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Speaker 1: Good morning.

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Speaker 2: I'm Richard Salama.

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Speaker 3: And I'm Doug Krisner. Here are the stories we're following today.

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Speaker 1: Yeah.

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Speaker 2: Absolutely, and we're looking at that cutting of US bank

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Speaker 2: ratings by S and P Global Ratings, blaming a tough

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Speaker 2: operating climate for this downgrading five regional US banks, including

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Speaker 2: Key Corp, Comerica, and Valley National Bank Corp. S and

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Speaker 2: P noting the impact of higher interest rates and deposit

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Speaker 2: moves across the industry as a cause. We heard from

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Speaker 2: Kane Anderson, CEO of Albert Rabil, saying that we're in

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Speaker 2: the early stages of a banking sector recalibration.

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Speaker 4: We've seen the tip of the iceberg on banking consolidation,

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Speaker 4: but very much the tip of the iceberg. Hopefully we

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Speaker 4: don't have a catalyst that makes it, you know, that

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Speaker 4: turns this from a slow moving train wreck into a crisis.

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Speaker 4: That was Kane Anderson, CEO Albert Rabil.

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Speaker 2: Now we've got Moodies, of course, lowering credit ratings for

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Speaker 2: ten US banks earlier this month and warning it may

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Speaker 2: downgrade others as precious amount on the industry. The kb

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Speaker 2: W bankingdex a major US banks has since slump to

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Speaker 2: almost seven percent of the situation may worsen for if

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Speaker 2: the Federal Reserve holds it higher for longer, because that

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Speaker 2: would further it rode the value of loans to borrowers

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Speaker 2: who need to refinance.

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Speaker 3: Well, Microsoft's takeover of Activision Blizzard seems to be back

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Speaker 3: in play. The software maker has submitted a substantially different

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Speaker 3: proposal to the UK's antitrust watchdog. Sarah Cardell is the

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Speaker 3: chief executive of the UK's Competition and Market's Authority.

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Speaker 5: The key difference is that this time Microsoft will not

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Speaker 5: be acquiring any of the cloud streaming rights in relation

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Speaker 5: to app visions games for the next fifteen years. Now

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Speaker 5: you might remember, but the main reason why we've brought

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Speaker 5: the deal originally was because we were concerned about the

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Speaker 5: impact on competition in this important new market for cloud gaming.

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Speaker 3: That is Sarah Cardell. She is the chief executive of

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Speaker 3: the UK's Competition and Markets Authority. By the way, she

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Speaker 3: went on to say, the acquisition is being reconsidered and

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Speaker 3: this obviously has created a lot of renewed hope on

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Speaker 3: Microsoft completing the sixty nine billion dollar deal for Shot.

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Speaker 2: All right, Well, Sam Bakwin Freede, is that pleaded not

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Speaker 2: guilty again, this time to a narrow list of charges

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Speaker 2: related to the implosion of the cryptocurrency exchange FTX. Back

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Speaker 2: when Freeda was in a Manhattan federal court, his first

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Speaker 2: appearance since a judge revoked bail ten days ago, Bloomberg

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Speaker 2: News legal report Chris Dameltch was in that courtroom, saying

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Speaker 2: defense attorneys raised a concern about access to their client.

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Speaker 6: They say they've not been able to prepare their defense

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Speaker 6: with him since he's been in jail, and that was

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Speaker 6: one of the main complaints they had today that they

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Speaker 6: have he has no real access to the materials he

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Speaker 6: needs to prepare his defense for a trial at starting

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Speaker 6: in six weeks.

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Speaker 1: They're really trying to push the.

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Speaker 6: Judge to kind of force the Bureau of Pusons to

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Speaker 6: kind of make accommodations for him so that he has

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Speaker 6: time to review this stuff, which they say is millions

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Speaker 6: of pages.

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Speaker 2: Well, indeed, that was Bloomberg's at Chris Demelcha reporting Bakwen

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Speaker 2: Freeda's scheduled to go on trial in October.

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Speaker 3: Well, Chinese president Xi Jinping is looking to boost the

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Speaker 3: global influence not only of China, but South Africa as well.

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Speaker 3: She was hosted by South African President Cyril rama Fosa

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Speaker 3: in the run up to this week's Bricks Summit in Johannesburg.

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Speaker 3: Here is Bloomberg' Jennifer Sabasajia.

