August 20, 2025 • 20 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Global stocks paused after a record-breaking run, with a sharp selloff in heavyweight technology shares dragging markets lower and futures indicating further declines.
(2) President Donald Trump has bought hundreds of bonds since he returned to office, including those sold by US companies affected by the sweeping changes to federal policies he’s championed.
(3) A package of security guarantees for Ukraine will take shape as soon as this week as leaders seize on President Donald Trump’s backing for a plan that involves sending European troops as part of a potential peace deal.
(4) Thousands of firefighters worked overnight to contain dozens of deadly wildfires burning across Spain and Portugal as heat and gusty winds spread blazes through dry brush, forests and crops.
(5) When a company abruptly ditches its CEO, the costs of the shakeup can quickly add up. Bloomberg News consulted with compensation consultants, academics, corporate lawyers, executive-search advisors and public-relations experts on the true cost of firing your CEO.
(6) Overtourism and climate change have created a dangerous feedback loop that endangers Southern Europe’s tourism industry.
Podcast Conversation: Why We Love Succession Dramas About Billionaire Family Business
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Europe podcast. Good morning, It's Wednesday, the twentieth of August.
I'm Stephen Caroll and London. Coming up today. A record
breaking run in global stocks loses momentum after a sharp
selloff in big tech names. Why ousting a CEO has
(00:26):
never been so expensive inside the Golden parachutes, retention bonuses
and search fees driving up the cost of change at
the top. Plus, we have a special report on how
over tourism and climate change have created a dangerous feedback
loop that threatens Southern Europe's economies. Let's start with a
roundup of our top stories. Global stocks have paused after
(00:49):
a record breaking run as concern grows that the rally
of recent months has advanced too far and too fast.
The s P five hundred close down zero point six
percent yesterday, while the Nasdaq one hundred by one point
four percent, with Nvidia leading a retreat in big tech.
The AI powerhouse is due to report earnings next week.
Daryl Kronk's CIO for Wealth and Investment at Wells Fargo,
(01:10):
says he remains bullish on the tech sector because of
their earnings growth.
Speaker 2 (01:14):
You've got to go where growth resides, and there's just
no doubt that that's where the growth is. You saw
in the latest second quarter earnings numbers. You take the
seven largest stocks, the earnings growth were twenty nine percent.
If I take X those earnings growth was like three
and a half.
Speaker 1 (01:30):
Wells Fargo Starl Kronk, speaking to Bloomberg earlier. As traders
are firming up bets on a September interest rate cut
from the Federal Reserve, newly released transaction data shows US
President Donald Trump bought bondsworth at least one hundred and
four million dollars since returning to the White House. The
bond investments include a raft of American companies affected by
sweeping policy changes championed by the president. The Bloomberg Billionaires
(01:54):
Index estimates Trump's net worth at six point four billion dollars,
but unlike his predecessor, the president has not divested or
placed his assets into a blind trust. Trump's business empire
is instead managed by two of his sons and operates
in several areas that intersect with presidential policy. European countries
are developing a plan to send British and French troops
(02:16):
to Ukraine as part of a potential peace deal between
Kiev and Moscow. Leaders are said to be looking to
leverage President Trump's support for a package of security guarantees
that would involve European boots on the ground with possible
US air support. Here's what the US President told Fox News.
Speaker 3 (02:33):
When it comes to security, they're willing to put people
on the ground. We're willing to help them with things,
especially probably if you can talk about by air, because
as nobody has the kind of stuff we have, really
they don't have. But I don't think it's going to
be a problem. I think if a deal is made,
you know, famous last words, right, But I think if
a deal is made, I think Russia's had it. They've
all had it and for a very extended period of time.
(02:56):
I don't think there'll be a problem. But so there'll
be some form of security. It can't be NATO because
that was that's just not something that would ever ever happen.
Speaker 4 (03:05):
He couldn't.
Speaker 1 (03:06):
Those comments on Fox News came as Bloomberg learned Trump
called Hungarian Prime Minister Victor Orban on Monday after European
leaders pressed him to intervene and Ukraine's stoled EU membership.
Bid EU leaders say Ukraine's membership is part of broader
security guarantees, but Orban has described the idea as unnecessary
and dangerous. The UK government faces legal action after a
(03:31):
council won a court battle to stop a local hotel
being used to house asylum seekers. The Bell Hotel in Epping,
east of London, has been at the center of violent
protests in recent weeks. District council leader Chris Whitbread says
the decision showed the government cannot ignore planning rules.
Speaker 4 (03:48):
We always knew.
Speaker 5 (03:49):
The Bell Hotel was the wrong location because of its
close proximity to schools and other parts of the community.
It was never going to work out. This is not
a victory today, This is ruling for common sense.
