Good afternoon, everybody.
Yes, indeed. We are across Bloomberg platforms. I am Carol Massar, along with Norah Mulinda. Tim is off this week.
A week that feels awesome to the market.
Stocks are higher by 0.7%. But looking at some of the stories, trading is kind of meh.
A little bit of this and that. We will talk about the market, U.S. yields. Could it be that the U.S. is a safe haven? We will talk about that and the tighter financial conditions we are seeing in the U.S. I thought that was an interesting report by our Bloomberg colleagues. Also, higher rates. This is a guest you brought to us. The real estate market cares about the rate environment.
Everybody cares about the rate environment, but specifically real estate. That drives every decision in this market.
They are pivoting. We have a lot to get to. We will talk about the growing business of growing diamonds in a lab, something we have covered a few times at Bloomberg. Natalie Morrison is the founder of Astoria London. She will join us back in our studio to talk about what is going on. They have been growing, opening stores.
Sarah Jessica Parker has a line coming out under the brand. She is driving a lot in terms of the creative at the company. She will be joining us in studio. It is a Monday. We have a little bit of this, a little bit of that.
We have to get a check on the trade. The S&P higher. Over to Amy Morris, in for Charlie Pellett.
President Trump to unveil a plan to ease restrictions around the use of red-dyed diesel. That is free of most federal fuel taxes but is restricted to off-road applications like farm equipment, construction, and heating oil. The Trump administration is preparing to ease the limits that restrict the use of that type of diesel.
The average cost of diesel right now, about $6.32 per gallon. Crude oil moving lower, off session lows. WTI less than $90 a barrel, but Brent crude creeping back up near $101 a barrel. We check markets for you all day long at Bloomberg. S&P 500 is up 0.7%. Nasdaq nearly 1% higher. The Dow up 310 points, 0.7%. The Nasdaq up 0.7%. The 10-year Treasury yield at 5.3%. The 30-year Treasury yield at 5.69%.
The service sector in the U.S. expanded at a slower pace in September. Cost pressures growing by the most in four years. One institute's index fell a half point. Resilient consumer spending, strong business investment, all of that continues to support demand for services, but firms are dealing with mounting costs. ISM's measure of prices rose to 74, the highest since July of 2022. The measure had hit a nearly one-year low in February before the Iran war sent fuel costs higher.
For on-demand news 24 hours a day, subscribe to Bloomberg News Now wherever you get your podcasts. That is a Bloomberg Business Flash. Let's return to Bloomberg Businessweek Daily with Carol Massar and Norah Mulinda.
Good stuff. Thank you. U.S. stocks trading near all-time highs despite geopolitical risks, concerns about elevated oil prices and bond yields. Europe is something we have been talking about a lot today. The euro to its weakest level since 2025. It has boosted the dollar's haven appeal, but U.S. rates go up and the dollar usually also strengthens.
Absolutely. We are looking at the broader scope right now. I think when looking at rates, we see the benchmark 10-year at 5.34%, still elevated above the key 5% we are keeping an eye on.
Not 6%. Let's see what our own Michael Ball has to say. He joins us in studio. First of all, good afternoon.
It is good to have you. It feels like a little bit of a weird day. We are focusing on France and overseas. It also seems like a day where all of a sudden American exceptionalism is back in vogue. Tell us about the trade.
We saw a little bit of relief in spreads, a continuation from Friday. The data was OK. You guys covered it. It was not overly strong. It confirms the S&P PMI, which was stronger. We had the revisions there. You see tech leadership. You have had most of the sectors in the green. Not the kind of story where we had communications and tech being charged and everyone else suffering. Some relief, but there is no real solution to these problems. Talking to traders today, do we have to worry about the physical stuff again because it was not driving yields higher? That would seem surprising because you see an escalation with the Saudis and Houthis over the weekend, but here we go.
There are days where the markets shrug off the same stuff we talk about every day, but there are days where we see a reaction.
Crazy volatility. We are seeing major indexes in the market with double-digit gains, but I am curious. We are talking about the news happening today, and typically you might expect money would be pouring into Treasuries, which would ultimately push yields lower, but we are seeing them elevated, talking about the 10-year above 5%. Tell me, why are Treasuries not getting more of a haven bid?