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Speaker 7: The fifteenth annual Brick Summit has officially kicked off in Johannesburg,

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Speaker 7: but ahead of the summit's major events, South African President

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Speaker 7: Cyril Ramaposa hosted the only state visit that we're going

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Speaker 7: to see this week with Chinese President Shi Jimping. And

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Speaker 7: this is an important meeting for these two leaders and

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Speaker 7: these two countries. It is the twenty fifth anniversary of

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Speaker 7: these countries celebrating their diplomatic relationship, and these two leaders

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Speaker 7: are talking about how to enhance their trade relationships and

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Speaker 7: expand collaboration and trade on a number of sectors from

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Speaker 7: mining to agriculture and textiles. Now, for the rest of

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Speaker 7: the week, these two leaders will be meeting on behalf

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Speaker 7: of their roles as leaders of two of the five

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Speaker 7: Bricks nations to talk about a number of agenda items,

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Speaker 7: including potentially expansion, deepening trade with their own local currencies,

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Speaker 7: and also enhancing their voice on multilateral stages and forums.

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Speaker 7: In Pretoria, I'm Jennifer's Abasaja Blimberg News.

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Speaker 3: We were talking a moment ago about this surge in

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Speaker 3: US treasury yields. I think that's been a primary reason

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Speaker 3: that the equity market has struggled over the past several weeks.

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Speaker 3: Tom Essay, he's the founder of the Sevens Report. He

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Speaker 3: was saying investors are pushing out the date of expected

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Speaker 3: rate cuts as they begin to accept this idea that

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Speaker 3: the Fed may hold rates higher for longer. And Essay

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Speaker 3: was saying, it's not the height of rates that really

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Speaker 3: matters as much as how long they stay high. And

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Speaker 3: he went on to say that if FED share J.

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Speaker 3: Powell hints at higher for longer when he speaks on Friday,

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Speaker 3: the equity market will need to brace for a little

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Speaker 3: bit more volatility. Global News is next here on DBA.

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Speaker 3: The US has responded to North Korea's announcement of plans

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Speaker 3: to launch a satellite in the next few days at

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Speaker 3: Baxter with Global News from the Bloomberg Newserm in San Francisco.

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Speaker 8: Eddie, Yeah, Doug. Of course, the concern is as a

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Speaker 8: spy satellite. This coming after the trilateral meeting between the US,

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Speaker 8: South Korea, and Japan. At the Pentagon, Brigadier General pat

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Speaker 8: Ryder says, the three allies do now have an agenda.

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Speaker 9: We're going to take all necessary measures to ensure that

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Speaker 9: the security of our homeland and the defense of our

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Speaker 9: allies continues, and we will continue working closely with Japan

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Speaker 9: and RK to promote peace, security instability in the region.

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Speaker 8: And North Korea's warren Japan's coast guard. A potential of

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Speaker 8: falling debris after the launch. Surrender of Donald Trump's inner

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Speaker 8: circle continues today. Former Trump attorney John Eastman and Fulton

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Speaker 8: County jail grated by reporters as he left.

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Speaker 3: Do you still think the election was stolen? Absolutely?

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Speaker 2: Absolutely, still no question.

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Speaker 8: Yeah. So looks to be the theme of the defense.

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Speaker 8: They were trying to uncover what they still believed to

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Speaker 8: be was stolen vote.

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Speaker 3: My legal team and I will vigorously contest every count

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Speaker 3: of the indictment in which I have been named, and

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Speaker 3: also every count in which others are named.

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Speaker 8: Eastman also says he feels all his co defendants will

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Speaker 8: be cleared. Mark Meadows, donald Trump's former chief of staff,

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Speaker 8: as asked a federal judge in Georgia for an emergency

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Speaker 8: order barring Fulton County District Attorney Fani Willis from arresting him.

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Speaker 8: More than half of the voters likely to attend Iowa's

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Speaker 8: Republican caucuses believe Donald Trump's false claims that he won

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Speaker 8: the twenty twenty election. This is an NBC des Moines register.

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Speaker 8: Fifty one percent believe Trump. Hong Kong will impose new

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Speaker 8: controls on food imports from Japan and response to the

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Speaker 8: release of treated wastewater from the Fukushima Nuclear Power Plant

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Speaker 8: Chief Executive John Lee. Hong Kong's measures, he says, need

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Speaker 8: to protect food safety and public health. Officials on Maui

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Speaker 8: are now saying they're estimated eight hundred people still missing

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Speaker 8: in Lahina Town. Governor Josh Green.

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Speaker 4: We do expect to see a lot more loss of life.

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Speaker 1: It's going to be tragic. I want to brace everyone

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Speaker 1: for that.

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Speaker 8: This is cruise now are going to have to switch

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Speaker 8: to very professional, high tech solutions to go through buildings.

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Speaker 8: He says. The President's visit was good because he granted

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Speaker 8: all of Green's monetary requests and well weight loss diet

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Speaker 8: fads come and go and go, and come and come

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Speaker 8: and go. The latest is salad and fries.

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Speaker 7: He mix those two things together and you're just kind

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Speaker 7: of you're in the middle, and that's the sweet spot.

