About this transcript: This is a full AI-generated transcript of Fresh US Strikes On Iran Risk Fragile Ceasefire — The Opening Trade 6/11/2026 from Bloomberg Television, published June 11, 2026. The transcript contains 19,226 words with timestamps and was generated using Whisper AI.
"Good morning. So U.S. forces have hit Iran again. Oil has climbed again. The ECB is expected to hike today. President Lagarde is expected to say there's more to come. We're going to be live in Frankfurt to talk about all of that. Plus, Oracle predicts it will spend even more on data centers...."
[00:00:00] Speaker 1: Good morning. So U.S. forces have hit Iran again. Oil has climbed again. The ECB is expected to hike today. President Lagarde is expected to say there's more to come. We're going to be live in Frankfurt to talk about all of that. Plus, Oracle predicts it will spend even more on data centers. Investors are not impressed. That said, SpaceX is said to be four times oversubscribed. Go figure, Anna.
[00:00:28] Speaker 2: A lot of evolving stories to keep an eye on and a lot of evolving market moves to watch as well, Guy. Let's start with the Brent price then. Given what we've seen overnight between the U.S. and Iran, Brent crude up half a percent right now with a 93 handle. We've been above 95, though, overnight. So we are off at those earlier highs. The story evolving around stocks as well. NASDAQ features actually up by at least six tenths of a percent. So the thinking around stocks is evolving. But we did see selling in the latter part of the U.S. session yesterday. So maybe European stocks need to catch up with that first. And the euro dollar certainly in focus as we have the ECB meeting coming up today as, Guy, you were mentioning. The countdown to the opening trade starts right now.
[00:01:19] Speaker 1: So it is Thursday morning. Let's just say the news agenda is fairly competitive this morning. There are a lot of big stories out there that you need to focus on. Clearly what happens with the Spurs versus the Knicks is going to be one feature of the landscape today. I think a lot of people are going to be talking about that. But away from sport. Oh, yes. And the World Cup starts today. We have some fairly serious stories out there. Oil is up again. And I was pointing that out. You've got the U.S. hitting Iran once again. You've got an ECB meeting coming up. We're going to talk about that in just a second. And there is so much tech news out there. It's going to take a little while to work our way through exactly what is happening here and what the bottom line ultimately is. But let's start with oil. The U.S. has hit Iran once again. Trump is clearly frustrated. The oil price has risen once again. This on the back of obviously what we saw yesterday with U.S. inflation continuing to climb.
[00:02:05] Speaker 2: And we get PPI data out a little bit later on today. Yeah, absolutely. So that keeps the inflation effects of that higher oil price firmly on the agenda with the ECB meeting, which we'll come to in a moment. But sticking with the developments in the Middle East, then, Guy, this is the second night in a row that we've seen the U.S. and Iran firing at each other. From the U.S. perspective, they say they've hit surveillance systems, air defense and communication within Iran. The Iranians, according to reports, have been targeting the fifth fleet in Bahrain. That's according to Iranian news sources, though. And President Trump has said, so they've stopped for the night, but he has said that they will bomb again if they don't get an agreement signed with the Iranians. I mean, this is adding up to an extremely strange definition of a ceasefire right now. We assume that's over. Well, I mean, we do have oil prices responding, but not as much as they used to. I'm not sure if that's linked to your question. But it is interesting that we, yeah, we went up above 95. But given we have seen two nights in a row of military action resuming, a reopening of the strait looking further away, not closer, it is interesting that we didn't go higher on oil, perhaps.
[00:03:04] Speaker 1: What is interesting about that strait being closed is that we are seeing increasing reports of this kind of dark exit, let's call it that, from the, through the straits of a series of tankers. So you are getting some oil out. Clearly, tankers are probably not going to go back in again, which is another factor. And things like fertilizer, there's not a lot of activity there in terms of movement on that front. So bear that in mind as well. So kind of the situation is evolving. I wonder whether the oil market is not responding because maybe that oil is coming out. Yes, we're getting more military action, but there are signs that oil is coming out of the Gulf. Does one offset the other?
[00:03:39] Speaker 2: We talked about this a little bit yesterday, the fact that Korea, for the first time, is offering oil that's come out of the Gulf. Sorry, Kuwait is offering to Asia oil that has come out of the Gulf for the first time since the war began. So that is certainly something we are watching. This, of course, puts inflation once again, as if it ever left the agenda, but firmly in focus for us. So let's talk about what we're going to get from the ECB because we are expecting an interest rate hike. The inflation rate in the eurozone running at 3.2% in May. They had to balance that with the sluggish growth agenda, which does raise questions about whether this would be defined as a policy mistake. Maybe impossible to say that right now. The market is assuming that we get another hike, at least one more, maybe even two more from the ECB this year, and then some cuts in 2027. We're going to hear a lot about scenarios today, but a lot of focus perhaps will be on anything that looks like forward guidance from Christine Lagarde and how the market reassesses the forecast coming through from the ECB around inflation and growth.
[00:04:37] Speaker 1: It's the latter I'm quite interested to see because the expectation is that inflation, they're going to ratchet that higher in terms of their expectations. What does that mean for growth? What do rate hikes mean for growth? What are the latest PMI data signal on that front as well? How much of a growth slowdown are we going to see? Is the ECB, if it hikes today, still neutral? Where is restrictive? Do we need to go one to you point two more times before we get into that restrictive territory? Do they have a little bit of room to play around that kind of neutral level?
[00:05:05] Speaker 2: Yes, I know neutral notoriously difficult to identify, but I know that in our reporting this morning talking about, you know, maybe if we get one more hike, that takes us up, quote unquote, to the top of what might be deemed the neutral range. So are we toying with at least the top of that neutral range? And what, as you say, does that mean for growth? Jeffery, you telling us earlier this week on this program that it will be a mistake if the ECB hikes today, but that is what the market is expecting to see. And others underscoring the very different position we find ourselves in with the U.S. and the Eurozone right now. I mean, amazing that U.S. inflation has a four-handle. So we're talking about the ECB hiking two or three times this year with a three-handle. The U.S. has a four-handle, but the story very different there. The growth story added on top of the inflation story for some people might give more suggestion of a hike being reasonable in the United States, but that doesn't seem to be imminently where we are, even if the conversation around December is evolving.
[00:05:55] Speaker 1: The market's certainly pushing the Fed. We'll come back to that. I suspect that's going to be a topic we need to discuss. What else is also pushing the U.S. economy right now is the AI data center build out. You've got a huge deficit in the United States, plus you've got a data center build out. Both of those two things repelling the economy. Oracle overnight, fascinating. The numbers actually looked okay on a kind of nominal basis. I guess kind of talk about it maybe in those sort of terms. So the revenue line looks pretty good. The problem is that they've basically boosted their 27 guidance in terms of the data center build out story. Now, part of that's because they've got a lot of capacity they need to build because there is demand for that compute. The other reason is that the inflation rate within the build out story is epic right now. So the cost of building this stuff is getting more and more expensive. But the market was not happy, therefore, to see that coming through. I'm surprised that anybody was surprised, but maybe the number was just bigger than what we thought. So the question, therefore, is how sustainable is this? Neil Kaplan is going to join us shortly. Apparently there's a big Goldman Sachs note out talking about huge numbers in terms of the 2027 bill. That's not just going to be Oracle. But then you pair that with the Wall Street Journal story on open AI and the fact that they're thinking about having to cut token prices in order to drive demand. Now, you'd want to do that before an IPO. But nevertheless, that speaks to this whole idea of can you generate enough revenue to justify the expenditure?
[00:07:11] Speaker 2: And do both of those stories add to this sense of nervousness around the AI trade at a time when we're going to see SpaceX coming to market, basically, which is enormous and has to be, you know, room has to be made for it. And so that adds up to a lot of things to be concerned about in terms of the near-term trade in AI. Maybe it doesn't tell us anything about the longer-term rationale. We'll talk a lot about SpaceX through the morning, but I'll just go to what my favourite quote came from Sebastian Boyd on the Markets Live blog, channeling Jim Chanos, I think, who's been talking about this. He defines SpaceX as a profitable little satellite Wi-Fi business wrapped in a lot of loss-making hopes and dreams. And that, for some people, is going to be what is at play here, what is being tested by this giant IPO.
[00:07:52] Speaker 1: It's four times oversubscribed, though.
[00:07:54] Speaker 2: Yes, which isn't, well, yes. Although, is that good or bad? I don't know.
[00:07:58] Speaker 1: Normally, I'd say four times isn't very big. But then you think about the scale of kind of what four times actually means. Four times a big number. Yeah, precisely. It's a very big number. OK, what have we got coming up on the show? Just over there is Joseph Verratti. He's the Wizz Air CEO. The company's just published numbers. They are ahead of expectations. We're going to talk about what is happening with the winter. And we're going to figure out exactly what that's going to look like. Antonio Garcia-Pascal Santander, CIB, Economics Global Head, is going to be joining us very shortly as well. We'll get a preview on the ECB and figure out what is happening there. Paul Markham, GAM Investments Investment Director and Global Equities Head joining us as well. And I get for Imane, Norsken, VC General Partners. I think he's, I think we're talking to Tom at, it is the Founders Forum, isn't it? That's where Tom is, basically. Yes. That's what he's doing today. And that will be the conversation he'll be having.
[00:08:46] Speaker 2: Yes, absolutely. So some of those conversations, no doubt, Oracle, SpaceX, all in the tapestry, the backdrop to the tech events taking place in the UK this week. Let's tell you about some of the market-moving, potentially market-moving data points we're watching for and events. Euro Area Finance Minister's meeting in Luxembourg for a Eurogroup meeting. We have an OPEC monthly oil report, clearly garnering quite a lot of attention given the backdrop. 1.15 ECB rate decision press conference follows that with Christine Lagarde, of course, giving her take on where we are on that trade-off between inflation and growth for the Eurozone. 1.30 p.m. UK time, we get US PPI jobless claims. And, of course, lest we forget, the FIFA World Cup kicks off in Mexico with the host nation, that is Mexico in this case, in the first match, taking on South Africa. We will get to the earnings story out of Wizz Air and perhaps ask Joseph Faraday at some point what he's expecting from the World Cup.
[00:09:40] Speaker 1: Who does he think is going to win? I'm sure that's top of mind this morning. OK, let's deal with the Wizz numbers. Full-year income beating expectations. The EBITDA line is ahead of expectations. The market expected a loss. That's not what we've seen delivered. Full-year net income, 2.2 million. The estimated loss, 34.9. So we're ahead there. Probably could have been even better if we didn't have a war in Iran and higher fuel prices. Full-year revenue, 5.69 versus an estimate of 5.8. So a little light maybe on the revenue line at the top. But as you work your way down, things get better and better. Joseph's here. Joseph Faraday, nice to see you. Good morning. Good morning. How much better would these numbers have been if you didn't face a high oil price?
