PEOPLE NOT TAKING LONG HAUL TRIPS THAT THEY USED — THAT
THEY ONCE DID. >> YOU ARE RIGHT.
GENERALLY SPEAKING, WHEN DEMAND IS TOUGHER, THAT IS WHERE
REALLY THE LAW — LOW-COST CARRIERS COME TO THE FORE.
PEOPLE ARE TAKING SHORTER TRIPS IN TERMS OF TIME SPENT AWAY AND
TERMS OF DURATION. RYANAIR HAS A LOT OF THESE
ROUTES. COST CONTROL IS DOING WELL AT
RYANAIR. WE HEARD THE CFO SPEAKING ABOUT
IT JUST NOW. THAT IS ALL HELPING THE COMPANY.
THIS IS ONLY THE FIRST QUARTER, SO A LOT OF ANALYST REPORTS I
READ THIS MORNING POINT TO A VERY FAVORABLE OUTLOOK, SAYING
THERE IS REAL UPSIDE IN TERMS OF WHAT THEY CAN DO THIS YEAR.
ALSO AN INTERESTING CONTRAST TO SOME DEGREE WITH EASYJET, WHO
REPORTED LAST WEEK AND THAT QUARTER WAS SABOTAGED SOMEWHAT
BY THE ATC STRIKES WE HAVE SEEN ACROSS EUROPE, IN PARTICULAR
FRANCE. RYANAIR DODGING THAT BULLET A
LITTLE BETTER THAN EASYJET. THE STOCK ALMOST 10% TODAY, AT
AN ALL-TIME HIGH NOW. LIZZY: WE HAD THE CFO ON BLOOMBERG
EARLIER SAYING ANY TARIFFS WOULD BE ON BOEING’S ACCOUNT,
NOT OURS. TALK TO US ABOUT HOW THAT WORKS
FOR THE NON-AIRLINE EXPERT IN THE ROOM.
IS IT AS EASY AS SAYING, WE ARE NOT PAYING? >> THAT IS SORT OF THE FIGHT WE
ARE IN RIGHT NOW. IT FEELS AS WE MOVE INTO THIS
AUGUST 1 DEADLINE, NOBODY KNOWS HOW IT IS GOING TO PLAY OUT.
THIS IS AN INDUSTRY THAT HAS LIVED IN A TARIFF FREE WORLD
FOR THE BETTER PART OF 44 — 45, 40 EIGHT YEARS.
NOW THEY HAVE TO COME TO TERMS WITH WHAT PAYS OFF.
WE HAVE HEARD THE AIRBUS CEO SAY WE ARE NOT GOING TO PAY IF
WE SHIP OUR PLANES TO THE U.S.. WE HAVE HEARD DELTA AIRLINES IS
A BIG CUSTOMER FOR AIRBUS SAYING, WE ARE NOT GOING TO PAY.
YOU HAVE THIS BIT OF A STALEMATE.
RYANAIR NOW SAYING THE SAME THING, SAYING WE HAVE FIXED
CONTRACTS WITH BOEING ON OUR PLANES, SO WE DON’T WANT TO
COUGH UP THAT MONEY. HOW THIS WILL PLAY OUT WILL BE
VERY INTERESTING. THESE ARE MOBILE PRODUCTS, THE
AIRCRAFT, SO THEY MIGHT FIND A WAY TO TAKE IT SOMEWHERE ELSE
FIRST AND THEN IMPORT THEM. BROADLY SPEAKING, THIS IS
UNCHARTED TERRITORY FOR THE INDUSTRY, AND WE ARE HURTLING
TOWARDS THAT AUGUST 1 DEADLINE. THE GENERAL VIEW IS EVERYONE
SAYING WE HOPE THAT COMMON SENSE PREVAIL, BUT AGAIN, TIME
IS TICKING. GUY: GIVE ME YOUR TAKE ON THE DEMAND
PICTURE THAT RYANAIR IS SEEING AT THE MOMENT AND HOW STRONG IT
IS. THERE IS SOME EXPECTATION MAY
BE THAT WE WOULD START TO SEE DEMAND FADING.
WHERE IS IT COMING FROM? WHY DOES IT REMAIN AS STRONG AS
IT WAS AND WHY IS THE OUTLOOK SO POSITIVE? >> THEY ARE DOING VERY WELL IN
SOME FRINGE MARKETS, FLYING INTO SCANDINAVIA MORE.
THEY ARE BASICALLY ABLE TO MOVE THEIR KIT AROUND FAIRLY NIMBLY,
AND GOING TO PLACES, SWEDEN, EASTERN EUROPE IS A BIG MARKET.
THEY ARE ALSO BENEFITING FROM THE WEAKNESS OTHERS ARE
EXPERIENCING. WE KNOW WIZZ AIR HAS HUGE
PROBLEMS WITH THEIR FLEET, SO THAT IS HELPING.
GERMANY IS NOT MUCH OF A BRIGHT SPOT FOR RYANAIR, SO THAT IS
PROBABLY ONE THAT IS HURTING THEM A BIT.
IT HAS BEEN DIFFICULT FOR A LONG TIME.
BUT THEY CAN MOVE INTO PLACES LIKE IBERIA.
THEY CAN MOVE INTO PLACES LIKE SPAIN, LIKE GREECE, SCANDINAVIA.
