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Speaker 2: Big news in the world of kind of digital advertising,
Speaker 2: Google partially loses US advertising tech anti trust case. So
Speaker 2: a federal judge found Google guilty of illegally monopolizing online
Speaker 2: advertising technology markets for advertising exchanges and tools used by websites,
Speaker 2: websites to sell ad space. To figure out what all
Speaker 2: that means, We've got some smart people who do this.
Speaker 2: We have people Bloomberg Intelligence that just look at litigation
Speaker 2: and what it means for certain companies because that can
Speaker 2: move stocks in a big, big way. We've got a
Speaker 2: couple of voices. You're the one, you know, Jennifer Ree,
Speaker 2: a Bloomberg Intelligence senior litigation analys Talk to her for
Speaker 2: a long time. She helps us out on a lot
Speaker 2: of these big cases. Now we've got another voice as
Speaker 2: well on Bloomberg Intelligence, Justin Turci, Bloomberg Intelligence Antitrust, Litigation
Speaker 2: and policychanneles. He's down there in d C. Right now, Jen,
Speaker 2: talk to us about Google here. What's the what did
Speaker 2: the court find here?
Speaker 3: Yeah, you know, this is a really complicated case, honestly, Paul.
Speaker 4: Google has these products which you refer to.
Speaker 3: It's called the ad tech stack, and it's not something
Speaker 3: you know, normal consumers know about, but it's a series
Speaker 3: of software from start to finish whereby publishers and advertisers
Speaker 3: can come together to sell and buy space on the Internet.
Speaker 3: Right And it's important because it's moving very quickly and
Speaker 3: lining up the ads properly, you know, with the consumers
Speaker 3: that should see those ads. Google actually has, through a
Speaker 3: series of acquisitions and some of its own products, control
Speaker 3: over that entire stack. It has competitors for certain pieces,
Speaker 3: but it's one of the only ones that has.
Speaker 4: All the pieces.
Speaker 3: And so the allegation here was that Google was manipulating
Speaker 3: its control over some very desirable pieces of the stack
Speaker 3: to force publisher and advertisers to use all of its products,
Speaker 3: taking fees all along the way, and basically naming its
Speaker 3: price because it had these must have products. So what
Speaker 3: this judge found was that for some of those products,
Speaker 3: one on the publisher side, the publisher ad server, and
Speaker 3: then the ad exchange that sits right in the middle
Speaker 3: and does the auction between the advertiser and the publisher.
Speaker 3: That Google was monopolizing both of those products and also
Speaker 3: illegally tying them together. Meaning hey, publishers and advertisers, if
Speaker 3: you want to use our ad exchange where we have
Speaker 3: these really desirable advertisers, you have to use our publisher
Speaker 3: ad server and therefore we keep our ninety percent or
Speaker 3: so market share.
Speaker 5: All right, justin let's bring you in here to just
Speaker 5: get your take on the context of Google, because this
Speaker 5: isn't the first time that there's been an ANATRUS case
Speaker 5: against Google. What did you make of this decision?
Speaker 6: Yeah? Absolutely, And I think Jen really hit the nail
Speaker 6: on the head here. You know, this is obviously compounding
Speaker 6: the search ruling that came out last year, and we're
Speaker 6: heading too a remedy's phase on that case this coming Monday.
Speaker 6: But to Jen's point, really this aspect of the ruling
Speaker 6: focusing on the publisher adserver in that exchange that Jen
Speaker 6: said sits in the middle. That is the crux of
Speaker 6: the case here. The government is going to likely ask
Speaker 6: now for divestitures of that publisher adserver and the ad
Speaker 6: exchange in the middle. But I really do question whether
Speaker 6: or not the quarters in a position to order that.
Speaker 6: I think a lot of testimony at the trial which
Speaker 6: I attended, really points to the fact the publishers feel
Speaker 6: reliant on the ad server because the ad exchange in
Speaker 6: the middle then gives them the real time advertising they
Speaker 6: want from Google Ads. So if you sip that court
Speaker 6: in the middle, perhaps you get a remedy that's desirable
Speaker 6: without actually forcing a divestiture either of those properties.
