OpenAI-Linked Stocks Slump, Oil Tops $110 Again — The Opening Trade 4/28/2026

[0:02] Good morning. It is Tuesday, April the 28th. Here is what's on the agenda. Oil up for a [0:07] seventh straight day. Germany's Chancellor says Trump is being humiliated by Iran. [0:12] Earnings from Barclays and BP are imminent and a hawkish hold from a divided BOJ. [0:19] You're right that the oil price is higher, Tom. Let's check in with just how high it has [0:22] climbed. $110 a barrel on Brent is where we are right now. That's up another 2% [0:27] from yesterday. So as the straight to four moves remains closed, we move slowly and [0:32] slightly faster than slowly to the upside here in Europe. Eurostoxx 50 futures pretty flat though. [0:38] Thinking about that, thinking about oil, thinking about earnings, thinking about the AI trade of [0:42] course as well. And this is the picture on dollar yen. As we're getting into central bank decisions, [0:46] we've got a bit of strength coming through in the yen. A slightly hawkish picture being painted by [0:51] the vote split over at the BOJ. More on the BOJ to come this hour. The countdown to the opening trade [0:56] starts right now. Tuesday the 28th. Good morning. How you doing? Let's talk about headwinds. Let's [1:17] talk about tailwinds. Headwinds. Oil prices. $110. Anna just talks us through what exactly we're [1:24] seeing there. That's the headwind that these markets are facing. And it feels like that headwind [1:28] is getting stronger and stronger. The tailwind for markets over the last few days has of course been [1:32] tech, semiconductors in particular. But basically the capex spend on the AI story has been the big driver [1:38] here. And you've only got to look at the Wall Street Journal story this morning on OpenAI to [1:43] start to worry about that a little bit. The CFO is getting nervous about what the spend story looks [1:48] like. The CFO is getting nervous about the IPO. We'll talk about CATL a little bit later on in the [1:52] program as well. Is that a little warning sign as well? So the headwinds getting stronger and the [1:58] tailwinds getting weaker this morning. Is that the kind of the balance that we're talking about in [2:03] markets? Sarah Fry, the CFO of OpenAI, to your point on this Wall Street Journal story, suggesting [2:09] they're concerned about user acquisition and sales. They set themselves a very aggressive target for [2:14] 2025. According to the reports, they did not meet that target. So you join the dots between a falling [2:20] user base for OpenAI, according to the Wall Street Journal. We know their market share has been on the [2:25] consumer side, has been falling, even though they do have the largest market share on the consumer side. [2:30] The competition from Gemini of Google has been upped, and the competition from Anthropic in [2:34] terms of enterprise, where arguably Anthropic are winning. So what does that mean in terms of the [2:38] capital spend for a company, OpenAI, that's committed to spend about $1.4 trillion on an [2:43] infrastructure, and that ties into the earnings story of this week in terms of the CapEx story? [2:47] Yeah, absolutely. We're going to get more details on CapEx, on those earnings calls, aren't we? On those [2:51] earnings briefings that we're going to get from big tech. So this is really a question that is [2:55] important to markets right now in this week. And there's no doubt that this has been a thing that has [2:59] been supporting markets in the face of the negativity coming through from the geopolitics [3:03] and Iran. But to what extent has the Iran story been driving U.S. stocks at all? I was actually [3:08] taken by one Bloomberg Opinion piece near K-style writing that the U.S. stock market isn't flirting [3:13] with new highs because it thinks the Iran war is ending. It never cared about this war, and it won't [3:18] enlist the war spreads beyond the Middle East. Those who think a drawn-out conflict with Iran will hold [3:22] back this market are in for more surprises. But then that question around AI is even more important, [3:27] isn't it? If this is the only thing that is underpinning optimism in these markets right [3:31] now. [3:32] The counter-argument to that is oil prices are going higher. Gas prices are going higher in [3:37] America. It is a tax on the consumer. The consumer economy is very important to the U.S. economy. [3:42] It is definitely important to the global economy. And as oil prices push higher and higher, [3:46] and you see more and more houses raising their forecasts, are we underpricing that risk and [3:51] overpricing the AI story? That is the question. [3:54] Let's move from that nicely to BP earnings. Adjusted net profit, $3.2 billion. That is [3:59] above the estimate. Debt gearing coming in at 24.7. That's not far from the estimate of [4:04] 24.4. Slightly higher, but that is going to be an area of focus for investors. A few other [4:10] lines coming through on upstream production. They see second quarter reported upstream production [4:15] to be lower than the first quarter. I mean, no surprise that the net profit number, I suppose, [4:21] is a strong one because we'd already heard that this was going to be an exceptional period for [4:25] oil trading. I'm looking for any detail around trading. Don't see it at first glance. This is [4:30] the first time that the CEO, Meg O'Neill, is going to be in position, is in position, of course. She's [4:35] been there since the beginning of April. And so we will look for more detail there. [4:38] We know in the analyst notes as well, they're looking for details in terms of the buybacks and [4:42] dividend story as well, and whether or not get more clarity from the newly appointed CEO. The [4:47] distribution policy was in focus. Do we worry about the fact that the operating cash flow [4:50] is coming in significantly below? The estimates at 2.86 billion versus the estimates of a little [4:55] over 4.4 billion. There's the redhead then, to your point, Anna. 3.2 billion adjusted net in the [5:00] first quarter, a very solid beat versus the 2.6 billion. There's nothing on trading here. Where's [5:06] the line on trading? Barclays and BP, we'll talk about Barclays in a second, basically are the same [5:10] story this morning. What is happening with trading? We've seen Shell talk about the fact that they're [5:14] looking at exceptional trading conditions. Where's the line on BP? We need to get that [5:18] line on BP and figure out what is happening on trading, because Barclays is definitely a [5:22] trading story. The investment bank, super strong. Yeah, absolutely. First quarter investment bank [5:27] revenue, 4.03 billion, and that is above where the estimate had put it. The key number to be [5:33] watching for here also is global market revenue. So that is an area that the market has been focused [5:38] on. And I'm looking in particular for whether they get over 2.8 billion pounds on global market [5:42] revenue, because that would put it at the highest quarterly performance since 2014. So just [5:47] underscoring all the headwinds that consumers might face from higher energy prices, there [5:51] are trading opportunities in all of this volatility. There's trading opportunities in the volatility [5:56] in oil, to your point, Guy, and indeed in things that Barclays is trading. Revenue, equities [6:00] look like they're ahead at 1.12 billion. FIC looks a little light, but only a little. It's basically [6:07] in line with expectations. So it looks like the equity outperformance has been a driver [6:13] of the economy. They have reiterated their 2026 and 2028 targets, and they are announcing [6:18] a £500 million buyback as well. We'll continue, of course, to monitor the story around Barclays [6:22] and, of course, the stock when trading starts at 8 a.m. UK time. We'll get all the details [6:27] on that story and the broader earnings story, the BOJ. So talking about the inflation story, [6:32] all of these themes, we're tying what's happening in terms of the oil price and trading and energy [6:36] through the key three agenda items for you today. And that was certainly a focus, not [6:41] unexpectedly for the BOJ, but arguably a slightly more hawkish hold than some had expected with [6:46] that vote split and the biggest vote split, the biggest diversion or dispersion of votes [6:51] under OEDA. So 6 to 3, keeping rates at 0.75%. Traders now increasingly betting that June [6:58] is the month where they hike, but the forecast as well. So they're forecasting slower growth, [7:03] that's been slashed in half, and higher inflation. And therein lies the challenge for a country [7:08] that's very dependent on those energy imports. Two questions. Are they behind the curve? [7:12] Is that going to be a problem? Is that going to get price into the back end? And what do you do if [7:17] you're a Japanese institution investor into fixed income? Because I think Venran was running the [7:22] numbers on this. You're getting a higher rate when swapped back into dollars on JGBs than you are [7:28] on treasuries at the moment. Why are you buying treasuries? Well, for a long time, we've been [7:32] asking when that money's going to come home, haven't we? As interest rates go higher in Japan. [7:36] And that's what's interesting about this. Before the war in Iran, this was an outlier bank amongst [7:41] the big central banks, wasn't it? Because it was already hiking. And yet we've seen them step away [7:46] from that. And you can ask questions about what is the relationship between the politics and the [7:50] monetary policy here. And either you think that there's some kind of direct link there, or you think [7:56] that actually this is just a central bank, as Skylar was telling us yesterday, that steps back when [8:00] things are volatile and says, we're just going to think about it. And that's where they seem to be [8:03] at the moment. A lot of central banks would like to think about it right now. I don't know what it [8:07] is, but they've got a lot to think about. Peter Kinsella, UBP Investment Services Head, will be joining us [8:12] shortly. Geoffrey Yu, BNY, Senior Market Strategist, a little later. Chris Hallam, Goldman Sachs, European [8:18] Financials Head, here to talk about the big banks that are reporting numbers. You've got Barclays this [8:22] morning. You've got UBS tomorrow. There's lots on deck this week, Tom. Here's what else we are [8:27] watching throughout the day. King Charles III and Queen Camilla are in the US for their first state [8:31] visit, of course. And at 9 a.m. UK time, Euro-area bank lending survey will be coming out. At 11 a.m. [8:37] UK time, we're going to get in the Norway Wealth Fund Investment Conference. That begins, [8:40] Francine Lacroix, on the ground for us. And today, Musk versus OpenAI and Sam Altman. The barbs are [8:46] already traded on X as well. That trial begins later today. That will be pretty fascinating. [8:52] Also later, on the earnings from Airbus and out of the US, Starbucks, Visa and Robinhood. [8:59] OK. Lots going on. Let's talk about some other things that are going on. The world's biggest [9:03] battery maker, CATL, has raised $5 billion after pricing a Hong Kong share placement. The key thing [9:10] here is that it was at the bottom of the marketed range. The deal marks the largest share offering [9:15] yet this year in Hong Kong. CATL, Hong Kong shares, have soared 139% since their debut last year, [9:22] giving the company a market value of $288 billion. Bottom end of the range, the stock took a hit [9:28] on the back of that. Bloomberg understands that one of the airs of Essilor Luxottica has agreed to buy [9:34] two of his sibling stake in the family holding company for about €10 billion. Essilor Luxottica [9:40] is the world's largest iMare maker, with the brands such as Rayburn, Oakley, Ursa. All within [9:46] the stable. Sources say Leonardo Maria del Vecchio, who turns 31 next week, will come away with [9:52] 37.5% of the family. And the UK Prime Minister Keir Starmer is bracing for another day of scrutiny [10:01] in Parliament over his decision to appoint Peter Mandelson as ambassador to Washington. MPs will vote [10:07] on whether to launch a formal investigation into claims that Starmer may have misled Parliament [10:12] over Mandelson's vetting process. The Prime Minister has faced intense scrutiny ever since [10:16] Bloomberg revealed in September the extent of Mandelson's relationship with the sex offender [10:20] Jeffrey Epstein. Coming up on the programme, we will take a look at the stocks to watch at the [10:25] open, including Novartis, the Swiss pharmaceuticals company, reporting profit below analyst estimates. [10:30] It seems that generic competition really the issue there. An unexpected sales decline [10:35] in focus for us. So we'll watch that stock in Switzerland. Plus, we'll go live to Oslo, [10:40] where the Norwegian Sovereign Wealth Fund is holding its annual investment conference. [10:44] We'll get a preview of what to expect on the ground there. We will be hearing, of course, [10:48] from Francine Lacroix, who is there for us. Up next, Michael Gappin, who is the chief [10:53] US economist over at Morgan Stanley, will be with us in studio. Great week to check in with him. It is [10:59] Fed Week. What does confirmation of Walsh mean for the Fed? IB plus BBTV Go is the place to go. If [11:07] you want to ask questions, get involved in these conversations. This is Bloomberg. [11:31] At the moment, I can't tell what strategic exit the Americans are pursuing, especially since the [11:38] Iranians are obviously negotiating very skillfully, or perhaps very skillfully refusing to negotiate, [11:43] and then letting the Americans travel to Islamabad only to send them back without any results. [11:47] An entire nation is being humiliated by the Iranian leadership, [11:51] especially by the so-called Revolutionary Guards. [11:56] That was the German Chancellor Friedrich Mertz, of course, speaking there. Those comments come as [12:00] the White House says President Trump has convened national security officials to