Europe’s Key Rivers Are Drying Up; Mixed Messages on US, Iran Talks — The Opening Trade 8/3/2026

[00:00:00] Speaker 1: Good morning, everybody. It's another Monday, Monday, August the 3rd. Here's what's on the agenda. Energy prices drop as President Trump says new Iran talks will begin today. America's got Japan's back in FX markets, and the yen jumps again. And AstraZeneca has explored buying Bristol-Myers Squibb, but it's unclear if they're still talking. [00:00:20] Speaker 2: Well, Anna, here's the picture in markets this Monday morning. Oil lower off the back of President Trump, saying that those talks between the U.S. and Iran are going to restart. $83 a barrel is where we trade right now, down 0.5%. That boosting sentiment in the futures picture, both sides of the Atlantic this morning. Eurostoxx 50 futures up 0.8% in contrast to what we've seen in the Asian session. Fears swirling around competition from Chinese AI, DeepSeq releasing a new model. And then, as you say, we keep a close eye on the yen. $156 per dollar is where we trade right now, higher 0.6%. We've already had confirmation of the yen intervention from both the U.S. and Japan. Is there going to be more? President Trump saying that what we've had so far is a signal of friendship. The countdown to the opening trade starts right now. [00:01:22] Speaker 1: Welcome to the program, everybody. Another week on the opening trade. It's just on 7 o'clock here in London with Anna and Lizzie this morning. Let's chart, Lizzie, risk appetite on global markets in relation to the Middle East story. Because at the end of Friday, very late European time, but at the end of the U.S. Friday trading day, we got some suggestion from other media and later confirmed that President Trump was considering some sort of big attack on Iran. And then over the weekend, an about face on that, a change of mind. President Trump saying he's not going to attack Iran. He's concerned about the reaction from allies in the region, Saudi Arabia being cited in particular. And so instead, he's putting the focus on talks. What does that mean for markets? It means that equity futures are higher. Oil prices are significantly weaker, partly because equity, partly leading to that move in equity futures. So we're down by 5% on the oil price this morning. And Treasury yields are decreasingly factoring in inflation. [00:02:13] Speaker 2: Yeah, we had been looking at oil at $90 a barrel on Brent at the end of last week. But this is that classic escalate to de-escalate strategy from Donald Trump. He'd said that the attack would have been the biggest since World War II. But pulling back from that seemingly, the focus, of course, has to be on the Strait of Hormuz. And President Trump says that any deal has to include that. It's a bit more ambiguous when you look at the position of Iran, saying that talks are happening between Iran and Oman. They're in the final stages on a route through the Strait of Hormuz. But they don't include whether it will be open or closed. So surely, when you're looking at the oil picture this morning, it's a bit optimistic, isn't it? Given the fact that we've seen a re-escalation before, we've had talks before, and the talks haven't always ended happily. [00:03:00] Speaker 1: Yeah, absolutely. It's a very strange negotiation, isn't it, between Iran and Oman. If they're focusing just on opening up a middle passage, a third route through the Strait, but not talking at all about whether it will be open. They blame the Americans for the fact that it is still, to some degree, largely closed. Whether oil markets are trying to move on from this as a dominant narrative seems to be important. And we'll speak to a guest later in the program who says that, yes, the more traditional supply and demand dynamics are increasingly trying to assert themselves. So that's something that we need to keep in mind. [00:03:30] Speaker 2: And on that point, Javier Blas has a great column on how much oil's in storage. He says that the global oil cushion is depleted, not exhausted. And so, yes, the only solution is to reopen the Strait of Hormuz. And, yes, the longer the war continues, the thinner the buffer gets. But from a market perspective, he says things aren't as bleak as the oil balls would have us believe. [00:03:49] Speaker 1: And what's really interesting is that if you were going to intervene against the dollar, you might choose to do it on a day where the dollar is naturally going to be weaker because you've called off a big attack. [00:04:00] Speaker 2: Yes. Well, let's take a look at the yen and the intervention story as well. So I'm just finding the yen here at 156.40 per dollar. We know that there's speculation there could be even more intervention. We now know that the U.S. and Japan are working together because it's been confirmed. And this is in a way that they haven't for decades. So Treasury Secretary Scott Besson is saying that the U.S. wouldn't hesitate to step in again. Reuters, did you see that snapshot of his to-do list at Count David? [00:04:30] Speaker 1: It definitely looked like it might have been written for other eyes. Just because, I mean, you know, Scott Besson used to be in FX markets. And the idea that he'd write out Japanese yen in long form just seemed a bit surprising to me. But who on earth knows? [00:04:41] Speaker 2: Maybe I'll write a note to self pay rise in large letters or something. Five to ten billion. Yeah, five to ten billion. That would do me nicely. But, look, Trump's saying, as I said before, that the intervention is a signal of friendship. So lots of questions now. Like, is there actually going to be more intervention? Because has the U.S. Treasury got the firepower to do that? Is it effective when they do do it? Goldman says it is. And where does dollar-yen go from here? Because, of course, it also depends on what the BOJ does. How hawkish is it? And therefore, pretty obvious answer, maybe. But is it time to get out of the carry trade? [00:05:18] Speaker 1: Well, yes, that is one part of the argument, isn't it? But on the other hand, I was actually drawn to some of the comments that we got from the FX chief in Japan, Mamura, who was talking about actually BOJ and monetary policy coordination. And I do think that is something that is newer this time around, because lots of guests have said to us, without the BOJ changing interest rates more quickly, the cadence stepping up on the interest rate hikes, this isn't going to stick in markets. But now we've got Mamura saying he's got a shared understanding with the BOJ, and they will respond to FX in coordination with monetary policy. So that did sound out to me as being potentially a little bit new in this conversation about the Japanese currency. Shall we talk about M&A? Yeah, within the pharma space. So we have reporting, as do others, that AstraZeneca has explored buying Bristol-Myers Squibb over in the United States. This is all a story citing people familiar with the deal, very early stages of talks, and actually not even clear if talks are ongoing or whether they've ended. So we'll put that sort of caveat around it, but it could be something that moves the AstraZeneca share price, of course. AstraZeneca has really ambitious targets, around $80 billion. They sounded as if they wanted to get there, largely on a standalone or on a sort of organic basis when we spoke to the CFO just last week. But this would be one other way of doing that kind of thing. [00:06:32] Speaker 2: But when you listen to the CEO, who's been on Bloomberg, you know, not that long ago, saying actually they always reject pictures for drugs that are not their core diseases. This is Pascal Surio. Yeah, and, you know, we know that Astra is a cancer powerhouse, so why would they stray into what Bristol does? And also analysts pointing out that you could knock the earnings per share if you bring Bristol-Myers Squibb into your house. So why would Astra want it? Arguably, it could be a good time to do this, because Trump looking favorably on mergers at the moment. But even if you did have a deal, there are likely to be antitrust concerns. So the FT is saying the deal will be valued at nearly $400 billion. [00:07:13] Speaker 1: Yeah, which is a monster, isn't it? This would be the largest pharmaceutical deal of all time if it were to go ahead. It's interesting looking at the share price there. And, yeah, AstraZeneca is two times as large as Bristol-Myers on market cap basis. But if you look at the very recent moves, AstraZeneca are actually suffering that disappointment on one of their heart-related drugs that missed some of its goals. And Bristol-Myers actually doing quite well nicely, thank you. So I wonder if those most recent dynamics are important or not at all. And it is interesting that Bristol-Myers does have some cancer drugs, but I know that some of some things coming off patent is also a concern over at that particular business. Let's tell you what else is coming up on the program in terms of the guest conversations. Paul Skinner will be with us, Wellington Management Investment Director. Are we concerned about long-end yields on a lack of guidance from the Fed? Is that part of the narrative? And what does that mean for corporate finance? What does it mean for yields and investment portfolios? We'll also talk to Gautam Samath, M&G Investments Multi-Asset Fund Manager. Lots to think about at the start of trade this morning. No doubt we will see energy stocks dropping as a result of Brent prices 5% weaker. We'll also speak, as I mentioned earlier, to Carol Knackley about energy markets, Crystal Energy CEO. It's not just energy prices are weaker, it's also gas prices, all of that very much on the back foot this morning. [00:08:26] Speaker 2: So that's what's coming up on the show. Let's take you through what else is coming up throughout the week. Today we've got more U.S. earnings in the form of Palantir's numbers. Tomorrow we get U.S. jolts job opening numbers, as well as earnings stateside from SpaceX and AMD. And then on Wednesday, Euroarea PPI and European earnings from Novo Nordisk. U.S. earnings including Disney and Uber. Thursday, more eco data, Euroarea retail sales numbers, U.S. initial jobless claims numbers too. And European earnings from Rheinmetall and Siemens. And then on Friday, the thing that everything seems to lead up to eco-wise, of course, the jobs report. So various bits of data. Do we see the World Cup boost to hiring fading in those payrolls numbers? But Anna, such an interesting spectrum of earnings stateside this week. SpaceX is the first since the IPO. [00:09:16] Speaker 1: Yeah, absolutely. First earnings report since the IPO. And it's a company that, well, the share price has dropped below the IPO price. Does that tell us anything meaningful or is that just a very short-term metric and a short-term lens? So we'll certainly be watching that one. That'll be interesting. Palantir also in focus as well. Increasingly difficult in Europe, actually, the Palantir business, it would seem. Whether you're talking about the NHS, the Metropolitan Police, both of those UK stories, but also over in France, according to our reporting. [00:09:42] Speaker 2: Yeah, just this push for digital sovereignty. France's domestic intelligence agency trying to replace Palantir with a local alternative. So that difficult for that company. And AMD as well, a really interesting one tomorrow. We'll see how the types of Microsoft and Anthropoc are going for them. [00:09:56] Speaker 1: Yeah, and I do think, and you mentioned the non-farm payrolls data, and that certainly is where we're going to be working our way towards. And given the new stance from the Fed, the lack of forward guidance, and the lack of any understanding of the Fed's reaction function to this data, you wonder if that sets us up for a little bit of volatility. Will we see more volatility around all kinds of data prints, including the jobs report at the end of this week? And speaking of the Fed, coming up, Fed Chair Kevin Walsh is said to weigh changing the frequency of policy meetings. We'll discuss what it could mean for bond traders. Plus, Europe's key rivers are drying up as the continent contends with extreme heat. And, of course, those wildfires. We'll dive into the impact for power generation and European economies as a result of that. Up next, we'll be joined by Peter Kinsella, Investment Services Head at Union Banker Privé. Lots to talk about when it comes to the yen. Then we'll start the conversation there and see where it takes us. IP plus BVTV Go. That is the function, or the two functions to use, on the Bloomberg Terminal this Monday, every day, if you want to get in touch with the team that puts together this program. This is Bloomberg. [00:11:00] Speaker 3: What we're doing is we're talking