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

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Speaker 2: This is the Blueberg Day Bake Curt podcast, available every

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Speaker 2: morning on Apple, Spotify or wherever you listen. It's Thursday,

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Speaker 2: the seventeenth of July in London. I'm Caroline Hepka coming

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Speaker 2: up today. Markets are rattled as President Trump floats the

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Speaker 2: idea of firing Jerome Powell to lawmakers before denying he

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Speaker 2: has any plans to do so. Germany rejects that he

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Speaker 2: used two trillion euro proposed draft budget, calling plans for

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Speaker 2: a significant hike in spending unacceptable. Plus, can the man

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Speaker 2: who cleaned up Britain's banks fixed the country's wildly unpopular

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Speaker 2: and indebted water industry? We have a special report. Let's

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Speaker 2: start with a round up of our top stories. President

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Speaker 2: Trump is denying reports that he intends to fire a

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Speaker 2: Federal Reserve chair, Jerome Powell. That's after he is said

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Speaker 2: to have raised the idea in a closed door meeting

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Speaker 2: with congressional Republicans that was then leaked to the press. Separately,

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Speaker 2: The New York Times reported that Trump has a draft

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Speaker 2: of Powell's termination letter, which was shown to lawmakers during

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Speaker 2: the meeting. Bloomberg's Anne Marie Harderen put that claim directly

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Speaker 2: to the President in the Oval office.

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Speaker 3: Large Republican lawmakers last night, no I talked about the

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Speaker 3: concept of fire, and I said, what do you think?

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Speaker 4: Almost every one of them said I should. But I'm

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Speaker 4: more conservative than they are.

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Speaker 2: President Trump added that while he doesn't rule anything out,

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Speaker 2: he's highly unlikely to remove Powell unless there is evidence

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Speaker 2: of fraud. In his words, The President then went on

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Speaker 2: to make a series of unfounded claims about fraud related

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Speaker 2: to the cost of renovating Federal reserve buildings in Washington. Now,

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Speaker 2: markets reacted sharply to the initial reports that Powell could

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Speaker 2: be axed. Stocks, the dollar, and long term US government

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Speaker 2: bonds all retreated, while short term treasuries rallied on speculation

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Speaker 2: that a new FED chair would cut interest rates. Those

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Speaker 2: moves were quickly unwound as Trump walked back the report,

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Speaker 2: but Bloomberg Economics says that they believe Trump is testing

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Speaker 2: the markets to see whether he can fire Powell, and

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Speaker 2: the sharp reaction appears to have convinced him to pull

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Speaker 2: back on the firing rhetoric for now. It's a message

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Speaker 2: echoed by Our Market's live stash is Mark Cranfield.

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Speaker 4: The more it gets talked about, particularly by President Trump,

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Speaker 4: the more traders will have to take it seriously, and

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Speaker 4: you will probably see those odds start to increase. Now,

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Speaker 4: it may well be that Bloomberg Economics are right, that

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Speaker 4: Trump will be watching the market reaction, and if the

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Speaker 4: market reaction is not too severe, then maybe that is

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Speaker 4: the telling point that makes investors say, yes, this is

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Speaker 4: a real possibility, and it could happen sooner than later.

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Speaker 4: So everybody is watching the movements in the markets, the

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Speaker 4: pricing odds in the futures, and the betting man marckets

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Speaker 4: as well. You put all those together, and it's beginning

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Speaker 4: to look like a case of no smoke without a

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Speaker 4: bit of fire.

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Speaker 2: Mark Cranfield, speaking there as Bloomberg Economics modeled what replacing

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Speaker 2: power with a more Dubvish chair could mean for the

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Speaker 2: US economy. While making certain assumptions. The model found that

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Speaker 2: removing the third chair could drive real USGDP down by

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Speaker 2: zero point six percentage points by the second quarter of

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Speaker 2: next year, with an unemployment rate close to five percent

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Speaker 2: and headline inflation CPI of around three percent. Well, President

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Speaker 2: Trump said that he would send letters to more than

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Speaker 2: one hundred and fifty countries, notifying them that their tariff

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Speaker 2: rate could be ten or fifteen percent. In an interview

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Speaker 2: with Real America's Voice broadcast later on Wednesday, Trump said

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Speaker 2: that the rate was going to be the same for

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Speaker 2: everyone for that group, Trump added that the trading partners

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Speaker 2: that would receive those letters were not big countries and

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Speaker 2: they don't do that much business. Asked about the prospect

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Speaker 2: of a deal with the European Union, well, the President

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Speaker 2: said that the US could make a deal possibly with Europe,

