July 17, 2025 • 21 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Once again, President Donald Trump demonstrated his power to shake up global financial markets. This time, by returning to one of his favorite topics: whether to fire Federal Reserve Chair Jerome Powell.
(2) The US President said he would send letters to more than 150 countries notifying them their tariff rates could be 10% or 15% as he forges ahead with his trade agenda.
(3) JPMorgan Chase keeps putting more distance between itself and key rivals.The first half saw the bank’s market value surpass that of its three largest competitors — BofA, Citigroup and Wells Fargo — combined.
(4) Wall Street banks were optimistic Donald Trump’s second term would unleash a dealmaking boom. Instead, it’s delivered a trading bonanza.
(5) When Jon Cunliffe arrived at the Bank of England in 2013 he had a daunting task: implement the biggest ever clean-up of Britain’s banking system — designed in the wake of the financial crisis — to prevent highly leveraged lenders from collapsing. Tempted out of retirement in 2024, the 72-year-old has been asked to pull off a similar job, but this time as the architect of a reform package to fix the UK’s heavily indebted and wildly unpopular water industry
(6) Germany has rejected the European Commission’s €2 trillion ($2.3 trillion) budget proposal, hours after it was announced by European Commission President Ursula von der Leyen in Brussels.
(7) UK Prime Minister Keir Starmer and German Chancellor Friedrich Merz will sign a new Anglo-German treaty in London on Thursday that includes a commitment to assist each other in case of armed attack.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:10):
This is the Blueberg Day Bake Curt podcast, available every
morning on Apple, Spotify or wherever you listen. It's Thursday,
the seventeenth of July in London. I'm Caroline Hepka coming
up today. Markets are rattled as President Trump floats the
idea of firing Jerome Powell to lawmakers before denying he
has any plans to do so. Germany rejects that he
(00:30):
used two trillion euro proposed draft budget, calling plans for
a significant hike in spending unacceptable. Plus, can the man
who cleaned up Britain's banks fixed the country's wildly unpopular
and indebted water industry? We have a special report. Let's
start with a round up of our top stories. President
Trump is denying reports that he intends to fire a
(00:53):
Federal Reserve chair, Jerome Powell. That's after he is said
to have raised the idea in a closed door meeting
with congressional Republicans that was then leaked to the press. Separately,
The New York Times reported that Trump has a draft
of Powell's termination letter, which was shown to lawmakers during
the meeting. Bloomberg's Anne Marie Harderen put that claim directly
(01:16):
to the President in the Oval office.
Speaker 3 (01:19):
Large Republican lawmakers last night, no I talked about the
concept of fire, and I said, what do you think?
Speaker 4 (01:25):
Almost every one of them said I should. But I'm
more conservative than they are.
Speaker 2 (01:32):
President Trump added that while he doesn't rule anything out,
he's highly unlikely to remove Powell unless there is evidence
of fraud. In his words, The President then went on
to make a series of unfounded claims about fraud related
to the cost of renovating Federal reserve buildings in Washington. Now,
markets reacted sharply to the initial reports that Powell could
(01:54):
be axed. Stocks, the dollar, and long term US government
bonds all retreated, while short term treasuries rallied on speculation
that a new FED chair would cut interest rates. Those
moves were quickly unwound as Trump walked back the report,
but Bloomberg Economics says that they believe Trump is testing
the markets to see whether he can fire Powell, and
(02:17):
the sharp reaction appears to have convinced him to pull
back on the firing rhetoric for now. It's a message
echoed by Our Market's live stash is Mark Cranfield.
Speaker 4 (02:27):
The more it gets talked about, particularly by President Trump,
the more traders will have to take it seriously, and
you will probably see those odds start to increase. Now,
it may well be that Bloomberg Economics are right, that
Trump will be watching the market reaction, and if the
market reaction is not too severe, then maybe that is
the telling point that makes investors say, yes, this is
(02:50):
a real possibility, and it could happen sooner than later.
So everybody is watching the movements in the markets, the
pricing odds in the futures, and the betting man marckets
as well. You put all those together, and it's beginning
to look like a case of no smoke without a
bit of fire.
Speaker 2 (03:07):
Mark Cranfield, speaking there as Bloomberg Economics modeled what replacing
power with a more Dubvish chair could mean for the
US economy. While making certain assumptions. The model found that
removing the third chair could drive real USGDP down by
zero point six percentage points by the second quarter of
next year, with an unemployment rate close to five percent
(03:30):
and headline inflation CPI of around three percent. Well, President
Trump said that he would send letters to more than
one hundred and fifty countries, notifying them that their tariff
rate could be ten or fifteen percent. In an interview
with Real America's Voice broadcast later on Wednesday, Trump said
(03:52):
that the rate was going to be the same for
everyone for that group, Trump added that the trading partners
that would receive those letters were not big countries and
they don't do that much business. Asked about the prospect
of a deal with the European Union, well, the President
said that the US could make a deal possibly with Europe,
but that he's very indifferent to it. Let's think about
(04:16):
bank earnings too. Today JP Morgan is now worth more
than its three largest US rivals combined. The US lender
scored thirty billion dollars of profit in the first half
of the year, and it now has a trillion dollars
more in assets than any other US bank. It comes
as American banks posted record earnings performances, with Gold and
(04:38):
Sachs posting its best stock trading revenue in history. RBC
Capital Markets, head of US bank equity strategy, j Gerard Cassidy,
says you can put the record performance down to President
Trump's liberation Day.
