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

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Speaker 2: This is the prely Big Day BAQ podcast. Good morning,

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Speaker 2: It's Tuesday, the fourth of November. I'm Caroline Hepkeitt in London.

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Speaker 1: And I'm Stephen Caroline Brussels. Coming up today. Goldman Sachs

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Speaker 1: CEO again says he believes a significant stock sell off

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Speaker 1: is coming, but it's nothing to be afraid of.

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Speaker 2: The UK's Prime Minister Kis Starmer says the upcoming budget

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Speaker 2: will see tough but fair decisions, plus.

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Speaker 1: That you use climate fight heats up. Ministers meet to

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Speaker 1: hash out a deal on the next stage of targets

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Speaker 1: to cut emissions.

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Speaker 2: Let's start with the roundup of our top stories.

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Speaker 1: David Solomon, the CEO of Goldman Sachs, says he believes

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Speaker 1: stocks could fall by as much as twenty percent, but

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Speaker 1: he doesn't think that means people should be reallocating their investments.

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Speaker 1: The view from one of All Street's biggest names echoes

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Speaker 1: his previous comments on the market and comes as global

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Speaker 1: stocks have dropped partly due to uncertainty about rate cuts

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Speaker 1: and concerns about lofty tech valuations. Speaking at the twenty

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Speaker 1: twenty five Global Financial Leader's Investment Summit, Solomon said a

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Speaker 1: market pullback should be expected.

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Speaker 3: It is likely they'll be, you know, at ten to

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Speaker 3: twenty percent drawn down in equity market sometime in the

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Speaker 3: next twelve to twenty four months. And I'd say there

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Speaker 3: are very few people in this room that don't think

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Speaker 3: that that's a meaningful possibility. It doesn't mean that the

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Speaker 3: general direction of capital flows, investment portfolio allocations changing. It

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Speaker 3: just means things run and then they pull back, so

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Speaker 3: people can reassess.

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Speaker 1: Solomon out of the Goldman's advice is to remain investors.

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Speaker 1: The comments are echoed by Morgan Stanley's CEO Ted Pick.

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Speaker 1: He said we should welcome the possibility that there could

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Speaker 1: be ten to fifteen percent drawdowns. Meanwhile, Capital Group CEO

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Speaker 1: Mike Gitlin told the summit that while corporate earnings are strong,

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Speaker 1: what's challenging our valuations?

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Speaker 2: Well, the warnings film CEOs come as shares impalente fell

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Speaker 2: in extended trading after earlier gaining as much as seven percent.

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Speaker 2: Following the company's latest set of results. Palenteer raises annual

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Speaker 2: revenue outlook to four point four billion dollars and it

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Speaker 2: beat analyst estimates for third quarter sales, but concerns about

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Speaker 2: the company's record valuation led to a pullback from some traders.

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Speaker 2: Palentine has been one of the biggest beneficiaries of the

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Speaker 2: AI boom. It shares her up more than one hundred

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Speaker 2: and fifty percent this year, but the company now has

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Speaker 2: the highest price to sales ratio in the S and

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Speaker 2: P five hundred. Jill Lurier is head of technology research

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Speaker 2: at DA Davidson.

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Speaker 4: This is a company with a four billion dollar run

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Speaker 4: ray that's growing sixty three percent. There's nothing even remotely

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Speaker 4: close to that, which is how we got to the

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Speaker 4: situation where valuations are at unprecedented levels, not just for

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Speaker 4: them but for any software company, and that seems to

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Speaker 4: persist as long as they can continue to raise the bar.

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Speaker 4: Let's not forget that's sixty three percent is an acceleration

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Speaker 4: from the fifty percent last quarter, which was faster than

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Speaker 4: the quarter before that.

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Speaker 2: Gil Leurier, speaking there as tech stocks more broadly, rallied

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Speaker 2: on the news that Amazon had signed a seven year

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Speaker 2: deal with open ai for computing power. Open ai will

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Speaker 2: pay Amazon Web Services thirty eight billion dollars for access

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Speaker 2: to hundreds of thousands of Nvidia chips.

