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

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Speaker 1: Daymake You at podcast, available every morning on Apple, Spotify

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Speaker 1: or wherever you listen. It's Wednesday, the fourteenth of August.

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Speaker 1: Team in London. I'm Caroline Hitkat.

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Speaker 2: And I'm Stephen Carroll coming up today. UBS reports blockbuster

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Speaker 2: results as profits beat estimates and inflows hit twenty seven

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Speaker 2: billion dollars.

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Speaker 1: Goldman Sachs and JP Morgan say markets are now pricing

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Speaker 1: in high odds of a US recession.

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Speaker 2: Plus the letter of the law. US authorities consider a

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Speaker 2: push to break up alphabets Google after a landmark competition ruling.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: The Swiss banking giant UBS has reported double the profits

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Speaker 2: expected on the second quarter. Net income at the bank

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Speaker 2: came in at one point one billion dollars versus estimates

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Speaker 2: of five hundred and twenty million. UBS's key wealth management

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Speaker 2: business are strong client inflows, with twenty seven billion dollars

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Speaker 2: in net new assets in the period. A year after

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Speaker 2: completing the takeover of Credit Suite, the bank says it's

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Speaker 2: on track for pre merger levels of profitability. UBS also

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Speaker 2: says it expects to book another one point one billion

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Speaker 2: dollars and integration related expenses in the third quarter. It's

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Speaker 2: still planning up to a billion dollars in share buybacks

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Speaker 2: this year.

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Speaker 1: Wall Street Banks, JP Morgan and Goldman Sachs say that

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Speaker 1: the markets are pricing in HAGH odds of a US recession.

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Speaker 1: The calculations come in the wake of a sell off,

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Speaker 1: which briefly sparked fears across markets last week. Barta Manthi

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Speaker 1: Exty statistic City Group agrees. She says the evidence is

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Speaker 1: pointing towards an economic downturn, so.

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Speaker 3: We indeed, one of a few brokers we have a

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Speaker 3: recession penciled in for this and next quarter out of

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Speaker 3: the US, so we think the slowdown in the data

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Speaker 3: is much stronger than.

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Speaker 1: It looks like city groups are to Manthi. There speaking

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Speaker 1: to Bloomberg Radio, Goldman Sachs says that together equity and

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Speaker 1: bond markets are seeing a forty one percent probability of

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Speaker 1: a US recession. That's up from twenty nine percent in April.

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Speaker 1: The jump is being driven by market wages on a

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Speaker 1: more aggressive pace of rate cuts from the FED and

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Speaker 1: the lagging performance of stocks. JP Morgan has a similar model. Meanwhile,

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Speaker 1: the Atlanta Fed president Raphael Bostik says that he's still

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Speaker 1: looking for a little more data before supporting a reduction

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Speaker 1: in interest rates from the US Central Bank.

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Speaker 2: The former JP Morgan strastus, who departure sent shockwaves across

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Speaker 2: Wall Street, has resurfaced on social media. It's the first

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Speaker 2: time we've heard from Marko Kolanovitch since his exit in July.

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Speaker 2: Bloombrooks twa Adebayo has the story.

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Speaker 4: Once hailed as one of Wall Street's last remaining bears,

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Speaker 4: Marko Kolanovich made his name with stark warnings about stock

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Speaker 4: slumps and volatility blow ups.

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Speaker 5: S below twenty fifteen or call it twenty thirty to

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Speaker 5: twenty fifty range. And why I'm mentioning that range because

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Speaker 5: basically at that point, momentum turns negative and point also

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Speaker 5: option positioning will result into some outlaws outross some equities.

