1 . This is a market that has significant spread. Volatility is taking higher. The Health Care Sector is usually a performing. Financials are under pressure, italian banks plus aberdeen under significant pressure. One stock is under pressure as a result, do we see more consolidation in the space . There is novo nordisk. The chart paints a incredible picture and many have compared to the stock to the forms we have seen out of Companies Like apple. This is an antiobesity drug but now we are it is seeing benefits for cardiology, stroke patients. That is significant because it will make it easier for the Insurance Companies to pay out to use the drug. Novo nordisk rallying massively, the stock of 17 and the liaison up and lily is up. Alix the same thing he is talking about exactly the same here at my side of the pond. The stories are similar. Eli lilly is at a record. The weight loss drug blue past expectations but it was writing on the coattails of others. All the weakest performers within the s p save one are part of the regional banks from the downgraded of moody and the ones on the watchlist of a negative rating. That wont happen for about two hours is the three year option. We are seeing some buying come in. We are looking at yields down about eight basis points. Tons of demand. Kailey bank guy banks firmly and focus in europe. A surprise tax coming out of the government. Nobody saw this one coming but we will find out if anyone saw it coming. The impact is clear. Italian banks have been big performers. The italian market has been outperformer. They drop down for italian banks. This is the scale of the move. The red bar takes you back to the similar moves in the banking crisis in the spring. That was generated out of the United States. You see the scale of the moves. Italian banks getting drop hard. The question is will other governments in your be looking and thinking i could do that as well . Alix are they banks or utilities . I dont know anymore . The head of banking for federated hermes joined bloomberg earlier and these were his thoughts. That is not the first time and it will not be the last time. Potentially at a cost of longerterm cost of equity for the Banking Sector. Kailey text guy takes us to our question of the day. Our banks a good investment . It is the kind of volatility around the sector that has always been a problem for banks and therefore discounts have been applied. Is it trading revenue, is it regulatory risks . Is it the fact that the governments look at this and say we will bail you out. Lets kick this around. Our team is here. I will start with you. Did anybody see this coming . No, no one at all. It was a real late evening surprised by the government, especially by the deputy Prime Minister who announced the tax during a press conference where he was supposed to talk about new tax and licenses and how to protect italian Tech Companies after the last Cabinet Meeting before the summer. It came out of the blue. Alix it could caused banks about 2 billion euros. Where does this leave the banks . If they need to lend . It leaves the banks of the same place they have been before. The gist of that story is you have this attitude towards the bank that is very negative and for 15 years there is this sense there is a burden of guilt the banks have to repay ever since the financial crisis. It comes as a timely reminder that regulatory risks for banks is never in the price and you never know what is coming. Nobody saw this one coming. Everybody knows that is why the sector is so cheap. Banks are not in a place for they see any sympathy from the public. Guy as a result of which there could be more of this coming. Could we see this in germany . Are governments going to be replicating what is coming out of rome . Jean patrick absolutely. That is why we see german banks going down hard today as well. Im am surprised the germans do not come up with it earlier. We have the government that is very anticapital markets. There would be no surprise if they come up with that idea. Everybody is happy rome takes the first step. They will look at how this plays out, how people will react. If there is coming a law and the government is pulling this off then you can bet germany is the next to follow and spain is looking at its legislation and the u. K. Will certainly. Alix is it our bad for being surprised by this . The difference between germany and italy is italy is a populist government. Is it our bad for not knowing this is coming down . Tomasso that is a good point. Giorgia meloni has portrayed herself as a pro investment Prime Minister. Then suddenly arrive such a merger unexpected up the measure the measure could cost about 3 billion euros today. Guy i care what youre saying about the Giorgia Meloni government. It is trying to be paloma pro market yet we are starting to see the reality of the situation. If the pro market veneer wears off, if Giorgia Meloni is seen to be not pro market, the markets will turn against italy. Btp spreads have come in significantly. The biggest buyers are italian banks. Isnt she shooting herself in the foot by hurting the italian Banking Sector which she relies on to keep that spread low . Tomasso from the first draft of the decree we saw last night to the press release, it was announced this afternoon there was already more difference in how much the banks are going to pay. Was this part of a behind the door negotiation between banks . It needs to be approved by the parliament in the next 60 days. I think there is room to see more changes. Alix see more changes, maybe it is for the better when it comes to italian banks. Maybe it is not so onerous. What will be the end result . At least in the u. S. When we have a banking issue we have 4000 banks. There is consolidation ability, things that can