WEBVTT - Oil Rises to October High, Consumer Sentiment, U.S Bank Earnings 0:00:02.960 --> 0:00:06.640 Bloomberg Audio Studios, Podcasts. 0:00:06.160 --> 0:00:07.280 Radio news. 0:00:09.960 --> 0:00:13.840 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:13.920 --> 0:00:17.320 weekdays at ten am Eastern on Applecarplay and Android Auto 0:00:17.360 --> 0:00:20.279 with the Bloomberg Business App. Listen on demand wherever you 0:00:20.360 --> 0:00:23.400 get your podcasts, or watch us live on YouTube. 0:00:25.040 --> 0:00:27.240 You're listening to Bloomberg Intelligence Radio, where we bring you 0:00:27.320 --> 0:00:31.040 all the top analysts proving all our top analysis. They 0:00:31.080 --> 0:00:33.800 cover two thousand companies, one hundred and thirty industries all 0:00:33.840 --> 0:00:35.400 around the world, and we're going to bring all that 0:00:35.440 --> 0:00:38.159 for you live. We also top our newsroom for the 0:00:38.240 --> 0:00:43.720 amazing information sourcing storytelling that they provide, and the latest 0:00:43.720 --> 0:00:46.320 to do so will be Alex Longley, Bloomberg Oil Trader 0:00:46.400 --> 0:00:48.560 Reporter is standing by to talk about what's going on 0:00:48.600 --> 0:00:51.479 with oil. So Brent is up by over two percent, 0:00:51.840 --> 0:00:55.120 WTI crewed up three percent. Almost Brent is going to 0:00:55.160 --> 0:00:57.000 be the thing you look at if you're looking at 0:00:57.000 --> 0:01:00.440 international geopolitical risk. WTI will track it, but it's really 0:01:00.480 --> 0:01:03.080 a little bit lower because that more of a domestic pricing. 0:01:03.440 --> 0:01:05.080 I'll Alex explain that from Ali Smith. 0:01:05.160 --> 0:01:07.400 She asked, so I did, She asked, So that's why 0:01:07.560 --> 0:01:09.559 I feel so if I wanted to know, surely someone 0:01:09.560 --> 0:01:10.679 in the audience wants that's. 0:01:10.520 --> 0:01:11.960 What I was thinking. That's what I was thinking. 0:01:12.040 --> 0:01:12.959 A voice for the people. 0:01:14.200 --> 0:01:16.600 That's my ale explain. Let's get to the next alexplain. 0:01:17.000 --> 0:01:19.840 Alex talk us through the recent spike and why we're 0:01:19.840 --> 0:01:21.680 seeing it. 0:01:21.680 --> 0:01:23.880 It's been a sort of a three pronged rally. Obviously 0:01:23.959 --> 0:01:27.640 today there's extremely high geopolitical risk given the news surrounding 0:01:27.680 --> 0:01:30.480 Israel and Iran, and that's been the kind of final 0:01:30.520 --> 0:01:32.959 catalyst that's pushed Brent crude, as you said, four above 0:01:33.040 --> 0:01:35.759 ninety dollars a barrel. But this also was a broader 0:01:35.840 --> 0:01:38.880 rally in the making. We've had stronger than expected demand 0:01:38.920 --> 0:01:41.120 in the first quarter according to the traders, although we 0:01:41.120 --> 0:01:44.120 had a report from the International Energy Agency today which 0:01:44.240 --> 0:01:47.080 cast that into slight doubt. We've had tighter supplies as 0:01:47.120 --> 0:01:52.320 OPEC keeps its keeps its production relatively low, reduced by. 0:01:52.200 --> 0:01:54.360 Two million barrels a day through until June. 0:01:54.480 --> 0:01:57.400 And we also have globally a reflation trade in which 0:01:57.480 --> 0:01:59.520 some traders are getting back into the oil market who 0:01:59.640 --> 0:02:01.800 left they were looking for portfolio hedges. 0:02:01.920 --> 0:02:04.320 So when you throw in the geopolitical tumult. 0:02:04.400 --> 0:02:06.280 On top of that, you have an oil price that's 0:02:06.320 --> 0:02:09.600 heading well into the nineties barrel and in which traders 0:02:09.600 --> 0:02:11.480 are kind of afraid to short the market heading into 0:02:11.480 --> 0:02:11.880 the weekend. 0:02:11.880 --> 0:02:13.480 And that's why we get rallies like we're seeing. 