This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance, and tech news as it happens. Bloomberg Businessweek Daily with Carol Massar and Tim Stenev, live on Bloomberg Radio, Television, and Bloomberg Originals. And a very good afternoon, everybody.
Yes, indeed, we are across Bloomberg platforms: radio, TV, YouTube, Bloomberg Originals. I'm Carol Massar, along with Nora Melinda. She is Bloomberg TV markets correspondent. Tim is off this week. So good to have you here.
Well, it's great to start the week on a week where it does feel like not quite everything is awesome, but it kind of feels that way in particular to the U.S. market.
Absolutely. As we're kind of seeing, stocks, they are higher. Yes, the S&P higher by about seven-tenths of a percent. But you know, even as we're kind of looking at some of the stories throughout the day, trading is kind of, you know.
Yeah, yeah, I'm gonna say. Yeah, it felt that way on our planning call. There was like a little bit of this, a little bit of that. So anyway, we're going to get into it. We're going to talk about the market. We're going to talk about U.S. yields. Could it be that the U.S. is once again a safe haven? So we'll talk about that. Also, the tighter financial conditions that we're seeing in the U.S. I thought that was an interesting report by one of our Bloomberg colleagues. Also, higher rates and rates. This is a guest you brought to us. We're talking about the CEO of Realty Income, Sumit Roy. The real estate market cares about the rate environment. I mean, everybody cares about the rate environment, but specifically real estate. I mean, that pretty much drives every decision that they're going to make in this market.
Yeah, and they're big time when it comes to retail. But they're kind of pivoting too. So we have a lot to get to with him.
And then we're going to talk about the growing business of growing diamonds in a lab. It's something we've covered a few times here at Bloomberg. Natalie Morrison is the founder of Astrea London. She's going to join us back in our studio to talk about what's going on. They've been growing, opening stores. We've also got with us the company's global creative director. She's Sarah Jessica Parker, so she's got a line that's coming out under the brand. So she's really driving a lot in terms of the creative at that company. So she's gonna be joining us here in studio. It's a Monday. We got a little bit of this, a little bit of that, everything. We kind of need that to get going. Hey, also to get going, got to get a check on the trade because we are seeing risk on, most names in the S&P higher. Over to Amy Morris in for Charlie.
All right. Thank you, Carol. President Trump set to unveil a plan to ease restrictions around the use of red-dyed diesel that is free of most federal fuel taxes. But it is restricted to off-road applications like farm equipment, construction, and heating oil. The Trump administration is preparing to ease those limits that restrict the use of that type of diesel. His latest bid to pare costs for the essential fuel ahead of the November midterm elections. The average cost of diesel right now about $6.32 per gallon. Crude oil, though, moving lower off session lows. However, WTI still less than $90 a barrel, but Brent crude now creeping back up near $101 a barrel. We do check markets for you all day long here at Bloomberg. S&P 500 is up seven-tenths of a percent. Nasdaq nearly 1% higher. The Dow up three-tenths of a percent. Russell 2000 index up seven-tenths of 1%. The ten-year Treasury yield at 5.34%. The two-year yield at 4.84%, and 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 more than four years. The Institute for Supply Management's services index fell a half point to 54.9 last month. Resilient consumer spending, a stable job market, strong business investment, all of that continue to support demand for services, but firms are still dealing with mounting costs. ISM's measure of prices paid for materials and services rose to 74. That's the highest since July of 2022. The measure had already hit a nearly one-year low in February, just 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. I'm Amy Morris. That's the Bloomberg Business Flash. Let's return to Bloomberg Businessweek Daily with Carol Massar and Nora Melinda.
All right. Good stuff. Amy, thank you so much. So, U.S. stocks trading near all-time highs despite some ongoing geopolitical risks, concerns about elevated oil prices and bond yields, renewed political uncertainty in Europe also is something we've been talking about a lot here today. It sent the euro down to its weakest level since May of 2025. So that's a reason why you've seen U.S. Treasury yields moving up. It also has boosted the dollar's haven appeal.
But U.S. rates go up, and usually the dollar also strengthens. Absolutely. And I mean, we're really just looking at the broader scope right now. I mean, I think that when I'm looking at rates, we do see the benchmark ten-year currently sitting at about 5.34%. So still elevated above that key 5% mark that we've been keeping an eye on. Not at six, though.
We can think about it. Let's see what our own Michael McKee has to say. He's Bloomberg News macro strategist. He joins us here in studio. It is, first of all, good afternoon.
It's time. Well, it's good to have you here. We couldn't even settle our plan and call. It feels like a little bit of a weird day. It's the news. Like we're 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 here.
