Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Daymake You at podcast, available every morning on Apple, Spotify or wherever you listen. It's Wednesday, the fourteenth of August. Team in London. I'm Caroline Hitkat.
And I'm Stephen Carroll coming up today. UBS reports blockbuster results as profits beat estimates and inflows hit twenty seven billion dollars.
Goldman Sachs and JP Morgan say markets are now pricing in high odds of a US recession.
Plus the letter of the law. US authorities consider a push to break up alphabets Google after a landmark competition ruling.
Let's start with a roundup of our top stories.
The Swiss banking giant UBS has reported double the profits expected on the second quarter. Net income at the bank came in at one point one billion dollars versus estimates of five hundred and twenty million. UBS's key wealth management business are strong client inflows, with twenty seven billion dollars in net new assets in the period. A year after completing the takeover of Credit Suite, the bank says it's
on track for pre merger levels of profitability. UBS also says it expects to book another one point one billion dollars and integration related expenses in the third quarter. It's still planning up to a billion dollars in share buybacks this year.
Wall Street Banks, JP Morgan and Goldman Sachs say that the markets are pricing in HAGH odds of a US recession. The calculations come in the wake of a sell off, which briefly sparked fears across markets last week. Barta Manthi Exty statistic City Group agrees. She says the evidence is pointing towards an economic downturn, so.
We indeed, one of a few brokers we have a recession penciled in for this and next quarter out of the US, so we think the slowdown in the data is much stronger than.
It looks like city groups are to Manthi. There speaking to Bloomberg Radio, Goldman Sachs says that together equity and bond markets are seeing a forty one percent probability of a US recession. That's up from twenty nine percent in April. The jump is being driven by market wages on a more aggressive pace of rate cuts from the FED and
the lagging performance of stocks. JP Morgan has a similar model. Meanwhile, the Atlanta Fed president Raphael Bostik says that he's still looking for a little more data before supporting a reduction in interest rates from the US Central Bank.
The former JP Morgan strastus, who departure sent shockwaves across Wall Street, has resurfaced on social media. It's the first time we've heard from Marko Kolanovitch since his exit in July. Bloombrooks twa Adebayo has the story.
Once hailed as one of Wall Street's last remaining bears, Marko Kolanovich made his name with stark warnings about stock slumps and volatility blow ups.
S below twenty fifteen or call it twenty thirty to twenty fifty range. And why I'm mentioning that range because basically at that point, momentum turns negative and point also option positioning will result into some outlaws outross some equities.
Kalanovitch they're speaking to Bloomberg back in twenty eighteen, but when his more recent pessimistic views failed to materialize, the strategist once called Gandalf parted ways with JP Morgan after
nineteen years. The abrupt change led many investors to wonder if his exit foreshadowed a market top, comparing him to Charles Cloff, who famously left Merrill Lynch in nineteen ninety nine after maintaining his bearish stance before the dot com bubble pop. Now, Kalanovich is back, armed with a fresh social media handle and a new downbeat take, predicting increasing bankruptcies and credit card delinquencies in London tiwa ad Abio Bloomberg Radio.
The Justice Apartment is considering a breakup of alphabets Google. We're told that it's one of the options being looked at after a federal court found Google monopolized the online search market. Who is Bloomberg's antitrust reporter Leah Nylen.
The Justice Department is supposed to come up with a plan for how it would resolve the alleged illegal conduct by Google. Last week at federal judge found that they had monopolized the markets for online search and also search text dads. Those are the ones that appear at the top of the search results whenever you Google for something, and so the Justice Department is mulling a bunch of possibilities, but sources tell us that a breakup is definitely on the table.
Bloomberg's Leah Nylon the move would be Washington's first attempt at dismantling a company for illegal monopolization since efforts to break up Microsoft two decades ago. Shares of Apple were down as much as two percent in late trading.
Ukraine's president Vajemya Zelenski has tasked his top commander with working on next steps as the army continues its encouragion into Russian territory. The surprise military offensive has changed the narrative around the war, which has what some had seen ending in Ukraine inevitable loss. Now, three people close to Russia's defense ministry tell Bloomberg the Kremlin is struggling to
recruit enough new fighters. The sources say regional officials are missing more than a third of their recruitment Quotas Russia's president Vladimir Putin has vowed to secure his country's borders, Ukraine's Foreign Ministry spokesperson Gyorghi Tiki says they're not interested in keeping the land.
