That european equities are largely on holiday and think that trend does actually continue. The stoxx 600 is down by 1. 1 today. Theres a big china effect, but in this youre looking at names like hsbc, which has a u. K. Effect as well, but also a chinese effect. Plus some of the miners acting as a little bit of a drag. So stoxx 600 down, maybe moving away from that 460 level. The names that i think are actually interesting today speak kind of against that narrative. The european consumer seems to be alive and well right now. The u. K. Consumer seems to be alive and well right now, which is surprising considering what is being chucked at them. Marks and spencer, the stalwarts of the british high street, has been revamping its stores, refining its strategy. Its beginning to work. Theyve upgraded their numbers. But its interesting, its not just in clothing. Its also in high end groceries as well. This is fascinating. This was unexpected. Marks and spencer responding to it. Look at that share price jump that were getting on the back of that that stock, that consumer facing stock up by over 7 today. We know where were going with this. This is back to the us and the retail sales number, pandora, another stock as well. Consumer facing up by 2. 65 today, upgrading guidance. The consumer appears to be alive and well and continuing to spend money neither of these two stories, alex, speak to me or tell me about a consumer that is necessarily slowing down significantly. And guys, get ready because guy has to replace jeans. So its been four years. The replacement cycles there. Hes going to go buy stuff here in the us. If you just look at the market, you would not have expected a jumping retail sales number and the previous month being revised upward. You got the s p up by 9 10 of 1 . Tech also getting hit hard as well. Energy getting smacked down by 2 . Oil really rolling over. Also by 2 , despite the fact that the dollar is relatively mixed. Discover financial. Thats an idiosyncratic story. But it is the weakest performing stock within the s p. The ceo is resigning their compliance issues, the stock getting hit down by 10 plus, if you were having a consumer that was really fighting the fed and the fed was going to keep fighting, you would think that yields would actually push higher. And for a moment that happened. You know,. The two year up above five and then we saw buying come in and now were down by five basis points. So i wonder how much of this is actually positioning and thinner volume rather than a clean read of what were making of the retail numbers because the setup is the same retail and consumers are doing all right. And one of the reasons for that is that wage growth actually is relatively strong. Certainly were seeing that in the uk right now. This is the data that we got earlier on today. 7. 8 year on year growth. That is a sensational number and way stronger than anticipate. And maybe weve got the question the wrong way round. Were talking about the fed fighting, the consumer, fighting the fed. Maybe its the fed, maybe its Central Banks that have to fight the consumer. This wage story that is developing here in the uk is pointing to the fact that the bank of england may have more to do. Maybe it does need to create significantly more slack in the labor market. The market is now talking about the possibility of it having to go 50 basis points once again, but the narrative is quite straightforward. Alex look at what is happening with wages. Look at what is happening with the consumer. It tells a similar story. Yeah, it does. And does it continue though, i think is the question. Were all waiting for that shoe to drop. When does it . So jean bodin is head of Blackrock Investment institute earlier and he spoke to guy. Im going to throw to a shot for guy, which is a little weird, but he spoke to you. This is what he had to say. Were seeing an aging in retirement like weve never seen in the us. Its happening in economies more broadly. And i think what were going to see the next leg now is through the wage pressure thats going to start to build up. And i think thats where were going to see more sustained pressure on inflation coming next. So its a roller coaster inflation story we see globally. And i think the uk is a bit has been through out this cycle or this story in the front line of whats happening. John, without talking to me a little bit earlier, alex, you can talk to him. Youve just got to show up at 5 a. M. To do it. Its fine. I mean, get out of bed a little earlier. Ive done been there, done that like, no, thanks. Oh, yeah, were good. Were good. Its fair enough. Okay. Thanks for the offer. Im just. Im just putting it out there in case you feel left out. A question of the day is the consumer fighting the fed or the bank of england . Maybe we should flip it around. Is the central bank story going to be one that has to be basically other Central Banks going to have to fight the consumer . Lets kick this around equity markets. Reporter Michael Mercieca joining us, sophia horta, e costa from our markets today team joining us. Sophia, to you. First of all, the consumer looks really strong. The wage data out of the uk today looks really strong. We talk about the consumer fighting the fed and the Central Banks and the bank of england, but is it really the other way around . Yeah, i think we have an interesting story here because at long last, wage growth is surpassing inflation. So you do have finally an increase Household Spending power, which in the uk is something that is a positive story. I mean, we were talking today on the blog is this a negative thing for the uk economy if consumers arent being arent being squeezed . And you know, you had after the us retail sales data, you had a rush of economists actually upgrading their gdp forecast. So actually, does this feed into the soft landing story guy . I mean, is the is this kind of, you know, not too hot that its actually helping the fed rather than being inflationary . Exactly. I mean, i mean, its i think its i think youre trying youre trying to youre trying to trip me up here. I mean, i think its will the consumer, i think will the consumer be able to handle higher Interest Rates . And today, the retail sales picture