to them in the form of a negotiation. It begins tomorrow afternoon, and we'll see if it's true. I'd love to do that. Save a lot of lives. Save a lot of unnecessary power, to be honest with you. It would take many, many years to ever build it back. If it could, I don't think it would be even buildable back. So we had an attack that would be the biggest attack since World War II. [00:11:44] Speaker 1: That was U.S. President Donald Trump speaking to reporters on Air Force One just yesterday. Now, oil has tumbled after President Trump's comments that he'd called off a supposedly planned attack on Iran. And new talks will begin, he says, today. The U.S. President also suggested a deal to reopen the Strait of Hormuz is near. Let's get more details on what we know here with Bloomberg's Abiyah Abu Omar. Abiyah, good morning. So, in some senses, we've been here before. A threat of escalation and then stepping back from that threat of escalation. Oil prices are moving substantially on this. We are down by 5% on Brent. What do we know here? [00:12:20] Speaker 4: Good morning, Anna. Multiple times we've been here over the course of this war. President Trump saying something about an attack on Iran and then going back on his words. And this is not very dissimilar, right? So what President Trump did say, as you just heard, is that he was preparing for the biggest attack since World War II. And then he said that negotiations with Iran are set to recommence. Now, there's a lot of unclarity about what exactly those two sides are going to negotiate, where they're going to negotiate, and whether Iran has actually agreed to those negotiations. Now, something to bear in mind is that there have been no direct conversations happening lately. And we saw a period of escalation in the region, followed by days of calmness and then re-escalation. But what we expect is if those talks were, in fact, to recommence, as President Trump had said today, we expect that the Strait of Hormuz to be front and center. And, Anna, we have kept an eye on the multiple concessions that the two have talked about over the course of this war. That includes the nuclear component, that includes the oil sanctions, the blocked assets. But those have all seemingly taken a back seat over the course of this war. Now, the Strait of Hormuz has taken the priority when it comes to both the United States and Iran. We're still seeing movement either sporadic or paralyzed at times. Now, we're seeing some ships and tankers make their way across the waterway with their lights turned off or seeking approval either from Iran or the United States. But really, it does feel like the Strait of Hormuz is front and center. And perhaps what is different this time around as well is that we also are aware of talks happening between Iran and Oman about the ability to open a middle passageway in the Strait of Hormuz to allow for a bigger trickle of movement to happen in the waterway. Now, this is all happening at a time where tensions in the region run quite high. What's also different this time around is that you're seeing fighting happening between proxies of Iran in the region. In the Red Sea, for example, Saudi Arabia has resorted to that waterway throughout the war, really. And now that is at the risk of being hit by Iran's proxies in Yemen, the Houthis. But if we go by what President Trump had said, he said the talks will continue today, that he got pleas from countries in the region, including Saudi Arabia's Mohammed bin Salman, who told him that he prefers a return to diplomacy, a return to talks over fighting. So this is what we're keeping an eye on and definitely on the timing and the location and whether those mediators are going to come to the table and mediate between the two warring sides. [00:15:05] Speaker 1: Abiyah, thank you very much. Bloomberg's Abiyah Abu Omar. So the focus then on these talks, where and what will be discussed and, crucially, by whom exactly. What does it mean for markets? Let's start our conversation there with Peter Kinsella, Investment Services Head over at Union Bancaire Privé. Really nice to speak to you, Peter. Thanks for joining us this Monday morning. So we'll start with the oil price just because it is such a sizable move this morning. But we definitely want to leave lots of time to talk about the yen because I know that is quite interesting. So, I mean, a 5% move in the oil price. Once again, do you constantly re-evaluate strategy around these oil price moves or are you having to look through this? [00:15:40] Speaker 5: I think you have to look through it. You've got to assume a slightly higher range, somewhere between sort of $75 and $85, $90 per barrel. I think it's unlikely we go beyond those levels. You've still got significant reserves, right? And if we look at it, I think the big key with oil is actually the demand destruction that we've seen in Asia, particularly in China. So we're not for that demand destruction. Certainly, we'd see oil prices a hell of a lot higher than we are today. But given that paradigm, I struggle to see oil sustaining rallies above $90 per barrel. And that's really been the case in the last several weeks. So I would assume a little bit lower from here. [00:16:14] Speaker 1: Okay, well, linking these stories, I mean, the fact that we've got a weaker dollar makes it easier, a better time to intervene if you want to strengthen the yen, perhaps, and the weaker dollar perhaps being driven as well by the geopolitics. So on the yen, we're at 156.51. We saw on Thursday some significant strengthening, now confirmed that that was intervention along with the United States. Maybe it's happening again today. We're not entirely sure. What does it mean that the Americans are now on board with this intervention? [00:16:39] Speaker 5: So I think we'll have to find out, first of all, how much the Americans have actually done in terms of the intervention. The last time they did it in 2011, it was kind of a piecemeal quantity. It was about a billion dollars. We know the BOJ has been in the market several times. This time, it appears they've done around just over $50 billion in terms of the intervention. So we'll have to gauge the actual size of the intervention. However, the fact that we've seen sort of Japanese officials talking about a joint understanding with the Fed vis-à-vis monetary policy, that's important. And I think as well, what you're seeing from the Treasury, and Besant in particular, is saying, okay, yen was simply too weak. I think every FX strategist in the street has believed that for a very long time. The question was really what was the catalyst towards, you know, propelling, getting some yen, sustained yen appreciation. This could be the start. I think that certainly if the U.S. and Japan have drawn a line of the sand at kind of $1.64, fine. [00:17:31] Speaker 1: And we know that Besant used to be involved in FX markets when he was at a hedge fund. So I'm sure he knows what he's up to here. But in terms of whether this has a lasting impact, a lot of guests have said to us in, you know, past weeks, without the BOJ stepping up the cadence of rate hikes, you know, the yen just weakens again. Is that the case? And how much more urgency would we need to see from the BOJ to make this strengthening stick? [00:17:57] Speaker 5: Right. If we look at what the BOJ said on Friday, they've raised their growth and inflation forecast for next year. And both the two and the 10-year JGB yield curve, both parts of the yield curve have steepened somewhat. So the question is really can we go to a faster pace than is already priced in by the market? The market's priced in just over two further rate hikes in the coming year and a half, two years. Is it possible to get three? Yeah, I would say it's not impossible. But again, really for me, it's got to be a meaningful cadence of rate hikes. And that doesn't appear to be the case at present. So I'm kind of on the fence vis-a-vis whether it's going to, you know, whether we're going to see an actual game changer here for yen. You know, is fair value for dollar yen? Probably 145-ish, 140. And that would be consistent with two-year, 10-year yield spreads. However, the question really for me is we've got to see the BOJ really step up to the mark. And under Ueda, they've really struggled to do that. [00:18:53] Speaker 2: Well, let me stay on the central bank theme because you had the dollar with its worst week in over three months. Anna's talked about maybe some of the collateral damage from the intervention. But, you know, how much is it a sign of the credibility problem personally created by Kevin Walsh? Because now you've got these reports he's going to have even fewer Fed meetings per year. [00:19:11] Speaker 5: Yeah, I think, look, it's definitely a regime change at the Fed. There's no doubt about that. And at the Fed's meeting last week, we basically had a dearth of information. We don't know what inflation measure they're going to use. He didn't articulate how he's going to get inflation back to 2%. I mean, bear in mind we're above 4%. And I think if we look at the yield curve dynamics post-Fed, so the 30-year yields, long end of the curve, really steepened aggressively. Five-year, five-year forwards rose significantly. So we're basically pricing in and increasing inflation risk premium to the dollar, which, of course, is bad news for the greenback. There's no doubt about it. And so I think from the Fed's perspective, this communication that we're seeing, it's very early days. I think we have to acknowledge that. But it's not a particularly auspicious start. [00:19:54] Speaker 2: I mean, I only say this half-tongue-in-cheek. We've got a load of jobs data coming out this week. What was more for the dollar going forward? Is it the actual data or Kevin Walsh's communication or lack thereof? [00:20:05] Speaker 5: Well, this is it. I mean, ultimately, it has to be driven by the data, right? And I think the risk, really, is that if Walsh is saying, OK, the market's doing our job for us, you know, financial conditions have tightened, et cetera, we don't need to do anything, the risk, really, is that he falls behind the curve, right? Because the underlying data moves against him, and then he's forced into sort of, you know, proactive rate hikes, reactive rate hikes, should I say. So it's going to be a tricky period. But overall, definitely last week, I think, is quite important. It's probably calling time on the dollar's recent rally, I think it's fair to say. [00:20:36] Speaker 1: I mean, he has said, you know, we'll just stay laser focused on getting back down to 2%. Why is that not enough for the markets, Peter? [00:20:44] Speaker 5: Well, I mean, you can say you are, but the question is how you do it, right? And we priced in, I mean, the overnight index swap market is priced in roughly two rate hikes from the Fed. Then they pared that back somewhat from post-Fed meetings. So it does appear at the moment that the market's kind of starting to doubt what he's saying. And that's why it matters, because ultimately, if you're a central banker, you've got to say what you do and then do what you say, right? And he's doing neither and saying neither are present. [00:21:10] Speaker 1: OK, Peter, thank you very much. Thanks for joining us. Peter Kinsella, Investment Services Head at UBP. [00:21:15] Speaker 2: Well, let's take a look at what else you need to know this Monday morning. Alibaba shares have jumped in Hong Kong after it released its latest flagship AI model, with performance claims putting it alongside global leaders like Anthropics Fable. The debut comes after Moonshot's Kimi K3 sent ripples through stock markets in Silicon Valley last month as Chinese developers showed they could quickly catch up with the top models out of the US. Meanwhile, Monty Deopaski is reportedly exploring a takeover of Banco BPM after talks over a merger of the two banks collapsed on Friday. This is according to the Financial Times, which says that Monty Deopaski's CEO has been considering approaching BPM's largest shareholder, Clédi Agricole, to discuss a move and that no takeover would proceed if the French bank isn't willing to engage. And two helicopters collided in Greece's Attica region while fighting a wildfire as emergency services face challenges to contain blazes across Europe. Four consecutive heatwaves and worsening drought have gripped the continent, with consequences rippling beyond record temperatures. Well, Anna, this has consequences, the heat, both for power and for freight, and really it risks European competitiveness with the US and Asia at a crucial moment, of course, on top of the horrific human toll. [00:22:31] Speaker 1: Yeah, the human toll, of course, of the fires and the economic toll of the fires. And when we're thinking