About this transcript: This is a full AI-generated transcript of Oil Prices Retreat, Apple Results on Deck from Bloomberg Television, published November 2, 2026. The transcript contains 19,269 words with timestamps and was generated using Whisper AI.
"Good morning. It's Monday. It's November the 2nd. Here's what's on today's agenda. NASDAQ futures point higher after Friday's sell-off as the tech trade shows some stability in Asia. Brent slips nearly 3% as other media reports highlight Gulf diplomacy. But Goldman sees higher energy prices fearing"
[00:00:01] Speaker 1: Good morning. It's Monday. It's November the 2nd. Here's what's on today's agenda. NASDAQ futures point higher after Friday's sell-off as the tech trade shows some stability in Asia. Brent slips nearly 3% as other media reports highlight Gulf diplomacy. But Goldman sees higher energy prices fearing re-escalation. And we're live in New York ahead
[00:00:27] Speaker 2: of the midterms asking what's at stake for Europe. We'll see what comes next in the context of the fact that Brent is down fairly hard this morning because it could be contributing to what we're seeing in terms of equity futures this morning. Yes, the NASDAQ is bouncing. It's only up by eight tenths of 1%. There's a little fade over the last few minutes as well. How much of that is down to maybe a little bit of dip buying? How much of that is down to what is happening around the energy story? It's a big week coming up. The midterms obviously on deck. EUROSOX 50 futures pretty much flat up by three tenths of 1%. It is going to be a massive week. U.S. politics is going to dominate. We continue with this tech trade story. The countdown for the opening trade starts right now. Good morning. So with the recovery in NASDAQ futures, let's reflect then on what happened.
[00:01:11] Speaker ?: What a session it was on Friday and how much more ground needs to be made up because you saw the NASDAQ 100 dropping the most since June of earlier this year. Of course, a drop of almost three and a half percent.
[00:01:19] Speaker 3: Intel itself dropping almost 30 percent. A fall of 28 percent for the U.S. chipmaker Intel. The Semiconductor index, the Semiconductor index, the Sox index tumbling as well. So that is the context in an environment where it seems the future look on earnings growth is suddenly a little bit more moderated in an environment where for the sceptics this is a tech trade that's become overextended. So to your point, Guy, is this dip buying? We've got other clearing events. Of course, we've got the midterms. We've got NVIDIA earnings later this month. To what extent is this dip buying? And we're going to see sustainable recovery. Or is this a maturing of how investors are thinking about the A.I. trade?
[00:02:08] Speaker 1: Yes. And is it good that we are thinking very carefully and more carefully and in more detail about the A.I. trade? Howard Marks making that point, saying that this is a sign that investors are being more thoughtful and being more sceptical. But that's not necessarily a bad thing. They're trying to discern between the things that are going to win and the things that are not. And also our colleague Anthony Stevens just sort of reminding us of the fact that this is very much about execution and it is about cash. And we saw that in some of the earnings reports last week. The ones that the markets bulked out in particular are the ones that are just not delivering enough cash at the same time as investing.
[00:02:39] Speaker 2: I like the John author's piece this morning. This is just a pre-shock. Every shock that we get to this trade does it weaken the foundations. At what point do the foundations start to seriously crumble? Was that it last week? Didn't feel like it. Yes, there were some big downside moves. But the fact that we stabilize so quickly maybe suggests that actually maybe we're not there yet. But still on a three day basis. If you look at Nasdaq futures, we're still down by 4%. Yes, we're getting a bounce this morning. How much of that bounce is down to what we're seeing in oil? Crude stabilizing and moving lower. Is that something that can be sustained over the next few days? I don't know. But certainly it is a cause for rejoicing maybe for equities this morning. Enough maybe to stabilize the situation.
[00:03:19] Speaker 3: So this is on reports from Axios that maybe President Trump is prepared to give a little bit more time before he pulls the trigger again in terms of potential. He's flagged potential attacks on Iran after the midterms. Of course, that vote taking place tomorrow reporting suggesting he's prepared to give the Iranians a little bit more time. Some suggestions that maybe negotiations are moving potentially with all the caveats in a slightly, slightly more positive direction. But there are just so many continuing so many unknowns about whether how much direction is that. And so how convincing this move lower is and whether it can be sustained.
[00:03:52] Speaker 1: Yes, it does seem that the market is moving on that hope and that hope, not necessarily expectation, but that hope that we don't see reescalation in the Middle East after the midterms. The messaging we've been getting out of the region over the weekend, the Iranians talk about preparing for reescalation. Gulf countries, according to our reporting, also preparing for retaliation from Iran if there is some reescalation at the attacks. And we're on the ground at the ADIPEC event in Abu Dhabi this week, so we'll continue to track this. And Goldman Sachs, just like many others, having to reassess where are we going to be on oil prices at the end of this year and into next and elevating the prices that they're expecting because of the risk of reescalation.
[00:04:31] Speaker 2: I was just talking to Michael O'Leary in the green room as we were kind of getting ready for him to come on air this morning. They expect oil prices to come lower. He does see at some point next year actually the possibility for peace. Doesn't know, but that's what kind of his base case is. But even then, what he is saying is even if the oil price comes down, crack spreads are going to remain very, very wide. This isn't really about the Brent headline price. It's about product prices and spreads will likely remain high, which means that actually the stuff we consume, jet fuel, which he expects to remain very elevated going into next year, diesel, gasoline, all of these kinds of things are likely to remain elevated. So even if you get a lower Brent price, you may not get a lower product price.
[00:05:11] Speaker 1: I will also flag that we have on the subject of other products, but well, on the subject of gas, we have a really interesting report out of the Wall Street Journal this morning suggesting that the U.S. are putting pressure on the Europeans to take Russian gas once again. Will obviously in the next round of reporting be looking for any response from Europe on that because Europe has gone to great lengths to try and dial back the exposure to Russian product.
[00:05:31] Speaker 2: Okay. All of this is going to play, of course, into the U.S. midterm elections. President Trump says he may have to become Mr. Vito if the Democrats gain a majority. A tacit admission maybe that actually that is what is going to happen. Following his comments, New York Times polling found the Democrats are leading in almost all of the seven key battleground states that will determine control of the upper house, the Senate. We're joined now by Bloomberg's Oliver Crook in New York. Ollie, it was a tempestuous weekend going into the elections. We obviously saw all of the shenanigans in Michigan. We're trying now as Europeans to understand what this will mean for us.
[00:06:06] Speaker 4: Any inkling at this point? Yeah, I mean, obviously, depending on the outcome of the election, if the Democrats do manage to sweep both the House and the Senate, and it seems that there is a path for that to happen, albeit a little bit narrower in the Senate, that obviously will have ramifications for the Europeans. How wide it's going to be, though, is going to be very hard to establish for the Trump administration. If you do get this Democratic blue sweep across the United States, what that will effectively do is hamstring his domestic agenda. What that now puts on the table for him is the places where he can act, where he has basically full executive sovereignty, and that is on international affairs. So there's a lot of questions about, you know, a man who's very concerned with his legacy, how he's going to be remembered. If he can't make his mark in the United States, there is an increasing chance that he will have to make that mark abroad. Now, that could cut either way. Obviously, there are people who are watching closely that say this could mean that he will be, you know, intensely more negative on Ukraine. It could bring him back on side in Ukraine. It could bring the question of Greenland back into the conversation. But I think there's also a broader question about the sort of MAGA movement more broadly, right? We talk about Marco Rubio coming to the right wing of the United States and the right wing of the United States and the United States and the United States. Is there a sense that actually this Trump ebb is sort of ebbing back, that the sort of high moderate watermark has been reached and that also for these right wing parties within Europe who have tried not to align themselves as much with the Trump administration as they did in the lead up to the 24 election and in the afterglow of the victory is potentially an effect you could also have here in Europe. But of course, there's another question, right? Even if the do Democrats do come to power in 2026, there's a real question about what this Democratic Party is and what it means in terms of free trade, what it means in terms of the relationship for Europe. So that is a question that will also have to be answered over the next two years. And the Europeans will be searching for clues over that over that period of time leading into the election in
[00:07:51] Speaker 2: 2028. Tech trade is going to be interesting in all of this European exposure. Their pharmaceuticals as well, another sector we're going to watch very carefully. And we're looking forward to Oliver Crook's coverage out of New York as we work our way through the next 24, 48 hours, 72 hours as we try and understand what the implications of these midterms are going to be, Tom. As we think
[00:08:10] Speaker 3: about tech, I mean, today is just if we put the spotlight on two major companies, one is Apple, which is, of course, cash flow positive, Alphabet, cash flow negative. And they just come through with a new line in terms of debt offering and a bond offering in euros. So Alphabet, of course, the parent company of Google kicking off seven part bond offering in euros. This is the company that dropped about 15% just last week on concerns about his advertising business and the spend in terms of the capex story around AI infrastructure. So additional capital then being drawn from the markets for Alphabet and its
[00:08:38] Speaker 2: plans to build out. Are they going to have to pay a higher price? What are investors going to be saying? Are they going to be less keen maybe to go for this one? It's been obviously huge, huge amounts of debt coming through. And most most people have accepted it in terms of the term sheet they've been offered. Is that still going to be the case? Nadia Martin-Wiggin is going to be joining us shortly. We're going to be talking about what is happening in the oil and gas space. The Svelin Capital take on that. Gerry Fowler from UBS joining us around the open. Peter Speights, Greendom, General Director here to discuss European tech, European tech with the US flavor, VC funding. What are we going to see over the next 12 months in that space?
[00:09:15] Speaker 3: Let's look ahead to what else we are watching throughout the week. Today, I mentioned this, of course, Apple with its earnings. Palantir as well. That's aftermarket. Tomorrow, it is, of course, U.S. midterm elections. We just had a set up there from Oli. Plus, on the earnings front, AMD, super micro earnings. Really interesting, of course, as we continue to pass the details in the semi-space. Wednesday, euro area inflation print will cross. On Thursday, it's the Bank of England's rate decision. And on Friday, nonfarm payrolls. U.S. October jobs report dropping on Friday.
[00:09:44] Speaker 1: Lots to look ahead to, then. Coming up on the programme, we will look at your stocks to watch, including, of course, Ryanair. The low-cost carrier looking to cut costs to offset an expected jump in fuel charges. We heard from Michael O'Leary during daybreak. We'll bring you some of that sound later. Plus, more unrest in France. This is the country's bond futures slip after Fitch ratings put its credit rating on a negative outlook. So, once again, shining that spotlight on France. We'll have the latest. Up next, we will be speaking to David Rees, head of global economics at Schroeders. If you have any questions, please do get in touch with us. We do like to hear from you. We like your contribution to the programme, IB plus BBTV GO. That is the function to use on the Bloomberg terminal. This is Bloomberg.
[00:10:36] Speaker 3: Happy Monday. Welcome back. We're a little over 45 minutes from the opening trade. You're looking at European futures pointing high by two-tenths of a percent after the drop. By the close on Friday, we're about four-tenths of a percent. The FTSE 100, though, called lower by around two-tenths. A little bit of weakness over in France, but broadly across the headline basis on the benchmark. Modest gains of two-tenths of a percent.