Speaker 2: Justin I just I wonder like at the trial, who
Speaker 2: do they get to get up on the standard say,
Speaker 2: I don't like Google? Doesn't everybody kind of Is anybody
Speaker 2: really complaining about Google and its advertising service?
Speaker 6: Yeah, you know, Paul, I think really who's complaining is
Speaker 6: the publishers who are selling that space on their websites
Speaker 6: through the publisher ad server, right. I think their complaint
Speaker 6: is largely they don't really have a lot of control
Speaker 6: over the kind of ads end up on their website.
Speaker 6: They don't have control over the pricing involved with all
Speaker 6: of that. They don't really like the fees that are
Speaker 6: involved in If they want to use a different add
Speaker 6: ex change in the middle, perhaps and find a lower rate.
Speaker 6: You know that they're paying to get those ads for
Speaker 6: furnish to their website. Don't want to collect a higher fee.
Speaker 6: They're not able to do that if they're really relying
Speaker 6: upon the prices of the policies that Google is using
Speaker 6: to display those ads on their properties.
Speaker 5: What did Google say in response, Well, you know, Google
Speaker 5: would say, look, we have loads of competitors for these products.
Speaker 4: You know, they sort of pick apart the policies that.
Speaker 3: The Department of Justice pointed to, saying that you're forcing
Speaker 3: these companies to use your products, saying no, no, no no,
Speaker 3: based on these policies, they're not forced.
Speaker 4: They have options. They can go to our competitors.
Speaker 3: And by the way, there's this doctrine an antitrust and
Speaker 3: it's called a refusal to deal, and essentially it's a
Speaker 3: big defense that's used by a lot of these companies. Essentially,
Speaker 3: what the refusal to deal doctrine says is that any
Speaker 3: company has the right to deal with who they want
Speaker 3: to and they don't necessarily have to do business with
Speaker 3: their competitors. So, in other words, a competitor ad exchange
Speaker 3: doing working with Google's publisher ad server, and that can
Speaker 3: often work but in certain cases, the conduct of the
Speaker 3: company goes beyond just sort of what's covered by a
Speaker 3: refusal to deal, and it becomes an unreasonable restraint of trade.
Speaker 4: And that's where you sort of get past that.
Speaker 3: So what Google tried to say is, well, this isn't
Speaker 3: unlawful under the intetist laws because we don't have to
Speaker 3: do business with our competitors.
Speaker 7: Folks.
Speaker 2: Here at Bloomberg, we have complete transparency amongst all employees.
Speaker 2: We know where everybody is all the time. It's called
Speaker 2: the outfunction. It's the calendar I look for justin like,
Speaker 2: where is this guy? And he's based in New York,
Speaker 2: but he's down in d C. And I go look
Speaker 2: at his calendar, which is the outfunction, and he's It's
Speaker 2: something called the FIC versus Meta trial, another technology company.
Speaker 2: Why are you down in DC for this trial? What
Speaker 2: is this trial?
Speaker 8: Oh?
Speaker 6: You know, this is a topic of the week. I
Speaker 6: feel like Paul, right, So the f suing Meta right
Speaker 6: now is seeking a divestiture of Instagram. And what's that
Speaker 6: huge for the as the acro actual acquisitions of those
Speaker 6: companies that are arguing with anti competitive but as we
Speaker 6: all know, they've on these properties now for well over
Speaker 6: a decade, and I have to say, seeing Zuckerberg on
Speaker 6: this stand in the last few days at sestimony has
Speaker 6: been really, really strong. He did a great job sending
Speaker 6: off a lot of the criticisms coming from the suc
Speaker 6: whose case. I think we both saw Jenna and I
Speaker 6: was already not necessarily the strongest. There's a lot of
Speaker 6: holes there. I don't think they really defined the marketplace
Speaker 6: the right way in terms of positioning Meta as a monopolist.
Speaker 6: So there's a lot going on. It's big tech on trial.
Speaker 6: I think everywhere you look these days, that's right.
Speaker 2: And now it's not just Jen, We've got a bigger
Speaker 2: team of litigation analysts. Jen, as you sit back here
Speaker 2: in your experience, are these tech companies I've risk? Do
Speaker 2: you think from the courts?
