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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg daybaq At podcast. Good Morning, It's Thursday,

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Speaker 2: the thirty first of July. I'm Caroline Hepkeitt in London and.

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Speaker 1: I'm Stephen Carroll. Coming up today. Keeping things magnificent, Meta

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Speaker 1: and Microsoft deliver bumper results as big tech powers stock

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Speaker 1: market gains.

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Speaker 2: The Fed keeps interest rates steady, but Powell's Committee sees

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Speaker 2: dissent from not one but two FED governors for the

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Speaker 2: first time since nineteen ninety three.

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Speaker 1: Plus an exclusive report on why developers say safety regulations

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Speaker 1: imposed after the Grenfell terror tragedy in the UK have

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Speaker 1: made it too complicated to build new high rises in

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Speaker 1: the country.

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Speaker 3: Let's start with a roundup of our top stories.

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Speaker 1: Meta is taking advantage of its lucrative advertising business to

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Speaker 1: spend more aggressively on artificial intelligence after it reported second

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Speaker 1: quarter earn that beat Wall Street estimates. The Silicon Valley

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Speaker 1: Giant forecast third quarter sales that could go higher than

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Speaker 1: fifty billion dollars and raised its twenty twenty five capital

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Speaker 1: spending forecast up to up to seventy two billion dollars.

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Speaker 1: Here's more from Bloomberg Technology anchor Caroline Hyde, the.

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Speaker 4: Generative AI is making the advertising more easy to use.

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Speaker 5: Marketeers want to lean into it.

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Speaker 4: And one you're seeing the pricing of those ads going

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Speaker 4: up by about nine percent.

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Speaker 5: They're able to charge more and more broadly.

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Speaker 4: And they're also trying to articulate what does the superintelligence

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Speaker 4: labs mean for them. Yes, they've been spending in capex,

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Speaker 4: but boy, they've been spending big on talent. We've heard

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Speaker 4: about the two hundred million dollar pay packages, the amount

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Speaker 4: they spent on scale AI.

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Speaker 5: But all of this is about making it.

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Speaker 1: More personable Bloomberg's Caroline Hyde. There as Meta executives including

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Speaker 1: Mark Zuckerberg, said it's AI technology is already producing quote

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Speaker 1: meaningful revenue.

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Speaker 2: Microsoft is expected to reach a four trillion dollar market

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Speaker 2: cap after it reported quarterly earnings that beat Wall Street estimates.

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Speaker 2: The big text Allotz would be only the second company

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Speaker 2: to hit that milestone, after the chip maker en Vidia

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Speaker 2: at the beginning of July. The jump in shares was

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Speaker 2: fueled by a thirty nine percent increase in revenue from

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Speaker 2: Microsoft's Azure cloud computing unit. Dan Ice, Global, head of

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Speaker 2: Tech research at web Bush Securities, shared investors optimism.

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Speaker 5: Massive beat on cloud.

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Speaker 6: You've see more and more of these use cases, these hyperscalers,

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Speaker 6: those are the best indicators that just should where the

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Speaker 6: next spending in AI is gone.

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Speaker 5: And that's why right now, if you're a tag.

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Speaker 1: Bear, you're in hibernation, moved in that cave, and you

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Speaker 1: can't find AI in the spreadsheet.

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Speaker 2: Dan, I'm speaking there, the global head of Tech research

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Speaker 2: at Webb Bush Securities. After the Microsoft CFO, Amy Hurd,

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Speaker 2: told analysts that she expects to see full year revenue

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Speaker 2: growth in the double digits.

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Speaker 1: Standard Charters reported expectation, beating Second quarter earnings adjusted pre

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Speaker 1: tax profit came in at two point four billion, beating

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Speaker 1: estimates of one point nine billion. The lender also announceday

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Speaker 1: Fresh one point three billion dollars share buyback as part

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Speaker 1: of a plan to return at least eight billion to

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Speaker 1: shareholders between twenty twenty four and twenty twenty six. Shares

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Speaker 1: and Standard chartered up slightly after the break in. Hong Kong.

