Cristiano Ronaldo's Portugal walkout could cost millions

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1:07borrowing is getting more expensive for governments around the world. For the federal government, they are going to be taking on even more debt. That's a little bit of a doom cycle that continues on. Financial conditions may need to actually be tighter than what the Fed thinks right now. It's world business report from the BBC World Service. Amliana Byrne, government borrowing costs are climbing across major economies. We'll look at what's driving the sell-off and bonds. Brazil heads to the polls with Lula and Bolsonaro locked in a close race. What does the choice mean for Latin America's biggest economy? And Cristiano Ronaldo walks out on Portugal after a rift with the manager. What could it mean for one of the biggest brands in world sport? Let's start with government borrowing costs. They're climbing sharply around the world as investors sell off government bonds. Let's spell this out. Yules in the United States, Britain and France have reached levels not seen for decades.

2:08As investors are worrying about higher inflation, rising oil prices, the prospect further interest rate rises. These moves matter far beyond financial markets. Higher government borrowing yields can feed through into more expensive mortgages and business loans, while governments themselves have to spend more simply servicing their deaths. In France, those pressures come as the government is already trying to get its public finances under control. Here's Roland Lescure, French Finance Minister. Let me reiterate, France remains a highly credible borrower. Our current account is balanced, our strengths are widely recognised, whether in energy, technology or finance. Our financial sector is robust, and our banks are among the strongest and best capitalised in the Eurozone. The better capital is it. The economy is French. So what's driving investors to sell government bonds so aggressively, and why is the pressure spreading across global markets? Let's hear from Molly Brooks, US rates strategist,

3:09aptiti securities in New York. I would say we've had the same key themes that we've kept going back to for probably the last month or so. One of which is persistently high oil prices. Higher growth expectations has also been driving long-end rates here, as well as fiscal concerns seem to be popping up in the background. And then finally, I would say AI hyper-scaler issuance has also been another fear that has been percolating through markets. Over the past two weeks, it seems like we may have just hit some type of repositioning event that this has kind of triggered some concern in markets and some repositioning once we hit through specific levels. I know 5 to 5 and 10s, for example. We've been above there the last couple of days now. We're now below it, but above 5, 5 and 30, so very elevated rates at this point.

4:10But I don't think that this has been a last two week story, but rather a last month story that all of these factors have been contributing to the long-end continuing move up. Because the thing is, the US economy is still looking pretty resilient, isn't it? And normally that sounds like good news. So why is strong growth actually adding to that pressure in the bond market? Yeah, so higher growth actually increases interest rates. So that's one of the components that we look in in terms of specifically the long-end. I think some of this may be the AI story. We have gone a number of good indication of current growth, whether it's GDP yesterday, just consumer remaining resilient. We have seen the US economy hold up, and despite of higher rates at this point. So I think that that's one of the factors that is actually a good thing, and that's why you actually see kind of the correlations between equities and rates.

5:14In good times, you don't see higher rates actually weighing on equities because it's driven by this higher growth, which is good for equities. It's really when it's more of the inflationary side that you see higher rates weigh on equities. So right now, we're kind of in a good environment in terms of the economy, but that is leading us up to the highest level of rates that we've seen in decades. Because market seem to be pricing in more rate rises than the Fed itself is actually signaling. So what's our talents or investors essentially saying they don't think the Fed has inflation under control yet? I think some of this is actually just that we think that financial conditions may need to actually be tighter than what the Fed thinks right now for rates to be high enough to be impacting the economy enough to impact inflation. If we're not seeing the impact on the equity markets and other types of financial conditions,

