Transcripts For BLOOMBERG Bloomberg 20240704 : vimarsana.com

BLOOMBERG Bloomberg July 4, 2024

Good morning, this is bloomberg daybreak europe. I am tom mackenzie. Japanese stocks lead gains in asia after wall street initiatives february at fresh record highs. The fed wasted is showing u. S. Underlying inflation rose in january at the fastest pace in nearly one year. China factory activity shrinks for a fifth straight month as weak demand continues to hamper growth in the worlds secondlargest economy. Loss dozens of palestinians are killed near a convoy of aid trucks in gaza. President biden said the issue will complicate talks, but he remains hopeful of a ceasefire. Lets check in on these markets as we say, another record being notched by wall street yesterday, a fourth straight month of gains. The data is looking less concerning when it comes to inflation, a more benign inflation picture coming in line with expectations. U. S. Jobless claims it ticked up suggesting there is softness coming through for the labor market and revisions when it comes to pce inflation gauge for the month of december, revisions over seeming to feed into the optimism across the markets yesterday. What is the next catalyst as we look ahead to steps coming through from the fed . Do they go in may, do they go in june . European futures building on gains from yesterday up. 5 of 1 . Looking to read. 6 of 1 and the ftse 100. Come picture rallying supportive of the picture. S p futures looking to build on the gains up. 1 of 1 . Nasdaq futures back about 18,000. At the rally foreign nvidia was pronounced after softness for that stock up. 3 or 4 for nasdaq futures. We had a response is coming through from fed officials. Atlanta fed president Raphael Bostic say he thinks a cut could be coming in the summer. I am of the view it will probably be appropriate if things go the way i expect for us to start reducing rates in the summertime. Tom treasuries flight in the session today after the rally yesterday on the back of the inflation print. 10 year at 425. They get in focus grabbing our attention after the governor ueda came out and set the target for the boj is not get inside, pushing back on one of his officials who suggested the picture was becoming clearer. Ueda is giving a self optionality, but you were getting weakness in the japanese yen today. Gold remains above 2000 per ounce and bitcoin still above 61,000 just down. 3 of 1 . Lets cross arbiter asia with avril hong standing by in singapore. What is sending up to you . Avril china, japan, but also the u. S. , at the inflation print seems to be clearing key uncertainties for investors, and they are risk on today. Asia stocks writing, decay nikkei leading the charge because almost 2 higher, interesting depended on the jobless rate, that slid, so this represents a tight labor market and could put further upward pressure on wages. As you mentioned earlier, we are seeing doj governor tempering expectations, and that is why you receiving the yen erasing gains from yesterday. It board, china data focus as well, factory activity showing a fifth straight month of contraction, but then at half 12 months were spent to contraction, really flashing concerns about slowing demand. Lets flip the board because that seems to be shrugged up by the markets and the focus seems to be shifting toward annual gathering of the countrys top leaders for the consumer, the real estate sector, baby stimulus, and csi 300, hang seng edging higher today. A sign of Risk Appetite we are seeing in the region is coming through from chinese tech stocks. Meituan surged by 11 earlier, the most in one year. Jd. Com unavailing price cuts a day after removed from alibaba, a sign of weak demand by that is risk on in the region partly thanks to what we are saying that if u. S. Data. Tom expectations are high ahead of the National Peoples congress. Joining us from singapore. Lets get to the action stateside, Stock Traders in risk on mode is the feds preferred inflation gauge met expectations, a fourth consecutive months of gains coming through for u. S. Stocks. I am joined by the chief equity strategists of bloomberg. Always fantastic to get your insights. What do you make of the Market Reaction to the inflation print yesterday . It is consistent with Market Reaction weve been having all your. It is really a story of the idea that inflation is still decelerating, still well intact. It yearoveryear numbers generally in line with expectations even if we got a little bit of a bump on a month over month basis, and we have had strong earnings numbers coming through. The strong Earnings Growth that occurred of the Fourth Quarter with s p 500 roasting Earnings Growth of it sent versus consensus expectation for less than two big is find this rally, the idea that ai is changing things but Economic Conditions are generally improving his support of persistent earnings gains, and that is resulting in more optimism about 2024 getting reflected in risk tolerance, which is a key driver of stocks. Tom what is your level of confidence that the earnings strength will persist for u. S. Stocks in the quarters ahead . I think it is pretty high. Expectations are very low. When we look at it is embedded in s p 500 price expectations, it is for somewhere between 0 and 2 Earnings Growth over 2024. The consensus of analysts is telling us we should get more than 10 based upon their forecast, and their forecast has proven to be more bearish, so there is significantly more earnings power people are concerned about, and that is about Market Sentiment being driven more by macro headwinds and concerned about the macro outlook and with the fed is going to do, where is it a reality earnings are improving and improving quite quickly. Remember the s p 500 was ended