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Speaker 1: Good morning.

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Speaker 2: I'm Nathan Hager and I'm Amy Morris. Here are the

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Speaker 2: stories we're following today.

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Speaker 3: We begin here in the US, where Moody's Investor Services

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Speaker 3: lowered the credit ratings for ten small and mid sized lenders,

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Speaker 3: and it also says bigger banks may face downgrades as well.

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Speaker 3: Bloomberg's Valerie Titel has more on the reasons behind the moves.

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Speaker 4: The first one is higher funding costs. We saw evidence

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Speaker 4: of this in the recent earnings announcement. We saw a

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Speaker 4: net interest margin compression. We know that it is eating

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Speaker 4: into these smaller banks profitability. Moody cites that as their

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Speaker 4: main reason. The second reason is regulatory capital weakness. We

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Speaker 4: know that the US regulatory capital framework is going under flux,

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Speaker 4: and they want to include a broader cast of banks

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Speaker 4: in this regulatory net. Third is their asset risk. Now

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Speaker 4: this is getting a lot of attention. Moody's is directly

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Speaker 4: pointing to their commercial real estate loans that a lot

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Speaker 4: of these small and mid size banks sit on.

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Speaker 3: Bloomberg's Valerie Titel notes some of the banks seeing ratings

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Speaker 3: cuts this morning include M and T Bank, Webster Financial,

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Speaker 3: Bank of Oklahoma Financial, and several others.

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Speaker 2: Banks are also under pressure in Europe. Italy's right wing

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Speaker 2: government spook markets with an unexpected tax on bank profits.

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Speaker 2: We get more from Bloomberg's Ton Metcalf in London.

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Speaker 5: Big surprise in a negative way for the sex and

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Speaker 5: not just initially but also the wider banks where we're

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Speaker 5: seeing always there all but yeah, the big Italian banks

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Speaker 5: are UNI credit down basically as much as six point

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Speaker 5: five percent at the open, which gives you indication of

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Speaker 5: how this is being received. I don't think it was expected.

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Speaker 5: And it's really interesting because obviously it comes against the

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Speaker 5: backdrop all those earnings where we were just talking about

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Speaker 5: how much money these banks making off the higher rate environment,

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Speaker 5: and now it looks like Rome is looking to sort

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Speaker 5: of take a piece of that, and about two billion

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Speaker 5: of people are expecting this tax to raise.

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Speaker 2: Bloomberg's Tom Metcalf notes Italian banks are the worst performers

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Speaker 2: in Europe this morning. Italy's main stock exchange is now

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Speaker 2: down one point sixty six percent.

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Speaker 3: Miami stocks fell in Asia over night after disappointing economic

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Speaker 3: data out of China. The country's exports fell for a

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Speaker 3: third straight month in July. Bloomberg Daybreak Asia anchor Brian

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Speaker 3: Curtis has more from Hong Kong.

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Speaker 6: Export slump fourteen and a half percent from a year earlier.

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Speaker 6: That's the worst decline since February of twenty twenty. Imports

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Speaker 6: contracted twelve point four percent, more than double estimates. I

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Speaker 6: left a trade surplus of eighty point six billion dollars

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Speaker 6: for the month. It's a double whammy for the economy.

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Speaker 6: Global demand is weak, and so is domestic consumption. There's

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Speaker 6: a plethora of issues here, sagging business and consumer confidence,

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Speaker 6: a deflating property market, and a government that is wary

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Speaker 6: of large scale stimulus in Hong Kong. Brian Curtis, Bloomberg.

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Speaker 7: Daybreak, Thank you, Brian.

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Speaker 2: Back here in the US, we have some news on

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Speaker 2: new tech coming out of Apple. Sources tell us the

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Speaker 2: company is testing a high end, next generation laptop processor.

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Speaker 2: More from Bloomberg's Doug Prisner.

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Speaker 8: The new chip is the M three Max, and it'll

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Speaker 8: be at the heart of a high end MacBook Pro

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Speaker 8: lap top, expected to debut next year. The central processing

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Speaker 8: unit includes twelve high performance cores for demanding task like

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Speaker 8: video editing, and for efficiency cores for less intensive applications

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Speaker 8: like browsing. The web v M three chip will mark

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Speaker 8: the first time Apple is shifting to a three nanometer

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Speaker 8: production process for Mac chips. The aim is to provide

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Speaker 8: better battery life and strong performance gains. In New York,

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Speaker 8: I'm Doug Krisner, Bloomberg Daybreak.

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Speaker 3: Okay, Doug, thanks for watching shares of Tesla this morning.