Speaker 1 (04:02):
With Bread success raises questions over the government's practice of
using hotels to house asylum seekers. Across the UK, the
Labor government's first year in office has seen illegal crossings
of the Channel rise to a new record high, stoking
public anger about controlling migration. Thousands of firefighters, aided by
(04:23):
soldiers and aircraft, are continuing to tackle wildfires across Spain,
although temperatures across the country have begun to drop in
recent days. Spain is still confronting one of the most
destructive fire seasons in recent decades. The fires have killed
four people and burned almost one five hundred square miles
of land, equivalent to an area more than twice the
(04:45):
size of London. The number of CEOs being forced out
of their jobs is on the rise and its expensive.
One analysis has found one hundred and thirty four CEOs
were pushed out last year in the Russell three thousand.
Bloomberg is consulted with compensation consultants, PR experts, and executive
search advisors to try and find the true cast of
(05:07):
firing a CEO. Bloomberg James Wilcock has more Get your
Calculators Out. Bloomberg estimates the median compensation for a forced
out US boss was six point two million dollars, the
sign on fee for their replacement another nine million. And
then there's the new higher pay packet. The one hundred
(05:28):
top earning CEOs accompanies with more than one billion dollars
in revenue are paid twenty two percent more than last year,
according to pay consultant Equila. That's a median of thirty
one million dollars, so factor in the millions in lawyers
plus payments to the rest of the board, and the
whole exercise is a lot more expensive than showing the
(05:50):
boss the way to the exit in London.
Speaker 4 (05:53):
James Wilcock, Bloomberg.
Speaker 1 (05:54):
Radio, those are your top stories on the markets we're watching.
The mscis specific and extend by one percent, and the
NIKA and Tokyo is one point six percent lower. The
Hangstang Tech Index mirroring the fall that we saw in
the Nasdak yesterday, down one point three percent. European Stock
Future is also pointing lower by seven tenths of one
percent this morning. The Bloomberg Dollar Spot Index is a
tent stronger, the Euro trading at one sixteen thirty four
(06:16):
and looking ahead to the Wall Street SETI and Nasdak
features are pointing lower by six tenths of one percent.
Speaker 4 (06:21):
Now in a moment, we'll dig into the.
Speaker 1 (06:23):
Tech stock sell off, plus bring you our reporting on
how over tourism and climate change in Southern Europe are
creating a dangerous feedback loop for economies there. But another
story I wanted to mention this morning, and a good
point raised by Bloomberg's James Tarmi watching children squabble is
annoying unless it's about inheritance, and then it turns out
(06:44):
its theater. So he's been watching about the upcoming Netflix
series about the Guinness family, set in the late nineteenth
century in Ireland and focusing on the four children of
Benjamin Guinness over the beer empire. Now, the difference to
the likes of Succession is that most of the kids
don't actually want to run the business.
Speaker 4 (07:00):
They just want the money chase, right.
Speaker 1 (07:02):
So this is coming at a time where there's increased
interest in the Guinness clan. There are also two nonfiction
books about them coming in the next few months. Very
interesting to see how the series turns out. That it's
created by Stephen Knight, a Pegy Blinders fame, so that
ought to put an interesting spin on this for a for.
Speaker 4 (07:22):
An audience viewing it around the world.
Speaker 1 (07:24):
I'm always curious that this as well, whether or not
they're going to get the accents right. I have to
say credit to the creators of the Sing Street musical
film that's recently been staged in London over this summer,
which I saw, which is essentially full of people with
accents like mine.
Speaker 4 (07:38):
And they did a great job, lots of them.
Speaker 1 (07:39):
I was very surprised to find out afterwards that they
weren't Irish. So I will be applying a similar level
of standard to this Netflix series coming up as well.
That's due out to be released next month. Something to
look forward to for your autumn culture calendar. Well, let's
dig into some of the bigger market moves that we
have seen today. Shares an aged joining the sell off
(08:01):
that we saw in Wall Street yesterday, the Nasdaq finished
one point four percent lower, futures pointing to further losses
at the open later on Wall Street. Our Markets Live
Executive editor Mark Cudmore joins me now for more. So, Mark,
is this investors realizing that valuations are stretched or are
we just looking at an August moment on markets?
Speaker 6 (08:20):
I think there's a whole host of issues. I think
there's a really ripe reason for tech to sell off.
I think we've got Jackson hole this weekend, where the
risk coming out of that is higher long end yields.
And because of the incredible capex cycle we've seen in AI,
their higher duration assets than they were before, so they're
more vulnerable to move in long end yields, and I
expect whatever happens within a week or two of Jackson
(08:43):
Hole will see higher long and yields because either Powell
falds to administration pressure, in which case you see a
twist deepening of the curve, or it pushes back against
administration pressure, in which case the administration will double down
next week, which will again alarm the back end of
the curve. So you're going to see AI suffer from
that that problem of higher long and yields. You do
have lofty valuations, you've got retail kind of trader seasonality.
