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

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Speaker 1: Daybreak Europe podcast. Good morning, It's Wednesday, the twentieth of August.

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Speaker 1: I'm Stephen Caroll and London. Coming up today. A record

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Speaker 1: breaking run in global stocks loses momentum after a sharp

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Speaker 1: selloff in big tech names. Why ousting a CEO has

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Speaker 1: never been so expensive inside the Golden parachutes, retention bonuses

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Speaker 1: and search fees driving up the cost of change at

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Speaker 1: the top. Plus, we have a special report on how

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Speaker 1: over tourism and climate change have created a dangerous feedback

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Speaker 1: loop that threatens Southern Europe's economies. Let's start with a

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Speaker 1: roundup of our top stories. Global stocks have paused after

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Speaker 1: a record breaking run as concern grows that the rally

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Speaker 1: of recent months has advanced too far and too fast.

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Speaker 1: The s P five hundred close down zero point six

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Speaker 1: percent yesterday, while the Nasdaq one hundred by one point

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Speaker 1: four percent, with Nvidia leading a retreat in big tech.

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Speaker 1: The AI powerhouse is due to report earnings next week.

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Speaker 1: Daryl Kronk's CIO for Wealth and Investment at Wells Fargo,

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Speaker 1: says he remains bullish on the tech sector because of

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Speaker 1: their earnings growth.

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Speaker 2: You've got to go where growth resides, and there's just

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Speaker 2: no doubt that that's where the growth is. You saw

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Speaker 2: in the latest second quarter earnings numbers. You take the

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Speaker 2: seven largest stocks, the earnings growth were twenty nine percent.

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Speaker 2: If I take X those earnings growth was like three

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Speaker 2: and a half.

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Speaker 1: Wells Fargo Starl Kronk, speaking to Bloomberg earlier. As traders

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Speaker 1: are firming up bets on a September interest rate cut

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Speaker 1: from the Federal Reserve, newly released transaction data shows US

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Speaker 1: President Donald Trump bought bondsworth at least one hundred and

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Speaker 1: four million dollars since returning to the White House. The

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Speaker 1: bond investments include a raft of American companies affected by

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Speaker 1: sweeping policy changes championed by the president. The Bloomberg Billionaires

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Speaker 1: Index estimates Trump's net worth at six point four billion dollars,

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Speaker 1: but unlike his predecessor, the president has not divested or

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Speaker 1: placed his assets into a blind trust. Trump's business empire

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Speaker 1: is instead managed by two of his sons and operates

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Speaker 1: in several areas that intersect with presidential policy. European countries

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Speaker 1: are developing a plan to send British and French troops

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Speaker 1: to Ukraine as part of a potential peace deal between

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Speaker 1: Kiev and Moscow. Leaders are said to be looking to

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Speaker 1: leverage President Trump's support for a package of security guarantees

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Speaker 1: that would involve European boots on the ground with possible

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Speaker 1: US air support. Here's what the US President told Fox News.

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Speaker 3: When it comes to security, they're willing to put people

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Speaker 3: on the ground. We're willing to help them with things,

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Speaker 3: especially probably if you can talk about by air, because

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Speaker 3: as nobody has the kind of stuff we have, really

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Speaker 3: they don't have. But I don't think it's going to

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Speaker 3: be a problem. I think if a deal is made,

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Speaker 3: you know, famous last words, right, But I think if

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Speaker 3: a deal is made, I think Russia's had it. They've

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Speaker 3: all had it and for a very extended period of time.

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Speaker 3: I don't think there'll be a problem. But so there'll

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Speaker 3: be some form of security. It can't be NATO because

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Speaker 3: that was that's just not something that would ever ever happen.

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Speaker 4: He couldn't.

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Speaker 1: Those comments on Fox News came as Bloomberg learned Trump

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Speaker 1: called Hungarian Prime Minister Victor Orban on Monday after European

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Speaker 1: leaders pressed him to intervene and Ukraine's stoled EU membership.

