Good morning.
I'm Nathan Hager and I'm Amy Morris. Here are the stories we're following today.
We begin here in the US, where Moody's Investor Services lowered the credit ratings for ten small and mid sized lenders, and it also says bigger banks may face downgrades as well. Bloomberg's Valerie Titel has more on the reasons behind the moves.
The first one is higher funding costs. We saw evidence of this in the recent earnings announcement. We saw a net interest margin compression. We know that it is eating into these smaller banks profitability. Moody cites that as their main reason. The second reason is regulatory capital weakness. We know that the US regulatory capital framework is going under flux, and they want to include a broader cast of banks in this regulatory net. Third is their asset risk. Now
this is getting a lot of attention. Moody's is directly pointing to their commercial real estate loans that a lot of these small and mid size banks sit on.
Bloomberg's Valerie Titel notes some of the banks seeing ratings cuts this morning include M and T Bank, Webster Financial, Bank of Oklahoma Financial, and several others.
Banks are also under pressure in Europe. Italy's right wing government spook markets with an unexpected tax on bank profits. We get more from Bloomberg's Ton Metcalf in London.
Big surprise in a negative way for the sex and not just initially but also the wider banks where we're seeing always there all but yeah, the big Italian banks are UNI credit down basically as much as six point five percent at the open, which gives you indication of how this is being received. I don't think it was expected.
And it's really interesting because obviously it comes against the backdrop all those earnings where we were just talking about how much money these banks making off the higher rate environment, and now it looks like Rome is looking to sort of take a piece of that, and about two billion of people are expecting this tax to raise.
Bloomberg's Tom Metcalf notes Italian banks are the worst performers in Europe this morning. Italy's main stock exchange is now down one point sixty six percent.
Miami stocks fell in Asia over night after disappointing economic data out of China. The country's exports fell for a third straight month in July. Bloomberg Daybreak Asia anchor Brian Curtis has more from Hong Kong.
Export slump fourteen and a half percent from a year earlier. That's the worst decline since February of twenty twenty. Imports contracted twelve point four percent, more than double estimates. I left a trade surplus of eighty point six billion dollars for the month. It's a double whammy for the economy. Global demand is weak, and so is domestic consumption. There's a plethora of issues here, sagging business and consumer confidence, a deflating property market, and a government that is wary
of large scale stimulus in Hong Kong. Brian Curtis, Bloomberg.
Daybreak, Thank you, Brian.
Back here in the US, we have some news on new tech coming out of Apple. Sources tell us the company is testing a high end, next generation laptop processor. More from Bloomberg's Doug Prisner.
The new chip is the M three Max, and it'll be at the heart of a high end MacBook Pro lap top, expected to debut next year. The central processing unit includes twelve high performance cores for demanding task like video editing, and for efficiency cores for less intensive applications like browsing. The web v M three chip will mark the first time Apple is shifting to a three nanometer production process for Mac chips. The aim is to provide
better battery life and strong performance gains. In New York, I'm Doug Krisner, Bloomberg Daybreak.
Okay, Doug, thanks for watching shares of Tesla this morning. They're down about one percent. That comes on news the chief financial officer, Zachary Kirkhorn is stepping down after thirteen years at Tesla. Longtime Tesla investor Kathy Woods reacting to the news, we spoke with the Ark Investment CEO late yesterday.
It's a tough job.
It's a tough, tough job.
So I guess thirteen years was a really good run for zach.
Can't say enough good things about him and what he did for Tesla.
Tesla is the largest individual contributor to Kathy Woods flagship Arc Innovation ETF. The company's chief accounting officer will take over the CFO role in addition to his current duties.
That's what's happening on Wall Street. Let's catch you up now on the latest political news. We're learning more about Donald trump presidential campaign strategy. Sources say he plans to hold rival events to deny his challengers the public spotlight. Joan Donegher has details from our Bloomberg ninety nine to one newsroom in Washington.
