August 22, 2025 • 17 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Warnings on defaults are starting to pile up in the $1.7 trillion private credit market, prompting at least some analysts to raise concern about underappreciated risks in one of Wall Street’s favorite money spinners.
(2) Bond investors are heading into Friday’s much-anticipated Jerome Powell speech largely expecting the Federal Reserve chair will indicate policymakers will start cutting interest rates next month.
(3) Nvidia has instructed component suppliers including Samsung Electronics Co. and Amkor Technology Inc. to stop production related to the H20 AI chip, The Information reported, citing unidentified sources.
(4) The US and European Union took the next steps to formalize their trade pact, detailing plans that could reduce tariffs on European automobiles within weeks while opening the door to new potential discounts for steel and aluminum.
(5) The UK is bolstering its air defense capabilities with a new contract for missile systems, as European military planners work to map out a post-peace plan for Ukraine that could see its skies protected by western allies.
(6) UK consumers are the most optimistic they’ve been about their household budgets in 12 months, according to a closely watched survey, a sign Britons are starting to feel the benefits of the Bank of England’s interest rate cuts.
Podcast Conversation: AI Slurs Are Just the Start of the Backlash
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Youroate podcast. Good morning, It's Friday, the twenty second
of August. I'm Stephen Caroll and London coming up today.
Default warnings begin to pile up for the lucrative private
credit market as analysis suggests stress levels are underappreciated. Bond
(00:26):
investors away to key speech by the Federal Reserve charge
your own pal as they look for signs policymakers may
start cutting rates next month. Plus why Germans are increasingly
ditching the safety blanket of savings accounts for the risk
and reward of the stock markets. Let's start with a
roundup of our top stories. Warnings on defaults are starting
(00:46):
to pile up in the one point seven trillion dollar
private credit market. A number of analysts this month are
holding up a light to signs of underlying stress. Analysis
by JP Morgan says the rate of companies not making
payments in this space is five point four percent. That's
double the default rate most see in private credit. Bloomberg's
(01:07):
James Wilcock has more.
Speaker 2 (01:09):
Money has surged into private credit in recent years, then
interest rate shot up with many businesses unable to pay.
Private lenders use tools like payment in kind loans, but
rather than being charged interest, the sum gets added on
to your final debt. Analysts call these agreements shadow or
selective defaults. They say, when you take these private arrangements
(01:32):
into account, the rate of defaults in the space doubles
to between five or six percent. That has spooked many,
including regulators, who fear it hides stressed firms and could
be the prelude to a bubble. In London, James Wilcock
Bloomberg Radio, the.
Speaker 1 (01:49):
Federal Reserve charge your own Power, will deliver a key
policy speech in the coming hours as bond investors look
for signs that the Central Bank plans to cut rates
at its next meeting in September. Rates been on hold
since December as policymakers worry about sticky inflation and the
possible impact of tariffs. Speaking to Bloomberg, Chicago FED President
Austin Goolsby says he's hopeful the latest inflation print was
(02:12):
a one off.
Speaker 3 (02:14):
The last inflation report that came in where you saw
services inflation, which is probably not driven by the tariffs,
really start shooting up is a danger.
Speaker 4 (02:27):
That's a dangerous data point.
Speaker 5 (02:29):
I'm hoping that that's a bit of a blip, so
I think we still have a fair bit of information
that we're going to get before September or the whole
fall to determine what path we're going to be on.
Speaker 1 (02:41):
Goolsby's comments come as Jerome Pile faces mounting pressure from
President Donald Trump and other White Eyes officials to resume
cutting rates. Meanwhile, reporting from the Wall Street Journals suggests
the Fed chief will also use his speech to scrap
the Central Bank's recent approach to setting rates that focused
on risks associated with near z zuro interest rates and
low prices. And you can listen to Jerome's Pal's speech
(03:04):
live on Bloomberg Radio at three pm, with full analysis
and reaction to follow. It's being reported that in Nvidia
has told its component suppliers to halt production of the
company's H twenty AI chip, according to the information, which
cites unidentified sources, and Vidia issued the orders this week
after Beijing urged local firms to stop using the chips.