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Speaker 1: Bid EU leaders say Ukraine's membership is part of broader

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Speaker 1: security guarantees, but Orban has described the idea as unnecessary

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Speaker 1: and dangerous. The UK government faces legal action after a

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Speaker 1: council won a court battle to stop a local hotel

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Speaker 1: being used to house asylum seekers. The Bell Hotel in Epping,

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Speaker 1: east of London, has been at the center of violent

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Speaker 1: protests in recent weeks. District council leader Chris Whitbread says

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Speaker 1: the decision showed the government cannot ignore planning rules.

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Speaker 4: We always knew.

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Speaker 5: The Bell Hotel was the wrong location because of its

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Speaker 5: close proximity to schools and other parts of the community.

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Speaker 5: It was never going to work out. This is not

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Speaker 5: a victory today, This is ruling for common sense.

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Speaker 1: With Bread success raises questions over the government's practice of

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Speaker 1: using hotels to house asylum seekers. Across the UK, the

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Speaker 1: Labor government's first year in office has seen illegal crossings

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Speaker 1: of the Channel rise to a new record high, stoking

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Speaker 1: public anger about controlling migration. Thousands of firefighters, aided by

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Speaker 1: soldiers and aircraft, are continuing to tackle wildfires across Spain,

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Speaker 1: although temperatures across the country have begun to drop in

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Speaker 1: recent days. Spain is still confronting one of the most

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Speaker 1: destructive fire seasons in recent decades. The fires have killed

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Speaker 1: four people and burned almost one five hundred square miles

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Speaker 1: of land, equivalent to an area more than twice the

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Speaker 1: size of London. The number of CEOs being forced out

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Speaker 1: of their jobs is on the rise and its expensive.

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Speaker 1: One analysis has found one hundred and thirty four CEOs

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Speaker 1: were pushed out last year in the Russell three thousand.

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Speaker 1: Bloomberg is consulted with compensation consultants, PR experts, and executive

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Speaker 1: search advisors to try and find the true cast of

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Speaker 1: firing a CEO. Bloomberg James Wilcock has more Get your

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Speaker 1: Calculators Out. Bloomberg estimates the median compensation for a forced

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Speaker 1: out US boss was six point two million dollars, the

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Speaker 1: sign on fee for their replacement another nine million. And

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Speaker 1: then there's the new higher pay packet. The one hundred

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Speaker 1: top earning CEOs accompanies with more than one billion dollars

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Speaker 1: in revenue are paid twenty two percent more than last year,

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Speaker 1: according to pay consultant Equila. That's a median of thirty

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Speaker 1: one million dollars, so factor in the millions in lawyers

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Speaker 1: plus payments to the rest of the board, and the

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Speaker 1: whole exercise is a lot more expensive than showing the

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Speaker 1: boss the way to the exit in London.

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Speaker 4: James Wilcock, Bloomberg.

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Speaker 1: Radio, those are your top stories on the markets we're watching.

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Speaker 1: The mscis specific and extend by one percent, and the

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Speaker 1: NIKA and Tokyo is one point six percent lower. The

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Speaker 1: Hangstang Tech Index mirroring the fall that we saw in

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Speaker 1: the Nasdak yesterday, down one point three percent. European Stock

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Speaker 1: Future is also pointing lower by seven tenths of one

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Speaker 1: percent this morning. The Bloomberg Dollar Spot Index is a

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Speaker 1: tent stronger, the Euro trading at one sixteen thirty four

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Speaker 1: and looking ahead to the Wall Street SETI and Nasdak

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Speaker 1: features are pointing lower by six tenths of one percent.

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Speaker 4: Now in a moment, we'll dig into the.

