In commodities prices. Easing inflation and policy support should help in the second half. And softbank surprising with a loss despite son returning amid tech sector gains lets get straight to it european banks in focus after the Italian Government decided to impose a surprising windfall tax on Net Interest Income for the italian lenders. You see it is dragging down the sector unicredit is one of the best performing stocks not just in the ftse mib, but the stoxx 600. It was up 700 . Unicredit down 5 . Really, really sharp moves d downwards in the italian banks this was a surprise to the Investment Community and banks and i was speaking to the unicredit a coueo a couple week ago. The government has come out with the measure. I would say a lot of it is down to the fact that similar to other countries, italian banks have not been quick to pass on higher Interest Rates to depositors they do quick to pass on the margin to lending, but not to depositors you ask what you can do to shore up support for us, but lets impose tax on net income generation it hasnt been well received the reaction in the market today is telling it tells you not many people aw this coming. When you step back and look at the government, this is a populous government which is not as populous as many expected and feared since taking over meloni has not pushed through a populous agenda as many thought she would do when you step back, not a surprise with the reaction 40 tax on the banks looking at citigroup this morning publishing a note this will equal 19 of banks net profit in 2023 facing a substantial negative on the banks. I thought that note was interesting because it shows the banks that probably will get hit the most are the Smaller Banks like unicredit which has been a key part of the lending exposure to germany the Smaller Banks are the ones most geared to higher Interest Rates and growing quickly. If you look at the levy structured, it is different from the one posted which is a percentage of total Net Interest Income over here, you have to cross a threshold in growth, and then that tax comes in. If you are growing on Net Interest Income, you will be taxed more. Getting back to the conversation with banks the last few weeks with guests, the Analyst Community was long peripheral banks that is why we see a pullback in the banking space. Get in the peripheral banks and not passing it on to depositors. Last thing, the distribution that you would have gotten from investing in the banks is a key appeal to investors. Unicredit, as i have spoken to the ceo several times, they have distributed 100 of buybacks in divi dividends. Going forward, you have to think if that impacts that profile we will talk more about banks and joined by the founder of macro advisers that will be happening at 10 30 cet. A topic on our minds this morning. In the early hours of trade and european banks down this morning. That is not the only story were monitoring from overnight. Julianna. We are seeing a pullback in basic resources names in europe. Part of the reason is disappointing data from china. Imports and exports fell in july missing forecasts and accelerating losses from the month before exports led by a more than 20 plunge in shipments to both the u. S. And the eu. Now total imports also cratered falling by 12. 4 on the year breaking it down by region, here are interesting steps. Chinese exports to the United States over here declined by 23 year on year exports to the eu fell by more than 20 according to a cnbc analysis of customs data in contrast, exports to russia expanded by 52 . This was lower than the 91 growth rate. Interesting to see where the china trade relationships are strengthening and weakening. In terms of the Market Reaction, here is a look at asian equities overnight. Nikkei trading slightly higher performance with the shanghai trading down by a touch. Hang seng in hong kong selling off down 1. 9 . A look at the yuan you have the onshore trading stronger against the greenback joumanna. Im happy to bring in our next guest kyle bass. Kyle, great to have you in london we see you on the air waves in the u. S. , but nice to have you in europe. Ill start with the numbers from overnight which is the driver for the price action were seeing disappointing both on exports and imports relative to Market Expectations the take away here is clearly activity is beginning to slow down in china. We are not getting the big pick ups in momentum or the recovery that analysts had been hoping for or anticipating. When you look at the construct of the chinese economy, you have youth unemployment of 20 to 40 real estate is in a serious decline. That grdrove gdp. Xi figured that out. Home prices were untenable and unreachable for the middle class. The people exiting university are not marrying or not having children and living in their parents basement the fertility rate has collapsed and china has a problem. Xi figured that out. Anyone who believes the real estate sector is turning around is wrong gl what do you think of the stimulus measures . Nothing like the previous playbook, but they announced measures to stimulate consumption and small tweaks and liquidity operations will that make a difference . I dont think so. I think it is stopgap measures. What is lost on the audience is the schizophrenia of the pboc. You have the representative fired in october at the end of the Party Congress and rehired him a few weeks later