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Speaker 1: In the UK, the Prime Minister Kiir Starmer says his

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Speaker 1: government will make tough but fair decisions in its upcoming budget.

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Speaker 1: The warning comes as the Chancellor considers dozens of possible

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Speaker 1: tax increases to fill a fiscal whole of as much

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Speaker 1: as thirty five billion pounds. Bloomberg's UK politics reporter Joe

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Speaker 1: May's says her options are limited.

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Speaker 5: She has this manifesto pledge not to increase taxes on

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Speaker 5: working people. So that's why we are talking about things

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Speaker 5: like an exit charge when you leave the country, paying

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Speaker 5: perhaps twenty per cent tax.

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Speaker 4: On your holdings.

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Speaker 5: We are talking about things like larger properties paid more

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Speaker 5: in council tax perhaps. But her problem is that there's

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Speaker 5: a large of money to be raised and it's not

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Speaker 5: clear how much these kind of narrow taxes on the

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Speaker 5: wealthy would raise.

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Speaker 1: Are UK Government reporter Joe May speaking there, Bloomberg understands

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Speaker 1: that Reeves wants to take He wants to use a

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Speaker 1: potential productivity downgrade from the Office for Budget Responsibility to

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Speaker 1: simplify the UK's tax system and make it fairer. New

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Speaker 1: pre budget analysis from the Resolution Foundation think tank suggests

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Speaker 1: unexpectedly strong pay growth may offset the anticipated downgrade, leaving

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Speaker 1: the Chancellor with a fiscal hold that may be smaller

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Speaker 1: than many private forecasters expect.

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Speaker 2: In the US, voters are heading to the polls and

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Speaker 2: the biggest set of elections ahead of next year's midterms.

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Speaker 2: Governor races are being held in Virginia and New Jersey,

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Speaker 2: and a new mayor will be elected in New York City.

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Speaker 2: Polling shows Democratic nominees or in ma'am Donnie has a

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Speaker 2: lead in that race. Frank Lnce, politics and communications consultant,

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Speaker 2: says he expects a tough set of results for the Republicans.

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Speaker 6: The way that the voters usually react in an off

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Speaker 6: year election, which this is, is that they punished the

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Speaker 6: party in power. It just happens every two years, and

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Speaker 6: I think it's going to happen this time too.

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Speaker 2: Thank Lant, Speaking there on Bloomberg's balance of power. President

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Speaker 2: Trump has endorsed the former New York Governor Andrew Cuomo,

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Speaker 2: saying that he would be reluctant to send federal funding

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Speaker 2: to his hometown if Ma'm Danny is elected. Michael Bloomberg

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Speaker 2: has endorsed Andrew Cuomo in the mail race and donated

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Speaker 2: to a super pack supporting Cuomo. Bloomberg is the founder

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Speaker 2: and majority owner of Bloomberg LP, the parent company of

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Speaker 2: Bloomberg Television and Radio.

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Speaker 1: Sadi Aramco has reported profits that beat analysts estimates as

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Speaker 1: a boost and production outweigh the impact of weaker oil prices.

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Speaker 1: Net income adjusted for one time items rose by zero

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Speaker 1: point eight percent to the equivalent of around twenty eight

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Speaker 1: billion dollars in the third quarter. That's compared to a

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Speaker 1: year earlier. The result that surpassed market expectations, as free

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Speaker 1: cash flow also exceeded the dividend payout, and.

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Speaker 2: Lastly, top CEOs at Western companies are cautiously optimistic that

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Speaker 2: China's long retail downturn is coming to an end. Several

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Speaker 2: firms have posted strong results in China in recent weeks,

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Speaker 2: suggesting a rebound in consumer spending. Bloomberg's freddie Fulston has.

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Speaker 7: More Laoreal added as LVMH just a few companies signaling

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Speaker 7: an uptick in consumer confidence in China. It comes as

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Speaker 7: Beijing has pledged to significantly boost consumption in its economy

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Speaker 7: over the next five years, but it's no mean feat

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Speaker 7: amid an uncertain job market and a lingering real estate crisis. Esday,

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Speaker 7: Lorder's CEO Stefan de la Favoried told Bloomberg there's some

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Speaker 7: momentum building and the market is starting to accelerate, but

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Speaker 7: stop short of declaring a full comeback, saying there's still

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Speaker 7: some caution in China. In London, Fredi Fulston, Bloomberg Radio, and.