The former president plans to skip appearances with other Republican candidates. Instead, sources tell Bloomberg he'll hold separate events surrounded by his allies. His aim to make sure his rivals don't get the exposure they need to chip away at his status as the front runner in the nomination race. The sources say this will allow Trump to draw attention away from lower
polling candidates and shore up his own lead. The plan, however, does not mean he'll skip this month's Republican National Committee candidates debate. He may still take part. Joan Doneger Bloomberg Daybreak.
Joan thanks. There's also a controversial special election on the schedule today. Voters in Ohio will vote on constitutional amendments tied to abortion rights. Bloomberg's Ed Baxter has the story.
It is Ohio's Issue one, and if it's approved, a sixty percent super majority would be required to amend the constitution. Currently it's a simple majority. Now, this is a GOP back referendum that was called to proceed before an expected vote in November on a proposed amendment that would enshrine abortion rights in Ohio's constitution. The White House has even chimed in now saying it strongly opposes any attempts to take away a woman's choice. I'm at Baxter Bloomberg Daybreak.
Time now for look at some of the other stories making news around the world. And for that we are joined by Bloomberg's John Tucker.
Good morning, John, and Amy, Good morning to you. That's hal the size of golf balls falling in Huntington, West Virginia. As a deadly storm system hammered the eastern half of the nation from New York to Georgia. At least two people died, thousands of flights were canceled or delayed, and more than one point one million homes and businesses lost power. The storm spread, it was massive, with tornado watches and warnings posted across ten states from Tennessee to New York
and anders. In South Carolina, a fifteen year old boy was killed when a tree fell on him, and Florence, Alabama police say a twenty eight year old man was struck by lightning and died. Former President Trump's legal team made their late afternoon deadlines respond to a protective order request of evidence in the twenty twenty election charges against him. Trump's attorneys say he shouldn't be subject to a blanket gag order seeking to narrow the scope of sensitive materials
in the case. New York City officials investigating a shark attack at Rockaway Beach Monday evening, where a fifty year old woman surfing near the shoreline was bitten in the left leg. Beachgoers were told to leave.
Everybody was leaving the beach and they were just like, just don't get in the water.
I was like, what happened? He was like, somebody got bit by a shot utter reaching the shore. The woman was taken to Jamaica Hospital in critical condition. The Red Cross now following the FDA's new guidance on blood donations, announcing that all donors will answer the same eligibility questions regardless of gender or sexual orientation, and will be assessed for blood donation based on individual risk factors, not on
sexual orientation. Secretary of State Anthony Blincoln says the US is backing regional efforts to bring a diplomatic resolution to
the extremely traveling situation in Niger. West African heads of state are preparing to meet later this week to discuss the crisis in the nation where soldiers seized control of the state and took the president hostage and a committee of scientific expert says the South Korean based research center behind the claims of a breakthrough in superconductor technology will be providing it with samples required for the validation process
in as early as two weeks. That material LK ninety nine, they claim, is capable of conducting electricity with zero resistance at root temperature in pressure. Global News twenty four hours a day, Power Buy more than twenty seven hundred journalist and analysts at more than one hundred and twenty countries. I'm John Tucker. This is Bloomberg Gamy.
All right, thank you John. Time now for our Bloomberg Sports update. For that, we bring in John stash.
Hour amby Baseball handed down Suspension's after that big fight that took place at second base on Saturday, Tim Anderson of the White Sox Jose Ramirez of the Guardians squaring off. Anderson took a month to the face, but he was
evidently seen as the instigator because he got hit. With a six game suspension, Ramirez will sit for three games baseball in Boston, the Red Sox out to end a four game losing streight, tied two to two with the Royals bases loaded, bottom of the ninth hitch swing, gonna dry your left field, higher deep toward the pole.
It ISAA Paul rod It hit the poll.
The Red Sox walking up a grand slam.
By Poplo reyis can you believe it? His first home run as a member of the Red Sox, and the Red Sox win at six to two.
I'll walk off grand slam EEI in Boston with the call, and the Red Sox are ahead of the Yankees. Now on the Al East is the Yanks lost in Chicago the White Sox.
Five to one.
