Higher as inflation data fuel hopes for a soft landing for the u. S. Economy. The bank of japan holds and unscheduled bond buying operation. Manufacturing contracting for a fourth straight month in another that the economy is failing to find traction. Youll kashkari says the u. S. Inflation outlook is positive but warns higher Interest Rates could still see some job losses. Christine lagarde says the ecb could hike again even after a pause next time. Happy monday. The start of a new week. And the end of the month. August and september tend to be if you look at history some of the worst two months for the s p 500. Strategists are asking, is it time to brace for a selloff . U. S. Equity futures pointing to a lower opening. As for treasuries, the question that lingers from friday is whether japanese investors will rush home in pursuit of highyield out that the bank of japan has tweeted its program. The japanese are some of the biggest investors and buyers of u. S. Debt so will treasuries join less foreign demand. I on friday japanese stocks having a great session this morning. More on that in a moment. Closer to home at the question remains, are the ecb and the fed done with hiking . We have a bank of england decision on thursday. Another big week for earnings. Almost as busy as last week. We have 169 Companies Reporting. We will bring you the latest breaking earnings. Heineken reporting for the first half. A week of print from the dutch beer giant. Firsthalf revenue missing estimates as expected. We have volumes down. The estimate was for three point 15 of a drop. Per staff revenue is up. The estimate a missed there as well. The full year outlook has been updated. Have a deeper look. Heineken facing mounting challenges in some of its most important markets like vietnam and nigeria. There have been questions over whether it would reach its full your targets and that depends on how its premier brand cells. Sells. We will bring you an interview with the ceo on markets today at 7 40 u. K. Time. Lets get back to how asia markets are faring. What is happening where you are. Good morning. Asian markets starting off the week with a bang. Starting with china. Manufacturing pmi beating estimates but still the fourth month of contraction. I think traders are looking at the data through rose tinted glasses. The shares are moving higher. There is more optimism in hopes of a stimulus coming through as we get weaker Economic Data coming out today. There has been more of a drip feed of measures such as the consumption benefits they are talking about in a few hours. There are potential reports that there may be more local level property measures coming out to support the ailing economy. More optimism coming back into the market which is a turn from before. And there is a lot of under waiting positions. Any sort of move back into shares on shore could move markets and bring the momentum back in. In japan, very much in the green. Morgan stanley and Goldman Sachs saying, by now. Traders are trying to address the news and understand what is the definition of flexible and nimble i the bank of japan. Yields on the jgb tenure moving 10year moving. That is weighing on the yen. A lot to see and i just before we can understand this path a lot to see and digest before we can understand this path. Host sticking with the china topic with our roundtable. I am joined by mallory and jill. Lets start with the china pmis. Manufacturing has contracted for a fourth month. No Manufacturing Activity as the economy is still under pressure. This is the backdrop to the government measures. What drove this week data . What do you expect from the announcement . Youre looking at continued evidence of the slowdown we have been talking about. Even though the Manufacturing Index picked up. It still remains in contractionary territory for a fourth month. It is also the nonmanufacturing gauge measuring the Services Sector activities. It stayed in the expansionary territory but it is slower than what economists thought it would be. It shows a continued loss of momentum. The data is backwards looking. In july, we got the announcement from the paula world we are progrowth from the college politboro, we are progrowth. We have seen a little bit of a hint from the Reform Commission this morning about what we may be expecting including some initiatives. It the government will remove restrictions on car purchase limits. It is not really the big stimulus that investors have been waiting for from this government. Lizzy investors waiting with bated breath for meaningful intervention. We have data from japan. What are you watching in particular after fridays boj announcement . We are slowly going to understand more about the bojs reaction function. They came in this morning with a bond buying operation with yields moving five basis points higher. It is dragging up treasury yields as well. It is one big risk on the horizon. If the bank of japan lets the yields rise slowly, maybe dampens relative dampens volatility on the way to 1 . Lizzy we have heard from Neel Kashkari after the latest u. S. Data. He is upbeat on inflation and the chance of the u. S. Avoiding a recession but he says there