Sure this could be situe.
Ukraine controls about one thousand square kilometers in this operation. I can also emphasize here unlike Russia, Ukraine does not need other people's territory. Ukraine is not interested in taking over the territory of the Curse region, but we want to protect the lives of our people.
Yorgi Tiki from the Ukraine Foreign Ministry.
There.
Western allies have so far given their blessing to the use of donated weapons inside Russian territory.
The US has approved the sale of up to fifty f fifteen fighter jets to Israel in a deal valued more than twenty billion dollars. The pack sends a message that weapons will continue to flow to the state even as it continues its war in Gaza. The Bowing jets are not expected to be delivered to Israel until twenty twenty nine at the earliest. Senior fellow at the Carnegie Endowment for International Peace, Aaron David Miller, says that the region is now at risk of falling into a multi front war.
At some point the Iranians and his baller are going to respond.
The only hope to avert a major escalation is a ceasefire deal, and I just don't see it coming.
Together right now. Aaron David Miller there a former Middle East peace negotiator for the US. He added his best hope was that by November there could be a six week ceasepar. The war in the Middle East has increasingly weighed in US electoral politics, with Republicans accusing the government of not doing enough to help Israel.
Suspected attempts by Iranian hackers to infiltrate US presidential campaigns have touched off a widening federal investigation into election interference. Investigators believe that attackers tied to Iran hacked into Republican nominee Donald Trump's campaign and gained access to internal documents. Sources who spoke to Bloomberg also say the intruders tried to breach the campaigns of Vice President Kamala Harris and President Joe Biden. However, it's unclear if those attempts succeeded.
In a moment, we're bringing more details and those results from UBS plus look ahead to today's US inflation data. But just a word on another story that caught her eye this morning. Bloomberg City Lab columnist Julia Hobsbond's when writing about Manchester having a moment, and this is partly about the power of local government, a very hot debate
here in the UK. Pe doicument. It comes to planning, for example, but also about the ambitions for the city to become a fifteen minute city, you know, improve transport, more walking involved, building more houses, redeveloping offices.
I think the interplay between the Metro mays in the UK, including Andy Burnham in charge of macheson surrounding areas, and the Labor government obviously a lot of the Metro well, the majority of the Metro mayors are now also labor leading, is going to be so interesting. And Julia, I think
writing about about Manchester is also kind of fascinating. I mean, when we were up there for the political party conference season up in Manchester, that feeling of that of kind of regeneration and rebirth was really evident, and the fifteen minute city was absolutely at the forefront of people's mind. So I really like the column that she's written, of course for Blueberg's City Lab when home building is such a hot button issue.
Well, let's go to our top story now. And those second quarter results from UBS analysts had been focused on performance of the wealth management division and how quickly the Swiss Bank is winding down its non core legacy units. We've got our EMEA Managing editor for Finance and Investing, Tom Metcalf with us for more. Morning, Tom, just take us to the headline numbers from UBS. How did the bank perform in this quarter?
Yeah, good morning. Look at first, blush, this looked like a pretty solid set of results. I mean, the number that stands out for me is in that wealth management business, So they had twenty seven billion dollars of inflows client inflows, and that is a very strong sign of people, you know, buying into the franchise, and obviously those are the core clients for UBS. You know, very very rich people. It's
the place where they want to put their money. So that's very strong, and you know, it's hard to you know, the profit really be estimates, but it's a bit difficult to unpick that in terms of, you know, the operational side because basically what's happened is Credit Swiss is fully integrated, so you know, you will see jumps in revenue and
stuff stuff like that. But the other thing that they're trying to integrate is obviously Credit Swiss and the fact that they've managed to i think cut their legacy or non care assets for something like forty two percent since the year before goes to speak. I think to you know, this message that hey, we are integrating, we are moving forward.
And certainly as I look at the you know, these results as they come out, it does look like they are just executing on that, and it's probably what shareholders really want to see. They want to see, you know, clients coming in, and also they want to make sure that that credit Swiss business is incorporated and effect starts to deliver like the UBS business has.
Yeah, that's very interesting, isn't it. What's the bank also saying then about the future and about the third quarter.