6:16if these aren't coming down due to higher rates, the Fed might actually need to tie in more than they initially were planning to. That was Molly Brooks, U.S. straight rate strategist at T.D. securities in New York and the pressure in the bond markets is being felt in Asia as well. Japan's 10-year government bond yield is climbed to around 3.1 percent close to a multi-decade high. As investors are weighing rising inflation and the prospect of further interest rate increases from the bank of Japan. Dr. Sejiro Tekashita is a professor of management and information at the University of Shizuoka and joins me now. Hello. Hi there. Good morning. Good morning. So good morning for you. I believe we woke you a little bit earlier. That's expected. Well, I really appreciate you coming on. So can you explain to me why Japan is feeling this global bond sell-off particularly Qutli? Well, basically, we've got, as you just reported, you know, the almost a race of interest rate rise, especially concerning the long-term

7:18mechanism that we're seeing in this middle-e situation where the oil prices are getting high and, of course, the Fed is obviously going to ward off with the inflationary pressure. So obviously, we've got the bank of Japan continuously trying to raise their rates. Although we're not as maneuverable as the United States or United Kingdom considering that our economy isn't as strong yet. And basically, our inflation is caused by cost-pushing inflation, not demand-pool inflation. So basically, you know, I would say bank of Japan is scratching their head as we speak right now. We've also got the domestic problem of people worrying about, you know, putting discipline into our financial system, considering that, you know, we have a high-depth problem as well. Hmm. I imagine the bank of Japan's job is quite difficult, as you mentioned, because, first of all, Japan spent decades worrying about deflation rather than inflation. So when interest rates are extraordinary low for such a long time, it must be a painful adjustment. Well, it is very much

8:25considering the fact also that, you know, bank of Japan itself, their current balance is reaching well over 600 trillion yen. They really don't want to raise their rates at this point. And, of course, you know, I think this is a worry about this, you know, depth of GDP is a bit over-emphasized considering the fact that if you look at net depth of GDP, let's not forget that we have quite a lot of assets, you know, the Japanese government and the Japanese people. So, but that said, still, you know, considering your demographics is pretty clear that, you know, the depth could be detrimental in the future. So obviously, people have a lot of doubts about, you know, whether we can continue this condition. So that's another reason for the, I would say, the continuous rise of the rates that are taking place, considering about the worries about, again, about the discipline of how we're going to deal with this financial issue in Japan. All right, Sejira, thank you so much. We've also got Kerry Leihy, economist at Columbia University in New York with us. Kerry, if government borrowing cost

9:28stay this high, what does that do to the US economy? Well, it's eventually going to slow it down. For the first time in, in, on record, the government spending more on interest payments and in his own national defense, and within 10 years, it will be spending more on interest payments than it's paying on social security. These are varied. These numbers have been around for a long time, and without any notice at all of a credible program, it's going to lead to higher rates and probably ultimately a downturn. Every president other than the current one has tried to put together some kind of a credible package since Device has started to explode under Ronald Reagan, but it isn't happening now, and there's no plan. No one's even offering a plan or even asking for a plan, and that's just going to put Congress, the White House, and the US economy in a precarious position. It's an interesting one as well, because we're looking constantly at what the Fed might do while all of this, but actually, could the bond market effectively tighten financial conditions on the Fed's behalf? It doesn't necessarily have to step in. That's right. There's an old argument that sometimes the market does the Fed's work for them, and you've already had a vice chairman of the

10:32board, Philip Jefferson, admit today that maybe we don't have to hike at the next meeting, we can take some time to look back. He's implicitly saying exactly that, that maybe conditions near term are moving too fast, and the best thing the Fed can do is not to pour gasoline on a fire, but sit and watch and hope it doesn't burn too hot. Good plan, Sansa. Kerry, you stay right there, and also a big thanks to Dr. Sejiro Tekashita, Professor of Management and Information at the University of Shizuoka. Now, Brazilians go to the polls on Sunday in a presidential election that's become increasingly tight. President Lulia in Nassio Lula, De Silva, is expected to lead the first round, but polls suggest he could face a very close runoff against Senator Flavio Bolsonaro, son of jailed ex-President Jarbonsonaro later this month. Here's some voters in Rio de Janeiro explaining what they want from the election. Because of the experience from the years that Lula has already