review Iran's [12:05] latest peace proposal. Let's get the latest from the Middle East, bring in Bloomberg's Jumana [12:09] Besechi in Dubai. What is the latest then on the president's thinking, Jumana? This time yesterday, [12:15] we were waiting to hear from the U.S. about Iran's latest offer. Has much changed since then? [12:23] Yeah, well, Ana, let's review what was in, what we think was in the Iranian counterproposal per [12:27] Iranian state media. And of course, yesterday, we were reporting on that, and it involves a mutual [12:32] lifting of the blockades that are around the Strait of Hormuz right now. So not just Iran lifting their [12:37] blockade, but the U.S. as well lifting theirs. In turn, Iran also asking for war reparations and [12:44] guarantees that the U.S. are not going to strike again. But crucially here, a deferral of negotiations [12:49] around the nuclear file. Now, yesterday, the White House Press Secretary Caroline Levitt said that the [12:54] U.S. are now sitting reviewing what the Iranians have proposed. But she also said the president has [13:01] made it clear what his red lines are. And from what we understand and what we gather from the course of [13:06] this war, some of the red lines include Iran wanting to establish a new protocol around the [13:11] straits, perhaps introducing a toll booth that is something that would be a non-starter, not just for [13:16] the U.S., but for many nations, especially those around the Gulf. War guarantees, difficult in reality [13:22] to implement, especially if you think about U.S. applying pressure on Israel to restrain Israel, [13:28] should they want to go down the war path again. And then the final point is the deferral of this [13:33] nuclear file. And if they do do that, it's also, in effect, a recognition that the war itself has [13:40] not been successful because the very purpose of the war was to stop Iran from going on to developing [13:46] a nuclear weapon. So unclear at this point where the U.S. stands on this. But they have said that [13:51] they are reviewing the proposal. What I will say, really interesting comments coming through from the [13:56] German chancellor overnight. And I think perhaps maybe he was not aware that he was being filmed. But [14:00] it's a reflection of how many leaders around the world are beginning to feel, especially around the [14:06] Strait of Hormuz, as we keep seeing these oil prices take higher and higher. We've got Brent sitting at [14:10] $110. A real question here about what is actually being done to lift the mutual blockades and return [14:17] shipping back to normal again. And at the same time, what the U.S.'s actual exit strategy here is. And it's been [14:24] unclear from all of the mixed messaging that has come from the White House over the past couple of [14:29] weeks what exactly that exit strategy looks like. At the same time, the Iranians are very inclined to [14:35] keep dragging out these negotiations for as long as possible because they know that they continue to [14:41] inflict pain, not just on the Gulf region, but on the global economy via the energy channels. [14:48] A lot of questions, not a lot of answers. Jumana, we watch with interest. Thanks for the update. [14:52] joining us out of Dubai. Michael Gapens here, Chief U.S. Economist at Morgan Stanley. Nice to see you. [14:59] Good morning. Interesting times. [15:01] Definitely live in interesting times. I don't know where to start. There's so many interesting [15:06] things to talk about. Let's start with what appears to be this disconnect between the U.S. economy, [15:13] which appears to a lot of people to be fine right now if you're living in America, and what is [15:18] happening in terms of the oil price and commodities prices and all the stuff that we need to keep the [15:23] economy functioning. There just seems to be this disconnect at the moment. There is. Certainly you [15:28] see it in U.S. financial markets where equity markets have largely moved on from this. So many [15:34] financial market prices have fully retraced and have said this appears not to be a long-term [15:40] problem. Other markets haven't. I think what you just heard in the previous segment is we're still [15:45] engaged in a bit of an economic game of chicken to see who can withstand the pressure for longer. [15:51] The U.S. is well positioned to handle these types of pressures, but no economy is fully resilient [15:57] to what's going on. When does it start to show up? What are you seeing in terms of your numbers? You get [16:02] into the granularity of this stuff. Is it starting to appear? It is. I mean, we think of this in kind of three [16:07] simple channels. There's the direct effect of higher energy prices on the consumer. There are [16:13] potential wealth effects if equity markets don't hold up. And then the third channel is do businesses [16:19] keep spending and hiring? And so far we're just seeing the negative effects through that first [16:23] channel. Certainly gasoline prices have risen by our estimates that will basically offset the [16:29] stimulus for households provided by the One Big Beautiful Bill Act. So it neutralizes that fiscal [16:33] stimulus. But at the moment, most of the business spending in the U.S. economy is AI related. [16:39] That continues to power on and equity markets have held up. So, you know, we're getting maybe [16:44] one third of the impact that may be there at its maximum. Yeah. Good morning to you, Michael. [16:50] So I suppose. So in that sense, is it is it fair to say that the up the updraft from AI outweighs [16:57] the negativity around higher oil prices for the U.S. economy? At the moment, yes. And I would say the [17:04] simple answer here is if it continues to stay a price story, meaning oil is available, but just at [17:10] a higher price, then the U.S. economy should do OK and that AI related spending should continue. [17:16] The risk is and we've all been talking about this at some point. When does it stop being a story about [17:21] price? And it's it's oil is just not available at any price. Certainly that would hit eight likely to [17:27] hit Asia first, then Europe and then the U.S. So I do think in the coming weeks in the four to six [17:33] week kind of horizon, the supply story will be much more prominent and add into the mix, then a change [17:42] of guard at the Fed. And I wonder what that means for your thinking about interest rates in the United [17:46] States. And we've heard from Kevin Walsh. He's talked a lot about reasons why he thinks rates [17:51] can go lower, broadly speaking, to do with the balance sheet, to do with AI. Do you do you expect [17:59] him to employ those that reasoning in the short term? I suppose I mean this year to enable lower [18:04] rates in the U.S.? Possibly so conditionally. But I don't think interest rate policy will change [18:11] all that much between Jay Powell as chair and Kevin Walsh's chair. Inflation is above above target. [18:17] So, yes, Kevin Walsh is laying out a scenario under which it would be possible for the Fed