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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: deb Acurate podcast, available every morning on Apple, Spotify or

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Speaker 1: wherever you listen. It's Friday, the twenty sixth of July

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Speaker 1: in London. I'm Caroline Hepca. Coming up today. As a

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Speaker 1: debate rages over when the Fed's first rate cut will come,

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Speaker 1: markets tear up popular trades. Sources tell us that the

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Speaker 1: UK Chancellor Rachel Reeves is leaning towards an institutional rather

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Speaker 1: than public sale and nat West shares plus Baja dem.

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Speaker 1: As the twenty twenty four Olympics gets underway in the

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Speaker 1: French capital, we discuss the risks and rewards of hosting

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Speaker 1: the games. Let's start with a roundup of our top stories.

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Speaker 1: Treasuries have held onto their recent gains as traders weigh

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Speaker 1: signs of a resilient US economy against calls for quicker

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Speaker 1: interest rate cuts from the Federal Reserve. This ahead of

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Speaker 1: US inflation data today, the core PC inflation, that is,

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Speaker 1: the Federal Reserve's preferred price gauge, is expected to slow

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Speaker 1: near to the Fed's two percent target on a three

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Speaker 1: month basis. Former New York Fed President Bill Dudley is

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Speaker 1: calling on policymakers to reduce rates at their meeting next week.

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Speaker 2: I think rate cuts are definitely coming. I just think

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Speaker 2: that at this point they's not a really strong case

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Speaker 2: for waiting. The FED doesn't cut in July and waste

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Speaker 2: of September, it's not going to have a huge effect

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Speaker 2: on the comments ditrectory, except the fact that when the

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Speaker 2: unemployerent rates starts to deteriorate, it seems to be a

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Speaker 2: reinforcing negative feedback loop. Jobs are lost, people pull back

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Speaker 2: on spending that leads to for their cuts in employment.

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Speaker 1: Bill Dudley's comments, which were echoed by fellow Bloomberg opinion

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Speaker 1: columnists Mohammad l Arian, who says that too long a

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Speaker 1: delay on rate cuts could prove a quote policy mistake.

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Speaker 1: But yesterday's better than expected US growth data two point

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Speaker 1: eight percent on an annualized basis for the second quarter

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Speaker 1: has reinforced bets that policy makers will wait until September

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Speaker 1: to kick off their monetary easing cycle in the US.

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Speaker 1: We assumptions that have driven global financial markets this year

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Speaker 1: do appear to be getting a rapid rethink. In bond

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Speaker 1: and currency markets, investors are racing to redeploy money At

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Speaker 1: the same time, stockholders have suddenly grown more skeptical that

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Speaker 1: tech companies massive investments in AI will pay off anytime soon.

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Speaker 1: Our cross asset reporter Isabelle Lee says that investors are

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Speaker 1: dumping shares of previous top performers.

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Speaker 3: The tip of the iceberg was really the lukewarm start

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Speaker 3: to the earning seasons. We have Alphabet with bloaded, Capex,

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Speaker 3: Tesla again postponing the ROBOTAXI, and investors got thinking, when

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Speaker 3: will we see the ROI of these AI investments.

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Speaker 4: AI.

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Speaker 3: Yes, is revolutionary and it really drove the market to

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Speaker 3: beat one record after the other, but it's not going

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Speaker 3: to happen overnight. And I think that's what they're slowly

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Speaker 3: coming to realize, so Isabelle Lee.

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Speaker 1: They're speaking ROI return on investment. Well, almost a third

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Speaker 1: of the S and P five hundred companies have reported

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Speaker 1: second quarter results so far now, according to data compiled

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Speaker 1: by Bloomberg Intelligence, only forty three percent of those have

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Speaker 1: managed to beat revenue expectations, and that's the lowest reading

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Speaker 1: in five years. As to individual stocks, Airmes is bucking

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Speaker 1: the luxury slow down, reporting a jump in sales revenue

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Speaker 1: at constant exchange rates rose by thirteen point three percent,

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Speaker 1: beating analyst expectations, and all regions grew by double digits,

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Speaker 1: with the exception of the area that includes China. Really

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Speaker 1: Usin Dumoutier, who's director of Actor Research for Luxury and

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Speaker 1: Sporting Goods at HSBC, says the brand's affluent client base

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Speaker 1: is spurring continued growth.

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Speaker 4: What we have seen in the recent releases is that

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Speaker 4: the brand that are more exposed to the wealthiest part

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Speaker 4: of the consumer, such as Ermes, are probably performing better

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Speaker 4: because once again the price hikes that the luxury goods

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Speaker 4: company have passed on are clearly alienating the aspiritial consumer

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Speaker 4: that has less effect on the worthiest one.