[00:11:05] Speaker 1: Now, the tech sell-off then, so much a part of the story on Friday, has eased in Asia following Friday's global route. NASDAQ futures also are pointing to a higher open on Wall Street. Let's bring in Bloomberg Markets reporter Anthony Stevens in Hong Kong. So, that's that then, Anthony. All done, all over. NASDAQ futures point higher. How do you how do you look back on Friday? And what do you take away from that big sell-off we saw in tech?
[00:11:30] Speaker 5: We saw the U.S. really punish bad execution in results, right? Intel is the poster child for that. But whether you look at, you know, Alphabet or Meta, whether you get ROI from the hyperscalers or actual production execution from the AI supply chain, the market has no patience for delays. It has no patience for bottlenecks or, you know, procedural problems. So, that level of punishment did not come over to Asia because we had a few kind of tailwinds on our side. We had some good earnings to offset the bad earnings. So, Tokyo Electron was quite good. Media Tech was quite good. And they've offset a pretty shocking number and shocking guidance from Kyokia. So, let's call that flat. We also had some really supportive macro, which is quite idiosyncratic to Asia. So, Korean exports, you know, grew 93% year on year. That's a spectacular number. And that helped draw a line underneath Korean sentiment. The KOSPI actually opened down 3% and went up as high as 3% on that macro kind of tailwind. Hynix, in particular, after eight-strong results, really steadying the ship. And then you have China, you know, supporting its market, deep sea coming up with another kind of technological improvement. So did CXMT. So, you're seeing some real resistance from China here on the downside. Remember that Korea and China actually led U.S. tech on the way down. So, Asia has taken its punishment. A lot of the positioning has come out of Asia. There's, you know, over $140 billion of foreign selling in Korea already. And almost no one serious you speak to owns the Chinese ecosystem. So, there is an element of, you know, this laggard place kind of catching up as money comes out of the U.S., which faces potentially a less supportive environment for AI going into the midterms. Maybe Asia is the incremental beneficiary of some of that outflow.
[00:13:18] Speaker 2: Anthony, we're going to watch that one very carefully. Anthony Stevens joining us on the morning after the night before when it comes to that tech trade. Joining us now to discuss all of this, David Rees, head of global economics at Schroders. Good morning. How are you doing?
[00:13:31] Speaker 6: Yeah.
[00:13:32] Speaker 2: The U.S. economy looks great. Data last week shows it's maybe accelerating right now. Things look fantastic. Yeah. If the AI trade wobbles, does that growth momentum continue? I don't think so.
[00:13:42] Speaker 6: We see the AI trade or the AI story in the U.S. as the cherry on top of the cake. Really, the story has been one of stimulus and robust consumption. You see, you pick through the noise. Consumer spending in the U.S. is super strong. And then AI tech, the capex, the wealth effect to some degree tops that up. Okay. Now, the consumers face a bit of a squeeze from inflation coming through of a lag. Yeah. Our assumption is they'll get through that and continue to spend. But that's probably the key risk that we're watching at the moment.
[00:14:09] Speaker 2: Midterm risk, big deficits, does that change anything?
[00:14:13] Speaker 6: Does anything change around the midterms? Look, in terms of the nuts and bolts of the economy, I don't think so. Neither side is going to want to tighten fiscal policy. If anything, the bias would be to spend a little bit more. Could that upset the Treasury market? Maybe. Does it come to tax rises, though? I don't think so, yeah. I don't think anyone is going to try and put taxes up before a presidential election in two years' time. This is the kind of game that's going on, I think. So fiscal is going to stay loose. Could the Treasury market react negatively? It could do. Could Trump then start to pull levers where he's got much more power on foreign policy? That's a bit of a risk and it's a bit of an unknown.
[00:14:47] Speaker 1: It is. And that takes us to Europe. Good morning to you, David. Hi. That takes us to Europe, doesn't it? Because whilst we might be excited by growth in the States, are you more concerned about growth in Europe?
[00:14:57] Speaker 6: So things do seem to be rolling over a little bit in Europe, I would say. So certainly on the manufacturing numbers, the PMIs are softening a bit. The data is following. So that's one area of concern. And if you look at things, measures of consumer confidence in Europe as well, that seems to be tailing off as well. So we do see evidence that Europe is starting to soften. It makes sense because it's been in the eye of the store with the energy squeeze. And if that starts to come through, it will take some pressure off the ECB.
[00:15:22] Speaker 1: And maybe that means Europe takes an even tougher line than it would be minded usually to do on Chinese imports. Which takes us to China, where the growth story there looking really weak domestically and therefore sort of lashing out for export. How does that resolve? Because this is a massive headache for other parts of the world.
[00:15:42] Speaker 6: I agree. So the domestic story of China is weak. And we've been making the argument that it's weaker than most people assume, and it will continue for a while longer. Hence, they've exported the capacity abroad. We were kind of assuming that this would steer the government towards some kind of stimulus package into year end. But actually, you saw the rally in the official data in September that lifted Q3 growth. It's probably reducing the probability that you'd get that kind of stimulus coming through. So probably that weakness drags on. Therefore, the need to export drags on as well into next year. Is China deflationary? Yes. Okay. So that's a positive? Well, it's deflationary in terms of exported cheap goods abroad. Yeah. So if you are like the UK that relies on imported goods, you can get a terms of trade improvement, a lower price. And therefore, that can help anchor your headline rate of inflation. Is it good for deindustrialization in the rest of the world? No, it's a continued issue.
[00:16:36] Speaker 3: Often when we think about central banks and, of course, that tilt at least the narrative last week from the central banks who stayed on hold but maybe are looking to another rate hike is we're not seeing second-order effects right now. Are you seeing any evidence at all of second-order effects?
[00:16:51] Speaker 6: It's different across markets. So in the UK, not so much, right? In the UK, domestically generated inflation is running at around 2%. The labor market data is ever so slightly better. But it's early days. You don't see this kind of rip-roaring second-round effect. So the Bank of England is going to get dragged into some hikes, but I don't think they're going to do that much. If you go to the US, domestically generated inflation, things like core services, is accelerating. It's rising above target and it's going to go higher if you look at a lot of the leads. So I think, you know, that's an economy that's running above capacity is generated inflation. If you come to Europe, yes, headline rates are high on imported inflation. Domestic generated is quite subdued so far.
[00:17:28] Speaker 2: If gas goes up significantly in Europe this winter, what does that do to your models in terms of growth?
[00:17:32] Speaker 6: Well, you're just adding basis points to headline inflation. You're going to subtract that from growth, ultimately.
[00:17:38] Speaker 2: So how big a hit? We're at 100 this morning. I don't know, somewhere around 100 this morning. You get up to 120. That's quite a big, in terms of percentage change, that's a big jump. Now, not all of it gets passed through straight away, but a big chunk of it will ultimately get passed through. And again, it varies across Europe. But kind of, what do the extreme, what do the tails look like in terms of...?
[00:17:58] Speaker 6: Well, it depends on how high you go. So when we modelled this a while back, you know, on the idea of oil going to 150, if you take gas on a similar colour trajectory or a bit more, that starts to get recessionary. Okay. But, I mean, this was then modelled six months ago or so on that initial shock coming through. Now, we've already adjusted to some degree, so you smooth the path out, but it's clearly a negative drag on growth and it takes you down to not much growth, if any.
[00:18:23] Speaker 1: So we're not quite, so we're not at those levels, but it's interesting that's the analysis if we were to go back to those levels and we think about the risks of re-escalation, for example, in the Gulf. But you mentioned on the Bank of England and Europe more widely, but on the BOE, you're not seeing those second round effects quite so much. What do you make then of the fact that we are going to see a hike perhaps from the Bank of England this week?
[00:18:41] Speaker 6: There are some tentative signs of life in the economy. I mean, the growth story has been a little bit better. The employment numbers look a little bit better. And so it makes sense to try and get out ahead of that. A couple of rate hikes, take a bit of steam out of the kind of nascent pickup in growth and then see what happens. But you've got to be very careful not to come and snuff any growth out as well. So it's a difficult balancing act. I suspect that by the time you get to, I don't know, early, middle of next year, you'll start to see the peak in energy inflation probably, barring another big pickup in prices. And if it's the case that domestic generated inflation is still quite well anchored, then I think you could start to tell the story that actually inflation, you could see the peak of things are going to start to roll over. And then you could wait to see what happens.
[00:19:24] Speaker 3: So to be clear, you think the markets are pricing in too many hikes at this point? Yes, too many.
[00:19:28] Speaker 6: OK.
[00:19:29] Speaker 3: And your expectation is for they go this week? Yeah.
[00:19:32] Speaker 6: And then into 2027? And then do one more. Yeah. And then that's the peak of the forecast. I think then we would be watching the energy market because if energy keeps going up and lifting headline, you know, into the mid fours or towards five, then they'll be obliged to keep going. Otherwise, I think, you know, the base case two and done.
[00:19:50] Speaker 2: More demonstrations across Europe this weekend. Yeah. Do you think the ECB at some point is going to have to start thinking about how do I protect the system? Like, at the moment, they're priced to raise. But do you think, like, how are you thinking about what the tools are that they could use, what they're seeing in front of them in terms of the pushback they're getting from society? Yeah. How does that play into, how do you plug that into your thinking in terms of what that could mean in terms of the policy direction?
[00:20:16] Speaker 6: So, in terms of policy direction, on the rate side, for the macro story, I don't think they're going to be doing a lot more. Now, I think the attention will really focus on the bond market and whether things start to get unhinged in the market with kind of spreads in France, et cetera. What does unhinged look like? I think unhinged looks like French spreads going up to three, four hundred over bonds. Oh, right, OK. We're way away from that. So far, what we've seen so far is not unhinged. We're quite hinged. Yeah, it's quite hinged. It's quite orderly. And you're not seeing broad contagion ripping through the block. Now, I think if you were to really see you getting close to the election in April, if the budget drags on and on and on without being passed, then you're going to see French spreads blowing out. Yeah. If you're starting to get a more serious conversation about the integrity of the euro, I think that's when policymakers become more motivated to intervene. But I think there's going to be a lot more pain before we get to that point. Ouch.
[00:21:08] Speaker 3: Negative outlook from Fitch, of course, and actually tying in the street protests to their adjusted view from August. David Rees, Head of Global Economics at Schroders. Thank you very much indeed for joining us this Monday morning.
