tom: i'm tom mackenzie in london. bouncing back. japanese stocks surge. san francisco fed president mary daly emphasizes that the fed does not need to react to one data point. on the ticket, kamala harris formally wins the democratic presidential nomination. we discussed her options for a running mate. the u.k. chancellor declines to rule out increasing capital

gains tax. we bring our exclusive interview with rachel reeves to you. ♪ ♪ ♪ ♪ tom: a pause to the selloff after "manic monday," but will that be sustained?, remains the key question. more than $6 trillion wiped off global equities. a breather in the session so far with european futures higher after losses of more than 2% yesterday and for the nasdaq 100 the worst start to the month since 2008. ftse 100 futures pointing to gains of 71 points. s&p also pointing higher after losses of around 3% yesterday. the nasdaq 100 futures looking to add 311 points.

let's flip the board and look cross asset because the weakness in the yen is the story of the day after that incredible strength yesterday with gains of more than 2%. some of that being unwound in the session so far. the carry trade was an important part of the mix when it comes to the negativity. the japanese yen at 145. getting closer to the 4% level after the rally and treasuries. now selling pressure. brent at $77 a barrel and bitcoin at 55,535 after that rout yesterday for cryptocurrencies. gains around 2%. let's cross over to avril hong standing by in asia with a check on the markets in singapore. what are you seeing across the screens? avril: we are seeing more green creeping into the screen after

the way about a day ago perhaps unsurprising that we are getting these comments about how the markets have overreacted. dip buyers. the nikkei, the topix higher. the circuit breakers triggered. there was a sense that we could see a bit more of that calm returning to the markets. it's going to take a while to fully recover but the boj has been coming under fire amid the market meltdown. criticism about the timing of the rate hike forced the onslaught. it was more to do with concerns about the u.s. economy but nonetheless we are seeing speculation that with regard to future rate hikes that could be put on hold. the yen is losing ground after that five days of rally. if you look at how japanese bonds are faring, they have been part of that global rally, and those yields have been coming down rapidly, and amid all this,

there was always going to be a tricky set up for a 10 year auction today, the first after the boj decision last week, and indeed, given the lower yields we are seeing in terms of demand, it was the weakest according to one measure since 2003, so a really interesting picture in japan assets as we see stocks elsewhere in the region also rebounding today. tom: ok. avril hong with their rebound in asian markets. we will see to what extent they can be sustained. japanese stocks specifically because it's fascinating in terms of what its unveiling. japanese stocks rebounding strongly just a day after their lunch into bear market territory. let's get the details and bring in whitney sue out of tokyo in terms of how the story is unfolding. are we likely to see buyers continue to buy the dip in japan? is this just a temporary breather?

what is the sense from traders on the ground in japan as to what was unveiled and has come to pass in the last 48 hours out of japan? >> sure. even after today's powerful rebound, investors are actually still quite cautious in the near term in terms of when we look at the market volatility and some of the key risks in the markets remain. as we look at the sharp decline on friday and yesterday as well, the main drivers are still there , worries around the u.s. economy slow down also with the yen. a more hawkish tone from the bank of japan and the yen appreciation as well as the volatility in the currency. along with a potential reversal of the carry trade to continue. those are actually still weighing on japanese stocks. so those factors -- until those

factors are out-of-the-way, investors are likely to remain quite cautious, and, you know, goldman sachs today had a note on how they see this move to continue for the time being, especially after the retail investors were hurt during this big decline. so it would take a lot more time for cinnamon to return and for people to buy into the story of japanese stocks. tom: what a turnaround from earlier in the year, when so many investors were talking about the benefits coming through in terms of exposure to japanese equities, corporate governance, the upside and what was happening with the the yen, and of course that's all turned. we will see if additional catalysts come through but it could be a challenge few days. when he sue, thank you very much indeed. let's get a check on the treasury rally. igniting a debate on how fast the fed needs to cut interest

rates. two year yields, sensitive to monetary policy at the front end, were pushed briefly below the 10 year note for the first time in two years. that this inversion did come through before reversing yesterday -- that disinversion did come through before reversing yesterday. mark cranfield, trace -- traders now pricing in more than 100 basis points of cuts by the fed this year. are they going to be disappointed again? >> it's like a game of chicken. who will blink first, the fed or the traders? the traders seem confident they have got it right. they have seen the data, a couple softish employment reports, and jerome powell himself say the employment situation is deteriorating, and so that is important. then you get the equity market going into a tailspin as well, which is something that often