(09:04):
This is the time of year where they step back
a bit August and September. Citadel came out with a
note about that last night. Of course, we've generally had
at the kind of the peak of the hype cycle
and AI relative to the impact cycle. It takes a
long time.
Speaker 4 (09:17):
To feature to protivity.
Speaker 6 (09:18):
As companies adopt AI, it's expensive to adopt those transformation,
so you get a dip in productivity. That moment. We've
got in video earnings next week, we've already priced in
to be an amazing beat. It will be an amazing beat.
Earning has been really good for all the AA companies.
We've had several weeks to price it in. For in Vidia,
it's more than fully priced in. So everyone's realizing it
can't really be a positive surprise. It can only be
a negative. I think we're saying some rotation because small
(09:40):
caps earnings been really good. We've got the threat of
chips taffs coming again from Trump. I'm not sure anyone
really believes that because he always say it's within two weeks,
but it might happen. And we've got the US administration
directly extracting revenues from companies. We've seen it, you know,
with both in Nvidia and AMD, and last week in
a little noticed comment from the White House, they said
they're looking to expand to other companies, let's say, direct
(10:00):
taking from revenues into the profit margin of companies. So
there's loads of reasons for our tech stocks un till off.
I'm an AI bill longer term, but you know, this
is the first time in a long while AI, I'm
very worried about.
Speaker 4 (10:11):
What is this Something that we need to get used to.
Speaker 1 (10:13):
Essentially, is that that there will be this long gap
that you're talking about between the investment and the productivity
gains coming through. So does it set us up for
a rough ride for these stocks of the coming months.
Speaker 6 (10:23):
Yes, So we have a j curve of productivity, which
is what we get in technology, which is as I said,
it's normally a dip in the short term as companies
realize they need to adopt this technology. And that's the
kind of phase we've gone into. Now everyone's kind of going,
oh right, we can't have our heads in the sand anymore. Ultimately,
I actually think AI will be transformative, and I think
it will be a massive global productivity boom and over
(10:43):
the coming years.
Speaker 4 (10:44):
I think it's the reason to be very bullish global stocks.
Speaker 6 (10:46):
But I think that the the evaluations of US megacap
techs have priced in just several problematic things. One accruing
almost all the benefits of this productivity boom accrueing them
very soon. You know, it's focused on very few stocks,
so I think, you know, and it's fully kind of priced.
So I think it's AI US AI tech sector in
(11:06):
particular that I'm worried about, and I think it's going
to be a problematic a few weeks ahead. As I said,
Jay Jackson, hall earnings in Nvidia, the chance of more
chip tariffs. Then we've got, of course the macro data
at the start of September, which is really going to
decide what the FED does. But they're in a quandary
because they're being forced by the administration to have too
easy policy relative to what economic orthodoxy would suggest. And
(11:29):
that just means that everyone believes the inflation problem is
going to get worse, which is already quite bad, and
that just means higher long and yields. And these companies
are higher duration assets because they spent so much on
the capex cycle, so they're yeah, they're really vulnerable in
the next month.
Speaker 1 (11:42):
Well, just in terms of Jackson Hole, I mean, there
are traders, you know, putting bats now on a bigger
than twenty five basis point cut in September. Do you
really think that Jerome pal is going to be able
to steer much in either direction on Friday.
Speaker 6 (11:54):
I think he'll try to keep his options open. That
the theme of the conference is about the labor market,
and I think if you look at the full title,
it tease it up to kind of talking about, Look, hey,
the labor market's cooling, but we're also seeing a decline
in supply, and that's why we're seeing not unemployment rate
not pick up, and everyone knows that you don't, you know,
tweak monetary policy to address a supply side problem that's
(12:14):
causing so so therefore, if you know there's a labor
market decline in the labor market supply because of the
crackdown immigration, well then cutting rates won't be the first
thing to fix it. And it's also not clear the
labor market's completely collapsing. Yeah, non from perils was disastrous,
but claims are still very very low. So I think
the labor market's very much cooling, but it's cooling for
a very hot level. Is it going off a cliff? No,
it doesn't seem like it. And meanwhile, inflation is very
(12:35):
very high, so you know what. I think the panell
knows that economic orthodoxy has said there's no way there
should be a cut next month, but he might feel
I kind of feel pressure to He won't be cutting
unless the data the start of September gives him the
cover to do so or I don't say that for
the whole committee. It's not just on him, but I
think enough committee members will feel the pressure and will
shift to a cut if the labor market data the
(12:57):
start of September is very weak, and inflation data a
few days later isn't very very problematic. I just don't
see that out coming happening, so I think it's going
to be very very hard to see September cut.