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Speaker 1: Those are our top stories on the markets this morning.

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Speaker 1: The Mscish Pacific Index down by nine tenths of one percent,

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Speaker 1: the Nika and Tokyo one point three percent lower, the

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Speaker 1: Cospian souls down by two point three percent. European stock

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Speaker 1: future is firmly in the red as well, down seven

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Speaker 1: tenths for eurostocks fifty Wall Street. We're seeing futures lower

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Speaker 1: as well, nine tenths for SMP mini's one point two

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Speaker 1: percent for NASDAK futures. The ten year treasury yields down

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Speaker 1: to basis points at four point zero nine percent.

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Speaker 2: Well, in a moment, we'll be discussing more on whether

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Speaker 2: equity markets are due for downturn. Plus, is the EU

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Speaker 2: retreating from its leadership role in limiting climate change? That

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Speaker 2: coming up next. But this story caught our attention. This

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Speaker 2: is the story of men's groups in big companies. This

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Speaker 2: is really an interesting story, isn't it.

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Speaker 1: Yeah, I mean our college Jeff Green and Saijo Kashan

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Speaker 1: have been writing about this as well, despite the fact

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Speaker 1: that I mean, I know certainly I rolled my eyes

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Speaker 1: a bit when I read the head of this as well,

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Speaker 1: because you kind of think like, do men need more representation?

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Speaker 1: Are they not represented enough at leadership roles in companies

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Speaker 1: or with for example, higher salaries is in the case

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Speaker 1: of many companies and corporate roles as well, but it

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Speaker 1: is something that is happening in companies like in the

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Speaker 1: UK Channel four and BA Systems or two of them

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Speaker 1: who've spoken to our colleagues for this piece as well.

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Speaker 1: I suppose if you think about it, you know there

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Speaker 1: are groups for other community groups for other communities at work.

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Speaker 1: You know, you could have LGBTQ groups for example. Yeah,

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Speaker 1: it works, so why not have a men's group as well?

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Speaker 1: In one argument for it. It's an interesting piece because

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Speaker 1: I think it examines both sides of this argument. You

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Speaker 1: can argue it both ways. Yes, you can speak to people.

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Speaker 2: It's just interesting that the companies that they cite essay,

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Speaker 2: Lorder and BAE Systems, you can kind of you can

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Speaker 2: understand why in some way, those are the companies that

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Speaker 2: stand out. Essay, Lord has got larger female workforce. BA Systems,

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Speaker 2: you know, they the huge defense contractor. They are larger

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Speaker 2: groups that are focused on men's health, you know, their

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Speaker 2: physical wellbeing and perhaps even their financial health. But yeah,

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Speaker 2: I think it's it's a very good topic to think

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Speaker 2: about though.

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Speaker 1: Yeah, I mean that the argument that these groups provide

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Speaker 1: support to people to talk about health issues or other

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Speaker 1: issues at work is sort of the goal. And they're

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Speaker 1: also very conscious about not being perceived as a boys club.

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Speaker 1: They're open to women to join as well, and some

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Speaker 1: of them have been co founded by women as well. Look,

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Speaker 1: it's a corporate trend that's out there are colleagues of reporters.

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Speaker 1: Are it's worth a read or put a link to

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Speaker 1: the story in our podcast show notes.

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Speaker 2: Okay, well, let's think about the markets now. The comments

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Speaker 2: from the Goldman Sachs CEO and others warning about this

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Speaker 2: possibility of a ten to twenty percent draw down in

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Speaker 2: equity markets in the next year or two. Let's being

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Speaker 2: in Blue Big TV Aca Quitti Gupta now for more

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Speaker 2: on this had Actually market is particularly in the US

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Speaker 2: hitting a record high off to record high in recent months.

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Speaker 2: Is this warning film Solomon film others that things could

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Speaker 2: come down any surprise. It's also quite a broad brush

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Speaker 2: warning about a drill down.