The curve steepening since we got the S&P PMI, so a lot of that has come into the front end. People are hiding out there. There is too much wishy-washiness there. You worry about the fiscal malfeasance, which is a global story, or the generation of the curve is not there. People feel what is hiding out in the hyperscalers and semis because of the way the factor is performing right now. People are finding some trouble. We are now starting to price in the midterm. We look 30 days ahead and are starting to think about it. We think the Fed will not go in October, so you have macro narratives shifting notably.
What about the news out of France? We are watching global elections. What is it we as U.S. investors need to keep in mind, or is it a case of bad news overseas means good news for the United States? It is interesting as we get ready for another earnings season. Does the earnings momentum continue, slow down a bit but still continue?
Specific to France, they are in a tough situation and putting the ECB in a tough position. The political bifurcation, both far left and far right, has made it hard for anyone to believe there can be a coalition or real solutions to the deficit problem. Not able to grow ourselves out of it that easily. If someone comes out and starts to do what we are seeing in the U.K. and gives solutions that are credible, we have seen a subsequent reversal and they have gotten more fiscal forgiveness. The pound has been outperforming. All of this at the expense of the euro. Just to switch back to the second part, earnings are needed because this is such a concentrated market. Earnings growth is only in a few names at the S&P level. What we got in Q2, all of a sudden there was an explosion in earnings guidance and the economy was holding up fine. Finally seeing it on that front as well.
Got to leave it there. Thank you so much. That is your market setup on this Monday. We will whittle it down to a sector that is interest-rate sensitive. This is as we talked about what has been going on in the Treasury market. We are above 5%. We have a great guest, one of the biggest in the world.
This is a massive company focused on retail. This is Realty Income Corp. We are joined today by the CEO. He is joining us on Zoom out of San Diego. Thank you for joining us. We have been talking about this rate environment when it comes to the bond market. Just broadly, seeing the benchmark 10-year still elevated above 5%, currently at 5.3%. Talk to us about how you are thinking about this in your business.
Yeah, thanks for having me. It is obviously something we are keeping a very close eye on. The 10-year today hovering around 5.3%. What we historically noticed is what you have expectations of the 10-year, not what the current rate is, but once that expectation of where the 10-year is going to be settles in, the environment in our business starts to adjust to reflect what the new cost of capital environment is going to be. For us, we are oftentimes viewed as a proxy given the long duration of leases, etc. Rates at large, commercial real estate at large tends to be rate sensitive. That tends to be the most sensitive to what happens to the rate environment. I think this is where Realty Income stands out because we obviously created multiple channels where we have the ability to invest in Europe, the ability to invest in other markets like Mexico and the U.K. Therefore, able to take advantage of where we have best risk-adjusted returns. Despite what is happening in the U.S., there are multiple channels for us to lean on and continue to grow our business.
Before we talk about what is going on in the U.S., you mentioned multiple markets. So what is the most opportunistic right now? Is it not the U.S., Europe, Mexico, the U.K., or elsewhere?
Yeah, if you see what we did last year, we had a similar situation where there was a lot of volatility in the rate environment, which started to have an impact on our cost of equity. We pivoted to do a lot more investments in Europe. Europe accounted for about 54% of the investments we made in 2025. So on the equity side, on the monetization of real estate side, we are willing to go and pursue transactions where we find the best risk-adjusted returns. But a higher rate environment also allows us to lean into one of the avenues we created for ourselves, which is on the credit side of the equation. So we find very interesting credit opportunities in the U.S., working with our partners, trying to lend our balance sheet, and basically take advantage of what we see on the higher rate side by lending to our clients at very good risk-adjusted rates overall. We can play either on the equity side or the credit side.
So you will not pick a market? You will not pick a favorite market right now?
[Laughter] Well, look, I was listening to your previous guest. The 10-year bond rate is 160 basis points inside of the U.S. Purely on the equity side, that is where we are seeing a lot of opportunities.
What is also interesting about your business is it is largely focused on retail, so that gives you a fantastic read on the consumer. What are your tenants telling you about the health of the consumer?