0:02:13.280 --> 0:02:15.640 Today, is the concern that this is going to be 0:02:16.120 --> 0:02:18.520 like that there's more upside risk here, that we're going 0:02:18.600 --> 0:02:20.799 to stay at this ninety ish level. I mean, what's 0:02:21.000 --> 0:02:23.679 the kind of sentiment right now about the outlook for 0:02:23.720 --> 0:02:24.840 oil prices. 0:02:25.600 --> 0:02:28.000 Yeah, and we've just had a big commodities conference here 0:02:28.040 --> 0:02:30.320 in Europe with all the kind of top traders from 0:02:30.560 --> 0:02:33.000 the independent trading houses so Vitol, Traffic gur or a 0:02:33.040 --> 0:02:35.440 gun for And one of the interesting themes coming away 0:02:35.440 --> 0:02:38.200 from that wasn't so much the more bullish outlook per se, 0:02:38.240 --> 0:02:41.200 which I think is everyone's become accustomed to very quickly, 0:02:41.200 --> 0:02:43.440 but it's actually the speed with which that's changed. We 0:02:43.560 --> 0:02:45.880 had IP week here in London in February and everyone 0:02:46.000 --> 0:02:50.520 was rarely relatively downbeat, was fairly confident that prices would 0:02:50.520 --> 0:02:53.400 remain range bound, and in a little more than six 0:02:53.440 --> 0:02:56.920 weeks since then, this has become a rampantly bullish market. 0:02:58.360 --> 0:03:00.280 We had Vitol talking this week about a kind of 0:03:00.320 --> 0:03:02.640 eighty to one hundred dollars range. As prices move higher, 0:03:02.760 --> 0:03:04.840 you will continue to run into the types of issues 0:03:04.880 --> 0:03:06.760 you do when you have high oil prices, things like 0:03:06.800 --> 0:03:11.080 demand destruction, things like incentivizing US supplies to produce more, 0:03:11.200 --> 0:03:13.280 or US producers to produce more, I should say, and 0:03:13.320 --> 0:03:17.839 also slip it from within OPEK itself. That said, there's 0:03:17.880 --> 0:03:19.760 also not much conviction that if price is wor to 0:03:19.800 --> 0:03:21.679 for which feels very unlikely today, that they're going to 0:03:21.680 --> 0:03:24.560 fall very far because OPEC producers are willing to protect 0:03:24.600 --> 0:03:25.359 that downside. 0:03:25.639 --> 0:03:28.480 Well, exactly, I have to think, at what point do 0:03:28.600 --> 0:03:31.640 the studies use that spare capacity. So they have a 0:03:31.680 --> 0:03:35.200 lot of it, they've been unwilling to use it. Is 0:03:35.200 --> 0:03:37.280 it like a ninety five dollars thing because they're going 0:03:37.360 --> 0:03:38.920 to be very worried about demand destruction. 0:03:40.600 --> 0:03:41.280 Yeah, for sure. 0:03:41.360 --> 0:03:43.360 And I think this is part of the bind of 0:03:43.400 --> 0:03:45.200 the meeting that we're going to have in June is 0:03:45.280 --> 0:03:47.160 And it's not just Saudi Arabia, don't forget, it's the 0:03:47.240 --> 0:03:49.960 UAE as well. There's been aggressively ramping up its production 0:03:50.040 --> 0:03:52.040 capacity in recent years, and it's kind of itching to 0:03:52.160 --> 0:03:55.680 use some of those barrels. That's kind of a question 0:03:55.760 --> 0:03:57.680 for two months down the line. I think for now, 0:03:57.800 --> 0:03:59.720 what opt producers will be looking to see as inn 0:03:59.720 --> 0:04:02.680 the of stability in this higher price level. We haven't 0:04:02.680 --> 0:04:04.640 actually been at ninety dollars a barrow that long in 0:04:04.680 --> 0:04:07.320 the scheme of oil pricing, right, So I think between 0:04:07.360 --> 0:04:08.720 now and then, the question is going to be how 0:04:08.760 --> 0:04:11.080 does the market look, how does do political side of 0:04:11.120 --> 0:04:13.480 the equation look, which you know, even from here to Monday, 0:04:13.480 --> 0:04:15.920 it's pretty hard to have a concrete view on what 0:04:15.960 --> 0:04:17.599 the market's going to do in the next few days, 0:04:18.480 --> 0:04:20.120 and so casting all the way ahead to June and 0:04:20.160 --> 0:04:23.040 having a sort of purity of whether or not there'll 0:04:23.080 --> 0:04:25.960 be bowers being produced either in the Atlantic basin, in 0:04:26.000 --> 0:04:29.480 the US for various reasons, and also in the Middle East. 0:04:30.080 --> 0:04:31.840 I think we have such a widespread of outcomes that 0:04:31.839 --> 0:04:33.480 it's more a case, as Opek said in our own 0:04:33.520 --> 0:04:36.560 report yesterday, of monitoring and then judging closer to the 0:04:36.560 --> 0:04:38.720 time how the market's looking and whether it needs extra barrows. 