[00:21:19] Speaker 2: Okay, what else do you need to know this Monday morning? Binance saw a net outflow of $3.6 billion in crypto assets. This after restoring customer withdrawals following last week's record hack. The world's biggest cryptocurrency exchange posted details of its withdrawals and deposits on social media, saying the flight of funds eased after an initial spike. The exchange had frozen withdrawals after the $6.3 billion theft, which the FBI and crypto analysts have now attributed to North Korean hackers. As we've just been mentioning, mass demonstrations across Germany became violent late Saturday as rioters faced off against police in Frankfurt, in Cologne, in Hamburg, and in Berlin. Authorities arrested more than 30 people after demonstrations smashed shop windows and looted stores. Early in the day, demonstrations passed largely peacefully in protests organized by a group known as Gen Z Regelt, loosely translated as Gen Z, sorts things out. The group had stressed it wouldn't tolerate any form of violence. And, as we've just been saying as well, France's credit score has been put on negative outlook by Fitch ratings, an unscheduled move late Friday, highlighting how quickly the country's public finances are now souring. The verdict is the latest indictment of France's inability to find a way to contain its ballooning debt burden, which has put the nation at the forefront of the bond market anxiety in recent weeks. But it's not just France now, is it? This is the challenge. We now have a European set of protests to think about. And that comes back to the idea we've just been discussing with David. How do policymakers now think about this from a sort of pan-European point of view?
[00:22:53] Speaker 1: Yeah, interesting to think about what to the extent to which there are and are not those links then between those demonstrations on the streets and what central bankers are doing. In terms of the bond market story then, I mean, it is interesting that Fitch has moved here, that Fitch has done this with this negative outlook because Moody's gave a kind of stay of execution to French OATs, didn't they? A week or so ago when they perhaps unexpectedly did not downgrade to be more in line with other ratings agencies.
[00:23:18] Speaker 3: And of course this wasn't a scheduled move by Fitch, was it? So it was an unscheduled move. So now, still A+ and a negative outlook. So A+, still in the same basket as Belgium and Portugal. But really interesting because they've done their official rating in August. And part of the line, part of the explanation, persistent political fragmentation and a challenging social backdrop increased the difficulty of delivering sustained fiscal consolidation. Which comes back to your main point, which is we're not just seeing this in France. We're seeing this elsewhere in Europe as well. Coming up, oil moving lower today. A straight-as-way U.S.-Iran diplomacy efforts. We'll discuss that outlook for energy. Stay with us. This is Bloomberg.
[00:23:58] Speaker 2: Good morning. How are you doing? 30 minutes to go until we start trading here in Europe. We're still thinking about the Halloween shock that we got Friday. That certainly shook the markets up this morning. We stabilize. Yes, Nasdaq EMEs are up by 0.8% of 1%. But they're still down if you look at a 2-3 day basis. So just think about it from that perspective. European futures, a little bit positive when it comes to the Eurostox, 50. But FTSE a little lower. CAX absolutely flat right now. What's happening with French bonds could be of interest? Yes, it will be of interest.
[00:24:42] Speaker 1: A number of them are closed right now. So we've got indications from the futures market that perhaps these yields will be going higher as a result of the fact that Fitch has moved to a negative outlook on French OATs. But we haven't got the prices open. The short end is open actually. Two-year yields actually coming down. But in terms of the rest of the curve, it's all still closed. So we'll come back with an update on that.
[00:25:02] Speaker 3: Yes, so political pressure on one side but lower oil prices on the other when it comes to what's happening in the bond space. Oil lower today then as hopes build that diplomacy could delay or avert another round of U.S. strikes on Iran. It comes as ministers and industry executives gather in Abu Dhabi for the annual ADIPEC conference. Bloomberg's Abir Abu Omar is on the ground and joins us from the Adnok Energy Center. Abir, are we seeing kind of any sense that there is material progress on diplomacy here?
[00:25:33] Speaker 7: Yeah, good morning, Tom. Well, we've been here multiple times before over the past eight months or so. President Trump's latest remarks suggest that he wants to return to diplomacy after the midterm elections. That that is the path that he favors for the time being. And of course, this comes after multiple weeks with multiple analysis of a lot of people saying that the consensus is a return to hostilities between the United States and Iran. Iran saying that it will retaliate almost instantaneously against countries in the region if the U.S. were to hit it again. But the latest we have heard from President Trump after speaking as well with Prime Minister Benjamin Netanyahu in Israel. Of course, he's facing elections at the time being that he said that he wants to come back to diplomacy. We also know that mediators are very active in the background, Tom. We know that the Qataris, the Saudis, the Pakistanis and the Turks have been to Tehran over the past week or so to try to bring some sense back to the table. So it remains to be seen. But for the time being, you're looking at traders and you're looking at energy markets. And they're seeing this as a sign of optimism with Brent down. I believe the last I saw was 3 percent or so. So we're seeing signs of optimism. But the next few days are going to be crucial for us to understand the trajectory of this war and whether, in fact, we will see a tangible real return to diplomacy this time around.
[00:26:53] Speaker 2: Well, it's exactly exactly 3 percent as I speak. So, yeah, your numbers are about right. Talk to me. This is usually a great way of gauging sentiments. It's a global gathering. A lot of people come to it. This one feels a little bit different. What's the vibe? What are people talking about? What is the sense? Any sense of trepidation about what happens after the midterms? What are you hearing?
[00:27:16] Speaker 7: Yeah, well, for once, it's happening at two venues this time around, Guy. We are still at the energy center at the opening ceremony that was intended by multiple global CEOs for big oil companies. We're talking Shell. We're talking BP. We ran into Meg O'Neill downstairs. We are also watching out for, of course, the boss of Adnock, Sultan al-Jabeq, who gave the opening ceremony speech. And his message was really about bringing back stockpiles. He said that there's a need to adapt to transportation routes, new transportation routes to get supply to users. And, of course, this is important. As you guys know, as Europe heads into the winter, getting those gas supplies is going to be incredibly important. You see their footage of Sam Altman. So it's not just energy bosses that are in town. We know that Sam Altman was in town to meet with the crown prince of Abu Dhabi, Sheikh Khaled bin Mohammed. He met with some G42 officials. And we know from Adnock pushing out a statement saying that open AI, of course, Sam Altman's company is going to be their company of choice to produce frontier models into energy. And so you've got deals there. Sam Altman coming to Dubai to come up with those deals, not just with G42, but some other subsidiaries and with Adnock as well. So it's still pretty early in the day. We're headed to the conference center in just a few moments to see just exactly who showed up and what the conversations are going to be about. But a lot of the conversations so far are about resilience and coming to terms with the fact that the world right now is facing unprecedented geopolitical and geoeconomic environments that are impacting energy prices. And just how do we kind of bring ourselves to deal with the situation at hand.
[00:29:03] Speaker 3: Okay Bloomberg's Abir Abba Omar with a finger on the pulse there at ADIPEC on the ground for us. Abir, thank you for that update. Let's bring in at this point more analysis on the energy space. Nadia Martin-Wiggin, research director at Sveland Capital. Nadia, good morning. Maybe just set the stage for us. How short right now is the world on oil of oil products and oil related products right now? How much tension is there in the global energy system?
[00:29:30] Speaker 8: Well, if we just look quickly at the diesel price, it's up more than two times where it was last year. If we look at the TTF price, the European natural gas price, it's up three times versus where it was a year ago. So I think when it comes to ultimate winter consumption products, the world is extremely short and refiners are running at full throttle except in China where, you know, high freight rates and indecision about the next step forward in our view has held them back from running full throttle refineries there.
[00:30:06] Speaker 3: Let's take the positive take then. Let's assume there is a peace deal as at least some some resumption of diplomacy and that there is not this attack coming post the midterms. How quickly could those could those inventories be refilled? How quickly could excess energy get back onto the market?
[00:30:26] Speaker 8: Well, in our view, it's very difficult to just have things not escalate and then just assume that things are moving much higher. What we see is very mixed data and it very much depends on the situation of the Houthis and what the Iranians say going forward. Whereas we have President Trump pulling back in his latest narrative. Of course, we have the U.S. election tomorrow. No one ever knows what Trump is actually going to do. Is he going to escalate or deescalate? In contrast, when the Iranians tend to mimic threats, they follow through on them. And they had said going into this weekend that they would increase attacks in the Strait of Hormuz. Now they're talking about diplomacy. So that seems to be a little bit pause. It's a very positive sign that all these CEOs are sitting in Abu Dhabi. But that cannot be taken for granted. The world is doing the best they can in work around. And to get through the Strait of Hormuz, we have the ship to ship transfers and shuttle services. But that adds about 14 days in terms of the time to load things and move forward. If we have ships hitting mines, that could cause a lot of delays. So as a result, it's not a quick fix. What we're looking is for higher directionality. I think the real solution comes from a new pipeline coming through Fujaira. That's 1.7 million barrels per day. Increased production coming from Brazil, Guiana and Canada. And those can come into the course of next year so that maybe in the third quarter, fourth quarter of next year, we're in a more normalized inventory situation. But right now, the inventories look very tough to fill in the short term.
[00:32:09] Speaker 1: Nadia, on the subject of Iran, we're just seeing some news lines coming through that Iran says exchange of messages between Iran and the U.S. continues, which sort of speaks to diplomatic efforts, I suppose, at this point. In terms of the demand story, Nadia, what do you make of Chinese demand at this point? Would you expect to see that step up soon or what trajectory is that on?
[00:32:34] Speaker 8: So Chinese inventories have drawn down around 60 million barrels, in our view, in the last few months in terms of commercial storage. So refiners need to import more crude to actually increase runs. There's a difference between internal demand in China and external demand, including, you know, storage and or apparent demand and exports of refined products. Last week, the Chinese include increased clean product export quotas, meaning that there is a capacity to increase exports of refined products, which should therefore increase imports of crude. But we don't have evidence yet of them buying a lot in the physical markets because, of course, including the price of freight, the price of crude is higher than where they've traditionally been buying.
[00:33:27] Speaker 1: And what should we be watching for on the shipping side of things, Nadia, depending what's going in and out of China, of course? What's the what are the ship? What's the shipping data that you're watching?
[00:33:38] Speaker 8: So we love watching prices fell in capital. So we're watching the freight rate, for example, TD 34. That is showing what is the cost of freight exiting Fujaira. So when that goes higher, it suggests that there are more ships going through. When that goes lower, it suggests fewer going through. TD 22 is the price of freight when you're leaving the U.S. Gulf Coast going to China. WTI in terms of physical production is the relative long because we have that huge U.S. SPR release in addition to sustained production and slightly higher production versus a year ago within the U.S. But we've seen that pull back at times. So we're really watching to see in the last couple of days it's gone higher. How much that can be sustained. Finally, you know, we're watching how much oil goes into Europe from the U.S. as well, because that's a relatively cheaper freight route. And that's where we see that being very popular. So what we see now that refiners are coming out of refinery maintenance from the fall is an increase of runs going forward. But we have lost that refinery capacity in the Middle East. And that is what really makes it tough for diesel
[00:34:50] Speaker 2: prices to really come down to a more comfortable level for consumption. Okay. Can I just pick up on that point. I was just talking to Michael O'Leary runs Ryanair. He says that even if Brent comes down, crack spreads are going to remain wide. I.e. product prices jet in his case will remain elevated. What is the relationship currently between say we do get oil prices, Brent pricing coming down into the 90s or even the 80s. Does the spread widen? And what happens to that spread if we do see a drop in the price of crude?