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Speaker 8: Nutritionist Wendy Well says that's what she had for dinner

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Speaker 8: last night. Social media has blown up with picks of

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Speaker 8: it salad and fries. Very protein rich, but oh well.

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Speaker 8: Global news power by more than twenty seven hundred journalists

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Speaker 8: and analysts number one hundred and twenty countries. In San Francisco.

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Speaker 8: I'm Ed Baxter in this is Bloomberg. Let's get to

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Speaker 8: our guests. Jeff Klinop is with us. Jeff is the

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Speaker 8: chief global investment strategist at Schwab. He joins the from Celebration, Florida.

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Speaker 8: Thanks for being with us, Jeff. A lot of hope

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Speaker 8: that the numbers that we're going to get from in

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Speaker 8: video Wednesday after the bell are going to justify this

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Speaker 8: two hundred and thirteen percent rally that we have seen

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Speaker 8: in the stock so farthest here do you have a

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Speaker 8: view on in video right now? And the AI theme

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Speaker 8: more broadly, well, at.

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Speaker 1: Three percent of the S and P five hundred, it

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Speaker 1: carries a lot of weight, and not just because of

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Speaker 1: the AI theme that it represents, but really this whole

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Speaker 1: shift in the market to really focusing on what I

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Speaker 1: like to call long duration stocks, those companies that are

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Speaker 1: a lot of potential growth in the future. And you know,

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Speaker 1: when interest rates are rising, they tend to be out

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Speaker 1: of favor. But this sort of bucked the trend. So

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Speaker 1: I think it's interesting today to see a little bit

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Speaker 1: of a slide in in video, just a reminder that

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Speaker 1: there's still some room for disappointment here, not just in

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Speaker 1: ability to deliver supply, but questions about is there some

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Speaker 1: double ordering inflating the books? You know, something we saw

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Speaker 1: during the post pandemic environment when supplies of many key

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Speaker 1: components were scarce. We know that we're a lot of

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Speaker 1: double and triple orders inflating the books, and then they

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Speaker 1: went away very quickly. So something to watch here if

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Speaker 1: they give us any color on that. And I think

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Speaker 1: the market's bracing for that. But overall, the AI theme

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Speaker 1: remains intact, and we know many businesses are still way

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Speaker 1: behind where they'd like to be in adopting that into

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Speaker 1: their platforms.

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Speaker 2: Jeff, The thing is it's the you know, people who

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Speaker 2: rushed into it thinking that all this is going to

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Speaker 2: be arriving tomorrow as opposed to this is in the

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Speaker 2: years ahead, and perhaps too much optimism is being built up.

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Speaker 2: And perhaps you know, you can even see that with

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Speaker 2: the number of users that chat gbt's had actually falling

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Speaker 2: for the first time in seven months, which perhaps might

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Speaker 2: be just representing a gut check of polls, maybe pulls

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Speaker 2: for reflection.

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Speaker 1: Maybe I think it is interesting to note that so

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Speaker 1: much is expected here in the near term. Chat GPT

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Speaker 1: just count everyone's attention in November. It often takes longer

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Speaker 1: for businesses to plan how to use this technology, how

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Speaker 1: to incorporate it into their operations and really make it

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Speaker 1: part of what they do. And while there's a lot

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Speaker 1: more discussion about AI on earnings calls, I've been tracking

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Speaker 1: the number of references to AI and related terms on

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Speaker 1: earnings calls the last few quarters. It's really spiked up.

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Speaker 1: At the same time, we are not yet seeing capital

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Speaker 1: investment in information processing and equipment. That's the category that

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Speaker 1: all of this will be included, and it's just not

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Speaker 1: really ticked up yet. There's a little bit of a

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Speaker 1: lag there, but we're not seeing a wave of investment

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Speaker 1: along the likes of what we saw say in the

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Speaker 1: Internet in like two thousand. I'm sorry. In nineteen ninety

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Speaker 1: three through nineteen ninety six, it really led to big

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Speaker 1: productivity gains. So it could still be very early in

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Speaker 1: that curve of ramping up, and that could lead to

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Speaker 1: some disappointment. I'm not an expert on Nvidia, but I

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Speaker 1: do know these things take a while for businesses to

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Speaker 1: figure out how to adopt them and incorporate them into operation.

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Speaker 3: Let's pivot the conversation talk a little bit about consumer behavior,

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Speaker 3: whether it's in the US or China. Shares in Nike

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Speaker 3: today we're down about one and a half percent, and

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Speaker 3: this stock has been weak for nine straight sessions. In

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Speaker 3: the course of that period, off about seven and a

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Speaker 3: half percent. In the US, there is some concern, as

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Speaker 3: we saw from the numbers coming out today by Dick's

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Speaker 3: Boarding Goods, that maybe there's a little bit of weakness

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Speaker 3: where consumers are concerned their budgets are becoming a little

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Speaker 3: bit more stressed. Before we go to the China story,

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Speaker 3: Jeff address how you view the American consumer right now.

