WEBVTT - Bloomberg Surveillance TV: August 1, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.920 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.720 Terminal and the Bloomberg Business App will be given the 0:00:36.720 --> 0:00:39.760 big issue. Stocks get their big Dubvish pivot, as fed shared. 0:00:39.840 --> 0:00:43.120 J Powell sets the stage for September Jason Thomas of 0:00:43.200 --> 0:00:45.800 Carlisle saying this, the case for a September raker is 0:00:45.920 --> 0:00:50.400 very simple. As inflation fools, policy becomes tighter if base 0:00:50.479 --> 0:00:53.840 rates remain unchanged, with cooler labor markets and a modest 0:00:53.880 --> 0:00:56.560 slowdown in nominal growth. There is no reason for tighter 0:00:56.600 --> 0:01:00.440 policy today. Jason joins us now for more. To catch 0:01:00.520 --> 0:01:02.240 up with you once again, Let's talk about that base 0:01:02.320 --> 0:01:05.880 case September. Like seventy people, it's what happens next. Weather 0:01:05.920 --> 0:01:09.360 seems to be some division and confusion the ultimate destination here. Jason, 0:01:09.840 --> 0:01:12.600 what do you think of the pricing beyond September for 0:01:12.720 --> 0:01:16.360 the next eighteen months or so, Well. 0:01:16.240 --> 0:01:19.080 I think it's very aggressive. I think the big lesson 0:01:19.280 --> 0:01:22.360 that we've learned over the last year is that policy 0:01:22.400 --> 0:01:26.080 has not been as tight as many suspected. Entering the year. 0:01:26.720 --> 0:01:30.280 There was, of course, expectations for six or seven rate cuts. 0:01:30.600 --> 0:01:33.800 That was predicated on the idea that a real interest 0:01:33.880 --> 0:01:38.280 rate of two percent would absolutely smother economic activity. Of course, 0:01:38.319 --> 0:01:41.319 that's not what we've observed, and I think learning from 0:01:41.360 --> 0:01:44.600 this experience would suggest that the fat is going to 0:01:44.600 --> 0:01:48.160 behave very cautiously. I think, in general, the less certain 0:01:48.200 --> 0:01:51.160 you are of the destination the terminal rate in this case, 0:01:51.840 --> 0:01:55.240 the more slowly, the more cautiously you're going to proceed 0:01:55.600 --> 0:01:56.280 in that direction. 0:01:57.560 --> 0:02:00.000 You put a comment out in your recent commentary, Jason, 0:02:00.080 --> 0:02:02.160 and I'm still trying to wrap my head around it, 0:02:02.160 --> 0:02:04.240 so I'd like your help. You wrote, it may be 0:02:04.240 --> 0:02:07.720 a time for investors to hold two seemingly contradictory thoughts 0:02:07.760 --> 0:02:11.799 in their head simultaneously. The time for rate cuts has arrived, 0:02:12.120 --> 0:02:14.959 but financial conditions are too accommodative for the FED to 0:02:15.000 --> 0:02:18.960 deliver the scale of easing anticipated by some market participants. 0:02:19.400 --> 0:02:22.160 Can you explain what the Fed should do with that 0:02:22.560 --> 0:02:23.920 and what that exactly means. 0:02:26.000 --> 0:02:28.760 Well, So, since the start of the year, policy is 0:02:28.800 --> 0:02:32.840 effectively tightened by fifty basis points, that's just the decline 0:02:33.080 --> 0:02:36.200 in core PC inflation observed in the first six months. 0:02:35.960 --> 0:02:36.359 Of the year. 0:02:36.720 --> 0:02:38.440 So I think there's a very strong case for two 0:02:38.520 --> 0:02:44.360 cuts September and December. Thereafter things get much murkier, and 0:02:44.400 --> 0:02:46.760 so really that's what I'm suggesting. You heard a lot 0:02:46.760 --> 0:02:50.560 of talk yesterday at the press conference about normalization. Are 0:02:50.560 --> 0:02:53.640 you just cutting rates once or are you normalizing policy? 0:02:53.960 --> 0:02:56.520 And I found this odd because we don't really know 0:02:56.840 --> 0:03:02.120 what normal is in the new environment. Have massive budget deficits. 