(03:26):
CEO Jensen Wang says the firmason talks at Beijing.
Speaker 6 (03:30):
US government Pertrup administration has approved licenses for US to
export age twenties to China. Recently, China asked some questions
about some security back doors in our ships. We have
made it very clear and put to rest that H
twenty has no security backdoors.
Speaker 1 (03:54):
Jensen Wong, speaking there in Taipei. The HEIGHT twenty is
a less powerful version of the company's cut Edge AI accelerators,
and was designed to comply with US export controls. Whoever,
any suspension of production would raise fresh questions about underlying
demand for the product. The United States and the European
(04:14):
Union have taken steps to formalize their trade packed. The
two issued a joint statements setting out specific benchmarks for
the EU to secure tariff discounts on cars, pharmaceuticals, and semiconductors.
The EU's trade chief, Marschefkovich, says there's more work yet
to be done.
Speaker 7 (04:30):
This is not the end, it's the beginning. This framework
is the first step, one that can grow over time
to cover more sectors, improve market access, and strengthen our
economic dies even further.
Speaker 1 (04:47):
Chefovich and other EU officials have been criticized for failing
to get lower tariffs on wine and spirit exports to
the United States. A White As official says lower tariffs
on EU goods could be in place with in weeks.
The British government will buy six new air defense systems
to deploy near Ukraine. The UK's Ministry of Defense says
it is signing a one hundred and eighteen million pounds
(05:10):
contract with European arms manufacturer MDB MBDA for the kit.
It comes as European and US defense chiefs meet to
discuss what security guarantees they can offer Ukraine if a
peace deal is reached with Russia. UK consumers are the
most optimistic they've been about their household budgets in a year,
(05:32):
according to a closely watched survey. Bloomberg's Crispit has more.
Speaker 8 (05:35):
The UK has faced something of a heat wave this summer,
and it appears that Brits are also warming to the
outlook for their personal finances. GfK's index tracking sentiment for
the next twelve months rose to five in August, up
three points from July. The recovery and household confidence suggests
the Bank of England's efforts to ease borrowing costs are
(05:57):
finally filtering through to the real economy, but it's not
all clear. Skies ahead. GfK's consumer Insights director Neil Bellameny
warns improvements in sentiment remain fragile, with quote clouds on
the horizon in the form of inflation and rising unemployment
in London. Chris Pitt Bloomberg Radio, those are your top
(06:19):
stories on the markets. We're looking at Eurostock's fifty futures
down slightly this morning, foot Sea one hundred futures are
up slightly ahead of drone pal speech later today. The
Bloomberg Dollar Spot Index is speaking were respot is up
by a tenth of one percent. The tenure treasure yield
helding steady at four point three three percent. Wall Street
futures are looking flatter a little lower for Nasdaq futures
(06:41):
at the moment. In a moment, we'll bring you more
on the default warnings that are beginning to pile up
on the private credit market, plus why Germans are increasingly
embracing investing in the stock market. But first, another story
that I wanted to mention this morning. Are you hearing
the word clanker more at the If not, you might
be about to Bloomberg copinians. Katherine Thorbeck has been writing
(07:04):
about the word some of you might recognize from Star wars,
and how it's been picked up by younger Internet users
as a blanket derogatory term for artificial intelligence and robots.
It's been used to express frustration with things like AI
slop that's turning up everywhere online, or the hallucinations the
technology can create. It's now showing up in search trends,
and Catherine expects that it may well end up being
(07:25):
one of those words of the year when we get
the new lists from dictionaries. It's also a good illustration
of how the extreme enthusiasm for AI from some isn't
that widely held in business. For example, a McKinsey survey
show that ninety five percent of firms haven't seen returns
on their investments in the technology. For consumers, mentioning AI
is proving a turn off for some shoppers, and polls
(07:48):
show people are worried about the effects the technology could have.