feeds into a softer economic policy, and the fed meeting to respond. you put those things together and it's no wonder that traders are convinced not only in september is a going to be 50 basis points but there will be more cuts to follow quite quickly after that, leading to at least 100 basis points worth of cuts. we have fed speakers coming, some in the next week or so, and they may push back. you are overdoing it, there's no need for us to panic. but there's an inflation report next week. it's a big one. the cpi report, if it comes in on the downside, if you get a soft number, traders will be more excited, and the fed can justify their 50 basis points. for now it's a question of traders are going out the data they can see, they can see the uneasy global markets. all that to them points to the fact that the fed need to act and act big to try and restore

some kind of confidence in markets. they will see want to see a few more pieces of data, but they will not give up easily. they will need to push back aggressively to stop this. tom: we will look ahead to that inflation print. many will be on tenterhooks leading up to that. meanwhile, we have heard from mary daley of the san francisco fed saying we have a solid labor market when you lift the hood. the vix at levels not seen since the 1990's yesterday. what do you make of the surge in volatility and what that tells us about the near term outlook, mark? >> this is going to be a dampener on markets in general, at least for the rest of this month, because what's happening is when you get these huge spikes in volatility in specific assets, currencies, equities, commodities, what this tells you is that the inputs they going to

risk management, the numbers explode higher, and that means that -- in japanese equities, which have been volatile, if you are holding 100 units, you can probably only hold 25, so that reduction, the fact that your risk manager is telling you these things have become so volatile you cannot hold such a large position, means some people are forced to reduce positions, forced selling into a market at a time when they probably don't even want to. they are saying these positions we have on a long-term basis look good. they are saying for the time being they are too crazy and we need to get rid of a few. you will have that going across the board -- that going on across the board. it would affect currencies, commodities, bonds. people who have had a difficult start to the month will find it hard to get on track because their positions will be reduced substantially, so a lot of people will be on the sidelines

and wait until september, and that will make the markets even more choppy in the short-term. it will be much more difficult for people to decide what is real and not real in the next couple weeks. tom: ok. mark cranfield on the challenges around more volatile environment, of course with the vix hitting those levels unseen since the 1990's. thank you very much indeed. these market adjustments, significant. now to the tech story and this is significant as well. a u.s. judge ruling google illegally monopolized the search market through exclusive deals. google paid billions to make it the default option on smartphones and web browsers. the company plans to appeal. more from annabelle droulers. this is significant. the focus in terms of the regulators and the squeeze on google. we have not had a ruling like this for some time. what are the takeaways and implications of this ruling?

>> we have not seen a ruling like this for more than two decades now, so it's extremely significant and a big win for the government. what was being questioned, as you said, was google being the default option on phones and web browsers. you get a new iphone and google is the browser loaded on their. apple pay is for that. they came out during the course of the hearings in this case that they paid to do so, to companies like apple and samsung. now the finding from the court is that those deals created a monopoly such that it locked out any other competitor from the market. the court also found apple was able to continue increasing the price of its online advertising pretty much unencumbered. because of that, the finding was that apple had created an illegal monopoly. the consequence is the judge in the case has set a hearing for

next month to try to discuss the timing for a separate trial. google, for its part, or alphabet, has said it will appeal the decision. their reaction coming through in the share price. google and apple fell, caught up not just in that broader tech selloff but concerns around this case in particular and the ramifications. tom: some of those ramifications could potentially lead to a breakup of some of these units at alphabet but that remains a key question. meanwhile, nvidia, and details about its plans around innovation, the next generation of its chips, and maybe they are facing some engineering challenges on that front. >> welcome as you know, tom, the pace of innovation at nvidia has just been so fast and furious, but it seems like even nvidia itself could be struggling to keep up. the storing in question was first reported.

bloomberg has been able to speak with some sources and we are hearing nvidia is facing production delays. these related to ai chips, which could affect production of the entire blackwell system, which if you recall, was announced in march of this year. nvidia did not comment on this report but they did say that production generally is on track to ramp up in the second half of this year. analysts at that point -- we did see that slide in nvidia coming through but they are still taking a pretty much in stride. if it's a few weeks, it is not too much of a problem for the company perhaps. the question is whether it goes beyond that, because the information for instance, the delays would mean that we wouldn't see any sort of shipments for blackwell until the first quarter of next year or 2025. with the company itself is saying that we are going to start same blackwell revenue in the course of 2024 instead. so big question marks over it.