[00:35:22] Speaker 8: Yeah, I think in the short term that crack spread could stay quite strong because, of course, the spare refinery capacity sits in China. And that can take an 80-day shipping route, depending where the oil comes from, right? It could be 30 days. It could be 65 days. And that is the problem. Because then you have that pause before that additional jet and diesel fuel comes back to the market. However, it's very important. So let's say in Q1, things could start to look better if we actually utilize all of that spare refining capacity. We also have to remember we do have a capacity for demand destruction in Europe in particular. We have around a million barrels per day of diesel demand driving to work. And if you look around, we are not behaving as in COVID, staying home or to work from home or walking increasingly and things like that. In the winter, of course, that's tougher. But that's what we're really watching for in terms of signs of actual demand destruction. Just one additional point on that, though. In 2022, when we had this crisis, you know, diesel was supposed to help against TTF when we hit those record TTF prices. This time, diesel's extremely tight and actually tighter than TTF.
[00:36:42] Speaker 2: So that's something we have to keep in mind on that dynamic as a safe. If it gets cold. OK, just you talk about TTF and how tight that market could be. If it gets cold, how quickly could that market get much tighter? And what are your kind of upside projections in terms of what price might look like?
[00:37:02] Speaker 8: Well, if we just look, it got a little bit cold now. And then we had this pop in TTF up to 100 euros per megawatt hour, which three times the price of last year. We are still in the season, which is, well, a little bit considered shoulder season. So we could have been refilling inventories. Two weeks ago, we started pulling inventories in France a week ago in Germany. How high can it go? Well, how long is a piece of string? It is, I think what's important to think about is what the EU has decided in terms of banning LNG exports from Russia into Europe, or sorry, imports into Europe. And the way the mechanism has been set, it's at 185 euros per megawatt hour before they hit their cap. So, of course, this was set in the crisis in terms of ideas initially in 2022, in terms of those kinds of levels. So, we're nowhere near that level to actually take away that ban right now, which suggests there is quite a lot of upside to come. On the other hand, if we were to get a true PR or MRU or something like that, that actually was worth something, then, you know, we could come down from where we are.
[00:38:18] Speaker 2: A piece of string. That's how we're going to measure things. Nadia, great to catch up. Always a pleasure. Thank you very much indeed. Nadia Martin-Wiggin, Research Director, joining us from Svaland Capital. Coming up, Wall Street gets another AI wake-up call.
[00:38:34] Speaker 9: People are saying, hold on, wait a minute. Let's be a little more thoughtful. Let's be a little more skeptical. That's very healthy. So, and I'm not saying that it's all been done, so it's totally healthy now, so now it's time to go in. I'm not saying that. I'm just trying to show that when everybody thinks something's infallible, it can be dangerous. When people start to say, well, maybe it's not as perfect as I thought, that's better.
[00:39:00] Speaker 2: That was, of course, Howard Marks, co-chair of Oaktree Capital Management, speaking exclusively to Bloomberg. We're going to talk more about the AI trades. Where does it go this week? That's next. This is Bloomberg. 11 minutes to go. Sit rep. This is the story here in Europe. We fade the earlier move. NASDAQ futures are still up stateside, but they're beginning to come in a little bit. We're only up by six, seven-tenths of one percent. European futures are definitely turning a little bit softer right now. FTSE in particular now down by 0.35. These aren't big moves, but they're enough maybe just to kind of change sentiment at the edge. The oil price is a big factor in the market this morning as well.
[00:39:57] Speaker 1: Yeah, I wonder if we are seeing a bit of a shift in sentiment. Let's get to the markets in three minutes on the opening trade with our markets live executive editor, Mark Cudmore. Mark, good morning to you. And to that point, I wonder if we are seeing a bit of a shift because a couple of hours ago, you could quite happily sit here in London and say, well, look at Asia. It looks pretty positive, actually. NASDAQ futures are really flying. I mean, NASDAQ futures are up by seven cents of a percent, but given the selling on Friday, that's not all that much, is it? I mean, I wonder what the mood looks like to us from Asia.
[00:40:27] Speaker 10: Yeah. In context of the large sell-off we saw across assets on Friday, it feels like a bit of a dead cat bounce, but it's still a dead cat bounce that I wasn't quite expecting this morning. You know, we talked on the show on Friday about how we expected it to be, you know, very bleak in the short term. It would be a bad close on Friday, and I thought that would continue at the start of this week because it's hard for many investors to buy ahead of the midterms risk. It's not that midterms expect to be a major market mover, but it's hard to justify after a terrible October if he's suddenly piling in for more losses ahead of the midterms, and with the uncertainty of what Donald Trump and the U.S. does around the Iran situation. So that's really what's overhanging the market over the next week or two, and it's hard to buy aggressively before that. So we talked about Friday that we thought that we'd be paying, you know, into the close, into the early part of November, but ultimately, you know, long-term investors would like that buying opportunity. I'm surprised that we've seen such good trading this morning. Cosby was really impressive. It opened down, but not by down as much as we expected, and very quickly turned largely positive. That kind of helps sentiment across the region. I think that this week will bring more turmoil, more losses in the short term, but I'm worried that sounds a bit, you know, around the corner forecast, given that I'm medium term, quite constructive. I think growth is still good, and I think the AI capex bubble has more nuance around it, but it's not burst yet.
[00:41:46] Speaker 2: Do the midterms change that? You get a blue sweep. What does that look like? Does that exacerbate that AI fear?
[00:41:55] Speaker 10: I think it does short-term. I don't think it's a big game changer. I don't think, like, a month or two from now, you know, that's going to really change the whole path of the AI bubble. We already know the second derivative of the AI capex expansion is turned negative. So growth is slowing down, and that's kind of the first step. But we're still seeing higher numbers, and a lot of the capex next year is pre-funded. I think that the midterm story is more of an individual name story. I think certain names will really get hurt, which is why it becomes the next more new in stage. But ultimately, these companies are still spending a lot of money. That is providing a lot of investment for other companies. It's providing jobs. It's a form of stimulus that's still supported in a high-growth economy. So I don't think it changes the narrative, but we'll certainly get very excited about it in the short-term if Democrats win both houses.
[00:42:43] Speaker 3: Mark, Apple can't really be described as an AI company at this point. Earnings today. Are you excited about the numbers from Apple and what it could tell us?
[00:42:51] Speaker 10: Yeah, I think Apple's still massive. As you say, it's not an AI trade. But the point is, it's such a large company that it makes up a large part of so many indexes and ETFs just because of its natural weight, just from passive investors. And it's such a big name out there for the retail side and consumers. So, you know, it's been the haven for the tech trade. You know, TV's Dan Curtis, who kind of identified that a few months ago with a nice chart. And that's been absolutely the case. It's still near the highs, despite the pains from the other hyperskalers last week. If Apple also disappoints, I know it's not a pure eye trade, that's going to cause another round of panic this week. So I really think it matters today.
[00:43:26] Speaker 3: OK, Bloomberg Markets Live executive editor Mark Cardmore, one eye on Apple later today. Remember, you can get up-to-date analysis and insight from Mark and the rest of the team. Just go to MLive. Go on your terminal. Let's get your stocks to watch this Monday. Louise Moon is here.
[00:43:39] Speaker 11: Morning, Tom. We're starting off with Ryanair this morning. They've had first half results this morning. A 15% drop in their profits. And on top of that, they're cutting costs. So they're saying that everything's on the table to cut their costs. You can see their shares are down over 22% this year. Obviously, this is all on the back of the Middle East. So they're looking at things from cutting staffing levels, staff pay, airport deals, all of that to cut what they're saying is 2 billion US dollars of fuel costs increases. So as I say, everything is on the table. They're saying pay freezers and other areas. That's a quote from their CFO this morning. Now, they're saying that next year's profit could also be hit and they're expecting more casualties across the whole airline industry. So that is Ryanair this morning on the back of their first half results. Now, sticking with transport but moving over to France, we're looking at the French trainmaker, Alstom. Now, they have cut their guidance and they're planning an overhaul. So they already cut their guidance once in April. And you can see that the slump there in their share price. And now this is on the second time. This is all the back of key German projects. Some delays there. You can see their shares down over 25% and also down in pre-market trading already this morning. So we'll be keeping an eye on that one. And then lastly, we are looking at the last stock. Let's move over to that one. We're looking at Halion. They've been cut to a hold at Berenberg. This is after third quarter results last year, a drop in sales and a cut in their guidance as well. And you can see right at the end of that stock there, that slumped last year on the back of that. So this cut, they're expecting this, their problems in China to persist. And but you can see mostly it's still on the buys, 11 buys and only six holds there. But that potentially could weigh on their stock as it opens.
[00:45:28] Speaker 1: Louise, thank you very much, Louise Moon, with those stocks that we watch. We watch oil, everything related to oil as well. 110 is the handle on Brent right now, down by 2.8%. Some positive lines around negotiation perhaps coming out from other media over the weekend. But the Iranians still talking about a lot of preconditions for any kind of diplomatic engagement.
[00:45:46] Speaker 2: Is that -- to what extent is what we're seeing this morning a kind of bounce off for a big day Friday? Is it down to the oil price? What is -- I think we'll get an idea once we start to look at the sectors as we work our way through the open. Monday the second, five minutes to go. The opening trade is next. This is Bloomberg. Monday morning. Good morning. A couple of minutes to go. We're in November now. Let's talk about Friday. I know you probably don't want to talk about Friday, but let's talk about Friday. Just to recap if you're kind of repressing that memory. It was brutal, particularly for tech. It was a heavy move to the downside. This is the S&P who rolled off pretty hard. We did bounce a little bit towards the end of the session, which could be conceived as being positive. This morning futures are higher, but maybe a little softer than they were when I first got in this morning. European futures may be telling a similar picture. Tom?
[00:46:46] Speaker 3: Yeah, just up a tenth of a percent. Cool to gain just a tenth of a percent to add just four points. Worth noting, of course, European stocks actually ended up in positive. Yes, weak on Friday, but for the week, European stocks were up. FTSE 100 futures, oil is going to be a factor here, and that is broadly positive for the equity markets. But, of course, weighing on the FTSE 100, currently down 3/10 of a percent, with Brent down a little over 2.5%. DAX futures is called lower by about 40 points, a little softer by about a tenth of a percent. Anna.
[00:47:12] Speaker 1: Tom, let's have a look at some of the individual companies we are watching this morning, and we have a few corporates reporting and a few surprise announcements. Let's go first to Ryanair, the aviation business. Second quarter profits beating estimates, introducing a cost drive, trying to offset $2 billion worth of fuel, surging fuel bill. They're saying that profitability will take a hit next year. That's just one of the comments coming through from the CEO, Michael O'Leary, as he spoke to Simon Carroll on the Daybreak program earlier on. BP, on the other end of that trade, BP in focus as well. They've completed a deal to offload their Castro lubricants business. That gives them $6 billion, which will be useful in paying down their debts. I know the team caught up with BP at the end of last week, so that's a continuation of that story. We'll also watch all things to do with the oil price, of course, with it being down by 2.8%. And Alstom cutting guidance over at the French train company, announcing an overhaul after delays to a key German project guy.