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Speaker 4: Kalanovitch they're speaking to Bloomberg back in twenty eighteen, but

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Speaker 4: when his more recent pessimistic views failed to materialize, the

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Speaker 4: strategist once called Gandalf parted ways with JP Morgan after

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Speaker 4: nineteen years. The abrupt change led many investors to wonder

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Speaker 4: if his exit foreshadowed a market top, comparing him to

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Speaker 4: Charles Cloff, who famously left Merrill Lynch in nineteen ninety

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Speaker 4: nine after maintaining his bearish stance before the dot com

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Speaker 4: bubble pop. Now, Kalanovich is back, armed with a fresh

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Speaker 4: social media handle and a new downbeat take, predicting increasing

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Speaker 4: bankruptcies and credit card delinquencies in London tiwa ad Abio

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Speaker 4: Bloomberg Radio.

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Speaker 1: The Justice Apartment is considering a breakup of alphabets Google.

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Speaker 1: We're told that it's one of the options being looked

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Speaker 1: at after a federal court found Google monopolized the online

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Speaker 1: search market. Who is Bloomberg's antitrust reporter Leah Nylen.

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Speaker 6: The Justice Department is supposed to come up with a

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Speaker 6: plan for how it would resolve the alleged illegal conduct

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Speaker 6: by Google. Last week at federal judge found that they

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Speaker 6: had monopolized the markets for online search and also search

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Speaker 6: text dads. Those are the ones that appear at the

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Speaker 6: top of the search results whenever you Google for something,

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Speaker 6: and so the Justice Department is mulling a bunch of possibilities,

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Speaker 6: but sources tell us that a breakup is definitely on

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Speaker 6: the table.

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Speaker 1: Bloomberg's Leah Nylon the move would be Washington's first attempt

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Speaker 1: at dismantling a company for illegal monopolization since efforts to

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Speaker 1: break up Microsoft two decades ago. Shares of Apple were

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Speaker 1: down as much as two percent in late trading.

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Speaker 2: Ukraine's president Vajemya Zelenski has tasked his top commander with

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Speaker 2: working on next steps as the army continues its encouragion

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Speaker 2: into Russian territory. The surprise military offensive has changed the

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Speaker 2: narrative around the war, which has what some had seen

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Speaker 2: ending in Ukraine inevitable loss. Now, three people close to

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Speaker 2: Russia's defense ministry tell Bloomberg the Kremlin is struggling to

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Speaker 2: recruit enough new fighters. The sources say regional officials are

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Speaker 2: missing more than a third of their recruitment Quotas Russia's

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Speaker 2: president Vladimir Putin has vowed to secure his country's borders,

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Speaker 2: Ukraine's Foreign Ministry spokesperson Gyorghi Tiki says they're not interested

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Speaker 2: in keeping the land.

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Speaker 5: Sure this could be situe.

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Speaker 7: Ukraine controls about one thousand square kilometers in this operation.

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Speaker 7: I can also emphasize here unlike Russia, Ukraine does not

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Speaker 7: need other people's territory. Ukraine is not interested in taking

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Speaker 7: over the territory of the Curse region, but we want

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Speaker 7: to protect the lives of our people.

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Speaker 2: Yorgi Tiki from the Ukraine Foreign Ministry.

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Speaker 8: There.

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Speaker 2: Western allies have so far given their blessing to the

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Speaker 2: use of donated weapons inside Russian territory.

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Speaker 1: The US has approved the sale of up to fifty

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Speaker 1: f fifteen fighter jets to Israel in a deal valued

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Speaker 1: more than twenty billion dollars. The pack sends a message

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Speaker 1: that weapons will continue to flow to the state even

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Speaker 1: as it continues its war in Gaza. The Bowing jets

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Speaker 1: are not expected to be delivered to Israel until twenty

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Speaker 1: twenty nine at the earliest. Senior fellow at the Carnegie

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Speaker 1: Endowment for International Peace, Aaron David Miller, says that the

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Speaker 1: region is now at risk of falling into a multi

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Speaker 1: front war.

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Speaker 9: At some point the Iranians and his baller are going

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Speaker 9: to respond.

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Speaker 6: The only hope to avert a major escalation is a

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Speaker 6: ceasefire deal, and I just don't see it coming.