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Speaker 2: but that he's very indifferent to it. Let's think about

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Speaker 2: bank earnings too. Today JP Morgan is now worth more

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Speaker 2: than its three largest US rivals combined. The US lender

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Speaker 2: scored thirty billion dollars of profit in the first half

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Speaker 2: of the year, and it now has a trillion dollars

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Speaker 2: more in assets than any other US bank. It comes

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Speaker 2: as American banks posted record earnings performances, with Gold and

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Speaker 2: Sachs posting its best stock trading revenue in history. RBC

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Speaker 2: Capital Markets, head of US bank equity strategy, j Gerard Cassidy,

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Speaker 2: says you can put the record performance down to President

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Speaker 2: Trump's liberation Day.

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Speaker 5: We have to remember that the markets Obviously, drive are

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Speaker 5: a major factor behind the and BANG trading revenues, and

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Speaker 5: increased volatility is good for trading. It's not as strong

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Speaker 5: for investment banking revenues, but for training you won volatility,

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Speaker 5: and we certainly had that at the start of the quarter.

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Speaker 6: Well.

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Speaker 2: To Cassidy's point, trading revenue at the five biggest banks

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Speaker 2: in the US hit seventy one billion dollars in the

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Speaker 2: first six months of the year, the most for that period.

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Speaker 6: Ever.

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Speaker 2: Opinions differed on whether it would last, though, with Goldman's

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Speaker 2: CEO David Solomon saying that the coming quarters wouldn't be

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Speaker 2: on the same scale, where as City Group CEO Jane

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Speaker 2: Fraser says that volatility will be a feature, not a bug,

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Speaker 2: of the new world order. Here In Europe, Germany has

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Speaker 2: rejected the European Commissions to trillion euro budget proposal just

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Speaker 2: hours after it was announced in Bussels. The seven year

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Speaker 2: plan is eight hundred billion euros larger than its predecessor,

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Speaker 2: as the block tries to fund support for European in companies.

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Speaker 2: EU Justice Commissioner Michael McGraw told Bloomberg Radio it will

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Speaker 2: be two years of tough negotiations ahead the EU.

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Speaker 7: You have a lot of stakeholders who have the twenty

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Speaker 7: seven member states, you have the European Parliament, and it

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Speaker 7: is being framed and challenging circumstances with the capital repayments

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Speaker 7: on the COVID loans next generation EU beginning to be

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Speaker 7: repaid from twenty twenty eight, so that does place additional

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Speaker 7: pressure that could be twenty to twenty five billion euro

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Speaker 7: every year.

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Speaker 6: So that's the first call on the budget as such.

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Speaker 2: Former Ireland Finance Minister Michael McGraw there Germany's response to

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Speaker 2: the unveiling was to call any comprehensive increase in the

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Speaker 2: EU's budget unacceptable. Well, the UK and Germany are set

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Speaker 2: to sign a new treaty here in London today that

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Speaker 2: could include a commitment to assist each other in case

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Speaker 2: of armed attack. The ceremony comes as part of a

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Speaker 2: visit by the German Chancellor Friedrich Mertz to the UK.

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Speaker 2: Bloomberg's un Potts has more now.

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Speaker 8: The UK's Prime Minister has previously talked of a wider

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Speaker 8: reset grounded in the new spirit of cooperation. A senior

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Speaker 8: German official has told Bloomberg today's mutual defense pledge is

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Speaker 8: a reaction both to an increasingly aggressive Russia and growing

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Speaker 8: concern among European allies about the US commitments to NATO

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Speaker 8: under President Trump. The news comes as BAE, Britain's biggest

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Speaker 8: defense suppliers, said it's speeding ahead with the development of

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Speaker 8: its next generation Tempest fighter jets, proving this competition in

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Speaker 8: the defense space, as well as cooperation in London. I'm

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Speaker 8: you and pots to Bloomberg Radio.

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Speaker 2: Lastly, to some sports news now. Masters champion Rory McElroy

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Speaker 2: is back on home soil today for the starter of

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Speaker 2: Golf's Open Championship, which returns to Royal Port Rush for

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Speaker 2: the first time in six years. Today, he says he's

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Speaker 2: got a good opportunity to add a sixth major title

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Speaker 2: to his collection.

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Speaker 9: I want to do my best this week, to enjoy

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Speaker 9: everything that comes my way, and enjoy the reaction of

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Speaker 9: the fans and enjoy being in front of them and

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Speaker 9: play in front of them. But at the same time,

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Speaker 9: I want to win this golf tournament and I feel

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Speaker 9: like I'm very capable of doing that.