Speaker 1 (13:07):
Okay, Mark Kudmar, our Markets Live executive editor, thank you
very much for joining us and talking us through some
of what we're seeing on markets today.
Speaker 4 (13:16):
Stay with us.
Speaker 1 (13:17):
More from Bloomberg Daybreak Europe coming up after this. Firefighters
in Spain are continuing to battle several major wildfires in
the northwest and southwest of the country. Spain's Prime Minister
has called for a new response from the public and
private sector to what he describes as the climate emergency. Today,
Bloomberg's looking at how over tourism and climate change have
(13:38):
created dangerous feedback loop that threatens some of your Southern
Europe's economies are europe Climate reporter.
Speaker 4 (13:44):
Lara Milana is with us now for more. Lara, good morning.
Speaker 1 (13:47):
How is climate change shifting tourism patterns?
Speaker 4 (13:51):
Then in Southern Europe?
Speaker 7 (13:52):
So, Southern Europe, the European Mediterranean is warming very fast.
It's a climate hotspot for lots of reasons. And what
our story looks at today is that the tourism season
in the Mediterranean is getting longer. So tourists are not
just traveling in the traditional peak season of July and
(14:13):
August anymore to go to their beach holidays. They're traveling
also in April, May, June, September, October. So the tourism
season is getting longer. But actually what we're looking at
is the fact that the traditional peak months in some places,
in some hot spots for beach tourism and hot temperatures,
(14:36):
pig season is getting less busy, slightly less busy. And
then the other interesting thing that we found is that
even if the tourism season is getting longer, the weather
is becoming more unpredictable. So if you're traveling to the
Mediterranean for your beach holidays in May, you might see
extreme rain, for example. And the pig season is becoming
(14:56):
more unpredictable as well, because as you were seeing just
now seeing wildfires everywhere, heat waves obviously, and all sorts
of extreme weather events made wars by climate change.
Speaker 1 (15:08):
What does this shifting pattern, though, mean for the economies
that rely so heavily on tourism and also for the
environmental impact of visitor numbers.
Speaker 7 (15:19):
So for the economy, as we look at the numbers,
we see how I mean, the coronavirus pandemic obviously kept
everyone at home and there was a big deep in
tourism revenues for all of these countries who we're talking Portugal, Spain, France, Italy,
Greece all seeing huge deeps in tourism revenue after the
(15:42):
coronavirus pandemic. But what we've seen is that rebounding really
strongly over the past few years, So tourism GDP, We've
looked at tourism TDP, We've looked at tourism employment and
revenues from foreigners in all of these countries I just mentioned,
they've gone up, uh two levels higher than they were
(16:02):
before the pandemic. So from an economic point of view,
this is good for these economies that increased their you know,
employment and the revenue from foreigners. But actually when we
look at the environment, we see that these additional amounts
of tourisms we're talking millions of people here traveling to
(16:22):
these destinations which we're already crowded before the pandemic. Uh,
they're adding new pressures to the environment. So we're seeing
all of these places strange for water resources, especially because
the Mediterranean is becoming drier as it becomes hotter. We're
also seeing a struggle for powers, so we're seeing in
(16:43):
some places power cuts or power becoming more expensive. And
we're also seeing natural places, so you know, pristin beaches
and forests becoming crowded with people, more polluted, more noise,
and more danger of wildfires as well.
Speaker 1 (17:02):
So how are authorities then dealing with this tension.
Speaker 7 (17:06):
In the places that we've looked at, So this is
Ivisa in Spain, Alentejo in Portugal, and Trentino in Italy.
We're seeing very different approaches because the places we looked
at are difference. In Avisa, which is a traditional tourism
beach destination known for for clubbing as well, authorities are
(17:26):
i would say overwhelmed. They are trying to deal with
with the issue by promoting the the show what we
call the shoulder season, so the months right next to
the to the peak season to July and August. But
actually the results that we're seeing from these policies of
trying to balance it out and not have all the
(17:49):
pressures of over tourism happen in just two months, but
spread it out, it just means that more people are
coming in. So the amount of people that are choosing
not to travel in July and August does not compensate
the amount of people traveling in other months. So in short,
you have more tourism coming in more pressure. In Portugal,
(18:11):
we've seen a move where authorities and companies in the
sector try to move some of that tourism further north
to alleviate the pressures in places like in the south,
in the southern areas, and we've seen these same pressures
(18:32):
coming to the new places where they're trying to promote tourism.
So in sure that the problem is kind of moving
north with the tourism, and in Trentino in Italy that
trend is very nascent. So the other thing we've looked
at is people choosing not to go to the beach
(18:53):
but go to the mountains as they look for cool
weather and lower prices. But these problems are coming with
them as well. So we've seen sorry to s try
to do a range of measures from you know, limiting
cruise ships to imposing tourist taxes, but none of these
is really solving the core problem, which is over tourism
(19:14):
plus climate change, adding extreme pressure to places that were
already really pressured at break tourism.
