Country garden triples. The developer faces a faces a dt that could trigger huge effects on the Housing Market which brings us to is this the crisis we are looking for . Everyone is worried about commercial real estate. From new york, i am alix steel. Welcome to Bloomberg Markets. A lot of good stories that could portend where we end up a volume is really bite. It feels like august. Guy tomorrow is what they are waiting for. The inflation printout from the united states, a massive event. I suspect its a caution as a result of that. Things are happening with paying attention to. You see what is happening with european nation inflationary narratives . The real estate is to respond to think about. We had the moodys downgrade of the banks, one concern cited was commercial real estate. Cited was commercial real estate. Its a substantial portion of the office story. Wewe have the story coming out f china, Country Garden, is this the next shoe to drop . When does this is this the next shoe to drop . When does this shoe, finally drop . Alix i relate to shoes. We know its is this the next shoe to drop . When does this shoe, finally drop . Alix i relate to shoes. We know its coming because we have seen higher prices and rates and how it books like his like his the real question. The trickle down from the developer could be interesting. Guy like his the real question. The trickle down from the developer could be interesting. Guy property is related to the rate story, once you start seeing down valuations in Key Properties you can use that as a relative valuation valuations iy properties you can use that as a relative valuation proxy and you start to get cloudy. Our question of the day. Is the shoe going to drop . And related to the moodys downgrade story . Sonali there have been trickles in the market to this point, the Banking System has been a huge lender to the real estate sector, especially commercial real estate. This causes problems for companies trying to refinance. A story of how lenders are day. Is the shoe going to drop . And related to the moodys downgrade story . Sonali there have been trickles in the market to this point, the Banking System has been a huge lender to the real estate sector, especially commercial real estate. This causes problems for companies trying to refinance. A story of how lenders are ducking loans when it comes to offices and hotel. The office is the problem child but this other dynamic where there is capital that will be put to play. San francisco people are worried about office properties. Brookfield is not ready to call it not ready to call it quits. You have a little hope on a sunday. Alix there is there is money te raised for a distrust cycle. You lined up leaving real estate coverage, help me understand if youre looking at the u. S. Where are the problem children actually are . The office. Commercial properties been hit by this. We have seen hotel prices come down from their peak. We seem other properties propern reevaluated. But if the office in the issue is that there will be buyers but its about pricing and no one knows what an office is worth. The valuation is very tough. Guy if we were to say we work failed, what impact would that have . Katherine it would have a trickledown impact. They have seen we work pullback so landlords have had to readjust to the fact that demand is not there and we worked was a big part of the office market. It was a unique story with its own drama but i think it speaks of the biggest issues facing the office market. Whether we work mpox landlords or exacerbates this question of is there going to be demand for office space . Alix heres my question guy, how much of the we work story is idiosyncratic and they got bad timing, the ceo left after the ipo, their competitors is stocks are up today. That doesnt seem to me to save the office is dead. Guy iwg we used to call it Regional Services over here. Call it Regional Services over here. Its a u. K. Listed company, a company with substantial footprints in the, a company with substantial footprints in the u. S. And it had his numbers a few days back in the narrative was a positive one. Is not seeing the same prices, it prices, it has been a trusted business model. It doesnt prices, it has been a trusted business model. It doesnt feel like it has the sames problem with prices around the sector. The problem is, its drip, drip news. You wonder if that will turn into ayou wonder if that will tn into a torrid . How far away are it from becoming a problem. Its always been in the its always been in the background, until now. When you succumb to the foreground we start to until no. When you succumb to the foreground we start to focus on it . Sonali its been a its been at for investors because if youre in the debt market it matters and to the point we spoke about earlierearlier. I want to talk about the ripple effects. We work has burned 17 billion since it waswe work has burned n since it was founded and there was a different Investor Perception of risk back then. Before the rate hiking began. If youre invested in real estate where lending is hard to come by he will demand equitylike returns. The other point i would make is bankruptcy and restructuring some ticked up. We work has gone through a restructuring for bankruptcies filed were tied to real estate. There were people that came into the spaces. It not like they were empty spaces. Alix he was going to want to own an office space . What we see a lot of the rate h. If youre invested in real estate where lending is hard to come by he will demand equitylike returns. The other point i would make is bankruptcy and restructuring some ticked up. We work has gone through a restructuring for bankruptcies filed were tied to real estate. There were people that came into the spaces. It not like they were empty spaces. Alix he was going to want to own an office space . What we see a lot of refinancing