to further [18:24] lower rates. But at the moment, there's no consensus. There's literally zero consensus on the committee for [18:30] that. So if inflation does start to behave, meaning tariff pass through is transitory, oil prices are a [18:37] headline story. But there's limited second round effects. And we're getting positive productivity from [18:42] AI over time. Yes, he may be able to deliver those rate cuts. But that's, you know, at best a later this [18:49] year story. I don't think he can walk in and immediately change the landscape. The president's pretty clear [18:55] that he wants this new Fed chair to cut on day one. So how long is that patience going to last from the U.S. [19:00] president? Well, that, of course, we don't know. But that the desire to lower rates by the president [19:08] and in this case, if Governor Walsh or what soon will be Governor Walsh and then chair Walsh, if he [19:14] if he wants to do that, he's got to garner a consensus on the committee. The chair has outsized [19:20] influence on the thinking of the committee, but it's still a one person, one vote committee. And right [19:25] now, even what would be the formerly dovish members of the Fed are all in a wait and see mode. So [19:32] you know, it'll take time to build that consensus. And the data has to move in his direction. Right [19:37] now, it's not there. When does the consumer become challenged in the U.S.? I mean, the gas prices are [19:44] higher. Coffee prices are higher. Housing costs are high. And you haven't had those rate cuts to lower [19:49] the mortgage. The mortgage rates are high in the in the U.S. Are we still looking at a K-shaped economy [19:54] in terms of the consumer? When does when does the consumer become a problem? And when does that [19:58] start to affect labor markets? So I'd say, yes, we're largely still dealing with a K-shaped [20:03] narrative in the U.S. And, you know, unfortunately, in 2026, many of us thought the recovery would [20:08] would broaden out. Right. It has been narrowly driven by spending by upper income households. [20:13] We thought perhaps 2026 would be a year when the labor market would broaden out a bit more. [20:18] Inflation would come down and that would help purchasing power of lower and middle income households. [20:22] So right now we're not we're not getting that. So I would say parts of the consumer [20:27] are certainly challenged. But about 40 percent or more of total spending comes from upper income [20:33] households. As long as that stays resilient, the recovery in the U.S. should stay resilient. [20:38] And that's presumably related to the stock market of which there's an awful lot of wealth tied up, [20:43] which is related to what is happening with AI trade, which we're seeing an awful lot of. [20:47] We were talking about it earlier. The story on the on the journal's front page, [20:52] OpenAI questioning its its spending in terms of the data center story. [20:57] If you get a margin, how how small a decrease or even just stability in that spending story? [21:04] How will you plug that into your how are you how are you calculating this in your models in terms of [21:08] the effect that it's having in terms of data center build out, the consumer spend story with [21:14] their upper end and the stock market? How connected is it all? And if we start to see a slowdown in in data [21:19] center spending, does it cascade through the model fairly quickly? [21:24] It's all very connected, right? A lot of that spending is keyed on expectations of future returns, [21:30] which are also boosting asset prices. So the tension here is if you look at all the historical [21:35] innovation waves in the U.S., this would be number six. All of the previous five had kind of two key [21:41] components. One, they all worked or we wouldn't be talking about them. But two, they all had boom [21:45] bus cycles. Right. So I think what you're getting at is there there will be winners and losers along [21:51] the way. Yeah. And so there will be, you know, asset price appreciation, asset price bus, but likely [21:56] we'll get a successful AI technology out of this. But the AI spend, the asset market prices, the effect [22:02] that has on consumer spending, all that's intrinsically. Yeah. And given those waves and this is the [22:10] set use, as you say, the six, they all worked. They had boom bus cycles. Did they all drive [22:14] inflation up and then down? Or what did they do to inflation? No, I mean, that's a many of these [22:20] innovations took place across decades. Right. So pinpointing the actual effect on inflation at any [22:26] moment in time is, of course, difficult. So we're just trying to draw common themes from these. But [22:32] each cycle has come quicker. That's one factor of it. But they still tend to take a lot longer than [22:37] people think. At the moment, we're still, I'd say, fairly optimistic that AI will look more like [22:42] the Internet revolution, where it does boost potential growth, does boost actual growth. It [22:48] certainly will reshape the labor market. We'll see how much labor market displacement we ultimately [22:53] get. So that what it does to inflation then will be determined on that on that balance. So right now, [22:59] I'd say we don't totally know. On the jobs piece, I mean, a lot of tech companies are cutting headcount [23:03] and they are putting that down to AI and investing in AI. Are you seeing real disruption to the labor [23:09] market now as a result of artificial intelligence? I would say a very little bit. We've taken all the [23:14] occupational data and rank ordered them by exposure to AI based on potential task replacement and put [23:21] them into three buckets, high exposure, medium and low. And if you do that and you try to control [23:27] for cyclicality, because the unemployment rate has gone up across almost all occupations in the U.S. [23:32] over the past two years. But so if you control for that cyclicality, you find, you know, there is [23:37] a little bit of a rise in the unemployment rate in the high AI exposed occupation. That's [23:42] unexplainable. So a little, but not broad based. Michael, thank you very much indeed. Really great [23:47] to have you on set with us this morning. Michael Gappin, Chief U.S. Economist at Morgan Stanley. [23:52] We're going to discuss the latest rate decision at the Bank of Japan next. Stay with us. [23:56] This is Bloomberg. Tuesday the 28th. Good morning. This is what the future picture looks like [24:15] here in Europe. Very exciting. Very exciting indeed. The Sox 50 is called up by a staggering [24:21] one tenth of one percent. The FTSE is basically flat. The Cacarante is basically flat. So I have [24:27] nothing to report. So I'm going to hand it over to Anna with the bond market. Excellent. Well, [24:31] I have a little to report. We have higher oil prices. So we continue our feature on inflation [24:36] in the bond market story. So up by two basis points on the French 10 year, one basis point on [24:41] the German. So we're seeing a slightly higher