Transcripts For BLOOMBERG Bloomberg 20240703 : vimarsana.com

The equity front a little cautious. The countdown to be close starts right now. The countdown is on in europe. This is Bloomberg Markets european close with guy johnson and alix steel. Guy lets talk about the markets. Stoxx 600 down one or 2 . The new management did not really go well. Disappointment, expectations significantly higher. Underwhelm your do you do not want to underwhelm in this position. That is what is weighing on the paris markets today. There are single stocks that are on the move. The eurodollar is flat. We will wait. Stocks are doing absolutely nothing. Arm is down by 5 . Ipo to 51. This week this is where the price action becomes quite interesting. The best performer within the nonmoving s p up 1 . That is the oil price. It that discount actually has to close. Guy governments are actually paying attention to this. This is abigails shot from a little bit earlier on. Oh, yeah. It is a huge complement to abigail. You can see the channels we have been in. Im going to try to do my best. We have got this channel which exist at the top end, i hope i am describing it correctly which will act right now. Maybe whoop bounce off of that maybe we will bounce off of that. 100 bucks a barrel. Maybe not for long but maybe we will get there. We spoke in the last hour about 100 oil. I think the trends would suggest that were certainly on our way. We are getting close. Guy what Economic Impacts will 100 delivered . Does it mean stagflation . I think europe is already experiencing the rollouts of the process. Does it take a soft landing off the table . Julian lee joining us now to discuss in london. How are we going to get there . I think we will. It may not last. We are seeing more and more analyst coming out and saying 100 a barrel is looking more likely. The start of the year, the middle of the year there was virtually nobody forecasting 100 a bureau. Now we are starting to hear them say we may get there but it will not last. Alix even citi is saying that. I week in a new range for oil . 80 to 100, what does that do for the stagflation . It changes the narrative substantially. Throughout this Year Oil Prices were below were they were a year prior. All of the derivatives from oil has created a inflation in the economy. Not having the disinflation and forced means that the risk of the baskets of good you look at needs to do much more work. The reason we do not include oil prices in core, people would be paying more to drive things around. You will be paying more for goods and services and adding into the core basket. It will impact on all levels on the economy. At the same time it is a tax on spending. Guy the picture between europe and the United States. A number other factors going together. It feels like we are headed in that direction. We are almost accepting we are going to hit a stagflation environment, definitely in the u. K. , probably in europe. For the u. S. All of the upside is still priced. It is still ignoring all of the inflationary risk, the second airwave of inflation just at a time when growth is slowing wave of inflation just at a time when growth is slowing. Inflation realities need to be priced in the u. S. , which it isnt just yet. Alix do you agree are we in a new range of 80 to 100 . Is that enough to squeeze the consumer even more . Julian we seem to be in that range. Sounding policies is really what is driving this. They have decided and they can dress it up in terms of market stability or whatever. They have decided the oil prices we were seeing a month or two ago were too low for comfort for them. They have been prepared to sacrifice volume to boost the price. As long as they are prepared to do that, they can underpin this price range of 80 to 100 or 85 to 100, whatever it turns out. They are showing signs at the moment they are preparing to extend this production ceiling of about 9 Million Barrels a day. This is the longest they have been pumping for many years from outside the covid shock that they had and that very brief attack on the oil facilities. They are showing they are prepared to cut production in order to boost prices. Consumers are paying the price of this. The big winners are moscow. Guy the u. S. Consumer are going to suffer as a result of high oil prices. There is less tax on a gallon of gasoline over there. The u. S. Is still a massive producer of oil. The effect must be much less on you guys then on as. Alix a lot of the inflation costs that you still see and Oil Production is in the u. S. Because theres so much activity there. Oil prices does need to be higher because a custom much higher to get a barrel out of the ground. Exporting it, you make a lot more. Those local prices are going to be significant as well. Would you actually make for a barrel of oil . We have lost your mic. This is equivalent of a big clip that takes a stage. Much more conversation coming up. Thank you so much for joining us, julian lee. Oil staying sticky. And 94 a barrel staying sticky at the higher level. Chinese carmakers are under scrutiny in europe. We are going to break that down with mercedesbenz ceo. As we had to