about the economic toll, I mean, do we think about a reshaping of tourism flows as a result of this, if it were to continually be repeated? And then on to the energy side of things, as you mentioned, this does have an impact because as the rivers, as the river levels get lower, we see some actions having to be taken to shut down certain power generating facilities like we saw in Hungary. [00:22:56] Speaker 2: Yeah, which then has a political impact because you've got a new prime minister in, Peter Magyar, he's inherited this vulnerable system. But yes, if you're shutting down the nuclear power plant for the first time because it needs that water for cooling, he's got to pick up the consequences. [00:23:11] Speaker 1: Yeah, absolutely, as a result of the low levels in the Danube. We'll get more on that later in the programme. Coming up then, we will talk further about the Fed. Fed chairman Kevin Walsh said to be considering a rethink of the central bank's policy meetings and the frequency of them. We will talk to Paul Skinner about that conversation next. This is Blaine Berg. Welcome back, everybody. It is Monday morning once again, 30 minutes until the start of cash equity trading here in Europe. And the futures picture looks pretty buoyant overall, not so much for the FTSE 100, a lot of energy names listed in London, of course, or a couple of large ones. And that means that the drop of 5.5% on Brent will take its toll, no doubt, on some stocks. But we'll watch what's happening with AstraZeneca in the London market because that could also be interesting. But elsewhere, Lizzie, we perhaps will get a benefit from the fact that we've got a weaker oil price. We've seen that play out across Europe a number of times. [00:24:16] Speaker 2: Yeah, and we're seeing it across the Treasury curve and across the European bond curve this morning. If you look at the front end, you've got the German two-year down. The 10-year German yield is down five basis points at 315. And so that really playing out around the world this morning. Well, let's stay with the bond story. And Bloomberg understands that Fed Chairman Kevin Walsh has raised the possibility of changing the frequency of the central bank's regular policy meetings. One idea Walsh is said to have floated is for policymakers to meet just six times a year on interest rates and twice for substantive economic discussion. They usually, of course, meet eight times, though no decision has been made yet. Let's speak now to Wellington Management Investment Director Paul Skinnery joins us in the studio for more. Great to see you. [00:25:01] Speaker 6: Morning. [00:25:02] Speaker 2: So what do you make of this? Six instead of eight meetings, how much volatility can we see in Treasuries? [00:25:07] Speaker 7: Well, yeah, you know, as you go to less meetings, inevitably, everything is going to become so much more data dependent. And we're already seeing that. People are totally focused now on non-farm payrolls at the end of the week. It's becoming a much bigger thing than it has before because we're not getting any direction. But you've got to remember, 20 years ago, that was the way that we responded, markets responded to Fed decisions. They didn't have all the forward guidance that we do have now. So going back to the previous thing may not be that bad a thing. Getting the markets more market, sorry, data dependent may not be a bad thing. So I think we've just got to give Chairman Walsh a chance to, you know, develop his methodology and see how it works. Now, the problem he's got is that he really didn't give us much of a message in the last meeting. And that's been a mistake. Obviously, we've seen the yield curve steepen 25 basis points. That's that's quite a steepening. And so there are the downsides to not giving the market enough information. [00:26:12] Speaker 2: Yeah, I jokingly said to Peter Kinsella before his policy uncertainty more of a risk than inflation itself at this point. But you do wonder whether, you know, you're going to see bigger moves when meetings actually happen. When already you've got Fed dissenters kind of saying, you know, if we if we move now, it would prevent sharper action later. [00:26:30] Speaker 7: That's exactly right. And so what what more seems to want is the market to do the disciplining, to do the tightening itself. But markets overreact. I mean, that's a fundamental, you know, fact of markets. And so you don't want that overreaction. And that was the concept of forward guidance to give everyone at the market, certainly less volatility because they knew what was coming. So there are dangers to this approach. And I think we just have to see how things develop. But, yeah, overreaction of markets is part of things he's going to have to deal with. [00:27:04] Speaker 1: And, Paul, how does this add up for corporates who want to borrow at this point then? Because interest rates in the market at least are rising. We've got this higher risk premium now at the longer end because of this lack of transparency at the Fed. There is, you know, we're still thinking about whether the Fed might actually have to increase interest rates. And at the same time, there's a lot of competition for available capital. So we see AI companies wanting to build out really quickly, coming to the market, trying to get hold of that capital. And others may be getting crowded out. I don't know. But what does it mean for corporates in that space? [00:27:36] Speaker 7: I mean, this is the real theme that we're investigating at the moment, that we've gone from a period of huge abundance of capital when we were in financial repression and central banks were buying assets. Now they're selling assets and they're draining capital, they're tightening rates. And at the same time, you're absolutely right. This AI build-out is enormous. If you look at McKinsey's estimates of what's required for the data centers, $6.7 trillion by 2030. They've already raised $1.3 trillion of debt. That's draining liquidity out of the system. At the same time, you've got a huge amount of money going into private assets. They're less liquid, crypto, gold. And so we think that as we go into the end of this year, that demand for capital is going to make capital far more discretionary as to where it goes. They're going to support good companies and desert the bad companies. What does that mean? It means dispersion. It means much different things. And also more volatility. You've got less buying of the dips to smooth things. And dispersion and volatility are fantastic environments for active managers like Wellington, which is what we are. [00:28:47] Speaker 1: Okay, so dispersion. And so some yields that could be attractive then if we're seeing, you know, some yields could go higher, I suppose, on your analysis. But that might be because situations look more precarious. So how do you make sure you're backing the right horses? [00:29:00] Speaker 7: Well, it's all about, certainly in the fixed income world, looking at leverage, looking at the direction of leverage that's going. And this is the amazing thing. Those companies that led the market growth and economic growth that used to be capital light concepts, the tech companies, are now becoming capital intensive. And so that means that everyone's going to be competing for that capital. You've got central banks who are raising rates. And so, yes, the cost of capital for all corporates is going to rise. But those that are well managed, less leveraged, will get better access to that capital. [00:29:38] Speaker 2: So, Paul, this is one of the big themes in your notes at the moment. The other is headline, give Andy a chance, which I feel like should be on a T-shirt. We're talking about UK politics, of course. [00:29:48] Speaker 7: I mean, hardly I should talk about politics, but I do believe that we all want the UK to do better. And what Andy's brought is an optimism. You've seen retail sales up seven and a half percent, consumer confidence up. So it would be good if Andy could, you know, give us a direction, an optimism. However, he's got some seriously tough decisions to make about financing. And his job is not made easier by a Bank of England who are dragging their feet on actually raising rates. And because they're doing that, the yield curve in the UK is steepening. You know, we've steepened up 50 basis points this year, half a percent more expensive to finance that government debt. And so Andy and his government have to be very careful about what they propose that they're going to get financed by the Guildmark. [00:30:37] Speaker 2: Well, yeah, do you think that the market would forgive Chancellor Healy if he were to reduce the margin against the fiscal rules from what Rachel Reeves was leaving in the budget? I mean, you've got the date now, October 28th. [00:30:49] Speaker 7: Exactly. No, no, I mean, there's an enormous amount that the new Chancellor can do to set the agenda and make things look better. But without a central bank that's being careful, like the ECB, you know, if you look at what the ECB has done, they've raised rates and their long end has moved by a handful of basis points. You know, it's not the expensive raising capital for governments has not changed for the European government. The Bank of England have made it more difficult for the government. So the Chancellor's got a challenge in that he cannot raise too much money out there in the Guild market. And so they're going to be looking at different ways of raising funds. [00:31:28] Speaker 1: Meanwhile, Paul, we've got the oil price down by five percent this morning. I mean, such big moves have become, I mean, if not daily features, quite regular features, haven't they? I mean, how are you how are you thinking about the longer term picture? Are you just thinking about geopolitics being less predictable? Therefore, we all have to assume inflation is higher. Is that broadly? Absolutely. [00:31:47] Speaker 7: And, you know, the solution to the Straits of Hormuz is is a long term solution. We're not going to get there in the next week or so. I think optimism may be a little bit overdone. I'd agree with Peter earlier that the oil price is probably going to settle a bit higher than this, actually, because even if we open the Straits of Hormuz, there's a lot of repair, a lot of reconstruction that needs to go into. And the big problem is that China has doubled its oil exports in the last month. Now, that's a real worry because they were surviving off strategic reserves, which they'd run down by about 20, 25 percent. And now they're preferring to import. And that's going to probably have a lot more of an effect on the oil price longer term than an optimistic moment that we're having over the strait at this point. [00:32:38] Speaker 1: Well, thanks very much. Thank you for joining us. Well, we started that conversation on the Fed. [00:32:45] Speaker 2: Former Fed policymakers weighing in on Kevin Walsh's plans to retool the central bank. [00:32:51] Speaker 8: He left open the possibility that the task forces could recommend other measures. They could go to an average. Instead of picking one index, they could look at CPI, PPI. There are a lot of things they could do. But I think, Anna, as usual, raises an important point, is that an inflation targeting central bank needs to be clear about what it is it's targeting. It can and may evolve. And so I think that will be important. [00:33:16] Speaker 2: Richard Carradiver, former Fed vice chair, speaking to Bloomberg. And we'll have more on how central banks are seeing the inflation fight later in the program. Stay with us. [00:33:25] Speaker 3: We have a good relationship with Japan. We're very strong. Very, very strong financially. They are, you know, they have a weakening yen. And they wanted a little bit of help. And we're always there for Japan. Japan's been very good to us, with the exception, of course, of Pearl Harbor. [00:33:58] Speaker 9: Mr. President, what is the U.S. getting out of that arrangement? [00:34:02] Speaker 3: Financial benefit. Financial benefit. And we also, it's also good for the world economy. [00:34:11] Speaker 2: U.S. President Donald Trump speaking on Air Force One yesterday. Well, the U.S. and Japan have warned of further yen intervention as the two countries seek to lift the currency from a near four-decade low. Let's go more now with Bloomberg's Paul Jackson, who, of course, covers the Japanese economy and government out of Tokyo. Paul, good morning to you. How significant is it that you've got the U.S. acting alongside Japan now for the first time in over a decade? [00:34:37] Speaker 10: Oh, make no mistake, this is a total game-changer for the whole narrative. It looks like Japan's been trying to get the U.S. involved for some weeks. We did have Treasury Secretary