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Speaker 2: World Golf Number two will be McElroy speaking there. Island's

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Speaker 2: Shane Lowry lifted the Claret jug the last time the

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Speaker 2: tournament was held at the course in County Antrim. World

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Speaker 2: number one Scottish Shefflet is favorite for the title this year,

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Speaker 2: with three time major winner Padrick Harrington hitting the opening

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Speaker 2: tee shot. So that in the golf news end this morning.

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Speaker 2: Let's think about the markets though, in terms of the

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Speaker 2: volatile day that we had yesterday, the threats the independence

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Speaker 2: of the Fed. The dollar this morning is back to

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Speaker 2: some gains, but that was hit hard yesterday after the

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Speaker 2: florry of speculation then denial from President charm. The BlueBag

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Speaker 2: Dollar Spot index this morning is up by two tenths

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Speaker 2: of one percent. The VIX index also yesterday was above

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Speaker 2: nineteen given the repeated attacks on Powell. In terms of

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Speaker 2: treasury yields this morning, let's look to the tenure yields

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Speaker 2: which are almost two basis points at four forty seven.

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Speaker 2: The Feds Williams talking about the restrictive stance of the

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Speaker 2: Central Bank being entirely appropriate. Remember European stocks yesterday dropped

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Speaker 2: for a fourth session in a row, down six tents

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Speaker 2: of one percent. There were some major names hit yesterday

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Speaker 2: after results like Reno and ASML. Looking to Asia some gains,

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Speaker 2: mascih Pacific indexes up. Currently two tenths of one percent.

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Speaker 2: US stock futures are in the red right now. So

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Speaker 2: those are the markets. Well, in a moment we'll discuss

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Speaker 2: the threat to the fed's independence from political interference, and

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Speaker 2: also a special report on Thames Water and the man

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Speaker 2: being brought in to fix the UK's faltering water industry.

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Speaker 6: But another story got.

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Speaker 2: My attention this morning as I got up before the

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Speaker 2: bid men to be here in the studio. The era

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Speaker 2: of bragging about how little sleep you get as a

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Speaker 2: to executive is over.

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Speaker 6: I must say I cheered at this.

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Speaker 2: Kate Krader has been writing about the routines that CEOs

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Speaker 2: have for getting a good night's sleep, and this is

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Speaker 2: in Bloomberg Business Weeks. The CEO diet, Well, she has

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Speaker 2: Uber's CEO darakos Ushahi, pretty simple, get rid of the screens.

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Speaker 2: He says, he now falls asleep by reading Yes Wow,

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Speaker 2: a book.

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Speaker 6: It's back. Also a long soak.

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Speaker 2: Sam Caljioni, who is a founder of the craft brewer

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Speaker 2: Dogfish Head Craft Brewery, he apparently takes a half hour

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Speaker 2: long bath before going to bed. Daytime nappers are in

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Speaker 2: there too, writer Coco's co founder Michael Kerban and then

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Speaker 2: the estate agent to the rich and famous Rainy Williams,

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Speaker 2: who co founded Beverly Hills Estates. Her list is enormous

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Speaker 2: magnesium and zinc and an energy supplement and a long

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Speaker 2: skincare routine. Anyway, it's a really good read. So I'm

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Speaker 2: going to put a note and a link to that

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Speaker 2: article in our show notes. Kate's story gives you well

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Speaker 2: all of their financial vital statistics, none of the competition

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Speaker 2: about sleeping being for WIMPs. It's a really nice story today. Now,

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Speaker 2: President Trump took his pressure campaign against the Federal Reserve

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Speaker 2: chaired your Own Power to a new level yesterday, putting

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Speaker 2: markets into a short lived nosedive. Trump then denied a

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Speaker 2: plan to imminently acts Powell, but he didn't rule anything out.

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Speaker 2: Joining me now to discuss his Bloomberg's Markets Lives Shashi

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Speaker 2: is Mary Nicola, Mary Good Morning, Bloomberg Economic says that

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Speaker 2: President Trump is testing the markets to see whether he

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Speaker 2: can far the Fed chair.

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Speaker 6: Well, what was the market reaction? In more detail? There's

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Speaker 6: been a lot of volatility. So obviously we.