[00:48:06] Speaker 2: OK, here we go. Monday morning, the opening trade, November. Let's show you some numbers. Let's give you an idea of what is going on. In many ways, Europe has been insulated, isolated from some of the big moves we've seen in other markets, particularly Asia and, of course, over in the United States. This morning, though, the FTSE goes softer. Oil is down. Let's just factor that into our thinking around the FTSE, which has been something of a haven of late. 600 is down by 2/10 of 1%, so a little bit of underperformance, only a little bit of underperformance coming through from the FTSE. It'll be interesting to see the CAC after the downgrade we saw in terms of the rating for France Friday. Does that affect the banks? Is there any kind of impact in terms of that move? We're not down by much, only 1/10 of 1%. The Amsterdam story, we're down by 3/10 of 1%, which is interesting, but the IBEX bounces. It'll be interesting to see which stock is driving that this morning. We're up by 4/10 of 1%. We'll give the Germans a minute. We'll come back to that trade in just a minute to give you an idea of what the DAX is looking like. Tom, what does the sector story look like?
[00:48:59] Speaker 3: Low oil prices, at least so far in the session, is giving a boost then to travel and leisure. That sector at the top of the list, at least so far. Gains of just shy of 7/10 of a percent basic resources. You've seen copper and iron ore a little higher in the session. Basic resources as a sector is up 3/10 of a percent. Banks also gaining around 2/10. It's travel and leisure, top of the list right now. On the downside, the biggest loss is actually coming through through healthcare. Pharma stocks and some of those drug makers actually perform quite well in terms of the AI rotation out and into names within the healthcare space. But today, healthcare as a sector is down 1.2%. Energy, as expected, on low oil prices down 9/10 of a percent.
[00:49:36] Speaker ?: Anna?
[00:49:36] Speaker 1: Yeah, it's interesting that the overall picture then is slightly weaker across European markets, but the sector breakdown looks kind of risk-on, doesn't it? But that's because the oil price is coming down and that's having an impact. So, as you say, travel and leisure to the upside and healthcare to the downside. I was looking at the IBEX for you, Guy, and the banks are stronger, as Tom was pointing out, and that is some weight over in Spain. And so we see some of the banks doing pretty well. In fact, out of the top 10, more than half of them are banks over on the Spanish market this morning. Ryanair higher on the back of its numbers. And a lower oil price, I suppose. Yep, that's also a factor. Yep, good point. Because it's lifting others within that space as well. So, let's take a step back from this morning's moves and talk to Gerry Fowler, Head of Global Derivatives and European Equity Strategy at UBS Investment Bank. Gerry, good morning to you. Thank you. There's so many sort of top-down themes at the moment, whether it's the tech sell-off, it's the developments in the Middle East, the fact that we're heading to the midterms within 24 hours. How are you making sense of what we're seeing in the context of last week's sell-off, which was all very much about the tech, the AI thing? Yeah, you pretty much named it.
[00:50:42] Speaker 12: Investors, I don't think, like having to focus on more than one thing at a time. And there's four at the moment, in my mind. One is the level of bond yields, where we had a bit of a shock going through to August. We think that's largely over, but we're not going to get a lot of that yield compression back. So, anything that was damaged on valuation grounds because of rising yields probably stays at a cheaper valuation. So, things like defences. The second thing is the bond vol shock, which is when we sort of went to premium yields. And those have retraced on the Treasuries, but we're waiting for that on French bunds. Sorry, French OATs to bund spreads. So, as that comes in, I think that the things that have been damaged by volatility in European bond markets will recover. So, banks is one of those. But then we moved on into October and we got volatility in credit markets and, to some extent, more broadly risk. And that was really concentrated on the neoclouds and the AI trade. Now, this is primarily a significant momentum unwind. These are all the crowded positions being sold and all the crowded shorts being bought. And that applies across Europe as well. So, for example, banks were well held. So, they got sold alongside their French OAT exposure. But things like consumer cyclicals have actually done surprisingly well, but it's because they were the favourite shorts. So, this momentum unwind isn't just about AI, but the AI volatility and the momentum unwind there is catalyzed across everything. And then lastly, the thing we just don't know is what happens in the Middle East. That's, I think, the known unknown that is much harder to forecast.
[00:52:03] Speaker 1: Yes, it's hard to forecast. So, taking one of those then, which is sticking with the tech trade. Yeah. I mean, I know your focus is on Europe. But is this now – are people talking about buying this dip in the AI trade, saying this is just a wobble, it's healthy, sort of clear out of some of the more riskier positions perhaps? How are you thinking about it?
[00:52:23] Speaker 12: So, we and many saw the first wave of the momentum unwind, which was very much driven by investor positioning and leverage in Korea and things like that through to July, when there was a buyback blackout period. And then we got the cloud results. And they were strong enough that it's like, okay, there is revenue to back this up. And the market actually recovered. Momentum recovered. AI CapEx recovered. And then in October, we've taken another hit, but this time a bit more specifically around the return on investment in the long term. We thought that results last week would reassure investors that there is revenue at the end of the line. The cloud revenue numbers are still up. The cloud backlogs are still growing. Unless we produce more data centers, you can't unlock that backlog. So, in our view, the trade is still quite robust. But the momentum of the unwind really just gathered pace. And it really feels like the market just needs to find its own level of positioning where investors are comfortable with this level of volatility uncertainty. But when you've got, you know, memory makers trading on three times earnings, they're pricing an incredibly short AI cycle that we think is longer. When you've got hyperscalers trading under 20 times now when their revenues are growing 10 to 20 percent per annum, you're taking a fairly negative view. So I do think there's quite a lot of appetite for buying back into this. But I really think the trade is shifting on because so many of those first order data center beneficiaries, the people who produce the cables and the power units and all of these sorts of things, they're sold out for the 2027, maybe 2028. So they can't lift their revisions very easily. And that's what drives markets is this unexpected change in growth. That unexpected change in growth is shifting to a lot of European industrials and global industrials that help build new factories like ASML. They're not selling to data centers. They're selling to Samsung, Hynix and Micron to build more factories. So all of a sudden ASML is getting upgrades and you can see that across a decent chunk of the industrial landscape in Europe now.
[00:54:05] Speaker 3: Is there a risk as we think about the midterms of political backlash being being catalyzed to a greater extent if the Democrats do get this blue wave?
[00:54:14] Speaker 12: Yeah, it definitely feels like that. The momentum is for slowing down data center development specifically in the US. At the moment, it's been piecemeal state by state, but it could be broadening. It could become, you know, enabled at the federal level. So it definitely is a concern for the data center rollout. At the moment, I don't think we need to worry too much about it, except it probably does contain that first wave capex beneficiary upgrade. Because if you're an analyst and you're worried about exactly that concern, you don't push your numbers ever higher just because the companies say they're going to do lots more capex. But we all know there's a lot of construction to be done, whether it's fast or slow. You still need the industrial capacity to produce more memory, to produce more cables, to produce more, you know, whatever it happens to be for these data centers.
[00:54:55] Speaker 3: The other point you made is you listed the four key things that you think investors have to focus on are bond yields. And that ties in, obviously, to this increased composition of capital. But you said that bond yield story is done. Can you just extrapolate on that? Yeah, there's two components.
[00:55:10] Speaker 12: Yeah, there's two components to that. So bond yields, let's call it the Treasury, went from 3.8 to 4.8 between March and August, September. That was, in our view, an entirely justifiable lift in yields because growth has been accelerating. And while growth is accelerating, lots of companies that are part of that growth cycle were getting upgrades. So the tech companies, the industrial companies, the financial companies that were driving this acceleration in U.S. growth were getting upgrades, therefore outperforming the fact that bond yields were rising. Parts of the market, obviously, hurt if they're not part of that growth cycle. So consumer, defensive, these sorts of things. That, I think, is over. And 4.8, maybe 5 is roughly where the Treasury wants to settle fundamentally. But we probably won't come down a lot further. But we got that blowout in September, which was really positioning. It was a bit of an unwinds that we heard of some capitulations in the market and just bond volatility uncertainty. So we're really waiting for that to abate. We think it basically has in the Treasury. So that's why valuations feel a lot more stable and supported here. We're just waiting for it to happen in Europe, where, obviously, late September into October, we got political unrest, which just raises the risk premium for some of those bond markets for a little bit longer. But we think dissipates.
[00:56:17] Speaker 2: Why would hedge funds re-lever into year-end? Oh, it's a tricky one.
[00:56:20] Speaker 12: Yeah, not many have the appetite. So in part because a lot of people have been hurt in the second half. A lot of people made a lot of money in the first half, and they've given up a decent amount of that in the second half. So they're not sitting on profits they just want to ride out to year-end. They do need to try and chase the next trade. I mean, I had one client who literally said, I feel like my entire year is going to rest on my next trade. So, you know, I think there is appetite to take risk once we feel like we've got a direction. And I think more and more of the risk premium changes we're seeing, which are to price more and more risk premium, mean that the asymmetry is we will end up having the Santa rally with some caveats. We really just need to see the low of that momentum washout. And I would also say the CTAs in particular are now in the sell zone. So we might have a little bit more lingering selling from quantitative investors before we potentially get a much cleaner market. And then we've just got to hope that there's no escalation in the past.
[00:57:14] Speaker 2: Your sense is that there needs to be, to get to year-end we need more upside. They don't want to protect the book. They are willing to take risks with the book.
[00:57:21] Speaker 12: I think there's definitely appetite in both directions. The tails are fat. If we got an escalation in the Middle East, I think there'd be appetite to, like, lean hard into that to try and make some money on the downside. Equally, if we don't get the escalation in the Middle East, there's plenty of appetite to buy the upside from here.
[00:57:36] Speaker 1: Jerry, what difference does a Fed hike make to any of that?
[00:57:40] Speaker 12: So we've still got two more rate hikes priced. So a hike in December is, to some extent, expected. Once it's delivered, I think it's just sort of, you know, in line with expectations. The question will be where the market decides to price the end of that hiking cycle. Because it was originally four hikes, of which we've had one. Now it's three hikes, of which we've had one. So what I'd be more concerned about is if the inflation data or even the growth data continued to surprise positively, that suggested the Fed maybe needed to move back towards three hikes from now or more. And in particular, what we find is that if you have four hikes or less in a mid-cycle hiking phase, the market tends to be up over the next 12 months, because that's like a mid-cycle adjustment reflecting the changes in growth. If you have more than four hikes, it starts to really contain markets and they generally flatter down. So we're right in that window of sort of three to four hikes that have either been done or being priced, where the pivot is for the market. And at the moment, we're on the right side of that, suggesting, you know, yields don't need to go higher. Rates probably won't be particularly damaging to economic activity. And the growth we're seeing can be realized in equity returns.
[00:58:47] Speaker 3: Can I take you back to a comment you made about hyperscalers? And you suggested that you could make the case potentially now to add exposure to hyperscalers, giving the sell off on Friday. How do you think about negative free negative free cash flow and when that becomes a problem for the hyperscalers?