and just fired him the first week of july imagine if we are the bank of england and fired the governor and rehired him and fired and rehired him. This shows you what is going on over there it is not as great as one would think. You mentioned the headwinds coming xi jinpings way. What is most bothersome to him is it the youth Unemployment Rate or the property sector or the general slowdown or geopol . Xi jinping is not focused very much like putin, when wie talk about the autocratic leaders and what they care about, it is clear putin doesnt ch care about economics xi jinping is focused on taiwan. You can hear it in his speeches. We, on this channel, and on wall street, love to think they would never do that. It doesnt make economic sense we have to stop thinking that way. We have to listen to what the man says if you listen to what he says, i believe he will end up acquiring and reacquiiring taiwan. It will be a sharp issue for the economy and the u. S. Will have to improvise and quickly change what has already been going on which is a slow decoupling. What, based on listening to xi jinping, gives you the confidence he will go after taiwan in the next 12to18 months and what is the catalyst for it. I gave a briefing about this to Senior Military Leadership a few weeks ago. I think about it in a few buckets. Im not an expert in military matters, but i have consulted. They have one exercise to do before they tell xi think are ready to go. That is Amphibious Assault simulation the second is what is china doing the mainland in preparation for a potential war . We have seen the counter espionage law and the way they have changed their legal system to give beijing the right or ability to foreclose on western assets and detain expats with the counter sanctions law in 2021 if you look at what they are doing legally and build air raid shelters or combat hospitals everything you expect them to do, they are doing in the last two months, they are running marine diesel and refining at full tilt. When the economy is slowing down what does that tell you . There are signals that point in the same direction that none of us want. Xi will bring war to the west. Okay. Hopefully youre wrong. I hope so kyle, you are one with of the most notable china hawks in the market you have criticized the u. S. Government approach to the foreign governments cwith dealig with china yellen was there a few weeks ago and we saw the comments here on the station. What is the appropriate response from the u. S. Government and u. S. Companies we talk about qualcomm and intel and tesla of these are major u. S. Companies and derive income from china do you cut them off . So many people will get it wrong and lets says im right, unfort unfortunately, some companies will lose revenue and supply chains will be problematic i think when you think about foreign policy, we sit here in the uk imagine if there wasnt a Winston Churchill, what language would we be speak today . What have we learned through chamberlain is achieving autocratic madmen doesnt get you anywhere these are difficult decisions. We enjoyed a peace dividend minus a few, you know, skirmishes with terrorists we have not had major wars, really, since world war ii lets say world wars we believe that era of the world was overw with. Strength through weakness is what the u. S. Has adopted. Strength through weakness never whit works. I think we need to be stronger just today, were expecting President Biden to release the Outbound Investment restrictions we, today, just like the u. S. And uk and europe of the 1930s has been our money that has been building the military benefits and building the chinese war machines which has been built with u. S. And european money we have to stop that we have to stop. When you ask what should be done stop outbound restrictions on companies and any company that deal with Chinese Military building their aircraft carriers and war machines and ships and tanks. Everything theyre building is being built with u. S. Money. The democrats and republicans in the u. S. Are very open about their rhetoric against china wanting to derisk the relationship the approach is different from the Trump Administration to th Biden Administration what you can reflect back on the trump years and what can we learn from policy moving forward . I dont agree with the assertion it has been different. If you look at the Biden Administration, theyve gone good things. In the Trump Administration, he is known as being tough on china. He was never tough on whchina. It was his people and ediface below him. He fault that. I think when we get to where we are today, the private sector, joumanna mentioned intel and qualcomm and others, if we leave the National Security of our countries up to the private sector, well all be speaking chinese tomorrow we need leadership and Margaret Thatcher and Ronald Reagan we need someone to stand up and say this is not going to happen any more we need to think longer term not just about profitability, but safety and way of life. Kyle, i know you read the book chip wars because it highlights the future economic wars are going to be fought via semiconductors we have the likes of nvidia and Artificial Intelligence chipmakers that really are getting a lot of hype at the moment the u. S. , in that respect, seems to be ahead of china where do you think china stands in the race for semiconductors and these ultra high Tech Semiconductors