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Speaker 3: They're down about one percent. That comes on news the

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Speaker 3: chief financial officer, Zachary Kirkhorn is stepping down after thirteen

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Speaker 3: years at Tesla. Longtime Tesla investor Kathy Woods reacting to

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Speaker 3: the news, we spoke with the Ark Investment CEO late yesterday.

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Speaker 7: It's a tough job.

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Speaker 8: It's a tough, tough job.

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Speaker 6: So I guess thirteen years was a really good run

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Speaker 6: for zach.

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Speaker 5: Can't say enough good things about him and what he

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Speaker 5: did for Tesla.

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Speaker 3: Tesla is the largest individual contributor to Kathy Woods flagship

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Speaker 3: Arc Innovation ETF. The company's chief accounting officer will take

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Speaker 3: over the CFO role in addition to his current duties.

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Speaker 2: That's what's happening on Wall Street. Let's catch you up

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Speaker 2: now on the latest political news. We're learning more about

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Speaker 2: Donald trump presidential campaign strategy. Sources say he plans to

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Speaker 2: hold rival events to deny his challengers the public spotlight.

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Speaker 2: Joan Donegher has details from our Bloomberg ninety nine to

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Speaker 2: one newsroom in Washington.

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Speaker 9: The former president plans to skip appearances with other Republican candidates. Instead,

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Speaker 9: sources tell Bloomberg he'll hold separate events surrounded by his allies.

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Speaker 9: His aim to make sure his rivals don't get the

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Speaker 9: exposure they need to chip away at his status as

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Speaker 9: the front runner in the nomination race. The sources say

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Speaker 9: this will allow Trump to draw attention away from lower

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Speaker 9: polling candidates and shore up his own lead. The plan, however,

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Speaker 9: does not mean he'll skip this month's Republican National Committee

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Speaker 9: candidates debate. He may still take part. Joan Doneger Bloomberg Daybreak.

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Speaker 3: Joan thanks. There's also a controversial special election on the

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Speaker 3: schedule today. Voters in Ohio will vote on constitutional amendments

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Speaker 3: tied to abortion rights. Bloomberg's Ed Baxter has the story.

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Speaker 7: It is Ohio's Issue one, and if it's approved, a

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Speaker 7: sixty percent super majority would be required to amend the constitution.

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Speaker 7: Currently it's a simple majority. Now, this is a GOP

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Speaker 7: back referendum that was called to proceed before an expected

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Speaker 7: vote in November on a proposed amendment that would enshrine

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Speaker 7: abortion rights in Ohio's constitution. The White House has even

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Speaker 7: chimed in now saying it strongly opposes any attempts to

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Speaker 7: take away a woman's choice. I'm at Baxter Bloomberg Daybreak.

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Speaker 2: Time now for look at some of the other stories

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Speaker 2: making news around the world. And for that we are

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Speaker 2: joined by Bloomberg's John Tucker.

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Speaker 10: Good morning, John, and Amy, Good morning to you. That's

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Speaker 10: hal the size of golf balls falling in Huntington, West Virginia.

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Speaker 10: As a deadly storm system hammered the eastern half of

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Speaker 10: the nation from New York to Georgia. At least two

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Speaker 10: people died, thousands of flights were canceled or delayed, and

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Speaker 10: more than one point one million homes and businesses lost power.

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Speaker 10: The storm spread, it was massive, with tornado watches and

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Speaker 10: warnings posted across ten states from Tennessee to New York

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Speaker 10: and anders. In South Carolina, a fifteen year old boy

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Speaker 10: was killed when a tree fell on him, and Florence,

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Speaker 10: Alabama police say a twenty eight year old man was

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Speaker 10: struck by lightning and died. Former President Trump's legal team

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Speaker 10: made their late afternoon deadlines respond to a protective order

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Speaker 10: request of evidence in the twenty twenty election charges against him.

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Speaker 10: Trump's attorneys say he shouldn't be subject to a blanket

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Speaker 10: gag order seeking to narrow the scope of sensitive materials

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Speaker 10: in the case. New York City officials investigating a shark

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Speaker 10: attack at Rockaway Beach Monday evening, where a fifty year

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Speaker 10: old woman surfing near the shoreline was bitten in the

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Speaker 10: left leg. Beachgoers were told to leave.

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Speaker 11: Everybody was leaving the beach and they were just like,

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Speaker 11: just don't get in the water.