[00:59:00] Speaker 12: Yeah, it's a really good question. So this year has been an acute year of capex acceleration, which means that you need to get a lot of cash out the door that you don't get an immediate return on. But as these data centers get delivered, they should be unlocking the backlog, which means their revenue start to grow. So the question is, when do we get that pivot point that actually the revenue start coming in faster than the capex is going out? And we think that may well be in 2027. So we may be past the worst of aggressive spending that doesn't have a return. But also bear in mind, a lot of this is about capital scarcity. We've been concerned that the market wants too much money that the market doesn't have. There's an element of that, the structural as well, because the hyperscalers haven't been growing their buybacks in the same way they used to. But mainly because they've been dishing out their cash to a different ecosystem. So the memory makers are now sitting on hundreds of billions of dollars that only now are they starting to deliver back to investors. So the cash is there. It's just had to recycle very quickly in different parts of the market.
[00:59:56] Speaker 2: Nice to see you. Always a pleasure. Thank you very much for coming to see us. Gerry Fowler, Head of Global Derivatives and European Equity Strategy at UBS's Investment Bank. Call 6 looks like this. Let me just run you through some of the numbers that we're watching here in Europe. Tech is actually having a relatively OK morning, but it's interesting that Schneider is flat. Just pay attention to that. You are rolling out of some of the farmer names, but Novo is up. Nestle is flat as well. The big action is for the train sponsors this morning. Alstom under real pressure. Louise Moon has more. Indeed, that's one of the big stories in focus this morning.
[01:00:27] Speaker 11: So Alstom, you can see their shares plunging down 26 percent. They've cut their guidance and they're planning a huge overhaul. This is the second cut of guidance this year. So that's really weighing on shares as markets open. Now, moving on to another big mover this morning. Ibstock here in London, the building materials supplier down almost 10 percent, just over 9 percent. They're expecting their second half to be materially below expectations. Obviously, we've been seeing a lot of weakness in the sector for a while, and this is really weighing on Ibstock there. Now, moving over to Spain. We're looking at Caixa, the bank. Let's see how their shares are performing up almost 3 percent there. They've been upgraded to Morgan Stanley takes their buy ratings to 14. So the majority of their ratings really at the buy there. And finally, looking at BP here in London, taking a look at their shares down over 2 percent. Now, they they've had a mixture of news on the individual news. They've got six billion from from selling a stake in Castro. But at the same time, this reaction likely on the back of those lower oil prices and a similar story really for Ryanair. Ryanair presumably benefiting from that rise at that drop in oil prices just slightly into the green. They've also initiated a cost drive to offset a two billion fuel cost increase as well.
[01:01:45] Speaker 3: OK, Louise May, thank you very much indeed. Yet the Ryanair share price pairing some of the earlier gains. We're going to take a closer look at Ryanair and bring you some of our interview with the CEO, of course, Michael O'Leary. That is next. This is Bloomberg.
[01:02:07] Speaker 13: What's going on? Current oil prices remain where they are. We're looking at about a two billion increase in our fuel bill. Six billion this year could rise to eight billion next year. And we have to take out costs. So we've paid off all our debt. We're reducing our financing costs. We're purchasing the new max 10 jet aircraft in the first quarter next year from Boeing. 20 percent more seats burn 20 percent less fuel. But we're looking at everything. So airport costs handling costs. And I think up for debate now is going to be probably a pay freeze next April for pilots, cabin crew and the management team as well.
[01:02:49] Speaker 2: That was, of course, Michael O'Leary, the CEO of Ryanair, speaking to Bloomberg a little bit earlier on. Ryanair's decision comes as costs for the airline come in as a big factor. Ryanair reporting a 50 percent drop in profit after tax for the first half of the year. You want to know what's going on at Ryanair? Talk to Kate Duffy. She joins us around the table this morning. Nice to see you. Morning. So they've got it. They've clearly got a fuel problem. Hedging starts to roll off fairly soon in terms of the big hedges that they've taken out. Can they compensate with cost cuts? Like how far can this cost cut? This is a this is an airline that runs kind of a pretty tight ship anyway.
[01:03:24] Speaker 14: Yeah, absolutely. Cost cutting is in Ryanair's DNA. And this is what really impresses the investors and analysts that look at this company because they know they can do it. They're a low cost. But they have said today that they are reviewing their costs. This includes airport costs, handling costs. They even spoke about prep pay freezes for cabin crew pilots, even management. What about the countries that have higher aviation taxes? Well, they might pull out of those. They could look to move more into the countries like Sweden and Hungary that are not increasing these aviation taxes. So everything is on the table. This is what Ryanair was saying this morning. We will look to cut whatever we can, whether it be crew staffing in planes or pay and labor management across the company so that we are able to afford these higher fuel costs next year.
[01:04:13] Speaker 1: Yeah, it's interesting, isn't it, that the market gives them that, accepts that argument that we're good at cutting costs, because on the other hand, you could say there aren't that many costs left to cut in a very low cost airline. But that story will continue. How much damage is the higher energy price doing then to an airline like Ryanair?
[01:04:30] Speaker 14: It's doing a significant amount of damage. You know, it's not just Ryanair. We're seeing other airlines across Europe, across the globe, cutting their outlooks because of this higher price. And the question is, and this is what O'Leary was saying this morning, the question is, how long does it go on for? Even if there is a resolution next year, he said, you know, these higher fuel prices and that pressure will carry on until the end of next year because of the pressure on on refineries and tankering pressures as well. So this will result in lots of airlines taking measures, whether that be job cuts, although Ryanair said today there wasn't a risk of job cuts. But we have seen that, you know, Wizz Air are offering voluntary redundancies across their London base. So, yeah, Ryanair is not alone in this, but it is having a significant impact on carriers across the world.
[01:05:19] Speaker 3: Let me push you a bit on that part then. How much further does this go across the industry? What other airlines are you looking at? So potentially job and headcount reductions at Wizz. Are there airlines that will be taking pretty drastic measures as a result of this? How are you thinking about the broader industry impact?
[01:05:36] Speaker 14: There absolutely could be. Obviously, Ryanair is the first European airline to report. So we're yet to hear from Lufthansa Air France and IAG, the owner of British Airways, later this week. They are the legacy airlines. They are benefiting actually from the more premium travel segment. So they're seeing a lot of strong demand in the business and first cabin. So that will definitely prop them up. That's still holding up. Yeah, that's still holding up. But it's the low cost carriers or the smaller airlines that we're seeing, particularly AirBaltic, Norwegian, where there is a sense of challenging environment and a sense of hesitancy among customers to book the lower cost segment.
[01:06:16] Speaker 3: OK, Kate, thank you very much indeed, of course, on the numbers coming through from Ryanair and the broad implications across the sectors. They look to cut costs further. Bloomberg's Kate Duffy. Let's get to the macro picture right now. French bonds in focus once again under under a little bit of pressure after Fitch ratings put the nation's credit score on a negative outlook. The move coming as France's debt mounting continues to build, of course, with political gridlock, slumping growth and rising interest costs, derailing attempts at consolidation. More protests over the weekend. Let's get more from Bloomberg FX and rates reporter Georgia Hall. I'm looking at OATs right now, Georgia, and actually the reaction is fairly benign. What are you and the team watching for in terms of what could be a further pressure point across across the sovereign debt of France in the weeks and months ahead?
[01:07:01] Speaker 15: A lot of things, to put it to put it shortly. I think what we're seeing today is perhaps just a better, you know, risk is better today in the market. We're seeing oil come off a little bit. And so perhaps that's what is benefiting France right now. Also, another thing at play is perhaps that Fitch was the last piece of the puzzle until the budget comes up. So, you know, that was perhaps the last negative surprise that we might see. And so investors are just taking stock before we get to that volatility ahead. However, what's very interesting to look at with Fitch is that it could perhaps influence the foreign investor buyer base, who are about 60 percent of holders of French government bonds. And they're far more rating sensitive. So perhaps we could see some more trickle through come in the next few days.
[01:07:42] Speaker 2: Can we just turn our attention to the U.S. as well. Big refinancing operation coming up, kind of details coming up this week. There's an expectation that Besson, Scott Besson, the Treasury Secretary, is going to shift more issuance at the front end. Is that what most people now expect? And what impact could that have?
[01:07:55] Speaker 15: Yes, we are expecting either some guidance or perhaps a far more material shift to move down the maturity of the debt to shorter dated bonds, bills, etc. And that's really because yield levels are just where they are right now. And there's just not that much appetite to be issuing that far out on the curve. And so perhaps that could be positive. However, you know, that would lead to a lot more refinancing a lot quicker. You have to, you know, be refinancing every every year. And so the long term trajectory of that might be far harder to price right now.
[01:08:26] Speaker 1: And globally, I guess it varies by region, Georgia, but to some degree it must apply everywhere. We are seeing this much weaker oil price, aren't we, this morning? So we're down by more than 3% now at 109 the handle on Brent. Are we still in an era where bond markets are very much worried about inflation and energy prices? And therefore this moves them or did we get to a new place where bond markets started to worry more about the growth dynamic?
[01:08:53] Speaker 15: It's interesting because it's also something that Kevin Walsh brought up last week at the meeting of the Federal Reserve. It's I think it's still at play. However, that growth narrative really is one that did start to take over in the last month. We sort of reached that peak in yields and then they stopped corresponding so closely to oil. And so that was that was definitely one of those those switching points, that turning point where we started seeing oil go up and yields go down. And so that was that was a sign that perhaps the market is getting more worried about growth.
[01:09:19] Speaker 1: Okay, Georgia. Thank you very much. Georgia Hall with the latest on those bond markets. Let's just check in what's going on with Alstom, which is one of the stock stories that we're covering this morning. And we've seen a well, it's actually halted right now, isn't it down by 31 percent and then halted. It would seem as the company reports numbers difficulties in Germany.
[01:09:41] Speaker 2: Yeah, manufacturing trains is is a tough business right now. And it's interesting that in terms of the points that are being dropped off, it's actually a relatively small amount. It's in the top 10 in terms of the points drop on the 600. But even it's a 31 percent move and it's still dropping. Yeah, it's it's at number seven in terms of the points move. What you are getting this morning is a massive move in percentage terms and points terms out of Roche, Novartis, AstraZeneca. Those are the names that are really pushing these markets lower this morning. BP and Shell are down and then it get then you get to Alstom. But you're getting the kind of the reverse of the rotation that maybe we saw in the safety trade at the back end of last week.
[01:10:20] Speaker 3: Yeah, that's interesting. I mean, Alstom's margin has been crushed. They're looking at a two billion euro deleveraging plan. And of course, they've raised the outlook down or lowered the outlook the fiscal out for 2027. So margins cash burn one one and a half billion euro cash burn. The take from Bloomberg Intelligence is that these these numbers were pretty dire.
[01:10:39] Speaker 1: They're trying to try to take some self-help measures. So some of the analysts, I think it's Citi flagging. This is a company that's outlined two billion euros worth of debt reduction projects and plans to try and help themselves on that front. That's equivalent to around 25 percent of the market value of Alstom. And this uses organic and inorganic measures to get the debt down. But the analyst pointing out that the company hasn't given very many details about how that is going to come to pass.