earnings recession until the second half of 2023 the next several Earnings Growth comparisons are easy for the index. It would be look across to get also see earnings breadth hit it s recent low back in 2023. As more companies participate as we start to see by the Fourth Quarter, more Companies Participating in an earnings really does generally lead into stronger earnings emerging. Tom a constructive outlook when it comes to the earnings story. From the macro to the micro, because we had the story overnight over new York Community bank discovering material weaknesses in its loan risks, so the question is whether that comes back to haunt the markets this year. How concerned are you about developments within real estate and Regional Banks of the u. S. . Most Regional Bank analyst will target the concerns of this particular bank are representative of the concerns for the broader banking space. This is a bank that has its own lending book specific to new york, very exposed to new york commercial and residential real estate, but especially commercial properties in new york, and that is a unique market in and of itself that us postpandemic friction of volatility to go through, so this is not news we want to suggest is indicative of some broader endemic weakness in the banking space, nor in the financial space at large. What i will also say is Regional Banks are less important to the outlook for stocks. Regional banks as a market cap share are significantly lower than they have been in decades within the s p 500, so what we might see commercial real estate continue to present problems for Regional Banks, this is a tiny portion of market cap. What happens in the Financial Sector right now is driven what is happening by fintech, Consumer Finance companies, which we just had a major merger announced in Consumer Finance, what is happening across the space for diversified financials, which are bigger market cap institutions who have less exposure to commercial real estate as a percentage of their overall portfolio, so i certainly would not just this one data point is particularly meaningful for the Banking Sector at large nor for the equity market indices. Tom thank you very much, always valuable analysis from gina martin adams. U. S. President joe biden says he remains hopeful for the prospect of a pause between israel and hamas, but that is unlikely to begin by monday as he originally sought. He cautioned a deadly confrontation thursday around an 80 convoy complicate ceasefire talks. Joining me now is dana with the details. Is there hope for a ceasefire before ramadan . It is getting more difficult to hope for a ceasefire before that date, and i think last week when President Biden made those remarks he was the only one confident they could reach a ceasefire. We saw qatar saying they have no new information or lead some progress for a ceasefire, and qatar is involved in those talks, so it does not seem today or in the near future that there was a breakthrough, but President Biden is hopeful. Tom dozens of palestinians killed near a convoy of aid trucks. The trucks in gaza, there are conflicting reports regarding the incident. Do we know for certain what happened at this point . I think the picture is not clear. We have reports on the ground that there were shots fired at people coming to the 80 convoy. Israel denied that it soldiers shot at the crowd. What is clear is how dire the humanitarian situation is in gaza especially in terms of shortage of food, and that will definitely deepen and become even worse as israel repairs its offensive on rafah, and even the aerial footage it does not really show you what happened. It shows people swarming the aid trucks, which is the only factual thing that we can say. Tom a disturbing story continuing to come out of gaza and the latest on a move toward a ceasefire. Back to the macro story on an inflation front come at the euro zone take center stage today with the print coming through it around 10 00 a. M. U. K. Time, year on year inflation seen falling. Manufacturing data out of china was weak. We will see how the u. S. Compares, relative strength affected expected to come through. We will get Raphael Bostic and kudla responding to the inflation trend, their views on where the fed because next will be essential to these markets. As oil poste second straight month again we will be talking Energy Security and the progress of the Green Energy Transition with the president and founder of svb energy international. At that is a key conversation coming up. Stay with us. This is bloomberg. Tom welcome back to bloomberg daybreak europe. Oil has posted a second consecutive month again in february as Traders Await a decision from opecplus overextending supply cuts, Geopolitical Uncertainty and differences in perception continue to stream progress of the Green Energy Transition. Policymakers are adapting to future expectations. Joining me now is gender and president at svb energy international. I will start on the oil story. What is the outlook for oil as you look across the data once and we factor in the china impulse . What is your view in terms of demand . There is a huge discrepancy in the market based on our assumptions, and which company or organization you are going with. The demand expectation for this year it ranges from 1. 1 Million Barrels to 2. 