0:03:02.440 --> 0:03:05.320 I don't mean to catastrophize those, but we do have 0:03:05.400 --> 0:03:09.120 to appreciate that right now, the after tax incomes of 0:03:09.160 --> 0:03:12.960 households and the corporate sector are about one trillion dollars 0:03:13.080 --> 0:03:15.560 larger than they would be if you had a fiscal 0:03:15.600 --> 0:03:21.320 policy that was stabilizing debt to GDP ratios at reasonable levels. Secondly, 0:03:21.840 --> 0:03:25.560 you have the largest concentrated kapex boom we've seen in 0:03:25.600 --> 0:03:29.200 this country since the telecom boom of the late nineteen nineties. 0:03:29.880 --> 0:03:33.080 You just mentioned the quote yesterday from Alphabet about the 0:03:33.160 --> 0:03:36.280 risk of underinvesting. This seems to be something that's going 0:03:36.360 --> 0:03:41.240 to persist. Finally, you have deglobalization, or at least the 0:03:41.360 --> 0:03:45.000 presumption that more of what we consume in the US 0:03:45.320 --> 0:03:47.720 is going to be produced here, which is of course 0:03:48.080 --> 0:03:51.240 going to lead to potentially some upward pressure on prices, 0:03:52.000 --> 0:03:55.600 the potential for supply shocks, more volatile inflation. If you 0:03:55.680 --> 0:03:59.040 put all of this together, it sets up for, on 0:03:59.080 --> 0:04:02.040 the one hand, some rate cuts coming at the end 0:04:02.080 --> 0:04:05.960 of this year September again probably December, but then thereafter 0:04:06.480 --> 0:04:10.920 you could have rates that essentially settle in at four six, five, 0:04:11.120 --> 0:04:12.440 four and a half somewhere. 0:04:12.120 --> 0:04:12.960 In that range. 0:04:13.360 --> 0:04:15.440 Are you saying that that's a more likely neutral rate 0:04:15.480 --> 0:04:17.760 at this point and that the market has gotten way 0:04:17.800 --> 0:04:20.480 ahead of itself in terms of estimating that it's something 0:04:20.560 --> 0:04:23.520 closer to four or even three and a half percent. 0:04:25.640 --> 0:04:28.599 I think you have to ignore the experience of this year, 0:04:28.880 --> 0:04:31.560 of the last eighteen months to think that the neutral 0:04:31.640 --> 0:04:35.200 rate is still five fifty basis points in real terms. 0:04:36.160 --> 0:04:38.800 And so again, this is a situation where there's a 0:04:38.800 --> 0:04:43.040 lot of uncertainty. To be so wetted to a neutral 0:04:43.160 --> 0:04:46.479 rate at these low levels, at levels that persisted between 0:04:46.520 --> 0:04:49.960 the global financial crisis and the pandemic is to ignore 0:04:50.240 --> 0:04:53.440 recent experience. I think that would be very unwise for 0:04:53.480 --> 0:04:55.040 the FED to take that sort of approach. 0:04:55.320 --> 0:04:57.920 Well, Jason, this goes to a deeper question really, which 0:04:57.960 --> 0:05:00.840 is essentially a lot of people are betting that rate 0:05:00.920 --> 0:05:03.920 cuts are going to support the next leg of growth 0:05:03.960 --> 0:05:06.479 in the US economy. Are you saying that that's not 0:05:06.560 --> 0:05:08.839 a lever that they can really pull in the same 0:05:08.960 --> 0:05:12.280 kind of way that maybe some of those inflation sensitive 0:05:12.320 --> 0:05:16.080 strategies look better and some of the ones that rely 0:05:16.279 --> 0:05:20.120 on inflation coming off and the FED cutting rates are 0:05:20.120 --> 0:05:21.960 maybe a little fraudy. 0:05:24.360 --> 0:05:26.880 Well, I think that in general, if you look at 0:05:27.000 --> 0:05:30.159 risk premium in the economy, if you look at where 0:05:30.160 --> 0:05:33.480 credit spreads are today, they're tighter than they were again 0:05:33.520 --> 0:05:36.320 at any point since two thousand and seven. If you 0:05:36.360 --> 0:05:39.760 look at duration risk premium, where's the tenure in relation 0:05:39.839 --> 0:05:42.640 to the expected path for FED funds over the next 0:05:42.640 --> 0:05:45.880 ten years, it's effectively zero. If you look at estimates 0:05:45.920 --> 0:05:50.080 of