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Speaker 2: Sausage is General raised it's profit guidance and announced a

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Speaker 2: one billion euro buyback in a show of strength for

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Speaker 2: the bank's turnaround. Sockgen says that it expects return on

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Speaker 2: tangible equity to be nine percent this year. That's above

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Speaker 2: the eight percent it had previously full costs, The French

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Speaker 2: lender has been cutting costs and getting rid of poor

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Speaker 2: assets in a bid to change its fortunes. It shares

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Speaker 2: have had a seller start to the year, rising ninety

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Speaker 2: two percent as investors see a return to profit.

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Speaker 1: The Fed Schargeronne pals as interest rates are in the

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Speaker 1: right place, as the Central Bank opted to hold borrowing

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Speaker 1: cost steady for a fifth straight meeting. However, for the

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Speaker 1: first time in over thirty years, two Federal Reserve governors

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Speaker 1: from the majority to call for a rate cut, Michelle

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Speaker 1: Bowman and Christopher Waller, dissented in favor of a cust

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Speaker 1: highlight and growing divisions within the board. Speaking to reporters

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Speaker 1: after the decision, Chair Powell addressed, the vote splits.

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Speaker 6: What you want from everybody and also from a the

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Speaker 6: center is a clear explanation of what you're thinking is

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Speaker 6: and what are the arguments you're making, and that's we.

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Speaker 3: Had that today.

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Speaker 6: So I think basically this was quite a good meeting

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Speaker 6: all around the table where people were, you know, thought

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Speaker 6: carefully about this and put their positions out there.

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Speaker 1: The nine to two fo MC vote split comes as

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Speaker 1: intrigue grows over who will replace Powell once his term ends.

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Speaker 1: As President Trump continues to pressure him to cut rate

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Speaker 1: cut rates. Meanwhile, traders have paired bets for immediate rate cuts.

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Speaker 1: Markets are now pricing in around a fifty to fifty

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Speaker 1: chance of a reduction at the next meeting in September.

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Speaker 2: Well, US President Donald Trump has reached a trade deal

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Speaker 2: with South Korea, will issuing up bart of new tariff announcements.

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Speaker 2: The US will impose a fifteen percent one sided levey

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Speaker 2: on imports from South Korea, one of the world's largest exporters.

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Speaker 2: President Trump also said that he would start applying taxes

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Speaker 2: to small packages from all countries coming into the US,

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Speaker 2: and would up tariffs on India to twenty five percent.

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Speaker 7: They don't do very much business in terms of business

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Speaker 7: with US. They sell a lot to us, but we

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Speaker 7: don't buy from them. You know why, because the tariff

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Speaker 7: is so high. They have one of the highest tariffs

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Speaker 7: in the world. Now they're willing to cut it very substantially,

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Speaker 7: but we'll see what happens. We're talking to Indian now,

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Speaker 7: we'll see what happens. And it doesn't matter too much

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Speaker 7: whether we have a deal or whether we charge them

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Speaker 7: a certain tariff. But you'll know at the end of

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Speaker 7: this week.

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Speaker 3: Now, that was US President Donald Trump.

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Speaker 2: Many of the US leaders negotiations are going down to

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Speaker 2: the wire his self imposed deadline for trade deals that

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Speaker 2: comes tomorrow. Malaysia, Thailand, and Cambodia are expected to formally

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Speaker 2: announce steals ahead of that. The US also delayed the

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Speaker 2: implementation of a fifty percent tariff on Brazil's exports and

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Speaker 2: exempted a large number of goods though from that levee.

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Speaker 1: The global copper market is reeling from President Trump's fifty

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Speaker 1: percent tariff on imports of the metal, as the President

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Speaker 1: exempted key products, including refined metal, from the levee. The

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Speaker 1: unexpected move triggered a record plunge for US prices, hurting

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Speaker 1: traders who tried to anticipate the changes by hurrying the

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Speaker 1: metal into the US. Copper futures on comics in New

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Speaker 1: York plunged by more than twenty percent, the most ever,

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Speaker 1: as traders reacted to a move that recalibrates the value

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Speaker 1: of metal in the US versus the rest of the world.