rather than distrust . Katherine theres a chance they want to extend and pretend and see if they can extend and pretd see if they can make it work until demand takes backup. The biggest question, the reason that may not work demand is changed. Even work demand is changed. Even as Office Demand is sticking up and seeing companies return four days a week. The big issue isthe big issue ih higher rates and changing demand its a different scenario so maybe you can extend and pretend that it wont be as easy. As lenders, they dont want to hold these assets. Theyre not used to holding offices and want to manage the properties of theres an incentive to try to figure it out. Guy maybe the offloading of these loans into alternative spaces could circumvent the problem. What happens with covenants, loan structures in terms of valuations . Are there critical marks we need to be watching out for that could force issues with refinancing and valuations that were starting to see become reality . Katherine we work speaks to the reality coming home. One of the issues is figuring out pricing and finding buyers at that price. If we see major transaction dates it will give the market a bigger sense of what property is actually worth and that will in a good way, because maybe people assume its better or we have to mark stuff down. Thats what the market is waiting for and its hard to offload bones. If they can find a willing buyer, great. But i think it is tough to find a buyer and out a price you want. Alix the bid coming and not coming in for that as well as other areas. Thank you very much. More perspective on the question of the day, is commercial real estate pricing starting, picking up, is the you dropping . Gargi Pal Chaudhuri is up next, this is bloomberg. 76 of 23andme Health Customers surveyed reported taking healthier actions. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. Everyone says office is dead, office is no more and yet, if you look instantly while, i have a stake in park avenue and everyone is blown away in a maze that everyone is interested in office. People need to look in between real estate and what is legitimate and what is fading away. Alix that was Alexander Goldfarb talking about commercial real estate. That brings us to the question of the day is a commercial real estate crisis starting . And how a set of folding through the banks. With this is gargi Pal Chaudhuri. Are these the real estate prices we are been waiting for . Gargi in the market we think about on an unknown risk. This was a known risk from the svb crisis. We have all been talking about it. We knew when we saw the flu data and the higher rates will bite somewhere. I want say this is the beginning it was unknown risk that was ever present in the market and continue to be that for some time. Guy the moodys rating, that dog created earlier this week. You could argue that markets are trying to adjust to a higher rate environment. Cre has to adjust to it. While markets adjusted smoothly to this higher rate environment . Are we there yet in terms of being comfortable that weve gone from zero rates to 5 . Gargi as of right now, when you think about the equity market, not just the magnificent seven. Not just the top drivers but an equally rated basket. If you look at cyclicals recovery, benefits replace. It seems like things are price to perfection. It seems like the fed was able to achieve the soft landing, with inflation coming down, growth ok, moderating but anywhere near recessionary territory. What i will say is it too soon for us to breathe a sigh of relief . I think it might be. I think tomorrows data is so important. For us to read that file and see if inflation has credibly fallen. Alix you brought up in the inflation narrative in china today. Is it possible that we are in the summer of disinflation do you position for that . The disinflation weve been waiting for . Gargi on the next few months, until the end of the year. Its possible for us to see core inflation, im talking about cpi continue to move lower. Not that we get back to the 2 and i argue we dont have to. Tomorrow, we will see if it moves back up. But core inflation does begin downward trend. There are many reasons for that. Auto disinflation, services. What we are looking for most is how core focus is on housing and how to suck come down . A three month annualized number, thats been off. If that remains the case, i think they do not cause any more damage to any sectors of the economy including real estate. Guy summer of disinflation, that was her question of the day. Yes, if the cpi report comports. Theres always the risk of rea celebration of inflation. Its terms of that fear will about keep that fed on hold . Gargi at the last fomc it was not an exciting meeting but there was one paragraph around we wont be raising rates until inflation comes down to 2 . He opened up this window where he talked about we may see rates below neutral at some point and he doesnt often do this but pointed to the forecasted side, we dont put much weight on it but look at the forecast where they talk about cutting rates for the second half of 2024. In answer to your question will depend on disinflation and what that looks like next summer . If there still at 2. 5 or lower than that, anywhere near that i think they can. Especially if Unemployment Rate start edging up. The economy has retained job growth, i think they can. If not, it will be tough. Alix what did you do with the auction today, the 10 year, did you buy it . Gargi thats not the area you want to own, you want to see the three year option. Own through the belly of the curve, 35 Something Like an iei with duration of four years. Guy summer of love, summer fun, summer of disinflation. They all go together. Gargi Pal Chaudhuri great check out. Thank you very much indeed. Still ahead, in a crowded tv market we will hear from rj scaringe, this is bloomberg. 1 awww. Awww. Awww. Nope. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. And your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com you dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh alix we cover top stories in the west coast area, ed ludlow joins us now. They raised by inns, both modestly. Why did they not do more . The supply chain is improving. He said i spoke to the ceo, and see what he said about the demand issues. Have a look. One of the challenges is where our plan is located in the middle of the country and not a large market. As we are ramping, they get loaded onto the rail cars and that takes many weeks from the vehicle to leave plans and get delivered. When production is great and the ramp is steep you get this quarter over quarter delta and over time, we wont even notice it. But given the scale of our ramp and the overall magnitude its something. There is no supply crunch . Our biggest challenge is being able to receive the vehicle. So there are vehicles in the system how am i not seeing my vehicles . Its continued about production and take a timeout from dr. Gate and delivery. We could do that if we ship our money, we can ship them to trucks but we tried to maintain rail even though it doesnt work as well. Ed sounds like a push back against the idea that they face demand issues. They lowered their adjusted lost guidance, they are burning through billions of dollars of cash. But they said they dont need to raise anymore capital. The next generations are on track. The stock reaction is pretty severe. This is a name we continue to watch because of all the ev start ups seems legit. Guy so why the caution . I hear what he is saying about delivery, the evolution of how they deliver more vehicles and how that will work. But if its simply that they want to get it right . Is it better to have a save a surprise for the up side . What is your sense of thought question . Ed there thinking about the supply chain side. They are telling employees internally that they built 62,000 this year. Value low, that might be it. Guy its a wild tried strategy. Thank you very much, you can catch more of that interview with rj scaringe and abo0 minutes time. Disney, thats what well talk about next. This is bloomberg. Alix were about an hour into the u. S. Trading session. S p is superlight. Abigail is tracking the move. Abigail movement is superlight, nothing going on with the s p 500. There is a small loss, the dollar is down ever so slightly. Risk assets and neutral zone. The Energy Complex doing well. Not sure whats happening a crude oil but its relatively bullish. Natural gas, 5. 7 percent. Continuing the strength there. Asbury we have a move lower. Yields, eight basis points dropping into the cpi and ppi tomorrow. Will bond traders get it right . Theyve been moved around back and forth. Beneath that relatively flat s p 500, disney has struck a 1. 5 billion for Penn National to be able to use disney games in the u. S. Ahead of disney announcing tonight, ive heard the quarters moderate less Everyone Wants to hear bob igers media assets. A plan for a plan would be good news. But right now their focus on this deal. Guy thank you very much indeed. On what is happening in the markets. Lets figure out disney. They are looking at strategy, what is the plan . When will the be fully revealed . Bob igers turnaround plan under much interest. Raising the stock, what do you want to hear tonight . Thank you for having me. You have a great point, strategy is critical in terms of the discussion and speaking about what this Company Beyond strategy there is a leadership issue right now. Bob iger has extended his contract. Clearly, and strong position as ceo in the market continues to have confidence despite the challenges hes faced over the past 510 years. We have a new interim cfo. We dont have many other seats secured in the higher levels of leadership. This needs to see some leadership continuity. You bring up the critical topic of strategy. How will this company navigate this changing deal landscape . Wish assets are poor and which could be divested . We have a couple of issues, a stretch of competent performance. We have writers strikes and travel trends after being strung on the first half of the year. Alix just for the broad strategy strokes, disney is trading at 88. Do you think he needs a catalyst to get him to a hundred 25 dollars or does he need a strategy to get to that price on the stock . Michael they need to put a foundation to grow from. The potential of these assets in a changing landscape, we compare other companies. Netflix is a fair comparison for the Media Business of this company. At the point they can get the strategy operating. We believe in the core asset but we are at the foundation of defining strategy and from there the market can get enthusiastic about the value of equity. It is not a shortterm solution. Guy how do we trade between now and november . What happens now . Tonight, how are they going to manage these two events and what that will reveal them when . Michael thats a great question when we get from investors. When they can save the day were only a month or so away from a bigger and more detailed presentation . I think the expectation for tonight strategically should be pretty modest. Setting a little bit of a baseline of what trends have been producing, to investors and cfos are not familiar with. Explaining some of these pressures from the writer strike, content cycle in the early stages of deciding how to employ assets or what changes need to be made is taking the foundation over and building upon that as we get into september. Alix you brought up the theme park. At first it was holding up the broad money to spend. Were seeing some crash there and what is your look at the back half . Michael we have Slower Growth in the back half of the year. That is a reasonable view in light of just how fast the parts were coming out of