the equity risk premium, based on consensus forecast for 0:05:50.120 --> 0:05:53.359 dividend or earnings growth, it also looks very very tight, 0:05:53.880 --> 0:05:56.560 very narrow. So you know, I think that this all 0:05:56.640 --> 0:06:00.480 suggests that you have a market that is really priced 0:06:00.560 --> 0:06:04.880 for perfection to a large extent, and going forward, if 0:06:04.920 --> 0:06:08.640 we have some really unfortunate, unforeseen developments in the economy, 0:06:08.680 --> 0:06:11.320 of course, the fad with base rates at five point 0:06:11.360 --> 0:06:14.200 three percent has a lot of firepower, could do a 0:06:14.240 --> 0:06:16.440 lot to stabilize economic activity. 0:06:16.720 --> 0:06:17.520 But if things. 0:06:17.320 --> 0:06:20.960 Persist as they do today, again, I think base rates 0:06:21.000 --> 0:06:24.000 that you know, I would use as a baseline nothing 0:06:24.040 --> 0:06:26.520 that is lower than one hundred basis points from here 0:06:26.720 --> 0:06:29.600 as a reasonable expectation should growth persist. 0:06:29.960 --> 0:06:31.360 Jason, I don't want to put words in your mouth, 0:06:31.360 --> 0:06:33.280 so I just want to last for your opinion directly. 0:06:33.880 --> 0:06:35.400 Do you think the Federal Reserve is getting it wrong? 0:06:37.279 --> 0:06:40.240 No? Again, I think the case for rate cuts today 0:06:40.360 --> 0:06:41.119 is very clear. 0:06:41.600 --> 0:06:43.680 Not the same time labor Mark and Jason. I just 0:06:43.760 --> 0:06:45.839 mean in terms of how they think about the economy. 0:06:45.880 --> 0:06:47.680 Because I'll tell you what I heard in the news 0:06:47.680 --> 0:06:49.960 conference yesterday and even say this directly, but I think 0:06:49.960 --> 0:06:52.120 he gave us a lot of clues. He almost frames 0:06:52.120 --> 0:06:54.520 the inflation shop coming out of the pandemic because due 0:06:54.560 --> 0:06:57.279 to one of factors that are ultimately finding And what 0:06:57.320 --> 0:06:59.520 I hear from you is that actually some of these 0:06:59.520 --> 0:07:02.680 forces to hang around. Do you think he's getting that 0:07:02.720 --> 0:07:03.440 piece of it wrong. 0:07:05.279 --> 0:07:08.279 Well, there was, of course an element of inflation that 0:07:08.360 --> 0:07:13.160 was transitory, but I'm surprised given that the second and 0:07:13.200 --> 0:07:16.640 third order effects that we saw that people would still 0:07:16.640 --> 0:07:19.320 be of this mind. What we learned, I think in 0:07:19.360 --> 0:07:22.920 the inflation shock is that when you have shortages, you 0:07:23.040 --> 0:07:26.640 have a response to that. People over order. If they're 0:07:26.680 --> 0:07:29.960 expecting one hundred units of a component or part and 0:07:30.000 --> 0:07:32.760 they fear getting cut back, they order two hundred. You 0:07:32.800 --> 0:07:37.000 start seeing courting, You start seeing downstream price dynamics that 0:07:37.040 --> 0:07:39.880 are very difficult to control. And again, I think when 0:07:39.920 --> 0:07:44.440 we compare today relative to twenty nineteen, we see both 0:07:44.480 --> 0:07:48.480 with the fiscal deficit, with the kapex boom that certainly 0:07:48.520 --> 0:07:51.040 was not occurring. Then, I mean, you have fixed industrial 0:07:51.080 --> 0:07:54.760 investment in the United States right now that's three times 0:07:54.800 --> 0:07:59.160 twenty nineteen levels. And then again the shock from the 0:07:59.680 --> 0:08:03.360 Terra on China in twenty nineteen, most people expected they 0:08:03.360 --> 0:08:06.679 would be rolled back. Vice President Biden at the time 0:08:07.040 --> 0:08:10.280 suggested that this policy was unwise, it was harming American 0:08:10.320 --> 0:08:13.560 consumers and farmers. Now no one is speaking like that. 0:08:13.760 --> 0:08:17.000 In fact, the direction as it relates to trade frictions, 0:08:17.200 --> 0:08:19.960 I think is only in the direction of war. So 0:08:20.440 --> 0:08:24.440 you know, again, it's very important to when we contextualize 0:08:24.520 --> 0:08:27.720 the current situation, when we account for all of these 0:08:27.880 --> 0:08:31.680 massive changes relative to twenty nineteen, I think you're left 0:08:32.000 --> 0:08:35.400 with much more upside risk to inflation. Should you act 0:08:35.440 --> 0:08:38.520 more aggressed, should the Fed act more aggressively over the 0:08:38.520 --> 0:08:41.760 next six to twelve months than perhaps many perceive. 