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Speaker 7: Yeah.

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Speaker 8: I think it's Newton's law, maybe the second or the third,

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Speaker 8: that what goes up has to come down. I wasn't

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Speaker 8: very good at science, hence since the career in journalism,

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Speaker 8: but I think that's exactly what's happening here in this market.

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Speaker 8: You are seeing an exponential rise. This isn't your constant

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Speaker 8: kind of grind higher that you've seen in past decades.

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Speaker 8: This is a ultimately the almost kind of a stock

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Speaker 8: chart that's going basically vertical, and that is where a

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Speaker 8: lot of people are starting to get nervous. But before

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Speaker 8: I came on here, I did look up the year's

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Speaker 8: day performance of the S and P five hundred. We're

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Speaker 8: had sixteen and a half percent year to date, so

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Speaker 8: a ten percent draw down would give us, again rough math,

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Speaker 8: this isn't exactly how the math works, but still an

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Speaker 8: almost seven percent gain when you look at the S

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Speaker 8: and P five hundred, which actually has beaten previous years

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Speaker 8: of index performance. So that's I think kind of the

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Speaker 8: tone that a lot of these executives are taking, which

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Speaker 8: is that, yes, there's a lot of momentum, Yes there's

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Speaker 8: a lot of excitement. Not all of it is backed

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Speaker 8: up by the fundamentals, because so much of it is

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Speaker 8: based on growth you're going to see in five, ten,

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Speaker 8: maybe fifteen years, and then of course you never know

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Speaker 8: what happens in that longer timeframe. And for that reason,

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Speaker 8: because so much of it is pegged to speculation, is

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Speaker 8: peg tow expected growth, you could see some sort of

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Speaker 8: crashdown to reality. But again they've all kind of cushioned

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Speaker 8: all their statements by saying that even that crashdown wouldn't

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Speaker 8: be the worst thing.

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Speaker 1: Polunteer is an interesting example in the question of tech

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Speaker 1: valuations as well and whether or not they are stretched,

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Speaker 1: because the results are, on the face of it, extremely strong,

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Speaker 1: but as you say, investors still wondering about the outlook

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Speaker 1: down the line.

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Speaker 8: It's a really fascinating one because Palenteer is ultimately a

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Speaker 8: data service company. It does data software, and one of

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Speaker 8: the real key reasons that it became such an ai

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Speaker 8: kind of popular stock is because a lot of the

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Speaker 8: defense contracts from the US government started utilizing Palenteer's data services.

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Speaker 8: So not only did it become a technology company and

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Speaker 8: ultimately an AI company because they were investing heavily in

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Speaker 8: those as well, it had kind of the stamp of

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Speaker 8: approval from the US government, which if you look at

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Speaker 8: other contractors that the US government uses, like lockeed Martin

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Speaker 8: for example, or Boeing, when they had more exposure to

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Speaker 8: those federal contracts, you do start to see this kind

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Speaker 8: of inbuilt premium of it being viewed as kind of

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Speaker 8: a safe stock because so much of it comes, so

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Speaker 8: much of the revenue comes from those federal contracts. I

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Speaker 8: think what's really interesting here, and you can see this

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Speaker 8: in these numbers. Their bookings are actually up, their sales

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Speaker 8: numbers are up, their profit is up. On the surface,

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Speaker 8: everything looks great, but this is where the classic kind

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Speaker 8: of adage of Wall Street comes in, where you buy

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Speaker 8: the room or sell the news. And that's kind of

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Speaker 8: what's happening here. To your point, Steven about valuations, this

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Speaker 8: idea that so much of this is baked into these

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Speaker 8: market that when you actually see that come to fruition,

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Speaker 8: when you see those goat and those numbers actually show up,

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Speaker 8: everyone kind of says Okay, well that's exactly what we expected.

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Speaker 8: Let's take some money off the table now, because now

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Speaker 8: we don't know what happens next. You're not just seeing

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Speaker 8: it in the palanteer space. You're seeing this in defense

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Speaker 8: stocks in Europe as well, because so many people have

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Speaker 8: priced in this massive momentum tied to government contracts with

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Speaker 8: the mix of AI, and then when you actually start

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Speaker 8: to see and value it on the multiples that it's

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Speaker 8: trading at, you say, wait a second, maybe it needs

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Speaker 8: to come down a little.