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Speaker 10: I was like, what happened? He was like, somebody got

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Speaker 10: bit by a shot utter reaching the shore. The woman

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Speaker 10: was taken to Jamaica Hospital in critical condition. The Red

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Speaker 10: Cross now following the FDA's new guidance on blood donations,

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Speaker 10: announcing that all donors will answer the same eligibility questions

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Speaker 10: regardless of gender or sexual orientation, and will be assessed

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Speaker 10: for blood donation based on individual risk factors, not on

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Speaker 10: sexual orientation. Secretary of State Anthony Blincoln says the US

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Speaker 10: is backing regional efforts to bring a diplomatic resolution to

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Speaker 10: the extremely traveling situation in Niger. West African heads of

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Speaker 10: state are preparing to meet later this week to discuss

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Speaker 10: the crisis in the nation where soldiers seized control of

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Speaker 10: the state and took the president hostage and a committee

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Speaker 10: of scientific expert says the South Korean based research center

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Speaker 10: behind the claims of a breakthrough in superconductor technology will

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Speaker 10: be providing it with samples required for the validation process

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Speaker 10: in as early as two weeks. That material LK ninety nine,

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Speaker 10: they claim, is capable of conducting electricity with zero resistance

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Speaker 10: at root temperature in pressure. Global News twenty four hours

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Speaker 10: a day, Power Buy more than twenty seven hundred journalist

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Speaker 10: and analysts at more than one hundred and twenty countries.

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Speaker 10: I'm John Tucker. This is Bloomberg Gamy.

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Speaker 2: All right, thank you John. Time now for our Bloomberg

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Speaker 2: Sports update. For that, we bring in John stash.

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Speaker 12: Hour amby Baseball handed down Suspension's after that big fight

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Speaker 12: that took place at second base on Saturday, Tim Anderson

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Speaker 12: of the White Sox Jose Ramirez of the Guardians squaring off.

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Speaker 12: Anderson took a month to the face, but he was

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Speaker 12: evidently seen as the instigator because he got hit. With

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Speaker 12: a six game suspension, Ramirez will sit for three games

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Speaker 12: baseball in Boston, the Red Sox out to end a

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Speaker 12: four game losing streight, tied two to two with the

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Speaker 12: Royals bases loaded, bottom of the ninth hitch swing, gonna

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Speaker 12: dry your left field, higher deep toward the pole.

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Speaker 3: It ISAA Paul rod It hit the poll.

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Speaker 12: The Red Sox walking up a grand slam.

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Speaker 7: By Poplo reyis can you believe it? His first home

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Speaker 7: run as a member of the Red Sox, and the

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Speaker 7: Red Sox win at six to two.

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Speaker 12: I'll walk off grand slam EEI in Boston with the call,

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Speaker 12: and the Red Sox are ahead of the Yankees. Now

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Speaker 12: on the Al East is the Yanks lost in Chicago

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Speaker 12: the White Sox.

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Speaker 5: Five to one.

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Speaker 12: The Cubs were red hot, they had won thirteen and sixteen,

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Speaker 12: but they lost to the Mets in New York eleven

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Speaker 12: to two, the Mets ending at sixteen closing streak. Giants

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Speaker 12: sent the Angels to a seventh loss in a row,

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Speaker 12: eight to three. Seventh straight win for Texas five to

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Speaker 12: three at Oakland, and the Rangers now have a three

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Speaker 12: game lead in the Al West. Teddy Bridgewater signing with

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Speaker 12: the Detroit Lions. This will be his six different teams,

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Speaker 12: also played with Carolina, Denver, Minnesota, New Orleans and Miami.

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Speaker 12: He'll be the backup to Jared Goff on the Lions.

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Speaker 12: John Stanshaw were Bloomberg Sports.

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Speaker 11: From coast to coast, from New York to San Francisco,

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Speaker 11: Boston to Washington, d nationwide on SIRIUSXAM, the Bloomberg Business

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Speaker 11: Appen Bloomberg dot Com. This is Bloomberg Daybreak. Good morning.

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Speaker 11: I'm Nathan Hager. Banks are under pressure around the globe

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Speaker 11: this morning. Multiple risks have led Moody's Investor Service to

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Speaker 11: cut the credit rating on nearly a dozen small and

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Speaker 11: mid sized firms in the US and to put several

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Speaker 11: others on notice. Meantime, a surprise windfall tax on banks

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Speaker 11: in Italy has European lenders on notice this morning. Bloomberg

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Speaker 11: Radio and TV Markets correspondent Valerie Titlsman tracking developments in

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Speaker 11: the financial sector for US this morning, and val is

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Speaker 11: back here with us now. There's been a debate for

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Speaker 11: a while here Valerie on whether the worst was over

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Speaker 11: for small and mid sized banks in this country after

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Speaker 11: the regional turmoil following the Silicon Valley and Signature Bank collapses.