0:08:42.280 --> 0:08:46.520 Jason, you said that if growth continues, then this market 0:08:46.760 --> 0:08:50.760 is somewhat priced to perfection. Which market in particular is 0:08:50.800 --> 0:08:51.680 price to perfection? 0:08:52.000 --> 0:08:52.600 Is it sort of. 0:08:52.559 --> 0:08:54.880 A good news is bad news and bad news is 0:08:54.920 --> 0:08:57.160 bad news type of paradigm that we're entering into. 0:08:58.679 --> 0:09:01.679 To be clear, I think that when you look at indexes, 0:09:01.760 --> 0:09:03.560 if you look at the NASDAC, if you look at 0:09:03.600 --> 0:09:06.720 the SMP five hundred, because so much of the gains 0:09:07.080 --> 0:09:10.160 have been concentrated in, of course a very small number 0:09:10.400 --> 0:09:13.400 of stocks, and you look at the aggregates, and you 0:09:13.440 --> 0:09:16.160 look at the equity risk premium in the index. 0:09:17.200 --> 0:09:17.880 Then you say that. 0:09:18.080 --> 0:09:20.360 It's priced to perfection. Now, if you look at the 0:09:20.400 --> 0:09:24.240 broader US stock market, you see many stocks that look 0:09:24.360 --> 0:09:27.400 quite reasonably priced because they have not participated to the 0:09:27.400 --> 0:09:30.600 same extent. Many stocks where you've seen earning's growth fear 0:09:30.640 --> 0:09:35.040 an excess of price appreciation, of course, implying that valuations 0:09:35.040 --> 0:09:38.960 have come down in some cases quite materially. So you know, 0:09:39.320 --> 0:09:42.200 it's a market that I think is gravitating from momentum 0:09:42.240 --> 0:09:45.400 trades very focused on those stocks that you know actually 0:09:45.480 --> 0:09:48.560 quite benefited in many cases from higher rates. Many of 0:09:48.600 --> 0:09:52.800 these megacap companies, of course have negative net debt, and 0:09:53.080 --> 0:09:55.640 of course they have large cash piles that are earning 0:09:55.840 --> 0:09:59.199 floating rate interests that is an excess of their relatively 0:09:59.240 --> 0:10:02.559 low fixed rate liabilities. They're also, of course, generates so 0:10:02.679 --> 0:10:05.839 much cash in the near term that you know the 0:10:06.360 --> 0:10:10.520 effects of rates isn't so great. So it's quite rational 0:10:10.640 --> 0:10:14.120 that the market rotated into those stocks and they just 0:10:14.160 --> 0:10:17.079 the valuations now have reached levels where you know, I 0:10:17.120 --> 0:10:20.800 think on a perspective expected return basis, people have to 0:10:20.800 --> 0:10:21.840 start looking elsewhere. 0:10:22.240 --> 0:10:24.839 Jason, this was deeply thoughtful one of those conversations I'm 0:10:24.840 --> 0:10:26.600 going to re listen to a little bit later on 0:10:26.600 --> 0:10:29.160 this afternoon. Jason salmasa Kala, Jason, thank you. 0:10:39.040 --> 0:10:40.240 I want to turn to this story. 0:10:40.360 --> 0:10:43.120 Barklay's unvanning a share buyback plan worth more than nine 0:10:43.200 --> 0:10:45.480 hundred and sixty million US dollars This coming is the 0:10:45.480 --> 0:10:48.920 British lender reported better than expected second quarter investment banking 0:10:48.960 --> 0:10:51.760 revenue and boosted its guidance for the full year. 0:10:52.160 --> 0:10:52.959 Joining us now is. 0:10:52.880 --> 0:10:56.880 The Barklay CEO, CS ven Kada Krishnan Venkatt, it's great 0:10:56.920 --> 0:10:59.520 to catch up with you, sir. Once again, I will 0:10:59.520 --> 0:11:01.760 go through the numbers so you could be modest and 0:11:01.880 --> 0:11:04.480 you don't have to Equity underwriting booming. 