Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Speaker 1: Daymake You at podcast, available every morning on Apple, Spotify
Speaker 1: or wherever you listen. It's Wednesday, the fourteenth of August.
Speaker 1: Team in London. I'm Caroline Hitkat.
Speaker 2: And I'm Stephen Carroll coming up today. UBS reports blockbuster
Speaker 2: results as profits beat estimates and inflows hit twenty seven
Speaker 2: billion dollars.
Speaker 1: Goldman Sachs and JP Morgan say markets are now pricing
Speaker 1: in high odds of a US recession.
Speaker 2: Plus the letter of the law. US authorities consider a
Speaker 2: push to break up alphabets Google after a landmark competition ruling.
Speaker 1: Let's start with a roundup of our top stories.
Speaker 2: The Swiss banking giant UBS has reported double the profits
Speaker 2: expected on the second quarter. Net income at the bank
Speaker 2: came in at one point one billion dollars versus estimates
Speaker 2: of five hundred and twenty million. UBS's key wealth management
Speaker 2: business are strong client inflows, with twenty seven billion dollars
Speaker 2: in net new assets in the period. A year after
Speaker 2: completing the takeover of Credit Suite, the bank says it's
Speaker 2: on track for pre merger levels of profitability. UBS also
Speaker 2: says it expects to book another one point one billion
Speaker 2: dollars and integration related expenses in the third quarter. It's
Speaker 2: still planning up to a billion dollars in share buybacks
Speaker 2: this year.
Speaker 1: Wall Street Banks, JP Morgan and Goldman Sachs say that
Speaker 1: the markets are pricing in HAGH odds of a US recession.
Speaker 1: The calculations come in the wake of a sell off,
Speaker 1: which briefly sparked fears across markets last week. Barta Manthi
Speaker 1: Exty statistic City Group agrees. She says the evidence is
Speaker 1: pointing towards an economic downturn, so.
Speaker 3: We indeed, one of a few brokers we have a
Speaker 3: recession penciled in for this and next quarter out of
Speaker 3: the US, so we think the slowdown in the data
Speaker 3: is much stronger than.
Speaker 1: It looks like city groups are to Manthi. There speaking
Speaker 1: to Bloomberg Radio, Goldman Sachs says that together equity and
Speaker 1: bond markets are seeing a forty one percent probability of
Speaker 1: a US recession. That's up from twenty nine percent in April.
Speaker 1: The jump is being driven by market wages on a
Speaker 1: more aggressive pace of rate cuts from the FED and
Speaker 1: the lagging performance of stocks. JP Morgan has a similar model. Meanwhile,
Speaker 1: the Atlanta Fed president Raphael Bostik says that he's still
Speaker 1: looking for a little more data before supporting a reduction
Speaker 1: in interest rates from the US Central Bank.
Speaker 2: The former JP Morgan strastus, who departure sent shockwaves across
Speaker 2: Wall Street, has resurfaced on social media. It's the first
Speaker 2: time we've heard from Marko Kolanovitch since his exit in July.
Speaker 2: Bloombrooks twa Adebayo has the story.
Speaker 4: Once hailed as one of Wall Street's last remaining bears,
Speaker 4: Marko Kolanovich made his name with stark warnings about stock
Speaker 4: slumps and volatility blow ups.
Speaker 5: S below twenty fifteen or call it twenty thirty to
Speaker 5: twenty fifty range. And why I'm mentioning that range because
Speaker 5: basically at that point, momentum turns negative and point also
Speaker 5: option positioning will result into some outlaws outross some equities.
Speaker 4: Kalanovitch they're speaking to Bloomberg back in twenty eighteen, but
Speaker 4: when his more recent pessimistic views failed to materialize, the
Speaker 4: strategist once called Gandalf parted ways with JP Morgan after
Speaker 4: nineteen years. The abrupt change led many investors to wonder
Speaker 4: if his exit foreshadowed a market top, comparing him to
Speaker 4: Charles Cloff, who famously left Merrill Lynch in nineteen ninety
Speaker 4: nine after maintaining his bearish stance before the dot com
Speaker 4: bubble pop. Now, Kalanovich is back, armed with a fresh
Speaker 4: social media handle and a new downbeat take, predicting increasing
Speaker 4: bankruptcies and credit card delinquencies in London tiwa ad Abio
Speaker 4: Bloomberg Radio.
Speaker 1: The Justice Apartment is considering a breakup of alphabets Google.
Speaker 1: We're told that it's one of the options being looked
Speaker 1: at after a federal court found Google monopolized the online
Speaker 1: search market. Who is Bloomberg's antitrust reporter Leah Nylen.