which can be used for weaponry and military . It is the arms race of the 21st century that is key. The way i understand it is the reason were pushing so hard on a. I. And quantum, if you get to decrypt and if you one the r i you win the raice, you own the world. China is racing to that end. We are trying to race and trying to get there with our allies if you look back to october 7th of 2022 and what the Biden Administration did with the chips act and if you read what they wrote and they all believe that, that was a quantum leap, pardon the pun, in this fight for quantum you prsupremeacy. You cant wait to buy another chinese stock on wall street there is a dystopic relationship with investors and china i believe we will wake up and realize we have been at war with them a long time and we are now realizing it joumanna made a point of the next war being a chip war. You think about it we are organized in the west with departments that are the best in the world and among the best in the world. The cyber war we are fighting, which is different, we have War Departments for cyber, but we dont have an economic War Department in the uk or europe or the west or u. S we dont have a data department. Data war set up. China is winning those every single day until we define them as who they are and treat them as who they are and realize our two ideological, lets say, culture underpinnings is difficult given the Chinese Communist party it is important to acseparate te people there we are talking about the government and not the people. Those are two Different Things they have a beautiful culture for the last millennia kyle, thank you for sharing your views fascinating. You are kind to stick around we will talk more with you after this break kyle bass of hayman capital. S coming up, the dow sees the best day since june. We will have more with kyle bass just after this. Shipstation saves us so much time it makes it really easy and seamless pick an order print everything you need slap the label on ito the box and its ready to go our cost for shipping, were cut in half just like that go to shipstation tv and get 2 months free welcome back to street signs. Kyle bass is with us founder of hayman capital. Kyle, hope you were able to catch that previous segment. Lets pivot to the u. S how do you describe the issues on wall street that is tough when you look at banking, you saw Bank Downgrades today in the u. S. Or maybe yesterday. When you are in the uk, you dont know if it is today or yesterday. Or late in the evening. Last time i went to bed the bangking sector in the u. S. Is off. If you are a family or office and you want a construction loan, good luck. You wont get one. That turned off in april or may timeframe. With lending off and rates high and you saw the chinese exports numbers today, you will see a slowdown we will see that slowdown, i think, before the end of the year it will all fill in the numbers. We had 15 months in a row of declining growth we will get to a negative number at some point. We need to slowdown. The narrative in the markets is there is 40 more in the u. S. Than in the world. Things are going up because rich people have a lot of money were encountering significant headwinds. I think well get somewhere by the end of the year where the u. S. Will stop raising rates and cut late this year or early next year. Potentially rate cut this year who knows do you think Equity Investors are complacent about the risks i do. It is hard for me to balance the amount of capital in the system with where does it go. The key in the u. S. And what is the real issue is we will issue another 1 trillion of bonds between now and the end of the year that is a huge number. Who buys those bonds chi whichina is selling there is qt in the u. S some point in time the yeields are higher back home. That is important the currency basis swap which is macro technical and that is making it is not to the point yet, but close to japanese investors bringing money home and bringing it home from china and bringing it home from the u. S. They wont buy bonds and it will be tough kyle, last week, fitch downgraded the u. S. Sovereign rating what is your opinion on the decision they took a lot of people are saying they are looking at out dated data. Some say the fiscal situation is worsening. The justification they cited is brinksmanship. The Biden Administration jumped out and blamed it on january 6th. Come on that is ridiculous two and a half years ago it didnt take fitch two and a half years to figure this out. We have almost 5 trillion of government revenue in the u. S. This year. Were going to spend at least 6 6. 5 trillion. We will spend 1. 