Speaker 1: Good morning.
Speaker 2: I'm Nathan Hager and I'm Amy Morris. Here are the
Speaker 2: stories we're following today.
Speaker 3: We begin here in the US, where Moody's Investor Services
Speaker 3: lowered the credit ratings for ten small and mid sized lenders,
Speaker 3: and it also says bigger banks may face downgrades as well.
Speaker 3: Bloomberg's Valerie Titel has more on the reasons behind the moves.
Speaker 4: The first one is higher funding costs. We saw evidence
Speaker 4: of this in the recent earnings announcement. We saw a
Speaker 4: net interest margin compression. We know that it is eating
Speaker 4: into these smaller banks profitability. Moody cites that as their
Speaker 4: main reason. The second reason is regulatory capital weakness. We
Speaker 4: know that the US regulatory capital framework is going under flux,
Speaker 4: and they want to include a broader cast of banks
Speaker 4: in this regulatory net. Third is their asset risk. Now
Speaker 4: this is getting a lot of attention. Moody's is directly
Speaker 4: pointing to their commercial real estate loans that a lot
Speaker 4: of these small and mid size banks sit on.
Speaker 3: Bloomberg's Valerie Titel notes some of the banks seeing ratings
Speaker 3: cuts this morning include M and T Bank, Webster Financial,
Speaker 3: Bank of Oklahoma Financial, and several others.
Speaker 2: Banks are also under pressure in Europe. Italy's right wing
Speaker 2: government spook markets with an unexpected tax on bank profits.
Speaker 2: We get more from Bloomberg's Ton Metcalf in London.
Speaker 5: Big surprise in a negative way for the sex and
Speaker 5: not just initially but also the wider banks where we're
Speaker 5: seeing always there all but yeah, the big Italian banks
Speaker 5: are UNI credit down basically as much as six point
Speaker 5: five percent at the open, which gives you indication of
Speaker 5: how this is being received. I don't think it was expected.
Speaker 5: And it's really interesting because obviously it comes against the
Speaker 5: backdrop all those earnings where we were just talking about
Speaker 5: how much money these banks making off the higher rate environment,
Speaker 5: and now it looks like Rome is looking to sort
Speaker 5: of take a piece of that, and about two billion
Speaker 5: of people are expecting this tax to raise.
Speaker 2: Bloomberg's Tom Metcalf notes Italian banks are the worst performers
Speaker 2: in Europe this morning. Italy's main stock exchange is now
Speaker 2: down one point sixty six percent.
Speaker 3: Miami stocks fell in Asia over night after disappointing economic
Speaker 3: data out of China. The country's exports fell for a
Speaker 3: third straight month in July. Bloomberg Daybreak Asia anchor Brian
Speaker 3: Curtis has more from Hong Kong.
Speaker 6: Export slump fourteen and a half percent from a year earlier.
Speaker 6: That's the worst decline since February of twenty twenty. Imports
Speaker 6: contracted twelve point four percent, more than double estimates. I
Speaker 6: left a trade surplus of eighty point six billion dollars
Speaker 6: for the month. It's a double whammy for the economy.
Speaker 6: Global demand is weak, and so is domestic consumption. There's
Speaker 6: a plethora of issues here, sagging business and consumer confidence,
Speaker 6: a deflating property market, and a government that is wary
Speaker 6: of large scale stimulus in Hong Kong. Brian Curtis, Bloomberg.
Speaker 7: Daybreak, Thank you, Brian.
Speaker 2: Back here in the US, we have some news on
Speaker 2: new tech coming out of Apple. Sources tell us the
Speaker 2: company is testing a high end, next generation laptop processor.
Speaker 2: More from Bloomberg's Doug Prisner.
Speaker 8: The new chip is the M three Max, and it'll
Speaker 8: be at the heart of a high end MacBook Pro
Speaker 8: lap top, expected to debut next year. The central processing
Speaker 8: unit includes twelve high performance cores for demanding task like
Speaker 8: video editing, and for efficiency cores for less intensive applications
Speaker 8: like browsing. The web v M three chip will mark
Speaker 8: the first time Apple is shifting to a three nanometer
Speaker 8: production process for Mac chips. The aim is to provide
Speaker 8: better battery life and strong performance gains. In New York,
Speaker 8: I'm Doug Krisner, Bloomberg Daybreak.
Speaker 3: Okay, Doug, thanks for watching shares of Tesla this morning.