Speaker 6: The Justice Department is supposed to come up with a
Speaker 6: plan for how it would resolve the alleged illegal conduct
Speaker 6: by Google. Last week at federal judge found that they
Speaker 6: had monopolized the markets for online search and also search
Speaker 6: text dads. Those are the ones that appear at the
Speaker 6: top of the search results whenever you Google for something,
Speaker 6: and so the Justice Department is mulling a bunch of possibilities,
Speaker 6: but sources tell us that a breakup is definitely on
Speaker 6: the table.
Speaker 1: Bloomberg's Leah Nylon the move would be Washington's first attempt
Speaker 1: at dismantling a company for illegal monopolization since efforts to
Speaker 1: break up Microsoft two decades ago. Shares of Apple were
Speaker 1: down as much as two percent in late trading.
Speaker 2: Ukraine's president Vajemya Zelenski has tasked his top commander with
Speaker 2: working on next steps as the army continues its encouragion
Speaker 2: into Russian territory. The surprise military offensive has changed the
Speaker 2: narrative around the war, which has what some had seen
Speaker 2: ending in Ukraine inevitable loss. Now, three people close to
Speaker 2: Russia's defense ministry tell Bloomberg the Kremlin is struggling to
Speaker 2: recruit enough new fighters. The sources say regional officials are
Speaker 2: missing more than a third of their recruitment Quotas Russia's
Speaker 2: president Vladimir Putin has vowed to secure his country's borders,
Speaker 2: Ukraine's Foreign Ministry spokesperson Gyorghi Tiki says they're not interested
Speaker 2: in keeping the land.
Speaker 5: Sure this could be situe.
Speaker 7: Ukraine controls about one thousand square kilometers in this operation.
Speaker 7: I can also emphasize here unlike Russia, Ukraine does not
Speaker 7: need other people's territory. Ukraine is not interested in taking
Speaker 7: over the territory of the Curse region, but we want
Speaker 7: to protect the lives of our people.
Speaker 2: Yorgi Tiki from the Ukraine Foreign Ministry.
Speaker 8: There.
Speaker 2: Western allies have so far given their blessing to the
Speaker 2: use of donated weapons inside Russian territory.
Speaker 1: The US has approved the sale of up to fifty
Speaker 1: f fifteen fighter jets to Israel in a deal valued
Speaker 1: more than twenty billion dollars. The pack sends a message
Speaker 1: that weapons will continue to flow to the state even
Speaker 1: as it continues its war in Gaza. The Bowing jets
Speaker 1: are not expected to be delivered to Israel until twenty
Speaker 1: twenty nine at the earliest. Senior fellow at the Carnegie
Speaker 1: Endowment for International Peace, Aaron David Miller, says that the
Speaker 1: region is now at risk of falling into a multi
Speaker 1: front war.
Speaker 9: At some point the Iranians and his baller are going
Speaker 9: to respond.
Speaker 6: The only hope to avert a major escalation is a
Speaker 6: ceasefire deal, and I just don't see it coming.
Speaker 1: Together right now. Aaron David Miller there a former Middle
Speaker 1: East peace negotiator for the US. He added his best
Speaker 1: hope was that by November there could be a six
Speaker 1: week ceasepar. The war in the Middle East has increasingly
Speaker 1: weighed in US electoral politics, with Republicans accusing the government
Speaker 1: of not doing enough to help Israel.
Speaker 2: Suspected attempts by Iranian hackers to infiltrate US presidential campaigns
Speaker 2: have touched off a widening federal investigation into election interference.
Speaker 2: Investigators believe that attackers tied to Iran hacked into Republican
Speaker 2: nominee Donald Trump's campaign and gained access to internal documents.
Speaker 2: Sources who spoke to Bloomberg also say the intruders tried
Speaker 2: to breach the campaigns of Vice President Kamala Harris and
Speaker 2: President Joe Biden. However, it's unclear if those attempts succeeded.
Speaker 2: In a moment, we're bringing more details and those results
Speaker 2: from UBS plus look ahead to today's US inflation data.
Speaker 2: But just a word on another story that caught her
Speaker 2: eye this morning. Bloomberg City Lab columnist Julia Hobsbond's when
Speaker 2: writing about Manchester having a moment, and this is partly
Speaker 2: about the power of local government, a very hot debate
Speaker 2: here in the UK. Pe doicument. It comes to planning,
Speaker 2: for example, but also about the ambitions for the city
Speaker 2: to become a fifteen minute city, you know, improve transport,
Speaker 2: more walking involved, building more houses, redeveloping offices.