break, German Foreign minister talk to our own emory about the relationship with china. Being a partner in climate issues, being eight competito r. We have to protect our own. To strengthen our Critical Infrastructure in europe, but also looking at screenings. when the day that lies ahead of me seems impossible to face a lovely day lovely day lovely day lovely day a bank that knows your business grows your business. Bmo. You dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh the sleep number climate360 smart bed is the only smart bed in the world that actively cools, warms and effortlessly responds to both of you for up to 44 minutes more restful sleep per night. Save 1500 on the sleep number climate360 smart bed. Shop now at sleep number. Com. Avalarahhh guy we welcome our Bloomberg Radio and television with a fantastic conversation with the mercedesbenz ceo. He joins us in new york. Great to see you. Thank you for taking some time to see us here at bloomberg. The storm have been talking about over the last few days has been all about china. We are trying to work out whether europe is going to start a fire with china that is going to impact mercedesbenz. This talk of tariffs, trade wars around autos and evs. Are you worried . Are you worried . Ola great to be with you. We have a very strong business in china that has grown significantly over the last 10 years. We are continuing to invest in china to make sure were bring the product that the chinese customers are expecting from us. I think it is important in these types of discussions to not forget what has made us successful over the last decades. It has been opening up markets, free trade, free competition but level playing field. As long as all of those frameworks are in place to make sure that we can do business in a sensible way, we are not worried. Dont you expect beijing to react with countermeasures . Ola we will see how this plays out and what comes out of that. We like to remind people that open markets is what drives growth, it also drives wealth creation. If you look at the history of our company, it did not take more than 15 years to figure out that germany is not the only attractive market in the world. We have been here in the United States for more than 120 years. Companies go global in the competition goes global i think it is natural. We have the japanese comes to the United States. Then tesla came lets keep markets open. Lets let the Market Participants fight it out. Guy the German Foreign minister was speaking to our good colleague earlier on. She was saying there is a risk, europe is to exposed to china. That we need to be cautious in our approach to china. Do you think that european german luxury carmakers are at risk of being overexposed to china . That the market has become too big for you and the politics could get in the way . How do you think about when you good mornings like that from german ministers . Ola i think we learned anything independent make that supply chains can be fragile. To create some optionality and more resilience into your supply chains is generally a good thing for business. This is something that we have already started, especially on Battery Materials were we have devised a strategy where we are going to try as best as we can over the next years going to kind of region from region sourcing. We look at different commodities to make sure that the supply chain is resilient. It would be a complete delusion to think that we can divide the world the automobile world into individual ranges that have nothing to do with each other. The supply networks are too sophisticated. There are five consonants in every mercedes that is being sold. The of the invisible and figures out where the market is. Supply Chain Resilience yes. Keeping the markets open and the market working is more important. You have a strike going on in the u. S. , the uaw is striking on ford and still enters your you have production in the u. S. You still have to be prepared for supply chain issues due to the strike. What are you expecting now and how be expected to affect your business . Ola we do not expect any major impact on our business. Mercedes business doing business in more than 150 countries and economic regions. We try to make sure we are competitive and a attractive employer. At the same time the Auto Industry is getting more competitive, not less competitive. Whatever pressures we have uncaused will have to be made up and productivity. We have to be mindful im keeping the game on productivity up and make sure we dont have costs that run out of control. If they get a tweet 5 increase at uaw plans, you are going to have to raise your pay some point in tuscaloosa as well, otherwise you are going to lose workers to place up north. Ola we have been in the southeast of the United States with our plant in alabama and also our commercial van operation in South Carolina for 25 years almost 30 years. We have always kept up what has been going on with the economy. We watched that and make adjustments as we go along. At the same time we look at how can we do things better work in a smarter way because the cost competition is not going to go