[00:10:18] Speaker 3: We think probably we could have done 50, 60 million better on net profit if the war didn't happen. But that's very hypothetical. Of course, it happened and you have to deal with it. But we are in good position because given the circumstances, I believe that airlines need to have liquidity on hand. We have one of the highest liquidity ratios in the world of any airlines. You need to fly a good fleet of aircraft that doesn't drink too much fuel. And we do it. We are flying one of the newest fleet of any aircraft carriers. And you have to be hedged. And we are 84% hedged, which I think is a very good coverage. So we are much protected from the fuel spike, what the industry is facing.
[00:11:01] Speaker 1: Okay. I'll just go back from my answer. Let me just give you the kind of the sense that I got there. Summer's all right. Probably got enough fuel. Yes, prices are higher in terms of fuel. And some of that is being passed on to the consumer. But nobody wants to talk about the winter because the winter is going to be brutal. These numbers in some way don't tell the forward story of what comes next.
[00:11:21] Speaker 3: You probably can expect two halves of a year. So in the current half, we are into fuel supply secured, firmly secured. I don't think we are seeing anything coming. So people should be very relaxed to book and they will travel. And there will be no hiccups with that regard. Yes, fuel is more expensive than what it used to be. But it has not been put across into fares. So if you look at the fares environment in Europe at this point in time, actually fares are holding, even declining because of competition in the industry. Now, you come to winter when the cash flow cycle changes in the industry, you're going to be starting changes. You will see capacity going out. You will see prices going up as a result of that, especially by the weaker airlines that are not protected by hedges, that they don't have enough liquidity on hand to continue to compete and continue to fight. They will have to rationalize what they are doing. But this is for the winter period. You know, whenever input cost rises, there is a realignment of supply and demand. And that adjustment basically pushes the fares up. But it happens the other way around as well. When input costs come down, so let's assume that fuel starts falling at one point, you're going to be seeing capacity coming back up and taking prices down.
[00:12:33] Speaker 2: Yeah. Good morning, Joseph. Have you seen consumers changing their booking patterns, either changing where they go or booking more short term, closer to departure date? How are things evolving in terms of consumer behavior, given all the nervousness around the summer, even if that was misplaced?
[00:12:49] Speaker 3: Yes, I would say that overall consumer demand is intact, but people behave slightly differently. They book a lot more short term, so they are postponing their booking decisions. They book in the end, but they want to wait until they can. And off they go. There is a lot more preference for Europe. I mean, you see that Spain, for example, just recently reported record high numbers in terms of tourism in the country. But this is the shift, you know, from Asia, Middle East, towards European destinations. So we are seeing these trends happening.
[00:13:21] Speaker 2: And what can you do as self-help measures, as mitigation? You've mentioned the fleet, but that's a longer term sort of planning. What can you do in the short term to make this easier on yourselves, apart from hedge?
[00:13:32] Speaker 3: What you will see in a few months down the line is that a lot of capacity will be taken out of the market, especially by weaker airlines, and the stronger carriers with good liquidity on hand will take benefits of that.
[00:13:44] Speaker 2: Are you going to take capacity out?
[00:13:46] Speaker 3: Yes. Well, actually, I think we are looking at accelerating our growth. You go back six years coming out of COVID, we went counter-cyclical. So the whole industry was on its back foot. We were pushing forward and we were taking market opportunities. This is exactly the same, but we are planning on going into this winter.
[00:14:05] Speaker 1: So no deferrals? You're not going to defer any aircraft?
[00:14:08] Speaker 3: No. You're not going to cut headcount? You're not going to do anything like that? No. Actually, we are looking at the next phase of growth, how we deliver it. We are expecting 25% or so capacity growth to be delivered in the next few months for the remainder of the year.
[00:14:22] Speaker 1: The other thing that came out, I asked it to my mind, was talk of consolidation this winter. Are you going to see that? Possibly. I mean... Who's going to be on the block? He's talking about weaker airlines. I'm assuming you don't think you're one of those.
[00:14:36] Speaker 3: Definitely not. But that doesn't mean that we necessarily have to be a consolidating force by mergers and acquisitions. They may happen, but I don't think that we are prone to that kind of a concept. We have always been consolidating the markets through organic growth. So simply, airlines are weakening. They are taking capacity out. We backfill that capacity. Or we acquire assets like slots here and there. And that's kind of our way of growing. We will stick to that. This is what I think we are good at. We understand it. It doesn't create complexity. It changes the dynamics of the market without really getting into very complicated transactions and very complicated complexities.
[00:15:12] Speaker 2: So does that mean you wouldn't be interested in buying other airlines?
[00:15:15] Speaker 3: This is not the way we are doing business. I mean, personally, I have been looking at probably 50 different airline acquisition opportunities. We haven't concluded...
[00:15:24] Speaker 2: That sounds a bit interested. How many? 50?
[00:15:27] Speaker 3: Probably 50, intellectually. In Europe? Well, in Europe or elsewhere. Where elsewhere? Well, in the Middle East or in Asia, etc. But every single time we concluded not to get involved, simply just because of the complexities. We are an organic growth company. We're going to be sticking to that.
[00:15:43] Speaker 2: Let's talk of a consortium perhaps bidding for EasyJet, though. Could you see a role that doesn't add complexity as part of a consortium?
[00:15:51] Speaker 3: We are not busy with that concept. We are focused on our own growth and this is what we try to deliver.
[00:15:55] Speaker 1: Have you had any conversations with Castle Lake? No. Okay. If it was broken up, the organic... Could you buy slots? Could you buy aircraft delivery slots? Is that the way you think breakups might happen?
[00:16:07] Speaker 3: As I said, we look at everything happening. I mean, this is prudent business conduct and kind of intellectual investment. And you will position yourself against the very events happening around you. But I'm just saying that any complexities are bad for our business. We need to simplify this business. We are a low-cost carrier. Simplicity drives scores down. Complexity drives scores up. So we have to stick to principles. We have to stick to the model. But of course, if things are happening, we will observe those events and we're going to take a position. But we are not involved into any of this. We are not looking at it.
[00:16:48] Speaker 2: What's pricing power like right now, Joseph? Because obviously you're dealing with a higher cost base with the dynamics in the oil market. But at the same time, customers are booking kind of late. And maybe... Is pricing power stronger on certain routes than others? Are you concerned about that at all?
[00:17:04] Speaker 3: If you look at our revenue performance, actually, our revenue, our unit revenue is holding flat versus last year. So we are not pricing up. We are holding the prices. Even in certain places, prices are coming out. We are an actor of the market. We are not determining the market. We are just one of the players in the market. We think our advantage is not around the pricing power. Our advantage is around the cost base, but we can deliver this business. But we are a large airline now. We are going to be delivering 80 million passengers in the current year. I mean, that gives size, that gives some presence in the market, some power in the market. But we think it's a cost game. It's not necessarily a pricing game.
[00:17:41] Speaker 1: Joseph, always great to see you. Thanks for talking by to see us this morning and bring us the numbers. We really appreciate it. And the insight with EZ CEO, Joseph Varadi.
[00:17:50] Speaker 2: Coming up on the program, can Europe finally get its act together? We're talking about growth here. Ahead of next week's G7 Leaders Summit, Bloomberg talks to key players about how the bloc can compete globally and protect its economy. Plus, we speak to the CEO of Radisson Hotel Group about navigating the energy crisis and what's in store for this summer travel season. So the focus on travel dynamics across Europe, that continues this morning. Up next, preparing for liftoff, SpaceX attracts strong demand for its imminent IPO. Four times oversubscribed, we understand. We will break down many more of the numbers involved. If you want to get involved, please get in touch. IB plus BBTV Go is the function to use on the Bloomberg Terminal. This is Bloomberg.
[00:18:45] Speaker 1: Thursday morning. Good morning. How are you doing? 38 minutes to go until the start of equity trading here in Europe. Our futures over here look pretty red this morning. We're kind of reacting maybe a little bit to yesterday. What is interesting is the oil is up this morning and U.S. futures are up quite a lot as well. The Nasdaq futures are up by eight tenths of one percent. S&P is up by half of one percent. So quite a different position being predicted on that side of the Atlantic to ours. I wonder how long it will take us to kind of catch up to what that narrative is.
[00:19:14] Speaker 2: Yes, and that is despite the fact that we had after hours some pretty disappointing numbers out of Oracle, or at least the market took it that way. Oracle dropped over 10 percent in after hours trading after the tech company reported quarterly capital expenses higher than estimates. The expenditures largely related to data center spending have raised investor concerns over the profitability of AI infrastructure. We're joined now by Bloomberg senior strategist Neil Campling to talk us through these earnings numbers. It's interesting that this story is not going to set the pace for the Nasdaq then today. We have other bigger things to come to, which we will do in a moment, around SpaceX and the broader sentiment. But what was it about Oracle that disappointed? I mean, CapEx is getting a lot of attention.
[00:19:50] Speaker 4: As it should. Firstly, the stock had run 50% into the numbers from the April lows. So you had big expectations into the print. The numbers themselves came in pretty good in terms of the top line growth, 20%. The problem is, as you mentioned, the CapEx numbers. And what we're getting to now is we are being forecast for next fiscal year, they're going to get to a mind-boggling 100% CapEx to sales ratio. This is a company that's burning through a huge amount of cash. There's actually a Goldman's note out this morning that's suggesting that the AI hyperscaler CapEx next year could be $1.1 trillion. Consensus is around about $900 billion. Their upside scenario is $1.4 trillion. These numbers are...
[00:20:36] Speaker 2: Everything comes in trillions these days.
[00:20:38] Speaker 4: It does feel that way, doesn't it? It's called inflation.
[00:20:42] Speaker 2: Talking of trillions.
[00:20:44] Speaker 1: Talking of trillions. So we've got another basketball game on Sunday. Got some football to watch over the next few days. Does the basketball cost trillions? I think it probably does. It probably does feel like it.
[00:20:54] Speaker 2: The World Cup definitely does.
[00:20:55] Speaker 1: The World Cup definitely feels like it. And we've got the SpaceX IPO. The viewing over the next few days is going to be amazing. SpaceX tomorrow. So when are we going to get to kind of a number? When do we... What is it going to take to kind of get this stock out there and onto the market?
[00:21:14] Speaker 4: Okay, so we've had the headlines. The deal is like over four times I've subscribed, which is a big number, given this is the biggest deal in history. There are very sort of different opinions on this deal. Jim channels overnight saying, can't value this thing. Others are saying, actually, because it's a $28 trillion TAM, then maybe there's a huge opportunity. It's going to come to the market, obviously, pricing tonight, trading tomorrow. But because of the size of the deal, it's going to take a long time, even tomorrow's trading, until it actually starts getting prints in the market. I suspect we in Europe will be on our way home to go and watch the World Cup before we actually see this. BC is trading probably at lunchtime, US time, New York time.