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Speaker 1: Well, the American consumer I think is still very convinced

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Speaker 1: that the labor market is going pretty well. I mean,

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Speaker 1: I think that while we've seen spending pullback in some categories.

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Speaker 1: We're still getting a lot of spending on experiences over goods,

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Speaker 1: and these are big ticket experiences trips to Disney World,

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Speaker 1: you know, airline travel to Hawaii. So we're still in

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Speaker 1: that kind of post pandemic opening. Maybe we're getting towards

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Speaker 1: the end of it, but a lot of that high

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Speaker 1: end spending still taking place, maybe at the expense of

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Speaker 1: some goods purchases. That, however, could start to fade if

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Speaker 1: we start to see some of the layoff announcements I'm

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Speaker 1: hearing outside of the tech sector, businesses like CVS or

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Speaker 1: you know, a number of gosh, I mean, in the

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Speaker 1: tech space, we've heard many of them, but increasingly across

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Speaker 1: many other types of businesses they're talking about layoffs, and

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Speaker 1: you know, certainly financial services, even in healthcare, I've heard

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Speaker 1: some of this. If that starts to show up in

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Speaker 1: a more material way or get more attention, that could

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Speaker 1: begin to erode the confidence and maybe erode some of

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Speaker 1: that spending on some of those services categories that have

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Speaker 1: really seen the bulk of the enthusiasm by consumers.

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Speaker 2: It's interesting to note, you know, Doug was talking about

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Speaker 2: also the Chinese consumer the Chinese consumer's actually seen the

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Speaker 2: household balance sheets have improved significantly since the end of

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Speaker 2: twenty twenty one, but they're just not spending. And also

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Speaker 2: perhaps some of this has not been captured in the data,

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Speaker 2: but it is a problem of confidence emanating from perhaps

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Speaker 2: a wealth effect, and they're not feeling as flush as

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Speaker 2: they were when their properties were worth something more. Now,

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Speaker 2: it's interesting to know that we've got China making this

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Speaker 2: move to start to release service retail data separately from

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Speaker 2: just the whole thing is retail sales in one goes,

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Speaker 2: so you know that perhaps tells to something it does.

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Speaker 1: They've shifted a number of indicators right there. They're now

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Speaker 1: not sharing that youth unemployment data in the way that

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Speaker 1: they did before as well. So I think there's a

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Speaker 1: variety of maybe motivations behind all of that. I use

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Speaker 1: a lot of maybe non traditional measures to track what

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Speaker 1: I see going on in China. One of my favorite,

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Speaker 1: as it relates to the consumer is box office results.

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Speaker 1: You know, Disney many others report their results each weekend

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Speaker 1: in China, and they've actually been really strong. I don't

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Speaker 1: think it's just a Barbie effect. We've seen this for

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Speaker 1: many weeks now, I guess i'd say through July into August,

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Speaker 1: maybe suggesting a little bit of a revival in some

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Speaker 1: consumer behavior. I'm also noting that there's an uptick in

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Speaker 1: air pollution. This is a very unseasonable thing to be

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Speaker 1: happening right now within China. Two emissions and particulate emissions

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Speaker 1: are picking up based on EPA tests from US consulates

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Speaker 1: and cities across China, and that tells me there's more

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Speaker 1: maybe travel, more manufacturing activity taking place, maybe a little

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Speaker 1: bit of an early response to some of the stimulus

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Speaker 1: measures that were unveiled at the Polybro meeting in July.

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Speaker 1: So it's very early and things are still very soft,

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Speaker 1: but perhaps there's an improving trajectory.

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Speaker 3: Jeff, Before we let you go, Fed Shair J. Powell

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Speaker 3: will be speaking on Friday at thirty seconds or so.

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Speaker 3: What do you think we're going to hear from the

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Speaker 3: FED chairman?

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Speaker 1: I'm going to be listening very closely for two things.

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Speaker 1: Does he mention the slowdown in China that's a real

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Speaker 1: Dovish tilt in his hand towards when rate cuts may come,

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Speaker 1: Or if he continues to harp on a very tight

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Speaker 1: labor market, that's maybe a hawkish indication that the Fed's

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Speaker 1: got more work to do.

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Speaker 3: Jeff, It's always a pleasure. Thanks for making time to

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Speaker 3: chat with us. Jeff Klinop there. He is the chief

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Speaker 3: Global Investment strategist at Schwab. Joining us here on DBA,

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