0:04:38.880 --> 0:04:41.440 As you're talking about the traders like Vita, Traffic, Gura, 0:04:41.560 --> 0:04:45.200 et cetera. They're the guys that move things around. What 0:04:45.279 --> 0:04:48.440 are they talking about in terms of moving oil. Is 0:04:48.480 --> 0:04:51.480 it hard to move oil now because of the disruptions 0:04:51.480 --> 0:04:54.560 that we've seen in the Red Sea, et cetera, Or 0:04:54.640 --> 0:04:55.520 are things okay? 0:04:57.040 --> 0:04:59.160 I think in terms of the Red Sea, it's there 0:04:59.200 --> 0:05:01.120 in the background, but it's not the disruptive force that 0:05:01.200 --> 0:05:03.880 it was. Again, casting back to IP week in February, 0:05:03.960 --> 0:05:05.680 that was a big talking point. Then when the market 0:05:05.720 --> 0:05:08.680 at the front end was super strong, we saw big 0:05:08.680 --> 0:05:11.480 backwardation at the front of the curve, like strong demand 0:05:11.480 --> 0:05:13.960 for immediate barrels and prices trading higher as a result 0:05:14.000 --> 0:05:16.680 of that. We do still have a big backwardation at 0:05:16.680 --> 0:05:18.040 the front of the curve, but I think the feeling 0:05:18.120 --> 0:05:19.800 is that the Red Sea isn't as big of a 0:05:19.880 --> 0:05:21.880 driver there because that was a kind of a three 0:05:21.920 --> 0:05:24.039 to four week shift in supply chain that's now being 0:05:24.080 --> 0:05:26.920 allowed for. So I think on the delivery side you 0:05:26.960 --> 0:05:30.160 don't see that much worry. I think where people are 0:05:30.200 --> 0:05:31.680 talking a lot of the moment is on the demand 0:05:31.720 --> 0:05:34.960 side and on revisions upward, revisions to numbers. Even here 0:05:34.960 --> 0:05:38.080 in Europe, where we're supposedly are kind of a flat 0:05:38.080 --> 0:05:40.960 line oil demand region, if not falling oil demand region. 0:05:41.120 --> 0:05:42.960 But you look at some of the gasoline demand numbers, 0:05:43.000 --> 0:05:45.320 particularly in the Mediterranean, and you're seeing double digit ear 0:05:45.400 --> 0:05:49.080 on your percentage growth, and that kind of runs counterintuitive 0:05:49.080 --> 0:05:52.080 to the idea that demand should be falling in Europe. 0:05:52.120 --> 0:05:54.240 And that's before you get into the real demand powerhouses 0:05:54.279 --> 0:05:58.560 like China. Certainly, again talking to the traders, looking at 0:05:58.560 --> 0:06:00.520 some of the figures in the first quarter of the year, 0:06:01.320 --> 0:06:03.280 lots of numbers were coming in fairly strong, and that's 0:06:03.279 --> 0:06:05.720 partly what's driven this sort of this rampant move higher 0:06:05.720 --> 0:06:06.880 that we've seen in recent weeks. 0:06:07.040 --> 0:06:09.320 So, Alex, the question then that I would have from 0:06:09.320 --> 0:06:12.880 the economy perspective is when you have oil prices that 0:06:12.920 --> 0:06:15.159 are staying at this ninety dollars range, and of course 0:06:15.200 --> 0:06:17.680 remains to be seen of how long that's going to 0:06:17.680 --> 0:06:19.840 be the case for, But when does that start to 0:06:19.880 --> 0:06:22.920 filter it through to consumer prices, whether it's through other 0:06:23.320 --> 0:06:26.720 transit and logistics costs, jet fuel, you know, things of 0:06:26.720 --> 0:06:28.440 that nature. When do we start to feel it? 0:06:29.760 --> 0:06:31.960 And there's a couple of reasons that there's a time lag. Right. 