[00:21:56] Speaker 2: Well, no doubt we'll pick this up tomorrow and then once again then on Monday. Neil, thank you very much. We've got senior market strategist Neil Campling, thinking about all things SpaceX and total addressable market guy.
[00:22:07] Speaker 1: TAM. Okay. What else do you need to know this morning? Anthropic CEO says governments should have the power to block releases of advanced AI models if they pose unacceptable risks. In an essay, Dario Moday called for mandatory third-party testing of AI systems, including assessments of their potential to enable cyber attacks or help developments or develop biological weapons. He says authorities should be able to stop deployment if a model is judged too dangerous. Frazier's group has offered to buy the rest of Hugo Boss for around 2 billion euros. Frazier's, which is owned by the British billionaire Mike Ashley, already controls roughly a 26% stake in the German label. Hugo Boss later confirmed the unsolicited takeover offer, saying it would, quote, thoroughly examine the offer. And the US Treasury has refunded nearly $22 billion in tariff revenue collected from importers in May. It's the first batch of such repayments since the Supreme Court struck down a major component to President Trump's trade policy. According to a Treasury Department statement, the amount was roughly equal tariffs taken during the month.
[00:23:17] Speaker 2: Coming up on the programme, we will get an update on the ECB, what to expect from the European Central Bank today. It's expected to hike, of course. Attention turns to its outlook for the rest of the year. That's the outlook for inflation, the outlook crucially for growth. We will discuss with Santander's CIB economics head. This is Blinback. We will discuss with the U.S. Department of State.
[00:23:39] Speaker ?: We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State.
[00:24:09] Speaker 1: We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State.
[00:24:30] Speaker 2: We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State.
[00:24:58] Speaker 1: We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. Department of State. We will discuss the outlook for the U.S. And the effects of the Iran war as being transitory. Core inflation, remember, rose unexpectedly last month. PMI data has also signaled a significant slowdown in activity. How do you balance these two? Let's find out. Oliver Crook, Bloomberg's chief Europe correspondent, is in Frankfurt at the ECB. Oli, we're going to get a hike. That seems to be the consensus. The feeling around that, though, more mixed. A good idea, a bad idea. Hard to tell at this stage.
[00:25:37] Speaker 5: Yeah, absolutely, Guy. And I think that's the kind of debate we're going to want to drill down into the sort of governing council, the conversation around the table. I mean, they even had a debate at the last meeting about, you know, what would a hike look like in this meeting? So, I think they're really considering all kinds of scenarios. We're also going to get some new projections from them, economic projections. So, obviously, their outlook for what they're seeing on the growth front, on the inflation front, will be all important. But, as you say, 25 basis points effectively baked in. There is not really any question around that. That's really been confirmed by many of the statements and the commentary we've heard from governing council officials in the weeks leading up to the quiet period. But, as you say, Guy, there's a debate about -- there's, you know, consensus that this is going to happen. There's a bit of a debate as to whether or not it's a good idea. We heard from Jeff Yu a little bit earlier this week saying that basically if you raise rates this week, you're going to be cutting again in the fourth quarter. I spoke to Carson Breski over at ING this morning. He says it's not really a policy error to raise rates right now, but really only one hike is appropriate. It should be a one and done. So, another thing we're going to pay very close attention to in this press conference is the signaling around this hike. What kind of hike is this? Is this the beginning of a tightening cycle? I suspect they want to keep all options on the table, but don't want to really give that impression, but also don't want to say necessarily that this is just a sort of one and done. So, again, I think that in the big narrative here, we're thinking about the European economy, stagflation. Stag is less worrying than inflation right now for the ECB, and that's what we're expecting to hear from President Lagarde a little bit later today.
[00:26:59] Speaker 1: Oli, great stuff. Thank you very much indeed. Inside at the ECB, Oliver Crook, Bloomberg's chief Europe correspondent. We will, of course, bring you full and extensive coverage of that ECB policy meeting at 1:15 London time, and then we get President Lagarde's news conference that, of course, starts at 1:45 London time. Let's get some more analysis on this subject.
[00:27:22] Speaker 2: We're joined now by Antonio Garcia-Pascal, who is Global Head of Economics at Santander CIB. Antonio, very nice to have you on the programme. Thank you for being with us. So, we were just hearing there about the expectation is we get a hike from the ECB today, and then there are more expectations of hikes later on this year from the ECB. How many do you expect?
[00:27:44] Speaker 6: Yes, I think today is very clearly, nicely signalled across the entire Covenant Council. As for the next, look, I think the important signal that ECB has to convey, and they need to walk a very fine line because of growth and inflation, and they're working across purposes, is that this is not the beginning of a tightening cycle. It's a recalibration. And therefore, they will need to do one today, and then they will have to do probably a second one. And then it comes the decision when they deliver a second one. Will that be immediately after, in July? Or will they want to take a pause, reassess, recalibrate their expectations, and do it in September? I think more likely the latter, in September, is obviously not 100% versus 0%, but I think it has more merits waiting, so they do not convey that this is the beginning of a tightening cycle.
[00:28:42] Speaker 2: Okay, so they frame it not as the start of a hiking cycle, as you say there, Antonio. That's your expectation. Does that have a bearing on whether you think it's a good idea to hike or not? We were speaking to a guest earlier on this week who said he believed this would be a policy mistake. Do you think it's possible to say right now whether this hike today, if we get it, will be a mistake?
[00:29:04] Speaker 6: I think the closure of Hormuz will have the answer to that question, whether it's a mistake or not, right? If all of a sudden in June, the Hormuz Strait clears, and all the traveling through the Strait of Hormuz resumes, then probably it's one and done, and they should have not done it. It doesn't look like it's going to be like that. It's probably going to take more than a few weeks to wrap it up. But more to your question. Look, this is a supply-side shock, and of course, you know, theory will suggest you look through. The problem has happened for a long time, and you're still seeing already direct and indirect effects. And what the ECB is worried about is inflation expectations. The front end is increasing. Longer term, they're well anchored. But they need to make sure that they keep that well anchored, right? And that's the issue of credibility. And that's why they need to do a rate hike today and probably a second one. It's a recalibration, not a tightening cycle.
[00:30:00] Speaker 1: Antonio, how much slack is there in the Eurozone economy right now?
[00:30:05] Speaker 6: How much? Say it again, please.
[00:30:07] Speaker 1: How much slack, economic slack?
[00:30:11] Speaker 6: Yeah, look, I think when you're looking at Q2 currently, probably we are tracking growth close to 0%. I mean, right now it's based on stock indicators. And for the second, for the next quarter, for the third quarter, probably that number is going to be, again, very close to 0, right? So look at growth for this year, something which is going to be in the neighborhood of 0.5%. We were coming pre-war with growth that looked more like 1.3%. So there is substantial, right? And this is the damage that the conflict is doing. So we definitely are in a situation in which the ECB has to deliver a high, but it cannot be too aggressive for this reason, for the reason of growth, right?
[00:30:56] Speaker 1: So, okay, so let's take that a little bit further. If we get 25 today and we get another 25 later on this year, that gives us 50. Does that take us restrictive? Are we going to see, what do you think, what do you think a restrictive rate at the ECB would look like?
[00:31:15] Speaker 6: That's a good question, right? We don't observe the natural rate, but we have range estimates. I think probably if they bring it to 2.5%, that's probably in the upper bound of neutral, or at least very mildly restrictive, okay? That's probably where they want to be, given how inflation is increasing. And look, if the war gets resolved, let's say by the end of the summer, think of inflation probably will be around 4% by the end of the year, right? And I think they need to recalibrate to deal with that inflation and to keep inflation expectations well anchored. So I think 2.5%, that's probably in the upper range of what neutral is.
[00:31:59] Speaker 2: And Antonio, how would you expect this to be playing out in bond markets? Have we seen sufficient factoring in of rate hike expectations at the short end? What is the longer end telling you?
[00:32:14] Speaker 6: Yes, so definitely the market, I think they have been reading fairly well the ECB. You know, if move clearly into two hikes, also the ECB, remember, they told us that they bake in two hikes into the base scenario. So they provide quite a good guidance into that. So the market is debating whether it's going to be two or three. And I think probably that's about right. Three may be a little bit more aggressive, but it's not far off the mark, I think. As I said, they don't want to overtide because growth is going to be disappointing this year, right? And about the long end of the curve, there are other factors there as well, right? And it's not just inflation expectations, but in the longer end is growth, right? Which is for Europe, it's not going to be great. And then there will be other issues related to fiscal and fiscal problems, right? We need to look at the bond markets of the different European countries, right? And next year, there are important elections, including in France, that could bring some potential, you know, risk premium back to the equation.
[00:33:24] Speaker 2: Can I ask you about the complexity of what's going on at the Fed, Antonio, and how that might or might not factor into the ECB's thinking? I'm sure it has no direct relevance and won't get much reference today. How do you think the backdrop around the Fed, uncertainty around the reaction function, perhaps, under a new Fed chair? How does that, does that complicate things at the ECB at all?
[00:33:46] Speaker 6: Well, I think, you know, the Fed obviously leads and whatever happens, there is still over to the rest of the world. I think next meeting is going to be critical. We'll be hearing, you know, first time chairing the FOMC. The FOMC members or some members have been really moving more from the accommodative stance into neutral. And that's been very clear, the move, and the move has been recognized by the markets. So now what we're left to hear is chair Walsh and see what his views are. You know, we know he's been signaling us somebody that's probably from the center towards the dovish side. But it's going to be somebody that's going to appreciate what the inflation outlook is, which is going to be considerably above target. And also they pay potentially a bit less attention to a labor market. So I think that is key because if they obviously the ECB, sorry, the Fed were to move fast this year, that's not what I think at this point. But we need to recalibrate after the meeting. My view on the Fed, our view on the Fed, is that between 26 and 27, probably they need to deliver 50 basis points of hike. Because this inflation is going to be more persistent than some think in the Fed. Right. And then whether they're too aggressive and they go, they start this year, that probably can put pressure on other central banks.
[00:35:09] Speaker 1: Antonio, great to get some insight ahead of the meeting and what we're going to see maybe after it. Antonio Garcia Pascual, Global Head of Economics at Santander, CIB. 18 minutes to go until the market open. Coming up, big questions on AI pricing and the build out. We are going to discuss that with our great guests coming from the Founders Forum. We're going to be joined by the CEO of Fundamental, or I say we, Tom is, looking forward to this conversation coming up. That's next. This is Bloomberg.
[00:35:38] Speaker 2: This is the opening trade. Now, we've seen negative investor reaction overnight in the Oracle share price and after hours trading after the tech company reported quarterly capex higher than estimates. The focus there on the cost of the AI build out, how much of those fears shared across the sector. This in a week of UK tech gatherings. Today, it's Founders Forum, where CEOs and investors focus on the future of tech. Tom McKenzie is there, and I wonder how the cost of the AI build out is factoring into their conversations. Good morning, Tom.