0:11:04.840 --> 0:11:06.400 Equity is trading up nicely. 0:11:06.480 --> 0:11:10.200 The stock is up by something like fifty percent year today, Venkat. 0:11:10.240 --> 0:11:11.920 There was some weakness in thick trading that I want 0:11:11.960 --> 0:11:13.440 to get to in just a moment. But let's start 0:11:13.440 --> 0:11:15.880 with the position of strength you're in Equity is trading. 0:11:16.160 --> 0:11:18.440 Where did that strength come from, Venkat? And do you 0:11:18.480 --> 0:11:20.320 expect you to continue through the year. 0:11:23.080 --> 0:11:26.000 Well, thank you for asking me to join the program. 0:11:26.040 --> 0:11:27.280 I'm very grateful to be here. 0:11:27.720 --> 0:11:28.280 And as you. 0:11:28.280 --> 0:11:32.160 Say, we are in the process of delivering on the 0:11:32.160 --> 0:11:34.720 investor plan that we laid out in February of this year, 0:11:35.160 --> 0:11:38.160 which was to have a simpler, better, more balanced bank, 0:11:38.440 --> 0:11:41.320 a bank that returns twelve percent hour rote and above 0:11:41.360 --> 0:11:44.480 by twenty twenty six, returning about ten billion pounds to 0:11:44.559 --> 0:11:49.000 shareholders by twenty twenty six and more, and then rebalancing 0:11:49.040 --> 0:11:51.520 the bank so that the investment bank goes from around 0:11:51.600 --> 0:11:53.559 sixty percent of the bank to around fifty percent of 0:11:53.600 --> 0:11:55.920 the bank. One part of the investment bank is our 0:11:55.960 --> 0:11:59.559 market's business and the equity business, which you highlight. We've 0:11:59.600 --> 0:12:02.200 always had a great strength in equity, and I think 0:12:02.280 --> 0:12:05.720 as equity markets themselves have gone through the changes that 0:12:05.760 --> 0:12:08.120 you've seen in this since the start of this year, 0:12:08.559 --> 0:12:11.360 our traders have been able to capitalize on client demand, 0:12:11.440 --> 0:12:15.520 on increasing volatility and providing the kind of innovative derivative 0:12:15.559 --> 0:12:19.319 solutions they seek clients seek from Barclays and I do 0:12:19.400 --> 0:12:23.319 expect as market volatility keeps the pace for our performance 0:12:23.400 --> 0:12:24.760 in equities to continue. 0:12:25.080 --> 0:12:27.760 While we're seeing that same strength in Fick trading VENCAT, 0:12:27.920 --> 0:12:30.560 I wonder what you can do to turn things around 0:12:30.559 --> 0:12:32.880 in that particular part of the business. 0:12:35.240 --> 0:12:38.840 So within FEC we are a very very strong credit 0:12:38.880 --> 0:12:42.600 house and typically in the top three. One of the 0:12:42.640 --> 0:12:45.160 reasons in FICK that in the market and for US 0:12:45.200 --> 0:12:47.680 it affects us maybe a little more, is that credit 0:12:47.679 --> 0:12:50.240 spreads have been muted and credit volatility has been muted, 0:12:50.320 --> 0:12:53.959 quite the opposite case from equities. In European rates, which 0:12:54.000 --> 0:12:56.080 is an area of growth for US, we've improved from 0:12:56.120 --> 0:12:59.280 the first quarter to the second quarter, and securitized products, 0:12:59.280 --> 0:13:02.080 which is an important part of fixed income, is growing 0:13:02.120 --> 0:13:06.560 from strength to strength. So our fit performance is improved 0:13:06.559 --> 0:13:08.400 from the first quarter to the second and I could 0:13:08.480 --> 0:13:11.319 expect to continue to see more of that improvement as 0:13:11.320 --> 0:13:12.040 the year goes on. 0:13:12.360 --> 0:13:14.680 Venkatte, We've been having a debate for several months now. 0:13:14.800 --> 0:13:17.560 Are rate cuts good or bad for banks? Or rate 0:13:17.640 --> 0:13:21.800 hikes good or bad for banks? Our rate cuts broadly 0:13:22.040 --> 0:13:25.319 good or bad for your profitability at a time when 0:13:25.320 --> 0:13:27.359 a lot of people are expecting them globally. 