0:06:32.040 --> 0:06:34.599 We often many of the world's biggest consumers will hedge 0:06:34.640 --> 0:06:36.880 their suppliers and Therefore that part that ripple through effect 0:06:36.920 --> 0:06:40.159 to consumers takes months to filter through. I think you 0:06:40.160 --> 0:06:41.919 can make an argument that you are already seeing it 0:06:41.960 --> 0:06:45.400 to an extent. The CPI data this week, for example, 0:06:45.440 --> 0:06:47.360 had a higher filter through from energy prices, and I 0:06:47.360 --> 0:06:50.280 think you'll probably continue to see that in the coming months. 0:06:50.360 --> 0:06:52.280 As as I said before, you know, if we think, 0:06:52.320 --> 0:06:54.000 if we assume there's a two to three month lag 0:06:54.040 --> 0:06:55.440 and we think back to where we were earlier in 0:06:55.480 --> 0:06:57.560 the year, we're now tens of fifteen dollars higher and 0:06:57.640 --> 0:07:00.480 with a sort of a related knock on a onto 0:07:00.520 --> 0:07:03.800 things as you said, like gasoline and jet fuel prices 0:07:03.800 --> 0:07:05.880 to Alex's earlier point, The question is what happens then, 0:07:05.920 --> 0:07:08.120 do we do we hold in the nineties as political 0:07:08.200 --> 0:07:09.600 risks simmers for a few months or dold we have 0:07:09.600 --> 0:07:12.360 a market that moves higher. And I think, you know, 0:07:12.440 --> 0:07:14.960 as we shift from a kind of I think traders 0:07:14.960 --> 0:07:16.520 are kind of getting used to this idea that inflation 0:07:16.600 --> 0:07:19.080 might be slightly stickier than expected this year. The question 0:07:19.120 --> 0:07:20.480 then is going to be, okay, well, how long is 0:07:20.480 --> 0:07:23.200 it going to be stickier than expected? For and if 0:07:23.240 --> 0:07:26.640 crude prices and by association refined product prices sort of 0:07:26.920 --> 0:07:30.160 flatline at a higher level, perhaps the inflationary impact starts 0:07:30.160 --> 0:07:32.840 to die off. On the other side, if we see 0:07:33.000 --> 0:07:35.680 big expansions in refining margins or higher crude prices, then 0:07:35.720 --> 0:07:37.400 that's going to continue well into the rest of Tiety 0:07:37.480 --> 0:07:38.120 twenty four. 0:07:38.440 --> 0:07:41.880 Alex Longley joining us a Bloomberg Oil trader reporter. Thank 0:07:41.960 --> 0:07:44.800 you so much. You were like double al explained. 0:07:44.720 --> 0:07:47.440 Yes, I love that side. It was really nice. So 0:07:47.520 --> 0:07:49.440 you guys just really told so much. 0:07:49.840 --> 0:07:52.400 I love that. Okay, we're looking at is real potentially 0:07:52.440 --> 0:07:54.760 bracing for a direct and unprecedent attack by Iran and 0:07:54.760 --> 0:07:57.640 government targets as soon as Saturday. Of course, that moving 0:07:57.640 --> 0:08:00.160 to the upside when it comes to crude prices to 0:08:00.160 --> 0:08:00.880 the highest level. 0:08:00.880 --> 0:08:07.000 Now since October, you're listening to the Bloomberg Intelligence Podcast. 0:08:07.240 --> 0:08:10.480 Catch us live weekdays at ten am Eastern on applecar 0:08:10.600 --> 0:08:13.560 Play and Android Auto with the Bloomberg Business app. You 0:08:13.600 --> 0:08:16.880 can also listen live on Amazon Alexa from our flagship 0:08:16.920 --> 0:08:20.720 New York station Just Say Alexa playing Bloomberg eleven thirty. 0:08:21.840 --> 0:08:24.160 Mollie Smith in with me up for the next two hours. 0:08:24.200 --> 0:08:26.280 I've never angered with you before, but I'm really looking 0:08:26.280 --> 0:08:26.600 forward to. 0:08:26.680 --> 0:08:29.240 Yeah, We've got such a treat I'm so excited, especially 0:08:29.280 --> 0:08:32.439 our first guest coming right out of the University of Michigan, 0:08:32.480 --> 0:08:34.880 where I normally would be writing up this report, but 0:08:34.960 --> 0:08:37.080 we get to talk to Joanne Shoe herself today. 