[00:36:25] Speaker 7: Good morning, Anna. That is certainly part of the conversation from a cold and windy Soho farmhouse close to Oxfordshire. I'm very pleased to say I'm joined now by Jeremy Frankel, who is the founder, the co-founder and the CEO of Fundamental. They recently, earlier this year, came out of stealth. They've raised US$275 million. You're valued well north of a billion, about a billion and a half. And you're focused on building solutions for the enterprise using enterprise data around forecasting. You're backed by the likes of Salesforce. Anna was asking about the cost. And we are hearing a bit of pushback around the cost of compute and the cost of tokens and the cost of actually using and adopting AI and not necessarily getting the return on investment, the ROI. Are you facing any of that pushback with your corporate clients?
[00:37:09] Speaker 8: So first, it's very different because we're focusing on giving companies actual ROI and revenue by using our solutions. So we're not focusing on enabling companies to become more efficient. We're really focusing on delivering a real ROI for our users, which is very different than what you see in the broader market.
[00:37:27] Speaker 7: Talk to us about what it is exactly that you do that Anthropic, OpenAI and Gemini are not doing for the enterprise client.
[00:37:34] Speaker 8: So we've built a foundation model for tabular data. So when you look at the AI space in general, people are thinking about language models such as cloud or chat GPT. But what we realize is that the largest amount of enterprise data actually sits in tables. Things like databases, spreadsheets, CRMs, ERPs, all of those are tabular data sets. And that part of the enterprise world never really had a chat GPT moment, so to say. And we are really focusing on enabling companies to make better predictions out of their data.
[00:38:06] Speaker 7: Where are you seeing the strongest demand in terms of industries, across sectors? Where is that demand strongest?
[00:38:12] Speaker 8: So we've built a generalized model to work across every industry and every use case. But what we've seen, where we've seen a lot of interest from has been from companies, for example, in the media space, where they're trying to use it to predict viewership or ad placement or energy companies are trying to use it for demand forecasting for natural gas. And so across industries and use cases, there is a need to use tabular models to enable you to make better predictions on your data.
[00:38:38] Speaker 7: But when you go in and you're pitching, you're meeting with the CFO or the CIO of these big companies, do they raise the question of cost? Do they raise the question of ROI? Is there a little bit more cynicism now when you have these conversations?
[00:38:49] Speaker 8: They're skeptical about whether our models can actually deliver what they can. And so what I always tell every one of my clients, don't trust anything I say. Don't trust any of the numbers I show you. Try for yourself on your own data. And when they see the results in their own data, that's when the conversation turns from skepticism to excitement. What stops an anthropic doing what you are doing? It's a very different focus. Like language models are based on text. And you can train all your language models on all of the text on the Internet. Like Wikipedia has as much text as you want. But if you look at tables, the proprietary data sets sit behind closed doors. They sit with all those big Fortune 100 companies. And so getting access to the data is extremely difficult in order to allow you to make better predictions. And the second thing is the architecture itself is also different. As opposed to trading a model on the next token, you have to trade a model on messy data. And tables have a lot of complexities. They're incomplete. They are relational. And those things don't apply to language itself. And so you need a different architecture to handle that type of data.
[00:39:50] Speaker 7: What are your biggest constraints right now? Is it talent? Is it the cost to compute? Is it data center access? Is it training these models?
[00:39:56] Speaker 8: I think it's all of those. It's compute. It's talent. It's data. Because we need to get very different types of data than, you know, those language models need to.
[00:40:05] Speaker 7: This is a huge moment, obviously, in terms of the public markets. SpaceX pricing today, listing and trading tomorrow. OpenAI potentially anthropic as well by the end of the year. What is that doing? You're based in NSF. I know you have an office in Barcelona as well. What is the mood on the ground in San Francisco? What is this doing? How is it changing the dynamic there?
[00:40:23] Speaker 8: I think there's a lot of excitement. I think I read that roughly, what, 10,000 people are going to make over $20 million. I think that's definitely going to affect the real estate market in San Francisco as well, which is already high. But, yeah, I think there is a lot of excitement. And I think that there will be a lot more capital, both with, you know, VCs and LPs, which I assume will be deployed.
[00:40:44] Speaker 7: So, more capital. Look, you were at JP Morgan, you were at Bridgewater, you were a repeat founder. Do these valuations make sense to you, the OpenAI, the Anthropics, SpaceX's valuation? Does it add up?
[00:40:56] Speaker 8: I mean, the valuations are definitely high, but the pace of, the growth of revenue has been something we've never experienced before. I've seen a company like Anthropics going from several billion dollars in the beginning of the year to now, I don't know, close to $50 billion in revenue in a span of like four or five months. That's amazing. So, yeah.
[00:41:13] Speaker 7: Okay. Jeremy, thank you very much indeed. We'll watch and see what the response is, of course, in the public markets to these IPOs. Jeremy Frankel, who is the CEO and co-founder of Fundamental. Back to you, Anna. Guy.
[00:41:25] Speaker 2: Tom, thank you. Tom McKenzie, of course, at Founders Forum. Now, tech could be an important factor in the trading day ahead. So, let's turn now to today's markets in three minutes on the opening trade with MarketsLive executive editor, Mark Godmore. Mark, good morning from London. What is setting the mood in the markets right now? Because if you look at European futures, they look a bit negative. The oil price is a little higher. But U.S. futures, despite the Oracle numbers overnight, actually, U.S. futures looking pretty buoyant. So, what's the mood?
[00:41:53] Speaker ?: Yeah.
[00:41:54] Speaker 9: The price action in Asia was very impressive. You need to put the U.S. futures in context of the sell-off that we saw yesterday. But, you know, we had a U.S. session where tech stocks got hurt. And then we had the U.S.-Iran flare-up. The Asia session started very negatively. It looked like it was going to be quite a bleak day. We saw precious metals break lower. We saw Hong Kong stocks break lower. We saw, you know, Korean stocks trading very heavily. It looked like a really negative day. And, you know, in the second half of the kind of Asia session, we really improved quite a bit. Now, I know things are generally trading a little bit negative. But I find that impressive given that the U.S.-Iran conflict has probably seen the largest amount of strikes for a number of weeks as the most tense moment. And given that the tech news flow has been a little bit more negative with the expenses out of Oracle, with the fact that the SpaceX IPO is withdrawing liquidity from the system. So, actually, the price action is quite impressed from the short term. But I'm not sure that the pain of the sell-off we've seen in the last week or so is quite over yet. I think we have a pop in stock markets after the SpaceX IPO. But I think we have to get through that first.
[00:43:01] Speaker ?: I think we have to get through that first.
[00:43:02] Speaker 1: Mark, I am definitely going to watch Christine Lagarde at the press conference a little bit later on today. I'm assuming you will be, too.
[00:43:09] Speaker 9: Guy, you know that I absolutely will not be. Look, I always think ECB is a little bit anticlimactic. And I'm not expecting any major surprise today. I think, you know, the -- I do think it's funny that the ECB are obviously going to be the first to hike. And everyone wonders whether they've got the least inflation problem of some of the major central banks out there. But I'm not expecting the ECB to provide much fireworks. And I think we'll move beyond it quite quickly. I am much more concerned about the U.S. PPI figure today. I know CPI figure yesterday was a bit mixed. But I think PPI is where we'll see a headline number which is really going to upset people again.
[00:43:50] Speaker 2: Yes. So the headline number could upset people on the PPI story. What is that going to do to inflation expectations in the States, to Fed expectations in the States? Because given all the hype and the drama, the market wasn't enormously shaken by the CPI print yesterday.
[00:44:09] Speaker 9: No, they took it very well. But I think people have started to realize that the number is probably looking less good for stocks, I think, on what it means for the consumer. And I think, again, we're going to see this in a really high PPI number today. That the idea that, hey, that maybe margins are getting squeezed for U.S. stocks. So I think that the inflation dynamic is still pretty negative for the stock market. I think that people think the disinflationary trend in shelter has largely run its course. And the fact is, we've still got this supply shock from the Middle East not resolved. So we've still got a worsening inflationary outlook. We don't know how much worse. But we do know it's continuing to deteriorate. So I think inflation is going to continue to be a negative dynamic. And in the very short term, I think we might get another pop-up in yields to squeeze the stock market lower. Okay.
[00:44:55] Speaker 1: Plenty of things to watch this afternoon, even if Mr. Cardmore's not watching the ECB. Okay. Bloomberg Markets Live executive editor, Mark Cardmore. You can get up to date with all the great insights and analysis from Mark and the rest of the team. MLIV Go is the function on your Bloomberg Terminal.
[00:45:12] Speaker 2: They've been on a roll on the SpaceX IPO. There's lots of good stuff on the SpaceX IPO on the Markets Live blog. So I recommend that. Ahead of the open, though, should mention any stocks that might be on the move. Not a huge day for corporate earnings. But we're there, of course, in focus. We spoke to Joseph Faraday earlier on. Hugo Boss also in focus after Mark Ashley's Fraser's Group going for the path of that business that they don't already own. Absolutely.
[00:45:33] Speaker 1: So a bit of an A in the market this morning. It's interesting what the airline story tells us about what's happening with the consumers. Still seeing quite a buoyant summer. Going into the winter, they're going to see a few capacity cuts. Anyway, we've got five minutes to go. Equities are about to start trading. European equities are a little negative. US are positive. That's next. This is Bloomberg. Ok, a couple of minutes to go until we start trading here in Europe. When you think about the difference in US futures and European futures this morning, you've got to think about the sequencing and what happened yesterday and what is happening today. So this was yesterday's S&P session. Europe went out here, but the rest of the US session was fairly negative, which is why our futures this morning are also negative, because we've got to price that in despite the fact the US finished down there and it's going to bounce this morning to fill some of that gap up this morning. So that's why you're seeing positive US futures and negative European futures. We're going to play a little bit of catch up, but there's an awful lot of ground to cover between now and the end of the European Thursday session. So here we go. Down by two tenths of 1% for the 50. FTSE is down by three tenths of 1%. DAX is down by one tenth of 1%. We've improved a little bit as we start to glance sideways at what is happening with the US picture, Anna.
[00:46:58] Speaker 2: Yes, absolutely. And a sideways glance tells a much more positive story out of the United States. NASDAQ futures are up by eight tenths of 1%. With that in mind, let's have a look at where we're expecting to see some movement at the start of trade. I'll start at the bottom of that board then with that thought. Tech stocks could be in focus. Oracle earnings seemingly disappointing. That stock went down after hours on the back of ongoing concerns about CapEx, the cost of the build-out for AI. And that has been a perennial theme of this week as we've seen tech under pressure. So how does that translate into Europe? But as I say, futures in the States looking pretty buoyant. Hugo Boss could be in focus. Fraser's group making an offer for that one. But it's at a premium of only 4% to the closing price of yesterday. The British retail group, Fraser's, already owns 26% of Hugo Boss. So we'll see if we get much movement on that particular share price from the German clothing company at the start of trade. And Wizz Air in focus. We've got numbers there looking better at the sort of bottom line guide than we were anticipating. But they admit to give an outlook, of course. So they're not particularly interested in the M&A wave that is being at least discussed in the aviation sector. Yeah, tough winter coming.