This K-shaped economy is real. We have seen a lot of the businesses we are exposed to, the quick-service restaurants, the discount stores, the grocery business. Those are the businesses that tend to do well when you have this K-shaped recovery. And we see that in terms of the earnings guidance, in terms of performance of some of our clients that happen to be in these subsectors. Casual dining tends to suffer. You are not talking about the highest end of casual dining. The K-shaped recovery is real and they continue to do well, but some of the more national names you would expect to feel the brunt of this K-shaped recovery. You start to notice that. We are seeing that in our portfolio of names we are exposed to. It is a real issue. Thankfully, we reconstructed our portfolio to be very defensive in nature. Essential retail, when they tend to do well at times of economic uncertainty.
Speaking of essential retail, your portfolio is exposed to grocery stores, convenience stores, home improvement, dollar stores. Are there parts you are more cautious about right now?
Anything to do with discretionary retail. When you talk about higher-end items, they tend to suffer at times like this. We have been very deliberate about how we constructed our portfolio. One of the things we tried to stay away from is apparel and fashion and areas that tend to suffer at times of economic distress, so you will not find a lot of that. If you look at the portfolio today, it is about 90% in areas of low price point, service-oriented businesses and non-discretionary retail. That is the profile of the business we are exposed to.
If you are creating a company today and you could put as much money as you wanted anywhere, would you still do retail, or would you much rather double down on data centers?
That is a good question. I think what has defined us is our ability to continuously redefine who we are as a business. What is sacrosanct to us is our ability to continue to grow our dividends, which we have done for over 30 years today, quarter in and quarter out. Our ability to look for patterns and look for trends that we believe will help us continue to be the business that people associate with Realty Income is paramount to our success. What we saw on the data center side is a what-are-the-generation type of environment where there is so much focus on building out the infrastructure required for the digitization of everything we are doing, from AI to cloud computing to streaming, etc., to self-driving cars. You are going to need this infrastructure. We believe that the buildout of this particular infrastructure lends itself to the single-tenant freestanding buildings. That has been the thesis we are leaning into to try to continue to grow that piece of our business. Today, a small portion of our business, but the hope is it will be a much bigger portion. By definition, we are certainly going to be leaning into this particular area of the opportunity set we have available to us, and we hope this will become bigger. Having said all of that...
Go ahead. Finish, please.
We will not invest in every data center opportunity out there. We are hyper-selective in terms of where we want to invest in the data center space. Location is important. The partner who we are partnering with on the developer side is important. The type of leases is very important. Who is the counterparty? Who is the client we will be exposed to for 15, 20 years? That is important, and all of it will come to the floor when we make a decision about who we want to partner with.
So if you had to pick a percentage of how much data center, just quickly, would it be 30%? We are Bloomberg. We will hold you to it.
I wish I could, but I would just answer it this way. There are trillions of dollars that will need to be invested in this space. We believe, given the profile of the business we have, we need to be part of that solution, so it will be a much bigger portion of our portfolio.
We will continue this conversation. He is the president and CEO of Realty Income. Coming up, Natalie Morrison and Sarah Jessica Parker. We will talk diamonds grown in the lab. That is coming up next.
It is 2:21 p.m. on Wall Street. President Trump ready to unveil a plan to ease restrictions around the use of red-dyed diesel, free of most federal fuel taxes, restricted to off-road applications like farm equipment, construction, and heating oil. The Trump administration preparing to ease limits on the use of that diesel.
The latest average cost of diesel is $6.32 per gallon. Crude oil is moving lower. WTI less than $90 a barrel. Brent crude nearing $100 a barrel. A rally in giant tech companies drove stocks higher. Nasdaq up 1%.
Microsoft shares are 1.5% higher, touching an 11-month intraday high after the stock was upgraded to buy. Same worries about AI safety risks are driving enterprises to Microsoft as the trusted adult in charge. Analysts anticipate happier AI spending in fiscal 2027 and continue to emphasize Microsoft capacity. For on-demand news 24 hours a day, subscribe to Bloomberg News Now wherever you get your podcasts. That is your Bloomberg Business Flash. Let's go back to Bloomberg Businessweek Daily with Carol Massar and Norah Mulinda.
We talk about diamonds a lot. I talk about diamonds a lot. We talk about luxury. We talk about jewelry. We talk about watches. On diamonds, one of the things we pointed out a lot is how the market has drastically changed. Yes, a diamond may still be forever, but it may increasingly be grown in the lab. This market continues to grow, so we are delighted to have back with us the founder of Astria London, and she brought with her a great part of the team, Sarah Jessica Parker. Very well known to the Bloomberg audience. Welcome. Nice to have you here.