[01:11:02] Speaker 3: OK, we're going to get back to the tech story after the break. Coming up, we're going to speak exclusively to Peter Speck of the Swedish venture capital firm Creandum to discuss its latest $750 million fund for early stage startups. This is a venture capital firm that is backed the likes of Klarna, Spotify and Lovable. That conversation is next. This is Bloomberg. This is Bloomberg.
[01:11:32] Speaker ?: this is the opening trade. Happy Monday. We're 30 minutes into today's session. Futures have pointed higher, in fact, for European stocks. That's not how things have transpired, at least not yet. Across the benchmark, you're looking at losses of two tenths of percent.
[01:11:46] Speaker 3: The heaviest losses, at least for now, coming through on the FTSE 100, down two tenths of percent. Oil is certainly a factor there for the FTSE 100. The DAX is down 36 points and you're seeing a drop of around nine points, close to 10 points over in France. So not heavy selling, but given the futures picture, a slightly different scenario. set-up that we've seen. Guy, what are you looking at? Actually, a reasonably balanced market, 281 up, 304, 303 down. So actually, at that kind of level, not much movement.
[01:12:24] Speaker 2: We're balancing ourselves out. There is a little bit of churn in the market. The volume is ticking up just a little bit. You're definitely getting a rotation out of some of the safer trades. The farmer space that have done well over the last few days. That is certainly a feature to the right-hand side of the ledger this morning. On the other side, actually, there's some fairly interesting stocks. Kaisha is having a fairly good morning. There's an upgrade coming through. I think it's an equal weight at Morgan Stanley. That is being taken well. The banks actually are having an OK morning as well. CBC Capital Partners up 3%. I think it's offloading KFC Pizza Hut or looking to sell them, which is interesting timing, considering maybe the fact that maybe an economic slowdown is a factor that plays into that story. SML is definitely getting a little bit of a bounce this morning. And obviously, that's a big point contribution to the upside. But it's not huge. We're up by 7/10 of 1%. Downsided, we've already mentioned it, Alstom is down hard, cutting guidance, planning an overhaul. That stock is being hit and hit hard. We're down by 28%, nearly 29%. BP is off despite the capital announcements. That deal closing, but you've got energy is broadly soft this morning. Brent is lower. Euronex is down as well. The business CEO nominee coming through, being named David Knibb of NN Group, is going to be, we think, the next CEO of that business. That business stock, though, down 1% this morning. Guy, let's get up to date on some of the other stories we're covering this
[01:13:44] Speaker 1: morning. Oil moving lower this morning after an Axios report that said that U.S. President Donald Trump wants to give diplomacy with Iran more time before potentially resuming strikes following Tuesday's midterm elections. Meanwhile, The Wall Street Journal is reporting that U.S. officials are promoting a plan for Russia to resume sales of natural gas to Europe via pipelines running through Ukraine. Chinese stocks close higher after a report that financial regulators are meeting with banks and securities firms to discuss measures to support the capital markets. The efforts would add to steps taken by the government last month. Stabilize.
[01:14:24] Speaker 3: I think we'll have some audio issues, some tech issues, which happens sometimes on live TV. So we'll pick it up from here as we try and get Anna's microphone fixed on the back of that. Let's get back to what's happening in terms of the tech story. We saw earlier that Alphabet is raising capital euro bonds. At a time, of course, we've got this acute focus in terms of the spend that's coming through for AI companies. Of course, the self that we saw dramatic as it was more than three and a half percent on the Nasdaq 100 on Friday. But within that context, one of the big VC firms here in Europe, Creandum, Swedish venture capital firm Creandum has raised a new $750 million fund to invest in early stage startups. The company has backed some of Europe's most successful tech companies. You may have heard of them. Spotify, Klarna, Lovable and its latest fund is its largest to date. We're joined now exclusively by Peter Specht, partner at Creandum. And Peter, we'll get your view on what's happening in terms of the reassessments of the AI trade. But let's start with the raising of this of this fund. This is this is a chunky fund within the industry. This is this is a big fund. How difficult was it to raise capital in this environment where capital is
[01:15:37] Speaker 16: is now more expensive? I mean, it's hard to speak for the market, but for us it was a relatively smooth and fast process. But it is on the It is on the back of Creandum having a long history of of, you know, being one of the top performing funds globally. Yeah. And generating returns over over cycles. And many of the backers we have are leading European and U.S. institutions. And they've been back in venture for a very long time. So it's not a question mark about the asset class. They can pick whoever they want and they at the same time choose the work for us while we choose to work with them. And it's very long standing relationships that come together there. How much have you
[01:16:15] Speaker 3: deployed? How are you looking? And what are you looking to target and prioritize as you deploy this fund? Yeah, I mean,
[01:16:23] Speaker 16: usually the funds are deployed within two to three years. We're going to invest the fund across Europe and the U.S. You know, we also increase our U.S. team for this one year. We tripled it in size. And so we'll be backing hopefully the next levels and trade republics and Spotify's across these two regions. We're starting to get a few wobbles. Good morning, by the way. We're starting to
[01:16:44] Speaker 2: get a few wobbles in the sort of the tech ether, the ecosystem. Any sense that you're telling your guys to slow down a bit? Is the pace changing? Any kind of hints that maybe you want to sort of slow down a bit and have a think about where you're going to put some of this capital? I think we as a fund, we're always we're always very
[01:17:05] Speaker 16: selective and one in six companies that we have backed in the past has become a billion dollar company. Yep. And so we try to continue to do more of the same and back it in the in the most ambitious founders. And in terms of like speed, I think our our ambition continues to be very big as well as our founders. And so for founders, we actually say don't slow down, go hard, go aggressive. It's very early in the eye. It's a great time to build. And so, you know, the fund is also there in size to provide them with the right amount of capital to be aggressive and built like the most ambitious global companies they can. So early in AI. But but any sense over the next 12 months, you're
[01:17:43] Speaker 2: going to have more down rounds like it. There's the pace of the down round story start to pick up a little bit. Would you expect more as as as as maybe there are a few more wobbles and a few more concerns from investors. We haven't seen that currently in the market. I mean, as in
[01:17:59] Speaker 16: every cycle, there are ups and downs in cycles. Currently we're seeing still a lot of up and companies continuing to raise a big amount of capital growing fast. And I think what what is the important path right now is that we're seeing unprecedented growth rates among those companies. A lovable growing to over 500 million in ARR in the past 20 months. And even now when we see Antropic growing to 16 billion in revenue of the first half in 2026 just being founded five years ago. So I think that extreme pace of growth is
[01:18:33] Speaker 1: there right now still in the industry. Peter, good morning. How do you think about tech sovereignty, AI sovereignty within the European technology landscape. It's become something of an important topic for many people to think about. But there's so much American money going into European tech. So is it is it is it even possible as a concept. Founders here pick pick the best investors globally and founders are building
[01:18:57] Speaker 16: companies on a global scale. I think this is one thing that actually really changed over the past decade here is that founders are also European founders are going global even more from day one. And the the investors they choose is is a representation of that. I mean, Creandum is a global fund today with teams in the U.S. with teams in Europe. And at the same time they pick sometimes U.S. funds for in particular for later stages. So right now it's it's you know it's just the bar of ambition that has been raised and people want to have
[01:19:25] Speaker 1: support. And that's a positive being able to access large pools of U.S. capital. That's a positive. So I mean so any sense that we can cut the cord across the
[01:19:33] Speaker 16: Atlantic that that's a nonsense really is it. I mean for for for companies it's it's the best thing to be able to choose choose and pick which investors they want to have. Many of them choose both in Europe for example having European as well as having global or U.S. investors. And so that combination is usually a good one. And we see that very positive and collaborate a lot with these investors.
[01:19:53] Speaker 3: Can I ask you about the anthropic IPO and what that does in terms of exits. Does it. Is that a catalyst in terms of reopening the IPO pipeline. Do you think anthropic. How do you think it impacts your world or does it suck liquidity out and keep it constrained for other for other founders of other scientists that might want to list or might want to exit. I mean it's it's an extraordinary
[01:20:15] Speaker 16: positive moment for the venture industry and the tech industry. It's one of the biggest IPOs likely that we we have seen. It's it's an AI company. It's a lot of liquidity that flows back to LP's that then can be reinvested into the ecosystem. And it's also sort of like raises the ambition for founders of what's possible to build within five years. And so we think about it in a very positive way. OK. So you think it could be positive that that liquidity gets returned to the VCs.
[01:20:42] Speaker 3: They can put that back to work. What do you think the path forward is for exits right now. Are we seeing more strategics because the the pipeline is is essentially closed. How are you thinking about DPI and get and how much pressure you're under from or if not you than others within the VC world of Europe to get returns back to back to LP's.
[01:21:05] Speaker 16: Yeah. I mean we we still seeing both ways. We seeing strategics being active in particular in the AI space. You know the big the big the big the Max 7 etc have been very active and other companies as well. But we can we also seeing some of the IPOs happening right now. So I think both paths will also be going for the you know the paths of choice.
[01:21:24] Speaker 2: Peter great to see you. Thanks very much indeed for coming to see us. We really appreciate it. Peter Specht's partner at Creandum. Let's stay with the tech theme. Apple is set to give the first signs of how its new iPhones are selling when it posts results later today. The earnings come after Apple of course reclaimed the title of most valuable company on Friday. With investors flocking to the stock amid concerns about AI spending elsewhere. Joining us now Bloomberg equity strategist Ruhal Ahmed. Good morning morning. New iPhones coming out new foldable phones like a few wrinkles maybe to excuse the pun in terms of what is happening there. What are we going to learn from Apple a little bit later.
[01:22:04] Speaker 17: Yeah. So it's going to be a really interesting quarter more from a directional point of view. We only get about nine days of sales data for the new iPhone in this quarter. So what management say in terms of how demand is holding up etc is going to be what's closely watched. I think the bigger question as you allude to is the iPhone duo and whether that genuinely triggers an upgrade cycle. That's ultimately what drives the top line and the story for Apple. So whether we're seeing consumers start to shift behavior and genuinely start to upgrade rather than just move to a higher price model is the key tension.
[01:22:34] Speaker 1: Okay. So that focus on the upgrades important. What about the cost of memory chips that go into these phones and the extent to which that's going to weigh on the margins because they're having to absorb I guess. Maybe pass on some price increases but also absorb some of this on their margin.
[01:22:51] Speaker 17: Yeah. It's a great question. So Apple actually has been insulated from the broader tech saloft that we've seen just outperforming the Nasdaq by about 11 percentage points. But it is exposed via memory as you mentioned memory markets been very tight. They have increased prices by about 20 percent. And you know how consumers are reacting to that in terms of the price elasticity of demand I think is going to be really really crucial in this quarter.
[01:23:15] Speaker 3: Okay. So that's Apple and we're thinking about component costs and the duo as well. But and then we switch focus to Palantir because that's that company's reporting the always vocal and controversial CEO may be in focus Alex Karp with any comments he has. What are you watching for from from from Palantir with their deep links to to the US defense industry.