Speaker 1: I think the interplay between the Metro mays in the UK,
Speaker 1: including Andy Burnham in charge of macheson surrounding areas, and
Speaker 1: the Labor government obviously a lot of the Metro well,
Speaker 1: the majority of the Metro mayors are now also labor leading,
Speaker 1: is going to be so interesting. And Julia, I think
Speaker 1: writing about about Manchester is also kind of fascinating. I mean,
Speaker 1: when we were up there for the political party conference
Speaker 1: season up in Manchester, that feeling of that of kind
Speaker 1: of regeneration and rebirth was really evident, and the fifteen
Speaker 1: minute city was absolutely at the forefront of people's mind.
Speaker 1: So I really like the column that she's written, of
Speaker 1: course for Blueberg's City Lab when home building is such
Speaker 1: a hot button issue.
Speaker 2: Well, let's go to our top story now. And those
Speaker 2: second quarter results from UBS analysts had been focused on
Speaker 2: performance of the wealth management division and how quickly the
Speaker 2: Swiss Bank is winding down its non core legacy units.
Speaker 2: We've got our EMEA Managing editor for Finance and Investing,
Speaker 2: Tom Metcalf with us for more. Morning, Tom, just take
Speaker 2: us to the headline numbers from UBS. How did the
Speaker 2: bank perform in this quarter?
Speaker 9: Yeah, good morning. Look at first, blush, this looked like
Speaker 9: a pretty solid set of results. I mean, the number
Speaker 9: that stands out for me is in that wealth management business,
Speaker 9: So they had twenty seven billion dollars of inflows client inflows,
Speaker 9: and that is a very strong sign of people, you know,
Speaker 9: buying into the franchise, and obviously those are the core
Speaker 9: clients for UBS. You know, very very rich people. It's
Speaker 9: the place where they want to put their money. So
Speaker 9: that's very strong, and you know, it's hard to you know,
Speaker 9: the profit really be estimates, but it's a bit difficult
Speaker 9: to unpick that in terms of, you know, the operational
Speaker 9: side because basically what's happened is Credit Swiss is fully integrated,
Speaker 9: so you know, you will see jumps in revenue and
Speaker 9: stuff stuff like that. But the other thing that they're
Speaker 9: trying to integrate is obviously Credit Swiss and the fact
Speaker 9: that they've managed to i think cut their legacy or
Speaker 9: non care assets for something like forty two percent since
Speaker 9: the year before goes to speak. I think to you know,
Speaker 9: this message that hey, we are integrating, we are moving forward.
Speaker 9: And certainly as I look at the you know, these
Speaker 9: results as they come out, it does look like they
Speaker 9: are just executing on that, and it's probably what shareholders
Speaker 9: really want to see. They want to see, you know,
Speaker 9: clients coming in, and also they want to make sure
Speaker 9: that that credit Swiss business is incorporated and effect starts
Speaker 9: to deliver like the UBS business has.
Speaker 1: Yeah, that's very interesting, isn't it. What's the bank also
Speaker 1: saying then about the future and about the third quarter.
Speaker 9: Yeah, it's of a few interesting signs. It look at
Speaker 9: like most bankers at SEN, hey we expect volatility in
Speaker 9: the third quarter. Now, look that might not necessarily be
Speaker 9: bad news for banks like UBS. So their equities traders,
Speaker 9: for example, did fantastic well this quarter, and that's normally
Speaker 9: helped by volatility. One of the things they did say
Speaker 9: was they asked continuously clients kind of shift, as you'd expect,
Speaker 9: into higher interest products. So that may well put pressure
Speaker 9: on the margins, but you know, then again, when you
Speaker 9: got twenty seven billion dollars coming in, you can probably
Speaker 9: find ways to still make money.
Speaker 2: Under credits to ease point is to say, integration progressing,
Speaker 2: although another one point one billion dollars of expenses being
Speaker 2: flagged in the third quarter as well. Where is UBS
Speaker 2: in this process?
Speaker 9: Yeah, it seems like they're on track. I mean, I
Speaker 9: think they've sort of guided this year very much one
Speaker 9: of those years of bringing the IT systems together, bringing
Speaker 9: all the legal things into one, and that does involve
Speaker 9: a lot of costs. I think what they're doing good
Speaker 9: job of is very well flagging what those costs are
Speaker 9: going to be. So at one point one billion you mentioned,
Speaker 9: you know, that won't hopefully come as a surprise to
Speaker 9: people next quarter, to us, And Yeah, for me, it
Speaker 9: just seems like a so far as solid execution story.
Speaker 9: And I think, you know, I know, we've got a
Speaker 9: Matti coming on TV, the CEO of UBS, in a bit,
Speaker 9: and I'm sure he'll be probably striking quite a sort
Speaker 9: of a brilliant tone.
Speaker 1: Yeah, absolutely, fully across the schedule. Then for this morning,
Speaker 1: in terms of the buyback, how important a story is
Speaker 1: that amidst all of this, I mean, as you say,
Speaker 1: quite rosy news.