anywhere. Guy do you think Companies Like ford should be guaranteeing the workers working on combustion engines will have a place in the new ev world . Should they be guaranteeing jobs . Should they be carrying through the transitional process . Ola if i look at what is happening at mercedesbenz and around the world and germany were have most of our operations. Yes, we are investing heavily into the new technologist. We are creating new jobs there. The fact of the matter on the powertrain side of things, at the end of this transition which is a year plus affair is going to be less jobs on the powertrain. Fun Vehicle Assembly was about the same. Our demographics to make sure that we can get to a position where we do this in a sensible way. An electric suv, obviously a very luxurious product as you move even more upscale. At the same time the tesla model x and model s are getting longer. If you have lost customers to elon musk, are you gaining them back with this new push into luxury electrics . This is bloomberg. Ola what we have seen come here you have some extremely hightech luxurious products. We did make carbon copies of our combustion. Yes, we have a lot of conquest customers climbing into those vehicles. People who maybe did not look at mercedes. So far that plan is working out quite well. Guy you have a big smile on your face. You look like you are enjoying driving the car. Are you trying tracking mats history as he worked his way through this process. Matt this is the one electric vehicle that may be able to win me over because of the paddle peddle feel. The think sound. It really felt more like a more than a ev. Are you trying to make the electric vehicles feel like the luxury v8s that we long for . Ola theres a different sound profile. The way a car drives and rides, what you expect from a mercedes, the quality of how everything feels right, that is true for electric vehicle as it is for a company combustion vehicle. I got a special coming up next week. I know youre a big fan of the g wagon. The next year we will have an electric that will blow you away. Matt im looking forward to that. I have had the v8 version. Guy this is a high bar we are talking about. I hope you know what youre doing here. That is a big promise for matt. Champagne cells are beginning to falter, Luxury Goods Companies talking about a friend consumers are beginning to feel the reinflationary effect. As i want to be a challenge for you as well . Are you in that kind of bracket . Are you going to be affected by those forces . Ola our top end vehicle source sales were very strong. You have to watch the macro picture in north america and europe we have higher risk rates. Those higher Interest Rates are going to stick around for a while. That affects the pricing of capital goods in terms of financing and leasing. That is about 50 of our transactions. We are taking a cautious view on the macroeconomic side. Guy great to see you. We are really looking forward. This is a big moment. The mercedesbenz ceo and of course bloombergs matt miller. This is bloomberg. You with merrill. A bank of america company. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. sirens [due at target in 5 ] copy that. Make a hard left down the alley. Networks got you covered. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. Alix you are just talking about one of my favorite stories. That is the bubbly. There is champagne demand shortening. This struck me because as a joke, whatever i am doing you should be shorting, i hardly drink anymore versus my healthy champagne habits precovid. I am a good barometer of these not so awesome champagne sales. Guy is this good for the pro cycle markets . It speaks more widely. People are clearly having to downgrade their lifestyle expectations. You are hearing therefrom ola. Even the income brackets are starting to build the pinch. Champagne is one of the obvious kind of way of viewing this. Alix nightclub demand nightclub and beach demand is still totally rocking. This is definitely i am no longer drinking champagne alone in my house scenario. Guy is that anything . Alix i was definitely with my fiveyearold. Once this revenge is over, are we going to continues to see this happening . The lecturing sectors is one of the areas of weakness. It continues to be a area of concern. European equity markets are soft going into the close. The close is up next. This is bloomberg. So. I know you and george were struggling with the possibility of having to move. Hows that going . We found a way to make bathing safer with a kohler walkin bath. A kohler walkin bath provides a secure, spalike bathing experience in the comfort of your own home. A kohler walkin bath has one of the lowest stepins of any walkin bath for easy entry and exit. It features textured surfaces, convenient handrails for more stability, and a wide door for easier mobility. Kohler® walkin baths include two hydrotherapies whirlpool jets and our patented bubblemassage™ to help soothe sore muscles in your feet, legs, and back. A kohlercertified installer will install everything quickly and conveniently in as little as a day. They made us feel completely comfortable in