Speaker 5 (04:52):
We have to remember that the markets Obviously, drive are
a major factor behind the and BANG trading revenues, and
increased volatility is good for trading. It's not as strong
for investment banking revenues, but for training you won volatility,
and we certainly had that at the start of the quarter.
Speaker 6 (05:15):
Well.
Speaker 2 (05:15):
To Cassidy's point, trading revenue at the five biggest banks
in the US hit seventy one billion dollars in the
first six months of the year, the most for that period.
Speaker 6 (05:25):
Ever.
Speaker 2 (05:26):
Opinions differed on whether it would last, though, with Goldman's
CEO David Solomon saying that the coming quarters wouldn't be
on the same scale, where as City Group CEO Jane
Fraser says that volatility will be a feature, not a bug,
of the new world order. Here In Europe, Germany has
rejected the European Commissions to trillion euro budget proposal just
(05:49):
hours after it was announced in Bussels. The seven year
plan is eight hundred billion euros larger than its predecessor,
as the block tries to fund support for European in companies.
EU Justice Commissioner Michael McGraw told Bloomberg Radio it will
be two years of tough negotiations ahead the EU.
Speaker 7 (06:09):
You have a lot of stakeholders who have the twenty
seven member states, you have the European Parliament, and it
is being framed and challenging circumstances with the capital repayments
on the COVID loans next generation EU beginning to be
repaid from twenty twenty eight, so that does place additional
pressure that could be twenty to twenty five billion euro
(06:30):
every year.
Speaker 6 (06:31):
So that's the first call on the budget as such.
Speaker 2 (06:34):
Former Ireland Finance Minister Michael McGraw there Germany's response to
the unveiling was to call any comprehensive increase in the
EU's budget unacceptable. Well, the UK and Germany are set
to sign a new treaty here in London today that
could include a commitment to assist each other in case
(06:55):
of armed attack. The ceremony comes as part of a
visit by the German Chancellor Friedrich Mertz to the UK.
Bloomberg's un Potts has more now.
Speaker 8 (07:05):
The UK's Prime Minister has previously talked of a wider
reset grounded in the new spirit of cooperation. A senior
German official has told Bloomberg today's mutual defense pledge is
a reaction both to an increasingly aggressive Russia and growing
concern among European allies about the US commitments to NATO
under President Trump. The news comes as BAE, Britain's biggest
(07:26):
defense suppliers, said it's speeding ahead with the development of
its next generation Tempest fighter jets, proving this competition in
the defense space, as well as cooperation in London. I'm
you and pots to Bloomberg Radio.
Speaker 2 (07:39):
Lastly, to some sports news now. Masters champion Rory McElroy
is back on home soil today for the starter of
Golf's Open Championship, which returns to Royal Port Rush for
the first time in six years. Today, he says he's
got a good opportunity to add a sixth major title
to his collection.
Speaker 9 (07:58):
I want to do my best this week, to enjoy
everything that comes my way, and enjoy the reaction of
the fans and enjoy being in front of them and
play in front of them. But at the same time,
I want to win this golf tournament and I feel
like I'm very capable of doing that.
Speaker 2 (08:12):
World Golf Number two will be McElroy speaking there. Island's
Shane Lowry lifted the Claret jug the last time the
tournament was held at the course in County Antrim. World
number one Scottish Shefflet is favorite for the title this year,
with three time major winner Padrick Harrington hitting the opening
tee shot. So that in the golf news end this morning.
(08:35):
Let's think about the markets though, in terms of the
volatile day that we had yesterday, the threats the independence
of the Fed. The dollar this morning is back to
some gains, but that was hit hard yesterday after the
florry of speculation then denial from President charm. The BlueBag
Dollar Spot index this morning is up by two tenths
(08:56):
of one percent. The VIX index also yesterday was above
nineteen given the repeated attacks on Powell. In terms of
treasury yields this morning, let's look to the tenure yields
which are almost two basis points at four forty seven.
The Feds Williams talking about the restrictive stance of the
Central Bank being entirely appropriate. Remember European stocks yesterday dropped
(09:19):
for a fourth session in a row, down six tents
of one percent. There were some major names hit yesterday
after results like Reno and ASML. Looking to Asia some gains,
mascih Pacific indexes up. Currently two tenths of one percent.