Besant in Japan in May. There was a phone call the following month. Looks like these were all linked to negotiations over trying to get them involved. If you're a currency speculator and you're up against Japan, that's one thing. But if you're up against Japan and the U.S., that's going to give you pause about whether to bet aggressively against the yen. And we've seen nervousness in markets this morning as they respond to this news. We did have a two-and-a-half yen move in the Japanese currency against the dollar. Could have been more intervention. Could have been twitchiness in the market on the news flow. Not quite sure, but with the U.S. involvement, things have got a lot scarier for those speculators. [00:35:43] Speaker 1: Okay, scarier for the speculators. And I wonder what it means for our assumptions about the BOJ then, Paul. Because lots of guests have said to us, look, if the BOJ doesn't step up the pace of hikes, then intervention is harder. Now you've got the U.S. on board, so we take that on board, that this is a game-changer. But it does seem as if something's moving JGBs, you know, around the middle of the curve. We're seeing yields up by six basis points. Is this a market that's thinking the BOJ is going to act more quickly than we're assuming? [00:36:13] Speaker 10: Well, I think maybe the question you need to ask is, what did Japan have to give the U.S. in order to get this cooperation? And we know that Besant has been pushing for faster rate increases by the Bank of Japan. And he's been saying that that's the best way for the Japanese yen to reach an appropriate level. So we kind of have to assume that that's kind of part of the deal and that the likelihood of a near-term rate hike by the Bank of Japan has gone up as a result of this joint intervention. So the basic takeaway is, is September live? You bet. [00:36:58] Speaker 1: Paul, thank you very much. Bloomberg's Paul Jackson. September is a live meeting then over at the BOJ, he says. Let's turn to Markets in three minutes on the opening trade with our Markets Live executive editor, Mark Cudmore. Mark, good morning to you. So let's start with the yen and actually put it in a wider context because, obviously, the other side of that yen strengthening is dollar weakness. And the dollar seems to be weakening for all kinds of reasons, geopolitics in the Middle East, also perhaps the hangover from the Fed last week and what we heard or didn't hear from the new Fed chairman. What does that add up to in terms of the dollar from here? [00:37:34] Speaker 11: Yeah, I think it was potentially pivotal week for the dollar in terms of that even before the intervention, as you outlined there, Anna, the Fed really kind of did not have a meeting that it kind of implied much credibility and that undermines the dollar long term. Then when you follow that up with the U.S. supporting intervention by Japan, and we all said intervention in Korea and Taiwan. So, you know, multilateral intervention essentially against the dollar at a time when its own central bank is undermining it. That means it could be a big turning point. Now, I'm a little bit nervous. Despite being someone who's kind of structurally kind of long term bearish the dollar, I'm not quite sure it's ready to turn yet. And I do note that the price action in dollar yen, if you're the Bank of Japan, must be very disappointing. I mean, dollar yen, again, bounced a percent from this morning's lows. And I really think that officials need to probably get it below 155 tonight. Otherwise, I think the price action for those who are bearish dollar yen is quite worrying at the moment, given it keeps on bouncing back so rapidly. [00:38:38] Speaker 2: Mark, when we look at the stocks picture, you've got you've had a negative session in Asia compared to the rosy outlook for futures on both sides of the Atlantic this morning. The oil story feeding into the positive sentiment. But in Asia, a lot of it seems to be about concern on Chinese AI competition. How seriously should we be worried about that as a threat to other kind of tech stocks in the in the Asian continent? [00:39:07] Speaker 11: I think the the new Chinese models, while there may be only another incremental development in this story, is probably one of the most momentous things to happen in the last few days in markets. And that's despite the fact that we've had yen intervention. We've obviously got the U.S.-Iran twists and turns. But I think, you know, this is really changing the AI trade. Now, it's going to take some time to kind of work out. But I think it again threatens the the whole hyperscaler kind of business model in terms of how they're spending. I think probably one of the I mean, the people are really sophisticated on this. AI trade will kind of nail exactly which stocks will will win and lose out of this. But I think at a bigger picture level, it again, probably suggests the rest of the world outperforms U.S. stocks over the long term. That's a theme we've seen over the last 18 months. But U.S. stocks have been making a comeback up until two weeks ago. They'll now underperform again because they're priced to get a disproportionate amount of the gains from the AI theme. When, in fact, I think Chinese models are saying that they're going to democratize the returns. Everyone's going to benefit now exactly which stock markets in Asia may be. harder to take. But I think that's the bigger theme is that, you know, the rest of the world, EM, other countries that haven't got these hyperscalers can still benefit from the AI boom. They can still benefit from the productivity boom. I think it might be less positive for Korea that's based purely on those kind of two big memory chip stocks. But it's good for other outcomes. And Europe's benefiting from lower oil prices as well. So I think the bigger takeaway is rest of the world to continue outperforming U.S. stocks as has been the theme the last 18 months. [00:40:37] Speaker 1: Now, we're out of time on the clock, Mark, but I'm going to ignore that and ask you another question anyway. I want to ask you about non-farm payrolls because of the fact that we are getting less guidance from the Fed. Does that mean that we're in kind of summer markets, certainly here in Europe? Does that mean that we are going to be braced for more volatility around the release on Friday? [00:40:58] Speaker 11: Yeah, I think it really matters, this. And I think it's because everyone kind of left so disappointed and underwhelmed by last week's FOMC. I think if it's a very strong number, we'll kind of rapidly, you know, price this narrative that the Fed made a policy mistake last week. And we'll start moving not just towards 25 basis points in September, but considering whether they'll suddenly have to do 50 basis points in September. So I think that's going to be the debate if it's a very, very strong number. If it's a very weak number, then everyone will go, actually, Warsh was a genius after all. And it wasn't, you know, disappointing. And, you know, suddenly we'll kind of price and maybe they'll manage to be on hold for the rest of the year. But that will feed into the dollar downtrend story. So absolutely, there's going to be a heightened reaction function to jobs this week than there has been in recent months. [00:41:41] Speaker 2: OK, those numbers are out on Friday. Mark, thank you for now. That's our Bloomberg Markets Live executive editor, Mark Cudmore. And remember, you can get up-to-date analysis from Mark and his team by going to MLIV Go on your terminal. Now, as we look at Eurostoxx 50 futures up 7 tenths of a percent, let's dive into the individual stocks to watch this morning with Chloe Mellie. Chloe, what are you watching? [00:42:02] Speaker 12: Good morning, Lizzie. This is a very M&A-focused stocks to watch this morning. We're starting off with AstraZeneca, which is said to have explored a merger with Bristol-Myers Squibb, which would have created one of the biggest drug makers in the world. And this is something that would also give AstraZeneca the opportunity to expand its footprint even further in the U.S. Of course, we don't have any confirmation on either side, but we'll be watching out for the market reaction there this morning, especially after a little bit of weakness from AstraZeneca lately, as we can see here on the chart. It's also worth noting this is a potential merger that is actually something that investors and analysts have quite a lot of skepticism about, with one analyst in particular saying that this merger is tough to justify unless there are massive deal synergies that offset the revenue and earnings decline. So that is worth keeping in mind as we watch out for that market reaction this morning. Moving on to Italy and Italian banks are going to be in focus. There's a lot happening there at the moment. Bank of BPM has said it has abandoned its efforts to merge with Monte Paschi, which now opens the door for Intesa San Paolo to take over that bank. At the same time, there's an FT report that Monte Paschi is itself exploring a takeover of Banco BPM to ward off this Intesa deal. And so there's a lot going on, the potential for a lot of twists and turns in this M&A saga. So we'll be watching out for all of the market reaction there, for all of those names that are, as we can see, in the green so far this year. And finally, let's stay in Italy, but go over to Prismian, the electrical equipment manufacturer, which makes things like fiber optic cables for data centers. It has bought an electrical equipment manufacturer over in the U.S. called Actor. This is the latest deal in a series of deals for that company as it tries to expand further into the U.S. ahead of an expected dual listing in the U.S. as well. We've seen the stock rise quite significantly so far this year, up more than 39 percent. And this deal could push this even further this morning. So let's watch out for Prismian as well. [00:44:09] Speaker 1: Yes, AI-adjacent themes such as cabling. Chloe, thank you very much. Chloe Mellie with the stocks that are going to be in focus. And I'll just draw our attention, Lizzie, to a couple of stocks here. Total Energies, two stories here. It seems that Shell is selling some European renewables, some of its portfolio in that space, to Total Energies. And then Total Energies, in turn, is selling some European renewables to KKR, that latter deal, for 1.8 billion euros. So we'll watch how that particular share does. AB InBev, also some news there. One shareholder seeking to raise about three quarters of a billion euros in a block trade. So we'll watch that. [00:44:45] Speaker 2: Well, I mean, we'll watch energy broadly, won't we, given that we've got such a lower oil price. So that could be impacting the FTSE strongly today. A random little one, also Siltronic, raised to buy at UPS. And that indicated higher on Tradegate, so another stock to watch at the open. [00:45:01] Speaker 1: And just a reminder that on Friday, we saw a considerable weakness in the media space. Universal Music Group, fears about what happens with streaming and where the benefits and losses from that are going to be accumulating. Well, that was the biggest downside mover in terms of sectors. So we'll see if we get a bounce in any of that. Energy actually was the best performing sector. No doubt we will see something different today. So we're waiting for energy stocks to be on the back foot this morning. We have an oil price that is down by nearly 6%. Coming up, we'll bring you that opening trade. This is Bloomberg. Welcome back, everybody. This is the opening trade, Monday morning, the start of another trading week here in Europe. Friday seems like a long time ago, doesn't it? But this is the session that we saw during Friday in the United States. And after the European markets closed, we did see some gains over in the U.S. But since then, risk appetite has really been on quite the journey. After we saw U.S. markets close, we saw the U.S. threatening further military action, large-scale military action against Iran. That has, though, over the weekend been dialed back. President Trump saying that in response to the resistance from local allies such as Saudi Arabia, he's called off those strikes and wants to leave space for talks. As a result of that, the oil price is considerably weaker. You see at the bottom of the screen, we're down by more than 5%, nearly 6% lower on the Brent price. So how is that going to play out for European markets? Let's have a look at the futures picture. And we would expect that to give a boost to the likes of the DAX and the Cat Caron. So overall, Eurostoxx 50 futures are pointing higher. That could be the weaker oil price. It could be something that weighs considerably on the 5,100, though. And so expectations there are a little more