There's no doubt the potential for what AI can do
is huge, but Catherine makes a good point that AI
needs public trust to succeed, and if teenagers are already
making fun of it online, maybe that's a sign that
tech companies need to do a little bit more to
focus on practical applications rather than just rhetorical ambitions. Maybe
(08:09):
it means AI won't take over everything after all, or
it'll just end up being the cranks versus the clankers.
You read the full story at Bloomberg dot com for
its lash opinion. Well, let's bring you more now in
our top story and the rising warnings of defaults in
the one point seven trillion dollars private credit market. Our
market support of Valerie title joins me now for more.
(08:30):
By their nature, it's even in the name, we have
less date on private markets than we do in public markets.
So how are we tracking this uptick in defaults and
how significant is it?
Speaker 9 (08:38):
Look, this is really where it gets murkhy. The question
of how to track default is really almost have to
be taken on a case by case basis looking through
all of these private loans, because sometimes these loans are
basically restructured, which in a traditional corporate bond space, that
kind of restructuring would be classed as a default, but
not necessarily so.
Speaker 4 (08:59):
In the private credit market.
Speaker 9 (09:00):
These are things like deferring interest payments or perhaps selective
defaults like maturity extensions or any significant amendment activity. So
where as on the surface the official default rate for
private credit stands around two to three percent. That's data
compiled by JP Morgan. In reality, JP Morgan also warns
(09:21):
that could be something much higher, and they actually penciled
in five point four percent as the default rate if
they included some of these quote unquote selective defaults, and
that would put private credit more in line in terms
of the default rate with the syndicated loan market. That's
something that's done via traditional banks. We also had some
data from SMP Global and from Lincoln International that showed
(09:45):
that default rates in the second quarter of this year
could have been as high as six percent, and that's
up from what they calculated as a two percent run
rate when everything was going great back in twenty twenty one,
when this market was originally booming. And really, to complicate
this all further, a lot of these borrowers are not
really monitored by credit agencies or advisory firms, so it's
(10:07):
really hard to get a sense. But it does seem
to be that there is some data from a few
research analysts out there. They're showing that the selective defaults,
if you include them into the official rate, it could
be much higher.
Speaker 1 (10:19):
Okay, fascinating a story that we've been reporting on this morning.
But let's turn to the main event of the day
for markets. They speech by Jerome Powell. As Jackson holl
what are we expecting?
Speaker 9 (10:28):
I'm already sweating about what's going to happen this afternoon.
Let me tell you, the market is really wanting to
hear something dubvish from Jerome Powell. They want him to
somehow mention that the labor market has been weakening and
signal a September cut That would definitely spur a bond
market rally, spur an equity market.
Speaker 8 (10:44):
Rally off the back of that.
Speaker 9 (10:45):
The risk is, though, for at least for what's priced in,
is that he does not change his tune on the
labor market. Instead maybe focuses on some very nuanced monetary
policy framework. One thing that our own analog has been
writing about is he could draw attention to dropping the
flexible average inflation targeting framework, which would be slightly hawkish.
This is something that they used almost to look through
(11:07):
inflation back in twenty twenty one when it was first rising,
and then on the flip side, he could really say nothing.
He could say that they're data dependent There's still another
CPI print and another payroll print before the FED convens
again in mid September, but the market is really hoping
for something duvish here. We have seen odds for this
rate cut in September been paired back quite substantially this week.
(11:29):
After pricing in one hundred percent last week, we're now
down to seventy five percent, So the market has already
been rethinking how they've been pricing in these Fed cuts.
We also had a round of data yesterday that was
fairly mixed. Jobless claims rose, but then we had really
good PMI data out of the US as well, So
it seems mixed across many pictures. But I mean, I'm
holding my breath for three PM.
Speaker 1 (11:50):
Stay with us. More from Bloomberg Daybreak Europe coming up
after this.
Speaker 4 (11:55):
Now.