0:13:28.280 --> 0:13:29.679 Than you and Mark. 0:13:30.360 --> 0:13:33.040 So what I would say is very special about this 0:13:33.120 --> 0:13:37.200 rate cycle is that the what we're expecting is not 0:13:37.240 --> 0:13:40.400 a state of cuts but fine tuning adjustments. So the 0:13:40.480 --> 0:13:42.559 answer to your question is, I don't think they'll make 0:13:42.640 --> 0:13:45.040 that much of a difference to a bank like ours 0:13:45.120 --> 0:13:46.000 or to the large banks. 0:13:46.559 --> 0:13:47.760 You know, my colleague A. J. 0:13:47.920 --> 0:13:50.440 Raja at Thyaksha, who runs in macro research for US, 0:13:50.840 --> 0:13:54.640 often says a rate cycle is when you go up 0:13:54.679 --> 0:13:57.520 in an escalator meaning slow cuts, and come down in 0:13:57.559 --> 0:14:00.560 an elevator. Slow rises and then fast cut coming down 0:14:00.600 --> 0:14:03.800 in an elevator. What we've seen this time is we 0:14:03.840 --> 0:14:07.120 went up in an elevator meaning very fast rate hikes, 0:14:07.520 --> 0:14:09.840 and we may be coming down by the stairs. So 0:14:09.880 --> 0:14:11.920 you saw a fine tuning adjustment by the Bank of 0:14:11.960 --> 0:14:16.560 England this morning. You saw the FED pause, but they're 0:14:16.559 --> 0:14:19.440 indicating they may go later this year. All of these 0:14:19.440 --> 0:14:22.520 things are just trying to adjust interest rates by a 0:14:22.560 --> 0:14:25.880 small amount because real rates have crept up at a 0:14:25.920 --> 0:14:28.840 constant inflation which is two percent, which is low. But 0:14:29.000 --> 0:14:33.360 it's just trying to overcome the slight impediment of rising 0:14:33.400 --> 0:14:35.720 real rates. So I don't expect this to have much 0:14:35.760 --> 0:14:38.040 of an effect on the banking sector of any and 0:14:38.080 --> 0:14:40.240 certainly we are not changing the way we view the 0:14:40.240 --> 0:14:42.280 world because of this modest rate cut. 0:14:42.480 --> 0:14:44.400 In the meantime, you say that you are on track 0:14:44.480 --> 0:14:48.080 to achieve one billion pounds in cost cuts. There is 0:14:48.160 --> 0:14:51.520 sort of some swirling questions around where those cost cuts 0:14:51.560 --> 0:14:54.480 are coming from. Is it simply just being more efficient 0:14:54.520 --> 0:14:57.440 in certain sectors, is it ongoing job cuts? 0:14:57.720 --> 0:15:01.480 What are you executing? 0:15:01.600 --> 0:15:04.560 So we did a billion pounds worth of structural cost 0:15:04.600 --> 0:15:08.080 actions last year. We're seeing a the benefits of some 0:15:08.200 --> 0:15:10.800 of that. B We're seeing the benefits of a greater 0:15:10.880 --> 0:15:14.520 focus on productivity and efficiency in the way in which 0:15:14.520 --> 0:15:17.640 we run the bank. And what we're also seeing is 0:15:18.480 --> 0:15:21.880 the results of investments which we have made, particularly in markets, 0:15:21.920 --> 0:15:25.080 particularly in trading technology. I'm talking to you from our 0:15:25.120 --> 0:15:28.720 equity trading flow in London and the way we have 0:15:28.920 --> 0:15:31.680 increased our market share and electronic trading here in Europe 0:15:31.720 --> 0:15:34.560 and in the US is all a result of past investment. 0:15:34.680 --> 0:15:37.080 You have to continue to do it, but it's probably 0:15:37.080 --> 0:15:38.920 at a slower pace than we did in the last 0:15:38.960 --> 0:15:42.320 couple of years. So it's efficiency and better investment. 0:15:42.400 --> 0:15:44.400 Can I ask you about the advisory business with that 0:15:44.480 --> 0:15:46.720 in mind, how is that going? How's the turnaround going 0:15:46.760 --> 0:15:47.320 in that unit? 0:15:50.160 --> 0:15:53.880 So investment banking we've done, as you've seen the results 0:15:53.920 --> 0:15:57.840 in the banking side quite strongly. Equity capital markets did 0:15:57.920 --> 0:16:01.560 very well, advisories improving. We still have a little way 0:16:01.560 --> 0:16:05.720 to go. We are seeing deal volume pickup, We're seeing 0:16:05.760 --> 0:16:09.040 our backlog increasing, and I think over time, as some 0:16:09.120 --> 0:16:12.400 of these ideas fructify, you will see an improvement in 0:16:12.440 --> 0:16:13.400 the advisory numbers. 