Good morning from london.
This is Bloomberg Markets. Today I'm Anna Edwards alongside Guy
Johnson and crazy good self with the castro.
I just less than an hour away. Here's what you need to know.
European earnings continue with soc gen reporting a profits of as equities
traders help lift results. We'll speak to the CEO of Vestas and the
deputy CEO of credit agricole. This hour, apple jumps after hours
housing forecast to record sales growth. The iPhone maker announcing a 10
billion share buyback, the biggest in US history.
Plus, traders pull forward Fed rate cut bets by a month to November ahead of
today's key US jobs report. In the meantime, a quick check on the
markets here. We are seeing green on screen for your
stock. Photo features high by 4/10 of 1%.
Slight underperformance by the footsie 100, but nothing to write home about.
Still higher by 2/10 of 1%. The currency picture is interesting.
107 euro dollar 125 on cable. Marcus today starts right now. Friday, the 3rd of May.
Good morning. Ferrari is out with a new V12.
It's very pretty. I bet you it sounds amazing.
In other news. Apple is out with with an epic buyback.
We're going to talk about that a great deal, I suspect, throughout this show.
What does this signal about this company's future?
Warren Buffett make of it this weekend. It's jobs day in the USA.
We're looking at the headline number coming in at circa 240,000.
What is the Fed going to make of that? And the French banks.
French banks are having a very good morning this morning.
What do we make of all of this? Yeah, I can't believe you went with the
Ferrari line. I mean, it is Friday, so it is Friday.
We can talk about Friday. It is very positive titles.
I take your word for that guy in terms of the prettiness of the French banking
earnings. Yeah.
No, no, not at all. Bad, it seems and really interesting to
think about the interest rate story when it comes to in particular Credit
Agricole, because they are limited in the extent to which they can pass on
rate the rate hikes during that rate hiking cycle that we've seen.
And so that limited some of the upside potential, I suppose, in relation to
others. But does that also mean that the losses
are limited on the downside when we start to see the ECB cutting rates?
Well, the stock market really holding that up and to your point.
But Credit Agricole, I remember from last time around, they also had
underperformed on the fixed income side. That continues as well, this time
posting a 3% decline to your point in their FICC revenue in the first place.
Good. Doesn't it only beat Wall Street?
Well, on the number 3.4 down was Wall Street.
Yes. So that looks pretty good to me that the
Credit Agricole cost income ratio is sensational.
You look at what they're doing in terms of what they've taken out in costs.
These numbers are absolutely amazing. And you compare and contrast that with
software, which has got a long way to go on that cost income side.
Then it's really interesting in terms of what the two French banks are having to
do at the moment. Crédit Agricole is way ahead of the
curve in what it's anticipated. So Jane's got a long way to go.
Yeah. In terms of that fic line, though,
Kristie, you're right that they do have a history of outperforming, although
it's not such a large part of their business as it is for others.
But yeah, but they do have that history of outperformance.
But yeah, maybe they're not looking quite so about this time around.
I'm curious about this equity story though.
It's because SOC Gen as well put it, push posting their profit off of that as
well. I'm curious, why is this just kind of a
the entire market markets around the world are outperforming and therefore
they're getting in on the rally. I've traditionally not seen this kind of
equities outperformance drive profits to this extent volatility but we're
starting to get some it's a pick up is look at what's happening to the VIX.
You're starting to get some trading opportunities.
Maybe that's where this is is ultimately coming from.
There are other aspects obviously, of that business.
I think it's it again, you come back to these banks, what do they want to be?
And trading profits continue to be such a big part of the narrative is that
something that shareholders should reward or not reward?
Right. Well, and what do they want to be in the
future in a different sort of with a different macro backdrop.
So, for example, capital markets activity, M&A activity, that's all been
really sluggish and still is according to Dr.
Ed, even though anecdotally I don't know it feels its feels sitting here in this
seat. Let me talk about more IPOs and there is
a little bit of a brightness coming through in capital markets.
We talked about that with the CEO of Barclays not long ago.
But even he's saying, you know, we need another we need another month or two to
sort of feel really excited about this. But we do have another business coming
to market from Spain today. Yes.
The pooch IPO is, as I'm told it is pronounced.
It's interesting because then if you look at some of these French banks are
soft and are is Crédit Agricole really even positioned to take take advantage
or capitalize on that capital markets activity at Barclays?
Maybe. But I'm not sure if if SOC Gen and
credit score are IP as IPO facing, for example, with Barclays US.
We're going to be talking to the CEO of Crédit Agricole.
I'm looking forward to that conversation.
Durham Group. He's going to be joining us at 730
London time. Intercontinental is out with numbers as
well this morning. Diageo is adjusting the intercontinental
numbers. Then the good report was love that
revenue per available room plus 2.6, the estimate plus four.
So they've missed a little bit there. So.
Right. Tell us what's coming to Europe next
week. So it's going to be absolutely fine and
you'll find out just how fine if you stick with us until 830 this morning,
we're going to talk to MasterCard. They've done some analysis on just what
kind of boost you get to restaurants and hotels from just Taylor Swift being in
town. Stay tuned, folks.
Guy Johnson going to sing for us live on the air.
We're all very excited about that, aren't we?
I don't think anybody should be excited. I know that's not going to happen.
It may be Friday, but I'm certainly not in the mood to sing just yet.
We can listen to Ferraris if you want. I'm very happy to do so.
We will provide that soundtrack. Can we talk about Apple less, please?
Yes. I thought some of these things were
interesting, but the fact this is the biggest buyback in US history that's
going to cash Steve Jobs have done this, probably not.
Give us the. No, no, no.
I just I don't know. I don't know.
But this is this is a company that is kicking out so much cash that it's doing
the biggest buyback ever. And I wonder whether that's something
that tells us. I told myself that this is back in the
last show. What kind of what kind of company is
Apple? There's also, I think, questions around
its China sales data. All the data seems to point the fact
that they actually see a significant slowdown.
They did not seem to recognize that. On the earnings call last night, which I
thought was fascinating. Yes, I know.
I'm trying to side pointing to some other brighter areas suggesting that
China. You know, we knew about the weaker
sales. So it wasn't the phone side that
actually delivered the weakness in China.
It was it was it was other things. So questioning that kind of narrative.
Interesting. We have to wait until that developers
conference early until we get the substance of what I at Apple really
means. I mean, they talked about new phones
with new chips focused on A.I., But until you see exactly how Apple plans to
make its claim to take its place on that on that value chain, it's difficult to
sort of see what that will add up to. It is I'm curious by the rate there as
well. We had April Hangover in Asia as well,
talking about the very clear read through, of course, of suppliers.
So we're going to be watching that at the open as well.
It's also important to keep in mind you were talking about the buyback story.
I want to bring you right back to the debt profile as well, because, yes, this
is a historic buyback, of course, on the kind of entire US spectrum in a global
spectrum as well. But there also have a record amount of
cash pile they have issuance for when when rates were significantly lower.
They also have a maturity wall coming up.
When you look at their debt, for example, 2025 to 2027, it's a total of
something like 30 billion, which again in relation to the buybacks, in relation
to their cash pile is not that much. But something to keep in mind we're
talking about who's more exposed to that Warren Buffett this weekend, What is he
going to say about it? I think he owns about 6%.
Berkshire owns around 6% of Apple stock. I'm really fascinated to hear what his
take is on this. What does he think about?
Continuing to own that I selling it would be tough.
There's a really nice piece in the journal this morning talking about how
Buffett's kind of journey through the Apple story has progressed, But where it
leads him now, I think is a really difficult question.
Talking about Apple's journey, I like the services that there's a services
story in here as well, isn't there? And that's been something that's crept
up on the rails in recent years and it's something of a bright spot this time
around. And it isn't.
I mean, it's Apple TV, it's those things, but it is also the App Store, of
course. And we know they face legal challenges
around that, particularly here in Europe.
Is that certainly an area of vulnerability, I guess, that some
analysts are going to be watching? But genius bar the Apple care, although
I don't know anything about this stuff, this is not a point of pride.
The fact that you are able raise it is seen over here.
We take it slightly differently. We are bringing good team coverage.
Yeah, we are with balance currency. We're not all about the blue bubbles or
whatever they are. Blue, green.
I have no idea. Someone told me you can change the color
somehow. I don't know.
I'm still. I'm so invested.
I think maybe that's true. Some sort of shaming going on.
And that's the that's the apple thing wrapped up.
So we talk about macro because this is a talk about hair pulling.
When I say plenty, pulling forward, once again, expectations of a rate cut by
drum roll one month. But but but I mean, you know, that's
where the conversation has got to since the start of the year.
Talking about six rate cuts now we're talking about will they cut in November
or will they cut in December? But I suppose it's useful in the context
of this week has been a bit dovish since Tuesday.
We've seen yields from ten, particularly particularly at the front end.
Yeah. So what does today change it?
I we have been told this week unequivocally that we are data
dependent. The Fed is data dependent.
Here is a big piece of data. What is it going to tell us to 40 still
feels like a fairly strong number to me. The claims numbers continue to be really
kind of weak, strong depending on your kind of the way you want to approach
that. But the data generally is strong.
So which states are we watching within these numbers to tell us how the Fed is
going to react to it? The headline number obviously is going
to matter. I'm not speaking crazy here to 47 is the
whisper number 240 is the Economist survey.
That is still I think the standard for this morning is still higher.
The estimate is still higher than the average pace in the back half of last
year. So that's not great.
The other part of the way. But but it is it's depending on your
point of view. Yeah.
It's good for the economy. Is it correct to have but but for the
Federal Reserve it I don't I don't think it is.
And in terms of that they are looking for a some some more kind of pain in the
labor market. That is a good point.
It is good for the economy. People love jobs, but the wage growth
numbers are important as well. How much of that is driving the
inflationary story instead of playing catch up that they think a big deal
like the calendar I think is interesting because I actually didn't know when the
November Fed meeting was. It's November 7th.
That is two days after the election. So technically you could miss the
election risk. Yeah, if you were to wave to to to cut
in November, you really push back against any suggestion that that was in
their thinking. So yeah, you know that stuff from an
economist point of view people are talking about it, right?