Speaker 3: They're down about one percent. That comes on news the
Speaker 3: chief financial officer, Zachary Kirkhorn is stepping down after thirteen
Speaker 3: years at Tesla. Longtime Tesla investor Kathy Woods reacting to
Speaker 3: the news, we spoke with the Ark Investment CEO late yesterday.
Speaker 7: It's a tough job.
Speaker 8: It's a tough, tough job.
Speaker 6: So I guess thirteen years was a really good run
Speaker 6: for zach.
Speaker 5: Can't say enough good things about him and what he
Speaker 5: did for Tesla.
Speaker 3: Tesla is the largest individual contributor to Kathy Woods flagship
Speaker 3: Arc Innovation ETF. The company's chief accounting officer will take
Speaker 3: over the CFO role in addition to his current duties.
Speaker 2: That's what's happening on Wall Street. Let's catch you up
Speaker 2: now on the latest political news. We're learning more about
Speaker 2: Donald trump presidential campaign strategy. Sources say he plans to
Speaker 2: hold rival events to deny his challengers the public spotlight.
Speaker 2: Joan Donegher has details from our Bloomberg ninety nine to
Speaker 2: one newsroom in Washington.
Speaker 9: The former president plans to skip appearances with other Republican candidates. Instead,
Speaker 9: sources tell Bloomberg he'll hold separate events surrounded by his allies.
Speaker 9: His aim to make sure his rivals don't get the
Speaker 9: exposure they need to chip away at his status as
Speaker 9: the front runner in the nomination race. The sources say
Speaker 9: this will allow Trump to draw attention away from lower
Speaker 9: polling candidates and shore up his own lead. The plan, however,
Speaker 9: does not mean he'll skip this month's Republican National Committee
Speaker 9: candidates debate. He may still take part. Joan Doneger Bloomberg Daybreak.
Speaker 3: Joan thanks. There's also a controversial special election on the
Speaker 3: schedule today. Voters in Ohio will vote on constitutional amendments
Speaker 3: tied to abortion rights. Bloomberg's Ed Baxter has the story.
Speaker 7: It is Ohio's Issue one, and if it's approved, a
Speaker 7: sixty percent super majority would be required to amend the constitution.
Speaker 7: Currently it's a simple majority. Now, this is a GOP
Speaker 7: back referendum that was called to proceed before an expected
Speaker 7: vote in November on a proposed amendment that would enshrine
Speaker 7: abortion rights in Ohio's constitution. The White House has even
Speaker 7: chimed in now saying it strongly opposes any attempts to
Speaker 7: take away a woman's choice. I'm at Baxter Bloomberg Daybreak.
Speaker 2: Time now for look at some of the other stories
Speaker 2: making news around the world. And for that we are
Speaker 2: joined by Bloomberg's John Tucker.
Speaker 10: Good morning, John, and Amy, Good morning to you. That's
Speaker 10: hal the size of golf balls falling in Huntington, West Virginia.
Speaker 10: As a deadly storm system hammered the eastern half of
Speaker 10: the nation from New York to Georgia. At least two
Speaker 10: people died, thousands of flights were canceled or delayed, and
Speaker 10: more than one point one million homes and businesses lost power.
Speaker 10: The storm spread, it was massive, with tornado watches and
Speaker 10: warnings posted across ten states from Tennessee to New York
Speaker 10: and anders. In South Carolina, a fifteen year old boy
Speaker 10: was killed when a tree fell on him, and Florence,
Speaker 10: Alabama police say a twenty eight year old man was
Speaker 10: struck by lightning and died. Former President Trump's legal team
Speaker 10: made their late afternoon deadlines respond to a protective order
Speaker 10: request of evidence in the twenty twenty election charges against him.
Speaker 10: Trump's attorneys say he shouldn't be subject to a blanket
Speaker 10: gag order seeking to narrow the scope of sensitive materials
Speaker 10: in the case. New York City officials investigating a shark
Speaker 10: attack at Rockaway Beach Monday evening, where a fifty year
Speaker 10: old woman surfing near the shoreline was bitten in the
Speaker 10: left leg. Beachgoers were told to leave.
Speaker 11: Everybody was leaving the beach and they were just like,
Speaker 11: just don't get in the water.