Speaker 4: Absolutely? Look, you know you're at risk?
Speaker 3: He There are liability decisions now, two of them against Google, right,
Speaker 3: and in both cases the Department of Justice is going
Speaker 3: to ask a judge to force it to sell assets.
Speaker 3: As long as that's out there, those companies are at risk. Now,
Speaker 3: would I bet that that's what can happen? No, I
Speaker 3: don't think that. In the Search case, which has a
Speaker 3: remedy hearing starting Monday, Google will be forced to sell Chrome.
Speaker 3: And I don't actually believe in this ad tech case
Speaker 3: that they'll be forced to sell off the publisher, ad.
Speaker 4: Server or the ad exchange.
Speaker 3: But they're at risk of course, because you have no
Speaker 3: idea what a judge is going to do. I should
Speaker 3: say that the remedy hearings will take place, decision will
Speaker 3: be made, and at that point Google will appeal.
Speaker 2: All right, Jen Fantastic, I tell you, folks, Bloomberg Intelligence,
Speaker 2: it's not just stocks bonds. We've got litigation antitrust research
Speaker 2: at bi go. This stuff moves stocks. If you're a
Speaker 2: technology investor, you have to have an opinion on what
Speaker 2: the antitrust risk is for some of these big tech names,
Speaker 2: whether it's Amazon, Meta, Google, And we've got experience anti
Speaker 2: trust attorneys writing this research for our Bloomberg customers on
Speaker 2: b I go. It is awesome, some stuff justin terracy. Jenniferree.
Speaker 2: They are Bloomberg anti trust analyts for Bloomberg Intelligence. We
Speaker 2: got them and we had them in studio today giving
Speaker 2: us some opinions on Google and METI can't get it
Speaker 2: anywhere else.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Well, the stock story of the day to the downside
Speaker 2: is United Healthcare. This stock is down twenty two percent.
Speaker 2: That's the most in twenty five years after they cut
Speaker 2: their forecast, and you know it's their first earnings missing
Speaker 2: over a decade, so really shocking the investors in that stock,
Speaker 2: as well as the insurance space overall. So let's get
Speaker 2: some clear analysis on this. Glenn Losaf joins us Bloomberg
Speaker 2: Intelligence senior equity analysts covering these insurance companies. Glenn talk
Speaker 2: to us about United Healthcare. What happened today?
Speaker 9: High So United reported one Q results which were largely
Speaker 9: expected to be in line by the consensus inputting us,
Speaker 9: and the company basically cut guidance by twelve percent.
Speaker 7: I believe.
Speaker 9: Initial guidance was also the sort of seem conservative relative
Speaker 9: to their long term target, and now the new updated
Speaker 9: adjusted guidance is showing a decline of about five percent
Speaker 9: year over year. The main reason for it is the
Speaker 9: company highlighted that Medicare members are seeking twice as much
Speaker 9: here as they did the same period last year, which
Speaker 9: obviously drives costs and so on so forth.
Speaker 5: Yeah, they said at least. John Tozy of Bloomberg News
Speaker 5: his reporting says that the company said it was blindsided
Speaker 5: by rising medical costs. Is that surprising that a medical
Speaker 5: and sure would be blindsided by these costs? Isn't this
Speaker 5: the business that they're in.
Speaker 7: Well, it's not surprising.
Speaker 9: It happens from time to time, but the impact, based
Speaker 9: on the guidance cut is more than anyone could have expected,
Speaker 9: including them.
Speaker 7: Insurers usually look.
Speaker 9: At the trends of previous years to sort of forecast
Speaker 9: what the medical costs would be in the upcoming year.
Speaker 9: And obviously, if it happens that all of a sudden,
Speaker 9: you know, I need more care this year versus last year,
Speaker 9: you know, people getting older, maybe some people deforted, maybe
Speaker 9: some people changed plans.
Speaker 7: You know, medical costs, care demand goes.
Speaker 9: Up, and with that, costs go up and impacting health
Speaker 9: insurers like United. So it's it's surprising, but it happens,
Speaker 9: maybe not to the degree that we're seeing.
Speaker 7: The time around.