They said that it would have to be in December because November is the
election. But you missed that from economists
though. So whether you think you can talk to
them and some of them say, well, therefore it has to be before and others
will say therefore it has to be after seems quite
interesting on claims because Bloomberg economics saying that just getting no
clues from claims they're all so volatile you just can't really get
anything sensible at the skeptical on the signal values the way economists
would put that so so my desk is over there and lots of economists walk past
it and I keep talking to them. And so your desk, your desk, you okay?
Our desks are there. And I find it fascinating that
everybody's struggling with the data. Nobody, nobody can quite understand.
And the Fed talks about this putting putting this under the microscope.
Nobody can quite understand why we're getting the inflationary impulse that
we're getting and pointing at particular pieces of data to give us clues as to
what is happening. People are really struggling with it.
Yeah, but you can only say as the household survey they prefer to rely on
rather than the nonfarm payrolls. You get something about a third as good.
If you look at the household survey and sense of creation, and some suggest it's
the difference between part time and full time unemployment treated
differently so that if I maybe I'm sorry I didn't speak correctly, that it was
all about the inflation numbers. Nobody can figure out.
So do you look at the employment story? Do you look at what is happening with
the stock market? Do you look at financial conditions?
What do you look at to get a handle on why inflation is doing what it's doing?
And it's a sticky as it is, And I'll add to that list, housing as well.
Right. What what does the wealth effect look
like in over in the States? That's why the wages story, I think is
so important. So my vote is the wages numbers at at
8:30 a.m. Eastern time I'm going to watch out for
today. In addition to that, of course, 11 a.m.
UK time you are going to see the Pooch IPO begin to trade Europe's biggest
listing this year. That, of course, is going to be
something we watch very, very closely in terms of the European IPO market.
1:30 p.m. UK time as we're talking about that US
jobs report is going to come out again. We just walk through all the things to
watch through there and of course 3 p.m. UK time the US ISM services data we're
going to keep an eye on and see if some of the data kind of aligns something to
keep an eye there. So it's pitch.
Yeah, I heard it's coach like, like a dog like okay and, and this is
fragrances. Correct.
Marco Rubio, stuff like that, etc.. I'm just like peach is not an obvious
kind of. It doesn't say scream fragrances, but
maybe not in English. But that also probably is true as well.
It probably makes more sense in other languages.
Spanish I know pivots to elections are desperately clutching for one, but bad
smells. Oh my God.
We are wasting time thinking about things that are going to happen today.
We are waiting for more clarity on just how bad a night it's been for the
Tories. Currently in government, of course, but
facing a challenge in local elections and mayoral elections, we find out
today, tomorrow just how bad it's been and to keep a close eye on a couple of
major votes. Tees Valley and West Midlands if you're
interested. But that's that's where the focus is
now. Are we going to get I mean, educate me,
how are we going to get commentary from from Sunak?
From from oh, yes, Already the politicians are out on the sort of
domestic spin talking about how it's Yeah, it's what Labour's already calling
for an election saying this, especially after they took one particular
Councillor Rushmoor council, which includes Aldershot, which is the home of
the British army. Labour says if we can take that council,
we've never had it before. You need to call an election that is,
that is, that is there. But they've been saying that for a long
time and soon that will probably be coming out later.
Giving us his reaction I'm sure. And over Aldershot I think it's an open
question as to whether be is but but I think it's fair to say so but
Blackpool Blackpool South yes has gone Yeah that's an indication that was a by
election. That was a by election that was an to
look at. Yeah exactly.
And it does fit with this being this close election knowing you can
extrapolate from one to the other i.e. local politics.
It's general politics. Yeah.
Maybe this time round actually that that impact is what it tells us.
It's very interesting. There is yes, Labour did well but also
reformed it almost as well as the Tories.
Yeah, and that is a really interesting dynamic to watch.
Coming up on the programme, we will have a bit of UK politics, but it will also
get back to the French banking thing. Credit Agricole pulled forward its €6
billion profit goal after an earnings beat.
Don't miss our exclusive interview with the deputy CEO, John Grieve.
We love to catch up with your own. This at 7:30 a.m.
London time. Plus, Taylor Swift's arrest tour.
We talked about it earlier. It's coming to Europe this summer.
Guy's been researching the dates. What was it?
Guy was right. The ninth Paris that we all have
tickets. We look at the economic impacts.
We'll be joined by MasterCard and the Economic Institute for more details on
the impact, the uplift of the Taylor Swift effect.
Up next, Best Ask boasts an unexpected loss, has orders for wind turbines
plunge. We'll speak to the CEO, Henrik Andersen.
If you have questions, please get in touch.
We do like to hear from you. I.
Plus, baby TV. Go is the function to use when we bring
back Samuel this Friday. And every day.
This is my back. Welcome back to markets today.
We are about 40 minutes away from the cash equities open.
We are seeing green on the screen and we look at futures, though.
So something we're going to keep an eye on, especially as we digest some of
these earnings stories, which brings us to one we've got our eye on.
Vestas has posted an unexpected first quarter loss as orders for wind turbines
plunge is the latest sign of the fragile nature of the industry's recovery.
We are now joined by the CEO of Vestas, Henrik Andersen joins us right here on
set. Thank you so much for coming in early
for us. Walk us through these numbers here.
Why so much pain in the orders? No, I don't think and I think this is my
job to once in a while take that. There was a surprise on the on the
bottom line where people maybe got surprised that people on that consensus
have I wouldn't say not been listening in, but probably been running a little
bit ahead of saying that it will be more evenly spread.
Four quarters. We have started the year more or less,
as we expected, like to see that there is a ramp up in
the coming three quarters and we took away from the first quarter worked as
expected. We see improvement in the underlying
profitability on our projects. So actually pretty positive.
And then we finished last year with more than eight gigawatt in order intake.
We highlighted last year that coming out of a fourth quarter there was no
capacity investors that can deal with four times 8 to 32 gigawatts.
So therefore in reality we just had an super successful fourth quarter in the
order intake that then had some trailing coming into to Q1.
So actually looking a pretty positive into this year, looking pretty positive.
Our major market markets on the order intake.
So there is of course more activity to be picked up in the year in the coming
quarters. So so for us, little bit of of what we
thought was more or less in line with with expectations.
And then yeah, you had a you had a drop yesterday.
It's now our job to tell people that the coming three quarters to go for the full
year so it's okay so the profitability numbers are improving as the as you say,
it feels like at the core of this conversation is the pricing story.
And I'm curious how much of that is really under threat by some of the
competition you're seeing abroad in the United States and China, especially when
some of those products are being priced more cheaply?
How does that affect you? How does that change your strategy?
You know, as I sit here and I think the market has probably caught a little bit
macro changed. You saw interest rates coming up a lot
in the last 18 months. And of course, some of those projects
have been caught in the backlog for both developers and also for some of the
OEMs. I think we see across the industry a lot
more discipline, also maturity building around that.
There's not much fun in having projects in the backlog.
You either don't get builds or you are losing money on.
So I think there's a couple of tough learnings in that.
I think the major markets developing positive and I think there are a number
of where I've probably been a harsh critics on a lot of of of the political
environment. I think there are many good examples
also on governments now really doing what they were targeting and aiming to
do in the probably the last few years. Our costs, input costs coming down.
How much are they coming down if they continue to come down?
Do you think you can you can actually improve your rebate guidance?
I think after a quarter like yesterday, I think improving a bit guidance is the
is the longer term. I think we keep the guidance.
And I think here what we really have appreciated in Q1 is that we don't see
the same disturbances as we have had in the past, and that's one.
The other thing, of course, is that we have part of of the both the transport
and the raw materials either stabilizing or coming a little bit off the top.
I think the worrying thing for me, guy, is that that there still seems to be
some stickiness in wage inflation around in most of the developed markets and
that's that for us at least means that there is a constant sort of inflationary
to the components and then the turbine itself.
So you don't see that going away? I don't see it going away right now
because of course, as much as we probably lift a little bit that that was
lacking when we came with the energy prices coming up.
You had union negotiations in the beginning of energy prices being high.
I think those things have become sticky. You also saw it Fed are not particularly
happy that interest rates should be coming down soon because they can also
see in the in the in the labour market that it is still tight and therefore
also a cause for concern. Henrik You mentioned governments around
the world doing things that maybe you'd wanted them to do over recent years and
they hadn't. I'm thinking here about the US.
I.R.A. The ease repower EU agenda.
Your business has come up close to both of those.
Give us a sense of what they mean for a business like this.
Clearly, there is a difference between the two ways of doing legislation.
In the US. You do a legislation that is very much
dedicated and created for making products coming through.
Where in the EU we had tends to have a frame which probably doesn't drive the
same speed and commitment because it's more difficult to get individual
projects through that legislation. So I'm still I'm still an ambassador big
time for the US way of doing the legislation.
If you want to really build capacity in in a fast way, I think the positive in
EU is that it's the direction, it's the setting.
But then we also know that it's still the EU 27 countries that are in decision
mode for the permitting locally and they are just.
Hi. I will say Germany is setting a
fantastic example right now in in in Europe because they ride the permitting
through and they let the auctions follow the permitting.
And so they have been literally changed from, I will say, doing almost nothing 3
to 5 years ago to now suddenly have a run rate of of five gigawatt a year.
So you're quite like how the US does the incentives, but you like the permitting
that's happening in Germany. And on that subject, I wanted to ask you
about the US. Do you have concerns that post the
election that the permitting dimension might change in the United States?
It's always a question mark, but I would also say here for the first time in in
US sort of recent history with building out the energy assets they are doing
now. And it is a ten year frame.
It is very integrated in legislation and you have seen in at least in the past
that previous elections have always sort of carried over what has been.
And if we look across in the US right now, I don't think we should
underestimate that the localising of the supply chain is an enormous drive not
only to build wind or any other assets, but it is the components and that drives
employment and that drives an opportunity for us to see.
That's a lot of capital and a lot of investments are coming back to the show
of the US. So I will just say here it might look a
little bit more dramatic on the surface of the two candidates, but I think end
of the day, the two candidates still want to do the best for the US.
Xi Jinping is going to be in Europe on Monday, gets here Sunday.
Does Europe's green energy industry need protecting from China?
A I don't know. I could also raise the other thing as
I'm not going to see him, but obviously he is wanted to have a protection from
us for some time because we haven't sold any turbines in China for some time.
Okay. So therefore, let's let's make it a
level play. So what would you want from Europe in
terms of opening that market up? A I don't think it's it's going to open.