The Cubs were red hot, they had won thirteen and sixteen, but they lost to the Mets in New York eleven to two, the Mets ending at sixteen closing streak. Giants sent the Angels to a seventh loss in a row, eight to three. Seventh straight win for Texas five to three at Oakland, and the Rangers now have a three game lead in the Al West. Teddy Bridgewater signing with the Detroit Lions. This will be his six different teams, also played with Carolina, Denver, Minnesota, New Orleans and Miami.
He'll be the backup to Jared Goff on the Lions. John Stanshaw were Bloomberg Sports.
From coast to coast, from New York to San Francisco, Boston to Washington, d nationwide on SIRIUSXAM, the Bloomberg Business Appen Bloomberg dot Com. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. Banks are under pressure around the globe this morning. Multiple risks have led Moody's Investor Service to cut the credit rating on nearly a dozen small and mid sized firms in the US and to put several others on notice. Meantime, a surprise windfall tax on banks
in Italy has European lenders on notice this morning. Bloomberg Radio and TV Markets correspondent Valerie Titlsman tracking developments in the financial sector for US this morning, and val is back here with us now. There's been a debate for a while here Valerie on whether the worst was over for small and mid sized banks in this country after the regional turmoil following the Silicon Valley and Signature Bank collapses. But I guess Moody's now is saying not so fast.
Well, perhaps the worst is over, but there are still some overhanging risks, and moody citing in this sweeping overhaul citing three reasons for these downgrades. Now, the first one being, which they talked at length about, was higher funding costs. Now, we have heard a lot about this recently, especially in this round of earning seasons, when we saw that net interest margin compression from a lot of these smaller lenders.
That's because they are having to pay up a bit more to hold on to these deposits, and it's really eroding their profitability and hurting their costs of capital. So that being one of the key reasons why Moody's decided to do this sweeping assessment of these lenders. The other
one they cited Nathan was regulatory capital weaknesses. Now we know that the US is wanting to overhaul the regulatory framework, especially when it comes down to capital ratios of these banks in the US, and instead of just targeting the largest banks, this new overhaul is going to target a broader stretch of banks, and it's going to impact the smaller lenders, and Moody's citing in this report that perhaps their balance sheets won't be ready for those tougher capital rules.
The third one they raise is this asset risk. They specifically cite the commercial and real estate loans, which we know these smaller lenders in the US have a huge proportion of on their balance sheet, citing that as a key risk if we do enter a mild recession that could be a big vulnerability to these small lenders.
It sounds valerie like the analysts are pointing to more systemic risks for some of these small and mid sized lenders rather than some of the idiosyncratic issues that we saw with Silicon Valley and Signature Bank. Is that the right read on.
That look likely? I mean, there was twenty seven moves by Moody's overnight reading. Each report will delve into the specifics on each single stock, but collectively, these those three developments I named the higher funding costs, the capital weaknesses, the regulatory capital weaknesses, and that asset exposure to CRE has really just lowered the credit profile of smaller lenders
in the US just generally. And a lot of people were asking me this morning, oh, but in these earning announcements, we heard so much about these smaller lenders divesting loans and repairing their balance sheets. But Moody calls out specifically that yes, that is a good thing, but that also
means that they've pulled back on new lending. If they pull back on new lending, they're not taking advantage of lending at these new higher yields, which they need to do because their profitability is being eroded by having to pay more for those deposits.
And if we start to see more of that happen pulling back on lending, that raises the question about whether the US could actually be headed for a recession and potentially put more of a spotlight on what the FED does next.
Well, we know that what makes the smaller lenders in the US very different from those larger banks in the US is that the smaller medium sized lenders are really key to extending credit to the new economy, and if they are continually under pressure on their balance sheets, you know, pulling back on on these new loans could really impact the US economy, especially when it comes to commercial real estate.
We know they're very involved in that, but a lot of people say that these headwinds for these smaller banks really don't end until the FED does cut, because that would be the one thing that would really help them with their profitability. Right to reinvert the curve, to see those two year ee olds sink way lower than ten
year yields will help them with their profitability. But if the US economy is still holding in strong due to this government spending we're seeing from the Biden administration, you know, the turn of the cycle from the Fed could still be a long way off.
This is Bloomberg day Break Today, your morning brief on the stories making news from Wall Street to Washington, and.
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