Speaker 1 (11:55):
Germans have long preferred the safety of bank accounts to
the risk of the stock market, but that tied here
is to be turning as a German equities market booms
for a third year running. A survey by black Rock
has found that more than three million Germans have begun
investing in stocks over the past three years. That's the
biggest increase seen in Europe after Britain. Our senior market's editor,
Phil Tarapheno joins me now for more felt good morning.
(12:16):
What is drawing Germans to the stock market now, Well.
Speaker 10 (12:19):
You know, there is the bull market, which you mentioned,
and that always attracts traders when they see prices going up.
But that's bull markets come and go. And there's a
longer term trend at work here too, which is Germany,
like a lot of countries, is facing an issue of
they have an aging workforce. They have this pay as
(12:39):
you go pension system, and Germans are realizing the pension
that they're counting on may not be there when they retire.
There are fewer and fewer workers providing pension payments for
a larger group of retirees. You know, you look out
long enough and that system becomes unsustainable. And there's a
big political debate in Germany about what to do about
(13:00):
this right now. But a lot of Germans are taking
matters into their own hands and saying, look, I need
to set some more money aside, and it's not going
to be enough if I just put it in a
bank account.
Speaker 4 (13:10):
So I'm going to start investing in the stock market.
Speaker 1 (13:13):
So what does this mean then for the market and
for the broader German economy that more people are willing
to make this change.
Speaker 4 (13:21):
Well, you know, it's an important thing.
Speaker 10 (13:22):
I mean, there's this been this long running trend in
Europe of people generally take less risk and invest less
than in the US.
Speaker 4 (13:31):
And that shows up in all sorts of ways.
Speaker 10 (13:34):
It's difficult, relatively difficult to finance a startup in Europe
and in a country like Germany.
Speaker 4 (13:40):
So if you have more people putting money into.
Speaker 10 (13:42):
Risky assets, that just as an effect, a ripple effect
through the economy. It becomes easier to raise money, it
becomes easier to build that hot new startup or you know,
finance a young growing company. And you know, Germany big
powerful economy, but it is not a dynamic economy. It's
barely grown or has has been shrinking for the past
(14:05):
several years. And so if you get more financing and
more risk taking, that should be good for the economy.
Speaker 1 (14:13):
How big is the retail trading market in Germany now
or so, how does it compare to other countries? And
is this the market that there's more room for expansion?
Speaker 10 (14:23):
There's absolutely more room for expansion. You know, institutional investors
have long been a big player in Germany, but individuals
it's a tiny fraction in the US I think, you know,
like something like forty two of financial assets are in stocks.
In Germany that's around twenty percent. So you see, if
(14:47):
Germans were to put you know, say an equivalent of
the US or even France of their assets into.
Speaker 4 (14:54):
The stock market, that makes a huge effect.
Speaker 10 (14:57):
We saw one estimate from a think tank und by
the finance industry that says there'd be an extra one
point one trillion available for equity financing if Germans invested
even to the level that the French do, So that
makes a big difference. The German stock market is about
two point six trillion in market value right now, so
(15:18):
that would really move the needle if Germans as a
whole invested a lot more in the stock market.
Speaker 1 (15:25):
So why are these investors pushing their money there? What
stocks are they buying?
Speaker 10 (15:29):
Yeah, that's one thing that's a bit of a problem
right now. The US stock market has such a magnetic
pull on the rest of the world that we talked
to e Toro, the online broker, and they said, of
the ten most owned stocks in German accounts this year,
nine of them are American and they're the ones you'd expect,
Tesla and Microsoft and the big tech stocks. There is
(15:51):
exactly one German stock among the top ten, and that's
Ryan Mattal, the big defense contractor. But you can sense,
at least anecdotally from the people we've spoken to, that's
starting to change. They're looking at these stocks like the
German defense stocks have been on fire this year. They're
putting up returns like the tech stocks one hundred percent,
two hundred percent, and Germans are saying, hey, look at that,
(16:11):
I would like to get some of that.
Speaker 4 (16:13):
And so there is starting to be a shift.
Speaker 10 (16:16):
You you know, the question is does that hold up
if there's a bear market to people just walk away
and not come back for a decade or whatever. But
for now, at least they're embracing it and they're starting
to buy more German stocks.