Let's just let's just say it as it is. I think there it's it's it's different
people by and we call it typically country for country China for China,
India for India us for us and us is doing a little bit the same right now in
so much is saying it's us for us. Yeah so.
So I think I think I would rather say it's a China issue guy I think the world
and. Fortunately, have come a little bit into
probably a decade now where we have to get used to that.
There is there's a little bit more regionalization going on.
I am an outsider in the particularly home regions.
Yeah, you will play against each other. All right.
Henrik Andersson, Vestas group president and CEO, we thank you so much for
joining the program. Coming up, we're going to be talking
about those French banking earnings. Stick with us.
This is Bloomberg. Welcome back to markets today.
30 minutes from the start of actually trading for this Friday morning here in
Europe. Let's have a look at the futures
picture. And it looks kind of positive, up by
4/10 of 1% on the cap. Kiran said the French sorry.
The U.S. markets also just suggesting a little
bit of upside up by half a percent on Nasdaq futures.
I mentioned the French market because it is to Paris that we go next.
Crédit Agricole has beaten estimates and reported a record revenue of €2.3
billion for the first quarter earnings. The French lender has also pulled
forward a profit target of €6 billion for 2024.
Joining us now for an exclusive conversation is Jerome Greve, who's
deputy CEO of Crédit Agricole and Désir. And we welcome you to the program.
Thanks for joining us. Let me ask you about the the numbers
better than estimates. Of course, you've pulled forward your
profit goal. You're going to get to where you wanted
to be a year sooner than you previously anticipated.
What's the single, single biggest thing that's gone right and enabled that to
happen? Well, actually, there's no one single
element that helped us realize that level of result, and that helps us
be able to to to confirm that we are going to reach the target one year ahead
of schedule. Actually, it's a combination of the
permanent attention to all details in every business.
And it's also the result of a very efficient growth model that we've been
building and fine tuning over years. And this is a model in which actually we
benefit at the same time from organic growth linked to the fact that we are
able to serve our customers on the very wide basis of products and services and
also inorganic growth that is helped by the size and the critical size reached
by our different business lines. So no one one explanation for that, for
that better than expected performance. Thinking about the interest rates
environment and how that plays out for Crédit Agricole.
It seems that your ability to benefit from higher rates was was limited as
rates were on the rise because of some limitations in the French business and
your ability to pass those on. Does that mean that you're also going to
be cushioned as rates drop in Europe as they are expected at some points to do?
Will you be cushioned from that downside risk?
Yes, actually, a net interest margin accounts for only around one third of
the total revenues at the level of, say, the listed vehicle.
So we try to generate revenues across the board, not only on net interest
income, but also on fees, commissions, market revenues, insurance revenues.
So across the board. And when it comes to the evolution of
net interest income in France, we all know that French specificities lead to a
situation where actually banks suffer a little bit when rates increase and
suffer also a little bit when rates decrease, i.e., we take the burden of
the evolution of rates for the account of our customers.
To a certain extent, we play our role of a bank.
We deal with rates evolution instead of passing it directly to the customers.
We have some techniques in order to accommodate this evolution of rates, and
once rates are going to be stabilized, we are going to catch up with the normal
spread between the average cost of the customer resources and the average yield
of the customer assets. Darren.
Good morning. It's guy, your cost income ratio, it's
going to be 53.9. Your target is 58.
I. Both are impressive numbers, but 53.9
obviously is way ahead of expectations. Certainly in your targets.
How low does that number go? What's the new realistic target for the
cost income ratio? Actually, 58 was not the target.
It was a ceiling. And we are committed to remain below
this ceiling over time permanently for the duration of the present medium term
plan. So we do not have, of course, the
intention to go back to 58%. We tried to permanently be very, very
focused on the management of the cost basis of the different businesses that
we operate. And what we've said with these Q1
numbers is that actually the targets that we had set for 2025 are going to be
completely and fully reached as soon as 2024, including, of course, the fact
that over 2024 we are going to remain well below the 58% ceiling.
Okay, so you. You're ahead of your targets for 2025.
You're below your ceiling. You've got a cost income ratio of 53.9.
How easy is it incrementally now to get that number to decline?
Is this about as good as it gets, do you think?
What what would you have to do to get that number to come down a bit?
Yeah. I'm not sure that we want to continue to
come down permanently because, of course, trees are not climbing up to to
the sky. So we need actually to to be to be wary
and to invest enough in order to continue to fuel our future growth
whilst keeping a very efficient cost income ratio.
So we the good news with this low level of
cost income ratio is is that it helps us to, to, to, to be able to continue to
invest and to continue to fuel our future growth.
But the idea is not to permanently decrease the cost income ratio, it is to
remain very competitive, very flexible, very agile.
Jerome, The politicians are talking finally about making progress on the
Capital Markets Union. If we get a capital markets union, would
you be interested in doing cross-border M&A?
Do you think it would be a catalyst for cross-border M&A?
Well, actually, the first point is that we are taking quite with caution this
commitment to to to advance in the area of capital market union, because this is
a stance that has been a here since probably at least ten years and we
haven't seen any significant progress in the last ten years.
And the second point is that actually what is
on the path of potential cross-border M&A in Europe, in the banking industry,
it's not really the lack of a capital markets union, it's a lack of a banking
union. There is no unified banking market in
Europe. And so I do not expect this to change
anytime soon. Can I ask you about provisions?
You write provision is up 7%. It doesn't sound as if analysts are too
worried about that. But I wonder on the commercial real
estate side, I think we've asked you about this before and you've not been
concerned. Any updated thoughts on that front?
Well, real estate is a category of of assets that we have.
It's a very limited level of assets when compared to the to the global loan book
that we have and we haven't seen recently any sign of deterioration.
But again, it's a very limited part of our credit portfolio and it's very
diversified, both from a geographical point of view and also from an
underlying asset point of view. So no sign of deterioration, neither in
the field of commercial real estate nor more globally.
Jerome, we'll talk about the macro a little bit, if we can.
There's a lot of questions right now about how this bond market, this affects
market are going to react to an ECB and a Federal Reserve that are ultimately
diverging or at least will be diverging perhaps later this year in terms of
their monitory policy. Does that result in any liquidity cracks
or early signs of liquidity cracks in your view?
No, not at all. I think the banking system in Europe is
very solid, especially from a liquidity point of view.
This is actually one of the major changes that took place since the big
financial crisis back 15 years ago. At that time, bank were having quite an
aggressive liquidity transformation policy and now
Bank are very conservative from a liquidity management point of view.
As an example for Crédit Agricole Group, we have liquidity reserves
of an amount of 470 plus billion euro. So it shows that liquidity has been now
a concern permanently for banks and they are all very cautious as we are.
And looking back into the states, you talk about those liquidity reserves.
There's an expectation at the moment that some of these big Wall Street banks
in based in New York are going to have to start to hold more reserves just
simply by mandate from the government. That in addition with kind of higher for
longer narrative from the Federal Reserve, what is the read through into
the European banking system? But for the time being, we expect the
ECB to start to cut its skates probably in June.
And what we expect would be around three cuts for the full year of 24 and another
maybe three cuts in 2025. But it's clear that the ECB stance is to
say that there that are dependent and we hope that they
are not going to be fed dependent because obviously the signals coming
from the US is that probably rate cuts in the
US are going to be delayed and we wouldn't like the idea that the ECB
waits for the Fed to cut its head before starting its own process.
So, so what we expect is that the Fed should start to cut probably in June.
Jane. Okay.
There's a lot of differing opinion on that front.
Certainly. Jerome, great to catch up.
Always a pleasure. Thanks for the time.
On a busy day, I know. Deputy CEO of Credit Agricole.
Jerome. Groovy.
What are we going to be doing next? We will be talking about all of these
stocks that we've had news from this morning.
We're watching the French banks watch the Apple suppliers as well.
This morning. Stocks like micro.
Potentially could see a read across from the Apple numbers that we saw last
night. That big buyback also a factor, I
suspect, in the market as well. This morning, it's payrolls day in
America. We'll talk about that as well.
But we're going to be counting down to the market open next.
This is Bloomberg. Welcome back to markets today.
60 minutes away from the cash equities open Fridays.
We'll say jobs day. Futures for Europe do points slightly
higher as the U.S. futures this hour, let's focus on the
jobs story. Bloomberg's executive editor for Asia
markets, Paul Dobson, joins us now to talk about the markets in a couple of
minutes. And Paul, let's start with the jobs
story then. Expectations are that we get another
strong jobs report, but interesting diving under the hood.
There's quite a lot of economists increasingly asking questions about the
quality of the data that we get on the jobs front.
What are you watching for? Yeah, there's definitely those
challenges and people wondering if the household survey will continue to show
that wide difference with the headline numbers.
I think the other thing that people are going to be really focused on once again
on is the average hourly earnings, because that will give us more insight
into what the inflationary outlook is and what the Fed will be paying
attention to as well. Obviously, the markets had a little bit
of a retrenchment. They seemed a little bit happier after
Powell's comments midweek where he played down the chances of the Fed
hiking any more this year. So back to pricing in cuts for as soon
as November. You know, if we get soft hourly wage
data, then maybe that continues to bring forward, again those expectations of
when the Fed could start to ease again. On the other hand, if we get a big
number that then that could be a really negative surprise for the market.
Yet. We've been surprised by some of the wage
data that we've seen already this week, Paul.
But if you look at the week as a whole, we have seen frontend rates coming down
and some of that pinned on Jerome Powell and what he had to say about the the
lack of leaning towards a rate hike, if you like.
What are you to be watching for in terms of market response to the jobs data
today? Yeah, well, I won't be watching too much
because it'll be the end of the day By the time that comes out on a monday
morning in Asia, we will definitely be watching very carefully for what's
happened on Dollar yen. We'll be we'll be, you know, obviously
alert to the idea that if there is a big number, if there is a lift in US
interest rates again and a stronger dollar as a result of it, that once
Asia's currency markets back under pressure again right away, we'll be
watching for signs of intervention and push back, particularly in those nations
that have been pretty explicit about it, but also in Japan, where it's not
entirely confirmed that that's will happen, but more or less in tune.
And the thing is, Asia's had such a good week, the markets have been looking very
bright and rosy. The stock markets have had a good time
as well. So that could be a real big derailing.
When we come back, Monday morning and then Tuesday after the Japanese holiday.