Speaker 10: I was like, what happened? He was like, somebody got
Speaker 10: bit by a shot utter reaching the shore. The woman
Speaker 10: was taken to Jamaica Hospital in critical condition. The Red
Speaker 10: Cross now following the FDA's new guidance on blood donations,
Speaker 10: announcing that all donors will answer the same eligibility questions
Speaker 10: regardless of gender or sexual orientation, and will be assessed
Speaker 10: for blood donation based on individual risk factors, not on
Speaker 10: sexual orientation. Secretary of State Anthony Blincoln says the US
Speaker 10: is backing regional efforts to bring a diplomatic resolution to
Speaker 10: the extremely traveling situation in Niger. West African heads of
Speaker 10: state are preparing to meet later this week to discuss
Speaker 10: the crisis in the nation where soldiers seized control of
Speaker 10: the state and took the president hostage and a committee
Speaker 10: of scientific expert says the South Korean based research center
Speaker 10: behind the claims of a breakthrough in superconductor technology will
Speaker 10: be providing it with samples required for the validation process
Speaker 10: in as early as two weeks. That material LK ninety nine,
Speaker 10: they claim, is capable of conducting electricity with zero resistance
Speaker 10: at root temperature in pressure. Global News twenty four hours
Speaker 10: a day, Power Buy more than twenty seven hundred journalist
Speaker 10: and analysts at more than one hundred and twenty countries.
Speaker 10: I'm John Tucker. This is Bloomberg Gamy.
Speaker 2: All right, thank you John. Time now for our Bloomberg
Speaker 2: Sports update. For that, we bring in John stash.
Speaker 12: Hour amby Baseball handed down Suspension's after that big fight
Speaker 12: that took place at second base on Saturday, Tim Anderson
Speaker 12: of the White Sox Jose Ramirez of the Guardians squaring off.
Speaker 12: Anderson took a month to the face, but he was
Speaker 12: evidently seen as the instigator because he got hit. With
Speaker 12: a six game suspension, Ramirez will sit for three games
Speaker 12: baseball in Boston, the Red Sox out to end a
Speaker 12: four game losing streight, tied two to two with the
Speaker 12: Royals bases loaded, bottom of the ninth hitch swing, gonna
Speaker 12: dry your left field, higher deep toward the pole.
Speaker 3: It ISAA Paul rod It hit the poll.
Speaker 12: The Red Sox walking up a grand slam.
Speaker 7: By Poplo reyis can you believe it? His first home
Speaker 7: run as a member of the Red Sox, and the
Speaker 7: Red Sox win at six to two.
Speaker 12: I'll walk off grand slam EEI in Boston with the call,
Speaker 12: and the Red Sox are ahead of the Yankees. Now
Speaker 12: on the Al East is the Yanks lost in Chicago
Speaker 12: the White Sox.
Speaker 5: Five to one.
Speaker 12: The Cubs were red hot, they had won thirteen and sixteen,
Speaker 12: but they lost to the Mets in New York eleven
Speaker 12: to two, the Mets ending at sixteen closing streak. Giants
Speaker 12: sent the Angels to a seventh loss in a row,
Speaker 12: eight to three. Seventh straight win for Texas five to
Speaker 12: three at Oakland, and the Rangers now have a three
Speaker 12: game lead in the Al West. Teddy Bridgewater signing with
Speaker 12: the Detroit Lions. This will be his six different teams,
Speaker 12: also played with Carolina, Denver, Minnesota, New Orleans and Miami.
Speaker 12: He'll be the backup to Jared Goff on the Lions.
Speaker 12: John Stanshaw were Bloomberg Sports.
Speaker 11: From coast to coast, from New York to San Francisco,
Speaker 11: Boston to Washington, d nationwide on SIRIUSXAM, the Bloomberg Business
Speaker 11: Appen Bloomberg dot Com. This is Bloomberg Daybreak. Good morning.
Speaker 11: I'm Nathan Hager. Banks are under pressure around the globe
Speaker 11: this morning. Multiple risks have led Moody's Investor Service to
Speaker 11: cut the credit rating on nearly a dozen small and
Speaker 11: mid sized firms in the US and to put several
Speaker 11: others on notice. Meantime, a surprise windfall tax on banks
Speaker 11: in Italy has European lenders on notice this morning. Bloomberg
Speaker 11: Radio and TV Markets correspondent Valerie Titlsman tracking developments in
Speaker 11: the financial sector for US this morning, and val is
Speaker 11: back here with us now. There's been a debate for
Speaker 11: a while here Valerie on whether the worst was over
Speaker 11: for small and mid sized banks in this country after
Speaker 11: the regional turmoil following the Silicon Valley and Signature Bank collapses.