Yeah. So you saw a little bit of a relief, funny enough, in spreads in Europe. That was a continuation from Friday, but overall we didn't get it here. Now the data was okay. You guys covered it. It was not overly strong. You know, you had the price sub-reading kind of picking up. And again, we confirmed this S&P PMI we got which was stronger. We had the final revisions there today too, which stayed in line. I think today is a little bit because again, you see tech leadership. You've had at least most of the sectors in the green. So it's not the kind of story we've had where we've had, you know, sort of communications and tech leading the charge and everyone else suffering. And again, equal weight really underperforming the specs. So today saw some relief there. But again, there's just no real kind of like solution to a lot of these problems. This is again, when I'm talking to traders today, this is like, do we have to worry about the fiscal stuff again now? Because there really wasn't much else driving sort of yields higher today because oil was down. And that was even surprising because you saw somewhat of an escalation, again, between the Saudis and Houthis over the weekend.
But here we go. It's one of those things, Nora, and we talk about it to Michael, that there are days where the markets kind of shrug off, right? The same stuff we talk about every day. But then there's some days now that we see a lot of reaction, crazy volatility. I mean, a lot of shrugging off the fact that we're even seeing major indexes in the equity market seeing double-digit gains on a year-to-date basis. But I'm curious, as we're talking about the news that's happening today, we've got the stress overseas. And typically you might expect that, you know, more money would be pouring into Treasuries, which would ultimately push yields lower. But we're still seeing them elevated. Just talking about the ten-year still sitting above 5%, not at six. But tell me about, why aren't Treasuries getting more of that haven bid?
Well, I mean, the curve is steepening in the last two weeks, basically since we got that S&P PMI. So a lot of that actually has come into the front end. So people are sort of hiding out there opposed to taking the duration risk further out because there's just too much wishy-washiness there. Whether it's you worry about energy and longer-term inflation, whether it's you worry about fiscal kind of, you know, malfeasance, which is now more of a global story, or just generally, you know, the safe haven bid for that. The curve just isn't really there. Although, to your point, the dollar's got it because cash come in, but then people feel more comfortable hiding out in the hyperscalers and hiding out in the semis as just an equally, you know, because of the quality of the balance sheet or because of the way that factor is performing right now. So it is a weird tape. People are finding some trouble. We've kind of now starting to price in the midterm. For example, if we look 30 days ahead, we're starting to think about some of these more cash. We obviously think the Fed's now not going to go in October. So you have some macro narrative shifting pretty, pretty notably.
What about the news out of France? And we also are watching a lot of global elections. What is it that we as U.S. investors kind of need to keep in mind? Or is it just a case, bad news overseas can be good news for the United States? And I think it's also interesting, as we get ready for another earnings season where we're going to see, does the earnings momentum continue? Maybe slow down a little bit, but still continue.
Yeah, I mean, specific to France, they're kind of in a very tough situation. And they're putting the ECB in a tough position because he's not supposed to bail out any kind of like fiscal lack of discipline, which is what the case is. And the political buy for a case in both far left and far right now has made it kind of hard for anyone to believe that they can have a coalition, or there can be actually real solutions to this deficit problem that just isn't going to go away. They're not going to be able to grow themselves out of it that easily. So the choice is facing them into this election. It's really hard now if a Le Pen comes out or someone comes out and starts to do what we're seeing in the UK and give some real solutions that are credible, because keep in mind that the gilts are often in a similar situation not too long ago, and we've seen a subsequent reversal there and they've gotten more fiscal sort of forgiveness. So that's been outperforming. The pound's been outperforming and all this at the expense of the euro and others as well. And to your point, earnings, you know, just to switch gears back to you, your second part. Yeah, earnings really are needed right now because this is such a concentrated market with leadership being in only a few names. And funny enough, earnings growth is only in a very few names at the S&P level. So what we got in Q2 was as we got through that earnings season, you guys remember that all of a sudden there was an explosion in earnings guidance and the economy was holding up fine. But we were finally seeing it on that front as well.
All right. Going to leave it there, Michael. Thank you so much. So appreciate it. Bloomberg News macro strategist Michael McKee. That's your market setup on this Monday. And we're going to kind of whittle it down a little bit to a sector that's really interest-rate sensitive. And this is as we've talked about what's been going on in the Treasury market. We're above 5%. We wonder what's going to happen next. We've got a great guest. It is one of the biggest REITs in the world. I mean, this is a massive company and really focused on retail. You're talking about one of the biggest REITs, as you said, in the world. This is Realty Income Corp. And we are joined today by the CEO, Sumit Roy. And he is joining us on Zoom out of San Diego. So thank you so much for joining us. We've been talking so much about this great environment when it comes to the bond market. And just broadly seeing a ten-year, the benchmark ten-year still elevated above 5%, currently at about 5.3%. Talk to us about how you're thinking about this in your business.