tells us, yes. I mean, of course, were talking about the uk wage growth and the us retail sales. Its a completely different story in china. But i think this should really kind of reinforce the soft landing story. Were seeing markets weaken and i think they dont quite understand understand why. Alex, maybe you have thoughts on that. No, no, i dont. I feel like people are much smarter than me. Probably do. But the idea is maybe there isnt a clean read yet. Maybe it is positioning. So, michael, i guess that could be a question for you. A, then why the market responding the way it is or be like, do we need to play that . Like, is this a small cap, domestic facing consumer play . We need to be thinking about. Well, alex, its its a tough one again, because like we were discussing just earlier, the it could be a win win for for Central Banks. Lets put it this way. If you have a consumer that is holding really well and then when you have a recession, thats not coming or that you have a soft landing and you dont need and you have also inflation coming down, then the fed, the boe, wont need to raise rates as much as people think they will need to. And thats a win win. So well have to see. I think tomorrows number on inflation will be quite critical. Okay. So okay, thats fine. But wages are running very hot. Now. Is todays wage number commensurate with a return to 2 inflation for the bank of england . I think its a trend weve been seeing for for a while now. I mean, yes, the number is impressive. That number will come down. It it wont stay there. And yeah, you have a spike because you have you have pressure from from the labor market. You have difficulty to hire. So you have Companies Making a lot of money because they they had a strong pricing power. You had the consumer who had like loads of savings from the coming of the covid era. And thats not over. Thats not over. People are still saving money. Theyre still savings. Theyre theyre not depleted yet. You put those things together at the Mortgage Rates also. So Mortgage Rates are super high. But at the end of the day, a lot of those mortgages havent been rolled out world over yet. So theres still a lot of them to be remortgaged, remortgaged. So you have a lot of very positive input into the consumption in, lets put it this way. And thats whats holding up now. Well see on a longer term basis if thats going to hold. Thats the thing. And thats what the bears are saying. Like the the effect of the tightening and the Interest Rates rising are going to come with a lag and thats when it hits hard and the economy will feel it. And the consumers feel like how long that lag is. Guy. Interesting. Sophia mentioned this in terms of china. You know, obviously we know that china has issues. Yes, there have been calls for direct stimulus to the consumer, but service is was wasnt terrible Like Services are Still Holding up. And i wonder how similar or not the story is over there. Itll be interesting. So do they want is that where they want the money to be spent . I think the question here is, is there a lesson to be learned by china from what were seeing here in in in europe and in the United States . You put money directly into peoples pockets. They will spend it. Theyll save it for a while. And to michaels point, maybe they continue to do so. But they will spend it. Sophia, is there a lesson if you if youre the chinese, if youre the pboc and youre watching what has happened in the uk, in the United States during the pandemic, there was direct intervention to put money into peoples pockets. It generated inflation, it generated spending. It started off with goods, then it migrated into services. Maybe they dont want services, but at least people are going to be spending and the velocity of money will be going around. The velocity of money will pick up and go around the system. I think theres definitely a lesson there and the lesson, the first lesson of all is inflation and also the property. I mean, the bubble that we saw in a series of Asset Classes in the us. Lets not forget the meme stock era crypto. The Housing Market is completely unaffordable here. These are the kind of things that china doesnt want to generate and thats why its so reticent to kind of generate. Do the kind of fiscal transfer that we saw in the us and in the uk. So the concern is that, you know, then there will be the kind of aftermath of that and china that would be so destabilizing to the financial system. Thats the last thing that china needs. China is in deflation. I actually tweeted a map that showed china was the only country in red. Everything else was in green. Inflation is rising. Obviously, inflation is the problem. But i do think for china, theyre theyre looking the policymakers there are looking to how they can really get people to spend. Thats a really, really big problem because confidence there is so low. I would ask, you know, why is confidence here so high . Are people spending on things that they need . Are people like you guy buying jeans that they need to replenish . And, you know, is this the kind of cycle that were in or are people just paying more for for things right now, you know, is is is it kind of a confidence . Are you buying the same stuff but youre paying more for it or are you buying more stuff . Is it Discretionary Spending or is it stuff that you need . You just have to pay more for my jeans has got a hole in them and guys replacement cycle. Yeah, thats just a one time thing. Like now hes not going to buy a pair of jeans until like 20, 25, 26. So just keep that in mind. This is, this is true. All right, guys, thanks a lot. Really appreciate it. Equity markets reporter Michael Masika and sofia huerta. Acosta from our markets team today. Guys, thanks a lot. All right. Coming up, we continue our conversation on the consumer with Virginie MaisonneuveAlliance Global investors global ceo for equity. She joins us next. This is bloomberg. You cant buy a great conversations or moments that matter, but you can invest in them. At rowe price. Our strategic investing approach can help you build the future. You imagine t rowe price invest with confidence as if youre watching this gerber life guaranteed Life Insurance commercial. 