[00:47:59] Speaker 1: Seems to be the narrative as well there. OK, let's get some markets open for you. Let's show you what is going on. We are, as we've already indicated, expecting a little bit of red on the screen this morning. That's what we're getting early on from the FTSE 100. We're, to a certain extent, just pricing what we saw towards the back end of the US session yesterday. But we're starting to see things ticking up in the States. So things are maybe starting to improve as we come through into the open. So I think it's going to be kind of touch and go. And maybe we're seeing that already in terms of kind of how negative we actually are. It could only be sort of one, two tenths of one percent. Half an hour ago, it was kind of two, three, four tenths of one percent. So we've improved a little bit in terms of what we're seeing. And actually, we're starting to get quite a positive open here. So we are maybe pointing forward rather than backwards in terms of the way we're thinking about this market. The CAC's down by one tenth of one percent. But all these other markets are now up by one, two, three tenths of one percent. The AEX is up three tenths of one percent. Asia Tech was strong. That, I think, again, maybe feeds back into the narrative around why we're seeing maybe US futures improving. And with the Nasdaq up eight tenths of one percent, maybe it's Tech's that is driving the Amsterdam market. But the stock 600, absolutely flat, balancing that kind of negative session back in the US yesterday with a forward-looking narrative, which maybe looks a little bit more positive, Anna.
[00:49:13] Speaker 2: Yes, and it's that forward-looking narrative that seems to be driving things, isn't it, Guy? So as you've been pointing out, the futures picture was quite misleading then for this morning because we are seeing most of these markets go higher. The DAX not yet open. The Cat Caron is an outlier to the downside. But most of these European markets are then going higher. The AEX, as you rightly point out, getting some decent gains. And technology is one of the best-performing sectors this morning. So BE Semiconductor up by more than three percent. ASM International up by just shy of three percent. ASML up by 1.7. STMicro up by 2.7. So we've got some movement to the upside in technology. So perhaps taking the lead not from the dynamics around Oracle specifically, which did look as if it was a negative story. But NASDAQ futures just gaining and gaining right now. We're now up by nine-tenths of a percent on NASDAQ futures. And so technology jumping into top, top spot here on the European session. And energy stocks also not doing too badly. That's the second best-performing sector, which no surprise given we've seen the potential for a return to hostilities in the Middle East, really, haven't we? Overnight, two days of attacks by the US and Iran.
[00:50:17] Speaker 1: What I think is slightly, SAP is down. So it's the hardware companies that were up this morning in terms of what we're seeing within the tech space. So that's worth bearing in mind.
[00:50:27] Speaker 2: Yeah, Capgemini down as well and Sage Group. So it does seem as if those were some of the software-related names that we got nervous about earlier on this year, weren't they?
[00:50:35] Speaker 1: And we are seeing some of the luxury names down as well, which maybe explains why we are seeing what we are seeing in France. So, yeah, very kind of - the stock 600 is absolutely flat. So while we're getting, in terms of the individual forces around Europe, a maybe slightly more mixed picture, Europe basically is balancing out the session we saw yesterday in the States and the session we're about to get in the States, and basically saying, kind of, we'll leave it as is. Yes.
[00:51:00] Speaker 2: Let's talk about some of these dynamics in the session ahead. Paul Markham is with us, Investment Director and Head of Global Equities over at GAM Investments. Paul, nice to have you with us. So tech stocks not doing too badly this morning, although the market overall here in Europe pretty flat. US futures pointing higher, looking to bounce back from some of the losses in tech yesterday, it would seem. Does the tech sector in the States, in the Asian session, even here in Europe, does it feel usual to you? Or does it feel as if it is dealing with the big liquidity repositioning event that is the SpaceX IPO? It feels a little unpredictable at this point. Yes, it does, Alan. Good morning.
[00:51:35] Speaker 10: I think there is a sense of suspended animation, which we're sort of seeing in the market at the moment, ahead of that SpaceX IPO. The cash call on some of those stocks, which have already performed exceptionally well into this new issue. If you think, going back to the beginning of the Iranian conflict, tech has really outperformed very, very significantly. There's also a bifurcation, as guys quite rightly just mentioned, around hardware and software. And that is, to some extent, a continuation of the concerns which we've already seen. But also, the fact that the capex number from Oracle came in very high, I think is what's driving the equipment manufacturers in particular. So you've mentioned ASM, et cetera, this morning, which are benefiting from that. And I think the big question for those names is when the music stops. And that is when the amount of compute power that needs to come in starts to become a concern for the market.
[00:52:24] Speaker 2: So this could be good for the suppliers, even if it sent the Oracle share price down overnight. More broadly then, where do you rate your nervousness around the level of capex and the AI build-out, and whether it's running just too fast, running ahead of itself, if you like? I mean, where are we in the AI build-out story and what it does to our appetite for tech stocks?
[00:52:46] Speaker 10: Well, there are two sides to this, really, Anne. I think on the one side, there's the fact that the adoption of AI is very real. And that's why I would prefer to characterize what we're seeing as a gold rush and not a bubble. I think a bubble has connotations of being completely unjustified. And if you look at some of the business models in 1999, when some of us were lucky enough to be involved, that was the case then. In this case, there is something real which is just being chased very aggressively. So that's the first point. The second would be, I think, that there is a question as to whether or not the pre-anticipation of there being very significant AI compute is justified at the current pace of adoption, the current pace of capex. And I think that is the big question. And from that point of view, I think that there is very much a justification for buying this, what is clearly a secular growth situation, but it's just how quickly it's pricing things in, which is potentially the source of nervousness. Don't gold rushes and bubbles ultimately end in the same way? They do end in the same way, but the anatomy of how they burst, I think, is different. And also the fundamental justification or otherwise for them is slightly different as well. But what you can end up with is far too many dollars chasing far too few assets. You said the music is going to stop. Is that what that looks like? I think what that looks like, guys, is a situation where something relating to agentic AI comes into play. And what I mean by that is there will be an occasion when an agentic decision is made by AI in an industrial process, a health process, something which is going to cause either damage to human life or a very significant financial event. And when that happens, I think that changes the regulatory outlook and it changes the attitudes that society takes towards...
[00:54:22] Speaker 1: The regulation bursts the bubble.
[00:54:23] Speaker 10: I think, yeah. Or ends the gold rush. Ends the gold rush. And I think that we've already had very significant comments from the EU for some time now implying that they wish to regulate further. But the US and the Chinese have been quite relaxed about that and allowed AI to kind of develop. I think if that goes into reverse, then investors really will question valuation.
[00:54:44] Speaker 2: The Anthropic founder, though, even he's talking about regulation of AI models being a good thing. So, yeah, it's an interesting thought, isn't it, where the regulation...
[00:54:53] Speaker 10: He has mentioned that, though, in the context, I think, of saying, well, we've got stuff which is so powerful we can't release it yet. And I think there's a certain PR benefit to that.
[00:54:59] Speaker 2: That has been said, yes. That has been said, certainly. But, yes, so interesting to watch that one. So, we have all of this capital raising taking place in the market. Do you see portfolio effects, then, from people making space for SpaceX right now, but then Anthropic and OpenAI and all of the rest? And do we just have to work our way through all of that? And what lies on the other side of it, Paul, do you think?
[00:55:22] Speaker 10: Well, there's an unprecedented move apparently being made by the major index providers, which is to include these IPOs in the first instance, SpaceX, very quickly.
[00:55:33] Speaker 2: Not immediately in the case of the S&Ps. No, exactly.
[00:55:36] Speaker 10: But some of the others are including it quite rapidly. And that has flow impacts for ETFs in particular. There's also the fact that there will be a natural level at which portfolio managers on active funds will not want to take their overweights or their positions in tech any further. So, they'll want to sort of keep maybe a sort of one-in-one-out approach or they'll want to sell some existing holdings to make space for SpaceX in particular in the near term. And, of course, as we go through the year, we're going to get Anthropic and OpenAI, I think probably in the fourth quarter. So, yes, I think that is an ongoing issue. And if you are forced as a PM to look through your portfolio and say, what would I be selling to make space for? You look at your valuations. You look at performance. It's difficult to ignore taking profit in some of those names.
[00:56:18] Speaker 1: Is Europe going to protect me when the gold rush ends in the United States?
[00:56:23] Speaker 10: I think the big question there, guys, is to what extent the rotation benefits the sector mix in Europe. Yeah. Because I think that there is a – I mean, firstly, on the underlying tech side, is the EU going to protect you around, you know, the whole AI situation? I don't know. I think they're starting to sort of backtrack from that. But in terms of portfolio and market sort of positioning, I would say that if you have a rotation into those spaces which Europe is sort of much more highly weighted in, and that would probably prove to be a value rotation, then that would be a benefit. If the rotation is into certain other areas of the market, it could be, you know, healthcare, could be consumer, maybe.
[00:57:00] Speaker 1: Yeah. But if I'm looking to hedge my AI risk – you talk about taking profits – but if I'm trying to hedge my kind of tech risk, is Europe a hedge against the US? Is Europe a hedge against that or not? On an index basis, I would say yes.
[00:57:13] Speaker 10: Because the weightings in – explicitly in tech are so low. Right. And the weightings in more – the value more – the lower multiple areas. Yeah. Is that a relative trade or an absolute trade? It's a relative one. I think if tech comes off sharply, I think in the first instance you rotate into non-tech for a period. You may even rotate from hardware to software. Yeah. It could happen. Then you rotate more into the broader market. But overall, there's going to be outflows, particularly from retail. And when that happens, I think that pulls everything down. And that would be healthy, by the way, as long as it doesn't become a route. Yeah. And if it's accompanied by something else, that could be something like military action. It could be another further price shock in energy, for example. But I think Cetras Paribus, that rotation in and of itself isn't too damaging.
[00:57:53] Speaker 2: Okay. So we might see that be quite widespread in terms of its effect. Do you get a sense that the conversations around all of these big listings over the summer and the AI trade more generally, is it just drowning out a whole load of other probably quite good ideas, Paul, that we're not talking about because we're talking so much about this? I mean, are there things that we should be focusing on that maybe aren't getting the attention?
[00:58:14] Speaker 10: I think the fact that, you know, when you look at the economic numbers recently out of the US, I mean, the job number last week was pretty impressive. Clearly, the inflation that comes with that is starting to build in a way that is concerning. And I think what not many people are talking about that frequently is the fact that if you look at the difference, for example, in food production, fresh food is already starting to tick up. But what starts to come through and becomes very damaging is when packaged food starts to show those inflationary impacts. And that typically takes a few months to start working its way through. And when inflation finds its way into an economy, it starts to become quite difficult to remove it. And then you start getting potentially controversial political developments such as the UK proposals around price caps, for example. So I think that all of that could be something which we should be looking at. But having said that, it's incredibly impressive to see how much the US continues to create jobs.