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Speaker 1: Saw that the US dollar was undermined, and then of

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Speaker 1: course that we saw a steeper US Treasury curve as

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Speaker 1: a result. So clearly the market is unhappy with some

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Speaker 1: of these noises. And as long as the idea continues

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Speaker 1: to get floated, I think that you'll still see a

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Speaker 1: reaction that negatively, because you're what he's essentially doing is

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Speaker 1: undermining the Fred's credibility. He's blurring the lines between fiscal

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Speaker 1: and monetary policy, and that continues to be a cornerstone

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Speaker 1: for the US. And so as long as these ideas

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Speaker 1: continue to get floated and the market reacts negatively, that's

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Speaker 1: that's going to be a key test for how long

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Speaker 1: this goes. Now, if you look at the polymarkets, the

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Speaker 1: polymarkets are only pricing in about a twenty percent chance

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Speaker 1: of the Powell leaving by twenty twenty five. But again,

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Speaker 1: it's going to start increasing if more of these noises

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Speaker 1: come through, and that's going to increase volatility and undermine

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Speaker 1: the dollar and steep in the yield curve.

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Speaker 2: Okay, fed independence absolutely critical, says JP Morgan's Jamie Diamond.

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Speaker 2: Wall Street CEOs have been commenting on this situation. A

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Speaker 2: lot of them, what have they been saying?

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Speaker 6: Yeah, absolutely, They've reiterated.

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Speaker 1: Each one of them has said the same thing in

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Speaker 1: terms of talking about the importance of FED independence, FED

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Speaker 1: credibility and not blurrying those lines between monetary policy and

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Speaker 1: fiscal policy, and the fact that how important it is

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Speaker 1: for the FED to take action based on what.

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Speaker 6: It's he's available.

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Speaker 1: So we already heard from Fed William saying that current

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Speaker 1: policy is appropriate where it stands, and of course you've

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Speaker 1: had some CPI this week showing some bubblings and inflation,

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Speaker 1: so clearly there is an indication that they want to

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Speaker 1: take a more measured approach to policy, where as the administration,

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Speaker 1: the Trump administration clearly wants rates to move a lot

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Speaker 1: lower at a much faster pace than what the FED

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Speaker 1: is thinking. And of course there still is a lot

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Speaker 1: of uncertainty out there, so you don't know the risks,

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Speaker 1: the impact of tariffs that's really coming through. And then

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Speaker 1: of course you had an increase in fiscal spending as

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Speaker 1: result of the Big Beautiful Bill, so there's a few

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Speaker 1: pockets that are bubbling. And of course what these bank

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Speaker 1: CEOs are saying is just the importance of the FED

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Speaker 1: credibility at such a time.

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Speaker 2: The other question is about whether the next FED president

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Speaker 2: influences the board, what are the risks around the FED

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Speaker 2: board being captured politically and the US ends up with

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Speaker 2: lower interest rates, which is what President Trump would like

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Speaker 2: to see. I mean, we already know that the process

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Speaker 2: to replace pal is underway and his term is up

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Speaker 2: in May next year.

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Speaker 1: Yeah, but the problem is it's going to be policy mismanagement.

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Speaker 6: So if you end up.

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Speaker 1: Having inflation expectations un anchored, which is one of the

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Speaker 1: key jobs that the FED is doing, or having extremely

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Speaker 1: low rates when the economy is struggling along, absolutely fine,

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Speaker 1: and then there becomes an absolute mismanagement in the economy,

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Speaker 1: and that's where investors become really, really nervous and jitterly

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Speaker 1: and could actually exacerbate what some of the key themes

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Speaker 1: that we've seen were are the cracks and US exceptionalism

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Speaker 1: and also the Cell America theme that we've noticed since

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Speaker 1: the start of the year. So it's a really fine

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Speaker 1: and difficult line if that we start seeing that the

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Speaker 1: FED move in favor of political pressure rather than what

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Speaker 1: is really being asked for by the economy and what

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Speaker 1: needs to anchor growth and of course inflation.

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Speaker 2: Okay, Mary, thank you so much for being with me

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Speaker 2: this morning. Very good to have you on the program

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Speaker 2: Bloomberg's Markets Live. Stratch is Mary Nicola. So I want

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Speaker 2: to turn to a story here in the UK, The

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Speaker 2: man who cleaned up Britain's banks, John Cunliff, is set

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Speaker 2: to reveal his plans to fix the country's wildly unpopular

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Speaker 2: and indebted water industry. Joining me now is Bloomberg's Priscilla

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Speaker 2: as a Vedo Rocca, who's been writing about this.

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Speaker 6: Good morning, Priscilla.

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Speaker 2: Look, firsty, can you just tell us now how bad

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Speaker 2: the crisis at Thames Water and really across the industry.

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Speaker 10: Is In the UK, the crisis with Thames Water is

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Speaker 10: really bad. The companies in the process of renegotiating its

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Speaker 10: huge that file that by now it's nearing twenty billion.

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Speaker 6: It's looking to inject equity.