Speaker 1 (19:22):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 8 (19:28):
Look for us on your podcast feed every morning, on Apple, Spotify,
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Speaker 1 (19:34):
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I'm Caroline Hepca.
Speaker 1 (19:49):
And I'm Stephen Carroll. Join us again tomorrow morning for
all the news you need to start your day right
here on Bloomberg day Break Europe
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Europe podcast. Good morning, It's Wednesday, the twentieth of August.
I'm Stephen Caroll and London. Coming up today. A record
breaking run in global stocks loses momentum after a sharp
selloff in big tech names. Why ousting a CEO has
(00:26):
never been so expensive inside the Golden parachutes, retention bonuses
and search fees driving up the cost of change at
the top. Plus, we have a special report on how
over tourism and climate change have created a dangerous feedback
loop that threatens Southern Europe's economies. Let's start with a
roundup of our top stories. Global stocks have paused after
(00:49):
a record breaking run as concern grows that the rally
of recent months has advanced too far and too fast.
The s P five hundred close down zero point six
percent yesterday, while the Nasdaq one hundred by one point
four percent, with Nvidia leading a retreat in big tech.
The AI powerhouse is due to report earnings next week.
Daryl Kronk's CIO for Wealth and Investment at Wells Fargo,
(01:10):
says he remains bullish on the tech sector because of
their earnings growth.
Speaker 2 (01:14):
You've got to go where growth resides, and there's just
no doubt that that's where the growth is. You saw
in the latest second quarter earnings numbers. You take the
seven largest stocks, the earnings growth were twenty nine percent.
If I take X those earnings growth was like three
and a half.
Speaker 1 (01:30):
Wells Fargo Starl Kronk, speaking to Bloomberg earlier. As traders
are firming up bets on a September interest rate cut
from the Federal Reserve, newly released transaction data shows US
President Donald Trump bought bondsworth at least one hundred and
four million dollars since returning to the White House. The
bond investments include a raft of American companies affected by
sweeping policy changes championed by the president. The Bloomberg Billionaires
(01:54):
Index estimates Trump's net worth at six point four billion dollars,
but unlike his predecessor, the president has not divested or
placed his assets into a blind trust. Trump's business empire
is instead managed by two of his sons and operates
in several areas that intersect with presidential policy. European countries
are developing a plan to send British and French troops
(02:16):
to Ukraine as part of a potential peace deal between
Kiev and Moscow. Leaders are said to be looking to
leverage President Trump's support for a package of security guarantees
that would involve European boots on the ground with possible
US air support. Here's what the US President told Fox News.
Speaker 3 (02:33):
When it comes to security, they're willing to put people
on the ground. We're willing to help them with things,
especially probably if you can talk about by air, because
as nobody has the kind of stuff we have, really
they don't have. But I don't think it's going to
be a problem. I think if a deal is made,
you know, famous last words, right, But I think if
a deal is made, I think Russia's had it. They've
all had it and for a very extended period of time.
(02:56):
I don't think there'll be a problem. But so there'll
be some form of security. It can't be NATO because
that was that's just not something that would ever ever happen.
Speaker 4 (03:05):
He couldn't.
Speaker 1 (03:06):
Those comments on Fox News came as Bloomberg learned Trump
called Hungarian Prime Minister Victor Orban on Monday after European
leaders pressed him to intervene and Ukraine's stoled EU membership.
Bid EU leaders say Ukraine's membership is part of broader
security guarantees, but Orban has described the idea as unnecessary
and dangerous. The UK government faces legal action after a
(03:31):
council won a court battle to stop a local hotel
being used to house asylum seekers. The Bell Hotel in Epping,
east of London, has been at the center of violent
protests in recent weeks. District council leader Chris Whitbread says
the decision showed the government cannot ignore planning rules.
Speaker 4 (03:48):
We always knew.
Speaker 5 (03:49):
The Bell Hotel was the wrong location because of its
close proximity to schools and other parts of the community.
It was never going to work out. This is not
a victory today, This is ruling for common sense.
Speaker 1 (04:02):
With Bread success raises questions over the government's practice of
using hotels to house asylum seekers. Across the UK, the
Labor government's first year in office has seen illegal crossings
of the Channel rise to a new record high, stoking
public anger about controlling migration. Thousands of firefighters, aided by
(04:23):
soldiers and aircraft, are continuing to tackle wildfires across Spain,
although temperatures across the country have begun to drop in
recent days. Spain is still confronting one of the most
destructive fire seasons in recent decades. The fires have killed
four people and burned almost one five hundred square miles
of land, equivalent to an area more than twice the
(04:45):
size of London. The number of CEOs being forced out
of their jobs is on the rise and its expensive.