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Speaker 1: HSBC analyst Uri Usin du Mouti speaking to me there

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Speaker 1: on Bloomberg Radio. Despite the success, Almes did say that

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Speaker 1: it is experiencing softer demand for its more affordable items

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Speaker 1: like silk scars, reflecting that curb in spending by aspirational customers.

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Speaker 1: Bloomberg has learned that EU regulators are ready to intervene

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Speaker 1: on Meta's classified ads business, and EU order is likely

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Speaker 1: to rule Facebook Marketplace abused its dominance and it could

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Speaker 1: find the social media chant as much as ten percent

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Speaker 1: of its annual sales. The decision was still in draft

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Speaker 1: form and it could change before it's issued later this

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Speaker 1: year to the UK Now Chancellor Rachel Reeves is leaning

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Speaker 1: towards selling NatWest shares to institutional investors rather than the

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Speaker 1: UK public please Imberger has learned that they planned five

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Speaker 1: point six billion pounds share sale would come alongside the

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Speaker 1: government's gradual winding down of its stake. Bloomberg's James Walcock has.

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Speaker 5: More it's a relic of the financial crisis. The UK

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Speaker 5: government remains that West's biggest investor after bailing it out

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Speaker 5: in two thousand and eight. Former Chancellor Jeremy Hunt had

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Speaker 5: wanted to sell large parts of that twenty percent stake

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Speaker 5: to the public to try and encourage retail investors, but

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Speaker 5: Bloomberger's learned Rachel Reeves is planning on taking some of

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Speaker 5: that sale to institutional investors. The move may meet the

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Speaker 5: government money right as it faces a major shortfall in funds.

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Speaker 5: Reeves is expected to lay out a near twenty billion

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Speaker 5: pound funding shortfall for public services next week in an

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Speaker 5: audit of the previous government's record in London. James Walcock

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Speaker 5: Bloomberg radio.

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Speaker 1: And of course we're expecting that Wes's second quarter earnings

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Speaker 1: out at seven am London time this morning. And lastly

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Speaker 1: today mark's the official start of the Paris twenty twenty

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Speaker 1: four Olympics, with the opening ceremony due to take place

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Speaker 1: this evening. But as public attention is focused on the games,

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Speaker 1: France's cybersecurity agency is on high alert. It comes after

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Speaker 1: a number of French websites were shut down last month

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Speaker 1: in an attack that is believed to have been linked

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Speaker 1: to Russian intelligence. The co head of Goldman Sachs's Paris office,

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Speaker 1: Seline Marie Merchin, says that ensuring the Games take place

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Speaker 1: without incident is going to be crucial for the city.

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Speaker 6: It's an exceptional period, so people need to show, you know,

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Speaker 6: a sense of adaptability, because that's true that you know,

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Speaker 6: various is not functioning exactly as usual. But I do

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Speaker 6: think that having so much advertising, so much focused on

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Speaker 6: the French economy, can i again, can only be a

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Speaker 6: positive for.

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Speaker 5: All of us.

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Speaker 1: Goldman Saxes Seline Marie Marcher, who is speaking there to Bloomberg.

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Speaker 1: A task force of six hundred and thirty people have

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Speaker 1: now been assigned to the Games, but authorities worried that

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Speaker 1: non traditional targets may also be in the hackers' sites.

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Speaker 1: So the risks and rewards of the summer Olympic Games,

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Speaker 1: of course, those are some of our top stories and

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Speaker 1: for you today. Also, though, there's another story that's really

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Speaker 1: caught my eye on the Bloomberg terminal. It's Friday, so

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Speaker 1: I want to do something fun. It's all about music,

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Speaker 1: but it's political soundtracks. I mean, the music the politicians

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Speaker 1: use at their rallies can be so powerful, especially also

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Speaker 1: when in recent years there's been so much argument from

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Speaker 1: artists who don't want their iconic songs to be used.

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Speaker 1: There's a great story on the Bloomberg terminal. Kamala Harris

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Speaker 1: is using a track from one of the world's biggest

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Speaker 1: pop stars for her first official campaign video and also

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Speaker 1: for her early election events. Beyonce's song Freedom, which features

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Speaker 1: the rapper Kendrick Lamar, is the track, and the singer's

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Speaker 1: team has approved it for use in Harris's video, and

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Speaker 1: they've also managed to get licensing rights to it. Harris

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Speaker 1: talks about her campaign, you know, and she's based it

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Speaker 1: all around the idea of freedom. At least the initial

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Speaker 1: lines we choose freesm Then you hear Beyonce's lyrics, Harris

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Speaker 1: sort of trying to position herself as a moderate, freedom

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Speaker 1: from gun violence, freedom for reproductive rights, that sort of thing,

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Speaker 1: trying to I suppose lay out her offering to the

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Speaker 1: US public, of course, ahead of the November election. I

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Speaker 1: just thought it was really interesting. And we've we've got

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Speaker 1: a great piece on the terminal, or we've covered so much,

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Speaker 1: of course of the unusual US presidential race. So I

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Speaker 1: quite like that piece. It's on the termin I'll have

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Speaker 1: a read this morning. Back to more traditional matters, though,

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Speaker 1: shall we. The Fed's preferred inflation gauge is due out today.