will be job losses and slower growth. Overall i think the inflation outlook is positive. It should be slowly diminishing from here. We continue to be surprised by the dynamics of the reopening economy. We have to let the data guide us. Lizzy jobs numbers on friday, what are you looking at . The big print of the week is the nfp number on friday. It feels like from what the market is expecting we wont get it this month. Jobless claims holding extremely well the summer. Strong summer seasonals still helping the job market. It might not be until the beginning of the fall that we see weakness. Kashkari repeating the words of powell that we are likely to see some labor marker labor market weakness soon. Lizzy rarely does the fed managed to pull off a soft landing. It is time to worry about is it time to worry about the s p 500 . It is important to keep in mind some nuanced numbers. Indicators point to a soft landing. Joe davis, a chief economist at vanguard. He was talking about even if you get what you want out of this, to reach the fed target of 2 inflation, it will require an uptick in employment. Even if you just have an uptick of 100 basis points, you potentially get some recession warning trends flashing. I would also point out that Bloomberg Economics the other day was assessing this saying if you look at the good data, there are some underlying metrics that indicate some cracks in the u. S. Economy. Looking at some of the inflationary concerns and those types of reports. There is a lot of nuance you have to bake in. The fed still has to watch a lot of the indicators moving forward. Lizzy lets have a look at some of the data we are keeping an eye on in europe. 9 30 a. M. , we get an insight into the health of the u. K. Housing market. The economy expects another drop in mortgage lending approvals. You will likely see it in this data, the house price correction is thought to have further to go. At 10 00, we have euro area secondquarter gdp which is expected to be anemic. Though an improvement on the stagflation from the first quarter. And stronger than expected growth we have seen from france and ireland. Also at 10 00 london time we get euro area cpi. Core inflation unchanged at 5. 5 . We already saw on friday german and french inflation slowing to their lowest annual rates since the invasion of ukraine. On friday markets paired back to another ecb hike. There are concerns about domestically generated inflation. I head of the next decision, how much more focused is are going to be on the jobs data . Todays inflation print is one of the big ones of the week. Remember, we do have another inflation print before the ecb convenes again after the fall. Maybe not a huge market reactions to the prints. But with the ecb turning off autopilot making us more sensitive to data, may be a surprise in the core number could see a bundt rally. We still have one more cpi print to go before they meet again. Lizzy thank you to valerie and jill easing us into our monday morning. You can get a round up of the stories you need in todays edition of daybreak. The lead on china pmis and stimulus measures as discussed. They also have Christine Lagarde saying the ecb could also could always hike again. If Financial Times reported that blackstones Real Estate Trust has sold over 10 million in assets as it prepares to pivot to ai. You can go to da why be go on your bloomberg terminal. Coming up, more volatility likely lies ahead. We look at this weeks rate decisions from the reserve bank of australia and the bank of england. And we also discussed stress tests for banks. We speak to the European Banking Authority chairman. Stay with us. This is bloomberg. It is certainly possible that we would raise funds again it a september meeting the data warranted it. We have an open mind as to what the decisions will be in september and subsequent meetings. I want to stress that the decision today to tweak the ycc is not a step towards normalization. The aim is to enhance the sustainability of the monetary easing. Lizzy jerome powell, Christine Lagarde and others speaking about the policy announcements last week which was the focus for global markets. More volatility likely lies ahead. More decisions from the rba and the bank of england this week as well as key reports from u. S. Manufacturing and jobs. We are joined by Garfield Reynolds to take us through what we have coming up. We have been discussing the market fallout from friday. What lies ahead for gdbs in the end jgbs in the end . For the first time, in a lot of ways, no one is quite sure where the bank of japans tolerance levels are good on the one hand it seems quite aggressive. They came in today to hold down yields about after they jumped again but they are still only 10 basis points above the previous target. On the other hand, the two day yield the two day move in yield is the most since april. And arguably without the boj stepping in it would be considerably more. Jgbs face an uncertain outlook and a lot more volatility as we find out where are the tolerance levels as far as the boj is concerned. What does it think nimble operations means . And what is the fallout for the global bond market . There is