0:16:13.840 --> 0:16:15.920 I'd love your view, vencoun on how business is going 0:16:15.960 --> 0:16:19.200 more generally, as you look across Corporate America and corporations 0:16:19.240 --> 0:16:21.120 across Europe. I can share with you some of the 0:16:21.120 --> 0:16:23.520 comments we've heard from Corporate America over the last couple 0:16:23.560 --> 0:16:26.360 of weeks from P ANDNG they're seeing slower price increases. 0:16:26.760 --> 0:16:29.680 Kimberly Clark also saying the same thing. McDonald's are talking 0:16:29.720 --> 0:16:33.040 about the first sales slide since twenty twenty, PEPSI saying 0:16:33.080 --> 0:16:36.080 the consumer is becoming more challenged. You've got a massive 0:16:36.080 --> 0:16:39.160 consumer business as well with the barclaycart business. When you 0:16:39.200 --> 0:16:41.840 look at corporations and the consumer, are you seeing the 0:16:41.880 --> 0:16:44.720 same kind of slow down VNCAP from your vantage point? 0:16:47.680 --> 0:16:49.880 So, what we are seeing, which is good for the 0:16:49.880 --> 0:16:53.240 credit performance of banks, is we are seeing both consumers 0:16:53.280 --> 0:16:58.480 and corporates focusing on efficiency and managing their budgets more carefully. 0:16:58.840 --> 0:17:00.720 So if you are in the concer humer business and 0:17:00.720 --> 0:17:04.160 if you're a consumer oriented company. What you will see 0:17:04.800 --> 0:17:09.000 is therefore a lack of pricing power and then people economizing. 0:17:09.280 --> 0:17:13.280 We see that in our own customers. What that means though, 0:17:13.760 --> 0:17:16.520 is that even though employment is still very strong, both 0:17:16.520 --> 0:17:19.320 in the UK and the US, people are managing their 0:17:19.320 --> 0:17:22.280 budgets more carefully, which is one of the reasons why 0:17:22.320 --> 0:17:25.639 buy and large credit impairment costs for banks have been 0:17:25.680 --> 0:17:29.600 relatively well controlled. So it's good for the consumer to 0:17:29.600 --> 0:17:31.000 do this and manage their budgets. 0:17:31.359 --> 0:17:33.080 It's good for their lenders. 0:17:33.000 --> 0:17:37.560 Because they're seeing less signs of consumer distress. It's good however, 0:17:38.000 --> 0:17:40.880 it's for the economy. However, there are winners and losers, 0:17:41.240 --> 0:17:43.359 and that's what you're seeing from some of the people 0:17:43.400 --> 0:17:43.840 you're courting. 0:17:44.280 --> 0:17:46.920 Are you seeing a big difference in terms of consumer 0:17:47.000 --> 0:17:50.280 strength globally depending on the region. We've been talking a 0:17:50.280 --> 0:17:53.840 lot about how the consumer shows a lot of I 0:17:53.840 --> 0:17:56.600 guess restraint when it comes to spending, but more so 0:17:57.040 --> 0:18:01.080 in some of the sector is more leverage to highese consumers. 0:18:01.160 --> 0:18:03.560 How much you see in Europe in a weaker spot 0:18:03.560 --> 0:18:09.000 than say the US, well, I. 0:18:08.960 --> 0:18:12.160 Think I think the the slow down which we've seen 0:18:12.240 --> 0:18:15.640 in China is palpable and what Chinese demand has done 0:18:16.280 --> 0:18:19.159 is affected sectors which were particularly exposed to them. You 0:18:19.200 --> 0:18:22.240 saw some of it in the fashion goods industry, and 0:18:22.359 --> 0:18:27.280 tech of course is a different situation because you know 0:18:27.359 --> 0:18:30.280 the trade with China is being limited in tech for 0:18:30.359 --> 0:18:33.080 other reasons. But I do think that what you will 0:18:33.119 --> 0:18:36.600 see as people with that exposure to China being more affected. 