our home. And, yes, its affordable. I wish we would have looked into it sooner. Think i might look into one myself. Stay in the home and life youve built for years to come. Call. To receive 1,000 off your kohler® walkin bath. And take advantage of our low Monthly Payment financing. Guy monday, a little soft. It is a busy week. Volume is quite light. You do wonder the positioning in the story we are seeing here and the elements we are contributing to it. The consumer is definitely a little softer today. We will talk about it a little more detail. Montanez is down 8 10 of 1 . We are still in a very narrow range. The euro has been in the range longer than the u. S. Markets. There is certainly true about the narrative over here. Single stocks. Lets talk to what is through what is happening here. The stock is down. A new strategy update. What are our targets . Didnt go that well. A nice upgrade today. Let us responding positively as well. Downgrading forecast. A look at how you get punished if you do not deliver. Look at how much you get punished if you do not deliver on the High Expectations that have been set for you. Stock is down by 10 today. The week really starts to get i think once a week starts to get going. Tomorrow we have no budget stuff we are going to be focusing on as well. Future finance conference, that is where that is going to take place. Anna edwards you have to conference taking place in paris. Have cambridge out with earnings. You have got eu cpi. I think that is the story that everybody in new york is focusing on. We got the fed to thing about as well. The first couple of dates are quiet. Wednesday, thursday and friday are going to be huge. Alix it is all interrelated. Nouriel roubini talk earlier to Bloomberg Television about what the doe should do. The bank of england is sending dovish signal which of the policy rates are well above the fed. Inflation is well above the United States. What they should be doing is hiking rates all the way to 575. They are not sure whether they want to hike more. If that happens there could be a be anchoring expectation. Alix he is saying go to 5. 75 . I know we do this as a day ahead, the main event is going to be the fed. Do you think the boe will go to 5. 75 . We have come from an era where all Central Banks were synchronized. I think this week is fascinating because of the bank of japan is in a completely different place. The fed has accomplished quite a lot on the inflation front. The u. K. Hasnt peered to be specific to your question, we believe the bank of england still has serious work to be done more than the ecb and definitely more than the fed. More than one hike to go there. Guy how far does the link of england need to go and attempt the economy into what could be a mild recession but could end up being a serious recession . It all stems on one thing, to Percent Inflation target. This target has come about and given us a lot of troubles all over the place, including the u. K. If we are seeing that 2 is the core inflation and core inflation is significantly above their but also in the u. S. , it is different difficult to Central Banks to argue that they should stop raising rates. If you look at the economy and the structural things that are happening which means structural higher inflation for longer. It seems strange to destroy the whole economy. Alix if we get inflation on anchored, isnt that the counterargument . If the world gets accustomed to a inflation rate to around 3 , i think we can manage. I think we can get over it. Look how strong Consumer Spending has held up thus far. We get used to it. Guy are we getting to the point where our governments run Central Banks are aware of where the challenge lies . You have big differences that are going to be a problem for the United States which will end up pushing yields all around the Central Banks. Here in the u. K. Structural issues the bank of england really cant deal with. Is the right tool now Interest Rates . Or is this something that governments, treasury should be focusing on dealing with some of the structural issues rather on relying on the central bank to fight the battle . A really good question. You got to imagine it as a big table. On one side you have monetary and Central Banks. The other side have governments and fiscal policy. The two sides of the policy table are contradicting one another. Monetary policy is being sharply restrictive. The fiscal policy is accommodative. One side is putting extra cash in consumers wallets and the other side is pulling it out again. That is strange. There are structural things going on. Look at the world, the Balance Sheets, consumer Balance Sheets are relatively healthy. Company Balance Sheets are relatively healthy. Governments, they are not healthy. They are debt loaded. It is a bizarre time at the moment. Alix such a good way up putting it. Completely bizarre. All Central Banks are coming out this weekend, there is a tons more. When you think is going to have the most Market Impact . Where is the volatility going to be felt the most . The bank of japan. They are standing out like a sore thumb to. To be eight negative rates at this day and age