Speaker 2: What drives rising medical costs for somebody like United I
Speaker 2: mean they're the eight hundred pound gorilla in this whole industry.
Speaker 2: What's happening, Well, it's basically it's pretty easy.
Speaker 9: You know, more people are seeking more care, that's what's
Speaker 9: driving the costs. People getting sicker, you know, with age,
Speaker 9: are people differing care from last year to this year
Speaker 9: for example, That increases costs on the sort of the
Speaker 9: other side of the care demand. You know, more people
Speaker 9: are getting prescription drugs for example, more people are interested
Speaker 9: in preventive care versus reactive care sort of, you know,
Speaker 9: just going more often for chapobs, stuff like that drives.
Speaker 7: The costs.
Speaker 9: But it is surprising that sort of this significant jump
Speaker 9: relative to expects.
Speaker 5: Where does United Health go from here? I mean just
Speaker 5: on a stock level, I mean, falling in its biggest
Speaker 5: drop since nineteen ninety nine. Does that move look overdone
Speaker 5: to you?
Speaker 9: We're basically we're not supposed to sort of comment down
Speaker 9: price targets, as you will know, but basically the stock
Speaker 9: is down about twenty two percent as of right now.
Speaker 9: If we take a look at the guidance cut, which
Speaker 9: was three dollars and fifty cents from the previous guidance
Speaker 9: and apply sort of historical multiple over the last five years.
Speaker 9: The downside should be about, you know, maybe sixty percent
Speaker 9: of what it is right now, about eighty dollars or so.
Speaker 9: So based on that, it's probably an overreaction just because
Speaker 9: things like this don't usually happen to someone like United,
Speaker 9: as you mentioned, the eight hundred pounds debilla in the
Speaker 9: space and probably the most solid people in the business.
Speaker 7: But it is what it is.
Speaker 9: A market sort of quotes Sis on view on where
Speaker 9: the step should should trade.
Speaker 2: I'm're going at the ANR function for you United Healthcare
Speaker 2: twenty seven buy ratings on the street, one hold rating,
Speaker 2: one sell. No ratings changes today given this move in
Speaker 2: the stock. Great job, guys. Glenlosa, senior equerianos for Bloomberg Intelligence,
Speaker 2: joining us here.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
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Speaker 2: All right, this morning, President Trump posted on True Social
Speaker 2: that quote, How's termination cannot come quickly enough? End quote. However,
Speaker 2: yesterday at the Economic Club of Chicago, Federal chair FED
Speaker 2: Reserve Chairman j Pale stressed the importance of the fed's
Speaker 2: independence and it's quote broad support across both political parties
Speaker 2: are So we'll get a little sense here from FED
Speaker 2: Chairman shape Pal. Let's take a listen to his comments.
Speaker 10: Our independence as a matter of law, Congress has in
Speaker 10: our statute we're not removable except for cause we serve
Speaker 10: very long terms, seemingly endless terms. So it's we're protecting
Speaker 10: protected in the law. So you know, Congress could change
Speaker 10: that law, but there's I don't think there's any danger
Speaker 10: of that. FED independence has pretty broad support across both
Speaker 10: political parties.
Speaker 7: All right.
Speaker 2: That was Beedchairman Jpale speaking at the Economic Club of
Speaker 2: Chicago yesterday. Our own Michael McKee was there giving us
Speaker 2: some live reporting there. But certainly President Trump's tweet this
Speaker 2: morning got some attention from a lot of folks that
Speaker 2: look at the FED and look at the treasure market,
Speaker 2: look at interest rates in the US economy. Irid Jersey
Speaker 2: joints as chief US interest rate Strategists for Bloomberg Intelligence.
Speaker 2: I raight, I'm sure you've been talking to a lot
Speaker 2: of your institutional uster clients this morning. What did they
Speaker 2: make of the President's comments there on social media?
Speaker 11: Yeah, I mean a lot of people are just you know,
Speaker 11: I think that there's a scapegoating going on, right, Like
Speaker 11: President Trump might say that, oh, I want to get
Speaker 11: rid of J. Powell because I want to cut interest rates.