We want to talk about the stuff you are doing together, but I am curious how you guys came together because I am sure you get pitched a lot of things. You get pitched a lot of things. How is it this made sense?
We don't have time to tell each of our own versions, but I am sure they would be aligned anyway.
I got a call from my agent saying this young woman had reached out and had started this business, although it was not a brand-new newborn, and she wanted to have a conversation about it. It was specifically around lab-grown diamonds and what she hoped to do with the company and how she wanted to grow it in a partnership we may or may not be able to sort out. I was really intrigued and discovered how little I really knew about lab-grown diamonds. Most of what I knew was generally what is happening in this country and the price point I found it successful. That is how limited I was. The person that runs the master class.
Let's talk about the acceptance of lab-grown diamonds because I remember doing stories and there were limitations, costs involved in terms of the creation, but how has it evolved? When I talk to most people who get engaged today, it is a lab-grown diamond.
60% of the engagement diamonds are lab-grown diamonds. It is a $100 billion market a year. 1% of the market in 2015, 5% in 2021, almost 30% last year, although we don't know the exact number. I don't know if you heard, but it will be 100% by 2030.
Natalie always moves those predictions closer to where we are, and she is always right.
By 2030, 75%. I will make a bet on 90%.
I want to know what specific aspect of this project resonated with you? Yes, I need to be in on this.
I think the creative part is always compelling to me, but that without the kind of, that is necessary as I discovered over the many years being a creative person. You don't get far, it does not matter how big you dream, but there is also this technology that she was particularly excited about. She was extremely excited about the creative and what could be done and what she wanted to do and what she hoped we could do with this other collection. But the technology was a phenomenon to me. The fact that we can have so much flexibility by that you can ask so much of it, the quality and cut and clarity and the kind of elegance and beauty and luxury that did not exist yet in the lab-grown diamond business was pretty exciting to try to be worthy of. You know? Thus far, she has been right.
We want to talk about your connection because it is very unique, but let's go to the technology. There were limitations in the size. Lots of limitations, so there were questions about whether or not this could become something. Tell us about the technology or what we need to understand to the audience about what has changed.
I think what has changed is with technology growing all the time, there is nothing we can't do right now, so people dream big.
This is the first diamond necklace in the world, 174 carats, 1% of the diamonds in the world. So there is nothing we cannot achieve. Colors, clarity, flexibility.
This is a ring on a torque, so it actually spins. We also have all the new connection has necklaces and bracelets and cuffs. That is just part of the technology of great engineers and jewelry designers that can go hand in glove with the technology that goes inside lab-grown diamonds.
We are talking about a different era in jewelry. It is not just about using the technology. It is also creating a house on the future focused on sustainability, craftsmanship, design. When you mix all of this, we have to do a good job.
Talk to me about how difficult this is to pull off, being the expenses, the capital needed. How difficult is it when it comes to the technology to make things as beautiful as what you are wearing?
It is much more expensive than people think. It is getting cheaper with the economy of scale because the lab-grown diamond was discovered in 1950 originally. But now it has become only really famous since 2018 when the FTC in the U.S. declared a diamond is a diamond, whether from a lab or a mine. The technology is very expensive. You need a lot of PhDs. It is getting cheaper and cheaper.
Talk to us about your connection which launched this month because it has a real vintage feel to it. You talked about it. They are fun and move around.
They are fun but hopefully not silly. So much of what I love and have worn is really from thrift shops, consignment shops, vintage spots, and it is old. It is colorful. It is often bigger in scale. It has a little body to it. At the same time, it is not as feminine as what people typically consider jewelry for women. Some insight as this extraordinary collection that already exists. I say it is ultra-feminine. It is for a lady. Is this other consumer, this other shopper that might want a touch more muscle and a touch more -- I think of a metropolitan approach to it, but it is not, and it is for everybody. It just has a little bit more kind of -- it is a fuller figure. I don't know. This is one of them, but when I pull the piece, there are so many. This is part of the new connection. We have these pendants. It is just the tiniest corner of a portrait. It is just really based on color and a kind of shape and silhouette that might be recognized but feels that's recognized for the past but feels contemporary and is full of color.