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Speaker 1: According to a White House statement, a semi finished products

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Speaker 1: such as pipes and copper intensive goods like cables will

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Speaker 1: now be subject to the new tariffs.

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Speaker 2: Those are our top stories for you this morning. Let's

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Speaker 2: look at the markets. So STOP futures then for the

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Speaker 2: US are absolutely surging on the back of a bomb earnings.

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Speaker 2: Microsoft shares gained a percent after as Meta up more

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Speaker 2: than eleven percent, and nasdag stop future at the moment

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Speaker 2: to hire by one point four percent. European stock Future

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Speaker 2: is also up by a quarter of one percent. South

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Speaker 2: Korean stocks down this morning alongside Indian shares because of

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Speaker 2: those tariff announcements. Copper price differentials between the Europe and

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Speaker 2: the US have really collapsed, China's factory activity worsening in July.

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Speaker 2: You've also got CSI three hundred stocks down by one

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Speaker 2: percent on the back of that, and then after the

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Speaker 2: FED decision to hold interest rates steady, two year treasury

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Speaker 2: notes were seven basis points high yesterday, although little changed

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Speaker 2: this morning. So that's a look at where we are

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Speaker 2: on the markets.

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Speaker 1: In a moment, will bring you more on the market

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Speaker 1: reaction to those megacap tech earnings and the latest trade headlines,

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Speaker 1: plus why higher rise building projects are facing increasing delays

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Speaker 1: in the UK put in the story that we've been

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Speaker 1: reading this morning. This is about artificial intelligence and its

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Speaker 1: use in financial markets, and a study by researchers at

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Speaker 1: the Wharton School of Finance have been looking at a

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Speaker 1: fundamental flaw is that essentially, even when humans aren't involved,

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Speaker 1: AI bots are ganging up together.

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Speaker 2: Well, this is the initial conclusion of this researcher. It's

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Speaker 2: a trio of researchers at Wharton, including finance professor Ith Goldstein.

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Speaker 2: So they carried out a simulation of real world markets

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Speaker 2: and trading. Obviously that's difficult, but they did this with

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Speaker 2: artificial intelligence bots or traders. Now, the conclusions of this

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Speaker 2: are that instead of battling it out for returns, the

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Speaker 2: AI traders actually ended up fixing prices, they hoarded profits,

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Speaker 2: and they sidelined human traders, i e. The kind of

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Speaker 2: worst nightmare for regulators. And this has got a lot

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Speaker 2: of attention from asset managers, from regulators, even though the

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Speaker 2: research doesn't say that AI collusion is happening in the

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Speaker 2: real world, even though a lot of traders are already

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Speaker 2: using But yeah, it's a really kind of fascinating view.

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Speaker 1: My favorite part of this is that Essentially, the AI

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Speaker 1: figured out that once they've done a good enough job,

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Speaker 1: they could just give up and stop looking for new strategies,

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Speaker 1: which sounds to be fair very familiar. So I think

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Speaker 1: that this is, you know the fact that I almost

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Speaker 1: respect the AI from basically saying I've done enough.

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Speaker 3: Actually, yeah, I've made enough money. That's good enough for me.

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Speaker 2: Well, my addition to this is that I really want

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Speaker 2: to shout out to Wharton for their YouTube channel because

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Speaker 2: I got to actually listen and we wrote a long

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Speaker 2: piece about it which is very interesting. But we also

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Speaker 2: got to hear from the professor himself on the Wharton's

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Speaker 2: YouTube channel.

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Speaker 3: So yeah, so shout out to them.

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Speaker 1: I think we'll put a link to our story by

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Speaker 1: lu Wang in our podcast show notes. But let's turn

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Speaker 1: to the markets now and investors navigating a barrage of headlines,

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Speaker 1: central bank decisions, tariff agreements, and those big corporate earnings

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Speaker 1: as well. We've got our markets live strat as Mark

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Speaker 1: Cranfield with us for more on all of this.

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Speaker 3: Mark, good to talk to you.