plenty of concern that higher jgb yields would bring money back into japan and away from overseas where japanese investors hold about 2 trillion or more worth of foreign bonds. As for the yen, so far the bojs apparent efforts in keeping something of a lid on yields are proving to be a downer for the yen. That is the two sides of the equation. If jgb yields takeoff, that would be seen as the boj winking at a normalization which was not what he was doing he said but normalization meaning heading away from quantitative easing rapidly and moving away from ultra easy policy. We saw strong gains with rumors of the bojs shift came out before the boj met. Today we have a continuation of those strong declines we saw breakout on the yen on friday to take it back to where it had been before the rumors came out. If you keep a lid on jgb yields that is bad for the yen because the trip back towards a world where Japanese Central bank policy is close to what the you close to what the world is doing, that is what the yen needs to recover from the weak levels on a historical basis. Lizzy we were talking about chinese pmis. Tonya said investors are looking at them with rose tinted spectacles. Stocks are pretty relieved this morning. They are but they have become less relieved as the day has gone on. You always have to be cautious about reading too much into a bit of a bounce in chinas stocks. You were talking before about the s p being 5 short of regaining its record high which came in in 2020 two. The chinese stock market is 30 below its most recent peak and the peak came in early 2021. A market that is that far down and has been that far down for that long, it does not take a lot to spark what looks like an impressive move. Chinese stocks are up 1 now but, over the last year they kept on coming down and down. So they are cheap. They are cheap for a reason but they are cheap. That gives a possibility for every little hint that somehow the chinese authorities are going to come up with the right levers to undo some of the damage that to some extent has been delivered by the chinese authorities to the outlook of chinese economies Chinese Companies and their investment outlook. Finding something sustainable requires coming up with something that would convince investors that this time is different. Lizzy we keep an eye on the policy announcement later. The aussie dollar is also in the spotlight ahead of tomorrows rba decision. What are traders expecting . Traders are expecting strongly that the rba will hold policy at four point 1 . There is a 75 chance for that. The majority of economists are forecasting a hike. That gives that gives us a chance for volatility. If there is a hike, you will get a jump in the aussie dollar. If it holds you will have a constituency saying the rba is done and it will call time on rate hikes for just about anybody else except for new zealand. In the short term at least you could say the aussie pop if the rba does raise, the pop will have trouble sustaining because he will also have a tendency for traders and economists to say the rba did the rate hike and that might be it. We expect them to do one more hike and they have. Time to call it a day. Lizzy thank you to bloomberg mliv strategist Garfield Reynolds. Time to call it a day on that conversation for now. Coming up, western leaders say they are ready to use force to restore democracy in niger after last weeks coup. More on that developing story. This is bloomberg. Lizzy welcome back. West African Leaders say they are ready to use force to restore democracy in new sheriff necessary. A massive rally in support of coup leaders marched on the French Embassy. What do we know about the nations new military leader . There is still a lot we are learning about this new leader. He is a long army leader. What is most important is he has been a leader of the president ial guard since 2011. He was appointed by the former president who was a close ally of the west. He stayed on with this new president. For many people it caught them off guard it he was doing Something Like this. What we heard from his speech last week is he was concerned about the security situation in the country and also governance. The question is is he the right person to lead the country forward and what this means for the international community. Speaking of that community, over the weekend we saw a lot of responses as you mentioned. They were looking we are looking at pictures of our rally that happened towards the French Embassy in niger. We heard the eu, the u. K. And france suspending Development Aid to this country. This country has received 2 billion in international aid. This is a concern for the international community. The strategic importance of niger for uranium and also because it is critical in the fight against jihadists in the region. This is a region that has already fallen victim to a number of twos coups. We will hear from more International Leaders including the u. S. Which has not yet pulled out developmental age. Lizzy thank you to bloombergs jennifer with the update on africa. Lets check in on the markets. We have a picture of the futures. Asian equities rallying especially in china. Euro stoxx 50 futures in the green. Looking ahead to the wall street open, s p and nasdaq futures pointing to a sleepovers just arent what they used to be. A house full of screens . Basically no hiccups . You guys have no idea how good youve got it. How old are you . Like, 80 . Back in my day, it was scary stories and flashlights. We dont get scared. Oh, really . Mom can see your search history. 