5 trillion more than we make revenues up 22 over 2021numbers. Up 22 thats amazing that is inflation drivedriven. Fitch is saying it is unsustainable. Interest expense from 500 billion to almost 1 trillion in a short twoyear timeframe we spend 1 trillion of interest on 5 trillion of revenue. When you get over 10 , you become a problematic country what with fitch is saying is true unfortunately, i dont know i think the politicians have been taught by the fed that the fed will always be where the central bank will print whatever needs to be printed the stimulus was a massive mistake and it credit eed huge inflation around the world we all know it costs so much more to live lets say we can afford to live. Imagine the middle, middle class or god forbid, youre poor this disaffected so many of the wrong people that is why you are seeing the friction around the world increase. Fitch decision is valid twe should be happy we have a aa plus rating given the fiscal idiocy remwe are facing. This is happening at full employment never before have we seen a deficit this large in a percentage of gdp with full employment this is a political problem. Speaking of politics, before we let you go, electricsions ne year do you have a feel of biden and trump . This is my feel both of the people should be running our country for a multitude of reasons on each side i think you will see someone come in late i think you will see, my view is Glen Youngkin will come in late from virginia and wing the election this is my long shot poles polls over the weekend have trump and biden tied what world are we living we know no one wants to vote for either we need a viable candidate in the run. You will see bible candidates come in. My guess is Glen Youngkin. There are others somewhere as you say in the office, you cant break your arm jumping out the basement window. Anybody will be a better candidate than these two diguys you mentioned we need a Margaret Thatcher or Winston Churchill deal here. I think National Security is the key to running sovereign nations in the west for the next decade or more it hasnt been here before we are in a new paradigm a hinge in history where that changes. That hinge is going to be clear and present in the next couple years. Kyle, thank you very much great to have you on on the show today. Great to see you in europe and your perspective on all things big thinker. Kyle bass, founder of hayman capital. Coming up on street signs, european banks track the biggest fall since march we track what is going on with these banks specifically after the break. When we started selling my Health Products online our shipping process was painfully slow. Then we found shipstation. Now were shipping out orders 5 times faster and were saving a ton. Go to shipstation. Com tv and get 2 months free. Its hard to run a business on your own. With shopify, you have everything you need to setup your online store, to connect with customers, and to bring your dream business to life. Because when we work together, the future is bright. These days, your customers are not just down the hall. Theyre all over the world. So cute. It doesnt have to be lonely at the top. Join the millions to finding success on their own terms. Start your journey with a free trial today. Welcome back to street signs. Im Julianna Tatelbaum and im Joumanna Bercetche and these are your headlines shares plunge with italys biggest banks shedding 6 after rome pushing through a late night 40 windfall tax for 2023. Chinese falls double digits and kyle bass forecasts conflict in taiwan under leader xi jinping. I believe he will acquire taiwan by force next year. Glencore hit by easing inflation and chinese policy support which should help in the second half. Softbank with a loss of 3 billion which is worse than expected despite the fund returning to the black amid wider tech sector gains. European equities have been open for an hour and a half now. It is red across the board the standout is the italian market ftse mib down 1. 6 after the surprise banking thrown out by the meloni government last night. We will dive into that in detdetail in a market. The market is suffering than the wider european market. We are seeing a downtrade driven by the weak trade by china imports and exports plunging suggesting that the weakness in the chinese economy continues. Looking at european banks, the sector is trading lower. Not just the italian lenders the german index is trading lower. Deutsche bank is down 2 commerzbank down as well the italian lenders are hit hardest. It italys cabinet announced a surprise windfall on measures which imposes a 40 levy on extra profits booked by the bank this year. The founder of lc macro advisers is with us now lorenzo, your take on this with the Market Reaction which caught every investor by surprise you know, it is regrettable i think my view is that governments should regulate and make sure that regulation is properly implemented and respected and not in the macro dynamics i think this is a major mistake. It is not just this government in italy to interfere. I think it is a continuation of the trend we have seen in the past it is negative for a number of reasons. Just how negative is it when w when you look at the share prices, i can see some down 6 is the negativity priced in here or are we at the beginning mof more selling to come this is just the beginning as you mentioned before which is not just italy this morning, but china. I think the decision in italy could have contingencies if you tax windfall profit for banks today, nothing prevents the government from doing the same in the future on another sector you know, that is negative for financial markets. Valuations will suffer secondly, in terms of investment activity, how can you attract investment if you then tax, you know, in a subjective way in the Banking Sector or tomorrow it could be another sector. Third, taxing banks can be dangerous. In a situation you need bank lending to finance the recovery, then it could have implications for credit to the economy. Lorenzo, there is another argument that the deposit data has been extremely low as the ecb has been hiking Interest Rates and banks passed on that higher