Okay. Those are the vulnerabilities then.
Thanks so much, Paul, executive editor for Asia Markets.
Paul Dobson looking ahead to the jobs report and how it might play out for the
markets. Also in Focus as we head towards the US
session, Apple shares have jumped in late trading in the US after stronger
than expected sales last quarter and a forecast for a return to growth in the
current period. The iPhone maker also announced the
largest share buyback in US history. Let's get into a conversation with Matt
Bloxham from Bloomberg Intelligence, who's been poring over the details of
these numbers. Matt, very nice to have you with us.
So, I mean, there's a host of surprises to pick from here, which would you hone
in on as day? My significance, China,
because that was the really big focus for the last few weeks.
We had lots of channel checks was just saying that Apple had a terrible first
calendar quarter on iPhone share. And actually it was revenues were down
8% in China and it's about 18% of their total revenue.
The market was looking down from about 11% down.
So it's better than Tim Cook's commentary on the earnings call was
surprisingly positive. So positive the analysts all around.
Let's ask my question about is this really true, what we're hearing you say
about China? Are you suggesting it's not the iPhone
that struggling? Exactly.
It said the iPhone was up in the quarter, which people really struggle to
hear and it was other products. The problem which they obviously have to
fix. But, you know, those other products
include things like the iPad, which overall for Apple were down 17% in the
quarter. And that's because they've got a product
refresh that's announced next week. So they're expecting better sales from
that next quarter. So yeah, China really that was the big,
big thing that surprised people. I think some analysts are waking up this
morning still not quite believing what they heard.
Well, the share price reaction was pretty strong and all of that seems to
be more of a buyback story than anything else, a record buyback there.
I think we have a chart that's coming up that talks about just the amount of cash
that Apple is sitting on and the buybacks that you're seeing.
We have it on our screen right now. And just for our global audience that
are watching us, the top panel is the cash profile of Apple.
So you can see that it is still very, very high, but obviously coming down
from its peak a couple of years ago, whereas buybacks have been steadily
rising, Guy and have been in debate about this all morning, what do you do
with the amount of cash? Is this a no brainer that you just
deploy it into buybacks? I think so, because I mean, let's put it
in context. 10 billion sounds like a lot of money,
but it's 4% of that market cap. There are plenty of stocks that are
relatively low growth. But let's face it, Apple is relatively
low growth Now that you expect to get a yield, that dividend is only about half
percent. So four and a half percent total return
on Apple, not that much. Now, obviously, the market technology
market is changing all the time. There's so much money going into of
survey. They are sitting there and they can't
help themselves but make cash in $90 billion of revenue this quarter on a 30%
operating margin. They're just making money every quarter
like they can't believe. And then over time, they're going to get
back to a kind of net neutral position on the balance sheet.
But they want to have that optionality, that strategic long term optionality to
invest hundreds of billions of dollars into the next technology.
So they remain this year multitrillion dollar market cap company they are
today. And to reignite that mid-term growth
story with several things, you have a huge company, massive company like
Apple, moving around on the stock market as much as it is right now.
Does the analyst commit, Dan, this community is questioning the China
stuff. It's clearly struggling to understand
what is happening under the hood at apple, that the market is clearly
struggling to kind of place apple and all of these big technology stocks that
really stocks of this size should not move this much on an earnings number yet
they are. Why are we getting that kind of is there
a disconnect in terms of the understanding?
Is it just that the market kind of pushed the stock so far?
I don't understand why stocks of this scale are moving this much.
Yeah, I have not looked at the volume, but I said they can move around this
much on relatively small volume potentially.
So that might be one question. But yeah, I mean, ultimately still
people cling on to the fact that companies like Apple are kind of these
big kind of hero stocks, big idea that they're incredibly well positioned in
the technology cycle. You know, the world is going more and
more tech every day. We kind of wake up and some like Apple,
such an enormous dominant player with all of this cash has to be a massively
important part of that future. And they're still huge parts of the
economy. They have yet to make that transition.
And if they get it right and people want to bet on the fact that Apple's, you
know, multi-decade history means that they will get it right, that that still
means this is a big growth opportunity for them over the next year.
But is it kind of as black and white? Is that is it?
They get it right. We're great.
If not, they're they're IBM a bad they're kind of these companies that
have really struggled in the past have great kind of starts and then struggle I
think I think that there is that risk in there.
You know I mean, we see it with Tesla, too.
They're bull bears. You know, people have kind of very
polarized views on what this could happen.
Obviously, there are companies like IBM that go from 0 to 0 and back to hero.
Exactly. So, you know, they.
I'd go through that big cycle. Matt Grace, thanks so much for stopping
by on Apple Maps. Lots of joining us.
Bloomberg Intelligence. What else are we watching this Friday
morning? Joey, over to you.
Discussing that Apple getting back 6% gain in after hours trading.
A lot of that potentially driven by the share back share buyback.
But importantly, they also do predict a return to sales growth and that could be
of note for the suppliers here in Europe today.
There's that gain on the screen for Apple, but it does come a couple of
weeks after we saw that wobble in the share price in ASML had a pretty decent
decline after its earnings. Still holding a gain for that one.
But if we look at some of the other peers, a lot of them already nursing
losses for the year, including Infineon, SD, Micro and I, John, all of those are
suppliers to Apple and are exposed more to the personal computer personal
devices market as well. So potentially some relief will come
through following those numbers from Apple today.
Then in terms of your French lenders, we've got numbers out from SOC Gen and
also credit AG. You're speaking to credit AG earlier,
kind of confirming what we were expecting in that the fixed income
trading businesses across both firms have declined mostly over SOC Gen down
17% in terms of the bonds and currencies trading for the French lender.
Credit out not as bad, down 3%, but both are declining and both backing
provisions of €400 million this morning, potentially related to a bit of the real
estate. If we look at the longer term chart, SOC
Gen is the clear underperformer does have the bigger trading division of the
two banks, massive underperformance versus the euro Stoxx Banks index
potentially though the profit line beat in terms of some of the better retail
business might actually help the stock this morning.
Then in terms of down the track this is the spinoff from Mercedes a few years
back a bump in margins and profits beating expectations.
So we're seeing this one higher on the trade exchange today, though, there are
actually signs of weakening volumes, according to the CEO.
In the statement, he says that headwinds are increasing.
We can see that stock did have a decent gain since the IPO, but that's what we
like to say. Not a single sell rating on Daimler
truck, 17 buyers and they should all be pretty happy with those results this
morning. Okay, Thanks very much, Joe.
Our equities reporter Joe Easton joining us there with some of the numbers that
some of the stocks that could be in focus.
Don't miss our interview with that, too. Driving a truck CEO.
That conversation coming at 10:30 a.m. London time.
We'll also keep an eye on Anglo. There's been a lot of talk in recent
days, of course, about whether any rival bids might come through.
We've seen other media reporting on the possibility of rival bids.
It's certainly moved the ideals yesterday.
So we'll see if there's any We'll cross into the London session this morning.
Yeah, We'll also keep an eye on I know we are watching about the French banks
as well, but Danske Bank also coming out with headlines saying that they're
expecting their net interest income to top out in the third quarter.
So it's a smaller bank, but I'm sure we'll have a market move once those
markets opened in about 30 seconds time. Okay, Sorry.
5 minutes time. Yeah, 5 minutes.
But he's getting a holiday already. Nearly done.
We can do it right. Coming up, we will bring you the market
open. Of course, all those stocks in focus
that Jo's been talking about. The future speak to that looks a little
brighter for this morning. U.S.
futures also pointing higher, 3/10 of a percent on e minutes waiting for the
jobs report, though, out of the United States.
A little bit later on, what will that speaks to fed rate expectations?
We are also data dependent. Of course, this is by. Burning the third.
It's Friday. That's the important bit that you need
to note this morning. The other thing you need to note is that
we're going to see some sort of a positive apple effect on European
equities this morning. It feels like the old days.
I can't read the last time those words came out of my mouth.
Positive apple effect on on European equities.
But here we are this morning. We'll see that into the supply chain, I
suspect. And French banks could be interesting as
well. It feels like the Apple story is sort of
it is positive as we were just discussing data with Matt Bloxham.
But it sort of first is very low expectations.
As you said earlier on this week, you know, we thought we knew all the bad
news. It turned out we did and maybe we knew a
bit too much bad news, but also a massive buyback story.
Yeah. Like how much of this is like really
indicative of what's going on as opposed to Apple has a lot of money.
Okay. Yeah, great.
Honestly, I think that's kind of maybe the takeaway is that maybe they got too
much money that it really it is a bit to do with the like front it's a very
precise you going to find out that it's a very efficient way of dealing with
dealing with the problem. But and it's a very small part of their
market cap. This isn't kind of this isn't going to
sort of really rock the boat in a significant way.
Yeah. But it just speaks to the kind of the
enormity of where Apple is. It needs some innovation, which Steve
Jobs have done. This the company was a lot smaller, had
a very different set of challenges then. But but nevertheless, he wanted the
money to come back into the business so that he can invest, generate new
products and move the company forward. And a lot of the Apple suppliers are, of
course, in Asia. There are some in Europe.
And worth noting that Tech was one of the weaker performing sectors yesterday.
So if there's any sort of, you know, maybe positioned for a bounce on the
back of some positive Apple news. Yeah, absolutely.
And we'll talk about the tech trade as well.
And sometimes it's as simple as. Big cap, too.
Big cap, right. So ASML, for example, is going to be the
easy read through, even though they are not directly related in terms of the
supply chain. That's going to be something we watch at
about 12 seconds time. So it's a commodity trade, by the way,
which has been kind of the the major mover that we are seeing by some of the
actual commodities not moving that much in a three second time.
The US European markets excuse me, will open.
They are officially open. Looks like the 400 is now barely
positive actually. So we're going to let that trade shake
out just a bit. ASML is up, Anglo American is up.
We've talked about the fact there's been some reporting around a potential rival
bid coming through from BHP. It's interesting that the French banks
are having a fairly solid morning as well.
SOC Gen coming out of the gate fairly strong too.
But the big in terms of the points, it's ASML, Anglo sap, LVMH, those are the
kind of the companies that are moving in that in terms of the earnings story, SOC
Gen is up really quite nicely on the beat.
That is it is interesting that Anglo move, isn't it?