US stock futures are in the red right now. So
those are the markets. Well, in a moment we'll discuss
(09:40):
the threat to the fed's independence from political interference, and
also a special report on Thames Water and the man
being brought in to fix the UK's faltering water industry.
Speaker 6 (09:50):
But another story got.
Speaker 2 (09:52):
My attention this morning as I got up before the
bid men to be here in the studio. The era
of bragging about how little sleep you get as a
to executive is over.
Speaker 6 (10:01):
I must say I cheered at this.
Speaker 2 (10:03):
Kate Krader has been writing about the routines that CEOs
have for getting a good night's sleep, and this is
in Bloomberg Business Weeks. The CEO diet, Well, she has
Uber's CEO darakos Ushahi, pretty simple, get rid of the screens.
He says, he now falls asleep by reading Yes Wow,
a book.
Speaker 6 (10:22):
It's back. Also a long soak.
Speaker 2 (10:25):
Sam Caljioni, who is a founder of the craft brewer
Dogfish Head Craft Brewery, he apparently takes a half hour
long bath before going to bed. Daytime nappers are in
there too, writer Coco's co founder Michael Kerban and then
the estate agent to the rich and famous Rainy Williams,
(10:45):
who co founded Beverly Hills Estates. Her list is enormous
magnesium and zinc and an energy supplement and a long
skincare routine. Anyway, it's a really good read. So I'm
going to put a note and a link to that
article in our show notes. Kate's story gives you well
all of their financial vital statistics, none of the competition
(11:08):
about sleeping being for WIMPs. It's a really nice story today. Now,
President Trump took his pressure campaign against the Federal Reserve
chaired your Own Power to a new level yesterday, putting
markets into a short lived nosedive. Trump then denied a
plan to imminently acts Powell, but he didn't rule anything out.
Joining me now to discuss his Bloomberg's Markets Lives Shashi
(11:30):
is Mary Nicola, Mary Good Morning, Bloomberg Economic says that
President Trump is testing the markets to see whether he
can far the Fed chair.
Speaker 6 (11:39):
Well, what was the market reaction? In more detail? There's
been a lot of volatility. So obviously we.
Speaker 1 (11:45):
Saw that the US dollar was undermined, and then of
course that we saw a steeper US Treasury curve as
a result. So clearly the market is unhappy with some
of these noises. And as long as the idea continues
to get floated, I think that you'll still see a
reaction that negatively, because you're what he's essentially doing is
(12:06):
undermining the Fred's credibility. He's blurring the lines between fiscal
and monetary policy, and that continues to be a cornerstone
for the US. And so as long as these ideas
continue to get floated and the market reacts negatively, that's
that's going to be a key test for how long
(12:27):
this goes. Now, if you look at the polymarkets, the
polymarkets are only pricing in about a twenty percent chance
of the Powell leaving by twenty twenty five. But again,
it's going to start increasing if more of these noises
come through, and that's going to increase volatility and undermine
the dollar and steep in the yield curve.
Speaker 2 (12:48):
Okay, fed independence absolutely critical, says JP Morgan's Jamie Diamond.
Wall Street CEOs have been commenting on this situation. A
lot of them, what have they been saying?
Speaker 6 (12:59):
Yeah, absolutely, They've reiterated.
Speaker 1 (13:02):
Each one of them has said the same thing in
terms of talking about the importance of FED independence, FED
credibility and not blurrying those lines between monetary policy and
fiscal policy, and the fact that how important it is
for the FED to take action based on what.
Speaker 6 (13:21):
It's he's available.
Speaker 1 (13:22):
So we already heard from Fed William saying that current
policy is appropriate where it stands, and of course you've
had some CPI this week showing some bubblings and inflation,
so clearly there is an indication that they want to
take a more measured approach to policy, where as the administration,
the Trump administration clearly wants rates to move a lot
(13:45):
lower at a much faster pace than what the FED
is thinking. And of course there still is a lot
of uncertainty out there, so you don't know the risks,
the impact of tariffs that's really coming through. And then
of course you had an increase in fiscal spending as
result of the Big Beautiful Bill, so there's a few
pockets that are bubbling. And of course what these bank
(14:07):
CEOs are saying is just the importance of the FED
credibility at such a time.
Speaker 2 (14:13):
The other question is about whether the next FED president
influences the board, what are the risks around the FED
board being captured politically and the US ends up with
lower interest rates, which is what President Trump would like
to see. I mean, we already know that the process
to replace pal is underway and his term is up
in May next year.
Speaker 1 (14:34):
Yeah, but the problem is it's going to be policy mismanagement.
Speaker 6 (14:38):
So if you end up.