yields. This continues to be the narrative [24:45] as oil prices go higher. We continue to focus on that in bond markets, thinking about inflation. [24:49] Oh, the cynicism of Guy Johnson. That was really cynical. I'm just like that. That's what the [24:53] picture is. We've come a long way very quickly. Now we're waiting to mark it. So now we've [24:57] got an earning story. We've got the opening story. We've got the AI infrastructure. We've got [25:02] the BOJ and a split decision. Six three. Six three. The bond market's more exciting than the [25:07] equity market this morning. This is true. This is true. And are they more rational when it comes [25:11] to the risks out of the Strait of Hormuz and the geopolitics? So the BOJ, and that was a focus [25:16] clearly for the BOJ. And they had a split vote. Six three. They're holding rates. Of course, [25:20] that wasn't unexpected. That was pretty much in line. Zero point seven five percent. So the [25:25] expectation now is there's about a 70 percent chance they go in June. Yeah. Inflation has been [25:30] marked higher. Growth has been marked down. So inflation, the forecast is two point eight [25:34] percent for this year. Growth has been slashed in half to zero point five percent. And those [25:38] the dynamics. Governor Await is sitting down. You can see live right now. We'll keep across [25:42] the lines that come through from the governor. The yen was a little stronger on the back of [25:46] this decision. Yeah, it was a surprise. I think the hawkishness was a surprise. The [25:50] smoke split was a surprise this morning. Yeah, it was six three, wasn't it? And there was an [25:54] expectation that maybe there'd be two dissenters. And then we got three dissenters, a suggestion [25:58] perhaps that those on the BOJ, they want to get on with these rate hikes, which had until the Iran [26:03] war been the expectation in markets that we would get a rate hike now. And then slightly [26:08] counterintuitively, we have more inflation risk in an economy that's very exposed to higher [26:12] energy prices coming from the Middle East. And yet the BOJ stepping back from that hiking [26:18] in the very short term, at least. As we await for fresh lines from the governor, [26:21] and he's saying right now, Governor Await is saying that uncertainty remains over the Middle [26:24] East situation. Well, that is, I think we can all agree with that. Governor Await is speaking [26:29] to reporters in Tokyo right now saying that uncertainty remains, of course, over the Middle East, [26:33] and clearly that has been top of mind for the BOJ and the head of a central bank that has to take [26:39] into consideration that they are, of course, a major energy importer. Let's bring in Peter [26:42] Kinsella right now, head of investment services at Union Bank Bancaire Privé. Peter, good morning. [26:48] Thanks for joining us. Were you surprised by the split? And do you assume that June is now [26:53] in the cards for a hike to 1% for the BOJ? Was I surprised by the split? Yes. I thought it would [27:00] have been 7.2, 6.3, definitely more aggressive. Do I think June is realistic? Absolutely yes. I think, [27:06] if we look at what the BOJ has done, we had inflation trending roughly 1.5% on the latest [27:12] national CPI. They've raised their CPI expectation higher to 2.8% for the remainder this year, right? [27:18] So a huge jump in in their inflation forecast. If we look at the Shunto wage negotiations ongoing, [27:24] they're looking at a pace of around 5.2% for wage growth. So the underlying inflationary dynamic [27:29] here is actually pretty strong. Consequently, if we didn't have the war in Iran, I'm pretty sure the [27:35] BOJ would have gone today, right? So as by June, we should hopefully, you know, come to some conclusion [27:42] with Iran. That opens the door for June. Sorry to interrupt, though. I mean, Tom, but does that [27:47] make sense? That seems really odd, doesn't it? Yeah. It's sort of, when we say it out loud, [27:51] it sounds strange. It does, but I think it's just that removal of uncertainty, right? Because [27:55] what they're worried about is the second round effects from a higher oil price into inflation. [28:00] And that's why I think with the way this conference today, it's going to be super interesting. [28:03] So, but why would you, if you were worried about that, wouldn't you go today? Rather than saying, [28:07] oh, I'm worried about that. There's huge uncertainty. The oil price is going higher. [28:11] I'm going to wait. Does that mean they're behind the curve? Not necessarily, because what you're [28:16] waiting to see is the extent to which domestically generated inflation increases. That's what a [28:21] central bank can deal with, not the important inflation, right? So, you know, the true test of [28:26] a central bank here is looking for the second round effect, not the first round. But it's also, [28:29] it's not also indicative of a concern about the growth picture, that that's what's held them today, [28:35] that they're concerned that for now, the focus is on the growth impact and that inflation is a [28:41] story they deal with later. Is that part of the thinking? [28:43] Possibly. But look, I think the issue here, if we look at it, they've reduced growth from an [28:48] expectation of roughly 1% to 0.5%, right? So that's a substantial downgrade. But it puts us [28:54] towards a stagflation-style scenario, right, where you've got very, very high level of inflation, [28:59] 2.8%, 3%, and very low level of growth. My view on this is that they've got to be a bit more [29:04] concerned about the inflation component rather than the growth component. Because if we look at the [29:08] underlying growth, it's not that bad, right? Unemployment isn't particularly high. Tandcan [29:12] surveys are perfectly decent. You know, it's not as if we're going into contraction, right? [29:16] So what, how far do they have to go? [29:20] In terms of raising the rate? [29:21] Yeah. [29:22] Minimum 1.25%, if not 1.5%. I think that's where we're going to. [29:26] So is the risk to the upside? [29:27] You'd have to think so, yes, absolutely. [29:29] So what does that mean in terms of how you think the bond market is going to behave? Because at the [29:33] moment, Venram ran the numbers for us earlier. You're getting, once you hedge your JGB [29:41] holdings back into yen, you're getting a better rate than you are in US Treasuries. [29:46] Correct. [29:47] So why are Japanese investors buying Treasuries? And is that, at what point, we keep asking this [29:52] question about when we're going to see repatriation, but we must be getting to the point where that [29:57] starts to happen, aren't we? [29:58] I think that if we look at the big so-called repatriation trades, they tend to happen when [30:02] you have huge equity declines. Think of sort of 2008, 2009, 2020 to an extent. It's more [30:09] an equity-related repatriation story rather than a rate story. I think what you're likely [30:14] to see if this constant creep higher in JGB yields