Speaker 1 (16:31):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Streets and beyond.
Speaker 11 (16:37):
Look for us on your podcast feed every morning on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 1 (16:43):
You can also listen live each morning on London DAB Radio.
The Bloomberg Business App and Bloomberg dot Com.
Speaker 11 (16:49):
Our flagship New York station is also available on your
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I'm Caroline Hepka and.
Speaker 1 (16:58):
I'm Stephen Carroll. Join us again tomorrow. Good morning. For
all the news you need to start your day right
here on Bloomberg Daybreak Europe
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Youroate podcast. Good morning, It's Friday, the twenty second
of August. I'm Stephen Caroll and London coming up today.
Default warnings begin to pile up for the lucrative private
credit market as analysis suggests stress levels are underappreciated. Bond
(00:26):
investors away to key speech by the Federal Reserve charge
your own pal as they look for signs policymakers may
start cutting rates next month. Plus why Germans are increasingly
ditching the safety blanket of savings accounts for the risk
and reward of the stock markets. Let's start with a
roundup of our top stories. Warnings on defaults are starting
(00:46):
to pile up in the one point seven trillion dollar
private credit market. A number of analysts this month are
holding up a light to signs of underlying stress. Analysis
by JP Morgan says the rate of companies not making
payments in this space is five point four percent. That's
double the default rate most see in private credit. Bloomberg's
(01:07):
James Wilcock has more.
Speaker 2 (01:09):
Money has surged into private credit in recent years, then
interest rate shot up with many businesses unable to pay.
Private lenders use tools like payment in kind loans, but
rather than being charged interest, the sum gets added on
to your final debt. Analysts call these agreements shadow or
selective defaults. They say, when you take these private arrangements
(01:32):
into account, the rate of defaults in the space doubles
to between five or six percent. That has spooked many,
including regulators, who fear it hides stressed firms and could
be the prelude to a bubble. In London, James Wilcock
Bloomberg Radio, the.
Speaker 1 (01:49):
Federal Reserve charge your own Power, will deliver a key
policy speech in the coming hours as bond investors look
for signs that the Central Bank plans to cut rates
at its next meeting in September. Rates been on hold
since December as policymakers worry about sticky inflation and the
possible impact of tariffs. Speaking to Bloomberg, Chicago FED President
Austin Goolsby says he's hopeful the latest inflation print was
(02:12):
a one off.
Speaker 3 (02:14):
The last inflation report that came in where you saw
services inflation, which is probably not driven by the tariffs,
really start shooting up is a danger.
Speaker 4 (02:27):
That's a dangerous data point.
Speaker 5 (02:29):
I'm hoping that that's a bit of a blip, so
I think we still have a fair bit of information
that we're going to get before September or the whole
fall to determine what path we're going to be on.
Speaker 1 (02:41):
Goolsby's comments come as Jerome Pile faces mounting pressure from
President Donald Trump and other White Eyes officials to resume
cutting rates. Meanwhile, reporting from the Wall Street Journals suggests
the Fed chief will also use his speech to scrap
the Central Bank's recent approach to setting rates that focused
on risks associated with near z zuro interest rates and
low prices. And you can listen to Jerome's Pal's speech
(03:04):
live on Bloomberg Radio at three pm, with full analysis
and reaction to follow. It's being reported that in Nvidia
has told its component suppliers to halt production of the
company's H twenty AI chip, according to the information, which
cites unidentified sources, and Vidia issued the orders this week
after Beijing urged local firms to stop using the chips.
(03:26):
CEO Jensen Wang says the firmason talks at Beijing.
Speaker 6 (03:30):
US government Pertrup administration has approved licenses for US to
export age twenties to China. Recently, China asked some questions
about some security back doors in our ships. We have
made it very clear and put to rest that H
twenty has no security backdoors.