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Speaker 1: The headline year of a year figure expected to come

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Speaker 1: down from two point four to two points from down

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Speaker 1: to two point four from two point six percent previously.

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Speaker 1: You've also got Asian socks and US features up just

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Speaker 1: a little bit, swaps now pricing in a FED rate

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Speaker 1: cut in September. And this is the great debate. Bloomberg

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Speaker 1: anchor Crittie Gipta joins me now to discuss us. So

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Speaker 1: the issue about when we're going to see a first

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Speaker 1: right cut and then how deep those right cuts will go.

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Speaker 1: It's it's really raging your market is now why it is?

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Speaker 3: It feels like it's just the stage for j.

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Speaker 7: Powell to need a soundtrack when he comes on to

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Speaker 7: his press conferences any minute. Now, Look, what's tricky here

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Speaker 7: is that a September cut was largely priced out of

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Speaker 7: the markets because of the election risk, and that has

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Speaker 7: really turned around very quickly simply because of the data

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Speaker 7: and the drops you've seen in the data. In fact,

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Speaker 7: the data for and I'm going to go through a

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Speaker 7: couple here, your CPI, your consumer confidence, your PPI numbers,

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Speaker 7: so basically your production numbers as well. It shows kind

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Speaker 7: of factory output things like that, even things like durable

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Speaker 7: goods for example, which is really taking engage in the

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Speaker 7: US manufacturing sector. And remember, similar to or actulal sly

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Speaker 7: different to Europe. Manufacturing is not the core of the

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Speaker 7: American economy. I think it makes up something like twenty

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Speaker 7: percent relative to eighty percent of services or something like that. So,

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Speaker 7: but you are seeing pockets of weakness across the board,

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Speaker 7: and it's kind of coming out of this narrative of

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Speaker 7: consumer resilience and economic resilience out of the state. And

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Speaker 7: then you see this big drop I would argue you

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Speaker 7: even see in European earnings. I have now started to

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Speaker 7: say some of that weakness that we saw from China

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Speaker 7: were actually now also seeing from the United States, and

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Speaker 7: there is no longer that counterweight despite US US meeting

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Speaker 7: some of those expectations. So the top line here is

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Speaker 7: simply that because the data is showing that early weakness,

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Speaker 7: that's why you're sharing to see the cuts more early

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Speaker 7: priced in, despite the fact that the Federal Reserve has

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Speaker 7: made it quite clear that they don't want it to

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Speaker 7: be any sort of relate to any sort of political

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Speaker 7: activism or election or anything like that, because of course

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Speaker 7: it would move the stock market if you do see

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Speaker 7: a rate cut.

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Speaker 1: Yeah, absolutely, although surely it can't be to the same

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Speaker 1: level of the slowdown that we've seen in China. Is

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Speaker 1: certainly not that kind of depth. The other issue though,

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Speaker 1: I mean you kind of mentioned earnings and the assumptions

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Speaker 1: being recalibrated around FED rate cuts, but there's also the

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Speaker 1: kind of AI story that plays into this as well.

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Speaker 7: The rotation in stocks there is, and look, the momentum

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Speaker 7: that you're seeing in the stock market to the downside

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Speaker 7: is really just taking out some of the steam from

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Speaker 7: those AI plays, and you're also seeing in the chip sector,

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Speaker 7: which arguably some would say is a part of the

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Speaker 7: Trump trade that if you basically are look at chips

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Speaker 7: the way you look at defense stocks, for example, which

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Speaker 7: is so much of their rally has been yes, AI driven,

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Speaker 7: but also government contract driven. A laws of those government

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Speaker 7: contracts could get taken away in a Trump administration if

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Speaker 7: you get rid of the Inflation Reduction Act. That's a

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Speaker 7: lot of nitty gritty for basically saying that the pullback

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Speaker 7: you are seeing in stocks very much has an effect

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Speaker 7: on things like financial conditions, for example, but also how

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Speaker 7: effective the kind of wealth effect is on regular consumers.