the pen to bank and the data points that have been in the park slowing dramatically as we move into july. There are a number of parts of the park better on the upward trajectory by cruises. But park visits i have grown at a more modest rates and they have imposters. Guy can i draw a line between what disney is doing and what were doing with Domestic Airlines . Is that the same narrative . Is u. S. Domestic travel story slowing down more broadly . Michael it is possible. The broad domestic terrorism is not my area of expertise but we look at the jetblue topic or tsa volumes and stuff like that. Disney and the disney parks probably ran even hotter than Domestic Travel in general and that speaks of the longterm value of those assets. This is one of those places that people really wanted to go and travel demand was strong. It reflects really well on the value of the asset over time but if you ran a little hot you will have to deal with something that could be softer in the short term. Alix michael, thank think about. We have several things happening in china. You have Country Garden, looking like its headed for a followup to the coupons failed to come in. Chen zhao chief macro strategist will join us when we return. This is bloomberg. Welcome to the place where people go to learn about their Medicare Options before theyre on medicare. Come on in. Youre turning 65 soon . Yep. And youre retiring at 67 . Thats the plan well, youve come to the right place. Nows the time to plan ahead. Learn about an aarp Medicare SupplementInsurance Plan from unitedhealthcare. And how a plan like this helps you take charge of your health care with lower outofpocket costs. Heres why. Medicare alone doesnt pay for everything. Your deductibles and copays could add up to hundreds, even thousands of dollars a year. Everyones a little surprised to learn that one. Adding a Medicare Supplement plan helps pay some of what medicare doesnt. And that could mean fewer surprises and more predictable outofpocket costs. Call unitedhealthcare and ask for your free decision guide. Or talk with a licensed Insurance Agent or producer to learn more about plan benefits, options and rates. Medicare supplement plans let you choose any doctor, any specialist, anywhere in the us who accepts medicare patients. You dont have to deal with any networks or referrals. This kind of plan also goes with you anywhere you travel in the country. If youre turning 65 soon or over 65 and planning to retire. Find out more about the only Medicare Supplement plans endorsed by aarp. Thumbs up to that remember, the time to prepare is before you go on medicare dont wait. Get started today. Take charge of your health care. Call unitedhealthcare for your free decision guide and learn more about lowering your outofpocket medicare costs and seeing any doctor who accepts medicare patients. Oh, and happy birthday. Or retirement. In advance. Guy welcome to Bloomberg Markets. You are looking at the principal room. Coming up mark reuss, General Motors president. Thats at noon on bloomberg. We are not going to see china go back to where it was. Its a very big component of the global economy. Its consumer of metals but we have to be reminded by the fact that if we build a better world for everyone we need to develop into all metals. Copper is the most strategic of all those metals. Alix that was mark briscoe speaking to guy yesterday before the chinese Economic Data overnight. Are we entering a disinflation cycle . Joining us now is chen zhao chief macro strategist. They have to fight disinflation but they still want 5 growth, whats your take . Chen its difficult to achieve a sustainable 5 . Over a longer period of time the financial problem is so serious because of a lack of confidence. You could describe that as an implosion of business and entrepreneurial spirit and confidence. People dont want to spend. Everyone wants to save because they have no confidence in their future. That is temerity because of economic policy. I dont think its anything else. Economic policy is so bad, disinflation is going to be steady for a long time. Guy how should i think about this . Is china and the new japan . Is that the scenario we are looking at . Chen in the old days i would not believe that but increasingly, from the policy response in the beijing government ive seen so far, there is a risk of china becoming another japan. Japans problem is obvious. People are spending way more than the desired investment. Thats a big problem in china. They are saving more than what the economy can afford. The only remedy is for the government to this step in and spend a lot of money, more than his predecessor. The government refuses to do so. Alix its interesting what the government says about Country Gardens. That was more than a mismanagement story at a liquidity stress story. How they handle that and how much money they have to put towards it. Look at the bonds . Guy what do you think . I look at this and the unintended consequences that could come off of this are difficult to predict. Chen i just shake my head and say, these guys dont understand economics and they want to have control on everything. This guy being president xi jinping he wanted control of everything and now the most serious thing and dangerous thing he is telling his fellows you have to be steadfast. We have chosen a course in the government has to stay fast. They have chosen the wrong policy do you just go all the way to the end of that . That is what we are inhabiting. This is a very dangerous policy that he is pursuing because he, today, is often thinking about leveraging. Sarong a wrong time to think of leveraging. Alix use that what they could do for Country Garden . Chen its not going to cut it. All of these real estate companies, their struggling not only because of money but also, the structural shift. The chinese economy is changing, the entire country has matured. There