Speaker 11: But I think there's also an acknowledgment that in doing
Speaker 11: so creates certain risks to the economy. And I think
Speaker 11: from the administration standpoint, having a scapegoat on the economic
Speaker 11: outcomes is convenient. Right, So if the economy does fall
Speaker 11: into recession later this year, they can say, well, look,
Speaker 11: you know Powell was They can point to this tweet
Speaker 11: and say, well, the President said that he was going
Speaker 11: to be too late, and in fact he was right.
Speaker 11: And then if the economy chugs along, you can take
Speaker 11: credit saying that all of the fiscal policies that you're
Speaker 11: doing is supporting the economy. So I think that there's
Speaker 11: there's a political convenience here potentially that that JA Powell
Speaker 11: remaining in office can support the administration in some some
Speaker 11: way in public opinion.
Speaker 5: So ara does Trump actually have the ability to remove
Speaker 5: Powell from his seat as the chairman of the Federal Reserve.
Speaker 5: And well, I'm not how much longer is Powell there.
Speaker 11: I'm not a constitutional lawyer, so J. Powell probably knows
Speaker 11: better because he is an attorney. But there are some
Speaker 11: I would suggest that folks maybe go look at some
Speaker 11: of Elliott Stein's work here at Bloomberg Intelligence, because he's
Speaker 11: been following this very closely as to the different court
Speaker 11: decisions that will lead to independent chairs and directors of
Speaker 11: independent agencies, whether or not the president can can actually
Speaker 11: fire them, and what cause means, like how is caused
Speaker 11: to fined? That's something that's the Supreme Court is probably
Speaker 11: is going to be taking up and depending on how
Speaker 11: that goes will depend on whether or not the President
Speaker 11: Trump does. Now, let me say, from an economist standpoint,
Speaker 11: and you know I'm an economist by training, not an attorney.
Speaker 11: There's a vast literature on why central bank independence tends
Speaker 11: to have better inflation outcomes. Doesn't necessarily a better growth outcomes,
Speaker 11: but has better inflation outcomes. So the idea that you
Speaker 11: are going to take away the FEDS independence and have
Speaker 11: an executive branch. The executive branch ultimately run monetary policy
Speaker 11: probably means that you're going to have monetary policy that's
Speaker 11: easier than it should be at certain times, and that
Speaker 11: means that overall you could wind up having inflation and
Speaker 11: prices running a little bit hotter than it would if
Speaker 11: you had an independent central bank. Now does that mean
Speaker 11: that you get the nineteen seventy style inflation. Probably not.
Speaker 11: But at the same time, you can have inflation running
Speaker 11: a three and a half percent or four percent instead
Speaker 11: of a two And I think that's that's kind of
Speaker 11: a choice that both the courts, the American people, and
Speaker 11: the administration are ultimately going to have to make, even
Speaker 11: if even if Chair Powell can be removed by for.
Speaker 2: Cause, I got about thirty seconds left, the ECB cut
Speaker 2: rates against today. If I'm President Trump, I'm saying, where's
Speaker 2: my fedsherman? Why is he not cutting rates?
Speaker 7: Is that valid?
Speaker 2: Well, a little bit and a little bit not.
Speaker 11: I mean, I think J. Powell laid it out yesterday.
Speaker 11: And look, the FED has two mandates. The ECB has won.
Speaker 11: The ECB's job is to make sure that you have
Speaker 11: stable prices, and if prices are falling, and if there's
Speaker 11: other problems and growth is slipping, you cut interest rates.
Speaker 11: And if you look at the US economy right now.
Speaker 11: We still have one hundred and fifty thousand jobs per month,
Speaker 11: we still have rising wages. Retail sales weren't great, but
Speaker 11: they were fine, and so it's not obvious that the
Speaker 11: United States is slipping into a recession imminently. And I
Speaker 11: think that's the reason why the Fed is sitting on
Speaker 11: its hands, because it also doesn't know what inflation is
Speaker 11: going to do because of tariffs and inflation expectations have
Speaker 11: been rising. If you just look at the University of
Speaker 11: Michigan Sentiment survey, it shows, hey, maybe inflation expectations are
Speaker 11: way too high. So if you're the Fed, you have
Speaker 11: to balance those two mandates.
Speaker 2: A Eric, thanks so much for joining us. Appreciate it.