THOSE ARE THE STRONG MARKETS. IT IS A MIX OF PEOPLE GOING TO
LOWER COST AIRLINES BECAUSE THEY MIGHT RECONSIDER THE BIG
EXPENSES, AND THAT SOME OF THE OTHER CARRIERS, IN PARTICULAR
WIZZ AIR, IS HAVING A TOUGH TIME. LIZZY:
BLOOMBERG’S MANAGING EDITOR FOR GLOBAL AEROSPACE AND DEFENSE
COVERAGE BENEDIKT KAMMEL. A MORE NEGATIVE STORY FOR
STELLANTIS. CHEERS MOVING AFTER AN
AUTOMAKER RECORDED A 2.3 BILLION EURO NET LOSS IN THE
FIRST HALF. RESTRUCTURING EXPENSES, WANING
SALES, AND THE IMPACTS OF U.S. TARIFFS HIT.
WE GET MORE WITH OUR REPORTER. WE TALK ABOUT THE TARIFF HIT
HERE. IS THIS ACTUALLY A THEME WE ARE
GOING TO SEE ACROSS AUTOMAKERS IN EUROPE?
OR IS THIS A MORE INDIVIDUAL STORY UNIQUE TO STELLANTIS? >> I CERTAINLY THINK IT IS A
TWO WAY STORY HERE. THE U.S. TARIFF HIT IS SOMETHING FOR THE
COMPANY. WE STILL DO NOT HAVE FOUR-YEAR
GUIDANCE FOR THIS COMPANY. IT WAS GIVEN AT THE BEGINNING
OF THE YEAR AND THEN SUSPENDED BECAUSE OF TARIFF UNCERTAINTY.
AS OF TODAY, WE DON’T HAVE GUIDANCE.
WHAT PROMPTED STELLANTIS THIS MORNING, THE MAKER OF JEEP AND
SUVS IN THE U.S., TO ISSUE THIS STATEMENT IS THIS LACK OF
GUIDANCE AND THE DISCREPANCY BETWEEN ANALYST FORECASTS AND
THE REALITY THEY ARE FACING TODAY.
SO, THEY DO CITE A 300 MILLION EURO HIT FROM TARIFFS.
THAT INCLUDES LOST PRODUCTION AS PART OF THEIR RESPONSE
PROGRAM THAT STELLANTIS HAD SHUT DOWN SOME OF THE PLANTS IN
THE U.S. WHILE THEY AWAITED MORE GUIDANCE, MORE NEWS ON THE
TARIFFS. BUT THERE CERTAINLY ARE OTHER
ITEMS AT PLAY HERE. THERE ARE IMPAIRMENT FIGURES. THERE IS A CLOSURE OF PROGRAMS.
AND THEY WILL BE GIVING MORE DETAILS ON THAT WHEN THEY
PRESENT A FULL DETAILED RESULT ON THE 20 NINTH OF JULY.
BUT SOME ASPECTS ARE ALREADY EMERGING.
FOR EXAMPLE, STELLANTIS DECIDED RECENTLY TO DROP INVESTMENTS IN
HYDROGEN. THAT HAS AN IMPACT TODAY AND IS ALSO SHIFTING A
LOT OF THE FOCUS ON HYBRIDS. THE FORMER CEO WAS PUSHING ALL
OUT ON ELECTRIC VEHICLES. THEN DEMAND FOR ELECTRIC
VEHICLES IS NOT THERE TODAY AS WAS EXPECTED, NOT IN THE U.S.,
NOT IN EUROPE EVEN. SO, I THINK THERE IS A LOT OF
READJUSTING OF PRIORITIES HERE. THIS IS PART OF WHAT WE ARE
SEEING TODAY, BEYOND THE GENERAL SLUGGISH DEMAND FOR
AUTOMOBILES WE SEE EVERYWHERE. GUY:
WE DO HAVE A NEW CEO IN, AS YOU SAY. MAYBE PART OF WHAT WE ARE
SEEING THIS MORNING IS HIS FIRST REACTION TO WHAT HE HAS
FOUND UNDER THE HOOD, AS LIZZY WOULD CALL IT, AT THE BUSINESS.
I WOULD BE INTERESTING TO SEE WHETHER THAT IS WHY WE ARE
SEEING A MARKET REACTION. COMING UP, WE WILL CARRY ON OUR
CONVERSATION ABOUT WHAT IS HAPPENING IN GERMANY. WE ARE GOING TO HAVE THE CIO ON
NEXT. THIS IS BLOOMBERG. LIZZY:
THIS IS THE OPENING TRADE AND WE ARE 30 MINUTES INTO TODAY’S
SESSION. YOU’RE LOOKING AT THE STOXX
600, PRETTY FLAT AT THE MOMENT. A BIT ABOUT PERFORMANCE FOR THE
FTSE 100. THAT IS THE BEST PERFORMER
ACROSS THE CONTINENT AND THE BEST PERFORMING SECTOR IS BASIC
RESOURCES. SO THE TWO OF COURSE LINKED.
THE MINERS DOMINATING THE FTSE. IRON ORE AND STEEL PRICES
CLIMBING ON THE BACK OF CHINA’S PLAN FOR A MEGA DAM IN TAIWAN.
THAT IS BOOSTING THE LIKES OF CLINT GO — GLENCORE. AS WE APPROACH THAT AUGUST 1
TARIFF DEADLINE, THE EUROPEAN UNION IS LOOKING TO SEND SOME
OF ITS ENVOYS TO MEET TO FORMULATE A PLAN FOR MEASURES
TO RESPOND TO A POSSIBLE NO DEAL SCENARIO WITH U.S.
PRESIDENT DONALD TRUMP. THE U.S. SEEMS TO WANT A NEAR UNIVERSAL
TARIFF ON GOODS, HIGHER THAN 10%.
BUT HOW WILL BRUSSELS REACT? WE ARE JOINED BY BRENDAN MURRAY.