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Dont make them inherit your final expense tab to. The biggest ideas. Inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy. The first time you connected your godaddy website and your store was also the first time you realized, well, we can do anything. Cheesecake, cookies, the cookies manage all your sales from one place with a partner that always puts you first. Start today at godaddy. Com. Get your fixed income fix wants bloomberg real yield every friday at 1 p. M. Eastern. Right here on bloomberg your Global Business authority. Most of the ceos that we were listening to on the Second QuarterEarnings Call were seeing really strong signs, but they kept talking about this recession. And its a recession that we keep talking about. We keep pushing off and we keep pushing off and we keep pushing off. So my question is, do we really need to have this recession or actually can we just have a mild downturn and keep going . I think you have a need, a recession, but katrina makes a good point. Katrina dudley, frankly, mutual advisors, investment strategist and portfolio manager, speaking to alex and me in the last hour, takes us back to our quote of the day is the consumer were fighting the fed and by extension, the bank of england, ecb, etcetera. Joining us now to discuss, Virginie Maisonneuve, allianz global investors, global cio for equities. Virginie, nice to see you. Always a pleasure to speak with you. The consumer continues to be strong on both sides of the atlantic. Retail sales data. Today, home depot marks and spencer here in the uk posting really good numbers and raising guidance. Pandora, its numbers are really strong as well. The consumer still seems to be in good shape. Why isnt the consumer slowing down as much as the Central Banks maybe would like them to . Well, i think you have several factors. One, employment is quite in a good shape. Second hand inflation is wage growth, as weve seen in the in the uk. But also this inflation, when you get to that asymmetrical impact of inflation, gives power to the consumer. So i think were at that sweet spot for for some of the countries, as you have mentioned, and and that will continue to benefit the consumer for now. So virginie. Hi, its alex in new york. Is that how long does that period last . Because you can make an argument that this is good for Central Banks, right . Because it helps to support growth or that its bad for Central Banks. Were going to have to go harder. How long is this sweet spot . Well, so think higher for longer is definitely our central scenario, right . For rates. The sweet spot is is a bit tricky because if you look at tightening of monetary policy, there generally is an 18 month lag. And if you look at m2, you can see the very sharp decline. If you look at lead indicators, etcetera, weve seen that and we are 17 months into tightening. So i think that over the next six months were going to see some interesting, you know, behavior in the market. Perhaps some level of consolidation. But of course, all the money that weve put in to support covid, large amounts in the us, large amount in europe is still supporting the consumer here. So you probably will have softer lending if you want, but still some contraction in yeah, money supply has come down, but its come down from an increase high level and still by historic standards is is very, very high. Neel kashkari, hes been speaking with the last couple of minutes, says inflation is still too high in the United States. Do you agree with him . If you were at the bank of england, would you say the same thing . If you were at the ecb . Would you still say the same thing . Do these Central Banks still have more work to do . What does that work look like . So i think its higher for longer for europe. We think that core inflation is still too high and will continue to see some rate increase in the us. Its a little bit more opposed us until we see the key thing to watch is potentially negative surprise from oil or Energy Prices and food. If you look at the average oil price, last year in june, we were on average at 115. This year, 75. And youve seen gas prices, youve seen and if china manages to create some kind of rebound from where we are now, Energy Prices might surprise on the upside. Yeah, and weve and weve seen that guy particularly, i can tell you after driving this past weekend, like over 4 a gallon in certain places, like its getting a little bit dicier. So and then my question becomes, guy, you know, this is this is the fundamental backdrop, right . But is there a signal to the market for it . Like look at the market and extrapolate what the market thinks about the data or is this going to operate a little bit differently kind of throughout the next couple of weeks . Its august. I think you can ignore virgin. I dont know whether you agree. I think you can ignore the next couple of weeks what happens in september. Virginie, what does the market think when it comes back off its vacation . Well, whats interesting is the sentiment surveys that are around are showing that, you know, cash is much lower than it used to be. Sentiment on equities is quite high. So, you know, you go back to a china where you could say bad news is good news and for the rest of the other markets, you know, perhaps that good news might lead to short term bad news and some level of consolidation. Well, for china, everybodys negative. And we know theres a lot of measures that will be coming to support the market and the economy. So what do you like right now . Like whats going to outperform . Where do you put money . Well, i like diversification and i still like quality, quality growth, quality value. And the key themes in which you have strong conviction in climate technology. De water. Et cetera. Et cetera. Sustainability and china is definitely under played because well have some some support measure. I hear what youre saying about those long term kind of structural shifts that are underway. Virginie but but why should i take money out of a money market account thats earning me 5 to invest in those trends at the moment . Why is it why is that . Why is now the right moment to do that . Well, im not suggest doing that. You would do that now from cash. What im saying is within your equity allocation, you want to have some quality and diversification. I think that there is a decent competition from Money Market Funds. And given how strongly the markets have performed, you know, in the first half of the year and you want to have a little bit of cash, if you see that consolidation happen in order to top up the areas that you would like to have on a longer term basis, which has kind of been the whole thing, then you wind up having a buy the dip type kind of scenario, even the cash pile from the fund manager survey of bank of america is at 4. 