is bizarre. They are probably not going to do anything drastic. They have already started accommodation with the yield curve control. If youre the only one being so accommodative, you are exporting that lose policy in the world. That is interesting. Regarding the bank i do not think that is a big surprise. Regarding the fed, they are expecting to pause. The expectations that they themselves have around future rates. In the hopes that people had about rate cuts the next year how that works. Guy lets talk about rate cuts and where yields are going to go. Is there a danger that we get rate cuts or steady rates from the fed and yields continue to climb higher. I am wondering at that point how the economy reacts. We are going to see so much supply coming through. Were emergency qe continuing, may be from places like china. If yields continue to climb in the United States the cost of money continuing to climb, how does the fed react to that. . We talk about treasures that have been limited. As the government funding by the treasury account. We see the impacts on yields and that impact is quite sharp. That is definitely taking its course above and beyond what Central Banks are doing there. To your point it may seem puzzling. That is why you seen Growth Stocks richly valued equities among pressure because the yields are squeezing through. And definitely apps to the complexity of things. Guy great to see you. Joining us from amsterdam. We are going to have an exclusive interview with the german finance. Anna is gone off with a suitcase. European stocks are down for the day. I will show you the negative session and just a moment. We are looking at most oxen being lower. At the French Market to pressure. Lecturing names down. Lecturing names heading down. Certainly under pressure. Stocks slumping the most six months a little earlier on. We are going to talk about that next. Ok. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Guy the ceo joining bloomberg tv. That conversation 2 30 new york time. This is bloomberg. Not a good day. Talk down sharply. This after the Company Announced a view cuts. Here to talk more about the challenges that are facing the newly installed ceo as bloombergs alix. Nice to see you. Expectations were very high your how on earth did they disappoint to this degree . Alex analyst ended up coming in the last month were very enthusiastic with the ceo who argued for a change. Many appointed to the board because of that. He made some changes and pledges that were very important for the bank. Capital strength. That comes sacrificing growth really. Revenue growth targets are being lowered. At the same time has increased the target earlier this year. It is really not a good look for the bank within the French Market. The payout ratio is completely different. Now it is a 40 to 50 of the reported net income. It is fair to assume it is going to be lower in the first years when the bank is building up capital and then it might increase. This is two main concerns for analysts and investors today. Alix did they have to do this . This seems like a lot of disappointment. Then did this kind of cost cutting and build up, did this have to happen . Alex cost cutting was something that has been floating around the analyst for a while we are to the cost to income ratio was had compared two years. For the profitability, was in a tight spot until last week. Has a history of presenting targets to the market and not achieving them. Maybe it was easy for him to not do anything. Guy honesty is not the best policy here. He agrees of the views and insist his plan is the best for the bank in longterm. It is a plan that has not a lot of promises but promises that are achievable. This is a change. There were targets that were presented. Guy is he blaming the Previous Administration . He hinted at this with analyst your it he said a few things that were maybe not ideal. He was here at the time as well. I did notice that the planning resented for the Investment Bank two years ago, all of the targets were achieved within. Alix thank you very much. How do you get yourself out of the hole you just dug . Coming up, World Leaders for the united nations. We want to discuss what was on the agenda and who will not be attending. This is bloomberg. the first law of thermodynamics states that energy cannot be created or destroyed. but it can be passed on to the next generation. allday Energy Starts with clean hydration. Lmnt. More electrolytes. Zero sugar. You feel the difference when you get it right. Stay salty. Alix stocks still going nowhere fast. My a lot of movement. Abigail multiple moves. And little green then we had earlier. Noun about 2 10 of 1 . Now up a whopping 3 10 of 1 . Stocks and investors are trying to decide after two weeks of decline what weight to push stocks now. As for some of the movers behind the surface, this is not all goal despite the fact that the stock has been breaking down to some degree, there were reports of sales of the iphone 14 may be solid. You can see tesla down 2. 6 . Of saudi arabia and tesla talking about some ai reduction facility. Moderna down 8. 