we will be hearing from the company because we have earnings just around the corner, perhaps a bit of an opportunity to hear more about it, but i think i heard you mention earlier that some companies are starting to look to capitalize on this and amd is one of those. there shares managed to rise yesterday capitalize on those delays. tom: just about a week after they raised their sales outlook in terms of their ai accelerators. we will see if that trend continues with an update on those stories. annabelle droulers out of hong kong, thank you. 7:00 a.m. u.k. time on the earnings front, intercontinental earnings will be coming through. 10:00 a.m., euro area retail sales. we will get a gauge of consumer -- of the consumer across the retail zone. things have been soggy. the u.s. treasury will sell $58 billion worth of three-year notes.

we will see to what extent investors are willing to absorb that after the volatility of the treasury markets. maybe there will be increased demand. on the earnings front, one of south africa's largest banks with that big domestic focus coming through with a mixed set of results. the top line in terms of net interest income is amiss in the first half for net bank. when it comes to the interim dividend per share, that is above estimates, 9.71 rand, above the estimate. it's a beat in terms of the interim dividend per share, but in terms of net interest income, the top line coming in slightly softer on that front. we will be speaking to the ceo of that bank later this show. stay tuned for that conversation. coming up, kamala harris clinches the democratic nomination. it is now official. setting up that matchup against donald trump. more on the race for the white house and her potential vp pick.

that's coming up. this is bloomberg. ♪

tom: welcome back. happy tuesday. kamala harris has formerly

clenched -- has formerly clenched the democratic nomination. kriti gupta joins me for the latest. always a finger on the pulse of u.s. politics. it is now official. >> it is. in the last 24 hours. the parade and pomp we were expecting out of this is limited. that tells you about this idea that it was a foregone conclusion that harris would not only clinch the nomination but be the first black woman and south asian woman to do it so this is historic for both parts of the party. what is historic will be -- what is going to be happening and she will be campaigning. will that last into september? that's when the real polling, some say, will come forward, when the initial lead may start to narrow. the question will be the vice president pick.

we are waiting for that decision. reuters reporting that mark kelly may be out of consideration, narrowing it down to two names, with josh shapiro and tim walz, governor of minnesota. the emphasis i need to put his they are both governors, not senators, significant in terms of things like polling. pennsylvania has been pulling in favor of president trump despite having a democratic governor. this could help her ticket. on the other side, she also has to appeal to the labor crowd. shawn fain over at the uaw has been pushing for a third candidate, andy beshear, the kentucky governor. she is trying to figure out which part of the demographic she wants to appeal to the most. we will find out soon. >> that vetting procedure has been accelerating. thank you very much. the update now official. kamala harris is the candidate for the democratic party leading up to the vote in november.

we will bring you the bp pic as soon as we get it. the u.k. chancellor says the u.k. will strike the right balance, but she will not rule out increasing capital gains tax. more from our exclusive interview next. this is bloomberg. ♪

tom: welcome back. u.k. chancellor rachel reeves says she will not rule out increasing capital gains tax after warning difficult decisions will be taken to fill a 22 billion pound gap in the budget. she told us that the u.k. will strike the right balance on the tax and the budget in october. >> i think people should pay their fair share of tax and one

of the challenges we have in the u.k. is the gap between what should be collected by his majesty's revenue and customs and what is actually collected. we made a commitment and our manifesto that we will be sticking to which is we do not want to increase taxes on working people and we will be keeping income tax, national insurance and the value-added tax at the rates they are for the duration of this parliament. i would like taxes on working people to be lower but you cannot make promises without saying where the money can come from. the tax burden in the u.k. is at a 70 year high. i want to bring that down because i want to make britain the best place to start and grow a business and for working people to keep more of their own money. that's but -- that's what people will with this new labour government. that's why it is so important we grow the economy. there his been debate -- there has been debate about taxation