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Speaker 1: Let's start them with those results shares matter and Microsoft

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Speaker 1: surging after hours on Wall Street and that's really rippling

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Speaker 1: across markets elsewhere too.

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Speaker 8: It's kind of reassuring for global investors. They're a little

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Speaker 8: bit uncertain about which way tariffs are going to go,

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Speaker 8: how quickly before they make a serious impact on global growth.

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Speaker 8: There's been all kinds of warnings, and yet these huge

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Speaker 8: companies continue to make tremendous profits. We saw it also

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Speaker 8: from Alphabet last week as well, and they post very

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Speaker 8: positive outlooks as well. So there's a kind of reassuring

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Speaker 8: factor to equity investors around the world that companies can

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Speaker 8: continue to do extremely well even under these uncertain conditions.

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Speaker 8: And they still think that the AI story is so

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Speaker 8: big and so profitable that it can override whatever uncertainty

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Speaker 8: you see in terms of central bank policy, government policy,

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Speaker 8: wherever you see there's a lack of clarity in different

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Speaker 8: parts of the investing landscape. Don't need to worry because

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Speaker 8: AI will overwhelm all of that. That was a particular

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Speaker 8: part of the meta story. They see it's time to

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Speaker 8: even increase their investment into AI because the opportunity there

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Speaker 8: is so big. So that's something that investors can look

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Speaker 8: at and they can decide, yes, that's somewhere where we

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Speaker 8: can put our money because it's tangible and we can

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Speaker 8: see the results reasonably quickly, and that even though we're

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Speaker 8: not sure about some of the other parts of the

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Speaker 8: global world.

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Speaker 2: Yeah, maybe justifying the record highs in terms of US

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Speaker 2: stocks that we've seen recently, I suppose would be the argument.

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Speaker 2: But you mentioned the uncertainty about policy. So the FED

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Speaker 2: held interest rates steady. Powell shrugged off all the pressure

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Speaker 2: from the White House. But we mentioned that two FED

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Speaker 2: governors dissented, and that is highly unusual, so we're next

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Speaker 2: to the FED.

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Speaker 8: Yeah, governor's dissenting is it's been a couple of decades

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Speaker 8: since that, but it's not unusual to have dissenters in general.

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Speaker 8: We've had FED people, voters on the day going against

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Speaker 8: the FED decision, some of the regional people. So it's

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Speaker 8: a bit of a nuance really, as won't be too

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Speaker 8: excited the fact it happens to be governors, And obviously

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Speaker 8: they would also be looking at a bit of a

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Speaker 8: political aspect to it as well, considering that there's been

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Speaker 8: so much talk about who might take over from Jerome

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Speaker 8: Power and that at least one of the candidates could

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Speaker 8: be somebody who's currently on the FED board at the moment.

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Speaker 8: So there's a pinch of salt with all of that.

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Speaker 8: What it does do is it pushes back pretty hard

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Speaker 8: against the idea that September was. At one stage we

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Speaker 8: were thinking it was almost a shoe in for an

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Speaker 8: interest rate cut in September. That's certainly not the case.

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Speaker 8: Now is becoming a bit more of a coin toss,

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Speaker 8: And even by the time we get there, if Jerome

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Speaker 8: Power hasn't really changed his narrative at all, we might

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Speaker 8: even be thinking that it's going to be another hold

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Speaker 8: in September as well, quite a way before we get

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Speaker 8: to that decision. But certainly his press conference in particular,

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Speaker 8: he wasn't like a man who's there's certainly no need

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Speaker 8: to panic. It doesn't sound as though as any rush

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Speaker 8: wants a lot more time to assess the data. And

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Speaker 8: if he looks at the stock market, for example, as

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Speaker 8: an indicator of what people think about the US economy,

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Speaker 8: then there's certainly no rush to lower interest rates on

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Speaker 8: that basis.

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Speaker 1: And perhaps that's also factoring into the thinking around trade

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Speaker 1: as well. We've had another raft of tariff announcements fifteen

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Speaker 1: percent for South Korea, twenty five percent are for India,

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Speaker 1: fifty percent for Brazil with some exemptions though as well.