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Speaker 1: Tech stock sell off, plus bring you our reporting on

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Speaker 1: how over tourism and climate change in Southern Europe are

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Speaker 1: creating a dangerous feedback loop for economies there. But another

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Speaker 1: story I wanted to mention this morning, and a good

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Speaker 1: point raised by Bloomberg's James Tarmi watching children squabble is

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Speaker 1: annoying unless it's about inheritance, and then it turns out

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Speaker 1: its theater. So he's been watching about the upcoming Netflix

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Speaker 1: series about the Guinness family, set in the late nineteenth

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Speaker 1: century in Ireland and focusing on the four children of

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Speaker 1: Benjamin Guinness over the beer empire. Now, the difference to

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Speaker 1: the likes of Succession is that most of the kids

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Speaker 1: don't actually want to run the business.

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Speaker 4: They just want the money chase, right.

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Speaker 1: So this is coming at a time where there's increased

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Speaker 1: interest in the Guinness clan. There are also two nonfiction

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Speaker 1: books about them coming in the next few months. Very

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Speaker 1: interesting to see how the series turns out. That it's

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Speaker 1: created by Stephen Knight, a Pegy Blinders fame, so that

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Speaker 1: ought to put an interesting spin on this for a for.

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Speaker 4: An audience viewing it around the world.

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Speaker 1: I'm always curious that this as well, whether or not

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Speaker 1: they're going to get the accents right. I have to

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Speaker 1: say credit to the creators of the Sing Street musical

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Speaker 1: film that's recently been staged in London over this summer,

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Speaker 1: which I saw, which is essentially full of people with

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Speaker 1: accents like mine.

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Speaker 4: And they did a great job, lots of them.

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Speaker 1: I was very surprised to find out afterwards that they

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Speaker 1: weren't Irish. So I will be applying a similar level

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Speaker 1: of standard to this Netflix series coming up as well.

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Speaker 1: That's due out to be released next month. Something to

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Speaker 1: look forward to for your autumn culture calendar. Well, let's

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Speaker 1: dig into some of the bigger market moves that we

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Speaker 1: have seen today. Shares an aged joining the sell off

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Speaker 1: that we saw in Wall Street yesterday, the Nasdaq finished

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Speaker 1: one point four percent lower, futures pointing to further losses

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Speaker 1: at the open later on Wall Street. Our Markets Live

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Speaker 1: Executive editor Mark Cudmore joins me now for more. So, Mark,

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Speaker 1: is this investors realizing that valuations are stretched or are

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Speaker 1: we just looking at an August moment on markets?

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Speaker 6: I think there's a whole host of issues. I think

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Speaker 6: there's a really ripe reason for tech to sell off.

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Speaker 6: I think we've got Jackson hole this weekend, where the

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Speaker 6: risk coming out of that is higher long end yields.

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Speaker 6: And because of the incredible capex cycle we've seen in AI,

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Speaker 6: their higher duration assets than they were before, so they're

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Speaker 6: more vulnerable to move in long end yields, and I

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Speaker 6: expect whatever happens within a week or two of Jackson

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Speaker 6: Hole will see higher long and yields because either Powell

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Speaker 6: falds to administration pressure, in which case you see a

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Speaker 6: twist deepening of the curve, or it pushes back against

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Speaker 6: administration pressure, in which case the administration will double down

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Speaker 6: next week, which will again alarm the back end of

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Speaker 6: the curve. So you're going to see AI suffer from

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Speaker 6: that that problem of higher long and yields. You do

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Speaker 6: have lofty valuations, you've got retail kind of trader seasonality.

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Speaker 6: This is the time of year where they step back

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Speaker 6: a bit August and September. Citadel came out with a

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Speaker 6: note about that last night. Of course, we've generally had

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Speaker 6: at the kind of the peak of the hype cycle

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Speaker 6: and AI relative to the impact cycle. It takes a

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Speaker 6: long time.

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Speaker 4: To feature to protivity.

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Speaker 6: As companies adopt AI, it's expensive to adopt those transformation,

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Speaker 6: so you get a dip in productivity. That moment. We've

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Speaker 6: got in video earnings next week, we've already priced in

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Speaker 6: to be an amazing beat. It will be an amazing beat.

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Speaker 6: Earning has been really good for all the AA companies.