muted. Lizzie, what do you see in the individual stocks and sectors? [00:46:51] Speaker 2: Well, I'll come back to energy, Anna. But I want to start with the M&A action and the potential impact on stocks this morning, starting off with AstraZeneca and this story that it's said to have explored a merger with Bristol Myers to increase its exposure to the U.S. market. Will investors believe it will go ahead? Because analysts at the moment are very skeptical. So keep an eye on that. Also on Italian banks, you've had banker Monte De Paschi weighing a possible takeover of Banco BPM to ward off a hostile takeover from Intesa San Paolo. Watch all of those names. And then, as I say, energy stocks potentially lower, most likely lower on the lower oil price. But also individual moves maybe from Total looking to sell its Europe renewable stake to KKR, Anna. [00:47:35] Speaker 1: Yeah, lots of individual names to watch out for then. But overall, as you rightly said, Lizzie, last hour, the big move in oil prices is surely going to be the thing that stands out to us when we look at where energy names trade and other markets around Europe this morning. That's going to be the backdrop. Of course, we layer in there on top the latest news flow around the yen. That might be harder to see asserting itself across European equities. But that is certainly in our minds as we look at these European markets then opening up on the front foot. And actually the FTSE 100 a little stronger than had been anticipated, perhaps up by three-tenths of one percent. So much more positive picture than the futures that were painting for us. The IBEX up by seven-tenths of one percent. The Cat Caron's up by seven-tenths of a percent. So broadly speaking, Ben, we are seeing positivity. Perhaps there are other stories on the FTSE 100 that are offsetting any weakness around energy names. And there would be plenty of companies that would benefit from a lower oil price, of course. Lizzie, what are you seeing in the sector's backdrop? [00:48:30] Speaker 2: Immediately, I scrolled to AstraZeneca because, of course, this is the second biggest company on the LSE. But we haven't started trading there yet. So let's take a look at the broader sectoral picture. You've got about half, just over maybe three-quarters of sectors in positive territory this morning. Travel and leisure leading the gains up 1.8 percent. Construction, industrial goods and services not far behind. But bottom of the basket, as we expected, energy down 1.8 percent off the back of the lower oil price. Brent currently trading, let me find it, at $83 a barrel. So down 5.5 percent. As you say, that meaning that the FTSE's gains are held back somewhat this morning. But just some of those individual energy names that we had flagged as well. Total Energy's down 2.5 percent in Paris on this news, perhaps, that it's going to sell its European Renewables Energy stake to KKR. Also keeping an eye on Shell, which is down more than 2 percent. That's selling its Renewable Energies portfolio in Europe to Total. So it's all a bit of musical chairs when it comes to the energy names. And then just going back to the Italian banks that we'd flagged, well, Paschi's down 0.8 percent, BPM up 0.4 percent, and Intesa San Paolo up 0.8 percent. So, again, the musical chairs for Italian banking M&A playing out across those three stocks. [00:49:48] Speaker 1: Yes, and we've mentioned the energy names on the back foot. Travel and leisure and things related to it seems to be doing well. So you've got Airbus, one of the best performers in terms of the Europe stocks, 50 this morning, and Safran, the engine maker. So both of those, you could put those together, perhaps, and the airlines, of course, part of that trade as well. So 2E, Ryanair, IAG, all up by more than 1.9 percent. Let's think about, let's take a step back, perhaps, from the daily moves and talk about where we go on these markets. Gautam Samarth joins us, a multi-asset fund manager at M&G Investments. Gautam, nice to have you with us. Thank you for joining us. How do you keep pace, keep track of the oil price moves? Because we're down another 5 percent this morning, and, you know, on other days we've been sitting here and we've been up 5 percent. It seems like this kind of percentage move is nothing unusual right now. Real volatility in energy markets. Do you just have to construct portfolios that withstand a lot of volatility and a broadly higher energy price? Is that the landscape? [00:50:44] Speaker 13: You do. You do. The volatility in the oil price is something that we've got used to, certainly, I mean, let's say over the past six months. But even if you cast your mind back to the breakout of the first conflict of the year, which was over a year ago. Ultimately, what the market worries about is what are the inflation pass-through effects of oil and, therefore, what a policy response functions to this. And looking through all of this, there are some big picture things that we've learned over the last year. We've learned that the world's pretty resilient. It can deal with supply shocks in a way that we didn't think was possible pre-COVID. And if that can happen, then we can start to fade some of the impacts of the day-to-day news announcements. When is this conflict going to resolve? How it's going to resolve? How long it's going to take? We have no idea. But what we can say is that the system is dealing with supply shocks in a much more resilient fashion. [00:51:43] Speaker 1: OK, so the global economy can deal with those supply shocks and it has been dealing with what's coming out of the Middle East quite, you know, really well, considering expectations. Can the AI theme deal with higher rates? And is that what we should prepare ourselves for? And I guess I mean this in the context of whether the Fed has to put up rates or whether the markets just decide they need a higher premium to hold U.S. debt. [00:52:04] Speaker 13: So the two big surprises this year have been one, the resilience to the oil price shock. And the second one has been the upgrade of CapEx spend and investments going towards the AI theme that if you think about the counterfactual whereby you actually had a world where you didn't have these supply shocks, you might be in a disinflationary boom right now. You've got productivity gains, potential productivity gains coming through from the benefits of AI and you've got rapid build out of infrastructure that is stemming up. Certainly, if you look at the U.S. economy, a lot of the investment spending coming coming from that sector. So absolutely, that's got it's got legs to go. And there isn't that that much froth behind it. There's pockets of froth. But in aggregate, you don't see what you've seen in prior. [00:52:55] Speaker 1: And you don't think it's vulnerable to higher rates then that AI build out. [00:52:58] Speaker 13: It will be. You're pushing up against sort of limits of cost of capital right now as you move from equity financing to debt financing. That will matter. And you're starting to see that in the difference in terms of certainly if you look at CDS of companies that can build out with cash flow internal versus having to raise debt for it. You're seeing the impacts of it at the margin. But I think there's plenty of capital willing to chase this theme in the different pockets in which it evolves. [00:53:25] Speaker 2: Well, yeah, you want to know when that inflection point will be when you get the disinflationary boom, how big it will be and whether really you have to wait for oil to fall and for deficits to shrink to be a boom, as you're calling it. [00:53:39] Speaker 13: You do, and that'll be difficult to call. So if you can cut through into sort of look beyond 12 plus months, I think a lot of the conditions are in place for that to happen. If you think of what might have been the case had we not had a supply side shock and sort of a potential inflation flare up, you'd have rates that were possibly stable. I mean, we could argue there was no need for central banks to cut rates where we were in the growth cycle, where the labor market is. But you'd have lower costs of capital, a theme that was accelerating. And meanwhile, all the underlying service level inflation that we were worried about, that seems to be coming off. So certainly if you look at the core inflation numbers, the last few prints have actually been surprising to the downsides. You would have had upside surprises to growth and downside surprises to inflation. [00:54:40] Speaker 2: Can we also just talk about the Fed, because I am wondering how much of a problem we've talked a lot about Fed credibility already and the impact on the bond market so far this show. But I do wonder about the impact on stocks as well, because you had the worst Fed day for the S&P since, I think, 2024 last week. How much of a problem could Fed credibility create more broadly in these markets, given your multi-asset? [00:55:01] Speaker 13: It is. It's one where they're finding the balance between saying nothing and saying too much. After all, not saying anything is a form of communication. And when you leave open a potential interpretation of reaction function, you increase the range of outcomes and therefore the potential volatility. Now, you've just been through a phase where you had a pretty spectacular return. And certainly if you go back to the start of April onwards, you had a pretty spectacular bounce in equity markets, especially in the pockets of the equity market that you're talking about. And then when you create uncertainty as to what the trajectory of rates might be, that's always vulnerable to a reset. I think what we've seen is a bit of a reset rather than any meaningful change in equity market trend. [00:55:45] Speaker 1: Captain, can I ask you about the pharmaceutical sector, whether you see that as an area to maybe broaden out from, I don't know if it's AI benefits, but certainly if we're looking for things that are broader than just AI benefits in equity markets right now. And of course, the news of day around the pharmaceutical sector is AstraZeneca. And we've got reporting that suggests that they could be in talks for a possible merger with Bristol-Myers Squibb. Now, the investor community doesn't seem to be thrilled by that prospect. And as you might expect, the stock is down by more than 6% today on nervousness, perhaps, that they go and make such a big deal. And it would be a really big deal within the pharma landscape. Is pharmaceuticals an area of interest to you right now? [00:56:26] Speaker 13: So pharmaceuticals and healthcare more generally, there's been a rotation on the sort of, it's interesting, we've seen a steady sort of rise in equity markets, but within that, we've seen quite a lot of rotation this year already. Within that, a rotation towards healthcare was already underway. What we're seeing in terms of M&A activity, large cap M&A activity, tends to happen later on in cycles. I'm not going to profess to know what the merits to a merger over here would look like, but it's something that you tend to see later on in the cycle, probably talks to a bit of confidence at the corporate level. Something that we haven't really seen mega deals like this so far. [00:57:10] Speaker 1: And in terms of dispersion, what are the best opportunities to take advantage of that dispersion trade right now, Gautin? [00:57:17] Speaker 13: Sure. So if you look globally, I do think Asian equities are still an attractive place. Certainly, if you think about... [00:57:25] Speaker 1: In Korea or elsewhere? [00:57:27] Speaker 13: Well, Korea is a great trading opportunity. If you optically look at it, it's one of the cheapest markets, although we know that those earnings are very, well, they're potentially very elevated. They're clearly very volatile. But you've just had a significant reset in a market that's trading up or down 10 plus percent in a day. So it's a great trading opportunity, which speaks to a broader macro environment, whereby this volatility creates trading opportunities across asset classes. [00:57:54] Speaker 12: Yeah. [00:57:54] Speaker 13: But if you look at valuations, EM equities more generally, the LATAM complex, Asian equities, and then the debt side, some of the LATAM sovereign debt looks pretty attractive. [00:58:04] Speaker 2: Yeah. Are there certain EM bonds that are more attractive to you than Treasuries? [00:58:07] Speaker 13: Well, I'd say a Brazilian bond yielding about 14.8, 15 percent, a 10-year bond with a duration of less than five. Those yields have to rise about 300 basis points for you to lose money over 12 months. That's pretty attractive. [00:58:23] Speaker 1: And are you thinking, Gatham, about this market as being sort of providing tactical trading opportunities, or is this still a