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Speaker 2: Well, also, does it help or hinder? When the CEO is,

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Speaker 2: as he always is, typically bullish. This is Alex Krp

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Speaker 2: of Palenti is saying these are arguably the best results

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Speaker 2: that any software company has ever delivered. I mean, if

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Speaker 2: people are worried about valuations, you know you can make

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Speaker 2: that argument does it help or hinder? Look, just lastly,

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Speaker 2: though there are still loads of big deals happening. Alphabet

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Speaker 2: Meta have also a conducted big bond sales recently. Is

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Speaker 2: there still big demand from investors on the debt side?

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Speaker 8: There absolutely is. I think where maybe tech companies are

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Speaker 8: getting punished in the equity market, they're getting rewarded in

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Speaker 8: the bond market. Excuse me. I think this is really

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Speaker 8: crucial here because in the equity market, and again, what

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Speaker 8: happens the equity market affects the bond market. It kind

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Speaker 8: of changes the valuation and the issuance and the rates

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Speaker 8: that you can offer in the bond market as well.

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Speaker 8: But think about it, a lot of credit investors have

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Speaker 8: been lacking a forum in whish to get involved in

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Speaker 8: the AI trade as a bond market investor. So this

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Speaker 8: is kind of the dynamic that a lot of companies

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Speaker 8: are taking, kind of taking a bet on. You saw

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Speaker 8: it with Oracle and the massive I think over thirty

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Speaker 8: billion dollar issue as they did in the States. I

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Speaker 8: think what's interesting in the last twenty four hours is

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Speaker 8: that Alphabet came in and they did a double debt sale.

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Speaker 8: They did it in the United States and dollars and

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Speaker 8: then three billion in Euros as well, which tells you

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Speaker 8: that this capital markets deal activity boom you're seeing is

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Speaker 8: not just an American phenomenon. It is actually bleeding into Europe.

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Speaker 8: And I think that's really crucial. Not only are they

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Speaker 8: coming to market, there is their over subscribed deals. People

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Speaker 8: want in on this trade in the bond market.

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Speaker 2: Okay, Christy, thank you so much for being with us today.

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Speaker 2: That has been a big TV anchor. Qritti Gupta stay

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Speaker 2: with us. More from Bloomberg Day Bacube coming up after.

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Speaker 1: This at the next stage of the European Union's climate

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Speaker 1: transition hangs in the Ballads, with ministers meeting and Brussels

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Speaker 1: to hash out a deal on the emissions cuts they

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Speaker 1: expect to deliver over the next fifteen years, so that's

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Speaker 1: twenty forty. They're aiming to sign off on an updated

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Speaker 1: climate pledge ahead of the COP thirty summit in Brazil,

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Speaker 1: which starts in a few days time. Our reporter Micaal

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Speaker 1: Cabala is here with me in the Brussels studio for

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Speaker 1: more this morning. Micaal, what exactly our minister is debating

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Speaker 1: here in Brussels today.

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Speaker 9: It's likely to be a big, long day of climate

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Speaker 9: talks here in Brussels. European Union environment ministers are essentially

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Speaker 9: meeting to agree on new targets for cutting greenhouse gas

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Speaker 9: emission emissions. One major proposal is to reduce carbon emissions

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Speaker 9: by ninety percent by twenty forty compared with nineteen ninety levels.

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Speaker 9: That essentially is a key step intermediary steps. This ultimate

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Speaker 9: goal off the U to reach net zero by twenty

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Speaker 9: to fifty. This is days before the COP thirty talks

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Speaker 9: Kaikoff in Brazil, and that sort of leads me to

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Speaker 9: to the other goal that they're trying to reach today,

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Speaker 9: which is to reach a deal on an emissions target

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Speaker 9: for twenty thirty five, which signatories of the Paris Agreement

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Speaker 9: are supposed to submit to the UN. The EU has

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Speaker 9: already missed a deadline to submit that pledge, and with

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Speaker 9: top U officials traveling to the COP in just the

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Speaker 9: coming days, the Minister's meeting sort of the final push

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Speaker 9: to put a seal on those agreements.