8 . Its down, but its definitely still there. Virginie, thank you very much. Really appreciate it. Virginie maisonneuve Alliance Global investors, global cio for equity. But you have to wonder guy, though, does the buy the dip stay . Like if were already sort of overweighted on equities, if theres a lot of money in tech, will there still be that buy the dip . Well, theres clearly i think institutionally, maybe were starting to get a little bit stretched and a lot of short shorts have been closed, alex, but theres still that Money Market Fund that that still exists and maybe that is what ultimately props this market up. Do we go higher . I think is the question or is it is the market topping . I dont know the answers to these questions, but there are there are negatives and positives. Theres a lot of challenges coming for the market, for the real rate is high. But on the other hand, theres still a lot of theres a lot of dry powder out there still and there are a lot of risks, as you just mentioned, and many are also geopolitical, geopolitical that no one actually knows how to price in. So maybe that also argues for keeping your powder dry. Speaking of taiwanese Vice President is calling his island security a global issue now. He spoke to us in an exclusive interview. Were going to bring that to you next. This is bloomberg. Third kid. 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He is campaigning to become the islands next leader and spoke exclusively to Bloomberg Businessweek in his first interview with international media. Well, since he also also with the us, we must abide by the truth. Which is what i mean by pragmatism. It is that taiwan is already a sovereign, independent country called the republic of china. Its not part of the peoples republic of china. The roc and prc are not subordinate to one another. It is not necessary to declare independence. Its what is your roadmap to a formal independence. You may well join. My responsibility is to maintain the status quo in the Taiwan Strait while protecting taiwan and maintaining democracy, peace and prosperity. So no such framework exists. We must work to maintain the peaceful status quo because taiwan is already a sovereign country. How confident are you that the us will have taiwans back . Should the situation with china escalate . The main goal, said taiwan. The you the us is a close friend of taiwan. We are partners in a number of areas from politics, the economy, human rights to our society with taiwan. The and because taiwans security challenges are a global concern in the upkeep of peace and stability in both the Taiwan Strait and the indopacific region, fulfills the common interests of the international community. I believe that all democracies in the world, including the us, would be aware of how to respond if such a scenario were to take place. What do you want the world to know about you as a person . Was design. I am a rational and steady leader. I know how we can respond to the challenges we face as a country. I also understand that the serious and complex nature of issues in the Taiwan Strait call for rational and steady leadership. This will enable our country to move forward amid changing geopolitical circumstances. Taiwans vp speaking to bloombergs joel weber. Keep an eye on that story. Youre going to be hearing more. Think hes in the states . I think this story is one that the taiwanese are clearly very keen to make sure the spotlight stays upon. Lets put the spotlight now on whats happening in the markets and figure out whats going on. Ftse 100 underperforming today really quite significantly, which is surprising given the positive data weve seen the wage data very strong, but its not that story. Its actually the chinese story, which is weighing on the ftse 100 today. Hsbc is down, but its the big miners. Theyre down as well. Names like antofagasta are under pressure, glencore under pressure. Thats whats weighing on the ftse 100. Take a look at whats happening with marks and spencer. The retail kind of high street darling doing really well today. That tells you more about the domestic story. But thats a 250. The dax is down. I think only 5 or 6 stocks are in positive territory. The mood definitely more negative today. The kekerengu down by 1. 2 . Again, youve got stocks like lvmh under a little bit of pressure. So again, its the effect that china is having on european equities remains really quite significant. Well talk more about maybe the domestic narrative in the close. Thats coming up next. This is bloomberg. Woo hoo hoo. Ill be the judge of that. Oh, thats nice. Oh, searchable verified reviews. Thats better than the ham. And ive never said that. Booking. Com. Booking. Com. Yeah. If you had w2 employees in 2020 or 2021, you could be eligible for Cash Payments up to 26,000 per employee through the governments employee retentionr laundry. Its something about having that piece of paper. Some people think thats worth more than my skills. Ive run this place for 20 years, but i still need to prove that im more than what you see on paper. Is going to be so good they cant ignore you. The way my mind works, i have a very mechanical brain analytics and empathy. Thats how i gain. Clients am more. Im more than a paper. Its an amazing thing when you show generosity of spirit to someone and you want people to be saved and to have a better life, then you dont stop. The idea that we have saved 5 million peoples lives. Its overwhelming. Its everything. So its all a bit red in europe today, volumes quite light. So take this with a pinch of salt. Italys doing better. Banks are having a better day. But elsewhere, sony stocks are selling off. Its interesting, the london market and the the french markets, paris and london both down. Theres a chinese effect in here. Names like lvmh, names like glencore, names like antofagasta are responding to what weve seen in terms of the chinese data. The chinese are cutting rates. Clearly, there is more work to do to get that economy rolling again. Europe is responding to that. There is a european proxy sort of story here. Elsewhere. Lets kind of focus on what the Bigger Picture looks like. We havent moved that far away from the 460 level. Weve kind of moved down first thing, which tells you its more to do with whats happening in china than more to do with whats happening in the United States. You didnt get a big response in european equities around the retail sales number. It came earlier in the day. It came in response to what we got from china. You can see that in names like glencore, down by 3. 