good opportunity to get in and buy any dips, or is that not where we are right now? [00:58:34] Speaker 13: Both, but I think the tactical opportunities are significant. The volatility being created, what we've spoken about at the end on the show earlier on, the volatility in FX markets, the volatility that you're seeing in rates right now, especially at the long end of government bond markets, and even now in equities, intra-sector, and most recently across the tech sector, those are big trading opportunities. Now, if you are a big believer in this long-term trend, that's a tactical entry point. Otherwise, you can just trade the ranges. And so, as a macro investor, it's a great time to be around. [00:59:11] Speaker 2: One, five, six per dollars where we trade on the end right now. Gatham, great to see you. Gatham Samarth, multi-asset fund manager at M&G Investments. Well, let's turn over to the core six now. Where are they shaping? How are they shaping up this morning? We have all of them except for ASML in the green this morning. ASML down a quarter of a percent, but boosts across most of the board. Now, a great big hunch for Nestle. Novo up, brush flat to the upside. The biggest move there is LVMH, up 1.1%. Now, let's get to some of the individual stocks we're watching this morning with Chloe Mellie. Chloe, starting with Astra. [00:59:47] Speaker 12: Yes, good morning, Lizzie. We are seeing AstraZeneca take quite the hit this morning on all of this talk of M&A. So, AstraZeneca is said to have explored a merger with Bristol-Myers Squibb, and this would be a major, major deal, creating one of the largest drug makers in the world. And we are seeing investors be not quite thrilled at that prospect because maybe a deal of this magnitude might be quite hard to pull off. And so, we're down almost 7% this morning for that pharmaceutical company. We are also in the red this morning for oil because of this optimism that we could see the U.S. and Iran find a peace deal. They are set to restart talks today to try and find an agreement to reopen the Strait of Hormuz. And, of course, this is the kind of thing that sends those oil major shares tumbling. And so, we are seeing, in particular, actually, any is down the most this morning, down more than 2.7%. The flip side of that, of course, is that the travel sector, airline sector, is doing much better at the prospect of those fuel costs coming down. We are seeing IAG, which owns British Airways, TUI, Ryanair and Lufthansa, all in the green, and quite strongly in the green this morning on this optimism about a potential peace deal. We are also in the green for Siltronic, which makes a semiconductor equipment. It has been raised to a buy rating at UBS. This follows a string of buy ratings from last week with a lot of analysts saying that this is a company that is seeing a lot of very strong short-term and medium-term demand. And so, that is driving the stock this morning. And staying within this AI theme, we also have Legrand, which is a French maker of electrical equipment to data centers being upgraded by RBC analysts with the analysts saying that the recent pullback in the shares offers a very compelling opportunity to gain exposure to a very high-margin company. And so, we are seeing the shares up about 1.7% this morning for Legrand. [01:01:40] Speaker 1: Thanks, Chloe. Chloe Melly with the latest on those stocks that are on the move. One of those is AstraZeneca, of course. Shares in the pharmaceutical business falling this morning. In fact, that move in AstraZeneca taking 55 points off the FTSE 100. We will dive into what a potential takeover of Bristol-Myers Squibb could mean for the farmer giant. That story next. This is Bloomberg. Welcome back to the opening trade. We are 18 minutes into our session this Monday, and we've got a fairly positive picture across European equity markets. We have a considerably weaker oil price. We'll get to that narrative, though, because that seems to be developing. We'll get to that a little bit later on in this part of the program. Let's go to the AstraZeneca story, though, because AstraZeneca shares are considerably weaker this morning. They are down by 6.4%. This comes as Bloomberg learns that the UK drugmaker is set to have explored the acquisition of Bristol-Myers Squibb. A deal between the two would create one of the world's largest drug makers. Let's get more details with Bloomberg Health reporter Ashley Fairlong was with us on set this morning. So, Ashley, what do we know about the proposed deal, the extent to which there is a deal to really discuss here? [01:03:03] Speaker 14: Not very much right now. We know that there were preliminary talks. We don't know if those talks are still ongoing. We don't know if they have ended. I think the context that this comes in is that for the past year or so, there's been a lot of rumors about a mega merger between two large pharmaceutical companies. A lot of pushback against that as well, because in the past we've seen mergers have led to reduced R&D spending. We've seen, you know, potentially increased drug pricing. The reason for why potentially now this might be the moment for such a deal is that the U.S. administration is seen as more open potentially to such a merger and less likely to push back on some of the antitrust concerns that there might be in such a deal. [01:03:45] Speaker 2: When you look at what these two companies do well, does it look like a good deal to you? Because investors don't seem to be very impressed with the idea. [01:03:52] Speaker 14: Investors don't seem to think so for AstraZeneca. AstraZeneca is a high growth company. They have a really big pipeline that seems to, you know, people think will sort of bring them into the next decade. Bristol-Myers Squibb, on the other hand, is having more sort of concerns with patent cliffs. There's the lowest sort of PE levels. So we're sort of seeing a very different picture and there's less guarantee for investors that this will be a good deal for AstraZeneca. [01:04:22] Speaker 1: I mean, you mentioned one of the motivations could be that if you're going to do a big deal, maybe the regulatory backdrop in the U.S. would look favorably on this kind of thing at this time with the current U.S. leadership. That might be one motivating factor. Might they also want to increase presence in the U.S.? I mean, you've seen a lot of pressure on global pharmaceutical companies to produce more. [01:04:43] Speaker 14: That is the other sort of potential reason that Pascal Sorio, AstraZeneca CEO, might be pushing for this. Increasingly, AstraZeneca has made a larger presence in the U.S. We've seen an upgraded listing on the New York Stock Exchange. We've seen increased investments in manufacturing and research in the U.S. And we've seen, you know, increasingly the company position itself as a global company, but also an American company. So that could potentially be a reason. But as we've seen this morning, investors are not exactly keen on this proposition. Yeah. [01:05:16] Speaker 1: Yeah. Not getting the thumbs up right now. Thank you very much, Ashley. This is Ashley Furlan with the latest on the pharmaceutical sector. Now, sticking with European equities, it's a busy week ahead for earnings. But let's first take a look back at how the region has fared so far this season. To discuss, we're joined now by Bloomberg Intelligence Equity Research Director, Tim Craighead. So, Tim, we started this earnings season with really high expectations, would it be fair to say. Now we're some way through the earnings story. We've got quite a bit of clarity on where it's taking us. How does it look to you? [01:05:47] Speaker 15: Yeah. So we're roughly three quarters of the way through, if you think about it, from a market cap exposure perspective. More than 200 companies have reported. And it is interesting. It's been a pretty broad-based positive earnings cycle, notwithstanding a lot of the concerns that we went in with, you know, high oil prices, consumer confidence, etc. You think so far it's roughly 55% beat versus 25% miss, which, from a European context, that's a really good earnings report. Is that good? [01:06:20] Speaker 1: I feel like often things are, you know, ready to beat. [01:06:23] Speaker 15: Well, they are. But you think the U.S., if you look at those sort of stats, quite often is 75% or 80% beat. Europe doesn't play it that well. The companies don't play it. They don't game the system. So this is actually very handily constructive. And more importantly, maybe for the market, we're tracking at about 14% earnings growth right now versus coming in, as you would say, at about 11% before the results had started. [01:06:51] Speaker 2: So they're the broad strokes. Which are the sectors that are doing well and which are the detractors? [01:06:55] Speaker 15: Yeah, and this is part of that constructive story because it is pretty broad-based pharmaceuticals, notwithstanding the AstraZeneca news this morning. I mean, several have reported quite good numbers, semi-equipment in technology, industrials on the sort of broader tech play in Europe with a lot of the electrical equipment companies that play into the data center build-out thesis have reported good numbers. The financials with, you know, high interest rates that plays through into a higher net interest income. [01:07:27] Speaker 1: Yes, yeah, we were talking about AI adjacent things like cable makers, Prismian doing some M&A, has been doing quite a bit of M&A. Tim, what about the forward-looking story then? Because as you say, we're 75% through. That's not 100. We've still got some more discovery on earnings. [01:07:44] Speaker 15: So I suppose there are a couple of things that come to mind here. Number one, we are seeing positive estimate revisions on 2026 numbers. It's not like we're just beating and the 2026 estimate is static. It's up. But more importantly, the 2027 estimates are also revising positively in a like manner. So it is carrying into next year. Secondly, you look right now, we're about 15 times earnings for the stock 600. That's essentially a 10-year average PE. So we're not stressed on the valuation front. And this week will be interesting looking ahead. We've got HSBC, which is going to give us a pulse check on China wealth management flows. We've got Novo Nordisk, which, again, speaking about pharmaceuticals, we're quite constructive in terms of the prescription trends that we think will be better than expected for the Rogovi pill. BP is going to be interesting here in the UK because of what they say about the North Sea. And I think Diageo is going to be quite interesting. New CEO, how is the U.S. business going? Can they get this to start to accelerate? [01:08:58] Speaker 2: Which of them do you think will be the biggest surprise to the market? [01:09:01] Speaker 15: I'm thinking Rogovi, we're going to see, I hope, we have a focus idea, one of our high conviction ideas on this, where the prescription survey we do with doctors, not the patients, but the doctors, we're leaning quite favorably towards Rogovi versus the competing pill from Lilly. Well, we don't think that's reflected in numbers yet. [01:09:23] Speaker 1: OK, Tim, thank you very much. Tim Craighead from Bloomberg Intelligence. Thank you very much for joining us. Just a quick word on what we're seeing on the oil price. We'll put up the session chart. You can see where this has been moving. We are still substantially weaker on the oil price, but it has ticked up just in the last sort of half hour or so. And we've got some interesting lines out of Iran saying, for example, we currently have no negotiations with the U.S. This is the foreign ministry spokesman from Iran speaking. It's interesting, though, Lizzie, isn't it? Because we've, and this can contrast perhaps to President Trump, who said that talks will start today. But we've seen it in the past where people have different interpretations of what talks mean. And sometimes people are talking about the U.S. and Iran getting around a table together. Other times they're talking about messages being exchanged by intermediaries. So difficult to say whether everyone's talking about exactly the same thing. But interesting to see the oil price on the move as a result. [01:10:13] Speaker 2: Yeah. And, I mean, it's similar to when you talk about the Iran-Oman negotiations, you know, saying that they don't include whether or not the strait will be open or closed. But President Trump saying that this has to be part of any deal that happens. But, yes, in this latest statement, U.S.