0:08:37.240 --> 0:08:38.839 That's why we love this. So not only do we 0:08:38.880 --> 0:08:40.920 give you all the great analysts, but we also bring 0:08:40.960 --> 0:08:43.520 you int an analysis with the data crosses at the 0:08:43.520 --> 0:08:46.439 ten o'clock hours, So the University of Michigan sentiment coming 0:08:46.480 --> 0:08:49.200 in a bit lighter current conditions, also a bit lighter 0:08:49.320 --> 0:08:52.079 expectations get where I'm going, a bit lighter and one 0:08:52.120 --> 0:08:54.520 year in five to ten year inflation expectations guess what, 0:08:55.080 --> 0:08:57.640 a bit higher. So let's get more to it with 0:08:57.720 --> 0:09:00.439 Joeann Hue. She heads up all the daddy here from 0:09:00.520 --> 0:09:04.480 University of Michigan. She is University of Michigan Surveys of 0:09:04.559 --> 0:09:07.719 Consumer Director. All right, joe Ane, great to chat with you. 0:09:07.960 --> 0:09:09.600 What did you make? What's your takeaway? 0:09:10.679 --> 0:09:14.080 Essentially, consumers didn't really see any sort of changes in 0:09:14.120 --> 0:09:17.440 the economy, not just in this month but actually since January. 0:09:18.120 --> 0:09:19.239 They're in their. 0:09:19.080 --> 0:09:22.800 Income expectations, labor market expectations, their their views of their 0:09:22.840 --> 0:09:26.480 personal finances. Everything has been remarkably stable since January. The 0:09:26.520 --> 0:09:29.600 one exception is this month there was a slight uptick 0:09:29.760 --> 0:09:33.000 in inflation expectations, consistent with what we saw in the 0:09:33.000 --> 0:09:37.160 CPI report earlier this week. Consumers have internalized that information 0:09:37.559 --> 0:09:40.360 and bumped up their expectations for inflation. 0:09:40.520 --> 0:09:43.160 Accordingly Johann, how much of this is too to rising 0:09:43.200 --> 0:09:45.600 gasoline prices versus broader inflation. 0:09:47.400 --> 0:09:51.880 It is partially to do with higher gas prices, but 0:09:52.280 --> 0:09:56.439 typically gas prices tend to affect sentiment more than they 0:09:56.600 --> 0:10:00.679 affect inflation expectations alone. So you know, I think consumers 0:10:00.720 --> 0:10:04.480 are very much preserving judgment about the medium and longer 0:10:04.520 --> 0:10:06.280 term trajectory of the economy. A lot of them are 0:10:06.320 --> 0:10:10.040 mentioning uncertainty over the election, so they are taking some 0:10:10.080 --> 0:10:13.680 signal from gas prices. But you know, they have noticed 0:10:14.000 --> 0:10:19.400 that this inflation slow down is has accelerated, and they're 0:10:19.440 --> 0:10:23.240 not terribly pleased with the pace of disinflation. 0:10:23.679 --> 0:10:26.080 A walkers through the great stuff that you guys do 0:10:26.120 --> 0:10:29.720 of Democrats versus Republicans is a sentiment sort of on 0:10:29.800 --> 0:10:31.280 the same wavelength for both. 0:10:32.920 --> 0:10:35.400 It's a little too early to tell at mid month. 0:10:35.480 --> 0:10:36.960 We'll know more at the end of the month, but 0:10:37.040 --> 0:10:40.040 what we are seeing so far is that, as usual, 0:10:41.640 --> 0:10:44.040 consumers who are who belong with the party that's in 0:10:44.040 --> 0:10:46.080 the White House tend to have higher levels of sentiment 0:10:47.120 --> 0:10:49.560 than consumers in the party not in the White House. 0:10:49.559 --> 0:10:52.559 So right now Democrats have higher levels of sentiment than Republicans. 0:10:52.800 --> 0:10:55.920 Independence are right in the middle. And for all of 0:10:55.960 --> 0:10:58.480 these groups, there just weren't There haven't been that many 0:10:58.600 --> 0:11:02.120 changes since January. It's been four months of remarkable stability 0:11:02.960 --> 0:11:04.760 and how people view the economy. 0:11:05.080 --> 0:11:08.280 So we've seen generally, when you're looking along party lines 0:11:08.320 --> 0:11:11.720 that there have been for the most part, sentiment among 0:11:11.840 --> 0:11:15.920 Democrats and Republicans have been generally rising in recent months, 0:11:16.040 --> 0:11:19.320 while Independents have really been lagging a lot. Can you 0:11:19.360 --> 0:11:22.080 speak to how that you know, what that means for 0:11:22.280 --> 0:11:25.880 the mindset of somebody who perhaps is an undecided voter, 0:11:26.040 --> 0:11:29.679 if that's like how you would make that takeaway. 