11:35spent in power, for those of us from a more disadvantaged region, I think he pays a lot of attention to the needs of poor people through social programs. I won't change, you know, so I see it more as an opportunity for change because Lula has already been in power for many years. So let's see if changing this dynamic makes things better in any way. I think it's important to participate in the political debate, and if the candidate does not respond well to a question directed at them, they aren't using different words as if it were a different question. Now of course, as we heard there, the economy is playing a big part in the campaign. Lula can point to falling unemployment and inequality, and Brazil is now producing record amounts of oil and gas, but many households are still struggling with the cost of living and high levels of debt. So why haven't those stronger economic numbers translated into a more comfortable lead for the president, and how different would Brazil's economic direction look

12:38under Bolsonaro? To explain, here's Andrea Bastos-Tamco, a founder and chief economist at Bicide, Brazil. We are having some problems in the debit of the population. It's very high. People are losing the power of purchase, so Lula is not being as so favorite as it was before because of this. The cost of living is too high. People are having some balance sheet problems, and then it's affecting the Lula audience and winning this election. We've seen Lula announce more help for those indebted households in the final stretch of this campaign. Does that address the underlying economic problem, or does it mainly provide short-term relief perhaps? Yes, it's just a short

13:38relief. This is the third program to people that are with a high debit. It's not a structural problem. Most part of the other programs have very short relief, and this one, the third one, that is we think will be the same. So for Robo's solution of this problem, we have to address the fiscal policy, fiscal adjustment in next year. We will have room to lower interest rate and effects appreciation, and when we have effects appreciation, food prices goes down, and with a lower interest rate, people can have a structural relief to this problem. Bolsonaro is presenting himself as a more market-friendly candidate in economic terms. What would actually change under a Bolsonaro

14:39government, do you think? It's very different from Lula, because the most important measure that Bolsonaro is announcing is expanding cut of 1.5 percent of GDP. This is very strong, and this can very fast move a primary deficit from 0.5 percent to something like 1 percent. So this initial condition is very important for Flavio Bolsonaro, and they are the opposition are defending a new framework to fiscal rule. Something similar that was done by President Temer in the past, you put in spending cap of 0 percent growth for expenses, and then with this we have the conditions to

15:43decrease the neutral interest rate. That was Andrea Basto-Stamico, founder and chief economist at Bicenth Brazil. Your World Business Report from the BBC World Service. Nike has just reported a quantity sales of 11.2 billion dollars missing, analyst expectations, Kerry Lehi is still with me. Kerry, what's disappointed investors here, do you think? Well, they are talking about weaker growth, particularly in China. That's no surprise there, but when you put a big bet on China's major draw for your supply, and they slow down, you have a big problem. And also, Nike is changing the way they're handling sales, moving away from big time retailers and doing their own retailing. So their focus is shifted a little bit and it's allowed better to pick up some of the slack. So there's a lot of things going on, but I think probably China's lack of follow through on demand is probably the biggest part of the story on the disappointment on earnings and forward guidance. Now, we are all talking about cost as consumers as well,

16:48and inflation, higher borrowing costs we're talking about that earlier. Is that a problem for Nike as well? Yes, I mean, it's been what, three or four decades when Nike sold 150 dollar sneakers, and in some cases those sneakers kept a lot of small sporting goods stores afloat. But I think that is part of the problem and that people want a more reasonably priced product and they're not going to be feeling like splurging on a set of new air Jordans. Another one of Hollywood's biggest ever mergers is now moving towards the finish line. U.S. children's cleared Paramount Skydance to complete its 110 billion dollar takeover, Warner Brothers Discovery, and the boss of toy giant Mattel, Enon Creeze, is leaving to become co-chief executive of the new company that is being created by the merger and he's going to run that business alongside Paramount boss David Allison. Lots of moves here, Kerry. Do we know really what they want to come out of it, particularly the people who they've appointed? Basically two things are going