WHEN YOU LOOK AT ALL THIS, I WONDER HOW LIKELY RETALIATION
FROM THE EU IS, WHAT FORM THAT WOULD TAKE, AND WHO IT IS OUT
OF THE MEMBER STATE PUSHING FOR THE HARDEST FORM OF RETALIATION.
>> THESE NEGOTIATIONS SEEM TO BE GOING ALONG PRETTY WELL A
COUPLE WEEKS AGO, BUT SOMETHING HAPPENED AND THEY GOT BOGGED
DOWN ON SOME OF THE KEY ISSUES. WE HEARD COMMERCE SECRETARY
LUTNICK OVER THE WEEKEND SAY HE THOUGHT HE WAS CONFIDENT THEY
COULD GET A DEAL, BUT HE ALSO SAID, I THINK IT IS BECAUSE THE
MEMBER STATES ARE GOING TO REALIZE IT IS GOING TO BECOME
MORE PAINFUL FOR THEM IF THEY DON’T. IT IS NOT LIKE THEY WERE
OFFERING CONCESSIONS AND WE WILL SEE EYE TO EYE IN THE
MIDDLE. SO, THE EUROPEANS HAVE A BIG
CHOICE TO MAKE. DO THEY ESCALATE?
DO THEY MEET TRUMPS TARIFFS WITH BARRIERS OF THEIR OWN? OR DO THEY ACCEPT UNFAIR
NEGOTIATION AND TAKE THE ECONOMIC PAIN?
THEY HAVE BEEN SAYING THEY WANT THAT UNIVERSAL TARIFF RATE TO
STAY AT 10%. THE U.S. IS AT 30%. COULD THEY GET TO 20% WITHOUT A
LOT OF OTHER MEMBER STATES SAYING THAT IS TOO MUCH FOR OUR
OWN AUTO INDUSTRY OR OTHER INDUSTRIES? GUY:
BACK IN APRIL, THE MARKET FREAKED OUT.
THEY GOT REALLY UPSET ABOUT WHAT WAS GOING TO HAPPEN ON THE
TERROR FRONT. WE ARE NOW IN THE ALMOST EXACT
OPPOSITE SCENARIO. THE MARKET IS UNMOVED BY ANY OF
THESE HEADLINES. WHAT IS YOUR ASSESSMENT OF THE
LIKELIHOOD OF SOMETHING SIGNIFICANT HAPPENING HERE?
OR IS THE MARKET RIGHT TO CONTINUE WITH THIS LACK OF
SENSITIVITY TOWARDS THESE HEADLINES THAT DROP ON A MINUTE
BY MINUTE BASIS? >> I THINK WE HAVE A GOOD
ENOUGH TRACK RECORD NOW TO SAY THE TRUMP ADMINISTRATION’S
STRATEGY IS MAXIMUM PRESSURE, MAXIMUM LEVERAGE, APPLY THAT TO
THE VERY END. WE HAVE TWO WEEKS UNTIL THE
AUGUST 1 DEADLINE AND THERE SEEMS TO BE THIS COMPLACENCY
THAT EVENTUALLY THEY WILL SEE EYE TO EYE AND THEY WILL NOT
MOVE FORWARD IN THE TRANSATLANTIC TRADE WAR.
THIS IS THE WORLD’S BIGGEST TRADE IN INVESTMENT
RELATIONSHIP. THERE IS A TRILLION AND A HALF
DOLLARS WORTH OF ECONOMIC ACTIVITY BETWEEN THE TWO.
BLOWING THAT UP WOULD BE DETRIMENTAL TO BOTH SIDES.
I THINK THERE IS A SENSE THEY WILL GET TO SOME AGREEMENT.
SOMEONE IS GOING TO HAVE TO TAKE THE SHORT END OF THAT.
AND THE EUROPEANS ARE TRYING TO FIGURE OUT RIGHT NOW, WHAT IS
THAT PAIN THRESHOLD WE WILL BE ABLE TO ACCEPT THAT THE U.S.
IS GOING TO APPLY? GUY: WE WILL WATCH.
THE NEXT FEW DAYS COULD BE INTERESTING.
BRENDAN MURRAY UPDATING US. IT WILL BE AN INTERESTING WEEK
THIS WEEK. NEXT WEEK, REALLY INTERESTING.
WE ARE WATCHING ALL THIS UNFOLD AS WE THINK ABOUT HOW THE
GERMAN ECONOMY IS MOVING FORWARD.
MORE THAN 60 OF GERMANY’S LEADING COMPANIES UNVEILED AN
INVESTMENT DRIVE WORTH 100 BILLION EUROS THIS MORNING.
NEW PROJECTS WE ARE TALKING ABOUT.
THE WHOLE IDEA IS IT WILL HELP LIFT EUROPE’S BIGGEST ECONOMY.
WE SPOKE EXCLUSIVELY WITH TWO OF THE LEADERS OF THIS GROUP,
SIEMENS AND DEUTSCHE BANK. THE CEOS OF THOSE GROUPS.
THEIR ASPIRATIONS AND WHERE THEY EXPECT FUTURE GROWTH’S TO
LOOK. THEY ALSO TALKED ABOUT HOW THE
TARIFF STORY WILL IMPACT OUTLOOK AS WELL. >> LET’S PUT IT THAT WAY.
WE WILL END UP WITH HIGHER TARIFFS BECAUSE OF THE UNITED
STATES. WHAT WE DON’T REALLY WANT, WE
WANTED TO HAVE LOWER ONES BECAUSE WE BELIEVE IN FREE
TRADE. IT STIMULATES ECONOMIES. THAT WOULD DRIVE INFLATION TO
SOME POINT. HOWEVER, THERE IS ONE POINT
WHICH IS THAT WE HAVE TO STOP THIS UNCERTAINTY.