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Golo is real and when you take release and follow the plan, it works. Lizzy good morning. These are the stories you are waking up to. Asia stocks follow wall street higher after inflation data fuel hopes for a soft landing for the u. S. Economy. The bank of japan holds an unscheduled bond buying session. Chinas Services Sector slows further than expected in another sign that the economy is failing to find traction. Neel kashkari says the u. S. Inflation outlook is positive but warns higher inflation rates could still see some job losses. Christine lagarde says the ecb could hike again even after a pause time. Another big week for earnings. Almost as busy as last week. 169 Companies Reporting on the s p 500 and 87 on the stoxx 600. Out of austria we have the biggest bank in central and eastern europe. You have its capital ratio coming in at 14. 9 , beating the estimate of 14. 3 . Ecb rate hikes were expected to boost its record Net Interest Income even more in the second quarter. Loan loss provisions were expected to stay muted. We will stay on top of the breaking headlines for you. We have an interview with the cfo in a few minutes. Or broadly and markets as we approach the end of the month, the s p 500 is on track for its fifth straight month in the green. August and september do tend to be at its worst two months of the year. Strategists are asking if it is time to brace for a selloff. As for treasuries, the question hanging over from friday is whether japanese investors will rush home in pursuit of higher yields now that the bank of japan has tweaked its program. Lets get over to tonya chen in asia for a deeper dive into what is happening in those asian markets post the boj decision and the china data this morning. What is happening where you are . Asian shares are starting the week off with a bang especially in china. Traders are hearing what they want to hear as are the chinese investors. This is the fourth month of a contraction and yet shares are still in the green. Investors are hoping that this will prompt more stimulus. We have been getting a bit of that drip feed of stimulus measures over the last weekend. They were engaging with Tech Companies to see whether most invest to see what their most productive investments have been. There are reports about property relaxation measures on a local level. China traders are gobbling up the positive news. You still have to see the measures play out before we can see at the rally will take hold. And in japan shares also in the green. Morgan stanley and Goldman Sachs saying shares are a buy. Traders are still trying to digest this ycc adjustment on friday. Not sure what that line of flexibility is for the bank of japan. Yields went north of. 6 . We saw this unprompted bond buying operation. Lizzy thank you to bloombergs tonya chen for the update from asia. I want to come back to the earnings. Second quarter Net Interest Income is at 896. 3 Million Euros beating estimates. Ecb rate hikes were expected to have boosted its Net Interest Income even more this quarter. Loan loss provisions were expected to stay muted and that is what we are seeing and we will speak to the cfo in a few minutes. Elsewhere, Christine Lagarde said the ecb could pause any pause could be followed by an increase. She was speaking to the newspaper in france. She said the next meeting in september could have a further hike or perhaps a pause. This comes after the ecb raised its main lending rate last week. Most European Banks emerged stronger from this year is a stress test on how they would handle a sharp economic downturn. The European Banking Authority said to take us through the stress tests, joining us now is jose manuel campa. The stress test results were less severe than last time. What is that say about European Banks . Jose they were less severe than last time. We had estimated at 6 drop in gdp. White is the stress test less harsh . The good starting position of the banks. And good profitability. The good outcome was the stress test scenario would create a scenario with higher Interest Rates and lower gdp. The higher Interest Rates helped the income of many banks. The deterioration was compensated. Lizzy it was only in march when we saw the collapse of credit suisse. Can you really be sure that the system is robust . Jose this is an exercise. It is not a bulletproof prediction of the future. The exercise shows that banks were profitable right now. They are able to sustain large economic downturns. This this is [indiscernible] finally, this is an exercise that focuses on solvency. It does not focus on liquidity. Lizzy the ecbs top Bank Oversight official said she is frustrated at the excessive optimism of banks when they are marking their own homework. Is that a