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Speaker 10: At the same time this has been dubbed, just to

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Speaker 10: give some perspective, this has been dubbed the biggest corporate

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Speaker 10: recapitalization in Britain's corporate history. So there's a lot of

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Speaker 10: will into making this work. The creditors of the company

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Speaker 10: which now actually own Names Water. They're negotiating a plan

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Speaker 10: with water regulator off what in the company itself and

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Speaker 10: the management of the company to do this recapitalization, but

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Speaker 10: they are asking for a lot of concessions and these discussions.

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Speaker 6: Have been really heated.

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Speaker 10: If they don't reach an agreement, there's a high risk

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Speaker 10: on the table that this company will fall into the

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Speaker 10: special administration regime, which is very similar to nationalization. The

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Speaker 10: stakes are very high at the moment.

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Speaker 2: Yes, and also the stakes are high. And therefore when

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Speaker 2: he reads John connliff's career, when you know about his career,

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Speaker 2: he's held such a series of cedo roles, I mean

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Speaker 2: at the Bank of England, at the UK Treasury as

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Speaker 2: a government advisor over decades.

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Speaker 6: What is his task now?

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Speaker 10: That's right, he's a very seasoned civil servant and he's

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Speaker 10: been tasked by the UK government to look at the

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Speaker 10: current system and make the system work. So from day

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Speaker 10: one they excluded nationalization. They excluded changes to the current

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Speaker 10: price control mechanisms, which is established by the regulator that

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Speaker 10: sets up how much companies are allowed to spend and

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Speaker 10: invest in charge customers. So basically he was brought in

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Speaker 10: said Okay, this system is clearly not working.

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Speaker 6: What can we do?

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Speaker 10: What can we change to make it work without changing

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Speaker 10: how things are structured? And in this process in his

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Speaker 10: findings and throughout his travels and when he talked to

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Speaker 10: industry in his interim report, he indicated that he's looking

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Speaker 10: particularly at the role of regulators, which is very similar

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Speaker 10: to what he has done in the post financial crisis

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Speaker 10: prison with the banks to have more accountability. And he's

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Speaker 10: also honing in on the right type of investors for

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Speaker 10: the sector, and that means attracting people that want to

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Speaker 10: be there for a long time. They want lower returns,

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Speaker 10: they want the sector to be boring again compared to

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Speaker 10: what we have now, which are investors that have a

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Speaker 10: short time framework that they are looking to restrict returns

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Speaker 10: and that doesn't really work.

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Speaker 6: For the sector.

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Speaker 2: Okay, what is a utility. It should be a sort

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Speaker 2: of steady stream of income. I mean, critics have obviously

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Speaker 2: blamed privatization for and companies extract profits at what they

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Speaker 2: see is the expensive infrastructure. I mean, customers are going

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Speaker 2: to have to pay. This is partly the outcry over

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Speaker 2: Thames Water and why it's been so politically significant and

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Speaker 2: probably will stay that way.

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Speaker 10: Yes, that's right, just not only Thames Waters, across the country.

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Speaker 10: Bills have gone up to a record high earlier this year.

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Speaker 10: In April. And the issue here is that we have very,

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Speaker 10: very old infrastructure that requires improvements. For years, we had

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Speaker 10: the political will to keep bill lower, to keep household

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Speaker 10: bills lower. There was this angle from the political side,

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Speaker 10: and at the same time we had investors that are

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Speaker 10: extracted hefty returns from being part of those companies, and

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Speaker 10: that combination has put us where we are now. So

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Speaker 10: we had years of underinvestment in a massive infrastructure that

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Speaker 10: requires huge improvements that is really really old. We had

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Speaker 10: what is considered now what the market is viewing as

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Speaker 10: the wrong type of investors for this type of assets

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Speaker 10: in lower bills, which is also the political angle to this.

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Speaker 10: Years of political will to keep bills lower, and we

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Speaker 10: got to this point where someone has to pay the

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Speaker 10: bills right at the end of the day. Improvements are

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Speaker 10: not free, and that combination has put us where we now.

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Speaker 10: Where we are now with climate change, with population growth,

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Speaker 10: with water needs rising, the UK regulator approved one hundred

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Speaker 10: and four billion of investment for all water companies combined

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Speaker 10: for the next five years period and that's the highest

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Speaker 10: ever in history, which gives you a little bit of

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Speaker 10: scope on how much is needed to improve the system.

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Speaker 10: Right and we got to a point where we have

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Speaker 10: all these three factors against it. So this bill comes

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Speaker 10: at the end of the day, is not free.

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Speaker 6: This is Bloomberg Daybreak Europe.

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