Yeah. Thanks for having me, Nora. It's obviously something that we are keeping a very close eye on. The ten-year today is, you know, hovering right around the 5.3%. What we've historically noticed is, you know, when you have expectations of ten-years, so it's not really what the current rate is. But once that expectation of where the ten-year ought to be sort of settles in, the cap rate environment in our business starts to adjust to reflect what the new cost of capital environment is going to be. And so, you know, for us, we are oftentimes viewed as a bond proxy, given the long duration of our leases, etc. And REITs at large, commercial real estate at large tends to be very rate sensitive, but the net lease business in particular tends to be the most sensitive to what happens to the rate environment. But I think this is where Realty Income really stands out, because we've obviously created multiple channels where we have the ability to invest in Europe. We have the ability to invest in other markets like Mexico and the UK, and therefore are able to take advantage of where do we have the best risk-adjusted returns. So despite what's happening here in the US, there are obviously multiple channels for us to lean on and continue to grow our business.
So before we talk about what's going on though in the US a little bit more, you mentioned these multiple markets. So where, what's the most opportunistic for you right now? Is it non-US? Is it Europe? Is it Mexico? Is it the UK 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 rates environment, which then started to have an impact on our cost of equity. We pivoted to doing a lot more investments in Europe, and Europe accounted for about 50% of the investments we made in 2025. And 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 that we've created for ourselves, which is on the credit side of the equation. And so we find very interesting credit opportunities here in the US, again, working with our partners, trying to lend our balance sheet and basically, you know, take advantage of what we see on the higher rate side by lending to our clients at, you know, very good risk-adjusted rates overall. So we can play either on the equity side or on the credit.
So you're not going to pick a market. You're not going to pick a favorite market right now.
Well, look, it is, it's, I was listening to your previous guest. The ten-year bond rate is 130, 160 basis points inside of the US. And so clearly, on the equity side, that's where we're seeing a lot of opportunities.
See, but what's also interesting about your business is it's largely focused in retail. So that gives you a really fantastic read on the consumer. What are your tenants really telling you right now about the health of the consumer?
You know, this K-shaped recovery is real. We've obviously seen a lot of the businesses that 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 who happen to be in these subsectors. And, you know, casual dining tends to suffer. You know, we're not talking about the highest end casual dining. The K-shaped recovery is real there and they continue to do well. But some of the more national names that you would expect to feel the brunt of this K-shaped recovery, you start to notice that, and we are seeing that in our portfolio of names that we are exposed to. So it's a real issue. And thankfully, the way we've constructed our portfolio is very defensive. It's defensive in nature, and essential retail is what we are exposed to. And they tend to do well at times of economic uncertainty.
Yeah. And speaking of essential retail, your portfolio, of course, is exposed to grocery stores, convenience stores, home improvement, dollar stores. Are there certain parts of the retail space though that you're more cautious on right now?
Yeah. Anything to do with discretionary retail. Big. You know, when you talk about furniture stores, when you talk about higher-end discretionary items, those tend to suffer at times like this. And we have again been very deliberate about how we've constructed our portfolio. And, you know, one of the things that we tried to stay away from is apparel and fashion, and areas that do tend to suffer at times of economic distress. And so you're not going to find a whole lot of that. If you look at our portfolio today, it's above 90% in areas of, you know, low price point, service-oriented businesses, and non-discretionary retail. And that's the profile of the business that we are exposed to.
So if you are creating a company today, Sumit, 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 because you guys have done a big joint venture, looking to move much more aggressively into that area?
Yeah. That's a great question, Carol. Look, I think what has defined us is our ability to continuously redefine who we are as a business. You know, what is sacrosanct to us is our ability to continue to grow our dividends, which we have done for over 30 years today, you know, quarter in, quarter out. And so our ability to look for patterns and look for, you know, trends that we believe will help us continue to be the business that people associate with Realty Income is paramount to our success. And what we saw on the data center side is a once-in-a-generation type environment where there is so much focus on building out the infrastructure required, you know, for, you know, this digitization of, you know, everything that we are doing from AI to cloud computing to the streaming, etc., to self-driving cars. You know, you're going to need this infrastructure. And we believe that, you know, the build-out of this particular infrastructure lends itself to do that natively. Single-tenant, freestanding buildings. And that has been the thesis that we are leaning into to try to continue to grow that piece of our business today. Small portion of our business is circa 1%, but the hope is it's going to be a much bigger portion. And so by definition, you know, yeah, we are certainly going to be leaning into this particular area of the opportunities that we have available to us. And we hope that this will become bigger.