are some companies to invest in others die. Chinese credit is beginning to be salary. Guy what is the Global Impact of this . We have mexico wrapping up, canada wrapping up, that engine of growth, theyve taken away the export story. Are the implications are smaller or greater for the rest of the world . How does this ripple down through the rest of the economy . Chen everyone think about body bears, no one wants to touch u. S. Treasury loans. Im one of the rare few were i think bonds story will be a big deal towards the end of this year. With all the bears are toward stocks, they are all capitulating and nobody wants to touch bonds. I think we will see a big runs and bonds not only because of china but other factors coming into play. Alix just like it was a equity market, is it more vulnerable than the u. S. . Chen we have come a long way in terms of the stock market rally. We are careful when it comes to value. We have fiscal expansion in the u. S. , where do you go from there . Thats a huge deal, spending is growing at 20 and tax collection has collapsed. Guy any chance of the chinese chen they will not let it collapse. They have a lot of reserve, they can manage. I dont think they will let it crash. I think deflation is a big deal. No matter how they try to recover in china there is a major Manufacturing Center and it is going through a widespread price deflation. That has to be a good thing for bonds. I dont care where the bonds are. The united states, the german or the chinese bonds. Guy you like bonds, were given that detail there. Its great to catch up. You dont hear about a lot these days at the moment but we will see what happens. Maybe the disinflationary story will start the ripple more deeply. Chen zhao chief macro strategist. Relationships between chinas of the united states. They are trying to slow Chinese Development in ai. U. S. Money investment into those spaces and details on what is happening. Wall street week is next, this is bloomberg. [mo] if youre thinking about going back to school, this is for you. I ended up spending less money my entire time at snhu than i did in just one year at my other university. [juan] my time at snhu has given me more confidence. Now i can go for that promotion. If youre ready to go back to school. You can do it. Southern New Hampshire university has changed my life. And it can change yours too. [announcer] visit snhu. Edu. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh alix time for wall street b. Today we will continue the conversation, the u. S. Will restrict investment into china. This one testified private equity and how it ventures into china. What is the rest . Sonali quantum computing, artificial intelligence, over time we have seen large technologies get exposure to china and benefit from the growth like ali baba so to have this Cutting Edge Technology being targeted, when there is a reduction in investment in china because of these geopolitical risks. Guy people in the industry have been seeing this coming. Talk about the scale of the reduction weve seen and how big of a scale of reduction we could see coming to place . Sonali the reason you have to qualify as you have large private equity firms looking at these geopolitical tensions between the u. S. And china and they dont walk away from it. Bloombergs reporting qualifies the scope of this role thats yet to be announced that limiting the scope of the executive order to be only part of the revenue for these companies. It is not limiting all investment in the companys. You are still seeing even with the tension over the past few years the companys massive deals. Carlisle a in china. They kept the stake and got more investors into the company but you think about how big of an investment that is been. Its a factor but even mcdonalds is prone to ai. What is the scope of how much they have to lose their at the end of the day . Alix have you talked to any fundraisers from private equity firms, its all major. Thats where they go to do fundraising. Sonali because of these tension theres been movements of the middle east as well. All the people whove been in abu dhabi and dubai in the past few months. We wrote about carlisle cutting china exposure on the heels of geopolitical tension. They have continued to do work in the country but its a form of fundraising. Its not just large entities. Its also wealthy individuals. Theres been a massive accumulation of wealth in china that have become mass backers of private equity firms. Some of this movement has gone outside of china into india, singapore and other nations. Guy i think hedge funds moving to china will have geopolitical indications. Stoxx 600 up 2. 69 . The huge story is fuel and gas prices. The risk we will face as we approach the winter. Gareth mccartney to join us next. This is bloomberg. With personalized insights from 23andme. I did have hearing aids from another company. I was just frustrated. I almost gave up. With miracle ear its all about service. Theyre personable. Theyre friendly. Im very happy with them. We provide you with a free lifetime of aftercare. Meaning free checkups, cleanings, and adjustments. I see someone new. Someone happy. Its really made a difference. Call miracle ear at 1800miracle and schedule your free, no obligation hearing evaluation today. Its an amazing thing when you show generosity of spirit to someone. And you want people to be saved and to have a better life, then you dont stop. The idea that we have saved five million peoples lives, its overwhelming. Its everything. Guy wednesday, august 9. European stocks bounced back. Roma backing down on a windfall tax on italian banks. The big story out of europe today is the huge surge we are seeing in the price of lng. We will talk about that in a moment. The countdown to the closed starts right now. The countdown is on in europe. This is Bloomberg Markets european close with guy johnson and alix steel