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Speaker 1: Together right now. Aaron David Miller there a former Middle

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Speaker 1: East peace negotiator for the US. He added his best

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Speaker 1: hope was that by November there could be a six

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Speaker 1: week ceasepar. The war in the Middle East has increasingly

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Speaker 1: weighed in US electoral politics, with Republicans accusing the government

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Speaker 1: of not doing enough to help Israel.

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Speaker 2: Suspected attempts by Iranian hackers to infiltrate US presidential campaigns

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Speaker 2: have touched off a widening federal investigation into election interference.

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Speaker 2: Investigators believe that attackers tied to Iran hacked into Republican

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Speaker 2: nominee Donald Trump's campaign and gained access to internal documents.

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Speaker 2: Sources who spoke to Bloomberg also say the intruders tried

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Speaker 2: to breach the campaigns of Vice President Kamala Harris and

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Speaker 2: President Joe Biden. However, it's unclear if those attempts succeeded.

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Speaker 2: In a moment, we're bringing more details and those results

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Speaker 2: from UBS plus look ahead to today's US inflation data.

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Speaker 2: But just a word on another story that caught her

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Speaker 2: eye this morning. Bloomberg City Lab columnist Julia Hobsbond's when

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Speaker 2: writing about Manchester having a moment, and this is partly

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Speaker 2: about the power of local government, a very hot debate

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Speaker 2: here in the UK. Pe doicument. It comes to planning,

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Speaker 2: for example, but also about the ambitions for the city

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Speaker 2: to become a fifteen minute city, you know, improve transport,

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Speaker 2: more walking involved, building more houses, redeveloping offices.

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Speaker 1: I think the interplay between the Metro mays in the UK,

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Speaker 1: including Andy Burnham in charge of macheson surrounding areas, and

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Speaker 1: the Labor government obviously a lot of the Metro well,

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Speaker 1: the majority of the Metro mayors are now also labor leading,

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Speaker 1: is going to be so interesting. And Julia, I think

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Speaker 1: writing about about Manchester is also kind of fascinating. I mean,

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Speaker 1: when we were up there for the political party conference

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Speaker 1: season up in Manchester, that feeling of that of kind

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Speaker 1: of regeneration and rebirth was really evident, and the fifteen

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Speaker 1: minute city was absolutely at the forefront of people's mind.

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Speaker 1: So I really like the column that she's written, of

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Speaker 1: course for Blueberg's City Lab when home building is such

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Speaker 1: a hot button issue.

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Speaker 2: Well, let's go to our top story now. And those

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Speaker 2: second quarter results from UBS analysts had been focused on

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Speaker 2: performance of the wealth management division and how quickly the

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Speaker 2: Swiss Bank is winding down its non core legacy units.

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Speaker 2: We've got our EMEA Managing editor for Finance and Investing,

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Speaker 2: Tom Metcalf with us for more. Morning, Tom, just take

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Speaker 2: us to the headline numbers from UBS. How did the

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Speaker 2: bank perform in this quarter?

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Speaker 9: Yeah, good morning. Look at first, blush, this looked like

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Speaker 9: a pretty solid set of results. I mean, the number

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Speaker 9: that stands out for me is in that wealth management business,

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Speaker 9: So they had twenty seven billion dollars of inflows client inflows,

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Speaker 9: and that is a very strong sign of people, you know,

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Speaker 9: buying into the franchise, and obviously those are the core

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Speaker 9: clients for UBS. You know, very very rich people. It's

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Speaker 9: the place where they want to put their money. So

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Speaker 9: that's very strong, and you know, it's hard to you know,

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Speaker 9: the profit really be estimates, but it's a bit difficult

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Speaker 9: to unpick that in terms of, you know, the operational

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Speaker 9: side because basically what's happened is Credit Swiss is fully integrated,

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Speaker 9: so you know, you will see jumps in revenue and

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Speaker 9: stuff stuff like that. But the other thing that they're

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Speaker 9: trying to integrate is obviously Credit Swiss and the fact

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Speaker 9: that they've managed to i think cut their legacy or

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Speaker 9: non care assets for something like forty two percent since

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Speaker 9: the year before goes to speak. I think to you know,

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Speaker 9: this message that hey, we are integrating, we are moving forward.