and spending missing the bigger picture, growing the economy. >> you mention income tax. given the room it could potentiall generate, i wonder if you are considering bringing capital gains in line with the income tax? >> we have a budget on october 30 and we will set out our policy them but it's important when deciding tax policy to strike the right balance. you need to bring in the revenue to fund vital public services but we have also got to grow the economy. i will not do anything that makes it harder to achieve that economic growth and prosperity, because in the end, the only way we are going to lift living standards and have the money we need to invest in our public services, whether that is our health service or schools or indeed our police and armed forces, is by growing the economy. and so i am determined to ensure that when we set all of our policy, including tax policy, that we are not doing anything that will deter the investment

and growth we need to see in the u.k. economy, but we will make decisions around tax and spending at the budget and spending review later this year. tom: u.k. chancellor rachel reeves speaking exclusively to bloomberg. now other stories making news. the u.k. government says foreign states may be involved in fueling a wave of right-wing riots across the country. prime minister keir starmer says they will mobilize a standing army of police officers to deal with the violence. the unrest has been fueled by online misinformation following the murder of three young girls last week. starmer's administration has slammed a post on x buy you on musk that "civil war is inevitable" in the u.k., saying there was no justification for the remark. shares of palantir jumped in the extended trade after the company raised its outlook, citing continually demand for its ai software. the cio says the earnings report was historic for the company.

palantir provides analysis tools. coming up aramco earnings in focus,. there's been a laggard -- it's been a laggard. we have the details next. this is bloomberg. ♪ with so much entertainment out there wouldn't it be great...

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♪ tom: good morning. i'm tom mackenzie. japanese stocks surge, futures point two gains and mary daly

emphasizes the fed does not react to one point. kamala harris wins and we discussed her running mate options. a judge rules google acted illegally handing the government its first win against a tech giant in more than 20 years. alphabet taking a hit, futures point higher. there is a pause in the selling yesterday, but for how long? european futures pointing higher after losses of 3%. ftse futures adding after losses

of 3%. nasdaq pointing higher. worst start since 2008. flip the board because today there is some selling, yields are up, edging back at the front and after dissing version. japanese currency is down, brent gaining 1.2% and 10% route in bitcoin, paring losses for the crypto. getting earnings from a company challenged year to date.

in terms of earnings, and the second quarter, adjusted earnings in line with estimates. in terms of the top line when it comes to the second-quarter adjusted earnings, raising sales for pharmaceuticals. margins below estimates, estimates had been for 19.4%. let's get the details, saudi aramco is in focus and underperformed the market given

the government imposed cuts. coming in at 106, softer than estimates and expected to declare a total dividends in 2024. total revenue above estimates. let's get more on the earnings story and bring in joumanna with the details. what are you taking from these numbers? joumanna: instant reaction is in line with expectations, not

veering away, one takeaway is upstream numbers from oil have surprised to the upside because there is pricing power from other companies including chevron and exxon. weakness downstream, universal theme, refining margins under pressure. some strength has offset downside pressure. interesting to hear commentary today. they are confident in growth. the saudi government has 97%

ownership so when opec-plus pulls back or keeps production off market saudi arabia drives those decisions and positive commentary provides support to investors. maybe there is room to increase production. tom: we have to wonder what they are seeing, growth picture in the u.s., you are right in terms of the screen on refining. rusher is part of the mix, what is your sense about how the narrative will adjust ahead and the role they are playing?

joumanna: there are two things you need to consider. the first is it is large, owned by the saudi state and subject to variations in production. you will have a downbeat view of aramco production profile. dividend payouts, aramco is known for having the most generous yield of 7% and it will be difficult to pay these dividends. these payouts are higher than free cash flow putting them in a net negative position, not sustainable. they will have to take on more debt to pay out.

can they increase production and can they pay out dividends? if the answer is no or bleak, he would have a more bleak assessment and that explains outperformance down 19% when most are up. tom: comprehensive reaction from joumanna to the breaking earnings. thank you indeed. the fed's san francisco president indicated rate cuts and mary daly added the pace depends on more data. mary: policy adjustments as the economy delivers data so we know what is required.

if we reacted on one point we would almost always be wrong. tom: let's get more from venn ram. inflation print from the u.s. next week but markets price in more than 100 basis points of cuts. expectations that they deliver a cut. what is your take on this debates? ven: this idea that the fed came out swinging is frivolous and sensational but excuse me, you know, the fed has done it before. the real economy was under stress as opposed to markets.

in 2008 the fed made to rate cuts but there was a global financial crisis that major institutions were going belly up so there was a need to revive the economy. markets were seizing up during the pandemic and economy needed all the rescue it could take. is doing well, no suggestion the economy is queuing over. the fed would be happy to let trades unwind because there is fraud in the market. so the idea that they would make an emergency cut is laughable.