Because whether there was anything to those reports or not, leaving that
aside, there's been a lot of talk since we first saw that BHP bid and it looks
didn't look like it had much of a I mean there was premium but it wasn't huge.
It did prompt the question, are others going to come in, Are they going to be
other interesting And even we our reporters have been talking about BHP
coming back with a better offer because their first one was rejected by Anglo
Copper as hot like people want it, you can't find it.
It's difficult to dig out of the ground. You can buy it on the stock market, but
that's what you have to look at And oh my God, Kimberly wouldn't say this, but
the multiples of some of these Well, okay, you've incepted my brain, but I
think this is important. We talk about some of these commodity
movers as well, because at the same time that we're talking about the Anglo
story, we're also talking about a lot of conversation about who might go to the
states to list and move their listings and things like that.
There's a lot of narrative around that for Shell for Total as well, despite
those being the very companies that even move the Footsie 100 to those record
highs. I want to say it well, think it was last
week, the four day 100 and hit that record high.
It was a commodity driven move. It was a big oil, a big kind of miners
driven move. And interesting that health care is one
of it's one of the only sectors is in negative territory today.
So there's quite a risk on session that we're seeing this morning as limited is
not. It is as we wait for the jobs report.
We also just had no vote. Yes, a no vote was yesterday.
Of course, we to it, but it's down again today.
And a big chunk of that move this morning in that sector is another six
points off on novo. So that is that's down by 2.4% and a
stop that size down by 2.4% has a big impact.
We should also mention that Diageo is moving actually quite a bit as
well, one half percent this morning. And the reason I bring it up is because
there were headlines about a executive C-suite change that the CFO, CFO over
from Coca-Cola now becoming part of the C-suite over at Diageo.
So being received well by the markets at least this morning construction
materials best performing sector, the likes of CRH and Saint-gobain moving
higher. I mean, we've got things to trade around
this morning and US features are also looking positive.
You know, there's the Apple story, Nasdaq futures a high, a half a percent,
but we are waiting for the jobs report and that's going to be the big the big
picture. We're back to the macro advisory.
Yes, exactly. The earnings story is important and I
think the French bank speak to that this morning as well.
Like SOC Gen, we we spoke to Agricole a little bit earlier on, but SOC Gen, in
terms of the in terms of the percent this morning is the leading stock on the
SOC 600. Credit Agricole is the second best
percentage performance. So the French banks really kind of
knocking it out of the park this morning.
It's been a mixed earnings season for the banks.
Not always been not certainly not consistent.
But the French those two French banks is a pair this morning, certainly
delivering. So is.
UBS, BNP, HSBC, as well as there's a broader banking trend this morning.
Let us dive into the conversation about earnings a little more.
We are joined now by Natasha Etta. She's a fund manager at Artemus and can
take us through her thinking on where we are so far.
And it's actually very nice to have you with us.
Thanks for for stopping by to in the studio.
So, I mean, in terms of the US earnings story, you know, sales and earnings
growth you say has been solid in terms of absolute numbers, but there's been
quite a lot of white distribution of responses.
I suppose in markets volatility has differed depending on which stocks
you're talking about here. What does that tell us?
Well, exactly that. I mean, it feels like the market was
really full at playing Follow the Leader following the lead in the recent
earnings quarters. But in this earnings quarter, it feels
like that that game has stopped and it can't really find another leader to
follow. So and so the leaders before we seem to
have reached this very earnings surprise lulls into some in some aspects we've
reached that high base, lots of CapEx that's coming through that people aren't
sure on the returns of in the short term.
So that that's kind of paused and the rest of the market earnings have come
through. Okay.
But probably not enough for the market to get surprised on.
And I'm positive on and those are nothing else really to follow
geographically, though, that gives them opportunities elsewhere.
I think we think that to cast that net more broadly to other markets, but the
US is probably in a bit of a pause at the moment.
Okay, the US in a pause. I'm interested in that broadening out
trend and whether it is trying to find a different leader or trying to find the
way that the story permeates outside the tech sector because there are going to
be businesses that are quick to jump on it and capitalize on it.
And then there are going to be businesses for whom it makes little
difference. So are we seeing a broadening of that
theme or is it a genuine broadening of appetite for other sectors?
I think it's probably more the theme is probably a little bit of a pause.
We're waiting to see what the what the take up is going to be outside of that
hardware space. I mean, Apple's results last night are
hinting at it, but we're really yet to see the next leg of push there.
I wouldn't really say it's a broadening out of sectors.
I think it's probably more broadening out of geographies.
The US market, the multiples are higher. We need to that we haven't really got a
push on those earnings or anything for the multiples to chase.
So now I should probably investors are looking to other markets such as Japan
where we continue to see good performance continuing from last year
and Asia in recent months. China as well.
I mean that really has done very well from from the lows.
When we talk about that multiple story, I'm curious how from a fund managers
perspective, you you choose whether or not to invest in those companies.
And the reason I ask is if you hypothetically were to move Company X is
listing to New York, is that an immediate buy or is that a that's an
overvalued that's like automatically going to be an overvalued trade.
How do you think about that? It's the multiples in some ways reflect
the earnings. We look for earnings growth and that at
the moment it is true that maybe the US markets are about you'll get better
rewarded for that earnings growth and there's a bigger pool of liquidity seems
to be just growing and growing there and that helps.
Plus obviously you have those stocks, the tech stocks in particular
that are doing well on the earnings front and pulling those multiples for
the market as a whole upwards, which is why is important we continue to see
those earnings and that kind of leading leading sector.
But at the moment where those earnings surprises are coming from, for that
market to support those multiples may be a bit of a question in the short term.
Yeah, it's a little bit hazy in the short term.
Not adding to any of that clarity is probably the buyback story as well.
How much of the buybacks, the increase in buybacks we're seeing across sectors
in Europe are kind of muddying the waters in terms of where stocks in this
region should be valued. Buybacks tend to be quite supportive
actually for valuations. But does that change kind of the
underlying earnings story that you were talking about?
No, not so much. So it's it's in the end, maybe we're
starting to see in the US some of the share buybacks.
Those companies are moving to a bit less growth, returning more capital to
shareholders as actually quite healthy shows are very healthy, solid companies.
But actually we wait and move up to higher multiples are probably not
looking at at a share buyback story that's probably more just supportive for
for the downside, I'd say. Let's ask what does it tell me about
where we are with this market? Good morning, by the way that you've got
mega-cap stocks like Apple moving six or 7%, that you've got other members of the
Magnificent Seven moving similar amounts on earnings.
These days, these stocks are trading like small caps on earnings day.
And I'm warning you, there's a message that I should take away from that.
I think we've been discussing exactly that, too.
It does feel like I used to do emerging markets.
It does feel like the emerging markets, the comfort to the
developed markets. You don't tend to get such big, big
swings. It could be to do with I mean, Apple
last night those us talking about earlier very low expectations and then
very high expectations for other stocks and the market not quite being able to
price or foresee those. So I just there there is just more
volatility at the moment. I still we're wondering as well a very
small. Mrs.
on the top line seemed to bring an asymmetric return on the downside, but a
beat doesn't seem to bring that equal reward on the upside.
So. Also also wondering the same.
This small can feel stretched. Are you having conversations with
clients? You're having conversations internally
about the risk of staying invested at this point?
I wouldn't say so much that in the end, if the earnings are all coming through,
that that's very important for for the market and for the sport of that, what
the what the multiples are, they will swing around.
But essentially, earnings are coming through.
Growth still remains relatively solid. And so it's not really a our
conversations are probably more actually looking forward as a growth is it is
looking healthy, actually. And we continue to see these good
quality companies deliver decent earnings growth, returning cash to
shareholders either via share buybacks or dividends.
And actually that that paints a decent picture.
This Astra what tell me your thinking on China because I think you're the second
guess we've had this week at least the second he's been talking about
increasing exposure to China. You're doing that and you're continuing
to look at ways to add China exposure all the way through all the piecemeal
drip, drip feed of stimulus measures that we got in months back from China.
Lots of investors said this isn't it. It's not the game changer.
There's no bazooka. And it was as if that that that that
conversation just sort of died out. And yet here we are in the last month or
so with a lot more optimism for China what's happening.
Yeah, you're exactly right. I mean, we started to add to China
positions at the end of last year, and we have on that policy stimulus.
It's not all doom and gloom and it has come back by little by little on the
monetary side, On the fiscal side, also the rate of the regulatory side.
And there was quite a big announcement this week by the Politburo and where
they were calling for more measures to help support the property market, in
particular targeting the inventory and the housing market.
And that's really important because that is a a structural problem within a
Chinese economy. And so they're starting to look at more
structural problems as a long term positive is not just a short term
bazooka, and that makes us more positive on the longer term, potentially positive
in the longer term as well. And when you add in valuations where
they are and positioning, it paints quite a positive picture, at least in
the short term. So, yes, we're looking to add positions,
but maybe particularly the consumer space is very interesting.
You mentioned that regulatory word, which was the one big kind of headwind
for a lot of investors looking to invest in China initially.
What would spook you in terms of that? Again, what would you need to see to
say, okay, this is not worth the risk? Well, I actually think the regulatory
noise and some of the maybe more favorite sectors of of the economy by
international investors and that kind of the tech side
that that's been dying down for quite a few for quite a few quarters now.
We haven't actually seen incremental regulatory noise and actually that when
they tried to put in some more regulation on gaming, we had a very
quick news bite of there was some regulation coming in in December, I
think, and that was very quickly reversed and stamped out.
So actually on the regulatory side, there's actually is positive support.
But maybe the the new the news maybe wasn't coming through as clearly because
they're so worried about the economy. So I think that's going to continue for
at least the next few quarters. But if that does come back, yes, that
would be a worry for the market, though. Exactly right.
And the Footsie 100 continue to catch up.
All right. In the Footsie, 100 continue to catch
up. Well, the first 100 has been a
we've saying that UK market has in recent weeks been a kind of a safe haven
or a bastion of of lack of volatility, actually.
And what we're noticing is actually some of our U.K.
exposure has held up really, really quite well.
Even stocks that aren't oil stocks or banking stocks outside of that.
And so actually what we're seeing is maybe potentially are closing that gap,
as she said, of the U.S. stocks coming down then and relatively
now, they may look more interesting relative to the UK.
That's a good to see. Thanks for stopping by to see us.