0:11:30.080 --> 0:11:32.800 It's a little bit hard to say, because even among 0:11:32.840 --> 0:11:35.959 independence there are some that lean Republican and some that lean. 0:11:37.440 --> 0:11:38.479 That lean Democrat. 0:11:39.160 --> 0:11:41.800 So it's really hard to say from our data how 0:11:41.840 --> 0:11:46.840 many people are actually undecided at this point. You know, overall, 0:11:47.760 --> 0:11:50.320 you know, independence have been in the middle the rising 0:11:50.360 --> 0:11:52.480 tide that we saw towards the end of twenty twenty 0:11:52.520 --> 0:11:55.240 three in which sentiments searched, that was something we saw, 0:11:55.520 --> 0:11:59.319 you know, across all three political groups and across the 0:11:59.400 --> 0:12:02.440 all three footal groups. They're all I wouldn't say holding 0:12:02.440 --> 0:12:05.480 their breath, but they are really reserving judgment and waiting 0:12:05.480 --> 0:12:08.079 for the election at the end of this year because 0:12:08.080 --> 0:12:10.680 they do see that a lot of the economy is 0:12:10.679 --> 0:12:11.559 going to hinge on that. 0:12:11.640 --> 0:12:13.920 Well the molly did we see that in the CPI report? 0:12:14.280 --> 0:12:17.920 Butter prices are down belt to basis right, what pastries 0:12:18.000 --> 0:12:21.079 and cereals so like, I don't know your breakfast croissants 0:12:21.080 --> 0:12:22.760 that you're gonna make, It's could be worse. 0:12:23.200 --> 0:12:25.679 I mean, chicken prices were really high though, I don't 0:12:25.720 --> 0:12:28.360 know if you saw that. The poultry market though these days, 0:12:28.559 --> 0:12:29.160 that's crazy. 0:12:29.200 --> 0:12:31.199 My musand makes too much chicken. I'm like, it's not 0:12:31.320 --> 0:12:33.880 but the chicken anything. Yeah, now I can tell them 0:12:34.640 --> 0:12:37.400 why we'll get the CPI exactly get there before I 0:12:37.480 --> 0:12:40.920 let you go, Joanne. If I'm the fed I'm looking 0:12:40.920 --> 0:12:42.800 at this, Is there a takeaway for me? Is there 0:12:42.800 --> 0:12:43.400 a signal. 0:12:45.240 --> 0:12:48.280 I think the signal that that policy maker should take 0:12:48.320 --> 0:12:51.559 from this is that not only has you know, did 0:12:51.559 --> 0:12:54.760 the CPI come in hot earlier this month, earlier this week, 0:12:54.840 --> 0:12:59.080 but consumers have incorporated that into their expectations for the future. 0:13:00.080 --> 0:13:02.319 They are expecting a little bit more inflation in the 0:13:02.400 --> 0:13:04.280 year in the next five years than they were expecting 0:13:04.400 --> 0:13:09.040 just last month. So that's definitely not the trend that. 0:13:07.920 --> 0:13:09.080 That you want to see. 0:13:10.160 --> 0:13:12.880 And so consumers have noticed. 0:13:13.640 --> 0:13:15.640 All right, Joan, Thanks Lott. We really appreciate. It's always 0:13:15.640 --> 0:13:17.640 going to get their perspective instid analysis, right, we get 0:13:17.679 --> 0:13:19.920 the data, we get Joanne, we have you covered on 0:13:20.000 --> 0:13:24.120 all fronts. Joann Shu, University of Michigan, Surveys of Consumer Director. 0:13:24.240 --> 0:13:25.600 Was that cool for you? 0:13:25.760 --> 0:13:26.320 Oh my god? 0:13:26.400 --> 0:13:27.120 Yeah, super fun? 0:13:27.160 --> 0:13:29.240 I feel you got to interview a superstar. 0:13:29.480 --> 0:13:30.040 Oh nice? 0:13:30.040 --> 0:13:31.760 Okay, what a great start to Friday. 0:13:31.840 --> 0:13:34.360 Okay, we like to make my Molly's man happy. Here. 0:13:34.400 --> 0:13:36.120 Next you're going to bring in a tennis star. Then 0:13:36.320 --> 0:13:38.120 you really see me just like fly off. 0:13:37.960 --> 0:13:39.840 The seat because you're like a pro tennis player. 