0:18:36.640 --> 0:18:38.560 You've already seen it in the numbers and that I 0:18:38.600 --> 0:18:40.440 expect that you'll see that for some time to come. 0:18:41.280 --> 0:18:43.280 How much does it affect where you're expanding or where 0:18:43.280 --> 0:18:44.080 you're not expanding. 0:18:46.600 --> 0:18:50.879 Well, Barclay's is a first and foremost a consumer bank 0:18:50.920 --> 0:18:56.480 in the UK, a global investment bank, and so've got 0:18:56.480 --> 0:18:59.560 a very strong corporate presence and a wealth presence. But 0:18:59.680 --> 0:19:04.960 all of that is very highly connected to London, from Europe, 0:19:05.080 --> 0:19:08.680 from the United States, and then from India, Singapore, Hong Kong. 0:19:09.480 --> 0:19:12.520 We are not a major presence in mainland China, and 0:19:12.600 --> 0:19:15.040 so what we think is that the impact of what's 0:19:15.080 --> 0:19:19.280 happening in China is relatively more muted for US compared 0:19:19.280 --> 0:19:20.959 to other banks with larger exposures. 0:19:21.440 --> 0:19:23.080 It has really a question though about some of the 0:19:23.520 --> 0:19:27.080 tensions that have been coming to the fore politically internationally 0:19:27.119 --> 0:19:32.359 in terms of potential tariffs, potential restrictions, changing policies, the elections. 0:19:32.480 --> 0:19:34.080 How are you trying to get ahead of that at 0:19:34.119 --> 0:19:36.040 a time where there's a lot of policy uncertainty. And 0:19:36.160 --> 0:19:40.120 arguably that's one reason why advisory and mergers and acquisitions 0:19:40.200 --> 0:19:43.399 hasn't been as robust as some people had expected it 0:19:43.440 --> 0:19:43.600 to be. 0:19:47.040 --> 0:19:48.760 It's a very very good point, and I think the 0:19:48.760 --> 0:19:52.040 big area where all that comes into play is cross 0:19:52.040 --> 0:19:55.560 border m and A and cross border transactions. You've even 0:19:55.560 --> 0:19:57.720 seen slowdown of that within Europe itself. 0:19:58.200 --> 0:19:58.960 You know, for. 0:19:58.840 --> 0:20:01.480 Us it highlight it's one of the things which we've done, 0:20:01.520 --> 0:20:03.639 which is we decided very early this year when we 0:20:03.680 --> 0:20:06.280 did our investorday and made the decision towards the end 0:20:06.320 --> 0:20:08.919 of last year to invest thirty billion pounds. 0:20:08.680 --> 0:20:10.080 Of risk created assets in the UK. 0:20:10.680 --> 0:20:13.679 The UK has had its election, We've elected a business 0:20:13.720 --> 0:20:18.040 friendly government. The transition has been smooth and it points 0:20:18.040 --> 0:20:20.840 to the importance for banks like us to be in 0:20:20.880 --> 0:20:25.160 places with very clear economic policy, the good rule of law, 0:20:25.680 --> 0:20:28.840 growth and stable governments and stable economic policies. 0:20:29.320 --> 0:20:30.560 Venkat, the year is going well. 0:20:30.640 --> 0:20:32.320 Hopefully next time we're in New York we can catch 0:20:32.400 --> 0:20:33.280 up again here in the studio. 0:20:33.280 --> 0:20:34.720 I appreciate your time this morning, sir. 0:20:35.000 --> 0:20:49.160 Thank you the Farculey CEO cs ven Kara Krishna. Here's 0:20:49.160 --> 0:20:52.000 the latest investors turning their attention to the data following 0:20:52.080 --> 0:20:55.360 yesterday's FED decision. The July payrolls report you out tomorrow 0:20:55.600 --> 0:20:58.680 and CPI coming in just two weeks time. Fetch JPOW 0:20:58.760 --> 0:21:01.520 waiting for the numbers before committing to a Rake cup. 0:21:01.680 --> 0:21:04.000 The former Kansas City FED president as the George right 0:21:04.040 --> 0:21:06.960 in this I found the chair leaned pretty clearly to 0:21:07.000 --> 0:21:10.600 confirm market expectations for a September cup. While September looks 0:21:10.640 --> 0:21:12.920 like the meeting to take this action, I think this 0:21:13.080 --> 0:21:15.879