One analysis has found one hundred and thirty four CEOs
were pushed out last year in the Russell three thousand.
Bloomberg is consulted with compensation consultants, PR experts, and executive
search advisors to try and find the true cast of
(05:07):
firing a CEO. Bloomberg James Wilcock has more Get your
Calculators Out. Bloomberg estimates the median compensation for a forced
out US boss was six point two million dollars, the
sign on fee for their replacement another nine million. And
then there's the new higher pay packet. The one hundred
(05:28):
top earning CEOs accompanies with more than one billion dollars
in revenue are paid twenty two percent more than last year,
according to pay consultant Equila. That's a median of thirty
one million dollars, so factor in the millions in lawyers
plus payments to the rest of the board, and the
whole exercise is a lot more expensive than showing the
(05:50):
boss the way to the exit in London.
Speaker 4 (05:53):
James Wilcock, Bloomberg.
Speaker 1 (05:54):
Radio, those are your top stories on the markets we're watching.
The mscis specific and extend by one percent, and the
NIKA and Tokyo is one point six percent lower. The
Hangstang Tech Index mirroring the fall that we saw in
the Nasdak yesterday, down one point three percent. European Stock
Future is also pointing lower by seven tenths of one
percent this morning. The Bloomberg Dollar Spot Index is a
tent stronger, the Euro trading at one sixteen thirty four
(06:16):
and looking ahead to the Wall Street SETI and Nasdak
features are pointing lower by six tenths of one percent.
Speaker 4 (06:21):
Now in a moment, we'll dig into the.
Speaker 1 (06:23):
Tech stock sell off, plus bring you our reporting on
how over tourism and climate change in Southern Europe are
creating a dangerous feedback loop for economies there. But another
story I wanted to mention this morning, and a good
point raised by Bloomberg's James Tarmi watching children squabble is
annoying unless it's about inheritance, and then it turns out
(06:44):
its theater. So he's been watching about the upcoming Netflix
series about the Guinness family, set in the late nineteenth
century in Ireland and focusing on the four children of
Benjamin Guinness over the beer empire. Now, the difference to
the likes of Succession is that most of the kids
don't actually want to run the business.
Speaker 4 (07:00):
They just want the money chase, right.
Speaker 1 (07:02):
So this is coming at a time where there's increased
interest in the Guinness clan. There are also two nonfiction
books about them coming in the next few months. Very
interesting to see how the series turns out. That it's
created by Stephen Knight, a Pegy Blinders fame, so that
ought to put an interesting spin on this for a for.
Speaker 4 (07:22):
An audience viewing it around the world.
Speaker 1 (07:24):
I'm always curious that this as well, whether or not
they're going to get the accents right. I have to
say credit to the creators of the Sing Street musical
film that's recently been staged in London over this summer,
which I saw, which is essentially full of people with
accents like mine.
Speaker 4 (07:38):
And they did a great job, lots of them.
Speaker 1 (07:39):
I was very surprised to find out afterwards that they
weren't Irish. So I will be applying a similar level
of standard to this Netflix series coming up as well.
That's due out to be released next month. Something to
look forward to for your autumn culture calendar. Well, let's
dig into some of the bigger market moves that we
have seen today. Shares an aged joining the sell off
(08:01):
that we saw in Wall Street yesterday, the Nasdaq finished
one point four percent lower, futures pointing to further losses
at the open later on Wall Street. Our Markets Live
Executive editor Mark Cudmore joins me now for more. So, Mark,
is this investors realizing that valuations are stretched or are
we just looking at an August moment on markets?
Speaker 6 (08:20):
I think there's a whole host of issues. I think
there's a really ripe reason for tech to sell off.
I think we've got Jackson hole this weekend, where the
risk coming out of that is higher long end yields.
And because of the incredible capex cycle we've seen in AI,
their higher duration assets than they were before, so they're
more vulnerable to move in long end yields, and I
expect whatever happens within a week or two of Jackson
(08:43):
Hole will see higher long and yields because either Powell
falds to administration pressure, in which case you see a
twist deepening of the curve, or it pushes back against
administration pressure, in which case the administration will double down
next week, which will again alarm the back end of
the curve. So you're going to see AI suffer from
that that problem of higher long and yields. You do
have lofty valuations, you've got retail kind of trader seasonality.
(09:04):
This is the time of year where they step back
a bit August and September. Citadel came out with a
note about that last night. Of course, we've generally had
at the kind of the peak of the hype cycle
and AI relative to the impact cycle. It takes a
long time.
Speaker 4 (09:17):
To feature to protivity.