Really appreciate it. That's up to hedge fund manager joining
us from Artemus. Let's take a look at the core six sort
of quick have a quick look here. There's one stock I want to highlight in
this group this morning, and that is Ferrari.
So last night, Ferrari comes out, unveils its new car.
It's got a V12, active V12 still exists. Look at that.
Look how pretty the spider on the right hand side of the screen.
You were such a boy, I guess. Amazing.
But it's a V12. It's got to sound amazing.
You're not going to see it. There is no electrical assistance in
this car, which is pretty rare these days.
So this is something that's still doing, but I think are going to struggle to
sort of continue to do. But it's a it's not exactly the most
kind of original name. They basically called it the V12.
Okay. Well, I'm glad you're doing this.
I'm just so excited by this because it makes up for the fact that you made
very, very good and worthy jokes about the inner workings of combustion engines
this week, which I did not get. So I apologize.
Naturally aspirated. We were told about Superchargers.
I was confused about when an electrical engineering challenge that was.
But that was a super charging network. Don't know what he just said.
What? None of that.
Look at the cars. They're pretty Italian.
They're pretty bad. You're going to Spain?
They're sparkly, but they are. They are.
And you're not going to see many more of these.
It's going to be really cheap to see how they sell, whether that upper end market
continues to do as well as they are. But Ferrari, Ferrari is still producing
some nice looking cars. Shall we check in with Joey?
We can talk about this. Oh, can we?
Okay, let's. Let's go to.
Maybe not. Let's get to Joey.
So he's got the individual stocks on the move for us.
And I don't think he's starting with the auto sector, Joe.
Now, not starting with Ferrari, unfortunately.
I'm starting with the minors, though, because we have got to move higher in
Anglo-American, up 2.7%. We did get that.
Reuters reports overnight saying that Glencore is looking to potentially make
a rival bid. We haven't been able to confirm this
story, but worth noting some history between these two firms.
Xstrata, the former Glencore business, did many years ago attempt to takeover
Anglo American. Also, there was a note from Jefferies
recently saying that there would potentially be less political obstacles
to a takeover by Glencore, given that they would likely keep some of the
businesses that BHP wants to spin off. So it is kind of a no smoke without fire
situation. We will look to try and confirm that of
course, but we are seeing movements, Glencore coming down a little bit as
well today. Then in terms of the chip makers, we're
all looking at Apple today set to add 60 billion to its own market cap.
We're seeing a feed through some of that sales positivity coming through into the
chip makers. Infineon actually might carry a Sam and
bear. They all supplies to Apple in all gaming
Apple potentially ending that run of sales declines in the future quarters.
And in terms of those banks and other financials earnings, we're looking at
France because we got SOC Gen and also credit ag, both saying decent gains
today. The equities traders making up for
weakness in fixed income and currencies and also the retail banking doing pretty
well AXA over an insurance. Now they've gave an interesting update
on the Baltimore bridge collapse saying that they could be exposed by up to 00
million in their statement. We're seeing a decline in that one 1.3%.
The numbers actually look pretty good to me, but that one is declining in France
as well. Danske Bank reporting its first decline
in net interest income for around three years, and that one is declining today.
Again, the top line numbers didn't look bad, but it does seem to be that line on
and I taking that one lower. A quick look at a couple of others.
We had some breaking news while Taylor Swift gets a shout out because Universal
Music up 1.5% and she was mentioned in their results with her latest album
boosting their sales and that one gaining 1.5%.
Diamond getting slammed down 6%. They are warning of a potential slowdown
in orders. We're also seeing a decline in Volvo
trucks. The big rival, both of them declining
today. Jay-Z, the COO, saying it's going to
benefit from both the euro's and also the Paris Olympics.
All those fancy billboards with flashy adverts on them and that stock up 10%.
That is a big one. IHG, the owner of several hotels around
the world, saying a slowdown in Europe adding to worries about a slowdown in
the US. That's according to the big hotel chain,
putting numbers out of London that were down 0.8%.
Just quickly, one morning Coach Ryan Mittal gets yet another buy rating,
despite the fact it's up around 500% over the past three years and it's
gaining today. Tonight, Bank recommends buying that one
at 680, trading at 517, Massive upside and it's up 1%.
Over in Frankfurt. Joe Easton equities team walking us
through the important story than in mining the analyst calls and more
importantly, Taylor Swift in the euro. We're going to talk about that more
later on in the program. Coming up.
For now, though, French banks having a fairly good morning.
Credit Agricole soft and both beating first quarter earnings expectations.
French. That's the wider issues at play in the
European banking sector. That conversation next.
This is Bloomberg. I don't think you're Wall Street's eyes.
Paydays may soon be coming to the city of London.
It's been six months since the UK lifted a cap on bonuses that limited them to
two times a banker's base salary, a legacy of the financial crisis and a far
cry from the millions that top deal makers and traders in New York can make.
Now it's up to the shareholders at banks, including HSBC and Barclays,
which will be putting the matter to vote, said AGM.
If the proposals pass, the process of rejigging compensation could begin in
time for next year's bonus season, which Wall Streeters have historically counted
on to pay for elite private schools, luxury holiday homes and the most
expensive cars. The cap was scrapped by UK officials
battling to maintain London's pre-eminent position as a global
financial centre in post-Brexit Britain. Overhauling pay could have consequences
at home and abroad. Senior UK bankers who had fixed salaries
increased to circumvent the cap could now potentially face reductions, and
European rivals could find themselves at a disadvantage when hiring.
It's certainly a concern when when regulations in the US and the UK where
we are active in a number of our businesses, you know, start to move in a
way that places European competitors are disadvantaged.
Top proxy advisers are recommending that HSBC and Barclays shareholders approve
the measures, a sign they're likely to pass.
No longer will city rainmakers fail like the poor cousins of Wall Street.
Tom Mackenzie talking about bank bonuses.
I come back to the Ferrari. I mentioned it once again.
I big bank bonuses, nice Ferrari. I like.
I can say I come back to the Goldman Sachs side.
So that was that was very nice. That was Tom Mackenzie setting out
what's at stake for UK banks. But it's interesting that Goldman Sachs
just yesterday announcing that they're scrapping the Pre-brexit capital UK
bonuses already. So for you but for for US banks
operating in the UK. Yeah, this decision is already made and
you know, if that's the way they're going, does that increase pressure on
shareholders in UK banks to sort of approve the same kind of packages?
So I wonder whether we're going to see a problem where there's this there's this
desire amongst European authorities for key personnel, decision makers at banks
that are based in London, that are doing business in Europe to move to Europe.
Yes. And we have seen some of that, haven't
we? Precisely.
But whether or not this will throw Britain the kind of the gears of that
process, why would you want to move to Europe if ultimately your bonus is going
to be more heavily restricted as a result of it?
The kind of talent retention story at its core, not just with the UK but with
the US. Let's stick with the European banking
theme then. Credit Agricole and SOC Gen are in the
green this morning after reporting first quarter earnings beats.
But European banks are facing big issues, including pressure on pressure
to cut costs and possible downward movement on rates.
We expect the ECB to start to cut its rates probably in June, and what we
expect would be around three cuts for the full year of 24 and another maybe
three cuts in 2025. But it's clear that the ECB stance is to
say that they're a that are dependent and we hope that they are not going to
be fed dependent because obviously the signals coming from
the US is that probably rate cuts in the US are going to be delayed and we
wouldn't like the idea that the ECB waits for the Fed to cut its head before
starting its own process. That was your angry baby, of course,
speaking to us earlier on, talking about his expectations around the ECB and that
starting in June, he thinks, and for the rest of the year.
Let's bring in Bloomberg Stephen Ahrens. He's got details here on what Stockton
has reported, as well as that Credit Agricole conversation.
Let's start with Stockton then. What does the quarter mean for the CEO?
Because something of a revamp has been taking place at this French bank.
Yeah. Hey, so the new CEO who came in last
year has been in the job for about a year.
He's actually having a good day, I suppose, because the stock's up.
Stock to beat estimates this morning with the first quarter results.
However, the stock is still trading at a at a deep discount to rivals and it's
actually lagging in the performance of others.
So I think results today are given a boost to the CEO who is trying to revamp
the bank, but he still has a lot of work to do to convince investors that he his
plan is the right word for something. Stephen, how does that compare to Credit
Agricole than when we're looking at a record quarter?
What went right? What went wrong?
Yeah. I mean, Credit Agricole is certainly
taking the cake today. Net income is up, beating estimates.
Revenue at a record in the investment bank.
So they're doing a really good job. The traders, they have been
outperforming the competition for four straight quarters.
It's definitely the bank that is getting stuff right.
So, again, it's just trying to find sort of its pace.
It did beat estimates, but revenue's actually down and so is net income.
I think if you look in comparing these two banks, then Credit Agricole is the
one that's actually shining, even though the stock's up for certain as well.
We're sorry. I just want to turn to HSBC.
It's got its AGM out a little bit later on or it's going to start a little bit
later on. Clearly, we're going to see some fairly
significant management changes at the institution.
What are we going to watch out for? What are the key themes that therefore
we should be paying attention to at an AGM that is going to be not only
important, but today potentially even more important.
I mean. Yeah, exactly.
We just heard the story about the bonuses.
That's going to be a very important decision.
My expectation is that going to adopt this if they have a chance to try to
increase the attractiveness of HSBC as an employer in the city, then they're
likely to take it. And we've heard Deutsche Bank CFO saying
that would be a disadvantage for them. And if the bank can create a
disadvantage for others, then they probably will.
But the bigger decision still or the bigger news, what they're going to do
about the CEO changes, the CEO resigned or is says he's resigning.
He's going to stay on until they find a new one.
But that's going to be, I think, a bigger question.
David, thank you very much for being back 7 hours with the latest there on
the banking sector coming up. We'll be back.
We're moving on to the SWIFT. If we take a look at the latest research
from MasterCard on the impact of the Iris tool.
That's next. This has been hacked. The consumer is gradually getting into a
better place. We clearly see that consumer confidence
in Europe, for instance, growing up in emerging markets.
Remarkably, consumer confidence is strong and uptake is strong, too.
So it's really about the US consumer and the US consumer.
The ones that are decreasing their frequency into category is the lower
income consumers. They've have seen a gradual erosion of
their available income. That is clearly the group of consumers
that we need to pay attention to. And yes, that means we need to have our
back at the right prices, do the right promotions, advertise our brand test
along with the CEO.