[00:59:02] Speaker 1: Is it better to raise rates then? To kind of stamp that out? In the States?
[00:59:06] Speaker 10: In the States and here in Europe. I get a sense that particularly in the States that it's going to be something that's going to have to happen. And I think it's going to go against the narrative of the presidency. The danger of not doing that is you lose control of a growing inflationary situation. You lose credibility as a sovereign power. And I think that's really important. And institutional confidence, I think, particularly in the Treasury market, which is, you know, on the end of a very large budget deficit, I think is important.
[00:59:29] Speaker 1: Very large. OK, Paul, nice to see you. Thanks indeed for stopping by to see us. Paul Markham, the Investment Director and Global Equity's Head joining us from GAM Investments. Quickly look at the call six just to figure out what is happening there. You are seeing a little bit of diversions within the tech sector, which is interesting, I think, this morning. Defense stocks are up quite interestingly as well, given the backdrop to what we're seeing in the Gulf. Tech, ASML doing well. It's interesting that Novo, actually some of the pharma stocks this morning, are doing less well. But let's get back to that tech story. Alex is here with more.
[01:00:00] Speaker 11: Good morning, Guy. You're mentioning that divergence in the tech sector. Let's start then in the green. And it's the chip makers, those with exposure, of course, to AI chips, the semiconductors. In the green, you've got ASM, STMicro, ASML all in the green. ASML up approaching 2% this morning. Turning the board over, though, and looking at those European names linked to software, of course, out of the US. Oracle saying that legacy software sales for them were down. Potentially a read-through here into Europe. SAP, SAGE, Nimacek, all in the red this morning. SAP approaching 4% down. So that mixed-picture guy that you were talking about there in tech. Let's turn then to a different sector altogether. Let's talk about Hugo Boss. That's in the green this morning after that approach from Fraser's Group. Mike Ashley's Fraser's Group valuing the company around $2 billion. Fraser's down about 2%. Boss up about 6%. So that's playing out there. And just finally turning over to Wizz Air. Now, they beat estimates. They were predicted to make a loss. Of course, they have admitted to give a forward outlook, citing the situation in the Middle East. Up this morning, though, around 3%. So that news that they did not make a loss. They beat those predictions, putting them in the green out of the gate. Alex, thank you.
[01:01:15] Speaker 2: Alex Morgan with a rundown of some of those stocks that are moving this morning. Coming up on the program then, President Trump says he will continue attacking Iran unless Tehran signs a peace deal. More details on the latest U.S. strikes next. This is BlinkTech. Welcome back to the opening trade. 17 minutes into a European session that's a little bit more positive than advertised. Perhaps the U.S. futures picture is dragging expectations higher here in Europe. We see European stocks are on the front foot. The DAX, not so much, but other markets around Europe putting in a modestly positive performance, perhaps you'd say, Guy?
[01:02:08] Speaker 1: And that's against the backdrop of rising oil prices, which is a factor we need to fold into the narrative this morning. Oil has been moving up. This comes after the United States carried out more strikes against Iran. That's the second day we've seen that. President Trump has accused Iran of dragging out negotiations. Let's get a take on what is happening here. Abir Abu Omar joining us from Dubai. So the ceasefire, is it still in place? Is it not in place? What are we looking at?
[01:02:35] Speaker ?: Good morning, Guy.
[01:02:37] Speaker 12: That is definitely a question we were asking ourselves this morning after a second day of high. A second day of hostilities between the U.S. and Iran. So look, this happened yesterday when the U.S. retaliated against what it said was Iran downing a U.S. military helicopter yesterday. Iran retaliated by hitting countries in the region, including Jordan, Kuwait and Bahrain. The hostilities happened again today after President Trump told reporters that he will hit Iran again because he is disappointed with the way they have been negotiating towards this MOU that we've been talking about over the past couple of months. So to break this stalemate, we assume the U.S. hit targets in Iran today that ended overnight. Iran retaliated again by hitting the U.S. fifth fleet in Bahrain. Kuwait closed its airspace momentarily as a precautionary measure. And then Jordan reported 20 missiles or so in its airspace. So we're seeing this tit for tat happening quite, quite a bit more than it has been over the past two months or since the April 8th ceasefire was achieved, Guy. And so the uptick that we're seeing in the aggression is definitely a sign of concern. The ceasefire has been fragile since the very start of its of it coming to the table. But over the past week or so, especially with Israel hitting Iran and its incursion in Lebanon as well. We're again questioning just whether the broader talks will lead to a more permanent ceasefire and an extension of the one that is existing and an opening of the Strait of Hermuz.
[01:04:15] Speaker 2: Yeah, and asking questions about whether those talks are currently still taking place then, Abir. And with that said, what is the status of the Strait of Hormuz right now? Effectively closed has been the phrasing we've been using for a long time. But we do see trickles of vessels perhaps leaving via the strait with their transponders off. What do we know?
[01:04:35] Speaker 12: Yeah, absolutely. Look, I mean, also this morning Iran said that it was completely closed after the hostilities overnight. CENTCOM from the U.S. side said, no, that is not the case and that some ships are going through. So what we know is that some ships and tankers from Gulf countries, including the United Arab Emirates, including Qatar, have been slipping through with their LNG and crude shipments through the Strait of Hormuz. Our own reporting from our energy teams suggests that ships are not only blocking their transmitters, but actually going fully dark, shutting down their lights to go at night time in order to get those ships much needed tankers and much needed shipments through the Strait of Hormuz. But the case remains that the shipments through the waterway are a trickle of what they were pre-wartime. So again, something to keep in mind. And it is the main concession that both sides want to get through the line. The opening of the Strait of Hormuz is the key concession that both Iran and the United States want to achieve. But it still remains to be seen, Anna.
[01:05:39] Speaker 2: Abir, thank you very much. Abir Abu Omar joining us there from Dubai. Now, the European Central Bank is widely expected to raise interest rates today for the first time since 2023, partly, of course, or very much because of what's happening in the Middle East and the impact that's having on pricing. This as policymakers globally grapple with inflation resurgence driven by the Iran war and higher energy prices. That decision comes at a pivotal moment for the wider European landscape as leaders weigh fundamental changes to preserve Europe's wealth and its influence. Bloomberg's Stephen Carroll joins us now from Brussels. He's been taking a week's long deep dive into the prospects for Europe right now and the appetite for change. So is there optimism that change in policy can deliver for Europe, Stephen, or are we sceptical and have heard these lines before?
[01:06:29] Speaker 13: We're always sceptical, Anna, but there are signs of change, which is why this reporting is bringing us, I suppose, an indication of the momentum that may now be behind some of those much needed changes. And really the risk for Europe is also a key factor in this to the new Bloomberg economics analysis produced alongside our reporting shows that without change, if Europe continues on its current path, its output gap with the United States could double by 2040 to 7 trillion euros between the EU's output and the United States. The EU's already fallen behind both the US and China and that gap for the moment is diverging. There is a plan to address this. It's the Draghi report, nearly two years old at this stage. And the question we've been looking at is what changes or what signs of change are there that perhaps some of those reforms might finally be adopted? And they are there. We've got the six largest European economies agreeing to move forward on the long delayed capital markets union. That is a key sign of momentum that we will actually see some movement there. The EU's already cooperating more deeply on defence. We've got the safe loan programme that's rolling out in efforts to streamline access to European funds for individual countries that want to carry out joint or separate investments into defence. And then there's a question around competition rules. The EU said that it's revising its merger rules and we're already seeing an uptick in some of the big merger announcements. Look at what's been happening in the announcements in the French telecom sector, the future of SFR there. Perhaps a deal that wouldn't necessarily have been announced without an indication that things are changing from a Brussels point of view. And also what's been happening with Italian banks as well. Even the long running Unicredit takeover bid for Commerets Bank as well, which we know the German government is opposed to. The question is, is that does it look like that takeover could go ahead even if the German government is opposed to it? And that is the sort of change that we're starting to see in this momentum towards perhaps achieving some of the goals the Mario Draghi report set out.
[01:08:31] Speaker 1: We have momentum, but we've got hurdles ahead and there are many more still to cross. What are the big ones we're watching out for next, Stephen?
[01:08:39] Speaker 13: Joint debt is going to be one of them. This issue, which we know is very politically divisive, was something that was considered completely off the table until it was agreed during the pandemic. That discussion is returning in the debate in the coming months over the EU's next seven year budget that will start from 2028. We're entering into the key negotiation period between now and the end of the year. Can the EU agree to find the money that's needed? Because Mario Draghi says it's 1.2 trillion euros a year that would be needed to boost Europe's growth rate and bring it back towards the path that the United States is on. There's no sign of white smoke on that particular issue yet, but it is a very present debate and the choices that are going to have to be made by leaders in those budget debates are going to be very difficult. So that's one to keep an eye on too. There's the messy politics involved here as well. You've got a French election happening next year. If there's going to be initiatives from those big European economies, usually the engine of change within the EU, that may have to happen in the window before those elections if there's a change of leadership in France. So there's a timeline issue around this as well. And then there's the question of AI. You know, when Bloomberg Economics looked at this modelling, they weren't able to count what the effect of AI could be because it's simply too uncertain. This could be a point of divergence or convergence between the EU and the US, depending on how the European Union chooses to integrate it, how businesses in Europe choose to integrate it as well. The productivity gains, we're told, are possible. But of course, it will take some time to find out exactly what those effects will look like.
[01:10:10] Speaker 2: Steven, thank you very much. Bloomberg, Steven Carroll joining us there from Brussels with that deep dive into what Europe is and is not doing to try and shore up its future and its influence. And thinking about the hurdles ahead, Steven was just giving us a run through their joint debt was one of them he mentioned. Well, we were looking at pictures of Friedrich Merz, the German Chancellor, speaking in Berlin. He's talking about the US and saying that the EU expects stability and reliability on trade. I mean, this just underscores the need for Europe to come together to try and shore up its position because of the unreliable international backdrop.
[01:10:43] Speaker 1: When you think about US relations in particular, they'd be quite volatile and are likely to continue to be quite volatile. All of this, though, gets the backdrop of an ECB that's about to hike rates today and potentially could signal that further rate hikes are still coming. So is that a good thing? Can Europe stabilize its inflation or is it just going to damage growth and make it more imperative that all of this structural reform actually comes to pass?
[01:11:07] Speaker 2: Yeah, that inflation growth trade-off certainly front and center and something we'll be looking to get commentary on from Christine Lagarde later on today.