-Iran issues should be addressed in a later stage. So we'll continue to watch the oil price. $83 a barrel is where we are right now. And, indeed, we will be discussing all of the geopolitical impact on the oil market next with Carol Nackley. She is the founder and CEO of Crystal Energy. We'll also be discussing that OPEC Plus meeting over the weekend and the decision to hike, even if it is only symbolic. So that conversation coming up next. This is Bloomberg. [01:10:54] Speaker 1: Welcome back, everybody. Monday morning and the opening trade here in Europe looks really quite positive. We have a weaker oil price to thank for that, perhaps. So the oil price goes lower and the DAX goes higher, up by 1.3%. The Cat Caron is also getting some pretty decent gains. Autos and auto parts, the best performing sector across Europe today. And that plays well for both of those markets. The FTSE 100 is being weighed down by, yes, energy stocks because of the weaker oil price, but also AstraZeneca and the perhaps fear amongst investors that maybe AstraZeneca tempted into a big deal, a big merger. So we will certainly keep an eye on that one. So the FTSE 100 is standing out for the wrong reasons today. But broadly speaking, we are a lot stronger than Lizzie and we're up by three-tenths of 1% on the stock 600. [01:12:01] Speaker 2: Yeah, that's the geographical breakdown. Let me show you another way how much sentiment is being boosted this morning. Volume up nearly 30%. And then when you look at the ratio of stocks higher and lower on the stock 600, we are significantly to the upside. So let's pick out some of the individual leaders this morning. Airlines, as you would expect, are up on oil being down. Ryanair shares in particular up 3% right now. Then we've talked a lot about the M&A action happening today. Not just Astra, but also in the Italian banking space. Monte Di Paschi weighing a possible takeover of Banco BPM. So those shares in focus too. And if we turn to the laggard, Astra down 7% off the story that it's said to have been exploring a merger with Bristol Myers. We've also got any shares down on the broader oil theme down 2.5%. Shell is similar, but it's also got to factor in this story that it's selling its renewables portfolio to Total Energy. So that stock only down 1.3%. Compare that to any, Anna. [01:13:02] Speaker 1: Let's get an update then, Lizzie, on other stories we need to keep in focus this morning. Alibaba shares have jumped in Hong Kong after it released its latest flagship AI model. With performance claims putting it alongside global leaders like Anthropics Fable. The debut comes after Moonshot's Kimmy K3 sent ripples through stock markets and Silicon Valley last month as Chinese developers showed they could quickly catch up with the top models from the United States. The yen is advancing for a fourth day after the dollar, against the dollar, sorry, after the US and Japan warned jittery currency markets of further coordinated action after confirming their first joint intervention in 15 years. And oil prices have been tumbling as much as 7% this morning after President Trump said that new Iran talks would begin this afternoon. The planned negotiations come after he called off a planned attack on Iran, partially in response to pleas from US allies in the Middle East, including Saudi Arabia. Just in the last few minutes, as we were saying in the last part of the programme, Iran's foreign ministry spokesman has said that the country is not currently in negotiations with the US, but is in talks with Oman about the Strait of Hormuz and passage there. Lizzie? [01:14:11] Speaker 2: Well, off the back of that, we are seeing oil pairing. Some of the earlier losses down 4.9% now for Brent Anna at $83.64 the barrel. Let's get some analysis with Carol Nackley, CEO at Crystal Energy. Welcome back, Carol. Great to have you on the show. Does this just show that oil traders are too optimistic every time we get some of these developments that diplomacy is going to restore oil flows back through the Strait of Hormuz? Good morning. [01:14:41] Speaker 6: Good morning. Well, look, we are on a verbal roller coaster in terms of statements coming from the White House and from Tehran. But throughout this conflict, especially in the last few weeks, I know many lost hope that the Strait will not resume operations and the traffic will not go back entirely to normal, and therefore conflict is going to escalate further. But actually, these were the headline news. We all along, despite, for example, what President Trump said when he said, for example, that the deal was dead and the ceasefire was dead. Yes, we saw some very targeted escalation. But behind closed doors, both parties did not abandon the diplomatic route. And that by itself continued to give me hope. I'm cautiously optimistic that negotiations are still ongoing. Both parties would like to see an end to that. And not just both parties. The countries in the region, the GCC countries and other countries in the region, would like to see this reaching an end very quickly. But of course, we have to continue to expect the kind of volatility because we're still sailing to a certain extent in the fog. But at this stage, the market is telling us also there is some cautious optimism to expect in the current situation. [01:15:51] Speaker 2: Okay, so cautious optimism. How much is the wall premium currently embedded in Brent? Like, how much would that premium unwind if there were to be a new credible deal? If you had the Strait of Hormuz reopening tomorrow, how much lower could Brent realistically go, Carol? [01:16:09] Speaker 6: Look, so far throughout my career studying oil markets, I've never come across anyone able to put a very specific value to the oil premium. Because anyway, that varies from one party to the other. However, just to give you an example, when there were calls of ceasefire and the ceasefire was announced, we saw how much oil prices dropped, I think, around $20 or $25 very quickly. Even the latest increase that we saw last week, we saw prices jumping, I don't know, maybe to $100 and then immediately dropped back to $80. So just to give a rough number, and I'm here being very careful because I don't think we can pinpoint a very specific figure, but I'm not excluding entirely $20 to $25 being a premium, geopolitical risk premium added. And that's what's justifying this sharp volatility that we are seeing on a daily basis, but does not reflect really market fundamentals. [01:17:02] Speaker 1: Okay, and Carol, so if we want to move, I mean, so I hear what you're saying about optimism. We're on a verbal roller coaster and you're cautiously optimistic about what happens in the Middle East. If we can put that to one side, if we get to a place where the Strait reopens, do we then have to worry about what's happening in Ukraine or Ukraine activity in Russia? Is that a market-relevant war when it comes to broader energy markets still at the margin, Carol? How are you thinking about that? [01:17:31] Speaker 6: Absolutely. I mean, I'm seeing like a whole triangle of crises, although I use the word crisis carefully here, because you do have the war in Ukraine ongoing and you are involving an important producer of not just crude oil, but also of products such as diesel, and that is Russia, and you have the Strait of Hormuz, and also we saw an extension of the conflict recently to the Red Sea. So you do have a very, very tense triangle of geopolitical developments affecting key producing countries, regions, and trading areas for exports. So as long as you have this kind of fluid situation, I would remain concerned. But even if there is a peace deal today or tomorrow between Iran and the U.S., which is going to be lasting, that is the key point here, a lasting, a sustained ceasefire, then we still have to continue to worry about what's going on in Ukraine, what's going on with Russia, primarily on the products front, because Russia is an important exporter, and also because it's still happening at Europe's doorsteps. That said, you can see how the market kind of factored in a maintained conflict in Russia, between Russia and Ukraine. The key is not to look at one conflict in isolation, but rather see it as a souffle, one conflict on top of the other, on top of the other. But if you remove the major conflict in the Middle East, I think that will take away a lot of the pressure that we are currently seeing in oil market, both for crude and also for oil products, but will not eliminate it entirely. [01:19:05] Speaker 1: Yes. So then we'd be able to focus more on fundamentals, perhaps, Carol. Let me ask you about refined products, because even if we see some relief in crude markets, often refined products seem less able to take a leg down in terms of pricing and all kinds of reasons for this. I wonder how concerned are you about the supply of refined products and which specifically? Because actually, we've seen refineries working pretty hard. [01:19:34] Speaker 6: Definitely, if you look at the production capacity of different refineries, you can see they are operating, especially in North America, at almost maximum capacity. And that is by itself a reason for concern, because you do have sometimes breakdowns. You can delay maintenance, but the risk of something wrong happening when you're running refineries at such a full capacity is there. But I'm more concerned as we head towards the autumn season and the hurricane season that historically did cause disruption to refinery operations in the U.S. That said, we have to also be careful that we are now in a high demand season for different oil products, particularly gasoline and jet fuels, because it's the holiday season, the driving season. So maybe that is currently more of a concern today. But again, the risk remains high, especially as we go into the hurricane season. But hopefully by then, we're going to see a resolution of the homeless trade conflict, and there will be less pressure on refineries around the world in terms of availability of oil products. Because at the end, the homeless crisis is not a loss of refining capacity or damage to serious infrastructure. It's a logistical problem. Take that away, and you will see supplies being restored quite rapidly. [01:20:52] Speaker 2: Okay. Carol, I also want to just take you to the BP story. It's put its North Sea oil business up for sale, as we know. What does that say to you about confidence in the energy policy of the new Andy Burnham administration here in the U.K., and confidence in the U.K. continental shelf as well? [01:21:09] Speaker 6: Well, the U.K. North Sea is a mature, declining province, but we have to distinguish between a declining province and a dead province. So I always believe that there is always a potential there because, yes, the discoveries can be smaller, but the technology is also improving. However, the main problem in the North Sea, if you ask me, I would say has been the government policy. I have seen more changes in fiscal policies from the British government, irrespective of who was in power, whether labour or conservative. I have seen more changes in fiscal policy than perhaps I have recorded annual changes in oil prices. And, yes, the North Sea, from the U.K. perspective, comes with many advantages, such as lots of cooperation between companies and government. But really, to have a government fiscal take of more than 78 percent in a very declining, mature province, that is not really common around the world. So if the U.K. government would like to do something for the North Sea to extend its life further, the first thing they should look at is their fiscal tourism. I'm not surprised that BP said goodbye to the North Sea after the case of operation because there isn't much for large players in the North Sea. Maybe the smaller players, the independent players, but at the end, they need to see a better supportive policy for the government, though. Let's see how the new government under the new leadership in the U.K., whether they will be able to balance between their ambitious climate targets and really the realistic facts of the North Sea and extend its life by encouraging further investment. [01:22:43] Speaker 1: Yeah, so far, there seems to have been quite a bit of ambiguity about policy in the North Sea from the new the new government. Carol, so if we are able to step away from geopolitical concerns, whether that's here in Europe or crucially, of course, within the Middle East, and we go back to fundamentals, are you looking at a market that is very well supplied? How how how are you assessing the underlying fundamentals of this market right now? [01:23:07] Speaker 6: To answer the question, just look at what happened or what were the expectations before the conflict in the Middle East. Everybody was talking about almost everybody was talking about an expected surplus in the market. And that's why we saw prices trading between 60 and 70. And therefore, you had the conflict in the Middle East, which is more a