tom: ok, laughable versus fundamentals suggesting a big difference. in terms of treasury markets we are seeing selling after a huge rally, selling across treasuries. september seems all but locked in. further couple of cuts expected post-september. what do you make of the moves as they reprice? is sub 4% suitable? guest: yields are higher, two-year has equilibrium but

markets are thinking the fed will cut rates and that is exaggerated because i don't think they will show a hurry in cutting rates. they will cut in september if the data shows softness and slowing inflation. rates need to be restrictive so the fed will cut, but they will cut by 25 rather than 50 to be sure inflation is on the edge. they don't want to overdo it so there is risk to calibrate toward fewer cuts. tom: ok.

fanciful the idea of an emergency rate cut. not a jumbo 50 cut. thank you indeed. coming up, our interview with one of the biggest lenders in south africa wishing beyond the borders. the earnings story up next, this is bloomberg. ♪

tom: let's check in on markets with a sense of relief after global route yesterday, jurors higher. losses yesterday, ftse futures

adding 103 points. stateside adding 1.5%. nasdaq futures adding gains of two percent again, ending lower, were start since 2008. mega cap word a drag. concerns around nvidia. looking at a bright set up after the routes yesterday and we can flip to the yen and the treasuries with selling coming through. massive bond rally story in the session with yields of, little

more selling at the front considering how much money has moved in the last week. yen weakness after the strength yesterday at 145. grant $77 and keeping our eyes on risks of a further flareup, bitcoin at 55 thousand. let's get to earnings on the em space with south africa's net bank reporting income missed estimates. interim dividend ahead of forecasts. earnings came in higher year on year.

let's bring in the ce, jason quinn. walk us through the results. in your outlook. jason: thanks very much. great across south africa, but slow in the first half. the products we were pleased so overall we think rates come down and that stimulates appetite. bit more growth in the picture as well, optimistic and costs

and impairments, we were better than expected. tom: your team flagged to cuts in timber and november i wonder whether your view adjusted with markets pricing in more than 100 basis points. the read across? jason: yeah, so we've seen rates cut 50 basis points and another 75 next year, a lot of uncertainty around the fed.

our inflation is trending down and growth is starting to resume -- resume -- resume. tom: you are a domestically focused bank, what is your plan for pushing beyond the borders to the wider region? what are you looking to drive external growth? >> net bank is south african and we see opportunities for markets, some businesses in south africa and others we can grow into so we would like to capture growth and we would like to diversify, that will take

some time because equity winds are scarce. tom: you've got to one capital above the target. is there more you can do? jason: both of those as i mentioned, we look at m&a and surplus would be deployed for growth. we have all the approvals to execute a share buyback depending on conditions, we did not so long ago so that is on the table. all options are considered. tom: m and a in focus and buybacks jason quinn, i really

appreciate your update on the outlook. plenty more, this is bloomberg. ♪

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>> we will look back and say overreaction, the market. when demanding cuts. it will not happen. the fed will say this is not an emergency. tom: mohamed el-erian saying the market overreacted and we wonder

whether the inversion was part of that, it has been a harbinger of recession not happen yesterday. markets pricing in four cuts, four cuts, over 100 basis points and a signal that a recession is in the cards. flip the board, massive pop, levels we have not seen since covid so back to those levels and what that means for systematic trades, unwinding given the jump in volatility and domino effect.

we watch to see that easing, that spike yesterday pronounced. nvidia has been volatile indeed. sometimes it looks like it is moving more aggressively, it is down 25% indeed from june. and in terms of challenges engineering chips, they hope to have it in the hands of customers, blackwell chips and a run-up indeed. blackrock saying do not forget nvidia are not able to meet the demand, demand remains tight and jensen long has been talking about that. august the 28th and you can imagine the scrutiny. speaking to the ceo of iag, big

day so that is coming up indeed. before that, the opening trade setting you up for the trading day. european futures pointing to gains, making up for losses. stay with us, this is bloomberg. ♪ ♪♪ ♪♪ relax into a caribbean state of mind. visit sandals.com or call 1-800-sandals.

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anna: good morning from london. i am anner edwards. asian equities are higher, futures pointing to gains. treasury rally ignites debate, mary daly says the jobs market is slowing and the u.s.