3, 4 today. The commodity story leads into the into the mining story. Thats the narrative. Its pretty clear elsewhere. I just want to flag theres a couple of stories that i flagged it earlier, but i think theyre emblematic of a consumer that is not prepared to give up just yet. Marks and spencer out with raised guidance today. A bit of a surprise to the market. You can see how the market has responded. Its not just its not just the its not just the the apparel side of things, which is doing well. Theyve revamped stores, etcetera. Thats working. Its also the kind of the high end grocery side as well, which is continuing to perform as well. People are still spending money and guess you work it back to the wage data weve seen today. Kind of makes sense. So marks and spencer is a standout story and it speaks to this resilient consumer, pandora is another case in point as well. The Jewelry Company out with raised guidance as well. People are still spending money. Thats my takeaway from these two stories, alex. And were going to continue to watch this. How hard are Central Banks going to have to lean in on this . I think is a critical question. Were going to have to watch this space. Certainly, Neel Kashkari mentioning a moment ago that were going to have to do more earnings continue. Aviva out with numbers, Balfour Beatty out with numbers. Admiral, you are really seeing inflation in the insurance space at the moment. Check your latest quote. It will be significantly higher. You can push back on it. But but the quotes that are coming out are much higher. Naught Norwegian Sovereign Wealth Fund out with this report thats going to be interesting thatll tell us about the big picture narrative and what is happening. And then youve got uk cpi and rpi. Basically inflation measures are ones or ones new. It is there is an expectation that were going to be seeing inflation continuing to come down. But given the wage numbers, were seeing, can the bank of england really kind of look at that and say, we can stop here . Youre also going to get russian ppi out today, alex, but thats not the story coming out of russia. Russia is becoming really fantastic. Look at russia. Look at argentina. Theres some real crises beginning to brew in the emerging markets. Yeah, especially the yuan as well. The offshore yuan tumbling as well. Remember when the yen got the yuan got devalued a few years ago . That was a rough summer. So lets stay with russia for a moment. So dollar ruble is still around 100 after that emergency rate hike today. And the latest news that bloombergs reporting is that russia may partially reinstate capital controls. Now to help support the currency. Joining us now, tim ash, senior emerging markets sovereign strategist over at rbc, bluebay asset management. Hey, tim, is anything i mean, whats your take on what russia has done . And is anything theyre talking about doing going to work . Well, the rate hike this morning was expected 350 basis points. Some people expected capital controls at the session this morning. They didnt do that. It failed really. The ruble rallied a bit and then its back towards the 100 level mark. Its not convinced. And now youve been reporting the capital controls story. I mean, very predictable. The reality is rate hikes and capital controls dont solve the underlying problem, which is the war. Putin is losing the war. Its very bad for russias balance of payments. Obviously, sanctions are hurting them, hurting on the exports side. Now with the Oil Price Cap hurting them in terms of imports cost a lot more. And also capital flight has accelerated. Remember, also sanctions have meant that a lot of russias Foreign Exchange reserves have been frozen. So they cant use those independent defense of the currency. Tim, why is a weaker currency a bad thing . Why have they decided to fight against that weaker currency and rather, and hit the economy in theory by raising rates as a result . Why is that the better option than emilia . Who is going with well mean a weaker currency means higher Inflation Exchange rate pass through. Theres a danger, i think, that you see a rout, a complete collapse of the currency, which they obviously dont want as well. And i think mean generally countries like stronger currencies mean its a sign of success. Economic health, wellbeing, you know, no, no country in a good place devalues its currency. Countries devalue when they have problems. And i think thats the reality at the moment was not going well. Its costing a lot of money. Sanctions are beginning to work. You know, the current account position, theres a massive deterioration for the first seven months of the year. The current account surplus was down 85 . What what would happen with capital controls . Well, likely they at the moment, russians can get Something Like 1 million a month out of the country. And theyve been doing that. You can see from the data from central asia, transcaucasia, turkey, dubai, britons are getting money out. Theyre not buying the story. Theyre not buying the putin story. And likely that limit will be reduced very significantly. They did that actually straight after the the invasion in february 22nd. And because the currency went to like 120 then. So they did that. It did stabilize the currency. But i think the difference this time around is the balance of