ONCE THERE IS THE DEAL, THE DEAL SHOULD BE THE DEAL, THEN
WE CAN DEPLOY CAPITAL AGAIN BASED ON FACTS. >> WE HAVE BEEN TALKING A LOT
ABOUT EUROPEAN CHAMPIONS AND CHANGING THE WAY WE THINK ABOUT
PRESERVING COMPANIES AT THE NATIONAL LEVEL VERSUS THE
EUROPEAN LEVEL. WHEN YOU LOOK AT DEUTSCHE BANK,
WHICH IS NOW AT THE END OF A VERY LONG TURNAROUND PROCESS,
BUT NOW IS FEELING LIKE IT IS IN A STRONG AND CONFIDENT
POSITION, IS THIS A MOMENT FOR DEUTSCHE BANK TO GET INTO A
MUCH MORE AGGRESSIVE MODE, EXPANSION MODE, LOOKING AT M&A
ACROSS QUARTERS? WHAT DO YOU WANT DEUTSCHE
BANK’S ROLE TO BE IN THE WORLD OF EUROPEAN CHAMPIONS? >> I DO THINK WHAT WE SEE IS
THE GEOPOLITICAL UNCERTAINTIES WITH ALL THE ECONOMIC
UNCERTAINTIES. THERE IS ONE TREND WHICH IS THE
SAME ACROSS THE WORLD THAT OUR CLIENTS WANT TO HAVE A EUROPEAN
ALTERNATIVE TO THE U.S. BANKS. WE HAVE VERY STRONG AND CAPABLE
U.S. BANKS. BUT IN THIS WORLD OF GEOPOLITICAL UNCERTAINTIES,
THEY WANT TO HAVE A CAPABLE GLOBAL EUROPEAN PLAYER.
AND THERE ARE NOT SO MANY EUROPEAN BANKS LEFT WITH A FULL
INVESTMENT BANK, A FULL CORPORATE BANK, A GLOBAL
NETWORK IN OVER 60 COUNTRIES. THAT IS A ROLE WE CAN PLAY.
THIS ROLE WE NOT ONLY WANT TO PLAY BECAUSE WE ARE A LOWER
BANK , BUT IT IS EASIER TO DO THAT IF YOU’RE COMING FROM A
COMPANY THAT IS ECONOMICALLY ON THE RIGHT PATH AND IS ALSO
PUTTING IT EUROPE. WE HAVE A UNIQUE CHANCE NOT
ONLY AS GERMANY AND EUROPE, BUT ALSO AS DEUTSCHE BANK, TO BE
THE ONE FACILITATING AND CONTRIBUTING TO CLIENT GROWTH
AROUND THE WORLD. THE DIVERSIFICATION ALSO IN
BANKING, NOT ONLY TO RELY ON ONE BANK BUT MANY BANKS THAT
FROM A REGIONAL PROSPECT HAS NEVER BEEN BIGGER. >> YOU TALK ABOUT DIVERSIFYING.
IS THIS BUY EUROPE TREND A LASTING TREND?
IS THIS SOMETHING YOU ARE SEEING FROM INVESTORS, THAT
THEY ARE WANTING TO MAKE A MEANINGFUL COMMITMENT TO EUROPE?
AND WHAT DOES THAT LOOK LIKE IN TERMS OF NUMBERS? >> FOR THE FIRST TIME, WE SEE
SINCE THE LAST TWO OR THREE MONTHS, A SIGNIFICANT
REALLOCATION OF FUNDS, IN PARTICULAR TO EUROPE.
THE INTEREST IS HUGE. WHENEVER WE TALK WITH
INVESTORS, THEY REALLY WANT TO UNDERSTAND WHAT IS GOING ON, IN
GERMANY, IN EUROPE. ALREADY IN DAVOS THIS YEAR SIX
MONTHS AGO, MOST OF THE INVESTORS SAID, MICRO, GERMANY
IS REALLY GOOD. WITH THAT, THEY MEAN THE GERMAN
CORPORATES, COMPANIES. MACRO, YOU NEED TO DO
IMPROVEMENTS. GUY: ARE WE GOING TO START SEEING
THOSE WITH THE MERZ GOVERNMENT COMING THROUGH? SENTIMENT REALLY QUITE
POSITIVE, DEUTSCHE BANK AND SIEMENS.
BUT IN THE BACKGROUND, WE STILL HAVE THIS HUGE THREAT COMING IN
THE FORM OF POTENTIAL TARIFFS. THE CHIEF ECONOMIST AT ALLIANZ
COMING TO DISCUSS. IN TERMS OF WHERE WE ARE RIGHT
NOW, WE HAVE THIS INCREDIBLY POSITIVE PICTURE BEING TALKED
ABOUT BY GERMAN CORPORATE’S. WE JUST HEARD FROM DEUTSCHE AND
SIEMENS. THERE IS THE POTENTIAL FOR
SIGNIFICANT TARIFFS TO BE IMPOSED OVER THE NEXT FEW DAYS.
AND THE MARKET IS BASICALLY IGNORING ALL OF THAT.
WHERE DO YOU SIT CURRENTLY IN TERMS OF YOUR EXPECTATIONS FOR
HOW THE EUROPEAN ECONOMY IS GOING TO DEVELOP GIVEN THE
THREAT IT FACES FROM THESE TARIFFS? >> IT IS A PARTICULAR
CROSSROADS BECAUSE WE HAVE A WEEK TO KNOW WHAT WILL HAPPEN
WITH THOSE TERROR THREATS. THIS IS A HUGE UNCERTAINTY FOR
ALL THE CORPORATES THAT ARE MAKING HUNDREDS OF BILLIONS OF
TURNOVERS IN THE U.S.. WE HAVE TALKED 163 BILLION LAST
YEAR FOR GERMAN CORPORATE’S. IMAGINE HOW MUCH OF A STAKE
THERE IS IN THIS TRADE WAR TO BE MUTED IN THE NEXT QUARTERS.