Speaker 1 (03:54):
Jensen Wong, speaking there in Taipei. The HEIGHT twenty is
a less powerful version of the company's cut Edge AI accelerators,
and was designed to comply with US export controls. Whoever,
any suspension of production would raise fresh questions about underlying
demand for the product. The United States and the European
(04:14):
Union have taken steps to formalize their trade packed. The
two issued a joint statements setting out specific benchmarks for
the EU to secure tariff discounts on cars, pharmaceuticals, and semiconductors.
The EU's trade chief, Marschefkovich, says there's more work yet
to be done.
Speaker 7 (04:30):
This is not the end, it's the beginning. This framework
is the first step, one that can grow over time
to cover more sectors, improve market access, and strengthen our
economic dies even further.
Speaker 1 (04:47):
Chefovich and other EU officials have been criticized for failing
to get lower tariffs on wine and spirit exports to
the United States. A White As official says lower tariffs
on EU goods could be in place with in weeks.
The British government will buy six new air defense systems
to deploy near Ukraine. The UK's Ministry of Defense says
it is signing a one hundred and eighteen million pounds
(05:10):
contract with European arms manufacturer MDB MBDA for the kit.
It comes as European and US defense chiefs meet to
discuss what security guarantees they can offer Ukraine if a
peace deal is reached with Russia. UK consumers are the
most optimistic they've been about their household budgets in a year,
(05:32):
according to a closely watched survey. Bloomberg's Crispit has more.
Speaker 8 (05:35):
The UK has faced something of a heat wave this summer,
and it appears that Brits are also warming to the
outlook for their personal finances. GfK's index tracking sentiment for
the next twelve months rose to five in August, up
three points from July. The recovery and household confidence suggests
the Bank of England's efforts to ease borrowing costs are
(05:57):
finally filtering through to the real economy, but it's not
all clear. Skies ahead. GfK's consumer Insights director Neil Bellameny
warns improvements in sentiment remain fragile, with quote clouds on
the horizon in the form of inflation and rising unemployment
in London. Chris Pitt Bloomberg Radio, those are your top
(06:19):
stories on the markets. We're looking at Eurostock's fifty futures
down slightly this morning, foot Sea one hundred futures are
up slightly ahead of drone pal speech later today. The
Bloomberg Dollar Spot Index is speaking were respot is up
by a tenth of one percent. The tenure treasure yield
helding steady at four point three three percent. Wall Street
futures are looking flatter a little lower for Nasdaq futures
(06:41):
at the moment. In a moment, we'll bring you more
on the default warnings that are beginning to pile up
on the private credit market, plus why Germans are increasingly
embracing investing in the stock market. But first, another story
that I wanted to mention this morning. Are you hearing
the word clanker more at the If not, you might
be about to Bloomberg copinians. Katherine Thorbeck has been writing
(07:04):
about the word some of you might recognize from Star wars,
and how it's been picked up by younger Internet users
as a blanket derogatory term for artificial intelligence and robots.
It's been used to express frustration with things like AI
slop that's turning up everywhere online, or the hallucinations the
technology can create. It's now showing up in search trends,
and Catherine expects that it may well end up being
(07:25):
one of those words of the year when we get
the new lists from dictionaries. It's also a good illustration
of how the extreme enthusiasm for AI from some isn't
that widely held in business. For example, a McKinsey survey
show that ninety five percent of firms haven't seen returns
on their investments in the technology. For consumers, mentioning AI
is proving a turn off for some shoppers, and polls
(07:48):
show people are worried about the effects the technology could have.
There's no doubt the potential for what AI can do
is huge, but Catherine makes a good point that AI
needs public trust to succeed, and if teenagers are already
making fun of it online, maybe that's a sign that
tech companies need to do a little bit more to
focus on practical applications rather than just rhetorical ambitions. Maybe
(08:09):
it means AI won't take over everything after all, or
it'll just end up being the cranks versus the clankers.
You read the full story at Bloomberg dot com for
its lash opinion. Well, let's bring you more now in
our top story and the rising warnings of defaults in
the one point seven trillion dollars private credit market. Our
market support of Valerie title joins me now for more.