Speaker 11: But I guess Moody's now is saying not so fast.
Speaker 4: Well, perhaps the worst is over, but there are still
Speaker 4: some overhanging risks, and moody citing in this sweeping overhaul
Speaker 4: citing three reasons for these downgrades. Now, the first one being,
Speaker 4: which they talked at length about, was higher funding costs. Now,
Speaker 4: we have heard a lot about this recently, especially in
Speaker 4: this round of earning seasons, when we saw that net
Speaker 4: interest margin compression from a lot of these smaller lenders.
Speaker 4: That's because they are having to pay up a bit
Speaker 4: more to hold on to these deposits, and it's really
Speaker 4: eroding their profitability and hurting their costs of capital. So
Speaker 4: that being one of the key reasons why Moody's decided
Speaker 4: to do this sweeping assessment of these lenders. The other
Speaker 4: one they cited Nathan was regulatory capital weaknesses. Now we
Speaker 4: know that the US is wanting to overhaul the regulatory framework,
Speaker 4: especially when it comes down to capital ratios of these
Speaker 4: banks in the US, and instead of just targeting the
Speaker 4: largest banks, this new overhaul is going to target a
Speaker 4: broader stretch of banks, and it's going to impact the
Speaker 4: smaller lenders, and Moody's citing in this report that perhaps
Speaker 4: their balance sheets won't be ready for those tougher capital rules.
Speaker 4: The third one they raise is this asset risk. They
Speaker 4: specifically cite the commercial and real estate loans, which we
Speaker 4: know these smaller lenders in the US have a huge
Speaker 4: proportion of on their balance sheet, citing that as a
Speaker 4: key risk if we do enter a mild recession that
Speaker 4: could be a big vulnerability to these small lenders.
Speaker 3: It sounds valerie like the analysts are pointing to more
Speaker 3: systemic risks for some of these small and mid sized
Speaker 3: lenders rather than some of the idiosyncratic issues that we
Speaker 3: saw with Silicon Valley and Signature Bank. Is that the
Speaker 3: right read on.
Speaker 4: That look likely? I mean, there was twenty seven moves
Speaker 4: by Moody's overnight reading. Each report will delve into the
Speaker 4: specifics on each single stock, but collectively, these those three
Speaker 4: developments I named the higher funding costs, the capital weaknesses,
Speaker 4: the regulatory capital weaknesses, and that asset exposure to CRE
Speaker 4: has really just lowered the credit profile of smaller lenders
Speaker 4: in the US just generally. And a lot of people
Speaker 4: were asking me this morning, oh, but in these earning announcements,
Speaker 4: we heard so much about these smaller lenders divesting loans
Speaker 4: and repairing their balance sheets. But Moody calls out specifically
Speaker 4: that yes, that is a good thing, but that also
Speaker 4: means that they've pulled back on new lending. If they
Speaker 4: pull back on new lending, they're not taking advantage of
Speaker 4: lending at these new higher yields, which they need to
Speaker 4: do because their profitability is being eroded by having to
Speaker 4: pay more for those deposits.
Speaker 3: And if we start to see more of that happen
Speaker 3: pulling back on lending, that raises the question about whether
Speaker 3: the US could actually be headed for a recession and
Speaker 3: potentially put more of a spotlight on what the FED
Speaker 3: does next.
Speaker 4: Well, we know that what makes the smaller lenders in
Speaker 4: the US very different from those larger banks in the
Speaker 4: US is that the smaller medium sized lenders are really
Speaker 4: key to extending credit to the new economy, and if
Speaker 4: they are continually under pressure on their balance sheets, you know,
Speaker 4: pulling back on on these new loans could really impact
Speaker 4: the US economy, especially when it comes to commercial real estate.
Speaker 4: We know they're very involved in that, but a lot
Speaker 4: of people say that these headwinds for these smaller banks
Speaker 4: really don't end until the FED does cut, because that
Speaker 4: would be the one thing that would really help them
Speaker 4: with their profitability. Right to reinvert the curve, to see
Speaker 4: those two year ee olds sink way lower than ten
Speaker 4: year yields will help them with their profitability. But if
Speaker 4: the US economy is still holding in strong due to
Speaker 4: this government spending we're seeing from the Biden administration, you know,
Speaker 4: the turn of the cycle from the Fed could still
Speaker 4: be a long way off.
Speaker 1: This is Bloomberg day Break Today, your morning brief on
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