IT IS A BIG TOPIC. I THINK THIS NEWS FOR GERMANY
IS WELCOME. GERMANY IS SLOWLY BUT SURELY
GOING OVER ITS ETA’S FROM 2022 WHERE THEY REALIZED THE MODEL
WAS OFF. I THINK THIS ANNOUNCEMENT IS
VERY IMPORTANT, ALONGSIDE THE ANNOUNCEMENT OF PUBLIC MONEY
THAT IS GOING TO BE A KEY DRIVER OF GROWTH.
ALONGSIDE REFORMS. BUT THE KEEP MISSING IN ACTION PERSON, THE
ONE PART VERY IMPORTANT IS THE 99% OF GERMAN COMPANIES THAT
ARE SME’S AND NEED TO GROW THEIR INVESTMENT.
BETWEEN 2019 AND 2024, CAPEX, INVESTMENTS BY CORPORATE AND
GERMANY WENT DOWN 70%. SO, THE GOVERNMENT IS ALSO
TRYING TO DO SOMETHING ABOUT THIS. IT IS PART OF PSYCHOLOGY, BUT
IT IS ABOUT THE MOM AND POP SHOPS, THE HOUSEHOLDS.
THIS IS WHERE WE SEE RECORD HIGH SAVINGS.
SO, THERE IS STILL SOMETHING THERE TO UNLOCK FOR GERMANY AND
EUROPE IN GENERAL. IT WILL BE BETTER FOR EUROPE TO
GROW ON ITS OWN WITHOUT WAITING FOR GROWTH FROM THE OUTSIDE,
ESPECIALLY WHEN IT COMES TO THE TRADE WAR. GUY:
WHICH OF THESE TWO FACTORS WILL END UP BEING MORE DOMINANT, THE
IDEA THAT GERMANY NEEDS TO INVEST, THE IDEA THAT THERE IS
THE MONEY THERE TO UNLOCK AND THAT CAN BE DEPLOYED AND
DELIVER SIGNIFICANT RESULTS, BUT AT THE SAME TIME THE
OVERARCHING THEME IS THAT WE ARE FACING A TOUGHER TRADE
NARRATIVE WITH THE UNITED STATES, A KEY MARKET FOR MANY
OF THESE SMALLER MIDSIZE COMPANIES.
WHICH OF THOSE TWO THINGS DO YOU THINK WILL END UP BEING
DOMINANT? IS IT POSSIBLE TO HAVE A
POSITIVE STORY WHEN A TRADE WAR IS LOOKING MORE AND MORE LIKELY?
>> THE ANSWER IS YES BECAUSE THE DOMESTIC MARKET IN EUROPE
IS PRETTY HUGE. WE NEED TO DEEPEN OUR SINGLE
MARKET. WE NEED TO FIND WAYS FOR US TO
BE INDEPENDENT. I THINK THE TRADE WAR IS A
MASSIVE HEADWIND. LET ME START WITH THAT. ADDITIONAL TARIFFS IS COSTING
0.5 PERCENT IN GROWTH FOR EUROPE.
IF THE TARIFF FROM THE U.S. IS LANDING AROUND 15%, THEY HAVE TO DROP ANOTHER BASIS
POINTS SO THAT WE DON’T GO INTO RECESSION. BUT THERE IS NOT A LOT OF
INITIATIVE THAT COULD BE BOOSTED HERE.
THE CEO OF DEUTSCHE BANK WAS TALKING ABOUT THE ALLOCATION
INTO EUROPE. I TALKED A TON OF CIO’S IN
EUROPE WHO SAY MONEY IS FOLLOWING DEFENSE.
IT IS COMPLICATE IT, BUT IT LOOKS LIKE YOU GUYS ARE ON THE
SOMETHING WHEN IT COMES TO MAKING SAVINGS PRODUCTIVE.
SO, THERE IS A CORRECTION OF THE BIAS THAT WAS IRRITATING
EUROPE FOR SOME TIME. ALSO BECAUSE WE LOOK MORE
STABLE AND RULES DRIVEN. WE ALSO ARE MORE
FORWARD-LOOKING IN TERMS OF WHERE WE WANT TO SPEND THE NEXT
FIVE TO 10 YEARS OF OUR MASSIVE EFFORTS COME UP WITH PUBLIC
MONEY BEING UNLEASHED, BUT ALSO THE INITIATIVE GOING ON RIGHT
NOW TO MAKE SURE WE ARE CREATING A DIFFERENT ECOSYSTEM.
IT DOESN’T SAVE US FROM THE THUNDER OF WHAT THE TRADE WAR
IS GOING TO BRING, AND ALSO THE FRICTIONS BETWEEN THE EURO’S —
THE U.S. AND EUROPE. BUT IT IS A MOMENT WHERE IT IS
QUITE INTERESTING. I THINK THE EUROPEAN UNION, THE
EUROPEAN COMMISSIONER CALLED FOR ACTION BY EVERY BUSINESS
LEADER IN EUROPE, WHICH IS VERY INTERESTING TO SEE AS A REVERSE
CALL FOR ACTION. WE ARE WANTING THEM TO MAKE A
BOLD MOVE SO THERE IS A FORM OF
TRICKLE-DOWN OF THIS WHOLE EUROPE NARRATIVE. LIZZY:
IT WAS INTERESTING YOU SAID THE ECB IS GOING TO PAUSE RATES
THIS YEAR. I TAKE IT YOU DON’T SEE ANY
MORE CUTS FOR THE REST OF 2025. WHEN WE THINK ABOUT THE ECB, IT
IS NOT JUST TRADE. IT IS ALSO THE THREATS TO CHAIR
POWELL. WE HAVE THE ECB SAYING THE
EFFECTS OF OUSTING POWELL WOULD BE FELT OUTSIDE THE U.S.