(08:30):
By their nature, it's even in the name, we have
less date on private markets than we do in public markets.
So how are we tracking this uptick in defaults and
how significant is it?
Speaker 9 (08:38):
Look, this is really where it gets murkhy. The question
of how to track default is really almost have to
be taken on a case by case basis looking through
all of these private loans, because sometimes these loans are
basically restructured, which in a traditional corporate bond space, that
kind of restructuring would be classed as a default, but
not necessarily so.
Speaker 4 (08:59):
In the private credit market.
Speaker 9 (09:00):
These are things like deferring interest payments or perhaps selective
defaults like maturity extensions or any significant amendment activity. So
where as on the surface the official default rate for
private credit stands around two to three percent. That's data
compiled by JP Morgan. In reality, JP Morgan also warns
(09:21):
that could be something much higher, and they actually penciled
in five point four percent as the default rate if
they included some of these quote unquote selective defaults, and
that would put private credit more in line in terms
of the default rate with the syndicated loan market. That's
something that's done via traditional banks. We also had some
data from SMP Global and from Lincoln International that showed
(09:45):
that default rates in the second quarter of this year
could have been as high as six percent, and that's
up from what they calculated as a two percent run
rate when everything was going great back in twenty twenty one,
when this market was originally booming. And really, to complicate
this all further, a lot of these borrowers are not
really monitored by credit agencies or advisory firms, so it's
(10:07):
really hard to get a sense. But it does seem
to be that there is some data from a few
research analysts out there. They're showing that the selective defaults,
if you include them into the official rate, it could
be much higher.
Speaker 1 (10:19):
Okay, fascinating a story that we've been reporting on this morning.
But let's turn to the main event of the day
for markets. They speech by Jerome Powell. As Jackson holl
what are we expecting?
Speaker 9 (10:28):
I'm already sweating about what's going to happen this afternoon.
Let me tell you, the market is really wanting to
hear something dubvish from Jerome Powell. They want him to
somehow mention that the labor market has been weakening and
signal a September cut That would definitely spur a bond
market rally, spur an equity market.
Speaker 8 (10:44):
Rally off the back of that.
Speaker 9 (10:45):
The risk is, though, for at least for what's priced in,
is that he does not change his tune on the
labor market. Instead maybe focuses on some very nuanced monetary
policy framework. One thing that our own analog has been
writing about is he could draw attention to dropping the
flexible average inflation targeting framework, which would be slightly hawkish.
This is something that they used almost to look through
(11:07):
inflation back in twenty twenty one when it was first rising,
and then on the flip side, he could really say nothing.
He could say that they're data dependent There's still another
CPI print and another payroll print before the FED convens
again in mid September, but the market is really hoping
for something duvish here. We have seen odds for this
rate cut in September been paired back quite substantially this week.
(11:29):
After pricing in one hundred percent last week, we're now
down to seventy five percent, So the market has already
been rethinking how they've been pricing in these Fed cuts.
We also had a round of data yesterday that was
fairly mixed. Jobless claims rose, but then we had really
good PMI data out of the US as well, So
it seems mixed across many pictures. But I mean, I'm
holding my breath for three PM.
Speaker 1 (11:50):
Stay with us. More from Bloomberg Daybreak Europe coming up
after this.
Speaker 4 (11:55):
Now.
Speaker 1 (11:55):
Germans have long preferred the safety of bank accounts to
the risk of the stock market, but that tied here
is to be turning as a German equities market booms
for a third year running. A survey by black Rock
has found that more than three million Germans have begun
investing in stocks over the past three years. That's the
biggest increase seen in Europe after Britain. Our senior market's editor,
Phil Tarapheno joins me now for more felt good morning.
(12:16):
What is drawing Germans to the stock market now, Well.
Speaker 10 (12:19):
You know, there is the bull market, which you mentioned,
and that always attracts traders when they see prices going up.
But that's bull markets come and go. And there's a
longer term trend at work here too, which is Germany,
like a lot of countries, is facing an issue of
they have an aging workforce. They have this pay as
(12:39):
you go pension system, and Germans are realizing the pension
that they're counting on may not be there when they retire.