continues is probably a reduced rate [30:19] of capital outflows from Japan towards the States and other foreign bond markets. [30:23] Japan has been one of the biggest providers of liquidity for the global financial system [30:27] forever, it feels like. Is that coming to an end? [30:31] I wouldn't say so, not yet, no, because it's a question of alternatives, right? And let's face [30:35] it, you've been in a situation for a long time where domestic returns on capital have [30:40] not been great. They've been much better outside of Japan. And, you know, it's very hard to [30:45] change that narrative overnight. [30:46] A few lines coming through then from the press conference. He's saying some weakness is seen [30:50] in parts of the economy due to the Middle East, expecting moderate recovery to be maintained [30:53] over time. The Outlook report is based on a view that oil prices will fall. I mean, I suppose [30:59] that links to what futures are suggesting as well. And that's been much remarked upon. [31:04] Is there too much optimism then baked into futures expectations around oil prices, future expectations [31:10] around oil prices, do you think, Peter? Because this is going to be something that lots of central [31:13] banks pick up on, you know, rather than estimating oil prices themselves. They'll probably just [31:17] go with the futures curve, won't they? That's what they all do when they make their inflation [31:21] forecast. They base it off the futures curve, which is, you know, which is in backwardation. [31:26] I think the issue really here is if we look at the oil futures curve, for example, December [31:30] contracts, pre-war, there were levels of around $55 per barrel. At the moment, they're what, [31:35] $80, $85, right? So we are pricing it off a much, much higher inflationary base. That's [31:40] pretty clear. Is it fair to call oil a bit lower? I would say probably yes. But we're going [31:46] to have high oil prices probably for the next three to four months, right, at a minimum. [31:49] Yeah. Outside of the Japan story and the Asia growth story, here in Europe, we spoke [31:55] to Blue Bay yesterday, who was saying another month of closed Strait of Hormuz and we're [32:00] talking about recession in Europe. How close are we to that kind of scenario for you? [32:05] I would say definitely we've got downside risks to growth. That's what the PMI data told [32:10] us last week. Home services in particular. Yeah, which is strange because you would normally [32:15] expect to see it in manufacturing to a greater extent. That may well come. We know that Europe [32:19] is particularly exposed to higher energy prices through the manufacturing nexus. And likewise, [32:24] that's going to weigh on growth, no question. And that, again, puts the ECB in a real bind. [32:29] What about the pounds? The other thing that we were hearing from Blue Bay and Mark Downing [32:34] was the clearest way to short the UK is via the pound, not via gilts, particularly if you're [32:39] thinking about political risk and growth dynamics. And those are clearly looking challenged. [32:44] What is your level of confidence or lack of confidence in the UK right now? [32:47] So I think there's a few things to say. The first is that if you look at the five year [32:51] inflation expectations, five year break evens, they skyrocketed by 60, 80 basis points following [32:57] the outbreak of the war, whereas European and US equivalents didn't. They were flat as a pancake. [33:01] So it tells you and from a higher level. So it kind of tells you that the market believes [33:05] the UK has a structural inflation problem, which I agree with. [33:08] Is that priced into gilts markets? [33:10] Ish. We're starting to get, you know, 10 year gilts of about 4.95%. If we see political [33:17] changes post the elections in a few weeks, local elections here, the question is, well, [33:22] who would replace, say, Keir Starmer, right? And we're not exactly blessed with amazing candidates [33:26] to replace him. And the upshot of that is that markets will price in a bit less fiscal headroom [33:31] for Rachel Reeves. And consequently, the gilts market may come under pressure. But that will [33:35] be reflected in a weaker panel. [33:36] North of five? You're right, kind of 4.972 is the gilts number this morning before the [33:41] open in 20 minutes time. Do we go north of 5%? [33:43] I think it's not impossible. [33:44] Does it go much beyond that? [33:48] It would depend on the political dynamics, right? Because what we find in these crises... [33:53] What does the crisis look like? And how high could it go? [33:56] Well, look, I mean, that's anyone's guess. But I mean, could it go to 5.5? Yes, it probably [34:00] could in a stressed scenario. But the question then is, what's the political [34:03] reaction, right? Easy terrain in spending? Because that's a dynamic we saw during the [34:07] sovereign debt crisis in Europe, right? It gets worse until it gets better. [34:11] Excellent. I feel better now. [34:14] Very good. Nice to see you. Thank you very much indeed. Peter Kinsella, Head of Investment [34:16] Services at UBP. Let's talk about what we are watching elsewhere. Banking bosses are warning [34:23] of the inflation shock from the Iran conflict. [34:27] Now, our research has revised down our growth estimates in the US and around the world slightly, [34:32] maybe slightly less in China. And we've revised up inflation more than 140 basis points in Europe, [34:37] for example. So we really see an inflation shock coming through to some extent. And we [34:42] see growth mitigated. [34:43] That was, of course, Bernie Mensah, Bank of America's international president, speaking [34:49] to Bloomberg more on the economic fallout from what we see in the Gulf right now. That's [34:54] next. This is Bloomberg. 15 minutes to go until the equity markets open here in Europe. [35:22] It's Tuesday morning. I'm probably doing you a disservice if I tell you that there's nothing [35:26] going on in equity markets. But that's the picture you see on the screen in front of you. [35:29] But keep an eye on BP this morning, called higher. Keep an eye on Barclays this morning, [35:33] called higher. You are looking at some fairly big moves in the semi sector. Nordic semi, I [35:37] think, is going to be exciting. There are some single stocks out there. Buyer's another [35:40] one that could move today. But at a headline level, at an index level, I don't think you're [35:45] going to see much. Single stocks, though, sectors, I think the picture's going to be [35:48] more exciting. [35:49] Okay. So from a market perspective, that is certainly what we're going to focus on. From [35:52] a political perspective, political leaders all over the world trying to work out how they [35:55] deal with the impact of the war in Iran. What is that doing to the cost of living, to prices [36:01] for the people that they serve? Let's dive into that conversation now. Bloomberg is holding [36:06] its Citilab event in Madrid. It's a world leading summit for cities. And