I WONDER WHAT YOU THINK THAT WOULD LOOK LIKE FOR EUROPEAN
MARKETS, AND IF YOU AGREE WITH HIM. >> FIRST, WE STILL HAVE TWO
RATE CUTS THAT ARE PLANNED FOR SEPTEMBER AND OCTOBER, JUST TO
GET THAT OUT OF THE WAY. BUT THE REAL QUESTION IS INDEED
WHAT IS HAPPENING ON THE EURO-DOLLAR.
IT HAS BEEN A MASSIVE ROLLER COASTER SINCE THE BEGINNING OF
THE YEAR. THERE IS NOW THIS MOMENT WHERE
WE ARE IN A DIFFERENT COLT SITUATION WHERE WE DON’T WANT
THE EURO TO BE TOO STRONG. THERE IS SOMETHING HERE ABOUT
BUILDING AN ALTERNATIVE TO THE DOLLAR AS THE DOLLAR ERODES IN
THE EURO BECOMES A CURRENCY WERE EMERGING MARKETS WANT TO
ISSUE IT, OR A CURRENCY WHERE THE FINANCING OF THE DEFENSE
EFFORTS WANT TO BE. JUST LIKE THE ENERGY SECTOR
NEEDS TO LOWER THE DEFENSE. I WOULD SAY WHATEVER IS
HAPPENING NOW ON THE U.S. AND THE FED IS A MASSIVE DRIVER
OF EVERYTHING MARKET RELATED, INCLUDING EUROPE.
BUT THERE IS ALSO FOR US A BIT OF TIME TO ENGINEER SOMETHING
SLIGHTLY DIFFERENT. I THINK ABOUT STABLECOINS
MAKING THEIR WAY TO THE MARKET RIGHT NOW.
EUROPE NEEDS TO HAVE AN ALTERNATIVE TO THIS.
WE NEED TO HAVE AN ALTERNATIVE. I THINK A LOT OF US ARE
THINKING , HOW IS THIS A WAY FOR US TO GET SOME OF THE
CRUMBS THE DOLLAR IS LEAVING BEHIND AND MAKING IT A STRENGTH
AT A MOMENT WHEN EUROPE IS READY TO TURN AROUND AMID THE
PSYCHE OF INVESTORS, FINANCIAL MARKETS, AND TRYING TO MAKE IT
A HOMEGROWN MARKET THAT IS DECENT? GUY: YOU TALK ABOUT A CALL FOR
ACTION. IS THAT CALL FOR ACTION GOING
TO BE DELIVERED OUTSIDE OF GERMANY?
GERMANY SEEMS LIKE IT’S OWN SITUATION AT THE MOMENT, AND
THE REST OF EUROPE DOESN’T. I’M WONDERING IF THE TWO FIT
TOGETHER. THE REST OF EUROPE DOESN’T HAVE
THE POTENTIAL THAT GERMANY HAS A RIGHT NOW.
IT DOES NOT HAVE A DEBT BREAK TO RELEASE AND POTENTIAL TO
SPEND ALL THIS MONEY. ARE WE CONFUSING GERMANY WITH
EUROPE SOMETIMES? >> TO BE FAIR, IT IS TRUE THAT
IT LOOKS LIKE HEAVY LIFTING FOR DEFENSE AND EVERYBODY IS
LOOKING AT GERMANY. I OFTEN TELL MY FRENCH FRIENDS,
IF YOU EXPECT THE GERMAN MONEY GOING TO DEFENSE IS GOING TO
BIG COMPANIES IN FRANCE, YOU ARE WRONG ABOUT THIS. THE GERMANS HAVE BEEN SAVING
FOR THAT MOMENT. THIS BEING SAID, I THINK WE SEE
SO MANY GOOD VIEWS FROM ITALY AND SPAIN WHO HAVE BASICALLY
BEEN BACK ON A PRIMARY SURPLUS VERY FAST. ALSO BECAUSE OF THE
CRISIS IN 2014, BUT ALSO BECAUSE THEY HAVE THEIR REFORMS
ON THESE SECTORS AND REVISING A LOT OF PRIVATE INVESTMENT
GROWTH IN THE COUNTRIES. IN FRANCE, WE HAVE A LOT OF BIG
COMPANIES IN THE SECTORS WHERE THAT IS THE MOMENT OF THE
SECTORS, THAT IS THE MOMENT OF THE ENERGY TRANSITION, AND IT
HAPPENS THAT A LOT OF THESE BIG COMPANIES ARE IN FRANCE RIGHT
NOW. SO, I WOULD SAY THE ONLY WAY
THAT THIS GERMAN MOMENT BECOMES A EUROPEAN MOMENT IS IF WE LOOK
FOR COMPARABILITIES. WHICH IS SOMETHING EUROPE HAS
NOT BEEN HISTORICALLY VERY GOOD AT. WE HAVE ALL BEEN VERY
SANITIZING AMONG THE EXPECTATIONS OF COUNTRIES.
IT LOOKS LIKE COUNTRIES HAVE SOMETHING TO OFFER.