be done. What about in italy . Jean patrick lets not go down the consolidation in europe. That is a rabbit hole. Banks will take out a share of the banks and that is why would say you can be promarket and there is no danger for you. There been other companies who benefited from higher rates and high inflation. Governments are not playing that ball in the game because banks are like if you hit banks as a government, no matter what the other politics, where you are, it is a safe bet you win voters over when you go against banks. Alix guy banks and utilities seem to be the story. Europe relies on its bank channel. It is the main lending channel. What is the macro story that comes from this. Jean patrick there is one that you do not want to fully ruin banks. You want to make sure they have some capital they can keep on board that they can use in bad times. That is also the thing. When the times are bad they always cry for help the government is willing to help them because they are so important to the overall picture. It is not fair to blame banks for high Interest Rates and the profits they are you have toe taxpayer, we want something sometimes when your business is good. From that perspective, its kind of fair. Alix thank you so much, we appreciate it. I dont have seven screens, whats up with that . Thank you, we appreciate it. Coming up, more insight into our question of the day, our banks a good investment . We will speak to our guest with barclays. This is bloomberg. I do think what we are seeing much more is the bigger banks would be the true engines of growth. As sustained from the utilities. Keeping the big banks safe picking sure they can take some risk and jamie dimon did come out and say there are too many regulations coming away right now. If you want us to be the engine, you have to let us go do that. Guy that was earlier talking about the issue of what is happening with u. S. Banks. One in the United States then the story over here with the maloney government in rome imposing a tax on italian banks. Banks are getting banged up as a result and we are seeing that replicated across europe. It adds to the confusion we are seeing more broadly we are struggling to understand the macro story and now further volatility around the Banking Sector. Our banks a good investment in europe . Its tricky to understand. Our guest with barclays is joining us. Im confused. Theyre so many diversion sets of information at the moment im trying to fathom. Will we get a soft landing . How hydrates go . What deficits mean for the markets . What does china look like Going Forward . Now we have extra volatility around the Banking Sector. Is it easy to determine if anything is a good investment at the moment . All good points. Probably worth thinking about the framework and setting the scene a little bit. We have had a mode shift in markets. Certainly for the last five or seven days versus what we saw through june and july. Through june and july, Economic Data that was soft seen as positive news. We were pushing toward soft landing, goldilocks scenarios. In the last days, a lot of worry succumb to the surface and that is been catalyzed further by the European Bank situation. We have had softer Economic Data and the market interpretation is more negative. Bad news is now bad in perturbed bad interpretation for markets. They have had a couple of head fakes this year. January and february were positive for the European Banks as we saw the squeeze coming through markets but then again that was thrown off by the u. S. Regional banking situation. Now weve had the same again, European Banks strong earnings momentum through q2 but unfortunately today, the news around the italian banks situation and attacks has put that trade off once again and conversations are extending that much further on the negative side because investors want to know what this means in terms of interventionist policy and the multiple Disc Companies to be applied. Alix is this just an excuse to sell . We have a deal with italian banks and their lending capabilities, but are the headlines an excuse to sell . Guest its a very good point. To think about that properly, we need to think about helpful investor positioning has become. Soft landing has become consensus. Investor positioning is that much more full. We think about hedge funds, shorts of been squeezed aggressively. Banks have been big performers. Real estate also energy. We are in a vulnerable framework and there comes a time when we are going into a seasonally thin the quiddity time. Then liquidity time. The market is becoming much more susceptible the negative news flow and as you say, it is being seen as an excuse to sell. Guy what is the degree of certainty out there . When you talk to clients . Are they convinced they are on the right track . What is the Market Perception of what it season for in front of it at the moment and how positioning stands to do with that . Guest investor conviction is quite low and reason for that is when we think about how we started the year, the debate was around the recession, how deep it was going to be, which areas of the economy would be affected but markets did something very different, a series of shifting narratives being given by big times of quality growth and tech leadership. That has left investors challenged. Guy do they know why they have underperformed . Is it liquidity, ai . What is the reason for the performance . Guest firstly, we have had a lot of narrative shifts. We have the anticonsensual positioning squeeze driven by things like china reopening. Then quality growth, tech leadership, leadership. Then we shift again to a new narrative of a broadening of markets and tanks, energy, real estate leading markets. The constant shifting in narratives has been very difficult to keep