geopolitical development that has affected the logistics and the transport, among others, primarily, I would say. Now, restore those operations, plus add to that that you have an important country that used to be a member of OPEC, is now outside OPEC, that is the UAE. Add to that the growth, the strong growth we are witnessing from North America and from Latin America, such as Argentina and other countries around the world. And also add to that, the demand destruction that we have seen because of the conflict and some of that demand destruction is unlikely to come back once the conflict is resolved and prices go back to normal. So on balance, I don't see why we would expect to see a deficit in the market if everything goes back to the pre-conflict situation. [01:24:11] Speaker 1: Carol, thank you very much. Thanks so much for joining us. Carol Nackley, the CEO of Crystal Energy. Now, sticking with the energy theme, Europe's biggest rivers are drying up after a series of heat waves. That's starting to disrupt the transport of chemicals, oil products and other goods. Soaring temperatures are also curbing power generation, with Hungary shutting down its sole nuclear power plant. Energy prices are rising, straining Eastern European economies. Let's bring into the conversation Bloomberg Energy reporter Eva Brendel, who joins us now. Eva, good morning. So Europe's river levels then are lower. How significant is it that we're seeing these lower river levels and what does that mean for the energy complex? [01:24:52] Speaker 16: Good morning. So it was very significant because we have been seeing high temperatures, almost no rain during the last weeks. And water levels in a lot of big European rivers are now near record lows or are already hitting the record lows. So, yeah, for example, at the Rhine we can see how transport is impacted, vessels cannot load as much goods as they used to be. So freight rates are going up and this is impacting companies that have to get their goods through ships, basically. [01:25:28] Speaker 2: Okay, so an impact on freight but also on power. How is the lower river levels impacting power generation across Europe when, of course, you need that water for cooling? [01:25:38] Speaker 16: So we have been seeing quite severe impacts in Hungary, Hungary had to shut its only nuclear plant on Sunday and we've also seen that Romania had to reduce output at a French, at a nuclear plant and same things are happening in France where throughout the summer we already had record heat related outages and now we are seeing again some outages that happened due to warm river temperatures. And this all brings power prices up obviously. [01:26:13] Speaker 2: And of course a political challenge for Peter Maggia as well, Eva, thank you so much. That's our Bloomberg Energy reporter Eva Brendel with the latest on the heatwaves impacts. Well, coming up on the opening trade, we've got a slate of key AI earnings to look forward to this week, not least from Palantir and SpaceX. So we'll discuss those next. This is Bloomberg. Welcome back to the opening trade. 48 minutes into today's session and here is the picture in the European market. We are up four tenths of a percent for the stock 600 following gains in France and Germany, but weakness here in London by comparison, given that we have got oil lower, that's what's boosting sentiment elsewhere. But of course we have that exposure to energy here in London. So the Brent price now down 4.8 percent to $83 a barrel on President Trump, saying that talks are restarting between the U.S. and Iran, but Tehran in just the past few minutes, disputing whether that's actually going ahead. So oil pairing some of those earlier losses, Anna. [01:27:29] Speaker 1: Yeah, so oil majors and AstraZeneca, that share down 6 percent, weighing on the London market. Let's pivot to some of the earnings stories that we're going to be focused on later in the trading day. The U.S. software and analytics company Palantir is set to report second quarter earnings today with expectations of a rebound following a disappointing first quarter. The earnings also come as Europe seeks to move away from U.S. technology, with France saying in June that it would replace Palantir with a domestic provider. We're joined now by Bloomberg tech reporter Mark Bergen, who's been deep diving into Palantir and in particular can talk to us about the international dimension here. Good to see you, Mark. So how much of a negative dynamic is the landscape internationally for Palantir? Because, yes, we talked about France, but here in London, the Met Police, the NHS, all kinds of questions raised about those contracts. [01:28:16] Speaker 17: Yeah, I think a lot of it is questions. I mean, the France contract was a big contract with the intelligence agency. That is, to be clear, it's a three-year contract they signed in December, so it's not going to be an immediate hit to their revenue. But if you look at their business, if you just type in a terminal, look at their U.S. business is now close to 80 percent. Just a few years ago, it was around 60 percent. So some of that is because of the growth they've seen from the Pentagon and kind of U.S. commercial. There's a lot of attention from investors. But some of that is because, particularly in Europe, they have not had as much traction. And Alex Karp, the CEO, has spoken about that and very willing to tell investors his honest opinions about what he thinks about Europe. [01:28:54] Speaker 2: Yeah, not backward on coming forward with that. But that's the kind of government side, the government contract side. What about the commercial side, when you've got so much competition from the likes of OpenAI and Anthropic? [01:29:04] Speaker 17: Yeah, I think that's a message looking very closely at that, and the U.S. commercial in particular, but also the rest of the world. So Anthropic and OpenAI are basically coming after Palantir's business of these four deployed engineers, which looks a lot like AI consultancies, basically. And I think the argument from Palantir's side is that they've been doing this for a very long time, they have experience. I think the counterpoint to that is, what are they bringing to the table if this is something that OpenAI and Anthropic are going to compete with them very directly on? [01:29:32] Speaker 1: We also have, in terms of tech earnings this week then, Mark, we've also got SpaceX, and the share price has dropped below the listing price, of course. And we also, you know, it says space in the title, and we think of this as a company that is all about space. It is, but it's increasingly about putting data centers in space. And all of that means that AI is very much at the front and center of the earnings story here, so what should we expect? [01:29:56] Speaker 17: Yeah, I mean, I think we don't know what to expect, given this is the first, and given that it's Elon Musk. But AI is certainly a critical part of this, you know, the ex-AI merger. Now we're seeing both the sort of the grand moonshot of data centers in space, but also Grok and its competition with Google, Anthropic, OpenAI. Probably there'll be some questions, I would hope, about some of the pressure from the Chinese open source competitors and how Musk is responding to that. And then, obviously, the Wall Street Journal had that recent report about plans for Tesla to perhaps be merging with SpaceX. We saw Elon obviously deny that. But that, the sort of the grander Elon, Inc. vision, I think we'll hopefully see a bit more of the pieces of the puzzle coming together. [01:30:39] Speaker 2: Okay, Mark, thank you very much. That's Bloomberg's Mark Bergen with a preview of some of the tech earnings that we'll be getting later this week. And staying with that tech theme, Matt Garman, the Chief Executive of Amazon Web Services, will be joining Bloomberg Tech at 4.30 p.m. London time. [01:30:54] Speaker 1: It seemed like cloud was the place to be last week, wasn't it? And that puts the focus onto that AWS interview coming up later on in programming. Let's look ahead to what else we're watching throughout the week then. We have, as we've just been discussing, U.S. earnings from Palantir today. Tomorrow, we get some data out of the U.S. in the form of JOLTS job openings, but also some more earnings from SpaceX, crucially, as mentioned, and also AMD. On Wednesday, we get some European data. We also get earnings from Nova Nordisk and, in the U.S., earnings from Disney. On Thursday, we get euro area retail sales, U.S. initial jobless claims, some earnings out from Europe, some big German companies. And we move over to the U.S. on Friday, where we get the U.S. jobs report, and we talked about that with Mark Cardmore earlier on, about how there could be heightened volatility around that number. Let's talk to Bloomberg Skylar Montgomery-Koning, who is with us this morning, to talk about, well, everything markets. And, Skylar, let's start with the oil price, shall we? Because this is the big driver of a lot of moves in Europe this morning. The oil price is down by 5%, absent the fact that we don't really know who's talking to whom. But at least the U.S. has called off some big attacks, so they say, and say that some talks will take place. That at least tells us something about where their priorities are at right now when the oil price responds. [01:32:08] Speaker 9: Yes, and I mean, I think that very much is the bias of the oil market. It very much wants to sell off on this idea that the U.S. doesn't want to escalate. It wants to negotiate ahead of midterms. They don't want oil prices higher and not feeding negatively into inflation and consumer sentiment. I think the issue is we haven't really seen progress on the key issue, which is on the Strait itself, who controls it. So if you look at traffic through the Strait of Hermes, that's still very, very low. It's well below levels that we saw in June when you had that ceasefire and really true hope around de-escalation and transit resuming. And it's very, very well below the levels that you had that were kind of more normal in 2025. You also have the Bab Elm and Dab Strait with pressure on it in terms of not a lot of flow going through there. And so I think, you know, the downside we've seen in the oil price is a little bit premature. Something that I've looked at as a leading indicator is risk reversals. So the amount that investors are willing to pay for calls versus puts, that led the downside that we had in June. And that's still very elevated today. So it tells you that investors are saying, I'm willing to pay more because I think the risk is higher that you get oil prices rising on supply issues than downside on that supply coming online quickly. [01:33:16] Speaker 2: OK, so oil, obviously a massive factor in the inflation story. But we were just also talking to our reporter Eva Brendel about the droughts and the falling river levels here in Europe. How much of a stagflation risk is that? [01:33:28] Speaker 9: I think this is very much the stories of the 2020s in that this in itself isn't huge for Europe. It's more negative for Germany, but it adds on to all these other risks that we've had. So, yes, GDP in the second quarter for Europe was better than expected because Iran didn't hurt as much. But you have all of these things building. So estimates I've seen for Germany on third quarter growth show that the drought levels mean that the closure or partial closure, you know, disrupted shipping through this key riverway will reduce GDP by 0.2 percent. Now, third quarter estimates are only for GDP in Germany to be 0.1 percent. So it's very significant there, as well as to the companies that are directly impacted. Right. So they have to pay higher shipping costs. They have production that's been shut down. And it just means that margins are getting squeezed. And it's not just happening there. Right. You've talked earlier in the show about Hungary and power plant closures. You know, that key power plant in terms of nuclear does almost half of the electricity for Hungary and you've had wildfires elsewhere. And so it's just kind of adding to this very stipulationary backdrop that's a negative for bonds and equities in the region. [01:34:34] Speaker 2: OK, Skylar, thank you very much. That's Skylar Montgomery-Koenig with the latest on the markets. And just checking in on how we're faring in the European session, the stock 600 up four tenths of a percent. We're flat to the upside here in London. The Cat Cajon up nearly one percent and the DAX in Frankfurt up 1.3 percent. So that boost off the geopolitics, good for everywhere seemingly, but London as we see oil lower more than five percent now, $83 the barrel on Brent. That's it for the opening trade. The Pulse is coming up next. Stay with us. This is Bloomberg.