Speaker 6 (09:18):
As companies adopt AI, it's expensive to adopt those transformation,
so you get a dip in productivity. That moment. We've
got in video earnings next week, we've already priced in
to be an amazing beat. It will be an amazing beat.
Earning has been really good for all the AA companies.
We've had several weeks to price it in. For in Vidia,
it's more than fully priced in. So everyone's realizing it
can't really be a positive surprise. It can only be
a negative. I think we're saying some rotation because small
(09:40):
caps earnings been really good. We've got the threat of
chips taffs coming again from Trump. I'm not sure anyone
really believes that because he always say it's within two weeks,
but it might happen. And we've got the US administration
directly extracting revenues from companies. We've seen it, you know,
with both in Nvidia and AMD, and last week in
a little noticed comment from the White House, they said
they're looking to expand to other companies, let's say, direct
(10:00):
taking from revenues into the profit margin of companies. So
there's loads of reasons for our tech stocks un till off.
I'm an AI bill longer term, but you know, this
is the first time in a long while AI, I'm
very worried about.
Speaker 4 (10:11):
What is this Something that we need to get used to.
Speaker 1 (10:13):
Essentially, is that that there will be this long gap
that you're talking about between the investment and the productivity
gains coming through. So does it set us up for
a rough ride for these stocks of the coming months.
Speaker 6 (10:23):
Yes, So we have a j curve of productivity, which
is what we get in technology, which is as I said,
it's normally a dip in the short term as companies
realize they need to adopt this technology. And that's the
kind of phase we've gone into. Now everyone's kind of going,
oh right, we can't have our heads in the sand anymore. Ultimately,
I actually think AI will be transformative, and I think
it will be a massive global productivity boom and over
(10:43):
the coming years.
Speaker 4 (10:44):
I think it's the reason to be very bullish global stocks.
Speaker 6 (10:46):
But I think that the the evaluations of US megacap
techs have priced in just several problematic things. One accruing
almost all the benefits of this productivity boom accrueing them
very soon. You know, it's focused on very few stocks,
so I think, you know, and it's fully kind of priced.
So I think it's AI US AI tech sector in
(11:06):
particular that I'm worried about, and I think it's going
to be a problematic a few weeks ahead. As I said,
Jay Jackson, hall earnings in Nvidia, the chance of more
chip tariffs. Then we've got, of course the macro data
at the start of September, which is really going to
decide what the FED does. But they're in a quandary
because they're being forced by the administration to have too
easy policy relative to what economic orthodoxy would suggest. And
(11:29):
that just means that everyone believes the inflation problem is
going to get worse, which is already quite bad, and
that just means higher long and yields. And these companies
are higher duration assets because they spent so much on
the capex cycle, so they're yeah, they're really vulnerable in
the next month.
Speaker 1 (11:42):
Well, just in terms of Jackson Hole, I mean, there
are traders, you know, putting bats now on a bigger
than twenty five basis point cut in September. Do you
really think that Jerome pal is going to be able
to steer much in either direction on Friday.
Speaker 6 (11:54):
I think he'll try to keep his options open. That
the theme of the conference is about the labor market,
and I think if you look at the full title,
it tease it up to kind of talking about, Look, hey,
the labor market's cooling, but we're also seeing a decline
in supply, and that's why we're seeing not unemployment rate
not pick up, and everyone knows that you don't, you know,
tweak monetary policy to address a supply side problem that's
(12:14):
causing so so therefore, if you know there's a labor
market decline in the labor market supply because of the
crackdown immigration, well then cutting rates won't be the first
thing to fix it. And it's also not clear the
labor market's completely collapsing. Yeah, non from perils was disastrous,
but claims are still very very low. So I think
the labor market's very much cooling, but it's cooling for
a very hot level. Is it going off a cliff? No,
it doesn't seem like it. And meanwhile, inflation is very
(12:35):
very high, so you know what. I think the panell
knows that economic orthodoxy has said there's no way there
should be a cut next month, but he might feel
I kind of feel pressure to He won't be cutting
unless the data the start of September gives him the
cover to do so or I don't say that for
the whole committee. It's not just on him, but I
think enough committee members will feel the pressure and will
shift to a cut if the labor market data the
(12:57):
start of September is very weak, and inflation data a
few days later isn't very very problematic. I just don't
see that out coming happening, so I think it's going
to be very very hard to see September cut.
Speaker 1 (13:07):
Okay, Mark Kudmar, our Markets Live executive editor, thank you
very much for joining us and talking us through some
of what we're seeing on markets today.
Speaker 4 (13:16):
Stay with us.
Speaker 1 (13:17):
More from Bloomberg Daybreak Europe coming up after this. Firefighters
in Spain are continuing to battle several major wildfires in
the northwest and southwest of the country. Spain's Prime Minister
has called for a new response from the public and
private sector to what he describes as the climate emergency. Today,
Bloomberg's looking at how over tourism and climate change have
(13:38):
created dangerous feedback loop that threatens some of your Southern
Europe's economies are europe Climate reporter.