Speaker 1 (14:41):
Having inflation expectations un anchored, which is one of the
key jobs that the FED is doing, or having extremely
low rates when the economy is struggling along, absolutely fine,
and then there becomes an absolute mismanagement in the economy,
and that's where investors become really, really nervous and jitterly
and could actually exacerbate what some of the key themes
(15:03):
that we've seen were are the cracks and US exceptionalism
and also the Cell America theme that we've noticed since
the start of the year. So it's a really fine
and difficult line if that we start seeing that the
FED move in favor of political pressure rather than what
is really being asked for by the economy and what
(15:24):
needs to anchor growth and of course inflation.
Speaker 2 (15:28):
Okay, Mary, thank you so much for being with me
this morning. Very good to have you on the program
Bloomberg's Markets Live. Stratch is Mary Nicola. So I want
to turn to a story here in the UK, The
man who cleaned up Britain's banks, John Cunliff, is set
to reveal his plans to fix the country's wildly unpopular
and indebted water industry. Joining me now is Bloomberg's Priscilla
(15:49):
as a Vedo Rocca, who's been writing about this.
Speaker 6 (15:52):
Good morning, Priscilla.
Speaker 2 (15:54):
Look, firsty, can you just tell us now how bad
the crisis at Thames Water and really across the industry.
Speaker 10 (16:01):
Is In the UK, the crisis with Thames Water is
really bad. The companies in the process of renegotiating its
huge that file that by now it's nearing twenty billion.
Speaker 6 (16:13):
It's looking to inject equity.
Speaker 10 (16:15):
At the same time this has been dubbed, just to
give some perspective, this has been dubbed the biggest corporate
recapitalization in Britain's corporate history. So there's a lot of
will into making this work. The creditors of the company
which now actually own Names Water. They're negotiating a plan
with water regulator off what in the company itself and
(16:40):
the management of the company to do this recapitalization, but
they are asking for a lot of concessions and these discussions.
Speaker 6 (16:47):
Have been really heated.
Speaker 10 (16:49):
If they don't reach an agreement, there's a high risk
on the table that this company will fall into the
special administration regime, which is very similar to nationalization. The
stakes are very high at the moment.
Speaker 2 (17:02):
Yes, and also the stakes are high. And therefore when
he reads John connliff's career, when you know about his career,
he's held such a series of cedo roles, I mean
at the Bank of England, at the UK Treasury as
a government advisor over decades.
Speaker 6 (17:20):
What is his task now?
Speaker 10 (17:23):
That's right, he's a very seasoned civil servant and he's
been tasked by the UK government to look at the
current system and make the system work. So from day
one they excluded nationalization. They excluded changes to the current
price control mechanisms, which is established by the regulator that
(17:43):
sets up how much companies are allowed to spend and
invest in charge customers. So basically he was brought in
said Okay, this system is clearly not working.
Speaker 6 (17:54):
What can we do?
Speaker 10 (17:55):
What can we change to make it work without changing
how things are structured? And in this process in his
findings and throughout his travels and when he talked to
industry in his interim report, he indicated that he's looking
particularly at the role of regulators, which is very similar
(18:18):
to what he has done in the post financial crisis
prison with the banks to have more accountability. And he's
also honing in on the right type of investors for
the sector, and that means attracting people that want to
be there for a long time. They want lower returns,
they want the sector to be boring again compared to
(18:38):
what we have now, which are investors that have a
short time framework that they are looking to restrict returns
and that doesn't really work.
Speaker 6 (18:49):
For the sector.
Speaker 2 (18:51):
Okay, what is a utility. It should be a sort
of steady stream of income. I mean, critics have obviously
blamed privatization for and companies extract profits at what they
see is the expensive infrastructure. I mean, customers are going
to have to pay. This is partly the outcry over
Thames Water and why it's been so politically significant and
(19:15):
probably will stay that way.
Speaker 10 (19:18):
Yes, that's right, just not only Thames Waters, across the country.
Bills have gone up to a record high earlier this year.
In April. And the issue here is that we have very,
very old infrastructure that requires improvements. For years, we had
the political will to keep bill lower, to keep household
bills lower. There was this angle from the political side,
(19:40):
and at the same time we had investors that are
extracted hefty returns from being part of those companies, and
that combination has put us where we are now. So
we had years of underinvestment in a massive infrastructure that
requires huge improvements that is really really old. We had
what is considered now what the market is viewing as
(20:02):
the wrong type of investors for this type of assets
in lower bills, which is also the political angle to this.
Years of political will to keep bills lower, and we
got to this point where someone has to pay the
bills right at the end of the day. Improvements are
not free, and that combination has put us where we now.
(20:23):
Where we are now with climate change, with population growth,
with water needs rising, the UK regulator approved one hundred
and four billion of investment for all water companies combined
for the next five years period and that's the highest
ever in history, which gives you a little bit of
(20:44):
scope on how much is needed to improve the system.