So I think set all of that. Oh, go ahead.
Yeah. Go. No, no. I'll finish, please. Well, I was just going to say that, you know, we are not going to invest in every data center opportunity that is out there. We are hyper, hyper selective in terms of, you know, where we want to invest in the data center space. And, you know, location is important. The partner who we are partnering with on the development side is important. The type of leases is very important. Who is the counterparty? Who is the client that we're going to be exposed to for 15, 20 years is very, very important. And all of that is going to come into the fore when we make a decision about, you know, who we want to partner with.
So if you had to pick a percentage of how much data center, just quickly, 20 seconds, give us something, would it be 30% of the business we want to hold it in? Well, we are Bloomberg. We want to do it.
You know, Carol, I wish I could, but I will just answer it this way. Yeah. There are trillions and trillions of dollars that will need to be invested in this space. We believe, given the profile of the business that we have, we are going to certainly be part of that solution. And so it will be a much bigger portion of our portfolio than it is now.
We're going to bring you back, and we're going to continue this conversation. Sumit Roy, he's, of course, the president and CEO of Realty Income, joining us. Such a pleasure. Speaking of pleasure, coming up, Natalie Morrison and Sarah Jessica Parker, we're going to talk diamonds grown in the lab. They're working together. That's coming up next.
It's 2:21 on Wall Street. I'm Amy Morris. President Trump ready to unveil a plan to ease restrictions around the use of what's called red-dyed diesel. It's free of most federal fuel taxes. It's restricted to off-road applications like farm equipment, construction, and heating oil. And the Trump administration is preparing to ease limits restricting the use of that diesel. The latest bid to pare costs for diesel ahead of the November midterms. The average cost of diesel is about $6.32 per gallon. Crude oil is moving lower, WTI less than $90 a barrel. Brent crude is nearing $101 a barrel. A rally in giant tech companies drove stocks higher. We check markets for you all day long here at Bloomberg. S&P 500 up three-quarters of a percent. Nasdaq up 1%. The Dow is up about a quarter percent. The ten-year Treasury yield at 5.34%, the two-year yield at 4.85%, and the 30-year Treasury yield at 5.69%. Microsoft shares are 1.5% higher, touching an 11-month intraday high after Melius Research upgraded the stock to buy, saying that worries about AI safety risks are driving enterprises toward Microsoft as the trusted adults in charge. Analysts anticipate heavier AI spending in fiscal 2027, and they have continued to emphasize Microsoft's capacity to boost revenue through Azure and Copilot, which could present significant upside for the stock. For on-demand news 24 hours a day, subscribe to Bloomberg News Now wherever you get your podcasts. I'm Amy Morris. That's a Bloomberg Business Flash. Let's go back to Bloomberg Businessweek Daily with Carol Massar and Nora Melinda.
All right, everybody. So we talk about diamonds a lot here at Bloomberg. I talk about diamonds. I love the diamonds that remind my husband. No, we talk about luxury. We talk about estate jewelry. We talk about watches. But on diamonds, one of the things that we've pointed out a lot is how the market has drastically changed. Yes, a diamond may still be forever, but that diamond may increasingly be grown in the lab, and this market just continues to grow. So we are delighted to have back with us now, Natalie Morrison. She's the founder of Astrea London, and great that she brought along a key member of her team. We're delighted to have with her in studio as well, the company's global creative director. She's Sarah Jessica Parker, very well known to the Bloomberg audience. Welcome, welcome. Nice to have you here.
Yes. And we want to talk about that stuff that you guys are doing together. But I'm curious how you guys came together, because I'm sure you get pitched a lot of things. I'm sure you get pitched a lot of things. How is it that this kind of made sense?
We don't have time to tell each our own version, but I'm fairly sure they'd be aligned anyway. And just be curious what she said. She said, I got a call from my agent saying that this young woman had reached out and had started this business, although it was not a brand-new newborn, and that she wanted to have a conversation about it. And it was specific around lab-grown diamonds and what she'd hoped to do with the company and how she wanted to grow it, and a partnership that we may or may not be able to sort out. And I was really intrigued and discovered how little I really knew about lab-grown diamonds. And most of what I knew was generally what's happening here in this country and the price point that it had found its success, and that was kind of how limited I was.