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Speaker 6: We've had several weeks to price it in. For in Vidia,

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Speaker 6: it's more than fully priced in. So everyone's realizing it

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Speaker 6: can't really be a positive surprise. It can only be

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Speaker 6: a negative. I think we're saying some rotation because small

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Speaker 6: caps earnings been really good. We've got the threat of

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Speaker 6: chips taffs coming again from Trump. I'm not sure anyone

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Speaker 6: really believes that because he always say it's within two weeks,

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Speaker 6: but it might happen. And we've got the US administration

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Speaker 6: directly extracting revenues from companies. We've seen it, you know,

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Speaker 6: with both in Nvidia and AMD, and last week in

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Speaker 6: a little noticed comment from the White House, they said

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Speaker 6: they're looking to expand to other companies, let's say, direct

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Speaker 6: taking from revenues into the profit margin of companies. So

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Speaker 6: there's loads of reasons for our tech stocks un till off.

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Speaker 6: I'm an AI bill longer term, but you know, this

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Speaker 6: is the first time in a long while AI, I'm

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Speaker 6: very worried about.

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Speaker 4: What is this Something that we need to get used to.

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Speaker 1: Essentially, is that that there will be this long gap

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Speaker 1: that you're talking about between the investment and the productivity

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Speaker 1: gains coming through. So does it set us up for

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Speaker 1: a rough ride for these stocks of the coming months.

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Speaker 6: Yes, So we have a j curve of productivity, which

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Speaker 6: is what we get in technology, which is as I said,

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Speaker 6: it's normally a dip in the short term as companies

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Speaker 6: realize they need to adopt this technology. And that's the

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Speaker 6: kind of phase we've gone into. Now everyone's kind of going,

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Speaker 6: oh right, we can't have our heads in the sand anymore. Ultimately,

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Speaker 6: I actually think AI will be transformative, and I think

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Speaker 6: it will be a massive global productivity boom and over

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Speaker 6: the coming years.

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Speaker 4: I think it's the reason to be very bullish global stocks.

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Speaker 6: But I think that the the evaluations of US megacap

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Speaker 6: techs have priced in just several problematic things. One accruing

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Speaker 6: almost all the benefits of this productivity boom accrueing them

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Speaker 6: very soon. You know, it's focused on very few stocks,

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Speaker 6: so I think, you know, and it's fully kind of priced.

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Speaker 6: So I think it's AI US AI tech sector in

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Speaker 6: particular that I'm worried about, and I think it's going

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Speaker 6: to be a problematic a few weeks ahead. As I said,

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Speaker 6: Jay Jackson, hall earnings in Nvidia, the chance of more

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Speaker 6: chip tariffs. Then we've got, of course the macro data

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Speaker 6: at the start of September, which is really going to

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Speaker 6: decide what the FED does. But they're in a quandary

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Speaker 6: because they're being forced by the administration to have too

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Speaker 6: easy policy relative to what economic orthodoxy would suggest. And

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Speaker 6: that just means that everyone believes the inflation problem is

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Speaker 6: going to get worse, which is already quite bad, and

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Speaker 6: that just means higher long and yields. And these companies

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Speaker 6: are higher duration assets because they spent so much on

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Speaker 6: the capex cycle, so they're yeah, they're really vulnerable in

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Speaker 6: the next month.

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Speaker 1: Well, just in terms of Jackson Hole, I mean, there

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Speaker 1: are traders, you know, putting bats now on a bigger

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Speaker 1: than twenty five basis point cut in September. Do you

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Speaker 1: really think that Jerome pal is going to be able

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Speaker 1: to steer much in either direction on Friday.