in that context, [36:13] let's speak now to, from Baltimore, Mayor Brandon Scott, who spearheaded historic reductions [36:19] in violent crime in the city, but like many other cities, wrestling with these other challenges [36:24] around prices, perhaps. Mayor, thank you very much for joining us. I want to ask you about [36:29] the cost of living and whether this is a topic of conversation there in Madrid. As you're talking [36:33] to these other mayors, you must all be wondering what you can do to try, or to what degree you [36:39] want to cushion people from the higher cost of living. Is that something that is being discussed? [36:44] Well, that's something that's discussed every day. That's been discussed for us, especially [36:51] if these are mayors from around the world, but especially for us U.S. mayors since this [36:55] administration took office. The prices, the cost of living was already high, and it's just [36:59] been skyrocketing. When you think about rising gas prices, when you think about the price [37:03] of food, just the basic needs that people in any city within our country, but really [37:08] the world need, those things continue to rise. And it's unfortunate when people were already [37:13] pinching their pennies, or their dollars, or their pounds, or their euros, and they pinched [37:17] them even more because of this war. [37:19] Okay. Let's talk about how that actually manifests itself, Mayor Scott, in Baltimore. You have one [37:28] of the highest growth rates nationally for a city. So in some ways, you're ticking a lot [37:33] of the boxes right now. But what you've also got is one of the highest poverty rates, and [37:39] you've got one of the highest unemployment rates. You are the classic K-shaped economy in [37:44] so many ways in Baltimore. How do you, as the mayor, make sure that the growth that is coming [37:50] in, the technology sector story that is coming into Baltimore trickles down to the people [37:56] at the bottom end of the economic spectrum that are feeling the cost of living crisis [38:01] that Anna just referenced. How are you going to close that K-shaped economy? [38:05] Well, look, a few of the things that we do there. First, we make sure that we meet any [38:11] needs that we can meet. This is why we just announced an historic way for us to wipe out [38:15] property tax debt for seniors. This is why we just announced a new historic program to help [38:20] renters with their down payments. This is why we've expanded our housing incentives for [38:25] low-income buyers, like buy back the block, allowing those folks to own homes at a cheaper [38:29] rate than they were renting houses. But it's also why we're doing things like our Infrastructure [38:34] Academy and why we're having our Employment Development Office train people in the jobs [38:38] of today. We have to continue to do all of those things to make sure. Yes, I'm very happy [38:44] that in my time in office, we've seen our lowest unemployment ever, but we know it's too [38:48] high. Yes, we've had the lowest amount of violent crime ever, but we know it's too high. We have [38:52] to continue to work on those issues each and every day. And we also have to step up rental [38:58] assistance programs, mortgage assistance program. We've even had to help up to step up some of [39:03] our federal employees who were fired by the administration with their basic needs. We're [39:07] going to continue to invest in those neighborhoods, specifically those neighborhoods that have been [39:12] disenfranchised through even our housing initiatives throughout tax instrument financing, which has never [39:17] been used for affordable housing before now, making sure that we're uplifting all the Baltimore residents, [39:22] but in particular, those who've been left behind. And there are plenty of them. One of the reasons [39:29] you've been, you have been very successful in attracting tech STEM talent into the city, but you've also got [39:37] one of the highest corporate rates that there are out there. Can you continue to attract those kinds of [39:44] businesses that Baltimore needs without incentivizing them further? Have you reached the limits of that? [39:50] What else can you do to attract more businesses back to Baltimore? [39:56] Well, we know that we can continue to attract more businesses, but it's also about the investment that we're putting into the city. [40:02] And when you think about what we're doing now with our downtown rise initiative, with our initiatives that we're working with the state of Maryland to allow us to cut [40:10] some of those rates that we have. We're going to continue to push on that. But we know through our investments, through our incentives and with the institutions that we have, whether it be Johns Hopkins University, University of Maryland, we're always going to be a hub for that. We're a very unique city. We have a great port and we have a great eds and meds system, but we know that we can do more in the city investment. We're no longer doing public subsidy in Baltimore. We're doing public investment with our tax dollars to make sure that our residents and our taxpayers are also benefiting. [40:39] Mayor Scott, what is the message that Democrats should be coalescing around ahead of the midterms in November? [40:46] Well, I think that when you think about cities in particular, right, when you look at cities around the country, Democratic mayors have been leading this historic reduction in violence in cities around the country. Democratic mayors have been leading these historic investments into housing initiatives and economic issues across the country. [41:08] We should be talking to people from their kitchen table in a local way to say we have made this progress, historic progress amidst all this chaos of this administration. And those who are at the local level should be lifted up as really the examples of how the Democrats should be leading at a national level. [41:27] And that's what I'm going to always say, because when you want to look for leaders right now and miss all the chaos and miss all the insanity, you look to mayors across the country. [41:35] OK, Baltimore Mayor Brandon Scott, we appreciate your time. Thank you for the Bloomberg City Lab event taking place right now in Madrid. [41:44] We're going to get your stocks to watch shortly. But of course, Guy was talking about the fact that it is now a major earnings story as well with BP and Barclays. [41:51] And you said at the top of the show off camera, and I think you tied it in as well, which is that essentially this is two trading stories from both Barclays and BP. [41:59] And as the oil traders have performed very strongly, they've been talking BP about that exceptional strength. [42:03] Yeah, we've seen it in Shell, we've seen it in BP. Barclays also demonstrating it in equities as well. [42:07] The turbulence, actually we were just hearing about the turbulence in our last interview that we're seeing. [42:11] This chaos is causing a lot of opportunities out there for the traders to become