Right and we got to a point where we have
all these three factors against it. So this bill comes
at the end of the day, is not free.
Speaker 6 (20:57):
This is Bloomberg Daybreak Europe.
Speaker 3 (20:58):
Your morning brief on this stories making news from London
to Wall Street and beyond.
Speaker 2 (21:03):
Look for us on your podcast feed every morning on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 3 (21:09):
You can also listen live each morning on London Dab Radio,
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Speaker 2 (21:15):
Our flagship New York station, is also available on your
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Speaker 6 (21:22):
I'm Caroline Hepka and I'm Stephen Carroll.
Speaker 3 (21:25):
Join us again tomorrow morning for all the news you
need to start your day right here on Bloomberg Daybreak Europe.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:10):
This is the Blueberg Day Bake Curt podcast, available every
morning on Apple, Spotify or wherever you listen. It's Thursday,
the seventeenth of July in London. I'm Caroline Hepka coming
up today. Markets are rattled as President Trump floats the
idea of firing Jerome Powell to lawmakers before denying he
has any plans to do so. Germany rejects that he
(00:30):
used two trillion euro proposed draft budget, calling plans for
a significant hike in spending unacceptable. Plus, can the man
who cleaned up Britain's banks fixed the country's wildly unpopular
and indebted water industry? We have a special report. Let's
start with a round up of our top stories. President
Trump is denying reports that he intends to fire a
(00:53):
Federal Reserve chair, Jerome Powell. That's after he is said
to have raised the idea in a closed door meeting
with congressional Republicans that was then leaked to the press. Separately,
The New York Times reported that Trump has a draft
of Powell's termination letter, which was shown to lawmakers during
the meeting. Bloomberg's Anne Marie Harderen put that claim directly
(01:16):
to the President in the Oval office.
Speaker 3 (01:19):
Large Republican lawmakers last night, no I talked about the
concept of fire, and I said, what do you think?
Speaker 4 (01:25):
Almost every one of them said I should. But I'm
more conservative than they are.
Speaker 2 (01:32):
President Trump added that while he doesn't rule anything out,
he's highly unlikely to remove Powell unless there is evidence
of fraud. In his words, The President then went on
to make a series of unfounded claims about fraud related
to the cost of renovating Federal reserve buildings in Washington. Now,
markets reacted sharply to the initial reports that Powell could
(01:54):
be axed. Stocks, the dollar, and long term US government
bonds all retreated, while short term treasuries rallied on speculation
that a new FED chair would cut interest rates. Those
moves were quickly unwound as Trump walked back the report,
but Bloomberg Economics says that they believe Trump is testing
the markets to see whether he can fire Powell, and
(02:17):
the sharp reaction appears to have convinced him to pull
back on the firing rhetoric for now. It's a message
echoed by Our Market's live stash is Mark Cranfield.
Speaker 4 (02:27):
The more it gets talked about, particularly by President Trump,
the more traders will have to take it seriously, and
you will probably see those odds start to increase. Now,
it may well be that Bloomberg Economics are right, that
Trump will be watching the market reaction, and if the
market reaction is not too severe, then maybe that is
the telling point that makes investors say, yes, this is
(02:50):
a real possibility, and it could happen sooner than later.
So everybody is watching the movements in the markets, the
pricing odds in the futures, and the betting man marckets
as well. You put all those together, and it's beginning
to look like a case of no smoke without a
bit of fire.
Speaker 2 (03:07):
Mark Cranfield, speaking there as Bloomberg Economics modeled what replacing
power with a more Dubvish chair could mean for the
US economy. While making certain assumptions. The model found that
removing the third chair could drive real USGDP down by
zero point six percentage points by the second quarter of
next year, with an unemployment rate close to five percent
(03:30):
and headline inflation CPI of around three percent. Well, President
Trump said that he would send letters to more than
one hundred and fifty countries, notifying them that their tariff
rate could be ten or fifteen percent. In an interview
with Real America's Voice broadcast later on Wednesday, Trump said
(03:52):
that the rate was going to be the same for
everyone for that group, Trump added that the trading partners
that would receive those letters were not big countries and
they don't do that much business. Asked about the prospect
of a deal with the European Union, well, the President
said that the US could make a deal possibly with Europe,
but that he's very indifferent to it. Let's think about
(04:16):
bank earnings too. Today JP Morgan is now worth more
than its three largest US rivals combined. The US lender
scored thirty billion dollars of profit in the first half
of the year, and it now has a trillion dollars
more in assets than any other US bank. It comes
as American banks posted record earnings performances, with Gold and
(04:38):
Sachs posting its best stock trading revenue in history. RBC
Capital Markets, head of US bank equity strategy, j Gerard Cassidy,
says you can put the record performance down to President
Trump's liberation Day.