Speaker 9: Yeah, exactly. So they're sort of reaffirming what they said
Speaker 9: last quarter. Look, we will do this one billion sort
Speaker 9: of buyback this year, and they've said we'll look to
Speaker 9: do about two billion by the end of next So
Speaker 9: again that message, hey, we're on track, that we're trying
Speaker 9: to make no surprises here, and that was interesting for
Speaker 9: me that, you know, this buyback had been well communicated,
Speaker 9: but there was chatter sort of among analysts among she hells, hey,
Speaker 9: are they going to sort of give us some comfort
Speaker 9: around that, because obviously what we've seen in recent months
Speaker 9: is real ding dong with the Swiss regulators. Yes, the
Speaker 9: Swiss regulator saying hey, maybe you need to put up
Speaker 9: more capital, and we're talking like, you know, billions. I
Speaker 9: think some of the rangers given and go as high
Speaker 9: as twenty five billion, which would be very drastic. So
Speaker 9: we fascinated see how that plays out. I've only been
Speaker 9: able to sort of scan the results. I didn't see
Speaker 9: any mention of that, which is probably good tactics from UBS, right,
Speaker 9: like keep a low profile and hopefully resolve all that
Speaker 9: behind closed doors.
Speaker 2: Okay, Tom Metca for our EMEA Managing editor of for
Speaker 2: Finance and Investing, thank you.
Speaker 4: Now.
Speaker 1: The Atlanta FED person Raphael Bostick has said that he's
Speaker 1: looking for a little more data before supporting a reduction
Speaker 1: in interest rates. This ahead of today's US CPI print
Speaker 1: for July, Bloomberg Economics expects a headline reading of two
Speaker 1: point nine percent, a slight slowdown from June's reading. Our
Speaker 1: executive editor for Asia Markets, Paul Dobson, joins us now
Speaker 1: for more on this. Paul, good morning, Good to have
Speaker 1: you with us. What are the expectations then for the
Speaker 1: CPI print, which comes after, of course that softer producer
Speaker 1: price inflation data that can came out yesterday.
Speaker 8: The way that you just phrased it is right. The
Speaker 8: market was already looking for a slowdown in CPI in
Speaker 8: the data even before we got the PPI figures yesterday,
Speaker 8: and that will only have given people more firm conviction
Speaker 8: that the likelihood is that it will be a number
Speaker 8: on the softer side, and that should give people more
Speaker 8: encouragement that the Fed will be able to move closer
Speaker 8: to cutting interest rates in the near future. I think
Speaker 8: that what was interesting in the PPI numbers wasn't just
Speaker 8: that the headline number was below expectations, but also some
Speaker 8: of the input statistics, particularly the ones that the Fed
Speaker 8: concentrates on when it's thinking about its own favorite inflation measure.
Speaker 8: The court measures of CPI and the core PCE in
Speaker 8: particular were also lower. So basically the market took some
Speaker 8: encourage from that. We saw, on the one hand, lower
Speaker 8: treasury yields and also a weaker dollar as a consequence
Speaker 8: of that. Inequities on the other hand liked it pushing
Speaker 8: higher across the board.
Speaker 2: And the question of the risks of a US recession,
Speaker 2: we've seen Goldman and JP Morgan you know, looking at
Speaker 2: in their models that increased probability of that happening. How
Speaker 2: do those perceptions feed into markets, you know, the cpipin
Speaker 2: of course being part of that, and in Asia where
Speaker 2: you are, but where some of the greatest term al
Speaker 2: we're seen in the last week.
Speaker 8: The question here is whether the fedken engineer a soft landing,
Speaker 8: or whether the economy is slowing faster than it expected
Speaker 8: and it's going to be something more ugly when we
Speaker 8: hit the ground. So far, the market is probably pricing
Speaker 8: in the more benevolent of those scenarios. Is looking for,
Speaker 8: you know, the FED to kick off cutting interest rates,
Speaker 8: most likely with one cut in September, with the possibility
Speaker 8: of two cuts in September and then a couple more
Speaker 8: by the end of the year probably, And you know,
Speaker 8: that's as seen as the kind of a glide path
Speaker 8: rather than a slamming on of the bright in order
Speaker 8: to lower interest rates without having to panic or anything
Speaker 8: like that. Now, the thing is, it's that labor data, right,
Speaker 8: which is the problem. Was it was a lower than
Speaker 8: expected figure that we saw at the start of this month,
Speaker 8: and that set hearts racing somewhat about the possibility that actually,
Speaker 8: you know, the FED is moving too late or too slow,
Speaker 8: and that the US economy is already slowing much faster,
Speaker 8: you know, at at a much more worrying pace. And
Speaker 8: if that's the case, then maybe the Fed will need
Speaker 8: to cut interest rates much more aggressively.
Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the
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