Speaker 2: Sorry about your aston Villa team not making it. Our
Speaker 2: Jersey chief US Interest Rates Strategies Bloomberg Intelligencies there in Princeton,
Speaker 2: New Jersey.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
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Speaker 2: We had some movement from the European Central Bank this
Speaker 2: morning cutting rates again. I think the market's even discounting
Speaker 2: another rate cut in June. Hugh Worthington joins us Bloomberg
Speaker 2: Intelligence European rates strategist here what you learn from the
Speaker 2: European Central Bank this morning in their actions?
Speaker 8: Yeah, so we had on the face of it, they
Speaker 8: came out with their statements just what about an hour
Speaker 8: or so ago saying that they'd actually removed the idea
Speaker 8: that after the today's rate cut, the rates were still restrictive,
Speaker 8: which is initially seen by some as being a little
Speaker 8: bit on the hawksh side, But actually the actual press
Speaker 8: statement and then the press conference itself very much focused
Speaker 8: on this whole idea of the huge amount of uncertainty
Speaker 8: that he's facing in particularly in the face of Trump tarifs.
Speaker 8: And you've got to remember, you know, the Eurozone runs
Speaker 8: about about a two hundred billion euro trade surplus with America,
Speaker 8: and the focus was of, you know, very much on
Speaker 8: those They just have no idea what's going on. They
Speaker 8: didn't didn't feel they'd have a strong idea what was
Speaker 8: going on anymore by by the June meeting, and as
Speaker 8: a result, as you say, now we've actually got a
Speaker 8: selves to the point where, yeah, another cut is which
Speaker 8: would be I think the sort of the seventh or
Speaker 8: eighth on the trot now would be be ninety percent
Speaker 8: priced in June, so which which seems pretty reagonal. As
Speaker 8: a result, we had a situation where yields were sort
Speaker 8: of edging up on the day, and now you've got
Speaker 8: the two year yield in Germany down five point seven
Speaker 8: basis points in the day, it's one point seven percent,
Speaker 8: So you know that's a pretty dubbish outcome in the end.
Speaker 5: Yeah, I wanted to ask a little bit more just
Speaker 5: about the reaction in the markets. I mean, US yields
Speaker 5: are a little bit higher. I don't know if you're
Speaker 5: seeing any contagion of this ECB move into the US
Speaker 5: or this looks like a piece of news that's just
Speaker 5: contained inside the EU.
Speaker 8: I think it's the rate. Outlook in the EU VERSUS
Speaker 8: America is enormously different. America obviously faces something possibly of
Speaker 8: a self inflicted short term inflation shock, but in Europe
Speaker 8: I think the outlook is very different. Indeed, if anything,
Speaker 8: you know we're actually looking at so inflation for last
Speaker 8: month came out around two point two percent is very
Speaker 8: close to their target of two percent. But if anything,
Speaker 8: you know, things like energy prices where they where they struck.
Speaker 8: Expectations of forecasts for inflation later in the year are
Speaker 8: now much much lower than we're both in terms of
Speaker 8: oil and in terms of things like gas prices, and
Speaker 8: if anything, the ECB is probably facing more deflation concerned
Speaker 8: and undershooting their inflation targets later in the year rather
Speaker 8: than you know, the what looks like possibly a very
Speaker 8: different situation in America. So we're looking at very very
Speaker 8: different markets, you know, currently and very different rate outlooks
Speaker 8: as a result.
Speaker 2: Red headline just crossing the Bloomberg terminal right now. Philadelphia
Speaker 2: FED names Chicago FEDS Anna Paulson as president, So a
Speaker 2: new president of the Philadelphia Fed will have some more
Speaker 2: reporting on that in just a moment, Hugh, how concerned
Speaker 2: are the folks in Europe about this tariff policy coming
Speaker 2: out of the US. The person on the street and
Speaker 2: you're sitting in the pub tonight.