17:51on. I know almost any merger regardless of the industry. There's going to be some savings because a back office type duplication leads to some layoffs and people know this is going to happen. In addition, you've got another story regarding artificial intelligence which may remove or reduce the salaries to a lot of the so-called creative types. There's a lot going on in the industry, but net net people expect the leaders of this new firm to basically cut back on costs on both the creative types and the non-creative types. They'll have a more dynamic firm. I actually, Wall Street Journal is actually reporting, but Disney is bounding to restructure its television business and that could result in hundreds of layoffs, so the industry is very busy. All right, Kerry, you stay right there. In his speech to the UN General Assembly last week, President Donald Trump said his administration was seeking what he called a fundamental change in Cuba. Cuba's foreign minister responding by accusing Washington, imposing collective punishment through months-long fuel barcade. On the island, ordinary Cubans are enduring severe

18:53shortages and power cuts lasting up to 20 hours a day, but in Florida, some wealthy conservative Cuban Americans believe political change could now be close and they've set up a new organization to prepare for investment in a post-communist Cuba or what they like to call the day after. We'll grant reports from Miami. At the lavish home of one of Miami's top plastic surgeons, some of the wealthiest Cuban American families in Florida gather to trash out their vision of Cuba's future. Ramen hand and Rolex is on wrists. It's the fourth meeting of the newly created Cuban American National Chamber of Commerce. The group's president is 82-year-old real estate developer Juan Omar Sigstong. The intention of this group is to gather on the one roof that most prominent Cuban American entrepreneurs in Miami. The guests are convinced that the moment of regime change that they've spent almost seven decades hoping, praying and indeed pushing for is nigh.

19:56After countless false dawns, this time, says Mr. Sigstong, is different. I've been here in Miami for about a year or 62 or 64 years. This is the first time that Michael Rue, the Cuban American, is doing what you have been done 20 or 30 years. It's an absolutely failed state. On hearing those words from President Trump at the UN General Assembly, the Cuban delegation stood up in unison and left the chamber. As they walked out, he had a final message for them. Communism will never be coming to America, but freedom will be coming to Cuba. Although President Trump has repeatedly said Cuba is next after Iran, it's far from clear what the change might be. There has been reporting that essentially the US government asked the Cuban government, privatize your oil company under US hands, convince your president to step down and free political prisoners and then we can play ball. The Cubans have rejected that. In the University of Miami's leafy campus,

20:59I caught up with Mike Busdomante, an associate history professor there. I don't understand how someone like Marco Rubio sells that kind of interim arrangement with the very government that he and the community has from has opposed for so long. I don't see how they sell that in South Florida. The Cuban government recently passed 176 economic liberalization measures into law. President Miguel Diaz Cannell told the Cuban Congress they were to advance the defense of socialism to his critics, though they look like little more than full-blown capitalism. They lift the cap on the number of workers in a private business and permit ownership of multiple enterprises at once, including by Cuban Americans in Florida. Agriculture, what needs to be done with agriculture? There's a number of people here tonight that have volunteered already. But Miami real estate developer Juan Omar Sigsdor says they offer no guarantees to any potential investors in his homeland. Michael Rubio knows that these group of people are the ones that cannot go back

22:01and invest in Cuba unless that regime is out of power. On one of my trips to Cuba earlier this year, the tour guide took me around the empty streets of Havana in his car to show the total collapse of the tourism industry amid the fuel embargo. There's since been an exodus of international hotel companies and financial entities like Visa and Mastercard. Miami's ambitious plans aside, Cubans will endure more acute shortages in food, water, fuel and medicines. Most just hope their days get a little easier sometime soon. I was well-ground reporting from Miami. Now one of the biggest names in world sport, Cristiana Ronaldo has left the Portuguese national team's training camp. In its speculation, he could retire from international football. Ronaldo is the most famous Portuguese footballer of all time, the most well-paid athlete in the world, according to Forbes and his net worth is estimated at $1.2 billion.