[01:11:14] Speaker 1: We will be watching the press conference. I'm sure all of us will, apart from Mark Cutmore. Coming up, the energy price spike is fueling fears about hospitality. We'll talk about that next. We're going to be joined by the CEO of Radisson. This is Bloomberg.
[01:11:26] Speaker 2: This is the opening trade Thursday morning, 30 minutes into today's session. And actually, things are more positive than we perhaps had anticipated. The future's picture was looking a little negative. We thought we were going to have to catch down with the United States yesterday. That tech sell-off continued into their afternoon. But something through the Asia session turned a bit more positive. And NASDAQ futures, crucially, S&P futures also, but in particular NASDAQ futures, turning much more positive. And so maybe that's had something of a lifting effect across Europe. Certainly, we saw some of the technology names moving higher earlier on. Actually, some of the luxury names over in the Paris market, I noticed, have been doing pretty well. So up by around six cents of 1% on some of these markets. Half a percent then, Guy, overall. What do you see?
[01:12:19] Speaker 1: Let's talk about the internals. So actually, if you took the internals, it's a much more balanced picture that is emerging. 318 stocks up, 273 down. So there is a slight bias on the upside, but I wouldn't say it's exactly enormous. Volume's kind of OK-ish. Let's talk about where we are seeing some of the upside. We've talked about Hugo Boss this morning, Frazier's Group looking at that business, maybe looking to buy the remainder of it that it doesn't already own. Remember, it's already got 26%. Hugo Boss is up by 6.2% on that. Wizz there. Joseph Ferrati, the CEO of Wizz, was here a little bit earlier on. This was a business that was expected at the four-year level to post a loss. It didn't. It posted a profit. And he told us, actually, without the impact of higher fuel prices, the war, it would have been significantly higher. But there is that. And as a result of which, you don't get guidance for the winter, which is interesting. But actually, the numbers this morning are enough to lift the stock. We're up by 2.5% on that business this morning. BE Semi's up quite strongly. Tech is definitely leading the narrative. Hardware tech is definitely leading the narrative. I'll tell you what software is doing in just a moment. The hardware tech is definitely up. BE Semi's up by nearly 4% this morning. Let's talk about where we are seeing some negativity. Think about this as a kind of safety conglomerate. It does all kinds of different things around fire safety and issues. And issues around safety more broadly. But it's kind of a conglomerate structure. It's got lots of kind of portfolio companies. It is down 10% on the back of its numbers this morning. But I mentioned the fact that we are getting this divergence in hardware and software. Look at what is happening with SAP this morning. Down by nearly 4%. Capgemini down by nearly 4%. So you are getting quite a different picture emerging from the hardware and the software sector, Anna.
[01:13:57] Speaker 2: Let's get up to date on some of the other news flow that we are covering this morning then, Guy. The US Treasury refunded nearly $22 billion in tariff revenue that was collected from imports in the month of May. It's the first batch of such repayments since the Supreme Court struck down a major component of President Trump's trade policy. The amount was roughly equal to tariffs taken in during that month. That's according to the Treasury Department statement. Fraser's Group, as Guy was just saying, has offered to buy the rest of Hugo Boss for about 2 billion euros. Fraser's, which is owned by the British billionaire Mike Ashley, already controls a roughly 26% stake in the German label. Hugo Boss later confirmed the unsolicited takeover, saying it would thoroughly examine the offer. And the US military says it launched strikes against, quote, "multiple targets" in Iran for the second straight day after President Donald Trump accused the country of dragging out talks on an interim peace deal. The attacks followed strikes on Tuesday in retaliation for the downing of a US Apache helicopter. Guy.
[01:14:57] Speaker 1: Let's get back to some of the corporate news that we've been watching this morning. Wizz Air says the Iran conflict shaved close to 50 billion euros from its fiscal full-year profit. The carrier did not provide an outlook for the rest of the year. This, as alongside so many airlines at the moment, it grapples with higher fuel costs and continued economic uncertainty. The Australian Hormuz is obviously the big factor here. Fuel price is a massive input into the airline's story.
[01:15:25] Speaker 3: Fuel is more expensive than what it used to be, but it has not been put across into fare. You come to winter when the cash flow cycle changes in the industry, you're going to be starting changes. You will see capacity going out, you will see prices going up as a result of that, especially by the weaker airlines that are not protected by hedges, that they don't have enough liquidity on hand to continue to compete and continue to fight. They will have to rationalize what they are doing.
[01:15:53] Speaker 1: Joseph Varadi speaking to us a little bit earlier. Let's talk to Benedict Camel, Bloomberg's Managing Editor for Space and Aviation. Benny, good morning. The Iran war certainly having a visible impact on Wizz. It is obviously doing better than maybe we thought it would have done at this point. But nevertheless, huge challenge coming in terms of the winter.
[01:16:15] Speaker 14: Yes. I mean, right now we're in the summer period where things are looking good for everyone, really, depending, you know, no matter whether you're in good shape or not, because people are flying at the moment. But as Varadi said in his interview with you, he, you know, he's a little bit more, should we say, dubious about the back end of the year. At the same time, I thought he sounded fairly sort of upbeat and said we can actually be net beneficiaries of this. We can absorb some of the capacity that will be given up by others. We are in a growth trajectory and they have the fleet. They have the fuel efficient aircraft that will help them. So overall a fairly sort of, as I thought, upbeat sort of CEO. And you see it in the stock. It's up a fair bit this morning, partly also because, as Anna said, we had expected the company to report a loss for the quarter. They scraped through for the year. They scraped through just, you know, barely a profit, but nevertheless a profit. So all in all, for a company that has been considered as one of the great losers of the crisis, not a bad set of numbers.
[01:17:19] Speaker 2: Yes. And he sounded, as you say, sounded pretty defiant, talked about this as almost a growth opportunity. But more broadly, looking at the sector, looking at the European sector, how much pressure are higher fuel prices then putting on European carriers as they try to do what they can, like fuel hedging?
[01:17:35] Speaker 14: I mean, it's still something that's very considerable. And we heard just a couple of days ago in Rio at the IATA annual general meeting that fuel will take a massive bite out of the industry's profitability globally, but also over here in Europe. Europe is maybe a little bit different because the airlines here are more hedged. You can see it there in the graphic. And Varadi said this morning that into next year they are also solidly hedged. So there is a bit of an advantage on that side. Another advantage for a lot of European carriers is that people are sort of reorienting towards shorter trips, staying at home, staying closer here. Varadi said in his interview that Spain is a big market for them. So in some ways, if you're looking at Europe, if you're if that's your market, if you're running fuel efficient aircraft and if you're hedged, then you're actually not in a bad place. And that's sort of the pitch that Varadi is giving to the market.
[01:18:31] Speaker 1: For now, we'll see what happens as we work our way through the winter. Benny, thanks very much. Indeed, an update from Berlin. So someone's kind of almost underway. We've been hearing from the airline sector. The summer looks OK. Big focus on kind of areas like Spain, but we're going to work our way through the summer and then into winter. So what is the overlap between what we are seeing in terms of what we're getting out of the airline sector and the message we're getting there and what we're getting out of the hospitality sector more broadly? Let's try and answer that question right now. We have the perfect person to do that. Federico Gonzalez, Radisson Hotel Group CEO, joining us around the table. Good morning. Good morning. How are you? So I'm very well. Nice to see you. So the Wizz Air CEO was sitting there kind of an hour ago and he was painting a picture of actually a fairly solid summer. Markets like Spain doing very well. Yes. Is that a similar picture to what you're seeing?
[01:19:20] Speaker 15: Yes. I think I think when when you look to the summer, actually, it looks as I would say a healthy summer, OK, in terms of trends. But with significant differences by region, OK, and by market, if you look first continent wise, the US and America is soft or one, two percent growth. If you look to Asia, there are good trends. China is growing three, four percent. That was ahead of what used to grow in the last two years. Indonesia, for example, is doing extremely well, around six, seven percent growth. India keeps doing phenomenally well. So growing four or five percent, not only from overseas, but actually the internal demand is growing. And not only the key cities, but also in secondary towns. And when you look to Europe, you see very different trends. Italy has been doing very well, will keep doing very well, but driven more by events like the Winter Olympics and Milan in particular with Rome. Spain is doing phenomenally well. And what we consider a structural growth is not a given concrete event, but actually the last winter was very strong. Summer is doing well and it's doing well both in urban destinations like Madrid or Barcelona, but also Malaga, the summer destinations. So I think Spain is possibly the one that is benefiting the most. France, for example, is growing around three, four percent, but it's driven by demand in Paris and the upper upscale segment. I mean, well, mid scale and economy is not doing well. And then you have more country related trends, like, for example, Netherlands, that has been one of the growth countries in the past, is not doing very well because of a BAT increase that has been significant. And there has been a significant impact in demand. So very, very different by countries. Quite mixed.
[01:21:02] Speaker 1: So, OK, that's the picture for the summer. Airline CEOs have been telling me they don't know what happens this winter. They're expected to pull capacity out of the market globally. That's the message I got at IATA. If airlines are pulling capacity out of the market, does that trickle down to what you see?
[01:21:18] Speaker 15: It does, but it does more, I would say, in the overseas, in the overseas and in the trips between Middle East and Asia, between India and the UK. But I think when you look to domestic demand, there is less impact on those kind of shifts or trade offs between of the different airlines and airlines capacity. But I think, as you say, we are now used to, in hospitality, the same with airlines. You know, you need to be extremely prudent and you need to manage. You need to get benefit of what you know is going to happen, that is the summer. And on the winter, you need to get ready to, you know, be living and coping with any potential scenario. I think everything is going to depend on if the Iran situation gets solved during the coming months. OK, we were planning first March. Then we said possibly it's not before June. Now we're in June. So we're hoping that maybe it's by September. And I think the winter period, October to December, will have a significant potential impact if the event continues.
[01:22:18] Speaker 2: Yeah. Federico, good morning. You don't you don't have you don't own your brand of hotel in the US anymore. You sold that business a few years ago. But does it so does the World Cup acts as a sort of distraction from your business? Does it take demand away? Do Americans stay at home a little bit? The Europeans go there a little bit, but they're pretty high spending Europeans. Right. So do you see any negatives around the World Cup? No, not, not, not, not really.
[01:22:43] Speaker 15: I think when you look even to the to the impact of the World Cup or even the Olympics, OK, in every market, it is a very concrete segment of the population that will travel for that occasion. And I think it's good that it's not the majority of the population. I think when you look to the demand drivers in most of the most of the locations, I would say 90 percent of the business in our case is domestic. So obviously you have a five to 10 percent that is ready to to travel overseas to the US if there is a World Cup.
[01:23:13] Speaker 2: But this, I think, has a little impact. Yeah. We talked a bit about how patterns of travel have shifted because of the Middle East and the war that has been taking place there. I wonder more structurally with climate effects, whether we're also seeing a sort of elongation of the European summer from a travel perspective are slightly ironically, perhaps. But are Europeans maybe traveling more in the pre-summer and the early autumn instead of in the height of summer? Is it spreading out demand a little bit? What kind of patterns do you see?