Yeah, it's of a few interesting signs. It look at like most bankers at SEN, hey we expect volatility in the third quarter. Now, look that might not necessarily be bad news for banks like UBS. So their equities traders, for example, did fantastic well this quarter, and that's normally helped by volatility. One of the things they did say was they asked continuously clients kind of shift, as you'd expect,
into higher interest products. So that may well put pressure on the margins, but you know, then again, when you got twenty seven billion dollars coming in, you can probably find ways to still make money.
Under credits to ease point is to say, integration progressing, although another one point one billion dollars of expenses being flagged in the third quarter as well. Where is UBS in this process?
Yeah, it seems like they're on track. I mean, I think they've sort of guided this year very much one of those years of bringing the IT systems together, bringing all the legal things into one, and that does involve a lot of costs. I think what they're doing good job of is very well flagging what those costs are
going to be. So at one point one billion you mentioned, you know, that won't hopefully come as a surprise to people next quarter, to us, And Yeah, for me, it just seems like a so far as solid execution story. And I think, you know, I know, we've got a Matti coming on TV, the CEO of UBS, in a bit, and I'm sure he'll be probably striking quite a sort of a brilliant tone.
Yeah, absolutely, fully across the schedule. Then for this morning, in terms of the buyback, how important a story is that amidst all of this, I mean, as you say, quite rosy news.
Yeah, exactly. So they're sort of reaffirming what they said last quarter. Look, we will do this one billion sort of buyback this year, and they've said we'll look to do about two billion by the end of next So again that message, hey, we're on track, that we're trying to make no surprises here, and that was interesting for me that, you know, this buyback had been well communicated, but there was chatter sort of among analysts among she hells, hey, are they going to sort of give us some comfort
around that, because obviously what we've seen in recent months is real ding dong with the Swiss regulators. Yes, the Swiss regulator saying hey, maybe you need to put up more capital, and we're talking like, you know, billions. I think some of the rangers given and go as high as twenty five billion, which would be very drastic. So we fascinated see how that plays out. I've only been
able to sort of scan the results. I didn't see any mention of that, which is probably good tactics from UBS, right, like keep a low profile and hopefully resolve all that behind closed doors.
Okay, Tom Metca for our EMEA Managing editor of for Finance and Investing, thank you.
Now.
The Atlanta FED person Raphael Bostick has said that he's looking for a little more data before supporting a reduction in interest rates. This ahead of today's US CPI print for July, Bloomberg Economics expects a headline reading of two point nine percent, a slight slowdown from June's reading. Our executive editor for Asia Markets, Paul Dobson, joins us now for more on this. Paul, good morning, Good to have
you with us. What are the expectations then for the CPI print, which comes after, of course that softer producer price inflation data that can came out yesterday.
The way that you just phrased it is right. The market was already looking for a slowdown in CPI in the data even before we got the PPI figures yesterday, and that will only have given people more firm conviction that the likelihood is that it will be a number on the softer side, and that should give people more encouragement that the Fed will be able to move closer
to cutting interest rates in the near future. I think that what was interesting in the PPI numbers wasn't just that the headline number was below expectations, but also some of the input statistics, particularly the ones that the Fed concentrates on when it's thinking about its own favorite inflation measure. The court measures of CPI and the core PCE in particular were also lower. So basically the market took some
encourage from that. We saw, on the one hand, lower treasury yields and also a weaker dollar as a consequence of that. Inequities on the other hand liked it pushing higher across the board.
And the question of the risks of a US recession, we've seen Goldman and JP Morgan you know, looking at in their models that increased probability of that happening. How do those perceptions feed into markets, you know, the cpipin of course being part of that, and in Asia where you are, but where some of the greatest term al we're seen in the last week.
The question here is whether the fedken engineer a soft landing, or whether the economy is slowing faster than it expected and it's going to be something more ugly when we hit the ground. So far, the market is probably pricing
in the more benevolent of those scenarios. Is looking for, you know, the FED to kick off cutting interest rates, most likely with one cut in September, with the possibility of two cuts in September and then a couple more by the end of the year probably, And you know, that's as seen as the kind of a glide path rather than a slamming on of the bright in order to lower interest rates without having to panic or anything like that. Now, the thing is, it's that labor data, right,
which is the problem. Was it was a lower than expected figure that we saw at the start of this month, and that set hearts racing somewhat about the possibility that actually, you know, the FED is moving too late or too slow, and that the US economy is already slowing much faster, you know, at at a much more worrying pace. And if that's the case, then maybe the Fed will need to cut interest rates much more aggressively.
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