Mondelez International, they're talking a little bit about the state of the
consumer. And now we get to some of the other kind
of state of the consumer indicators, leading indicators, U.S.
indicators that we're watching. The Taylor Swift tour comes up over and
over again. Obviously, among some of the competition
by the likes of Ray Dalio, for example, he posted on his Twitter, It's shown up
in Fed commentary, something as an inflation driver.
Will we'll professionals have done the actual work.
I want Taylor Swift's US tour in particular, among other concerts as well
have done for that inflationary story and what it says about a U.S.
consumer and a global consumer in the face of that inflationary story.
I want to bring in a true expert who can provide quite some of the numbers on
here. Natalia Lekman.
Nova joins us this morning. She's the chief economist over at
MasterCard Economic Institute. And she's actually looked at that
economic impact specifically for the arrest or she joins us now.
Natalia, a pleasure to have you on the program.
When we heard you were coming on, we were over the moon to talk about Taylor
Swift. Any excuse on the show?
Talk to us a little bit about the inflationary impact here.
Is this simply the Taylor Swift effect or is the thing something broader?
It is definitely the hot topic and it makes me the person to be to talk to at
the dinner table. So look, we looked at the impact the
answer had on the US consumers. We saw that restaurant spending
increased by 68% within the two and a half mile or four kilometer radius of
the venue around the days of her concerts.
And similarly, hotel spending was up 47% in the same area and 32% within the
wider ten mile radius. So we would expect similar impact to
happen in Europe. She kicks off her European tour on May
9th. And if not greater, the public
transportation links in Europe imply that perhaps the impact could be more
spread out in terms of distance from the stadium.
And perhaps more importantly, the tour is likely to supercharge travel because
the tour takes place in the spring and summer months.
The best time to visit Europe. Concert goers may combine it with
vacation and extended stay. The concert may also attract people who
would otherwise not visit certain places and therefore boost travel in some parts
of Europe where we're still yet to recover to pre-pandemic levels.
And we know that people are willing to travel far for Taylor Swift concerts in
the U.S. The cities within airports are bigger
impact than those without. And the good news is that you can fly to
most cities where the arrest or is taking place around Europe.
So how are you viewing this then? Is this a I mean, doing more is very
exciting. And I and I almost regret not not
putting my own kind of hat in the ring here.
Is this then we talk a lot about from an inflationary impact, There's kind of a
negative connotation there. But this creates jobs, this creates
wages, This creates, of course, a lot of logistics.
And there's kind of mobility that I think a lot of European nations in
particular are looking to see, is this a positive?
Is this a tailwind to the economic data? I think I think it's a positive.
And I think it also tells us a lot about the consumer.
We know that over the last three years we saw that within discretionary
categories, consumers spent a disproportionate amount of money on
experiences rather than on things, and that spending on experiences extended
beyond so-called revenge travel, which is how we used to describe it.
When economies reopen from the pandemic and we saw this incredible boom in
travel, but it has been sustained. So we're optimistic that it will be
strong around Europe this year, not only because we have all the various sporting
and cultural events in addition to Taylor Swift concert with the Champions
League final Paris Olympics, the Euros 24.
But more importantly, from the consumer fundamentals perspective, fundamentals
are improving. We have rising real disposable incomes
as wage growth is finally outstripping inflation in some countries, with more
variable rates and shorter fixing on mortgages.
We do see easing mortgage squeeze and we're likely to see also normalization
of what were quite high savings rates last year when consumers were
incentivised to save more due to higher rates and economic uncertainty.
Tell you tell us what's in some ways tying the errors to a perfectly, as you
say, for the revenge travel post-pandemic era.
And in the United States, you saw that effects being exceedingly dramatic.
You say that you're you see that continuing, but Europe feels like it's
in a very different place economically. Europe feels like it's still struggling.
It's not seeing the supercharged growth that we continue to see over in the
United States. Why would the effect be the same in
Europe as it is over in the United States?
I think Europe was struggling in 2023. There were certainly big divergences
about growth, performance and in consumer performance between the U.S.
and Europe. But we got GDP data from eurozone
earlier this week, and although we're yet to get the breakdown for the
components which we'll get in early June from the individual countries, we saw
that household consumption has contributed positively to growth in
countries like Italy, like Spain, like France.
Yeah. So we are optimistic that those consumer
fundamentals will drive recovery in Europe this year.
In terms of the impact that it has. You brought up the Champions League.
Is it Taylor Swift concert, the equivalent of a Champions League final?
They talk often in the United States of of being comparable in terms of the
economic effects to a Super Bowl final. How should we think about it?
How should we compare and contrast the story over here in Europe just to see
the kind of the effect that she could have multiple concerts.
As we go around Europe, kind of talk to me about the sort of the scale of the
impact versus something that over here in Europe we can understand.
Sure. So sporting events and cultural events
do tend to attract a lot of spending on hospitality, as I mentioned.
We do see that the impact varies by the size of the city.
So we know that the Champions League finals taking place in London, which is
a big city, it has a lot of different cultural and sporting events taking
place at the same time, while the impact tends to be larger in smaller cities, so
we would expect the impact to be much greater in cities like Liverpool or Lyon
than in London or Paris. In terms of impact in the same city like
London, if we take the Champions League final or or Taylor Swift concert, we're
yet to see that. But we are confident that it will be
quite big for both events because both we just do see that consumers are
preferring to spend on things like live events.
Natalia. Good morning.
Is there any sense that spending we see on this kind of activity attending a
Taylor Swift's concert, for example, does it displace other spend or does it
add up from what you've said? It seems additive, but is there is that
to some degree a displacement? Normally I would say there's a
displacement because of this rotation away from you towards experiences and
away from spending on things. But we also see that certain spend in
categories like apparel or jewelry also tends to do well along the side of
experiences because they're so connected.
So in this example of the of the App Store, we would expect again, apparel to
the relatively well as people stock up on cute outfits to go to the concerts
and of course shops that sell memorabilia like t shirts or friendship
bracelet bracelets to also do well. So I think it would spill to the wider
economy, including to the rest of the retail sector.
It's a it's a lovely picture you paint. Let me ask you about international
demand. That was a bit of a feature of the US
story, but but not so much. And you can understand from the
geography why you expect that to be more of a feature of what happens here in
Europe. I think so because it is taking place in
spring and summer so people can use it as an opportunity to extend their stay
in Europe and make it turn it into a vacation.
When we look at, let's say US consumer with a stronger dollar, with relatively
cheaper prices of tickets in Europe, with Taylor Swift's new album, we would
expect that perhaps that's an extra incentive for them to travel to Europe
this summer. Battalion.
Final question, Is Taylor Swift going to be a feature of European GDP when we see
it next? Well, experiences are a feature of
European GDP. The services sector is doing really
well, and to the extent that she contributes to that economy, she's
visiting a lot of cities. I do think that we could see an uplift
in the second quarter from that extra spending.
Okay. All right, Natalia, like Minova, chief
economist over at the Fair Enough, chief economist of the MasterCard Economic has
been walking us through some of the economic impacts of Taylor Swift.
We didn't even get to talk about whether she listened to the album.
You have listened to the album, right? Let's do a couple of songs that I'm
making my way through it. It's a it's a full study.
It's a full process. I'm I'm I'm making my way.
It's like they're sort of notes on it. You can read in terms of deconstructed.
B Our producer is Abigail Morris, I'm sure will give me the full scale
debrief. But the thing is, I feel like for every
Taylor Swift's song, I was to I have to listen to like ten Enrique Iglesias
songs to just make it just out of loyalty because one Taylor Swift song is
worth ten. Enrique So I am not having this
conversation with you. I mean, that's the economics of it.
There, there, there. There is more to I watched the film.
I'm quite impressed with myself. I managed to sit still for quite so long
because it is quite long and we liked it.
We're a fan. Yeah.
Okay. All right.
We're going to keep an eye on it. Look, I.
I would take an excuse to talk about Taylor's life or Enrique Iglesias, but
speaking of Spanish things, let's talk about Spanish IPO market, Spanish Push
Dynasty launching what's set to be the biggest European listing this year.
We're going to drive through details next.
This is Bloomberg. This is markets today 44 minutes into a
European trading day that shows modest gains, up by 3/10 of 1% on the FTSE
102/10 higher on the Stoxx 600. We've got the jobs report ahead, of
course. Let's find out what else is on the
agenda today. 11 a.m., we get a pooch begins trading.
This is Europe's biggest listing this year.
We'll get more on that in just a moment. Then we get the jobs report UK time.
That's 130. That includes nonfarm payrolls, of
course, the unemployment rate, hourly earnings that wages story really crucial
U.S. U.S.
services data will also get that. That's at 3 p.m.
UK time. The services side of many economies very
much in focus but we will be. With that in mind, we'll be focused on
the jobs report. The the number is 240,000 I think.
But you were talking about a higher whisper number.
It's 47. Yes, a little higher.
Yeah. So around that kind of ballpark, which
will be a drop from the 303 we got last time, but not by 240.
Still a strong number. Yeah.
And this is the labour market. You put the claims the ADP number was a
bit of an anomaly. Maybe this was.
Yeah, it was a little bit weak, but, but all the other data seems to point to a
strong labour market. But what I'm confused by is the comp
that we're using here. Right.
Because I've seen, I've seen comparisons from economists saying, all right, well
200 is kind of the the pre-COVID high mark.
So is it the fact that we're still above 200?
That's the problem was the fact that we're down from three or three, as Anna
mentioned, that that's progress? Or are we comparing this to the back
half of last year where the average is still less than this number?
I don't know what we're coming at the numbers enough to exactly think about
that, you know, that level of detail. And do we.
Too much into that? Do we brush it off also, do we brush off
a seasonality which has been like the theme of the last couple of data print?
So I don't know. I don't see a problem for the next week
Strong. Yeah, well, we'll deal with it a little
bit later, but there's some great team coverage coming up a little bit later on
on Bloomberg Television. And there'll be the usual top live and
all the other good stuff that you need to be able to use on your Bloomberg
terminal. So we'll see what happens a little bit
later on. But but I think the bigger picture,
though, is that this is a labour market that's not cracking.
Yeah. And I think the data continue to
confound absolutely everybody. In theory, this should be a labour
market that should have cracked with these kinds of numbers in terms of the
interest rates that we've got. I mean, yes.