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Speaker 6: I think he'll try to keep his options open. That

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Speaker 6: the theme of the conference is about the labor market,

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Speaker 6: and I think if you look at the full title,

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Speaker 6: it tease it up to kind of talking about, Look, hey,

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Speaker 6: the labor market's cooling, but we're also seeing a decline

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Speaker 6: in supply, and that's why we're seeing not unemployment rate

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Speaker 6: not pick up, and everyone knows that you don't, you know,

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Speaker 6: tweak monetary policy to address a supply side problem that's

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Speaker 6: causing so so therefore, if you know there's a labor

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Speaker 6: market decline in the labor market supply because of the

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Speaker 6: crackdown immigration, well then cutting rates won't be the first

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Speaker 6: thing to fix it. And it's also not clear the

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Speaker 6: labor market's completely collapsing. Yeah, non from perils was disastrous,

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Speaker 6: but claims are still very very low. So I think

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Speaker 6: the labor market's very much cooling, but it's cooling for

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Speaker 6: a very hot level. Is it going off a cliff? No,

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Speaker 6: it doesn't seem like it. And meanwhile, inflation is very

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Speaker 6: very high, so you know what. I think the panell

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Speaker 6: knows that economic orthodoxy has said there's no way there

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Speaker 6: should be a cut next month, but he might feel

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Speaker 6: I kind of feel pressure to He won't be cutting

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Speaker 6: unless the data the start of September gives him the

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Speaker 6: cover to do so or I don't say that for

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Speaker 6: the whole committee. It's not just on him, but I

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Speaker 6: think enough committee members will feel the pressure and will

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Speaker 6: shift to a cut if the labor market data the

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Speaker 6: start of September is very weak, and inflation data a

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Speaker 6: few days later isn't very very problematic. I just don't

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Speaker 6: see that out coming happening, so I think it's going

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Speaker 6: to be very very hard to see September cut.

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Speaker 1: Okay, Mark Kudmar, our Markets Live executive editor, thank you

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Speaker 1: very much for joining us and talking us through some

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Speaker 1: of what we're seeing on markets today.

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Speaker 4: Stay with us.

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Speaker 1: More from Bloomberg Daybreak Europe coming up after this. Firefighters

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Speaker 1: in Spain are continuing to battle several major wildfires in

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Speaker 1: the northwest and southwest of the country. Spain's Prime Minister

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Speaker 1: has called for a new response from the public and

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Speaker 1: private sector to what he describes as the climate emergency. Today,

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Speaker 1: Bloomberg's looking at how over tourism and climate change have

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Speaker 1: created dangerous feedback loop that threatens some of your Southern

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Speaker 1: Europe's economies are europe Climate reporter.

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Speaker 4: Lara Milana is with us now for more. Lara, good morning.

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Speaker 1: How is climate change shifting tourism patterns?

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Speaker 4: Then in Southern Europe?

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Speaker 7: So, Southern Europe, the European Mediterranean is warming very fast.

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Speaker 7: It's a climate hotspot for lots of reasons. And what

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Speaker 7: our story looks at today is that the tourism season

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Speaker 7: in the Mediterranean is getting longer. So tourists are not

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Speaker 7: just traveling in the traditional peak season of July and

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Speaker 7: August anymore to go to their beach holidays. They're traveling

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Speaker 7: also in April, May, June, September, October. So the tourism

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Speaker 7: season is getting longer. But actually what we're looking at

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Speaker 7: is the fact that the traditional peak months in some places,

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Speaker 7: in some hot spots for beach tourism and hot temperatures,

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Speaker 7: pig season is getting less busy, slightly less busy. And

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Speaker 7: then the other interesting thing that we found is that

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Speaker 7: even if the tourism season is getting longer, the weather

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Speaker 7: is becoming more unpredictable. So if you're traveling to the

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Speaker 7: Mediterranean for your beach holidays in May, you might see

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Speaker 7: extreme rain, for example. And the pig season is becoming

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Speaker 7: more unpredictable as well, because as you were seeing just

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Speaker 7: now seeing wildfires everywhere, heat waves obviously, and all sorts

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Speaker 7: of extreme weather events made wars by climate change.

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Speaker 1: What does this shifting pattern, though, mean for the economies

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Speaker 1: that rely so heavily on tourism and also for the

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Speaker 1: environmental impact of visitor numbers.