[01:23:43] Speaker 15: I think we haven't seen a kind of a change. There is no there is no longer one one pattern, OK, where I mean, there was a given moment where everybody would have holidays in July or in August. OK, I think it's true what you say that that there has been a change where consumers are adapting themselves, not only because of the different pricing levels that you may have, but actually also because of their home, their own personal situation. OK, as population has grown up, OK, or there is more elderly population, they have more free time, so they are ready to have more flexibility versus the working population that actually had to go when they would have holidays. So I think it's more driven by the demographics and the personal situation than by one or other impacts.
[01:24:35] Speaker 1: Yeah.
[01:24:36] Speaker ?: Yeah.
[01:24:36] Speaker 1: How are you managing costs? The ECB is going to be meeting today, it's going to raise rates. Inflation is a factor that is kind of ripping through pretty much every industry. How is it affecting you? How are you dealing with the higher energy costs? Yes. A lot of industries are trying to take the energy costs out by becoming more renewable. What are you doing on costs and what are you seeing in terms of inflation?
[01:24:58] Speaker 15: Yes, I think you have different impacts, OK, but that obviously for us is very important. Number one is the labour cost, OK? I mean, in hospitality, labour is one critical component that has nothing to do with the current situation, but actually as immigration or has been more complicated source availability of resources has been more difficult in many of the countries where we operate. So I think we are trying to become more efficient, more effective, trying to make sure that we are able to plan and there are more solutions that we are implementing to make sure that the labour is planned in a better way. So you can maximize with what you have, OK, the results. Second, I mean, as we talked last time, artificial intelligence may help us to get out some of the administrative work that then we can deploy resources to more guest facing activities. And then obviously this energy, OK, energy, energy is around, depending on the hotels, but it's between 7 to 10 percent of the total cost structure. Yeah. We are, I would say, in most of the countries where we operate, we are still protected by, you know, the hedges we had or the deals we had. For 12, 18, 24 months now, the situation may change for 27 and 28, OK, so we need to plan. But I think at the same time, we and I think many of the actors in the industry, we are trying to make efforts to be more efficient at the same time that we still deliver our commitments to reduce our carbon footprint. OK, because it's not only energy and the cost, but actually how do we make all these changes while being respectful to the commitments we have with the environment and with our goals. And in that sense, for example, we introduced what we call carbon zero, neutral, neutral carbon hotels. We launched one in Manchester, another one in Oslo, where we are trying to invest. So it requires an investment, but actually it has an impact in the carbon footprint of the hotel and in the going cost, moving to electricity, to sustainable energy. And that helps, OK, the cost structure. And that helps.
[01:27:01] Speaker 2: These are the self-help measures. Federico, thank you very much. Thank you. Federico Gonzalez, the Radisson Hotel Group CEO. Coming up on the program, we were just hearing about AI and the difference it makes. We will be returning to Founders Forum, that tech gathering. Tom McKenzie is there. He'll have more on the state of the tech investment landscape. That's next. This is Bloomberg. Welcome back. This is the opening trade. Let's talk about technology some more. It's a big week for it. This year, we're set to see no fewer than three blockbuster IPOs with SpaceX launching tomorrow. The Anthropic and OpenAI IPOs, they are racing to be next, of course. That's all happening stateside. So what about Europe? Let's get back to Tom McKenzie. He's at Founders Forum and he's been trying to find out, Tom.
[01:27:52] Speaker 7: Anna, thank you very much indeed. Yeah, very pleased to say I'm joined now by Agatha Freymana, who is general partner at VC Norskund, which is based in Stockholm, a portfolio of about 60 different companies, largely across Europe. Look, there's a big focus on SpaceX and that IPO. Is SpaceX and that entry into the public markets just a reminder of US dominance, not just in space, in AI, but also in scale and capital?
[01:28:19] Speaker 16: It is. It is. It's definitely US is leading the way and showing us and what's possible. But I don't think this is US versus the rest of the world. For me, it's we're all watching it very, very closely to see what happens because it's a complete paradigm. It's a start of a paradigm shift. When I started in venture, we were the dream come true scenario was a $1 billion outcome. Then it sort of evolved into a $10 billion outcome. And now SpaceX is showing is that actually, no, we should be aiming for $1 trillion outcomes as early stage investors.
[01:28:47] Speaker 7: Is that a healthy paradigm? And does Europe really have have an opportunity to kind of match that level at some point?
[01:28:54] Speaker 16: It certainly gives us the sense of urgency and it puts a chip on our shoulders as Europeans to aim higher and strive for bigger outcomes.
[01:29:02] Speaker 7: You're very much focused on the renewable space electrification. It's fallen out of favor in recent years is is the momentum shifted around renewables and has the focus on AI pulled liquidity there and away from what you're focused on?
[01:29:18] Speaker 16: I completely, completely disagree with that. I think there has been a complete mismatch between the top line narrative that came with the election of Trump, where it's anti climate, anti renewables. But when we look at what's actually happened, this has been the best years ever for renewable energy. And it just clearly shows that to win the AI race, we also need to win the energy race. Whoever wins the energy race will win the AI race.
[01:29:42] Speaker 7: Has the Iran war been a catalyst?
[01:29:44] Speaker 16: It has been one of the many catalysts. I mean, the crazy thing that what we have experienced the last couple of years that us Europeans have been through three energy crises in four years. And we're paying a huge, huge price tag for that. If you just take the Iran conflict alone in the first 30 days, we as Europeans had to pay $14 billion in extra fuel subsidies and imports. So we as Europeans, we run our economy on energy that we don't own, fuel that we don't own, through waters that we don't control. So we need to make bold statements. And actually, one of the recent news from our side is that we've launched quite a bold campaign called Electro Union together with 100 other organizations, where we're putting pressure on European Union to make bolder targets. We want to see Europe electrified up to 50% by 2040.
[01:30:40] Speaker 7: Our former prime minister here in the UK, Tony Blair, says we should be drilling and tapping the oil reserves in the North Sea to power data centers to underpin AI. Is that the right solution?
[01:30:50] Speaker 16: Again, it's just completely the wrong misconception. Because today, clear as a fact is that renewable energy is the cheapest source of energy. The price of it has dropped by 90% over the last decade. There is no cheaper source of energy than renewable energy.
[01:31:04] Speaker 7: But are there real returns for investors? Are your LPs, are your investors seeing returns on these investments in renewables?
[01:31:10] Speaker 16: Absolutely. And if we just look back at last couple of months, we have some of the best IPOs that cleantech and climate space has seen. Fervo Energy, Solve Energy, X Energy, and also Aindride, one of our portfolio companies IPO-ing yesterday. So the momentum is there and the investor demand is there. And investors can see that if we take on hard problems and apply those to big challenges, we can see that that builds big, sustainable, defensible business opportunities.
[01:31:36] Speaker 7: Where within the energy stack are you finding the greatest opportunities right now then?
[01:31:41] Speaker 16: We're playing across the entire energy stack. More than half of the investments that we have done have been across the energy stack from energy production to grid balancing to energy storage. There is so much to be done because the whole energy infrastructure is outdated and we're up against the clock.
[01:31:59] Speaker 7: What do you think the demand around data center, compute use, energy, what is the correct solution around that in terms of powering that? And who are the players who can benefit from that? To what extent is Europe going to have a role in terms of our startup ecosystem empowering and providing the energy for those data centers?
[01:32:16] Speaker 16: Yeah, and coming back to again like why we need to rush towards renewable energy because from pure cost economic basis it is the cheaper source of energy. That's also we as Europe need to hurry up to accelerate the movement to renewable energy. So again like sometimes the misconception is that AI has killed the climate goals because again the energy demand at the moment is infinite. But I would argue that it's actually accelerating our progress towards renewable energy.
[01:32:44] Speaker 7: Okay, so AI can be that catalyst. Exactly.
[01:32:47] Speaker 16: Around renewables.
[01:32:48] Speaker 7: Agatha, thank you very much indeed for your perspective. Agatha Freymana who is general partner at Norskund VC. Anna back to you.
[01:32:56] Speaker 2: Tom, thank you very much. Tom McKenzie of course at Founders Forum, braving the weather. See umbrellas in the background. It's got that feel to it today.
[01:33:04] Speaker 1: It's got a jumper on, sweater on.
[01:33:06] Speaker 2: Yes, sensible.
[01:33:07] Speaker 1: Looking a little bit chilly. Okay, let's turn our attention to what the rest of the day is going to look like away from the weather. And maybe the weather starts to change today from a monetary point of view here in Europe. Let's figure out exactly how this is going to work. Blinberg, MLive Strategies, Skylar Montgomery-Kerning joining us around the table. Good morning. Mark thinks that, Mark Cudmore I'm talking about here, Mr. Cudmore, thinks that maybe the ECB is going to be a non-event today. Is that because everybody just expects a hike and as a result the bar kind of is quite high to shock?
[01:33:38] Speaker 17: I'd say two things. The first is generally when you look at European asset markets, they're pretty driven by what's happening in the US and elsewhere. There's not a lot of like home impetus behind them, particularly when you think about effects. And then I think it's right on there's a pretty high hawkish bar right now. They expected to hike. There's 70 basis points priced in for the hiking cycle. That seems very high. But there's also no reason for them to say, well, we're not going to do that. So there's no back pulling. We'll get the hike and maybe we'll get some guidance in the forecast in terms of how much weight is put on growth versus inflation. More weight put on inflation is more hawkish. But again, you know, you have a two year yield trading at 270. That's in line with your expectations for monetary policy on the hawkish end of the scale.
[01:34:19] Speaker 2: We should get more details about just how exactly SpaceX is coming to market over the next 24 hours. And then, of course, it comes to market tomorrow. Skylar, is this going to be more of a tailwind or a headwind for the sector? Tailwind because it focuses us on AI and the potential perhaps, but headwind because of portfolio effects. What are you watching right now?
[01:34:37] Speaker 17: I think right now the concern is kind of turn under the hood of the market in terms of you have so much issuance coming from IPOs. It could be a record year if you get Anthropic as well as open AI. And so you need to sell something to fund that. But what I would also say is that in the near term, IPOs tend to be quite beneficial for tech in particular and for the stock that's IPOing. So first day returns for stocks that IPO over the past 40 years is 19%. And in the dot com years, which, you know, a bit of a scary example, but you had like 70% on average. Yeah. So I think certainly, you know, those kinds of IPOs are designed to do well. You have things like lockups and et cetera. Okay.
[01:35:17] Speaker 2: It's all in that detail. Thank you very much. Bloomberg market side strategist, Skylar Montgomery, Koenig, of course. That is it for the opening trade today. We'll be back to do it again tomorrow. The pulse is up next. NASDAQ features up by 1%. This is Bloomberg. This is BlingPack.