payments look really bad now. I mean, the again, the Oil Price Cap is really hitting those oil and energy revenues. So what happens next . How does this story evolve . Well, unless the war ends and sanctions stop, its not going to get any better. Russia has no route to victory in ukraine. I dont see sanctions easing. Russias the availability of of dollars which they need is not going to get any better. Theyre just going to draw down reserves. So unless they, you know, massively hike rates and completely close the economy with capital controls, which stops growth, theres no easy way out from this unless theres an end to the war. So, tim, was this a fact what everyone thought was going to happen like a year ago when you had Oil Sanctions to begin with . Because it feels like now were starting to actually see oil being taken off the market from russia rather than before when oil was still able to flow like is this that result now . I think we have to remember that there was only one person that really knew this invasion was going to happen. It was vladimir putin. And hes been planning this since 2015. And he built russias buffers. So he built Foreign Exchange reserves to 600 billion, precisely this point, right . Precisely. Precisely. The invasion of and sanctions. And theres been durability. So the russias ability to ride through the last year or so without much impact in terms of domestic economy is because he planned it. And now those buffers are kind of getting eroded. You know, the west is as frozen, 330 billion central bank reserves. So thats at least half and what they have left is pretty soft currencies. Its its one its kind of not really convertible currency. So they dont have a lot of money to use in defense of the currency. So, you know, in the end, its you cant beat sanctions in the end. I mean, countries survive, they muddle through. But, you know, think of iraq, iran, north korea. But its not a good outlook for a country. And again, the war has to end. Sanctions have to end for russia to have any outlook, any positive outlook. Tim, does this have an impact on the battlefield, do you think, or does it change the mentality of the kremlin in terms of escalate to deescalate . Do they see themselves increasingly being backed into a corner, therefore take more and more violent action . And the sort of the flip side of that is, does it curtail the kremlins ability to buy the weaponry that it needs . Well, sanctions are made buying all that stuff more expensive. You can see that on the import side of the balance of payments. I think what was really interesting this week was that you saw division in between Economic Policy makers, maxim oreshkin, whos an adviser to putin, came out and slated the governor of the central bank, nabiullina, who was generally pretty well respected. So there fighting. And it comes after the wagner mutiny. So guess the ruble. You know, going through the 100, the prospect of a continued deterioration in the macro story. Capital flight. It will just probably push elites into further fighting with each other. I think tim, the other side of this, though, is the stronger dollar. And appreciate the ruble has its own particular problems. But we also seen the dollar index right around that 200 day moving average. Also, Fund Managers are short the dollar. So i can only imagine what kind of repositioning there has to be. How closely are you watching the dollar and kind of where the biggest Ripple Effect are you expecting . Well, i mean, the rubles problems that really nothing to do with the dollar. I mean, the ruble is the worst performing currency this year. And its all because of the war, right . I mean i mean, we are seeing obviously strong dollar. You know, u. S exceptionalism, us economy, strength, china, kind of weakness, tepid kind of growth. You know, and thats thats causing problems for guess the Global Economy at the moment. We have again kind of a crisis of confidence across emerging markets and broader markets because of kind of whats going on in china. And theres lots of individual, difficult country stories across emerging markets that are obviously not helping either. Tim it was great to catch up with you. Still good to get the insight. Thank you very much indeed. Tim ash of bluebay asset management. A quick look at where markets have finished not much action during the auction. You know, ive been talking about the fact that the european equities have been on holiday all week, actually then managed to miss the fact that italys been on holiday today. So the number youre looking at today is from italy. So thanks to those that have written in to point that one out, my bad. Not everyones okay. No, no. But my brain clearly was what it next. This is bloomberg. 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I. Private Market Alternatives help you outperform the traditional portfolio by up to 40 meat yield streak. The leading private market Investment Platform with ten highly vetted Asset Classes, diverse defi with alternatives. Open an account at yield street. Com. This is bloomberg markets. You are looking at live pictures of the principal room sam tabor bit digital ceo joining bloomberg crypto. Thats at 1 p. M. Eastern, 6 p. M. London. This is bloomberg. So home depot stock still just a little positive. Its faded, but the earnings definitely beat kind of suggest that the Home Improvement story is still actually rolling and the company is, as a result, doing a little better than expected. Max radchenko, td cowen, director of retail joining us now. Max, great to see you. Look, there was an expectation that wed start to see a slowdown. Yes, the long term structural story looks good, but maybe this quarter, maybe not so good. Why is this Company Still able to deliver what its delivered . Yes, great. Thanks a lot for having me on. So in general, to q was a solid quarter with both top line as well as a bottom line beat comps declined or same store sales declined 2 , but they did outperform both our and street expectations as as the home owner does continue to spend. Obviously the spending is somewhat muted, but its certainly better than what we expected. And then the company did reiterate their guidance for the full year despite the Second Quarter