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Speaker 1: I mean, how are markets taking this latest deluge of

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Speaker 1: trade headlines.

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Speaker 8: Generally in their stride?

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Speaker 7: Really?

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Speaker 8: I think it's partly because there's just a lack of details.

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Speaker 8: Every single deal that's been wheeled out this week really

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Speaker 8: has been very scarce on hard details. There's a lot

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Speaker 8: of exemptions as well for people to get their head around.

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Speaker 8: There's nothing apart from some of the headline numbers. There's

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Speaker 8: not too much that investors can say that that well,

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Speaker 8: that really applies to this transaction or that transaction. So

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Speaker 8: a lot of head scratching on what it really means.

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Speaker 8: And when they look at the US markets the way

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Speaker 8: that equity are performing so strongly there, they'll think, well,

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Speaker 8: if America among companies can continue to perform as strongly

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Speaker 8: as that, then that's a pretty good indicator for what

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Speaker 8: we can expect in the rest of the world. So

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Speaker 8: not definitely not the scare mongering that we had at

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Speaker 8: the beginning of the year when people were very concerned

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Speaker 8: where we were going with this. It doesn't mean to

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Speaker 8: say it's a non event, but the bar is much

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Speaker 8: higher for making people worried that tarists are really going

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Speaker 8: to bring the world to a grinding halt. It doesn't

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Speaker 8: look like that way considering the people are investing their money.

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Speaker 8: It doesn't look as though people are really scared about

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Speaker 8: the outlook for the global economy.

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Speaker 1: Okay, Mark Cranfield, our Markets Live Trusts, thank you very

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Speaker 1: much for joining us, and as we're thinking about today's

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Speaker 1: European trading session as well. Just to mention the other

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Speaker 1: banking results we've had out from Europe, a set of

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Speaker 1: beats from BBVA significantly higher four hundred million is the

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Speaker 1: beat on their profit number for the second quarter, coming

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Speaker 1: in at two point seventy five billion I also higher

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Speaker 1: than expected. And in France Credi Agricola also beating by

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Speaker 1: around four hundred million euros as well their net income

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Speaker 1: two point thirty nine billion as well. So some positive

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Speaker 1: reports out of those big European banks too.

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Speaker 2: Now to Britain's housing crisis. Developers in the UK say

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Speaker 2: that safety regulations imposed after the Grenfell Tower tragedy in

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Speaker 2: London have made it too complicated to build new high

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Speaker 2: rise buildings. Twining intent has been in both Global Business.

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Speaker 2: Reporter Jennifer Creary on this story, Jennifer, good morning, to

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Speaker 2: what exactly is the problem and how did it come about?

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Speaker 2: According to the developers.

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Speaker 9: After the Grenville tower fire in twenty seventeen, so that's

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Speaker 9: the tragedy where seventy two people died in a tower

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Speaker 9: block laze in London, the government brought in a bunch

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Speaker 9: of reforms the high rise construction because basically one of

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Speaker 9: the key issues was low adherents and enforcement to existing

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Speaker 9: safety regulations. On top of that, there wasn't really a

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Speaker 9: single authority overseeing the issue.

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Speaker 5: Now.

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Speaker 9: These reforms, which came into effect in October twenty twenty three,

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Speaker 9: were meant to ensure that developers passed certain checkpoints before

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Speaker 9: construction even begins, you know, for example, giving detail plans

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Speaker 9: for viral arm placements, exits etc.

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Speaker 5: The problem is, under this new regime is just.

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Speaker 9: So much red tape and so much confusion over what's

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Speaker 9: required from applicants that they're simply taking too long.

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Speaker 5: So there's essentially a backlock.

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Speaker 9: Now. One of the private equity firms we spoke to

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Speaker 9: bought a plot of land in Battersea in twenty twenty

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Speaker 9: one for thirty one million pounds. To this day they're

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Speaker 9: still waiting for permission to build, and you know, when

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Speaker 9: we spoke to the regulator, they told us that the

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Speaker 9: average weight time for approval to begin building these new

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Speaker 9: builds of twenty one weeks. But we've interviewed companies that

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Speaker 9: are waiting up to a year for approval and that's

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Speaker 9: simply too long for them.