fair frustration to be raising . Jose think it is fair to say the outcome over the last two years despite harsh economic scenarios including the russian invasion of ukraine, despite this, the realization that the outcome has been quite benign for the banks as we see what the results coming out. It is fair to say things are good thanks to policy options taken over the last few years. But uncertainty remains high and we need to be prudent. Lizzy cannot be complacent Going Forward. It does seem mainstream banks will be less relevant when it comes to the next Global Financial crisis. What do you feel about shadow banking . Jose it has been an area of concern for many regulators over the last few years. Shadow banking is a part of the Financial System that we understand less well than the traditional system. It is something that we need to continue to watch. I think work Going Forward is important. What is also important is the interconnection with that shadow Banking Sector and their traditional Banking Sector remain. Lizzy many banks will take this as a green light. Will they continue to increase investor payouts . Jose this is one of the benefits of our exercise. It provides detailed information about how the banks perform under a certain scenario and this information needs to be looked upon bank by bank. To better understand what is the capability of generating income Going Forward and also to absorb potential downturns in the institution. That will determine capital payouts. Lizzy is it fair to say the system has now stabilized after the u. S. Regional banking crisis . Jose i think it is fair to say. It is true the contagion from the u. S. Banks to the European Banks has always been limited. The European Bank system has remained stable and robust. Going forward we have reason to believe that will continue to be the case. Lizzy European Banking Authority chair, jose men while manuel campa. We get secondquarter gdp at 10 00 u. K. Time and a comes as weakness persists in germany. We are taking a closer look at the regions largest economy. The data in deutschland is pretty bad, im afraid. Germany is the only g7 nation forecast contract this year. Given the Energy Crisis that might not be a shock but the weak demand in china is not helping. Big business is more optimistic. The case for a soft landing seems to be improving. We presently do not expect a recession. There is a lot of resilience in the german economy. And good news, unemployment is near an alltime low. And that is in part because the labor force is shrinking. What we may not be able to see is the middle shot the mittelstadt. Especially with biden Inflation Reduction Act threatening germanys advantage. Lizzy bloombergs oliver croak with the latest on europes largest economy. Other news. Towing a ship carrying cars days after it started burning off the coast of the netherlands. The ship is being towed slowly and in a cautious manner. One person was killed when the ship caught fire last tuesday when its crew had to be rescued by helicopter. Take a look at what else we are looking out for throughout the week. Today, eurozone gdp and cpi data expected at 10 00. Tomorrow the reserve bank of australia makes its rate decision. In the afternoon a raft of u. S. Data including job openings. On thursday it is the bank of englands decision. The central bank is expected to hike by 25 basis points as inflation in the u. K. Starts to slow. In the u. S. We will be watching for amazon and Apple Earnings and on friday we get the allimportant u. S. Nonfarm payrolls reports. Coming up, raising the Profit Guidance for the year. We get more from the cfo just ahead. This is bloomberg. Lizzy welcome back. Earlier in the hour austrias erste bank. To take us through the earnings i am joined by the cfo, stefan doerfler. You have raised your Profit Guidance this morning. Why . Stefan good morning from vienna. On the back of Strong Revenue momentum and excellent risk performance we were able to improve the profitability guidance for the end of the year. Two higher than the return, 250 . Guidance has been proving to less then 50 which is an optimistic outlook for 2023. Lizzy optimism ahead. You have been benefiting from the ecbs rate hikes but other Central Banks have started cutting rates. The question is, when to cut rates . How do you see the outlook impacting your profitability . Stefan there have been different developments country by country. Some cycles are further ahead than others. We expect the ecb to look at data now and we expect them to evaluate the situation and take the decision in december whether to make a move or not. We are not as much dependent on the upcoming rate moves then we have been in the past. We have positioned for the rate hikes cycle and we have benefited from it. Overall we believe we can be a stable and our returns and we are optimistic for having a good return on capital in 2024. Lizzy you have helped to coordinate one of europes biggest ipo. What does that tell other companies considering selling their shares . Stefan we are happy we could participate in this transaction especially for the region and for romania. We believe Capital Markets as such overall are very