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Speaker 9: And certainly as I look at the you know, these

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Speaker 9: results as they come out, it does look like they

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Speaker 9: are just executing on that, and it's probably what shareholders

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Speaker 9: really want to see. They want to see, you know,

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Speaker 9: clients coming in, and also they want to make sure

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Speaker 9: that that credit Swiss business is incorporated and effect starts

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Speaker 9: to deliver like the UBS business has.

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Speaker 1: Yeah, that's very interesting, isn't it. What's the bank also

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Speaker 1: saying then about the future and about the third quarter.

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Speaker 9: Yeah, it's of a few interesting signs. It look at

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Speaker 9: like most bankers at SEN, hey we expect volatility in

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Speaker 9: the third quarter. Now, look that might not necessarily be

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Speaker 9: bad news for banks like UBS. So their equities traders,

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Speaker 9: for example, did fantastic well this quarter, and that's normally

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Speaker 9: helped by volatility. One of the things they did say

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Speaker 9: was they asked continuously clients kind of shift, as you'd expect,

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Speaker 9: into higher interest products. So that may well put pressure

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Speaker 9: on the margins, but you know, then again, when you

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Speaker 9: got twenty seven billion dollars coming in, you can probably

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Speaker 9: find ways to still make money.

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Speaker 2: Under credits to ease point is to say, integration progressing,

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Speaker 2: although another one point one billion dollars of expenses being

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Speaker 2: flagged in the third quarter as well. Where is UBS

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Speaker 2: in this process?

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Speaker 9: Yeah, it seems like they're on track. I mean, I

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Speaker 9: think they've sort of guided this year very much one

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Speaker 9: of those years of bringing the IT systems together, bringing

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Speaker 9: all the legal things into one, and that does involve

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Speaker 9: a lot of costs. I think what they're doing good

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Speaker 9: job of is very well flagging what those costs are

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Speaker 9: going to be. So at one point one billion you mentioned,

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Speaker 9: you know, that won't hopefully come as a surprise to

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Speaker 9: people next quarter, to us, And Yeah, for me, it

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Speaker 9: just seems like a so far as solid execution story.

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Speaker 9: And I think, you know, I know, we've got a

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Speaker 9: Matti coming on TV, the CEO of UBS, in a bit,

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Speaker 9: and I'm sure he'll be probably striking quite a sort

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Speaker 9: of a brilliant tone.

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Speaker 1: Yeah, absolutely, fully across the schedule. Then for this morning,

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Speaker 1: in terms of the buyback, how important a story is

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Speaker 1: that amidst all of this, I mean, as you say,

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Speaker 1: quite rosy news.

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Speaker 9: Yeah, exactly. So they're sort of reaffirming what they said

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Speaker 9: last quarter. Look, we will do this one billion sort

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Speaker 9: of buyback this year, and they've said we'll look to

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Speaker 9: do about two billion by the end of next So

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Speaker 9: again that message, hey, we're on track, that we're trying

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Speaker 9: to make no surprises here, and that was interesting for

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Speaker 9: me that, you know, this buyback had been well communicated,

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Speaker 9: but there was chatter sort of among analysts among she hells, hey,

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Speaker 9: are they going to sort of give us some comfort

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Speaker 9: around that, because obviously what we've seen in recent months

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Speaker 9: is real ding dong with the Swiss regulators. Yes, the

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Speaker 9: Swiss regulator saying hey, maybe you need to put up

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Speaker 9: more capital, and we're talking like, you know, billions. I

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Speaker 9: think some of the rangers given and go as high

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Speaker 9: as twenty five billion, which would be very drastic. So

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Speaker 9: we fascinated see how that plays out. I've only been

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Speaker 9: able to sort of scan the results. I didn't see

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Speaker 9: any mention of that, which is probably good tactics from UBS, right,

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Speaker 9: like keep a low profile and hopefully resolve all that

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Speaker 9: behind closed doors.