2 Million Barrels a day, so it is a huge gap. We can go from a healthy market and growth to an unbalanced demand and supply. Tom i have to interrupt, we have breaking news to bring to our audience, the snb german, stored in chairman Thomas Jordan will be stepping down. Jordan from the Swiss National bank to step down at the end of september this year. He joined the Swiss National bank is an Economic Advisor in 1997, at the details on to major swiss bank. Lets get back to these oil markets and we will get more detailed set up the next few hours. The physical market showing some signs of site is. Do you expect that tightness to continue in the weeks and months ahead . I think we are no moving toward seasonal higher demand, so particularly in the First Quarter in the month of february we had refinery overall and maintenance, so as we are moving toward causing the First Quarter, obviously we are having higher seasonal demand, so, yes, for at least the quarters we are heading to we are having a higher seasonal demand. Tom how much comfort to you think there is amongst opec and their members . Do you expect them to sit this one out, or did they extend the cuts . At what level will they be willing to but were supply into the market . Opec members but that the ministerial level and the secretarygeneral over and over said they do not talk price or look at a price but at the market fundamentals, so i would say opec managed to remain unpredictable. The market can have expectations but always has been unpredictable, and even members of opec always wait for the consensus especially since 2019. I am on the side of trying not to predict, but on the opec side they are very much looking at the fundamentals, and there is a huge discrepancy. Opec has its own view of market fundamentals, demand and supply, so depending on what they are seeing in the market they would obviously move on with maintaining or changing decisions about the cuts. Tom that discrepancy is there. When it comes to the geopolitical crisis in the red sea, the oil Market Reaction to that, is that becoming a longerterm theme baked into these oil markets now . We did not see a huge impact in terms of shocking the market or significantly impacting the market. Obviously the moment the conflict broke we had the saudi minister and russian minister coming out and saying they are going to continue with their voluntary cut, kind of giving an indication to the market this market is not going to cause a sudden interruption of the supply in the market, and as we saw it has not yet been interrupted to the market. Tom ok, founder and president at svb energy international. We will talk about the Energy Transition as well, because that is firmly in your wheelhouse. We hope to get more details on the decision by the snb head to step down at the end of this year and we see the currency move on the back of that story. Plenty more coming up. Thib. Tom welcome back to bloomberg daybreak europe. In 2023 Global Sustainable debt issuance decline for the second year in a row. To explain what i am joined by my senior associate on any of nef sustainable finance. It is been challenging for sustainable debt issuance. What is holding this market back . We have seen the second year of a drop in issuance following the drop in 2021 which was due to a postponement of debt issuance. Across all Asset Classes sustainable debt has been dropping. Reebonz green bonds have had a record year driven by financials and government, but it is a mix between antigreen watching, antiesg backlash, a lot of different forces were at stake in that regard. Tom i guess the question as to what extent those factors remain for this year and whether there is a lot of green that debt not being advertised as such. Is that part of the question as well . Dark out there is a lot of sustainable debt not being labeled as such. When we look at Clean Energy Companies that had the highest exposure to clean energy, we looked at about 5000 of them. They have raised their financing in 2023 through debt, but only 30 was raised through labeled debt. Tom is that because there is a stigma attached . There is a big antigreenwashing backlash. 18 states have passed a law, whereas only six states have passed pro esg law in the u. S. , so there is that backlash and the fact that investors care more about overall sustainability performance of Company Rather than a credential of an instrument, so issuers are doubling down on these efforts inves in green labeled debt. Tom there is not a premium. When it comes to banks appetite for that, where does that sound . Banks will have to double down their efforts. When we look at the ipcc scenario, what we found out is in the shortterm between now and 2030 on average for every dollar that goes to the fossil fuel industry four dollars needs to go to clean energy, so banks will have to jump on that transition and they will be pushed by regulators, but they are committing to do so. When we looked at the banks with a higher exposure to green energy financing, 53 of them have said a sustainable financing target, so they will have to jump on the bandwagon and drive that board by policy, in particular in europe. Tom interesting insights into what is happening around green sustainable debt and how that is likely to evolve. Thank you for doing the deep dive for us. The senior associate on nef sustainable financing. Swiss e done about 10 on the news that jordan is stepping down as the head of switzerlands National Bank after more than a decade of the job. 61yearold overseeing some of the biggest decisions in the snbs history including lifting the cap on the franc. Now is the right time for me to step down jordan has said. We bring you more throughout the hour. Stay with us. Tom good morning, this is bloomberg and im tom mackenzie. Japanese stocks lead gains after wall street finish february at record highs. Data showing u. S. Inflation rose at the fastest pace in a year. Chinas activity shrinks as weak demand hampers growth in the second largest economy. Dozens of palestinians killed near a convoy of aid trucks. President biden says the incident will complicate talks but he remains hopeful

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