Speaker 5 (04:52):
We have to remember that the markets Obviously, drive are
a major factor behind the and BANG trading revenues, and
increased volatility is good for trading. It's not as strong
for investment banking revenues, but for training you won volatility,
and we certainly had that at the start of the quarter.
Speaker 6 (05:15):
Well.
Speaker 2 (05:15):
To Cassidy's point, trading revenue at the five biggest banks
in the US hit seventy one billion dollars in the
first six months of the year, the most for that period.
Speaker 6 (05:25):
Ever.
Speaker 2 (05:26):
Opinions differed on whether it would last, though, with Goldman's
CEO David Solomon saying that the coming quarters wouldn't be
on the same scale, where as City Group CEO Jane
Fraser says that volatility will be a feature, not a bug,
of the new world order. Here In Europe, Germany has
rejected the European Commissions to trillion euro budget proposal just
(05:49):
hours after it was announced in Bussels. The seven year
plan is eight hundred billion euros larger than its predecessor,
as the block tries to fund support for European in companies.
EU Justice Commissioner Michael McGraw told Bloomberg Radio it will
be two years of tough negotiations ahead the EU.
Speaker 7 (06:09):
You have a lot of stakeholders who have the twenty
seven member states, you have the European Parliament, and it
is being framed and challenging circumstances with the capital repayments
on the COVID loans next generation EU beginning to be
repaid from twenty twenty eight, so that does place additional
pressure that could be twenty to twenty five billion euro
(06:30):
every year.
Speaker 6 (06:31):
So that's the first call on the budget as such.
Speaker 2 (06:34):
Former Ireland Finance Minister Michael McGraw there Germany's response to
the unveiling was to call any comprehensive increase in the
EU's budget unacceptable. Well, the UK and Germany are set
to sign a new treaty here in London today that
could include a commitment to assist each other in case
(06:55):
of armed attack. The ceremony comes as part of a
visit by the German Chancellor Friedrich Mertz to the UK.
Bloomberg's un Potts has more now.
Speaker 8 (07:05):
The UK's Prime Minister has previously talked of a wider
reset grounded in the new spirit of cooperation. A senior
German official has told Bloomberg today's mutual defense pledge is
a reaction both to an increasingly aggressive Russia and growing
concern among European allies about the US commitments to NATO
under President Trump. The news comes as BAE, Britain's biggest
(07:26):
defense suppliers, said it's speeding ahead with the development of
its next generation Tempest fighter jets, proving this competition in
the defense space, as well as cooperation in London. I'm
you and pots to Bloomberg Radio.
Speaker 2 (07:39):
Lastly, to some sports news now. Masters champion Rory McElroy
is back on home soil today for the starter of
Golf's Open Championship, which returns to Royal Port Rush for
the first time in six years. Today, he says he's
got a good opportunity to add a sixth major title
to his collection.
Speaker 9 (07:58):
I want to do my best this week, to enjoy
everything that comes my way, and enjoy the reaction of
the fans and enjoy being in front of them and
play in front of them. But at the same time,
I want to win this golf tournament and I feel
like I'm very capable of doing that.
Speaker 2 (08:12):
World Golf Number two will be McElroy speaking there. Island's
Shane Lowry lifted the Claret jug the last time the
tournament was held at the course in County Antrim. World
number one Scottish Shefflet is favorite for the title this year,
with three time major winner Padrick Harrington hitting the opening
tee shot. So that in the golf news end this morning.
(08:35):
Let's think about the markets though, in terms of the
volatile day that we had yesterday, the threats the independence
of the Fed. The dollar this morning is back to
some gains, but that was hit hard yesterday after the
florry of speculation then denial from President charm. The BlueBag
Dollar Spot index this morning is up by two tenths
(08:56):
of one percent. The VIX index also yesterday was above
nineteen given the repeated attacks on Powell. In terms of
treasury yields this morning, let's look to the tenure yields
which are almost two basis points at four forty seven.
The Feds Williams talking about the restrictive stance of the
Central Bank being entirely appropriate. Remember European stocks yesterday dropped
(09:19):
for a fourth session in a row, down six tents
of one percent. There were some major names hit yesterday
after results like Reno and ASML. Looking to Asia some gains,
mascih Pacific indexes up. Currently two tenths of one percent.
US stock futures are in the red right now. So
those are the markets. Well, in a moment we'll discuss
(09:40):
the threat to the fed's independence from political interference, and
also a special report on Thames Water and the man
being brought in to fix the UK's faltering water industry.
Speaker 6 (09:50):
But another story got.
Speaker 2 (09:52):
My attention this morning as I got up before the
bid men to be here in the studio. The era
of bragging about how little sleep you get as a
to executive is over.
Speaker 6 (10:01):
I must say I cheered at this.