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Speaker 11: But I guess Moody's now is saying not so fast.

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Speaker 4: Well, perhaps the worst is over, but there are still

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Speaker 4: some overhanging risks, and moody citing in this sweeping overhaul

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Speaker 4: citing three reasons for these downgrades. Now, the first one being,

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Speaker 4: which they talked at length about, was higher funding costs. Now,

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Speaker 4: we have heard a lot about this recently, especially in

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Speaker 4: this round of earning seasons, when we saw that net

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Speaker 4: interest margin compression from a lot of these smaller lenders.

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Speaker 4: That's because they are having to pay up a bit

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Speaker 4: more to hold on to these deposits, and it's really

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Speaker 4: eroding their profitability and hurting their costs of capital. So

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Speaker 4: that being one of the key reasons why Moody's decided

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Speaker 4: to do this sweeping assessment of these lenders. The other

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Speaker 4: one they cited Nathan was regulatory capital weaknesses. Now we

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Speaker 4: know that the US is wanting to overhaul the regulatory framework,

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Speaker 4: especially when it comes down to capital ratios of these

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Speaker 4: banks in the US, and instead of just targeting the

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Speaker 4: largest banks, this new overhaul is going to target a

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Speaker 4: broader stretch of banks, and it's going to impact the

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Speaker 4: smaller lenders, and Moody's citing in this report that perhaps

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Speaker 4: their balance sheets won't be ready for those tougher capital rules.

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Speaker 4: The third one they raise is this asset risk. They

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Speaker 4: specifically cite the commercial and real estate loans, which we

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Speaker 4: know these smaller lenders in the US have a huge

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Speaker 4: proportion of on their balance sheet, citing that as a

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Speaker 4: key risk if we do enter a mild recession that

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Speaker 4: could be a big vulnerability to these small lenders.

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Speaker 3: It sounds valerie like the analysts are pointing to more

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Speaker 3: systemic risks for some of these small and mid sized

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Speaker 3: lenders rather than some of the idiosyncratic issues that we

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Speaker 3: saw with Silicon Valley and Signature Bank. Is that the

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Speaker 3: right read on.

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Speaker 4: That look likely? I mean, there was twenty seven moves

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Speaker 4: by Moody's overnight reading. Each report will delve into the

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Speaker 4: specifics on each single stock, but collectively, these those three

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Speaker 4: developments I named the higher funding costs, the capital weaknesses,

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Speaker 4: the regulatory capital weaknesses, and that asset exposure to CRE

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Speaker 4: has really just lowered the credit profile of smaller lenders

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Speaker 4: in the US just generally. And a lot of people

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Speaker 4: were asking me this morning, oh, but in these earning announcements,

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Speaker 4: we heard so much about these smaller lenders divesting loans

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Speaker 4: and repairing their balance sheets. But Moody calls out specifically

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Speaker 4: that yes, that is a good thing, but that also

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Speaker 4: means that they've pulled back on new lending. If they

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Speaker 4: pull back on new lending, they're not taking advantage of

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Speaker 4: lending at these new higher yields, which they need to

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Speaker 4: do because their profitability is being eroded by having to

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Speaker 4: pay more for those deposits.

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Speaker 3: And if we start to see more of that happen

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Speaker 3: pulling back on lending, that raises the question about whether

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Speaker 3: the US could actually be headed for a recession and

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Speaker 3: potentially put more of a spotlight on what the FED

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Speaker 3: does next.

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Speaker 4: Well, we know that what makes the smaller lenders in

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Speaker 4: the US very different from those larger banks in the

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Speaker 4: US is that the smaller medium sized lenders are really

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Speaker 4: key to extending credit to the new economy, and if

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Speaker 4: they are continually under pressure on their balance sheets, you know,

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Speaker 4: pulling back on on these new loans could really impact

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Speaker 4: the US economy, especially when it comes to commercial real estate.

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Speaker 4: We know they're very involved in that, but a lot

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Speaker 4: of people say that these headwinds for these smaller banks

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Speaker 4: really don't end until the FED does cut, because that

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Speaker 4: would be the one thing that would really help them

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Speaker 4: with their profitability. Right to reinvert the curve, to see

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Speaker 4: those two year ee olds sink way lower than ten

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Speaker 4: year yields will help them with their profitability. But if

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Speaker 4: the US economy is still holding in strong due to

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Speaker 4: this government spending we're seeing from the Biden administration, you know,

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Speaker 4: the turn of the cycle from the Fed could still

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Speaker 4: be a long way off.

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