NOT ALL HAVE MONEY TO OFFER. BUT IN FRANCE ESPECIALLY, THEY
MAY NOT HAVE A LOT OF MONEY. EVERYWHERE I LOOK, THERE IS A
VERY HIGH SAVINGS RATE. THERE IS LOW CAPEX GROWTH.
THAT IS WHERE THE PSYCHOLOGICAL LIMIT IS IMPORTANT, BECAUSE
HOUSEHOLDS AND COMPANIES HAVE SOMETHING TO UNLEASH RIGHT NOW
IF WE WANT TO FINANCE THE NEXT FIVE TO 10 YEARS, INCLUDING THE
SECURITY TILT. LIZZY: WE HAVE A MEETING THIS WEEK.
BOTH HAVE BEEN IN LONDON THE PAST COUPLE WEEKS.
MAYBE A SIGN OF PROGRESS. THE CHIEF INVESTMENT OFFICER AT
ALLIANZ, ALWAYS GOOD TO HAVE YOU AND YOUR BEAUTIFUL ART ON
THE OPENING TRADE. WE THANK YOU. COMING UP, BRACING FOR A SLEW
OF EARNINGS THIS WEEK FROM SECTORS SUCH AS BANKING,
TRAVEL, AND TELECOMS. WE WILL GET YOUR PREVIEW NEXT.
THIS IS BLOOMBERG. ♪ LIZZY: 51 MINUTES INTO TODAY’S
SESSION. WELCOME BACK TO THE OPENING
TRADE. THE STOXX 600 TRADING LOWER.
THE WAS PERFORMING SECTOR ARE THE BANKS. WE ALREADY HEARD FROM CEOS.
THE BANKS ARE THE BIG SECTORS TO WATCH.
THEY ARE AFFECTED BY INTEREST RATE CUTS AND GEOPOLITICAL
TENSIONS. WHAT ARE WE EXPECTING OUT OF
THEIR RESORT? >> WE GOT A TASTE WHEN THE CEO
MENTIONED THERE HAD BEEN A BIT OF A BUMPY QUARTER.
HE KIND OF READJUSTED EXPECTATIONS DOWN TO THE
REVENUE THERE. AND HE ALSO MENTIONED WEAKER
THAN EXPECTED PERFORMANCE IN THE ADVISORY BUSINESS.
WE KNOW THE EARNINGS MIGHT DISAPPOINT A LITTLE BIT.
A BRIGHT SPOT MIGHT BE THE CORPORATE BANKS.
BARCLAYS RESTRICTED THEIR SUPPLY CHAINS.
THEY ARE LOOKING TO INVEST IN THE DEFENSE INDUSTRY AS WELL,
ESPECIALLY GERMANY. THAT MIGHT BE A BIT OF A BRIGHT
SPOT. WE ARE ALSO LOOKING TO HEAR
ABOUT COST CUTS, THE PERFORMANCE IN THE PRIVATE
BANK, AND THERE MIGHT BE A BUY BACK. SO, THINKING ABOUT THAT.
GUY: IS IT THE ONLY BANK REPORTING
THIS WEEK? >> WE HAVE A FEW OTHERS.
WE HAVE BNP. THE KEY THING TO LOOK OUT FOR
THIS EARNINGS SEASON IS ALL THOSE BANKS COME THROUGH IN THE
SECOND QUARTER IS LIKELY TO BE LESS RESILIENT THAN THE FIRST.
THINGS ARE STARTING TO CATCH UP. AS YOU MENTIONED, THE INTEREST
RATE CUTS ARE STARTING TO FEED THROUGH TO LOWER NET INTEREST.
WE SAW THAT WITH THE NORDIC BANKS EARLIER.
THE TARIFFS AND THE UNCERTAINTY IS FEEDING THROUGH THE COST OF
RISK AND INTO HIGHER PROVISIONS AS WELL. THE U.K.
BANKS MIGHT PERFORM A LITTLE BETTER, BUT THEY HAVE
STRUCTURAL HEDGES AND THAT IS ALLEVIATING THE IMPACT OF RATE
CUTS IN SHIELDING THE REVENUE. THAT MIGHT BE BETTER FOR THOSE
FROM FRIDAY. GUY: CHLOE MELEY. THE GERMAN INVESTMENT ALLIANCE
SUMMIT IS TAKING PLACE BEFORE THE HEARING FROM THE CEOS OF
SIEMENS AND DEUTSCHE’S. WE HAVE U.S.
HOME SALES TOMORROW. MERZ AND MACRON ARE MEETING IN
BERLIN. IT FEELS LIKE A THREE WAY
TRIANGLE BEING FORMED BETWEEN PARIS, LONDON, AND BERLIN.
WE HAVE EU AND CHINESE LEADERS MEETING IN BEIJING.
THE MAIN EVENT ON THURSDAY WILL BE THE ECB RATE DECISION,
ALTHOUGH IT IS UNLIKELY TO DELIVER MUCH OF AN OUTCOME. PLUS ALSO, WE HAVE U.K.
RETAIL SALES OUT, WHICH IS USUALLY SOMETHING OF A WEATHER
FORECAST. LET’S SEE WHAT VALERIE IS GOING
TO HAVE HER EYE ON THIS WEEK. WHAT ARE YOU WATCHING? VALERIE:
I THINK EUROPEAN BANKS WILL BE INTERESTING.