important for the Overall Development for europe and in particular for the region. We will keep on supporting the initiatives and urging a lot of the companies in the region to consider Capital Market activities. Lizzy we also recently reported that you are among the banks looking at bidding for otp. Unicredit said it is pulling out of the proceedings. Are you still interested . Stefan we were looking at the potential target. We are no longer in the process. In general we are interested we are looking to be a part and an active party of the consolidation in the region. Lizzy what sorts of purchases make sense for you at the moment . Stefan we have been purchasing the commerzbank activities in hungary. And after looking at love the potential little risks, in the third round we have been acquiring portfolio in the czech republic. Those kinds of transactions are attractive to us and it is adding to our organic growth and we are happy with what we have been achieving recently. Lizzy what put you off the otp romanian unit . Stefan i did not understand. It was simply my understanding that the seller has been looking at the incoming and we did not go incoming bids and we did not go aggressively. Lizzy thank you for that update on the earnings this morning. The erste bank cfo stefan doerfler. We look at the impact of rising temperatures across europe and what it could mean for the insurance sector in particular. That is next. This is bloomberg. 60,000 deaths were linked to extraordinary heat conditions of last year and i cannot imagine how many people we will be losing this year. And this is apart from the economic losses from the extreme heat. Arboriculture, transportation. It affects so many different fields. Lizzy that was the uns first global chief heat officer on the impact of extraordinary weather conditions in europe. Joining us now for the impact of the extreme climate conditions is bloombergs oliver croak. I spoke with munich ray about this and they did an assessment about how much damage has been done across the world and it makes for grim reading. In the first half of the year, some of it was insured and some not. 110 billion in damage due to Natural Disaster above the 98 billion which is the 10 year average. A third of it was from the United States and not from a single storm but from regular thunderstorms and hail which is getting more intense in the u. S. 80 90 of these losses are being driven by Severe Weather events. As risks are going higher, where are they materializing the most . The areas which we have in recent years, the last 10 years have seen most of this change which cannot be exclusively explained by social factors. Wildfires in california. We see the same in respect with the convective storms. Severe thunderstorms and parts of the u. S. And also europe. This all bears out in the price. The price of insurance goes up as risks go up. Is there a risk of things becoming uninsurable . He said we will always make a policy but the problem is you may not necessarily be able to afford it. Lizzy this is not the only economic consequence of extreme weather because we are also watching the levels of the rhine river. There is a ticker on the terminal for the point on the rhine river. It is an 800 mile river going from switzerland through germany into the netherlands. 10 of swiss trade. It moves two tons of material every year for every residence. In 2018 the levels fellneath a certain point, you cannot move cargo and that shaved 10 Million Euros off the industrial sector in germany. Companies are trying to find alternatives. Basf has the Worlds Largest Chemical Plant on the river for that reason. 15 barges a day it moves. In order to replace the barges, they will need 2000 trucks. At the moment we are ok on the rhine levels because there has been a decent amount of rain. I will be watching it closely. Maybe i will be standing there at one point when it dries up your dries up. Lizzy every day someone in the newsroom asks you to go to the rhine. Lets get a check in on the japanese markets and the yen. It has been the boj announced the unscheduled bond buying on friday. We heard from the asia affects head of research. It is possibly a small step towards the end of yield curve control and the boj could give up the control though that is probably more of a question for next year. The yen trading down. 5 . Flirting with 142. Stay with us. We are going to hear from the ceo of heineken after the low earnings. We will also speak to fortescue metals chairman at 9 30 a. M. London time. Up next, markets with dani burger and mark cudmore. This is bloomberg. I dont want you to move. Im gonna miss you so much. You realize well have internet waiting for us at the new place, right . Oh, we know. We just like making a scene. Transferring your services has never been easier. Get connected on the day of your move with the xfinity app. Can i sleep over at your new place . Can katie sleep over tonight . Sure, honey this generation is so dramatic move with the xfinity 10g network. Dani this is Bloomberg Markets today, i am dani burger live in london. Mark cudmore are editor joining us from sn
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