And that's and then some people say, well, look at the household survey there
you are seeing more cracks. But that's been something that's been
going on for months. But and the other factor you got to
think about as well is that you see immigration as a factor in these
numbers. For that reason, the economics don't
apply here. Right.
And and that's why there's no roadmap. And in terms of it, I'd be curious to
see what what the sector breakdown actually looks like, though.
Are we talking like where is immigration having the biggest breakthrough Is this
in hospitality services, like, for example, and which would be more
inflationary or is this in more kind of teachers, ambulance drivers, etc., where
government spending has been a big feature?
So government continues to spend kind of and still has a gap to close.
And that takes us back to the fiscal impact as well of what is going on here.
Yeah, one of our guests earlier this week saying don't focus too much on the
Fed right now, focus on the fiscal and so we didn't getting that commentary in
from Janet Yellen of course but on you'll think about the story about
immigration. I remember when we watched the
employment cost index go higher that was what a lot of people said.
This is even at a time when you've got immigration at levels that it is where
that's actually applying a downward pressure to those that wage numbers.
So that makes that and that's why the policy story matters so much.
I think it's still too early to kind of in the election risk that we're seeing.
But for economists or even for for bond traders, for example, they're saying
what does policy, what does the labour market look in 12 months time?
This is a key piece of that equation. People still want more clarity around
that. If the Republicans tightened up on the
immigration story, then you would then you would see potentially a reasonably
quick impacts. Or if Biden does, to write a fine, goes
in the other direction and kind of turn on the tap.
Let's turn our attention from from the payrolls number to an IPO here in
Europe. I'm going to make that connection.
The Spanish dynasty, the Peach family is launching what is set to be Europe's
biggest listing this year. Shares in the beauty and fragrance firm
start trading today. This after the company is looking to
raise €2.6 billion. Joining us now.
So, Tacopina, to talk us through what is happening here.
First of all, it's peach, right? Yeah.
Yeah. Know good Spanish authority.
Yeah. So that's the that's the correct way of
selling it. What is this What is the objective of
this IPO for this company? What are they hoping to do with it?
I think in this case, it's sort of succession planning.
This family's been held privately for over a century.
About three generations of the family have run it.
Now it's being sort of professionalized or being handed over from the family to
the public market. It has a lot of significance for the
European market. On the whole.
The European IPO market has been so quiet, so dominant almost for the last
two years. And we have a really big listing coming
through here. It seems like a sign of a proper
recovery. And this comes after the CVC IPO as
well. Is this a I mean, who's driving this?
Where is the appetite coming from here? It looks like investors are interested
in buying new stocks in Europe again, which for the IPO market is is the best
news we've had in over 18, 24 months. Booch For example, is pricing right at
the top of its initial price range, indicating strong demand quickly traded
really well. It was sort of the best debut for a
billion plus IPO in Europe in nearly two two years.
So it looks like investor appetite is back for new listings, which is great
news. So hopefully more to come on that
subject on just what this means for the broader capital markets story then.
So, I mean, I was looking at the October numbers.
They said M&A activity remained low. That's obviously backward looking to the
first quarter. Do we sense then will there be a
different story to tell around capital markets in the second quarter?
I remember we talked to the Barclays CEO and he was cautiously optimistic, saying
he needed a bit more information. Yeah, I think I think year on year, the
numbers do look better. Already in Europe, IPO proceeds have
doubled from the same time last year. But looking at the whole year with sort
of election risk in the back end of the year, I doubt that this year is going to
be sort of a banner year for listings. I guess a bit more activity in the next
two or three months. But what happens as we get closer to the
U.S. and U.K.
elections remains remains to be seen. Is there a sector story here as well in
the US when we talk about the IPOs, we say, right, well, tech IPOs are going to
be far more successful than an IPO in any other sector.
For example, here we've talked about CVC and now Puig.
That's a private equity firm and now a basically a perfumes business as well.
Is there a sector story when it comes to the IPO market?
Yeah, not really. In Europe, yeah.
It looks like demand is pretty sector agnostic.
Now, essentially, investors are saying they'll pay top money, top dollar for
whatever sort of number one for companies that are number one in their
markets that have great market share and a good sort of company governance
structure. So thanks so much.
Thanks for joining us. Bloomberg's Spencer Gopinath with the
latest on the Pooch IPO and what it means, the broader context.
Let's think about something else we're watching out for today.
We're watching the Pooch IPO then, because that's going to be a little bit
later on this morning, late morning UK time.
We'll get the opening price there. We're also focusing on the results of
local elections here in the UK and the bigger picture story there.
The opposition Labour Party has made gains overnight in these local
elections. Labour has also won a parliamentary
byelection from the Conservatives in another blow to Prime Minister Rishi
Sunak's leadership. Let's get details then.
We're joined now by Bloomberg's Joe Maze.
And good morning to you. I know that it's been a busy night for
the team checking the UK local elections story this by election in Blackpool
South. For the global audience, this has
significance because of how well Labour did, but also how well the Reform Party
did. Talk us through the consequences of
that. Yes, Labor won the seat on a 26% swing,
which is the third largest in by election history since World War II,
since World War Two. And if that was replicated nationally,
then Keir Starmer would be the next prime Minister.
And as you say, Reform UK. This kind of populist policy of omission
of the right in British politics. They almost beat the Tories to come
second messy. That's a real problem to see, not
because if that's replicated across the north of England in a general election,
it means that a Tory right wing vote is split effectively between them and
reform, which makes it more likely that Labour win seats.
So two worrying signs there. And as you say more broadly, some of the
council results so far chosen lost about half of all the councils they were
defending today. But there are still many more results to
come, especially very important mayoral elections happening in Tees Valley and
the West Midlands. Two key results where the Tories really
need they win. They don't see that could be quite a
danger as these might decide This guy is the man to beat us in such an election.
What does the day do in terms of the timing of that general election, Joe?
If the conservatives do badly, do they wait to the conservatives do badly today
accelerate into July, Maybe that move. What does it tell us about timing?
I think if anything, you've got to read that this suggests you should wait a
little bit, because clearly at this point, looking at the dates from today
as results come in is just stories aren't necessarily a good place to try
and win a general election. So I think the outcome would be less,
perhaps way less abstract. Some flights up to Rwanda maybe have
another physical event in the autumn and then perhaps of the election.
Then going now again in the next few weeks will be seen as quite dangerous
based on what we've seen today. There have been some in his party.
Joe, I know you guys have been reporting there have been some in the party have
been calling for, we should say, not to go.
We've had a lot of conservative party leaders over recent years.
And I think the, you know, mainline thinking is still there.
The main assumption is still that really soon that hangs on until a general
election. Take us inside the thinking within the
Conservative Party. How will they respond within the party
to these results? I think that is the fair working
assumption. I think the overwhelming majority of the
Senate body does still support in the MPC, in Parliament, there is thought
that kind of tail risk for him, which is that enough of them, do you think?
Well, hold on. I'm pretty quite likely to lose my seat
here. Given these these results, given the way
things are going, given the polls. So why not just roll the dice one more
time, perhaps someone else? What's there to lose?
That kind of mentality could lead to something.
Right. Let's go for change, leader.
Perhaps a finger like Penny Mordaunt. Perhaps someone else within the party.
It could happen. We've seen so many changes in the Tory
party. You really can't rule it out.
But the base case, this points out, does survive.
But as I mentioned, if those mayoral elections go against him in a couple
days and Tees Valley, West mids if you lose those.
Yeah. We could be in really uncharted
territory where the Tories thought, well let's give it a go.
It's up to Lancashire at Leicester. What does reforms performance tell us
about the prospects for the Tories in this upcoming election?
Well, hangover from performance is a worrying moment because that's a
positive, because it shows that in those pro-Brexit rebel seats, there is a
movement away from the Conservative Party to reform.
And if that's if that's going to happen in in many of those seats and Zoe's
right and it wouldn't then it makes it so hard the Tories to win those seats.
You have that real national picture with Labour doing well, you have that far
behind the polls. They really need all of the right wing
support in those areas to coalesce behind in such a position as have any
chance of holding those seats. But if they're losing so many bodies,
reform as we saw today, then it just makes holding those seats so much
harder. And you recently defected Lee Anderson
from the Conservative Party to reform. That's giving them that kind of national
platform in parliament to make their arguments.
So it's all going the wrong direction with respect to reform from a
conservative perspective. Okay, Jay, thanks very much.
Big bucks rhymes with an update on the voting that we've seen overnight in
local elections in the U.K. And we're putting it in the historical
context. I know certain commentators around the
election have been looking at the vote swing, and Joe was starting his report
there talking about the scale of the vote swing towards labor.
And this does take us back to the nineties, to the to the 90, you know,
mid-nineties period, this level of vote swing.
So this is quite significant from that perspective.
The question is what is labor inherit? I think if they were to win and what
kind of policy format, how different would policy be?
Yeah, given the constraints that they would find themselves under.
And this is a story that will repeat in many locations, the fact that, you know,
you're going to you might get changes of government in various places.
We've got a lot of elections taking place this year, but fiscal constraints,
post-COVID is a story that travels, isn't it?
It's not just a UK specific one to America, but
it is. And is this something that then you'd
have to see the monetary authorities take into account?
Yeah, I mean, you say it doesn't apply, but even Janet Yellen is worried about
the sort of medium term trajectory for U.S.
debt. Yeah, medium term.
Medium. Yeah.
It's not tomorrow, though, is it? Well, let's talk about what else we're
going to see throughout the day, because Bloomberg TV has plenty of good guests.
I want to bring you some of those high profile interviews in the next hour.
Francine. We'll be speaking to the Virginia
governor, Glenn Youngkin, perhaps giving us some insight on that fiscal story in
the states. Of course, the speaker of vote as well
being brought back onto the House. I wonder if he has thoughts on that.
A Daimler truck CEO, one of your worst performing stocks this morning.
Interesting to get that joining Bloomberg brief about 10:30 a.m.
and later in the day, a couple of fed related exclusives.
Chicago Fed president Austan Goolsbee and former Saint Louis vice President
James Bullard. On the data we've seen on the Fed's
path, I'm sure plenty of hot takes on that labor print That does it for
markets today. The pulse is up next.
This is bloomberg. Julia, thank you.