0:13:40.360 --> 0:13:43.040 I mean maybe on the Bloomberg tennis team, but you know, 0:13:43.320 --> 0:13:45.439 no one's looking for breaking points. 0:13:45.160 --> 0:13:51.200 There fair enough, you're listening to the Bloomberg Intelligence podcast. 0:13:51.440 --> 0:13:54.280 Catch us Live weekdays at ten am Eastern on fo 0:13:54.360 --> 0:13:57.080 card Playing and Broyd Auto with the Bloomberg Business app. 0:13:57.120 --> 0:14:00.560 Listen on demand wherever you get your podcasts, want us 0:14:00.600 --> 0:14:01.720 Live on YouTube. 0:14:02.640 --> 0:14:04.680 So let's get to the other part of the market today, 0:14:04.679 --> 0:14:06.640 and that's what's happening with banks. So JP Morgan is 0:14:06.640 --> 0:14:08.800 down by almost five percent, Wells Fargo is up by 0:14:08.800 --> 0:14:11.320 one tenth, and City Group now down by about three 0:14:11.360 --> 0:14:13.720 tenths of one percent. Granted, it's a tough tape. It's 0:14:13.760 --> 0:14:16.160 definitely sort of going to a safe haven flight to 0:14:16.200 --> 0:14:17.520 say if you don't want to take on that equity 0:14:17.600 --> 0:14:19.800 risk into the weekend. But nonetheless, let's dig through what 0:14:19.840 --> 0:14:22.440 we learned here. There is literally no other person that 0:14:22.480 --> 0:14:25.320 you want to talk to but Alison Williams, Bloomberg Intelligence, 0:14:25.640 --> 0:14:29.440 Senior Analyst, Global Banks and Asset Managers. She joins us. Now, 0:14:30.040 --> 0:14:33.920 all right, Allison, what was okay? Two questions? Is there 0:14:33.960 --> 0:14:36.720 a macro takeaway for me? And if not, what is 0:14:36.760 --> 0:14:37.360 the takeaway? 0:14:38.080 --> 0:14:42.000 So there is a macro takeaway which is positive, which 0:14:42.040 --> 0:14:45.000 is the fact that credit costs are coming in much 0:14:45.040 --> 0:14:49.200 better than expected, and that's because the reserve builds are 0:14:49.280 --> 0:14:52.200 either coming in lower than expected, such as a city 0:14:52.240 --> 0:14:56.080 group and we actually got releases at JP Morgan and 0:14:56.120 --> 0:14:57.400 wels fargetting. 0:14:56.960 --> 0:14:58.960 Things may not be as bad as me meaning that. 0:14:58.840 --> 0:15:03.120 Their outlook right. So the reserves are really all about 0:15:03.120 --> 0:15:06.760 what they expect for losses, you know, they're meant to 0:15:06.800 --> 0:15:09.200 look at losses over the life of the loan. What 0:15:09.240 --> 0:15:11.960 we've seen over the past you know, a year or 0:15:12.000 --> 0:15:15.680 so is just a change I think in the waiting 0:15:15.720 --> 0:15:18.840 of the scenario, So moving more towards an expectation for 0:15:18.960 --> 0:15:23.960 the goldilocks type of scenario versus the expectations for a recession. 0:15:25.360 --> 0:15:28.200 The you know, JP Morgan is trading down today clearly 0:15:28.200 --> 0:15:30.920 on the net interest income guidance disappointment. I would make 0:15:30.920 --> 0:15:34.240 the point that they have beaten an interest income and 0:15:34.360 --> 0:15:38.480 raised guidance for several quarters in a row. They kept 0:15:38.480 --> 0:15:42.640 their overall guidance for net interest income steady and their 0:15:42.720 --> 0:15:45.280 core net interest income, which we think is the metric 0:15:45.320 --> 0:15:47.560 to focus on, that's actually better. So we think that's 0:15:47.560 --> 0:15:50.280 a good thing, but still might not have been you know, 0:15:50.440 --> 0:15:53.040 enough for some of the bullish investors. But we do 0:15:53.120 --> 0:15:55.680 think that they could just be saving all the good 0:15:55.680 --> 0:15:57.760 stuff for their investor day. So they have investor Day 0:15:57.760 --> 0:15:58.360 coming up in. 0:15:58.320 --> 0:16:00.960 One of the under promise over to yes, and they 0:16:01.240 --> 0:16:02.760 love to see that in the corporate world. 