Speaker 4 (13:44):
Lara Milana is with us now for more. Lara, good morning.
Speaker 1 (13:47):
How is climate change shifting tourism patterns?
Speaker 4 (13:51):
Then in Southern Europe?
Speaker 7 (13:52):
So, Southern Europe, the European Mediterranean is warming very fast.
It's a climate hotspot for lots of reasons. And what
our story looks at today is that the tourism season
in the Mediterranean is getting longer. So tourists are not
just traveling in the traditional peak season of July and
(14:13):
August anymore to go to their beach holidays. They're traveling
also in April, May, June, September, October. So the tourism
season is getting longer. But actually what we're looking at
is the fact that the traditional peak months in some places,
in some hot spots for beach tourism and hot temperatures,
(14:36):
pig season is getting less busy, slightly less busy. And
then the other interesting thing that we found is that
even if the tourism season is getting longer, the weather
is becoming more unpredictable. So if you're traveling to the
Mediterranean for your beach holidays in May, you might see
extreme rain, for example. And the pig season is becoming
(14:56):
more unpredictable as well, because as you were seeing just
now seeing wildfires everywhere, heat waves obviously, and all sorts
of extreme weather events made wars by climate change.
Speaker 1 (15:08):
What does this shifting pattern, though, mean for the economies
that rely so heavily on tourism and also for the
environmental impact of visitor numbers.
Speaker 7 (15:19):
So for the economy, as we look at the numbers,
we see how I mean, the coronavirus pandemic obviously kept
everyone at home and there was a big deep in
tourism revenues for all of these countries who we're talking Portugal, Spain, France, Italy,
Greece all seeing huge deeps in tourism revenue after the
(15:42):
coronavirus pandemic. But what we've seen is that rebounding really
strongly over the past few years, So tourism GDP, We've
looked at tourism TDP, We've looked at tourism employment and
revenues from foreigners in all of these countries I just mentioned,
they've gone up, uh two levels higher than they were
(16:02):
before the pandemic. So from an economic point of view,
this is good for these economies that increased their you know,
employment and the revenue from foreigners. But actually when we
look at the environment, we see that these additional amounts
of tourisms we're talking millions of people here traveling to
(16:22):
these destinations which we're already crowded before the pandemic. Uh,
they're adding new pressures to the environment. So we're seeing
all of these places strange for water resources, especially because
the Mediterranean is becoming drier as it becomes hotter. We're
also seeing a struggle for powers, so we're seeing in
(16:43):
some places power cuts or power becoming more expensive. And
we're also seeing natural places, so you know, pristin beaches
and forests becoming crowded with people, more polluted, more noise,
and more danger of wildfires as well.
Speaker 1 (17:02):
So how are authorities then dealing with this tension.
Speaker 7 (17:06):
In the places that we've looked at, So this is
Ivisa in Spain, Alentejo in Portugal, and Trentino in Italy.
We're seeing very different approaches because the places we looked
at are difference. In Avisa, which is a traditional tourism
beach destination known for for clubbing as well, authorities are
(17:26):
i would say overwhelmed. They are trying to deal with
with the issue by promoting the the show what we
call the shoulder season, so the months right next to
the to the peak season to July and August. But
actually the results that we're seeing from these policies of
trying to balance it out and not have all the
(17:49):
pressures of over tourism happen in just two months, but
spread it out, it just means that more people are
coming in. So the amount of people that are choosing
not to travel in July and August does not compensate
the amount of people traveling in other months. So in short,
you have more tourism coming in more pressure. In Portugal,
(18:11):
we've seen a move where authorities and companies in the
sector try to move some of that tourism further north
to alleviate the pressures in places like in the south,
in the southern areas, and we've seen these same pressures
(18:32):
coming to the new places where they're trying to promote tourism.
So in sure that the problem is kind of moving
north with the tourism, and in Trentino in Italy that
trend is very nascent. So the other thing we've looked
at is people choosing not to go to the beach
(18:53):
but go to the mountains as they look for cool
weather and lower prices. But these problems are coming with
them as well. So we've seen sorry to s try
to do a range of measures from you know, limiting
cruise ships to imposing tourist taxes, but none of these
is really solving the core problem, which is over tourism
(19:14):
plus climate change, adding extreme pressure to places that were
already really pressured at break tourism.
Speaker 1 (19:22):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 8 (19:28):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 1 (19:34):
You can also listen live each morning on London Dab Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 8 (19:40):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepca.
Speaker 1 (19:49):
And I'm Stephen Carroll. Join us again tomorrow morning for
all the news you need to start your day right
here on Bloomberg day Break Europe
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