00:00Anything that happens within a 24-hour period is noise.
00:04And I think that once the market understands that we are focusing on fiscal consolidation
00:10and that we are trying to bring the market back into equilibrium in a thinly traded market.
00:21So ignore the noise, Besant says.
00:23Medjoupé, at this point, how desperate is Scott Besant looking?
00:27I mean, there's a credibility question, is there not?
00:29When you see the bond rally actually not lasting that long?
00:33So I think there is, of course, a credibility question.
00:35You can see that kind of playing out, I think, in the dollar and how the dollar is kind of
00:38moving.
00:39But I think the U.S. comes at it from a position of strength that maybe other countries would really,
00:44really struggle to compete with.
00:46When you're talking about one of the most deep and most liquid kind of bond markets,
00:50the approach of the Treasury really does have a lot of weight.
00:53And I think you could see, at least from the initial announcement that was made about buybacks,
00:57the move in markets, that people are listening and they're looking at what the Treasury is doing.
01:01I think the challenge is that markets have maybe had some time to think about it and have realized that
01:05actually scaling up the buybacks
01:08doesn't necessarily tip the scales when you look at the scale of long-end issuance,
01:12but also the scale of the U.S. deficit and where that's set to go.
01:15And I think that also reads across to lots of other kind of European countries.
01:19When we look at Germany, when we look at the U.K. and when we look at France,
01:23these countries where we continue to see a kind of increase in deficits,
01:26we continue to see pressure around the fiscal situation.
01:29And I think that's something we're going to continue to see in markets, that trend play through.
01:33And the dollar is weaker today.
01:35Marina, how does that impact European equities if the dollar is the pain point of all of this intervention?
01:41Yeah. I mean, European, like I was saying, earnings have been really strong.
01:47Euro strength, dollar weakness, optically, it's going, if that continues, it will bring down our earnings growth
01:54because our earnings growth is in local currency terms.
01:56We estimate every 5% rally in euro dollar brings down European earnings growth annualized by about two percentage points.
02:04So it will just shift the direction.
02:06Also, if you look at earnings revisions breadth, very well tracked by investors, asset allocators.
02:12There is a very clear pattern.
02:13Every time dollar weakens, local currencies in Europe strengthen,
02:17we see the ratio of European earnings revisions breadth versus the U.S. falling.
02:22So it kind of drives more inflows into the U.S.
02:26But then there's a question of, is this competitiveness?
02:29Is this a problem of competitiveness?
02:31We've done a lot of in-depth analysis bottom up.
02:33It's not.
02:34It's mostly just translation.
02:35So I think for investors, if you hedge FX, then probably U.S. equities look more attractive.
02:41If you don't hedge in constant currency terms, actually Europe will come out stronger.
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