And then I met the person who runs the masterclass. She asked me, well, talk to us about how the acceptance of lab-grown diamonds is, because I remember doing stories a few years ago, and there were either limitations, there were costs involved in terms of the creation. And I know there is to some extent, but how it has evolved. And because when I talk to most people who get engaged today, it's a lab-grown diamond, but actually, absolutely, 61% of the engagement rings in the US were lab-grown diamonds last year.
The reality is, I always speak about numbers because that's my background. So it's, we love numbers, $100 billion market a year, the diamond industry. Lab-grown diamond was 1% of the market in 2015, 5% in 2021, almost 30% last year, although we don't know the exact number.
I want to know what specific aspect of this project really resonated with you. What was it? Yes, this is, I need to be in on this.
I said, I think the creative part is always really compelling to me. But if that alone, without the kind of structure around it that is necessary, as I've discovered over the many years of being a creative person, you don't get very far. It doesn't matter how big you dream. But there is also this technology that Natalie was particularly excited about. She was extremely excited about the creative and what could be done, and what she wanted to do inside Astrea, and what she hoped we could do with this other collection inside Astrea. But the technology was a phenomenon to me, and the fact that you could have so much flexibility, that you could ask so much of it, that color and quality and cut and clarity and a kind of elegance and beauty and luxury that didn't exist yet in the lab-grown diamond business was pretty exciting to try to be worthy of. And thus far, she's been right.
And we want to talk about your collection because it's very unique within the brand. But now let's go to the technology, because I remember when I talked about us doing it years ago, there was limitation in size and there were lots of limitations. So I think there were lots of questions whether or not this could become something. Tell us about the technology. What do we need to understand, I think, to the audience about what has changed?
I think what has changed is that with technology growing and growing all the time, there's nothing we can't do right now. So people can dream big. You can now, speaking of big, I was wearing a face right now. This is the first diamond necklace in the world, 174 carats in D color, which corresponds to 1% of the diamonds in the world. So, yes, there's nothing we can't achieve. Colors, clarity, nature, earring, movement, engineering, movement, flexibility. This is a ring, although it's very hard. It's on a top, so it actually spins.
So it can be the... And then we also have all the new collection has, you know, necklaces that have that and bracelets and cuffs. But that's just a part of the technology of great engineers and jewelry designers that can go hand in glove with the kind of technology that now exists inside lab-grown diamonds. Yeah. And I think now we are talking about seeing a different era in luxury. It's not just about using lab-grown diamonds technology, but it's also creating a house of the future with focus on sustainability, craftsmanship, beauty, design. And when you mix all of this, we hope to do a good job.
And when you speak about this technology and talk to you about how difficult this is to pull off, maybe the expense, the capital needed. How difficult is it when it comes to the technology to be able to make things as beautiful as what you're wearing?
It's much more expensive than people think. So it's getting cheaper and cheaper with the economies of scale because the lab-grown diamond was discovered in 1950, originally by GE Capital, but now it's become only really famous since 2018, when the FTC in the US declared a diamond is a diamond, whether it comes from a lab or mine. Since that day it's growing, and because people get educated, there is no more myth about the diamond industry. So the reality is on the technology front, it's very expensive. You need a lot of food. There's a lot of rituals behind it, but it's getting cheaper and cheaper. The more you produce, the more we produce.
Well, speaking of, though, the stuff that you produce, talk to us about your collection, which launched this month, because it does have a real vintage feel to it. You talk about movement, the heart of the city. Yeah. Those necklaces, they're fun and they move around, right?
They are fun, but hopefully they're not silly. I think so. Well, so much of what I love and have worn, has that, not outside of the stuff that I've been fortunate enough to borrow, is really from thrift shops, consignment shops, vintage spots. And it's old, it's colorful, it's often bigger in scale. It's got a little body to it. At the same time, it's not as feminine as what people typically consider, you know, jewelry for women. So inside Astrea, this extraordinary collection already exists. I always say it's like ultra-feminine, you know, it's for a lady. But then there is this other consumer and this other shopper that might want a touch more muscle, you know, and a touch more, I think, of a kind of metropolitan approach to it, but it's not. And it's for everybody. It just has a little bit more kind of, it's got, it's a fuller figure. I don't know, this is one of them, but this is like, it's when I pull one piece, I'm like, but there are so many. Yeah. You know, this is part of the new collection, and we've got these pendants, but this once again, this is like, it's like it's just the teeniest, tiniest, like, corner of a portrait. It's just really based on color and a kind of shape and silhouette that might be recognized from the past. A nod, but it feels really contemporary, and it's just beautifully made in color.