23:03So how much is he worth on and off the pitch to Portugal? Keir McGuire is professor of football economics at the University of Liverpool. I don't think there will be a big loss for the Portuguese football association except in the sense that from a merchandise point of view, Cristiana Ronaldo is in a class of two or three players in the world. There's him, Leonor Messi, who's retired and killing Mbappe. So he does provoke interest that way, but equally many people buy his club shirts for the clubs he has played for in his career. Real Madrid Manchester United, Alain Lallon, so on. So it'll be a minor bump in the road from a fiscal point of view. And there's an argument to say that because his style of play doesn't necessarily fit in best with modern-day tactics, could Portugal actually make more money because they're more likely to progress further in tournaments without him than with him? Yeah, it's interesting though. Like one study, Reckon Ronaldo's 29 social media posts during the

24:04World Cup generated 85 million euro of media value, and that's more than Portugal's 565 posts of the time. So he does definitely have a commercial proposition for Portugal, doesn't he? That's right. I mean, he is one of the very few people in team sports who actually transcends the sport itself. And those people have been relatively few and far between in the history of all sport. You've got the likes of Michael Johnson, of course, Tiger Woods, Roger Federer, but those people have had to offer something special. And I think Cristiana Ronaldo has done that both in terms of being an athlete and being a celebrity in his own right. Anything that he says is scrutinized, and that generates interest. And it's very noticeable that players of his standard and again, you'd include Lee and Ormesey there, do have far more social media followers than the teams and the countries that they play for.

25:04When you have somebody with that kind of sway, does that create an awkward situation for a coach? Could a player become commercially too valuable to drop sometimes? Yeah, I think we have seen that into Miami when they've gone on tour and the tour promoters when Lee and Ormesey have not played in some of the tour matches have been very, very angry because that's what people come to see. They want to be able to put onto their Insta, their TikTok that here is one of the greatest players in the world actually playing football. So yes, it does become an issue because sometimes the players welfare, sometimes the players form might suggest that the player shouldn't play, but then you've got an expectation amongst the crowd. You wouldn't go see cold play of Chris Martin wasn't singing for example. People would feel disappointed. Does Ronaldo still need Portugal at this stage though because playing international football does that materially become, is that still valuable for him? No, it's not. His wealth, especially since going to Saudi Arabia, is at a level where he could

26:09easily become a footballing billionaire based on his career earnings, which will be incredible in dollar terms. That is very rare in team sports. So from a financial point of view, he doesn't need the attention. Portugal, they don't actually generate a huge amount of interest themselves. Unless Ronaldo scores from a sort of a viewings on social media, YouTube, clips and so on. So he doesn't need them because as you say, he can go to his amazing number of followers on his own accounts and do a promotion there or to link to his domestic football achievements, which of course are unparalleled in many regards. That was Kierman and Guar, professor of football economics at the University of Liverpool. Kierri, any US comparisons come to mind? Well, other than Tiger Woods, but I say the one is probably more applicable given the World Cup situation is Taylor Swift, where she may actually move dial on monthly estimates of GDP. So I think she's probably the one you all look towards. Yeah, absolutely. If Travis Kelsey

27:13retires the NFL, they're going to be like, oh, we're going to lose so much money. Kierri, lady, economist at Columbia University in New York, always a pleasure. And that is it from World Business Report. I'm Leana Bern. Thanks for listening. Balance your trading strategy by adding futures. CME Group helps you manage risk and capture opportunities in all market environments, capitalize on around the clock access to highly liquid global futures and options markets across all major asset classes, visit your online broker and get started. See what adding futures can do for you at cmegrope.com forward slash podcast. Derivatives are not suitable for all investors and involve the risk of losing more than the amount originally deposited and any profit you might have made. This is not a recommendation or offer to buy, sell or retain any specific investment or service. Investing with Schwab is like spending a Saturday at a great farmers market. You can fill your reusable tote with a bit of everything. Maybe a go for some free range self-directed investing.

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