Speaker 8: Sitting in the pub tonight, maybe the sort of people
Speaker 8: that I go to the pub with there is there's
Speaker 8: a lot of concern, But generally on you know, in London,
Speaker 8: I would say people are probably looking at the moment
Speaker 8: the headlines today more about that they think that a
Speaker 8: trade deal with the UK is possibly two or three
Speaker 8: weeks away. I think a trade deal with Europe though,
Speaker 8: is going to be you know, a lot more difficult, because,
Speaker 8: as I say, the trade with the UK is more
Speaker 8: or less in balance. But the problem you've got is
Speaker 8: in Europe is you know, they really run a two
Speaker 8: hundred billion euro trade surplus with America. One hundred billion
Speaker 8: of that is in Germany alone, So you know, they
Speaker 8: is I think people are much more concerned probably in
Speaker 8: Europe as to as to you know, and the capriciousness
Speaker 8: of Donald Trump with those sorts of numbers that you
Speaker 8: look about look around, as to how easy it would
Speaker 8: be probably to find a deal. And they definitely feel
Speaker 8: like that at the ECBLL as I say they are.
Speaker 8: They've made very clear at the meeting today that you know,
Speaker 8: come the next early June meeting, they don't feel like
Speaker 8: they're going to be in any way better in the way,
Speaker 8: any way, shape or form ast to exactly where they
Speaker 8: where tarifs are going to be and what's going to
Speaker 8: hit them.
Speaker 5: So what would get in the way of that final
Speaker 5: cut in June.
Speaker 8: I don't think a great deal perfectly, honest. I mean,
Speaker 8: I can't see. You know, a few weeks ago, everybody
Speaker 8: was focused on where do you think the neutral rate
Speaker 8: is going to be in Europe? And they were saying, oh,
Speaker 8: some would be one point seventy five and two point
Speaker 8: two five percent, And then the tone today's meeting was
Speaker 8: just one of complete uncertainty. You are at sort of
Speaker 8: tear up the idea of where neutral rates could possibly be.
Speaker 8: People are adjusting their rate expectations down. I think you're
Speaker 8: probably looking at you know, as I say, at the moment,
Speaker 8: the market pricing a rate of around one point seventy
Speaker 8: five percent by year end, but they're also pricing aban
Speaker 8: a seventy five percent chances that could be coming down
Speaker 8: to one point five percent, And I think that that
Speaker 8: seems you know, certainly, you know almost well, it's our expectation,
Speaker 8: and I think that's where we are going to end
Speaker 8: up with with with rates, where with rates markets going
Speaker 8: to be pricing, you know, by come that June meeting
Speaker 8: out of thought.
Speaker 2: A couple of weeks ago, we're talking about Germany and
Speaker 2: some other European countries reinflating their economies with fiscal stimulus,
Speaker 2: you know, infrastructure defense, is that still a story that
Speaker 2: you talk to clients about, Oh.
Speaker 8: Yeah, one hundred percent. You know that there is a
Speaker 8: lot of fiscal splods are going to be coming, particularly
Speaker 8: in Germany, but it's going to take an awfully long
Speaker 8: time to put that together. That's not going to be
Speaker 8: a story really friendly for this year, probably not even
Speaker 8: next year. You know, it's going to be something which
Speaker 8: is going to take years and years and years. Now
Speaker 8: now that may well be something that means that the
Speaker 8: outlook for for for rates could be a little bit
Speaker 8: more volatile, but really it's going to be sort of
Speaker 8: in years two to three onwards rather than than the
Speaker 8: very short term. In the very short term, the impact
Speaker 8: is going to be there's very little growth around in Europe.
Speaker 8: The Bundesbank currently expects growth in Germany to be a
Speaker 8: out zero point two percent in twenty twenty five, and
Speaker 8: that's actually was from from one percent just a few
Speaker 8: months ago. So I think the very short term, yes,
Speaker 8: there is going to be fiscal spending and infrastructure spending,
Speaker 8: but it's going to take probably this is going to
Speaker 8: be like a nine ten year project and it's going
Speaker 8: to take a long time for it to come through.
Speaker 8: It's not going to be coming through in the first
Speaker 8: couple in the next couple of years, that much, all.
Speaker 2: Right, Hugh, thanks so much for joining us. Always appreciate
Speaker 2: getting a few months of your time. Hugh Worthington, Bloomberg Intelligence,
Speaker 2: European Rates Strategist.
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