beat. And really we attribute a lot of that to conservatism just because the environment does remain quite uncertain. So, max, you have a outperform target. You have 380. Were at trading at 330 now and im wondering how you see like what gets you there within the next 12 months. Sure. So in general, we are constructive on the home depots longer term opportunity to continue to pick up market share, especially in the in the pro segment. The company has invested heavily in the assets as well as technology to continue to pick up share with the large pros. And we really like what theyre doing and we think that thats going to accelerate over the medium to longer term. And thats really one of the biggest factors thats driving our optimism as well as our outperform rating. Max, what is the story that i can take from the numbers today about the health of the consumer . Whats the kind of the macro read on the consumer from home depot . I think that there are several takeaways. First of all, in general, we think that the home owner does remain in better than feared position. They are continuing to spend, certainly theres a moderation. But the there is a lot of resilience and we think that thats going to continue. Some of the top factors that we do monitor to see if theres going to be a slowdown over the medium term, include the employment framework as well as home values, which do remain quite elevated. And we havent really seen much of a give back yet. And then furthermore, more just that mix of spend between goods and services, services has certainly picked up over the last several quarters and thats going to be the third top factor, which we think that as long as services doesnt come back all the way to 2019 levels, we think that spend at home depot as well as on the Home Improvement sector will continue to be resilient. So part of what they highlighted, max, was obviously the diy stuff versus a really big purchases can home depot do well with just the diy or do they need the big stuff to come back . So at home depot, the pro does continue to outperform diy and we think that on the side those homeowners do continue to engage in smaller projects. But that being said, really where the biggest weakness within diy is, is those large discretionary items. So think grills, think patio furniture. There certainly was a lot of pull forward over the past couple of years. And in general, thats really where were seeing the homeowner pulling back on. But as far as projects and some of that repair stuff, they do continue to spend. And then the pro business does continue to outperform. And thats one of the key factors why we do continue to like home depot is pros remain in a pretty solid position. Theyve got backlogs that are still pretty elevated, certainly below where we were at the height of the pandemic, but above historical trends and then new leads do remain solid as well. So the pros continue to work and they continue to buy products at home depot. The why, thats a new one. A lot of diy. Alex diy oh, diy. We just kidding. Diy, diy do i do it myself . No, but my husbands really handy with that stuff. He like chops wood, he like nails, floorboards in like hes. He does those things excellent. So he definitely frequents the home depot. Its a great, great. Youve got to love you got to love these kinds of stores. Its like walking around. Its like christmas when you walk around these places so that is how i feel about tj max or target. So now were speaking similar language now, now we now were on the same language. Just got to figure out which retail destinations we should be talking about. Exactly. And then we understand like aladdins caves. Amazing. And then, you know, speaking of well see what tjx does later on this week, speaking of. All right, max, thanks a lot. We really appreciate it. Max malenko, director for retail over at cowen. Thank you very much. Another story that were following within the market is Hawaiian Electric, extending its record slump after getting cut to junk by s p. So the Power Equipment maker is being investigated as a possible source of the deadly maui fires. We do not know that for sure here, but utilities need to do certain things when there is a fire and there are questions as to whether or not Hawaiian Electric did those things. Yaman patel of Bloomberg Intelligence joins us now. How how bad does this get . Well, i think immediately people will want to compare this to pga, which was the last big bankruptcy we had in this in this particular arena. But but there are a lot of differences here. Youve got first of all, bear in mind that the they operate in in a in a totally different environment legally. In californias case, you had a very strict doctrine referred to as inverse condemnation, which is strict liability. Basically, what that meant was, regardless of how prudent or what the lack of negligence was on the part of the utility, it could still be found liable. Thats not the case here in in hawaii, where i think the court would have to find a judge would have to find that the the utility had received enough warning and did not act accordingly, or its its equipment had not been maintained to the extent that that it should have been. Now, my understanding is that they had been given some warning of wind gusts and very severe Drought Conditions or dry conditions. Now, wind gusts are nothing new in maui or pretty much anywhere in hawaii. So that thats not necessarily a reason for them to deenergize here. But in the case of the dry conditions, its hard to its hard to determine whether or not just based on that utility should have switched off or changed the the lines at that point. I mean, how do we think long term about the way that these kinds of cases are going to affect the Investment Case for utilities . Theyre clearly going to have to invest significant amounts of money. Theyre either going to have to bury cables. Theyre going to have to change their behavior. Theyre going to have to turn off grids. This is something that is relatively new, but is a significant risk. How should investors be treating these utilities differently as a result of these risks . So when it comes to your normal regulated utilities, one of the reasons why pacific gas and electric was