Speaker 2 (10:03):
Kate Krader has been writing about the routines that CEOs
have for getting a good night's sleep, and this is
in Bloomberg Business Weeks. The CEO diet, Well, she has
Uber's CEO darakos Ushahi, pretty simple, get rid of the screens.
He says, he now falls asleep by reading Yes Wow,
a book.
Speaker 6 (10:22):
It's back. Also a long soak.
Speaker 2 (10:25):
Sam Caljioni, who is a founder of the craft brewer
Dogfish Head Craft Brewery, he apparently takes a half hour
long bath before going to bed. Daytime nappers are in
there too, writer Coco's co founder Michael Kerban and then
the estate agent to the rich and famous Rainy Williams,
(10:45):
who co founded Beverly Hills Estates. Her list is enormous
magnesium and zinc and an energy supplement and a long
skincare routine. Anyway, it's a really good read. So I'm
going to put a note and a link to that
article in our show notes. Kate's story gives you well
all of their financial vital statistics, none of the competition
(11:08):
about sleeping being for WIMPs. It's a really nice story today. Now,
President Trump took his pressure campaign against the Federal Reserve
chaired your Own Power to a new level yesterday, putting
markets into a short lived nosedive. Trump then denied a
plan to imminently acts Powell, but he didn't rule anything out.
Joining me now to discuss his Bloomberg's Markets Lives Shashi
(11:30):
is Mary Nicola, Mary Good Morning, Bloomberg Economic says that
President Trump is testing the markets to see whether he
can far the Fed chair.
Speaker 6 (11:39):
Well, what was the market reaction? In more detail? There's
been a lot of volatility. So obviously we.
Speaker 1 (11:45):
Saw that the US dollar was undermined, and then of
course that we saw a steeper US Treasury curve as
a result. So clearly the market is unhappy with some
of these noises. And as long as the idea continues
to get floated, I think that you'll still see a
reaction that negatively, because you're what he's essentially doing is
(12:06):
undermining the Fred's credibility. He's blurring the lines between fiscal
and monetary policy, and that continues to be a cornerstone
for the US. And so as long as these ideas
continue to get floated and the market reacts negatively, that's
that's going to be a key test for how long
(12:27):
this goes. Now, if you look at the polymarkets, the
polymarkets are only pricing in about a twenty percent chance
of the Powell leaving by twenty twenty five. But again,
it's going to start increasing if more of these noises
come through, and that's going to increase volatility and undermine
the dollar and steep in the yield curve.
Speaker 2 (12:48):
Okay, fed independence absolutely critical, says JP Morgan's Jamie Diamond.
Wall Street CEOs have been commenting on this situation. A
lot of them, what have they been saying?
Speaker 6 (12:59):
Yeah, absolutely, They've reiterated.
Speaker 1 (13:02):
Each one of them has said the same thing in
terms of talking about the importance of FED independence, FED
credibility and not blurrying those lines between monetary policy and
fiscal policy, and the fact that how important it is
for the FED to take action based on what.
Speaker 6 (13:21):
It's he's available.
Speaker 1 (13:22):
So we already heard from Fed William saying that current
policy is appropriate where it stands, and of course you've
had some CPI this week showing some bubblings and inflation,
so clearly there is an indication that they want to
take a more measured approach to policy, where as the administration,
the Trump administration clearly wants rates to move a lot
(13:45):
lower at a much faster pace than what the FED
is thinking. And of course there still is a lot
of uncertainty out there, so you don't know the risks,
the impact of tariffs that's really coming through. And then
of course you had an increase in fiscal spending as
result of the Big Beautiful Bill, so there's a few
pockets that are bubbling. And of course what these bank
(14:07):
CEOs are saying is just the importance of the FED
credibility at such a time.
Speaker 2 (14:13):
The other question is about whether the next FED president
influences the board, what are the risks around the FED
board being captured politically and the US ends up with
lower interest rates, which is what President Trump would like
to see. I mean, we already know that the process
to replace pal is underway and his term is up
in May next year.
Speaker 1 (14:34):
Yeah, but the problem is it's going to be policy mismanagement.
Speaker 6 (14:38):
So if you end up.
Speaker 1 (14:41):
Having inflation expectations un anchored, which is one of the
key jobs that the FED is doing, or having extremely
low rates when the economy is struggling along, absolutely fine,
and then there becomes an absolute mismanagement in the economy,
and that's where investors become really, really nervous and jitterly
and could actually exacerbate what some of the key themes
(15:03):
that we've seen were are the cracks and US exceptionalism
and also the Cell America theme that we've noticed since
the start of the year. So it's a really fine
and difficult line if that we start seeing that the
FED move in favor of political pressure rather than what
is really being asked for by the economy and what
(15:24):
needs to anchor growth and of course inflation.