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Speaker 7: That affects the data into consumer confidence and circles back

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Speaker 7: into some of the data that the Federal Reserve takes

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Speaker 7: into account. So if we continue to see a bit

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Speaker 7: of a red on the screen when you look at

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Speaker 7: the stock market, and it does indeed go to correction territory,

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Speaker 7: we're not there yet, but it is heading that way,

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Speaker 7: or at least it seems to be. That's where you

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Speaker 7: could see more of an argument for those cuts at

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Speaker 7: a time when there may not have been a strong

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Speaker 7: of a case before.

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Speaker 1: Yeah, absolutely, and personal income and spending and all of

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Speaker 1: that day to the PCE data dropping at one thirty

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Speaker 1: pm London time. Critty, thank you so much for joining me.

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Speaker 1: I'm going to quiz you next time we come into

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Speaker 1: the radio studio. What should be the rock song that

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Speaker 1: companies J Powell? I don't know music not my forte

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Speaker 1: after quiz someone else on it?

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Speaker 2: Right?

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Speaker 1: Thank you so much to Bloomberg anchor Critty Gupta there well.

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Speaker 1: Should we all be getting ready also this Friday to

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Speaker 1: fall in love with France? The Paris Summer Olympics twenty

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Speaker 1: twenty four begins today with what promises to be a

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Speaker 1: spectacular opening ceremony in the shadow of the Eiffel Tower.

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Speaker 1: Comes there at a tricky time, doesn't it for the

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Speaker 1: country politically, with Macron's government shaken by the recent election,

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Speaker 1: a caretaker government in place, no prime minister joining now

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Speaker 1: live from Paris Is Bloomberg's Caroline Connor, Caroline, what an

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Speaker 1: exciting day for you? What to expect then from these Olympics?

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Speaker 1: The opening ceremony, that four mile route along the send

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Speaker 1: just paint a picture for us.

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Speaker 8: Firstly, yeah, it's very exciting. It's for the first time

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Speaker 8: ever it's actually not going to be in a stadium,

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Speaker 8: but outside right in the city, along the Sand River,

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Speaker 8: along a four mile stretch of the river. You're going

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Speaker 8: to have nearly seven thousand athletes sailing down the river

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Speaker 8: on eighty five boats, each representing a different country. About

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Speaker 8: one hundred and twenty heads of state and government are

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Speaker 8: going to be attending. You're going to have Jill Biden,

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Speaker 8: You're gonna have all shows, You're going to have the

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Speaker 8: UK Prime Minister Kill Summer, You're going to have the

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Speaker 8: Israel President Herzog and it's going to be quite impressive.

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Speaker 8: I was talking to the Oval CEO yesterday on how

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Speaker 8: their plan to broadcast this life to about one billion

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Speaker 8: people with two hundred cameras on body camps, on boats.

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Speaker 8: Of course, there's going to be a lot of security

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Speaker 8: as well. Around forty five thousand security is on duty

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Speaker 8: all around Paris. We've even police diverse checking under the water.

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Speaker 8: There's no attack on the votes from ANDERNI, so quite

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Speaker 8: impressive high security. And at the end of the three

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Speaker 8: thousand dancers singers for a big finale at the base

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Speaker 8: of the Eiffel Tower. We expect Lady Gaga, we expect ayanakemuha,

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Speaker 8: and possibly a comeback of stelling Young as well.

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Speaker 1: Oh wow, okay, a huge moment then for France, for

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Speaker 1: Paris to shine. I mean not just the sports, it's

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Speaker 1: the culture. Politically though, it's a bit tricky.

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Speaker 8: Yes, it is a little strange atmosphere, given we still

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Speaker 8: have no new prime minister, no new French government since

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Speaker 8: the snap legislative elections ran off from July seventh, which,

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Speaker 8: as you know, resulted in parliament and no majority. President

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Speaker 8: Emaian Macmaar was actually called for an Olympic truce during

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Speaker 8: the game, so the Prime Minister Gabriel Atal should remain

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Speaker 8: a caretaker at least until the end of the Olympics

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Speaker 8: mid August, or this could go even until the end

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Speaker 8: of the Paralympics, which is the first week of September.

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Speaker 8: So we're gonna see. But at the moment, the executives

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Speaker 8: are trying to forget this political drama we've had over

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Speaker 8: the past months and trying to focus on the excitements

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Speaker 8: on this opening ceremony.

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Speaker 9: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 9: stories making news from London to Wall Street and beyond.

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Speaker 9: You can also listen live each morning on London DAB Radio,

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Speaker 9: the Bloomberg Business app, and Bloomberg dot Com.

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Speaker 9: I'm Caroline Hepca and I'm Stephen Carroll. Join us again

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