There are fewer and fewer workers providing pension payments for
a larger group of retirees. You know, you look out
long enough and that system becomes unsustainable. And there's a
big political debate in Germany about what to do about
(13:00):
this right now. But a lot of Germans are taking
matters into their own hands and saying, look, I need
to set some more money aside, and it's not going
to be enough if I just put it in a
bank account.
Speaker 4 (13:10):
So I'm going to start investing in the stock market.
Speaker 1 (13:13):
So what does this mean then for the market and
for the broader German economy that more people are willing
to make this change.
Speaker 4 (13:21):
Well, you know, it's an important thing.
Speaker 10 (13:22):
I mean, there's this been this long running trend in
Europe of people generally take less risk and invest less
than in the US.
Speaker 4 (13:31):
And that shows up in all sorts of ways.
Speaker 10 (13:34):
It's difficult, relatively difficult to finance a startup in Europe
and in a country like Germany.
Speaker 4 (13:40):
So if you have more people putting money into.
Speaker 10 (13:42):
Risky assets, that just as an effect, a ripple effect
through the economy. It becomes easier to raise money, it
becomes easier to build that hot new startup or you know,
finance a young growing company. And you know, Germany big
powerful economy, but it is not a dynamic economy. It's
barely grown or has has been shrinking for the past
(14:05):
several years. And so if you get more financing and
more risk taking, that should be good for the economy.
Speaker 1 (14:13):
How big is the retail trading market in Germany now
or so, how does it compare to other countries? And
is this the market that there's more room for expansion?
Speaker 10 (14:23):
There's absolutely more room for expansion. You know, institutional investors
have long been a big player in Germany, but individuals
it's a tiny fraction in the US I think, you know,
like something like forty two of financial assets are in stocks.
In Germany that's around twenty percent. So you see, if
(14:47):
Germans were to put you know, say an equivalent of
the US or even France of their assets into.
Speaker 4 (14:54):
The stock market, that makes a huge effect.
Speaker 10 (14:57):
We saw one estimate from a think tank und by
the finance industry that says there'd be an extra one
point one trillion available for equity financing if Germans invested
even to the level that the French do, So that
makes a big difference. The German stock market is about
two point six trillion in market value right now, so
(15:18):
that would really move the needle if Germans as a
whole invested a lot more in the stock market.
Speaker 1 (15:25):
So why are these investors pushing their money there? What
stocks are they buying?
Speaker 10 (15:29):
Yeah, that's one thing that's a bit of a problem
right now. The US stock market has such a magnetic
pull on the rest of the world that we talked
to e Toro, the online broker, and they said, of
the ten most owned stocks in German accounts this year,
nine of them are American and they're the ones you'd expect,
Tesla and Microsoft and the big tech stocks. There is
(15:51):
exactly one German stock among the top ten, and that's
Ryan Mattal, the big defense contractor. But you can sense,
at least anecdotally from the people we've spoken to, that's
starting to change. They're looking at these stocks like the
German defense stocks have been on fire this year. They're
putting up returns like the tech stocks one hundred percent,
two hundred percent, and Germans are saying, hey, look at that,
(16:11):
I would like to get some of that.
Speaker 4 (16:13):
And so there is starting to be a shift.
Speaker 10 (16:16):
You you know, the question is does that hold up
if there's a bear market to people just walk away
and not come back for a decade or whatever. But
for now, at least they're embracing it and they're starting
to buy more German stocks.
Speaker 1 (16:31):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Streets and beyond.
Speaker 11 (16:37):
Look for us on your podcast feed every morning on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 1 (16:43):
You can also listen live each morning on London DAB Radio.
The Bloomberg Business App and Bloomberg dot Com.
Speaker 11 (16:49):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepka and.
Speaker 1 (16:58):
I'm Stephen Carroll. Join us again tomorrow. Good morning. For
all the news you need to start your day right
here on Bloomberg Daybreak Europe
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