0:16:03.080 --> 0:16:06.280 Well, and they will be you know, they they will 0:16:06.320 --> 0:16:08.960 be telling their full story at investor Day. We expect 0:16:09.000 --> 0:16:12.120 to hear more about, you know, their expectations for returns 0:16:12.200 --> 0:16:17.320 or expectations for capital, their expectations for costs. The costs 0:16:17.360 --> 0:16:19.200 did come in higher at JP Morgan, but that was 0:16:19.240 --> 0:16:22.920 really due to the fdi C special assessment, which is 0:16:22.960 --> 0:16:26.000 something we'd expecting. We're expecting, so we think, you know 0:16:26.960 --> 0:16:28.840 that that's sort of fine. I guess just the one 0:16:28.880 --> 0:16:30.760 off well too, Yeah, so we would not make too 0:16:30.840 --> 0:16:34.120 much out of that. I mean, the bigger banks, the 0:16:34.120 --> 0:16:36.320 more deposits you have, the more you're gonna have to pay. 0:16:36.960 --> 0:16:40.400 And so JP Morgan all the other banks are making 0:16:40.400 --> 0:16:42.600 those payments. We saw those charges at Wells in City 0:16:42.640 --> 0:16:43.040 as well. 0:16:43.560 --> 0:16:45.600 So with this net interest income, I mean, this really 0:16:45.680 --> 0:16:48.760 what is going to be like the big item to 0:16:48.840 --> 0:16:50.720 look for in the bank earnings. We had a great 0:16:50.720 --> 0:16:53.320 story out earlier this week talking about that. You know 0:16:53.360 --> 0:16:56.240 how much this relates to the outlook for the FED 0:16:56.280 --> 0:16:58.800 path and this net interest income. For you guys who 0:16:58.800 --> 0:17:01.240 aren't as familiar with bank bound sheets like myself, this 0:17:01.280 --> 0:17:03.840 is how we described the difference between what banks earned 0:17:03.840 --> 0:17:06.760 on assets and what they pay on debts. So it's 0:17:06.800 --> 0:17:09.760 in their interest to see interest rates stay high and 0:17:09.760 --> 0:17:13.120 it makes that net interest income go higher. So you're 0:17:13.160 --> 0:17:16.200 telling us, then, Alison, that the guidance that they've zield 0:17:16.240 --> 0:17:19.960 been doing this under promise hopefully later over delivered situation, 0:17:20.119 --> 0:17:22.000 and that the guidance has still been pretty weak. 0:17:22.480 --> 0:17:24.400 Well, I think, you know, keep in mind that we're 0:17:24.440 --> 0:17:28.679 looking at guidance for the year, and I think, well 0:17:28.840 --> 0:17:31.080 that interesting income was the focus coming into the quarter, 0:17:31.280 --> 0:17:33.640 Like the credit class I think are are really kind 0:17:33.640 --> 0:17:37.359 of the they the surprise of the quarter, if you will, 0:17:37.359 --> 0:17:40.360 like sort of the key takeaway coming out of the quarter. So, 0:17:40.600 --> 0:17:43.800 you know, net interest income, everyone can see that. The 0:17:43.880 --> 0:17:47.280 last time these banks reported, we there were you know, 0:17:47.359 --> 0:17:51.360 six to seven cuts expected. As of today there's three, 0:17:51.400 --> 0:17:55.600 and so I think investors were looking for that change. 0:17:55.600 --> 0:17:57.280 But keep in mind a lot of those cuts were 0:17:57.400 --> 0:18:00.840 awaited in the second half. Again, we saw how quickly 0:18:00.880 --> 0:18:03.560 things change the last three months, so we don't think 0:18:03.640 --> 0:18:07.080 it's crazy. In fact, we think it's conservative and the 0:18:07.119 --> 0:18:10.840 right thing to do that these banks would be conservative 0:18:11.040 --> 0:18:15.439 and wait before they change around those expectations, right, instead 0:18:15.440 --> 0:18:18.439 of just jumping things all over the place. So I 0:18:18.440 --> 0:18:20.639 think it's right to be conservative. It doesn't mean that 0:18:20.640 --> 0:18:22.280 we're not going to get a change. And really, like 0:18:22.320 --> 0:18:25.040 as pointed out by City Group, the big change is 0:18:25.080 --> 0:18:27.960 going to be to next year. It's really twenty twenty 0:18:28.000 --> 0:18:31.760 five that as we get the changes in these expectations, 0:18:32.600 --> 0:18:33.680 that's where it'll play out. 0:18:33.880 --> 0:18:36.080