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Speaker 1: How dire is the situation at the moment for these

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Speaker 1: developers who are trying to build, Yeah.

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Speaker 5: I mean for them, the.

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Speaker 9: Longer they wait, you know, the higher the risks there

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Speaker 9: is of lower returns. So either they'll have to shoulder

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Speaker 9: you know, higher financing costs via a higher interest rates.

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Speaker 9: There's inflation, demand could fall, so you can see the

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Speaker 9: incentive to build very quickly. We spoke to one of

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Speaker 9: the UK's largest housebuilders who said that their firm is

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Speaker 9: waiting for roughly five hundred of their homes to be

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Speaker 9: signed off. Now that's going to make it harder for

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Speaker 9: builders to secure construction loans from banks because lenders now

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Speaker 9: have to include year's worth of deferred interest payments to

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Speaker 9: their calculations. So the situation is getting pretty die for them.

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Speaker 2: Yeah, And the backdop to this is the government wants

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Speaker 2: to build many more homes and wants to see many

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Speaker 2: more homes being built and London development's actually falling off

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Speaker 2: a cliff in the last in the latest kind of

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Speaker 2: the detail's latest numbers twenty twenty three to twenty twenty four.

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Speaker 2: How are the developers trying to address all of this

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Speaker 2: and trying to adapt to the new system.

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Speaker 3: I mean, what are they thinking about?

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Speaker 9: Yeah, so, so parts of the industry are trying to

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Speaker 9: find loopholes around the new safety regime, so for example,

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Speaker 9: building new builds that are under eighteen stories so they

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Speaker 9: don't have to apply for this kind of approval. We've

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Speaker 9: also spoken to some firms that are shifting away from

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Speaker 9: residential buildings, looking at of co working spaces things like that.

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Speaker 5: Some of them are shifting investments in the middle least.

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Speaker 9: We've heard of some companies laying off construction teams because

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Speaker 9: money is so tight. So the industry is trying to

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Speaker 9: find a way around this. I think the broader picture

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Speaker 9: here is, you know, the government needs them to build

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Speaker 9: homes as well. The government has this ambitious target to

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Speaker 9: build one point five million new homes by twenty twenty nine.

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Speaker 9: That's three hundred thousand homes on average per year. That's

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Speaker 9: a very ambitious target and if these delays continue at

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Speaker 9: the same rate, that target's getting further and further out

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Speaker 9: of reach.

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Speaker 3: What about the kind of reaction to this.

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Speaker 1: Has the government a regulator doing anything to actually address

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Speaker 1: the issues.

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Speaker 9: Yeah, so the regulator acknowledges that there's a problem, you know,

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Speaker 9: there's no doubt about that. They said that they're trying

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Speaker 9: to boost staff. We submit in the fo WIRE requests

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Speaker 9: that showed that they're only about seventy staff leafing through

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Speaker 9: more than one thousand applications in one month, so you know,

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Speaker 9: there's a serious crunch in that aspect. But the regulator

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Speaker 9: is also pushed back. They argue that a lot of

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Speaker 9: these applications are poor quality, so applicants who you know,

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Speaker 9: didn't read the fine print or they're not submitting the

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Speaker 9: right application and the right documents.

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Speaker 5: Their argument is, you know, how.

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Speaker 9: Can they build safe homes when they can't fill in

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Speaker 9: an application like this. Another point that the regulator made

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Speaker 9: was that thirty thousand out of the one point five

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Speaker 9: million homes the government wants to build are currently going

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Speaker 9: through this process, and that's only a very small proportion

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Speaker 9: of the overall targets, about two percent. I think if

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Speaker 9: we step back You know, the people that we've spoken

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Speaker 9: to in the industry, they are broadly in support of

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Speaker 9: these safety reforms. You know, no one wants a repeat

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Speaker 9: of the Grenville tragedy, but the issue is how do

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Speaker 9: they bring about these reforms in a system that's already

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Speaker 9: understrained and struggling to meet demand.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the

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