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Speaker 7: So for the economy, as we look at the numbers,

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Speaker 7: we see how I mean, the coronavirus pandemic obviously kept

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Speaker 7: everyone at home and there was a big deep in

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Speaker 7: tourism revenues for all of these countries who we're talking Portugal, Spain, France, Italy,

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Speaker 7: Greece all seeing huge deeps in tourism revenue after the

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Speaker 7: coronavirus pandemic. But what we've seen is that rebounding really

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Speaker 7: strongly over the past few years, So tourism GDP, We've

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Speaker 7: looked at tourism TDP, We've looked at tourism employment and

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Speaker 7: revenues from foreigners in all of these countries I just mentioned,

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Speaker 7: they've gone up, uh two levels higher than they were

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Speaker 7: before the pandemic. So from an economic point of view,

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Speaker 7: this is good for these economies that increased their you know,

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Speaker 7: employment and the revenue from foreigners. But actually when we

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Speaker 7: look at the environment, we see that these additional amounts

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Speaker 7: of tourisms we're talking millions of people here traveling to

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Speaker 7: these destinations which we're already crowded before the pandemic. Uh,

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Speaker 7: they're adding new pressures to the environment. So we're seeing

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Speaker 7: all of these places strange for water resources, especially because

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Speaker 7: the Mediterranean is becoming drier as it becomes hotter. We're

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Speaker 7: also seeing a struggle for powers, so we're seeing in

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Speaker 7: some places power cuts or power becoming more expensive. And

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Speaker 7: we're also seeing natural places, so you know, pristin beaches

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Speaker 7: and forests becoming crowded with people, more polluted, more noise,

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Speaker 7: and more danger of wildfires as well.

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Speaker 1: So how are authorities then dealing with this tension.

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Speaker 7: In the places that we've looked at, So this is

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Speaker 7: Ivisa in Spain, Alentejo in Portugal, and Trentino in Italy.

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Speaker 7: We're seeing very different approaches because the places we looked

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Speaker 7: at are difference. In Avisa, which is a traditional tourism

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Speaker 7: beach destination known for for clubbing as well, authorities are

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Speaker 7: i would say overwhelmed. They are trying to deal with

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Speaker 7: with the issue by promoting the the show what we

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Speaker 7: call the shoulder season, so the months right next to

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Speaker 7: the to the peak season to July and August. But

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Speaker 7: actually the results that we're seeing from these policies of

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Speaker 7: trying to balance it out and not have all the

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Speaker 7: pressures of over tourism happen in just two months, but

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Speaker 7: spread it out, it just means that more people are

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Speaker 7: coming in. So the amount of people that are choosing

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Speaker 7: not to travel in July and August does not compensate

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Speaker 7: the amount of people traveling in other months. So in short,

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Speaker 7: you have more tourism coming in more pressure. In Portugal,

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Speaker 7: we've seen a move where authorities and companies in the

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Speaker 7: sector try to move some of that tourism further north

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Speaker 7: to alleviate the pressures in places like in the south,

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Speaker 7: in the southern areas, and we've seen these same pressures

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Speaker 7: coming to the new places where they're trying to promote tourism.

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Speaker 7: So in sure that the problem is kind of moving

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Speaker 7: north with the tourism, and in Trentino in Italy that

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Speaker 7: trend is very nascent. So the other thing we've looked

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Speaker 7: at is people choosing not to go to the beach

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Speaker 7: but go to the mountains as they look for cool

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Speaker 7: weather and lower prices. But these problems are coming with

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Speaker 7: them as well. So we've seen sorry to s try

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Speaker 7: to do a range of measures from you know, limiting

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Speaker 7: cruise ships to imposing tourist taxes, but none of these

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Speaker 7: is really solving the core problem, which is over tourism

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Speaker 7: plus climate change, adding extreme pressure to places that were

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Speaker 7: already really pressured at break tourism.

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

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