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Speaker 2: The thing is, we've seen a pullback in terms of

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Speaker 2: climate targets in the US under President Chump. How has

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Speaker 2: that debate then influenced or played out in Europe.

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Speaker 9: Yeah, it's an interesting debate. Europe is a cop between

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Speaker 9: economic worries back home and really that shifting landscape where

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Speaker 9: the US is pulling back from from their climate leadership.

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Speaker 9: But there's always been a debate on these ambitious goals

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Speaker 9: in Europe. Attention has tradition turned to the bloc's major economies, Germany,

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Speaker 9: has concerns over its imbattle really card industry, and other

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Speaker 9: countries in Central Europe are worried about their heavy industries.

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Speaker 9: Hungary and Slovakia not expected to support that ninety percent

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Speaker 9: target for example. What's also interesting to look at is France,

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Speaker 9: the other economic heavyweight. It's traditionally been a leader on

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Speaker 9: climate ambitions, remembers it's home to this enormous nuclear energy

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Speaker 9: fleet and the Paris Agreement itself. Recently, we're we're seeing

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Speaker 9: is Paris is also stressing that need for more competitive industries,

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Speaker 9: and it's been seeking concessions on language in some of

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Speaker 9: the proposals that might be that are debated today. The

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Speaker 9: broader green agenda in the EU is also under some strain.

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Speaker 9: The EU has delayed its anti deforestation law by year,

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Speaker 9: for example, and in the last to two weeks of

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Speaker 9: fifty French and German CEOs wrote to their leaders urging

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Speaker 9: them to rethink corporate climate rules like a directive that

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Speaker 9: obligates and requires them to have a detailed transition plan. Now,

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Speaker 9: none of that really means that the EU will back

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Speaker 9: out of its climate ambitions. The EU institutions are very

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Speaker 9: very clear about that. They say we are staying in

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Speaker 9: the course, but some of those emerging worries about competitiveness

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Speaker 9: means it's more difficult to put industries and all the members,

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Speaker 9: all the twenty seven members on one side of the debate.

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Speaker 1: And look CEOs have been very vocal about this as well.

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Speaker 1: You know, if you think about Ryanair's Michael O'Leary also

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Speaker 1: being very clear, as he often is and forthright about

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Speaker 1: his views on some of these climate rules. Let's to

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Speaker 1: take a listen to what he had to say about

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Speaker 1: some of these measures when he spoke to Bloomberg yesterday.

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Speaker 10: There's a real I feel like schizophrenia in Europe. You

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Speaker 10: have most of the growth economy Sweden, Croatia, Hungary, Italy

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Speaker 10: have worked out environment or abolishing their environmental tax on

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Speaker 10: air travel because they're I feel like a break on

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Speaker 10: growth and they're being rewarded with dramatic growth. We're switching

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Speaker 10: capacity to those countries. The three countries who don't get

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Speaker 10: it are the dumb Germans, the stupid French, and Rachel Reeves.

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Speaker 1: Michael O'Leary from Ryan are there now. He of course

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Speaker 1: not shy in sharing his views about things like this,

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Speaker 1: and he never really has been either but are do

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Speaker 1: those comments land better now among the debate among European

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Speaker 1: leaders than necessarily they had before, given the broader debate

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Speaker 1: between competitiveness and maintaining this climate leadership.

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Speaker 9: Yeah, he doesn't mean those words the e. It's a challenge.

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Speaker 9: What the you is seemingly trying to do is to

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Speaker 9: link the climate goals and competitiveness, not setting those two

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Speaker 9: words against each other. Now we have the dragi and

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Speaker 9: the and the letter reports, so warning that the that

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Speaker 9: you're risks falling behind the US and China. Brussels is

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Speaker 9: now shifting its tone. It's talking about industrial strength and simplification,

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Speaker 9: all of that this attempt to cut red tape, speed

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Speaker 9: up permits and at the same time as the phrase goes,

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Speaker 9: stay the course on climate goals.

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

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