Interest Rates to people who want a mortgage, but not quick to pass on the Interest Rates to depositors. Italian banks have the lowest deposit numbers in all of european banks perhaps, what the government is trying to achieve here is for banks to pass on more benefits of higher Interest Rates costs to the customers what is the best way for them to go around achieving that i think, again, it should be about regulation making sure that the market is functioning correctly. Not really taxing because taxing implies the market is not functioning well which is to be proven in my view. Now, i think the problem is twofold. One is on the mortgage side and the other one is on the deposits it is normal, i would say, when you havea cyclical upswing in Interest Rates to see the interest margin widen. It has always happened you can argue that is widening too much, but it is normal to happen that way. Second way, the mortgage problem, italy has relatively low Mortgage Markets compared to many other countries basically, a lot of houses do not have a mortgage attached to them secondly, the majority of mortgages have shifted to fi fixedterm Interest Rates and they are not suffering that much as Interest Rates rise in banks, were prepared to intervene and extending maturities and provide support to clients i think this thing is a bit overblown in my view fortunately, it will happen in sequences. The big story from the shareholder perspective is the distribution which has been under way with buybacks and div dividends. To your mind, the announcement from the Italian Government yesterday will derail the bank plans for the very generous distributions to shareholders . I think so. It is likely this changes the picture. There might be decisions to step back or to change some of the decisions. Again, the problem is wider in my view. It means that the government can intervene in Market Dynamics today is the Banking Sector and tomorrow might be Something Else it is more fundamental i think if there is a problem with regulation and implementation, it should address that and not tax the banks. I think the decision by the Italian Government is a majo mistake in my view. The one thing you talk about is not being confined to the Banking Sector, where might the government turn its attention to next there is the issue of Energy Companies that traditionally has been a cash cow sector for various governments. Now, i think the taxation we have seen in the past was a bit more justified because clearly there were problems in regulation in the gas market which now has been properly addressed, i would say all sectors are regulated and potentially can be subject to windfall taxes in the future that is problematic, i would say. If the investment is also another issue, then as you know, italy is undergoing a Infrastructure Investment project partly financed by new money and if that happens in that sector, it could be a major problem as well. Lorenzo, i appreciate you joining us this morning. Founder of lc macro advisers. Ness in the basics resources. G g glencore earnings missed expectations amid broad declines in prices. The profit of 9. 4 should make for a positive second half in germany, bayer has a lost of 1. 9 billion euro. The chemicals giant slashed the outlook in the release citing deterioration in the weed killer a muted share price reaction this morning. Elsewhere in the uk, retail sales rose in july the worst result of the year according to the British Retail Consortium the uk will see inflation ease to 10 to the end of the year which is well above levels consistent with the inflation target of 2 that is just one part of the cpi basket a significant fall in food prices a long way away andmay not materialize and overall inflation in the country remains much too high. Arabile is here with more and taking a closer look at the retail Sales Numbers this month. Arabile, it is not a pretty figure we talked about the strength of the uk consumer so far, but i think it will change. It does look like things are beginning to change. It depends on the scale, joumanna you look at the july sales figure of 1. 5 it shows weakness and slowing inflation and higher Interest Rates meant consumers have been unable to buy more goods it depends on question side of the equation you are on. You look at the july number and that tells you the dropoff we have seen which is sitting in positive territory for now with the retail sales number. For the food sales figure, 8. 4 . Higher when you look at inflation figures at double di digits the chief economist saying that will drop off to 10 this year food sales are 8. 4 compared to the 9. 8 which tells you consumers are spending less with the impact of the higher Interest Rates and where inflation has been for the longest time is still hurting consumers. So as we have seen with nonfoo items. Clo clothing the summer wardrobes were not added to we see clothing dip off. Overall, Consumer Confidence is getting better, but it is not yet optimistic arabile, thank you for breaking down the numbers for us if you want to get involved in any of the conversation on the show or on the discussion with kyle bass on china or u. S. Politics or uk inflation, follow us on x, formerly known as twitter. You can follow us. Also coming up on street signs, soft bank posts the thid straight quarter of losses well discuss coming up next hi. Im shannon storms bador. When we started selling my Health Products online our shipping process was painfully slow. Then we found shipstation. Now were shipping out orders 5 times faster and thanks to shipstations discounted rates were saving a ton. Honestly, we couldnt do it without shipstation join over 100,000 Online Sellers who get ship done with shipstation go to shipstation. Com tv and get 2 months free. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes thats what im talking about. [ cheers ] running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. We are watching the italian banks and the price action this morning. You see here that the majors are down a lot more than 6 after the surprise announcement from the Italian Government of the windfall tax of 40 of Net Interest Income. We have been speaking to analysts this morning and many saying this was a surprise, but also not necessarily a good pi precedent. What other sectors of the economy could they tax next . The reaction in the italian Banking Sector as julianna and i were talking about, we are seeing profit taking or trimming at this point. Elsewhere, Softbank Group surprised with the quarterly loss of 3. 3 billion worse than expected. The japanese conglomerate saw the vision fund back in the black amid a wider recovery in tech stocks. The Portfolio Manager joins us good morning, richard. Talk us through the main take aways from the earnings. There was an expectation that softbank would move into profit territory, but that didnt transpire. Didnt transpire. I tell you the expectations are meaningless. There are so many oneoffs that come into the softbank numbers that nobody can make a sensible forecast for one quarter analysts thought they were making forecasts, but were not with the greatest respect to them the comment of the vision fund which is the engine to drive the company over years which is creating the innovation platform with world leading positions in many globally transforming businesses and that vision has significant improvement. I think that with the listing of a. R. M. Which will woulith whh will be the focus. They are longterm investors. We saw the down year for the tech stocks in 2022. We are seeing a bit of resurgence again this year will with will the vision fund benefit i think the overall recovery in technology has to help the valuation of the vision fund if we dive into details, the Vision Fund Companies are not publicly listed. That information they give us every quarter is based on auditor estimates. Im not trying to dispute those, but the figures will lag somewhat or correlate with public figures for nasdaq and so on there will be a broad longterm coalition. A lot of the individual companies have great opportunities. They have Great Potential which a lot of analysts have not been able to explore. These are not Public Companies i think over time, that value will be realized a. R. M. , for a long time wasnt able to doisclose details. Now we see that a. R. M. Has discovered it is disclosing more about its business and the perceived valuation of that company is rising massively and we will see how it moves soon. Richard, can you go into a little more detail on how you see softbanks stake in a. R. M. Is evolving post ipo i think they want to keep majority and go on with the consolidation portion of the business a. R. M. Will be the contributor to the net profit figure of softbank if you look at this with an analyst hat, this is a play on Global Technology . You can value softbank just like other companies over time. Look at the net profit and price earnings the point is there are profit figures you can use as an analyst. A. R. M. Is an important part of the issue which we think it could have companies con consolidate with holdings. You have the big Japan Business which is doing really well we had great numbers from the old dead holdings the other day with significant improvement in the businesses all of those things together, along with a. R. M. , became the majority stake and that means profits of softbank are more visible than people think. That will sustain the share price over time. Richard, thank you for joining us richard kaye joining us from to tokyo. Lets look at u. S. Futures wall street saw Risk Appetite return this morning, it looks like investors are traeading water in terms of the week ahead, the data print on thursday core u. S. Inflation is expected to rise by 0. 2 in july. The smallest backtoback gain in two and a half years. On the annual basis, the forecast is shows cpi rising by 4. 8 a big print to watch of course, after that nonfarm payroll report on friday a lot going on. That is it for street signs. Thanks for watching. Im Julianna Tatelbaum. Im Joumanna Bercetche. Worldwide exchange is coming up next. Shipstation saves us so much time it makes it really easy and seamless pick an order print everything you need slap the label on ito the box and its ready to go our cost for shipping, were cut in half just like that go to shipstation tv and get 2 months free it is 5 00 a. M. Here at cnbc global headquarters. Here is your five 5. One and done looking to cut the rally in half after the best day since june. Futures are lower. Adding a new risk to the rally. More than 100 billion of Government Debt to flood the market testing investor appetite for yields. In china, a new batch of desk disappointing Economic Data on the second largest economy. And apple trying to bounce back after the worst twoday stretch since november