7 . Not exactly sure why. This is a pretty solid decline. Not surprising with this bear or bull battle. Lets take a look at the chart we have taken and look at before. Last couple of months stalling as investors trying to figure out what is next. Is there more rate hikes ahead. Is the economy going too slow . Last week it didnt seem possible we will break out of the range. We may see this s p 500 go back toward the bottom of the range at like lets call it a little bit above 4300. It is not the range itself, it is what way it breaks out. It is unclear whether this is consolidation before a big move up or consolidation before a reversal back down. Stay tuned. Guy abigail, thank you very much. What we are watching for the rest of the day is instacart pricing for the head of its trading. Janet yellen, Hillary Clinton speaking at the Global Initiative annual meeting taking place in new york. New york is busy right now. Also, and new york President Biden attending the fundraiser dinner tonight. He will be addressing the human General Assembly tomorrow. I am sure you and new york traffic very much looking forward to that. Alix it feels like the trains also gets messed up. It is also pouring rain all day today. Midtown stinks. Emery, what is the most important thing you are watching this week . Emory the most important thing probably happened. President Bidens National security advisor sitting down. Emmanuel macron is not going to be here. Vladimir putin is not going to be here. China plays a pivotal role in what is going on right now whether it is the war in crane, whether what is happening in terms of export control the United States is trying to make sure theyre not getting access to advanced technology. We have seen the u. S. Have a number of meetings with the chinese and the counterparts. We have been waiting to find out if there will be one between biden. This meeting between Jake Sullivan can be the path to that. Guy can we talk about this prisoner exchange. Everybody is focused on the ohno price right now. Everyone was trying to figure out what is going to happen next. How significant and what is happening in today . What does that tell us about our relationship developing between u. S. Officials and iranian officials . Emory there is a lot of iranian barrows leaving the country heading to china. Not a lot of these sanctions have been fully enforced. I would say u. S. Officials knew much agree with that. All of this is taking shape around that prisoner exchange, which happened today, just a few hours ago in delhi. Five americans as well as two of them had relatives traveling with them as well. Making sure that the swap could happen. For the release of these americans prisoners were released from the United States as well as 6 billion of funds that have been frozen and south korea were transferred to qatari Bank Accounts that iran will be able to use recommended tearing and aid. This is what we will be hearing from the administration. Only humanitarian medicine. Things like that. Although you didnt have the leader of iran tell nbc they can see using for whatever they want. It is going to be stricken for humanitarian purposes. Alix tie that into the relation between the saudi and the u. S. And if we will get clarity on that. Doesnt feel like the sa have a lot of hammers to inflictu pain on the u. S. . Emory what we heard from the Iranian Foreign minister is that there will be intermediary that is meant to talk to the iranians and americans. It potentially there is a path for opening up, i would not say Nuclear Talks but may be understanding of where they are when it comes to nuclear. At the same time, you do have iran and saudi arabia opening up nbcs embassies. This is a breakthrough for these two main rival he in the gulf. Even though the United States is the biggest oil producer. We are on track to produce under 13 Million Barrels a day. Obviously they are a huge swing producer. What was more shocking to watch the oil market and opec was that saudi arabia instead of going one month of cuts they went to three months of cuts. This becomes political because we are heading into a election year. Guy what do you think the president is going to say tomorrow . Emory i think the president is not to double down on the support forum ukraine. This from ukraine. This becomes more political. The more important meeting is not just want to be when zelenskyy goes to the white house this week when he makes a trip to the capital who is he going to talk to in congress. It is very challenging right now to get ukraine aid across the finish line and congress. It is not even included in the continuing resolution to keep the government open to supplemental aid that a lot of republican hawks want to miss some of the republicans do not want to see. Alix thanks a lot. I am looking forward to having you here all this week. Nothing to home about here. Lots of things happening next week. Coming up feared this is bloomberg. P. This is bloomberg. 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. Caroline move from bloombergs World Headquarters in new york, i am Caroline Hyde. Ed i am ed ludlow, reunited in new york city, this is Bloomberg Technology. Caroline full ipo coverage