up with. It looks like an easy trade. But even those that got that part of it right probably did not have enough of it than as the market leadership broadened and spread into things like realistic, i think it has put people off even more. I think people feel low conviction because there has been a big shift to the right and until recently, they didnt have enough of the right things at the right time. Alix talking about palantir down by almost 9 . Coming up, what is moving to the upside . Novo nordisk riding high on the news that its obesity drug cuts the risk of heart attack and stroke. This is bloomberg. Alix big pharma stocks catapulting high. Novo nordisk obesity drug cuts the risk of heart attacks and strokes. Eli lilly had Solid Earnings as well. Our reporter joins us with the latest from berlin. For the novo nordisk drug, is it just the fact that it reduces obesity dust it is good for your heart, or does the drug actually help reduce heart attack and stroke on its own . The study is really the first time we have connected these dots and in this explicit way showing that reducing weight has a Significant Impact on heart health reducing the risk of strokes and heart attacks. Thats why these results have excited investors today. Guy the real reason why think investors are excited is because now you have proved this link. We can start seeing Insurance Companies paying up for it. This is expensive. If you were to buy it privately, it will cost you an awful lot. The fact that we now get insurance coverage, is that the real catalyst . Guest thats correct, that is huge. Insurance coverage in the u. S. Also gives them a better negotiating position with insurance and payers around the world to build the market for this medicine. Alix we talk about eli lilly and its own weight loss drug. Does novo nordisk stick out or is eli lilly close . What is it look like . Guest eli lilly is close. They have a drug that is sold for diabetes. They are seeking approval for weight loss. That approval may come in the u. S. As soon as the end of this year. Eli lilly is running its own outcome study like this one, but the results for that are in the future. Guy can they produce enough of it . Will there be enough supply to meet demand . Guest thats really the question. That has been the struggle up to now. I guess that will be something we will have to see whether they can keep up with demand for this medicine. Guy thank you very much indeed. Novo nordisk stop being catapulted higher today. We are seeing it up a lot, but let me show you this chart. This is a 20 year chart of novo nordisk. We used to compare them with apple. It is basically over the last few years it has been a longterm process. We have seen it over the last five years searching higher. 20 years it is up five point 5000 . Europe has decent bioTech Companies. I want to show you whats happening with the italian banks, they have been hit pretty hard. These are big hits, this is the market that is outperformed this year. Today, it has been unwound but it is not just italian banks taking a hit. We are also seeing a downgrade for u. K. Banks which is significant. Bmp downgrading virgin money. I think it has downgraded barclays as well. I dont think emp has any positive raining snout bnp has any positive ratings. Yes the italian banks are in focus today, but its banks around europe that are under pressure. U. K. Banks are under pressure as well. The Banking Sector in your is under significant pressure. The european close is coming up next. This is bloomberg. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. 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 five million peoples lives, its overwhelming. Its everything. Guy north versus south thats the narrative for european equities today. Denmark up, italy down. Italian banks are under significant pressure. Italy is underperforming. Italy down, denmark up. Everywhere else is a combination of the two factors. Its interesting to see how Health Care Stocks are performing broadly across europe. The pull push between the two ends of the spectrum resulting in relatively Little Movement for the stoxx 600. It has been about sectors and single stocks. Let me show you a few of the names. Unicredit the heavyweight out of italy down 6 . Aberdeen has been hit. Novo nordisk the balancing factor up by nearly 18 . A continuation of a theme, the stock has been on a tear for years. The performance has been incredibly impressive. Today a tugofwar in european equities resulting in an index that did move very much. Did not move very much. The earnings story continues. These are out this week. What will we learn about this summer and the holiday . Then a really interesting story, first thing tomorrow morning out of copenhagen, we will see vestas earnings. Is it a continuation of a thing . . Or are there factors between vestas and Siemens Energy . Joining us has a by raining by rating on the stock. What are you looking for for the numbers from vestas tomorrow . Guest it will be an important set of results. The thing we are waiting for is to have management views of whats happening on the quality side. We have seen whats happening at Siemens Energy, i think its a different story at vestas but the shares have been dragged down by similar fields. We think they will probably come out of this relatively in better shape than siemens. Guy why the difference between the two businesses . Presumably they are in the same business, but why such an obvious discrepancy between the two . Guest when Siemens Energy launched the five x since the beginning, we have heard of issues. They launched right before covert covid, they said they were having issues with plates forming crocs. They had to go back to r d and change the layout. We are seeing now whats happening in the sec