Speaker 2 (15:28):
Okay, Mary, thank you so much for being with me
this morning. Very good to have you on the program
Bloomberg's Markets Live. Stratch is Mary Nicola. So I want
to turn to a story here in the UK, The
man who cleaned up Britain's banks, John Cunliff, is set
to reveal his plans to fix the country's wildly unpopular
and indebted water industry. Joining me now is Bloomberg's Priscilla
(15:49):
as a Vedo Rocca, who's been writing about this.
Speaker 6 (15:52):
Good morning, Priscilla.
Speaker 2 (15:54):
Look, firsty, can you just tell us now how bad
the crisis at Thames Water and really across the industry.
Speaker 10 (16:01):
Is In the UK, the crisis with Thames Water is
really bad. The companies in the process of renegotiating its
huge that file that by now it's nearing twenty billion.
Speaker 6 (16:13):
It's looking to inject equity.
Speaker 10 (16:15):
At the same time this has been dubbed, just to
give some perspective, this has been dubbed the biggest corporate
recapitalization in Britain's corporate history. So there's a lot of
will into making this work. The creditors of the company
which now actually own Names Water. They're negotiating a plan
with water regulator off what in the company itself and
(16:40):
the management of the company to do this recapitalization, but
they are asking for a lot of concessions and these discussions.
Speaker 6 (16:47):
Have been really heated.
Speaker 10 (16:49):
If they don't reach an agreement, there's a high risk
on the table that this company will fall into the
special administration regime, which is very similar to nationalization. The
stakes are very high at the moment.
Speaker 2 (17:02):
Yes, and also the stakes are high. And therefore when
he reads John connliff's career, when you know about his career,
he's held such a series of cedo roles, I mean
at the Bank of England, at the UK Treasury as
a government advisor over decades.
Speaker 6 (17:20):
What is his task now?
Speaker 10 (17:23):
That's right, he's a very seasoned civil servant and he's
been tasked by the UK government to look at the
current system and make the system work. So from day
one they excluded nationalization. They excluded changes to the current
price control mechanisms, which is established by the regulator that
(17:43):
sets up how much companies are allowed to spend and
invest in charge customers. So basically he was brought in
said Okay, this system is clearly not working.
Speaker 6 (17:54):
What can we do?
Speaker 10 (17:55):
What can we change to make it work without changing
how things are structured? And in this process in his
findings and throughout his travels and when he talked to
industry in his interim report, he indicated that he's looking
particularly at the role of regulators, which is very similar
(18:18):
to what he has done in the post financial crisis
prison with the banks to have more accountability. And he's
also honing in on the right type of investors for
the sector, and that means attracting people that want to
be there for a long time. They want lower returns,
they want the sector to be boring again compared to
(18:38):
what we have now, which are investors that have a
short time framework that they are looking to restrict returns
and that doesn't really work.
Speaker 6 (18:49):
For the sector.
Speaker 2 (18:51):
Okay, what is a utility. It should be a sort
of steady stream of income. I mean, critics have obviously
blamed privatization for and companies extract profits at what they
see is the expensive infrastructure. I mean, customers are going
to have to pay. This is partly the outcry over
Thames Water and why it's been so politically significant and
(19:15):
probably will stay that way.
Speaker 10 (19:18):
Yes, that's right, just not only Thames Waters, across the country.
Bills have gone up to a record high earlier this year.
In April. And the issue here is that we have very,
very old infrastructure that requires improvements. For years, we had
the political will to keep bill lower, to keep household
bills lower. There was this angle from the political side,
(19:40):
and at the same time we had investors that are
extracted hefty returns from being part of those companies, and
that combination has put us where we are now. So
we had years of underinvestment in a massive infrastructure that
requires huge improvements that is really really old. We had
what is considered now what the market is viewing as
(20:02):
the wrong type of investors for this type of assets
in lower bills, which is also the political angle to this.
Years of political will to keep bills lower, and we
got to this point where someone has to pay the
bills right at the end of the day. Improvements are
not free, and that combination has put us where we now.
(20:23):
Where we are now with climate change, with population growth,
with water needs rising, the UK regulator approved one hundred
and four billion of investment for all water companies combined
for the next five years period and that's the highest
ever in history, which gives you a little bit of
(20:44):
scope on how much is needed to improve the system.
Right and we got to a point where we have
all these three factors against it. So this bill comes
at the end of the day, is not free.
Speaker 6 (20:57):
This is Bloomberg Daybreak Europe.
Speaker 3 (20:58):
Your morning brief on this stories making news from London
to Wall Street and beyond.
Speaker 2 (21:03):
Look for us on your podcast feed every morning on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 3 (21:09):
You can also listen live each morning on London Dab Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 2 (21:15):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
Speaker 6 (21:22):
I'm Caroline Hepka and I'm Stephen Carroll.
Speaker 3 (21:25):
Join us again tomorrow morning for all the news you
need to start your day right here on Bloomberg Daybreak Europe.
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