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Speaker 2: Okay, Tom Metca for our EMEA Managing editor of for

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Speaker 2: Finance and Investing, thank you.

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Speaker 4: Now.

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Speaker 1: The Atlanta FED person Raphael Bostick has said that he's

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Speaker 1: looking for a little more data before supporting a reduction

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Speaker 1: in interest rates. This ahead of today's US CPI print

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Speaker 1: for July, Bloomberg Economics expects a headline reading of two

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Speaker 1: point nine percent, a slight slowdown from June's reading. Our

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Speaker 1: executive editor for Asia Markets, Paul Dobson, joins us now

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Speaker 1: for more on this. Paul, good morning, Good to have

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Speaker 1: you with us. What are the expectations then for the

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Speaker 1: CPI print, which comes after, of course that softer producer

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Speaker 1: price inflation data that can came out yesterday.

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Speaker 8: The way that you just phrased it is right. The

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Speaker 8: market was already looking for a slowdown in CPI in

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Speaker 8: the data even before we got the PPI figures yesterday,

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Speaker 8: and that will only have given people more firm conviction

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Speaker 8: that the likelihood is that it will be a number

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Speaker 8: on the softer side, and that should give people more

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Speaker 8: encouragement that the Fed will be able to move closer

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Speaker 8: to cutting interest rates in the near future. I think

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Speaker 8: that what was interesting in the PPI numbers wasn't just

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Speaker 8: that the headline number was below expectations, but also some

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Speaker 8: of the input statistics, particularly the ones that the Fed

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Speaker 8: concentrates on when it's thinking about its own favorite inflation measure.

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Speaker 8: The court measures of CPI and the core PCE in

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Speaker 8: particular were also lower. So basically the market took some

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Speaker 8: encourage from that. We saw, on the one hand, lower

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Speaker 8: treasury yields and also a weaker dollar as a consequence

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Speaker 8: of that. Inequities on the other hand liked it pushing

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Speaker 8: higher across the board.

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Speaker 2: And the question of the risks of a US recession,

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Speaker 2: we've seen Goldman and JP Morgan you know, looking at

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Speaker 2: in their models that increased probability of that happening. How

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Speaker 2: do those perceptions feed into markets, you know, the cpipin

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Speaker 2: of course being part of that, and in Asia where

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Speaker 2: you are, but where some of the greatest term al

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Speaker 2: we're seen in the last week.

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Speaker 8: The question here is whether the fedken engineer a soft landing,

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Speaker 8: or whether the economy is slowing faster than it expected

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Speaker 8: and it's going to be something more ugly when we

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Speaker 8: hit the ground. So far, the market is probably pricing

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Speaker 8: in the more benevolent of those scenarios. Is looking for,

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Speaker 8: you know, the FED to kick off cutting interest rates,

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Speaker 8: most likely with one cut in September, with the possibility

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Speaker 8: of two cuts in September and then a couple more

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Speaker 8: by the end of the year probably, And you know,

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Speaker 8: that's as seen as the kind of a glide path

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Speaker 8: rather than a slamming on of the bright in order

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Speaker 8: to lower interest rates without having to panic or anything

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Speaker 8: like that. Now, the thing is, it's that labor data, right,

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Speaker 8: which is the problem. Was it was a lower than

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Speaker 8: expected figure that we saw at the start of this month,

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Speaker 8: and that set hearts racing somewhat about the possibility that actually,

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Speaker 8: you know, the FED is moving too late or too slow,

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Speaker 8: and that the US economy is already slowing much faster,

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Speaker 8: you know, at at a much more worrying pace. And

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Speaker 8: if that's the case, then maybe the Fed will need

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Speaker 8: to cut interest rates much more aggressively.

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