[01:23:34] Speaker 17: Yeah it's a really interesting week for them to report obviously with the midterms later this week. They're obviously very close to the Republican government. But I think with Palantir the story is very strong. Revenue has been growing you know 100 percent eight billion dollar run rate. But the valuation captures a lot of that. This is a stock that trades on 45 times sales was 100 times earnings. So a lot of that good news is priced in and it tends to sell off despite big beats. So that's going to be the tension you know how the market reacts even if they beat quite strongly. Well thank you very much.
[01:24:05] Speaker 1: Bloomberg's Rahel Armin with a look at some of these tech themes that we're going to be digesting this week. Coming up we'll also be thinking about US politics of course. The US midterms are set to reverberate globally. We will look at what is at stake next. This is Bloomberg.
[01:24:35] Speaker 2: Monday the second 46 minutes into the equity market session. This is the picture. We are flat here in Europe. The US is still positive but we faded a little bit the earlier move. Oil prices are lower. That certainly may be a factor that we have to fold in this morning Tom.
[01:24:54] Speaker 3: OK let's look ahead to what else we are watching throughout the week today. We get earnings from Apple and Palantir. That's aftermarket. Tomorrow quarter it is US midterm elections. Plus on the NS front out of the US. AMD, Supermicro, their numbers cross. On Wednesday we get Euro area inflation. On Thursday it's the Bank of England CERN with their rate decision. And on Friday the focus shifts back to the labour market of the US. US October jobs report on Friday.
[01:25:19] Speaker 1: So let's focus in on the politics with one day to go until those US midterm elections. Polls suggest Democrats could make gains in the House and in the Senate if they seek control. As they seek control sorry of both chambers of Congress. President Donald Trump made his final campaign pitch to voters this weekend holding rallies in Iowa and Kansas. Let's bring in Oliver Crook who's in New York to give us a bit more detail on what we can expect. Bring us up to speed then Oli. We've seen some of the polling data suggesting that yes the Democrats could do well in the House. Maybe even in the Senate. But of course polls can be wrong.
[01:25:57] Speaker 4: Yeah that's right. And I hesitate to read off these polls. But I guess I'm going to do it anyway. Because they've crossed over the last couple of hours from the New York Times and Siena University. And we should say that these are the polls that are key for the sort of Senate races within the United States. Just to remind everybody the Democrats effectively need to net an additional four seats in the Senate. That means they need to flip four and basically lose zero. And you look at some of the key seats that are currently held by Republicans like Kansas, Texas, Ohio, Maine, North Carolina. In all of those according to these polls the Democrats lead by five points. Now that may be a comfortable lead according to these polls. Again we know what has happened in the past years over in the United States. But that would of course then put them a line. There's also the question of the Michigan seat that has been vacated. That was held by the Democrats. We are now seeing a bit of a civil war within the Democratic Party that erupted over the weekend between the nominee. Abdul al-Sayed and the one who had run against him in the sort of in the lead up to that who has now defected to the Republican side. Which is a rare enough event really in U.S. politics at any time. But very rare in a sort of MAGA era where the Democrats really have sort of held a very strong line. But it's going to get very, very interesting. We've got those reports over the last couple of days from an interview that Trump gave to the Washington, say the New York Post, saying effectively that he would veto anything that came from a Senate and House that was held by the Democrats. But that is the president of the United States putting forward a strategy that would suggest that they could win. That means the president considers that it is certainly a possibility at this point.
[01:27:27] Speaker 2: Oli, how should European investors be thinking about this?
[01:27:30] Speaker 4: Yeah, I mean, we'll be thinking about a number of the different sectors. We're thinking about AI, more regulation potentially coming from the Democrats. We should say this issue of data centers when you look at the polls and the conversations across the United States has been a very, very prominent theme. There's also the question of health care, the research and development grants, the power of the person, of course, is, of course, held by the Congress. If that is held by Democrats, they could exert their influence. But there is, of course, the question of clean energy that is much closer to the sort of European side of things with the Democrats coming back in. Could they push that agenda forward? But there is, of course, the big question in the room. That is the question of Iran, the path forward if the president of the United States will resume bombing after the midterm elections, if the Democrats could constrain things in a certain way with the power of the purse. That obviously will bear massively on the question of oil and gas. I do think there is also an interesting political question, the dimension of this for Ukraine. But, of course, if the Democrats even do win in the House and the Senate, we were talking this about a little bit earlier, which kind of democratic party is this? We can assume that is one that is more generally speaking aligned with Europe. But is this a free trade free trade democratic party? Is this one that is going to seek to protect its tech companies? That we don't really know. And that is something that's going to be determined over the next couple of months and years for the Democrats as they do a bit of soul searching themselves.
[01:28:36] Speaker 3: Oli, with that important caveat, of course, around the polls, should this be a blue sweep, is the expectation then just to build on some of the points you'd be making that this is a president who shifts his attention to the international sphere and that's where the focus becomes?
[01:28:52] Speaker 4: I think absolutely, Tom. If you think about this president who is really so focused on having these sort of lasting changes, his legacy, the kind of influence that he can have on the United States, yes, but on the global stage, if his domestic agenda is completely hamstrung, he becomes sort of a lame duck on the sort of domestic agenda, he's going to turn his attention where he has sweeping executive authority and that is international affairs. What form that will take, I think, is anybody's guess. I think you have people who are in Ukraine and think about Ukraine, say this could go either way. Obviously, we had the president of the United States sort of buddying up to Putin to try to get some of that diesel on the market. Could that reverse? But by the same measure, it could work in the opposite direction. There is, of course, this other political dimension. We think about these right-wing movements in Europe that sort of align themselves earlier on with the Trump movement in the election campaign and in the afterglow of the victory. They have moved away from that. Is the question about whether or not sort of Trumpism and global MAGA is something that is on sort of the ebb is going to be another question. A ton of different things to sort of untangle, Tom. Going to be really interesting 48 hours.
[01:29:52] Speaker 2: Yeah, I'm really looking forward to your coverage, Oli. Thanks for being there for us. We really appreciate it. Oliver Crook joining us out of New York. Let's turn our attention to kind of how the markets are factoring all of this in. There's a lot going on this morning. But one thing that really kind of stands out is a big move lower in crude prices. Brent crude is now sub 110. We're down by 3.9% in terms of the market move we're seeing apparently on an Axios report that Trump's going to give diplomacy a chance. I don't know. Hard to tell. It's got a lot going on at the moment. Skylar Montgomery-Curney joining us from our MLive team to make sense of all of this.
[01:30:24] Speaker 18: Of all the moves this morning, that's the one that stands out. Yeah, I mean, absolutely. And it's kind of ricocheting across markets, right? It feeds into a more positive move within equities. I think the clearest divergences you're seeing are within FX. So stocky is your one that gets hit most when energy prices rise. That's the outperformer on G10 today. So you're very much seeing it being a kind of European currency positive, weighing more on the dollar and you're kind of exporting currencies like the Australian dollar, like the Norwegian crown. You know, there's a big question of how long this can be maintained. I think there's been a lot of worry with Trump tying what's happening with Iran to the midterms, with the idea being that if he gets a poor election result, you'll get escalation afterwards. Maybe, you know, as a retaliation for that, maybe under the idea that you want lower oil prices heading into the election. And then afterwards, you have less of a worry about that because the election result is behind you. So I think there's still a big question around what actually happens post midterms and whether or not you get escalation there and whether there is truly this kind of de-escalation.
[01:31:25] Speaker 1: And markets still I think have a risk premium and a reflection of that. So Skyler, there's an there's an FX and oil link going on here today. Then there's some sort of trade there. We see European currencies stronger, as you say. But thinking about what drives the dollar. I know that you've been looking quite in quite a lot of detail at the link between the AI trade and the dollar. I've read lots of notes from Standard Chartered on this subject as well talking about how the dollar. Yes, it's still perhaps a haven currency. But at the same time, what happens when we get a sell off in risk assets, which is the AI trade right now. How does that play out for the dollar?
[01:31:58] Speaker 18: Because so much of that innovation comes from the states. Yeah, absolutely. We've seen a very close tie recently between the dollar and AI. So as we've had these AI jitters, the dollar has not been the kind of typical safe haven that you'd expect it to be when risk sells off. And there are two kind of channels that we look at in terms of that supported the dollar on the way up with AI that will turn quite negative on the way down. And that's flows and growth. So what you've seen is massive inflows into U.S. risk assets, including equities and credit under the idea that U.S. earnings have been outperforming on the back of the tech story. So that makes those more attractive. You've also seen a really big contribution from AI to growth, which helps the dollar through rate differentials. It helps the growth differentials. And you get this kind of reflexivity in that dollar argument in that you get flows into U.S. assets. Those U.S. assets do better. You get a higher neutral rate, higher yields that then attracts more capital. But it also means it's harder to hedge because hedging becomes more expensive than those unhedged assets do well. And there's more of a reason to put dollars in. And I think it works very positively on the upside. But the worry is when that turn comes, it'll be quite negative on the downside in terms of that reflexivity going the other way entirely. And what you tend to see with the dollar is these big bull and then bear cycles. And they're seven to 11 years. We're at the end of a very long bull cycle. And the last one was broken when the dot-com bust. And what you saw during the dot-com as well is that the dollar and the S&P became increasingly positively correlated. So it wasn't the safe haven then. And I think I have more worries now than during the dot-com because the U.S. is more reliant on foreign capital to fund that equity, to fund that credit.
[01:33:31] Speaker 3: Okay. So the dollar under pressure potentially if the AI story continues to unravel. Can I bring you back to the midterms? Mike Wilson and Morgan Stanley have been talking to the team, the Bloomberg team, suggesting that there's a very strong record that within a six to 12-month period after the midterms, stocks rebound. Is that what should we expect this time around? How much conviction do you have in that, that the picture is brighter six to 12 months after these midterms?
[01:33:56] Speaker 18: I think the historic experience is very hard to refer to because you get very different election outcomes. I think the one thing that you can say is positive is that we're at the end of two weeks of a lot of event risk and nothing's really gone terribly wrong. And you do get reduced uncertainty post the elections. The other thing I'd say is it's widely expected that Democrats will win the House and the Senate. So that argues that it's already priced in. And the view from investors is that a democratic sweep is the most negative outcome for equities because it feeds into your AI worries. But what I would say is those AI worries, you know, they can be vetoed by the president, right? Unless you have a big enough of majority to override that. So it might be overblown.
[01:34:34] Speaker 1: Okay. Worth considering. Skylar, thank you very much. Thanks for your thoughts this morning. Skylar Montgomery Coney from our Markets Live team. Thinking about the markets and where they go next, Ed Yardini, president of Yardini Research, will be joining the surveillance team at 11:00 a.m. UK time. That's it for the opening trade. We're dealing with a pretty flat equity market, but definitely not flat in terms of U.S. futures and oil prices.
[01:34:55] Speaker 2: So futures have ticked up a little bit. They're not up massively. Big sell off on Friday. Oil prices are the real standout story this morning. The U.S. is back in its normal time zone. The pulse is up next. This is Bloomberg.