able to come out of the mess that it did, y, c and p y after katrina, entergy, new orleans was able to survive is because regulations permit them to recover the costs of everything that theyre lost. To the extent that, of course, they were not responsible. So wildfires is is the case. Were talking about here. But issues have been there for a as i mentioned, hurricane in the case of florida power, entergy, new orleans, houston, and in all of these cases, regulations allow through the ratemaking process, utility to recover all of their costs. So to the extent that you have that, theres nothing much that changes. I think where the change comes, if it does, is it stop at the parent level, which obviously affects the equity because utilities have holding companies, utility regulated utilities will then upstream dividends to the parent and then the parent will go ahead and pay dividends outside to the shareholders. So the regulatory utilities by and large, to the extent that theyre regulated, is not something that necessarily needs to change. Now, that said, you get to the issue of pushback and to the extent that utility customers are going to be covering the costs of of of rebuilding utility, then guess, you know, theres only so much that rates can go up. Right . Absolutely. Yeah. And ultimately whether or not where does where does that its a its a battle thats being fought certainly here in the uk. What about Dividend Payment versus investment in into infrastructure and whether or not that is sufficient . And increasingly its looking like the dividend pressure is only going to grow and grow. Thank you very much indeed. German patel of Bloomberg Intelligence. This is bloomberg. The first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. Just got an order from dinosaur, colorado. Start an easy to build. Powerful website for free with a partner that always puts you first. Start for free at godaddy. Com. Let Innovation Refunds help with your tax refund so you can improve your business however you see fit. Rosie used part of her refund to build an outdoor patio. Blink. Dr. Marshall used part of his refund to give his practice a facelift. Emily used part of her refund to buy a run a wax museum. Let Innovation Refunds help you get started on your tax refund. Stop waiting. Go to Innovation Refunds. Com. You really got the brows interact live brokers pays up to 4. 83 on instantly available cash in your brokerage account. How much interest can your bank or broker pay . Interactive brokers can servative and prudent Risk Management uniquely positions us to pay up to 4. 83 on uninvested instantly available cash in your brokerage account. The best informed investors choose interactive brokers. As a young man, my hair started to thin. I couldnt sleep. I was stressed about it and there were few options out there. Nutrafol is a drug free natural supplement that gave me my hair, my health and my confidence back. Get started at nutrafol common. Together we have the opportunity to build a more sustainable and inclusive future. At the Bloomberg New economy forum, we help make this possibility a reality by cultivating new connections among Global Leaders that transcend geographies, industries and ideologies. Because when Global Leaders work together, the outcomes benefit all of us. Learn more at Bloomberg New economy. Com. Stocks slip but off the lows. S p just down by about 7 10. Volume is improving a touch. Abigail doolittle tracking the moves. Abigail yeah, a decline here for the s p 500. But to your point off of the low but its interesting to see how overnight the s p 500 emini futures really sliding, probably some of it having to do with janet yellen commentary about the chinese economy. Now, if we flip up the board, we are going to see that an interesting dynamic has occurred because before we did have yields higher pressing, stocks lower. But you can see that tech stocks in particular are down just a little bit more, especially this basket of Goldman Sachs nonprofitable tech even as yields are down. So we have a true risk off day where stocks are down and bonds are down. Now, one piece of economic data, Homebuilder Sentiment declining for the first time this year to a 50. Apparently, some labor and Construction Costs going into that reading, but take a look at the homebuilding stocks. Theyre not listening. Why . Because Berkshire Hathaway announced positions in the 13 fs in both d. R. Horton, lennar, maybe some more, but the whole space getting a bit of a tailwind. China tech, though, guy, not so much having everything to do again, probably with those janet yellen comments. Yeah its amazing to see whats happening here. Plus youve got all the data plus the rate cuts, plus Everything Else going on. Vinfast ceo joining Bloomberg Technology, Caroline Hyde, ed ludlow. Looking forward to that show from alex from me. Have a good afternoon. With Verizon Business unlimited. I get 5g truly unlimited data and unlimited hotspot data so no matter what im running this kitchen. Make the switch. Its your business. Its your verizon. Sometimes you dont realize whats not covered by your dental insurance until you get the bill. Thats why affordable dental insurance from Physicians Mutual Insurance Company is important. This isnt some discount plan. 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The better way to do your laundry. Some things are better left to a professional. In hindsight, probably shouldnt have tried to remove my own appendix. Like when it comes to finding Financial Advisors. What was thinking . So leave it to smartasset to find them for you. Take the free quiz at smartasset dot com. Then youll be matched with up to three vetted fiduciary Financial Advisors to get started. Take the advisor match quiz now. At smartasset. Com. Was this close . This close from the heart of where innovation, money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and ed ludlow. Im Caroline Hyde at bloombergs World Headquarters in new york. And im ed ludlow in san francisco. This is Bloomberg Technology. Coming up, well discuss the outlook for chinas tech sector. And as its the Biggest Companies are preparing to report results, how will the slowing growth picture for china actually weigh on investor sentt