THE OTHER HIGHLIGHT FOR MONETARY POLICY IS GOING TO BE
THE ECB DECISION. WHAT HAS REALLY CHANGED BETWEEN
THEIR JUNE DECISION AND NOW IS THE FACT THAT THIS RENEWED
THREAT OF TARIFFS, THIS 30% NUMBER THREATENED BY PRESIDENT
DONALD TRUMP, AND ALREADY AT THE JUNE DECISION, CHRISTINE
LAGARDE CHARACTERIZED THE RISKS TO ECONOMIC GROWTH AS TILTED TO
THE DOWNSIDE. SO, THE MARKET WILL BE WATCHING
KEENLY ON IF SHE CHANGES THAT LANGUAGE, IF SHE SOUNDS A BIT
MORE BEARISH. IF SHE DOES, I THINK THE MARKET
WILL START TO PRICE IN THE CHANCE OF A SEPTEMBER RATE CUT.
THEY DO HAVE A SEVEN WEEK PAUSE IN BETWEEN THIS DECISION ON
THURSDAY AND SEPTEMBER, SO THERE IS A LOT OF TIME BETWEEN
THOSE TWO POINTS. MAYBE WE WILL GET MORE CLARITY
ON THE TRADE POLICY AND MORE CLARITY ON THE RATE TRAJECTORY
FOR THE ECB. LIZZY:
I WANTED TO TALK ABOUT JAPAN BECAUSE GUY TOLD ME NOT TO TRY
TO ANALYZE THOSE MOVES RIGHT NOW.
THE BOND IN STOCK MARKET ARE CLOSED, BUT WHAT DO YOU MAKE OF
WHAT WE ARE SEEING OF THE LIMITED REACTION TO THAT?
VALERIE: THE YEN IS STRONGER SO IT IS
HAVING A BIT OF RELIEF. ALSO, LOOK HOW GOVERNMENT BONDS
ARE RESPONDING. WE ALSO SEE A RELIEF RALLY WHEN
IT COMES TO JGB’S WHEN THEY REOPEN. IT SEEMS LIKE A MARKET
FAVORABLE ELECTION RESULTS. I THINK MAYBE THE MARKET WAS
BRACING FOR SOMETHING WORSE, OR MAYBE THEY PRICED IN A LOT
WORSE IN THE WEEKS GOING INTO THIS DECISION.
WE KNOW THAT THE HAD STRENGTHENED AROUND 3% —
SORRY, WEEKEND AROUND 3%, AND SOME YIELDS HAVE HIT TO DECADE
HIGHS. LIZZY: DO YOU THINK IT IS ALL ABOUT
JAPAN? OR THE MARKET IS LOOKING THROUGH JAPAN AND ONTO THE
TRADE STORY, THE ECB STORY? VALERIE:
I THINK JAPAN HAS DEFINITELY SET THE TONE WITH HOW
FIXED-INCOME HAS TRADED. THIS COULD SET US UP FOR A
DECENT SUMMER RALLY AHEAD AND INTO JULY IF THOSE FISCAL
WORRIES ARE PUT TO BED, FOR WHATEVER REASON, WHETHER
WARRANTED BY THIS RESULT FROM THE ELECTION OR NOT, BUT IT
SEEMS TO BE THE READTHROUGH. VALERIE: WE WILL KEEP — LIZZY:
WE WILL KEEP AN EYE ON IT TOMORROW.
WE THANK YOU FOR THAT SET OF WHAT IS ON THE DOCKET FOR THE
WEEK. WE HAVE A BUSY WEEK FOR EARNINGS HERE IN EUROPE, AND
THAT ECB MEETING OUT OF FRANKFURT.
A HOLD EXPECTED FROM THE DUMB LAGARDE.
WE ARE LOOKING AT THE STOXX 600, TRADING — TREADING WATER.
SLIGHT OUTPERFORMANCE FROM THE FTSE 100.
BUT THINGS ARE YET TO PICK UP SPEED.
I WILL BE WITH YOU NEXT HOUR. GUY: WE WILL FIGURE OUT WHAT IS
HAPPENING IN THE BOND MARKET, ANALYZE WHAT IS HAPPENING IN
JAPAN, AND PREPARE OURSELVES FOR WHAT WILL HAPPEN ON THE
TRADE FRONT NEXT. THAT SEEMS TO BE THE NARRATIVE
WE ARE BUILDING ONTO.

European Union and US negotiators are heading into another week of intensive talks, as they seek to clinch a trade deal by Aug. 1, when US President Donald Trump has threatened to hit most EU exports with 30% tariffs.

The yen strengthened versus the dollar on Monday after Japan’s Prime Minister Shigeru Ishiba said he would carry on as leader after the ruling coalition lost its majority in the upper house election. Hedge funds turned bearish on the yen for the first time in nearly four months, according to Commodity Futures Trading Commission data released on Friday for the week that ended on July 15.

The Opening Trade has everything you need to know as markets open across Europe. With analysis you won’t find anywhere else, we break down the biggest stories of the day and speak to top guests who have skin in the game. Hosted by Guy Johnson and Lizzy Burden.

Chapters:
00:00:00 – The Opening Trade
00:00:13 – Japan Election Results
00:02:11 – EU-US Trade War
00:05:17 – Japanese Yen
00:09:41 – Israel Attack on Deir Al-Balah
00:10:37 – China Block US Worker Exit
00:10:44 – Alaska Airlines
00:12:36 – Stellantis Stock
00:16:06 – Japan PM Ishiba to Stay
00:26:22 – German Firms Pledge Massive Investment
00:28:41 – Siemens CEO
00:36:37 – Deutsche Bank CEO
00:44:32 – FTSE 100 Check
00:47:34 – Stocks to Watch: Stellantis, RyanAir, Carrefour
01:04:50 – RyanAir Profit Doubles
01:12:46 – EU Tariff Retaliation
01:23:43 – Bitcoin, Stablecoin
01:30:29 – European Banks Earnings
——–
More on Bloomberg Television and Markets

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