kind of real. [42:18] And you can see these numbers that these companies are generating as a result of that. [42:22] If you've got a trading arm, you're probably doing OK right now. [42:24] Let's get some details on this. Charlie Wells is here with all the numbers. [42:27] Good morning, guys. So, yes, let's talk about those trading arms because we've got BP in focus. [42:32] They reported a really strong earnings read this morning, and they really sit at the crosshairs of this question about markets, right? [42:39] About to what degree are earnings going to be the propellant today, or to what degree is that going to be geopolitics? [42:44] And you think about BP. We know this has been a company in transition. [42:47] They've been a company that's really been struggling with strategy. [42:49] But since the start of this conflict, you can see this orange line here. [42:52] That is BP relative to its European competitors. [42:55] It has been outperforming up about 20 percent since the start of their conflict. [42:59] A lot of this has to, since the start of that conflict, a lot of this has to do with that trading. [43:04] And what's interesting here in Europe, right, is that these oil majors have bigger trading operations. [43:09] than a lot of their American counterpoints. [43:11] So strength coming from BP on a lot of this trading. [43:15] Another earnings story we need to talk about is Novartis, different industry pharmaceuticals. [43:20] Novartis really has been trying to push forward with these innovative prescription drugs. [43:25] That's been part of their strategy. [43:26] You can see that they are actually up. [43:28] This, I believe, is actually year-to-date up relative to a number of their competitors here in Europe. [43:33] But they had a surprise profit miss this morning. [43:36] And there's a lot of generic competition out there. [43:39] They face the biggest patent cliff in their entire history. [43:43] But if you look at this forward guidance, this is a moment where, in markets, [43:47] a lot of this forward-looking commentary from executives matters more than some of these backward-looking numbers. [43:52] They talk about being on track to deliver full-year guidance. [43:55] So let's see how the market digests that. [43:57] Is it the backward-looking numbers or is it this forward-looking commentary? [44:01] Ending with Barclays because we've been talking about traders. [44:04] Look, their equities traders did really well, beat expectations. [44:08] Their fixed-income traders, though, missed there. [44:11] So a little bit of a mixed picture. [44:12] You can see outperforming the FITC here. [44:14] But another question with Barclays is market financial solutions. [44:18] That's that non-bank lender that collapsed. [44:20] Barclays had exposure there. [44:21] So looking for comments on the impairment there, the potential impairment. [44:25] What is that going to be? [44:26] How does the market digest that versus these earnings numbers? [44:29] Yeah, it seems £228 million charge in relation to the collapse of MFS coming through from Barclays. [44:34] So we'll certainly watch how all of those stocks perform at the open. [44:36] Charlie, thank you very much. [44:37] Charlie Wells, with some breaking news on some of the corporates we're following, [44:41] we'll be back to that very shortly. [44:42] Just a quick moment to reflect on the uncertainty that central banks are facing. [44:46] The likelihood of actually hitting your base case seems to be very difficult to pin down. [44:49] We're hearing from Governor Ueda saying the likelihood is down by a lot for the outlook to be met. [44:54] So they're watching to see whether they get back on track in terms of the outlook. [44:57] But right now, their base case looks unlikely, he is saying. [45:01] They don't. [45:02] These central banks just want to sit and watch, though. [45:04] They don't know what's going to happen next. [45:06] Are we going to get more of that this week? [45:08] Is that going to be the narrative at the end of this week? [45:10] To what extent can you extrapolate from what we're hearing from the BOJ? [45:13] They've been such an outlier and now are starting to converge in terms of rates [45:16] and in terms of the rate differential versus the US, particularly if the US cuts twice this year. [45:20] Coming up, it's the opening trade. [45:22] Futures, of course, currently pointing essentially flat this Tuesday morning. [45:26] Stay with us. [45:27] This is Bloomberg. [45:44] Morning, Tuesday morning. [45:45] This is the picture. [45:46] Well, this is the legacy from yesterday. [45:49] The Stock 600 finished down yesterday. [45:51] The S&P pushed up towards the end of the session, as you can see. [45:55] So we've got a little bit of upside maybe to price in. [45:57] Today doesn't feel like, though, at an index level in Europe we're going to see very much. [46:00] But, Tom, I know you're going to show us a very exciting set of numbers in just a moment. [46:04] There are some single stock stories out there that are very exciting. [46:07] I'm going to try and push this line. [46:08] Anna's going to break that down for us in terms of some of the individual names. [46:11] But to your point, if you lift the hood, because on the index level, we are called flat across the European stocks at 50 futures. [46:17] Again, given that drop of 0.3% by the close yesterday. [46:19] 51 under futures, despite the beats coming through for BP and Barclays and the high oil price, currently pointing modestly low, but just by four points. [46:27] We'll see how that adjusts. [46:28] Of course, DAX futures points of losses are just 20 points, down a tenth of a percent. [46:32] Anna, which names are you focused on? [46:34] Yeah, let's talk about some of the big companies that have been reporting here in Europe this morning. [46:38] Let's start with Barclays. [46:39] Traders missing out, perhaps, on the full extent of Wall Street's market windfall. [46:43] Certainly on the fixed side of things, there's a bit of potential for disappointment. [46:47] The fixed income traders, I should say, broadly flat year on year was the performance there, even though equity traders were up 16% on the year. [46:56] So that's something we'll watch. [46:57] One dynamic we will watch at the open. [46:58] BP, on the other hand, profits jumping on the back of their trading activities. [47:02] Oil trading booming during the Iran war, as you might expect. [47:07] We're also keeping an eye on Novartis as well. [47:09] Well, we are seeing there that the profit fell more than estimated, sales unexpectedly declined in the first quarter, and generic competition seems to be the area of negativity for the likes of Novartis. [47:20] We'll certainly keep an eye on what's happening on the Swiss and the UK markets then, Guy. [47:25] Absolutely. [47:25] Lots going on. [47:26] Keep an eye. [47:27] There's lots of other stocks. [47:27] Nordic Semi is going to be interesting. [47:29] Bayer is going to be interesting. [47:30] There's lots of single stock stories that we want to focus on. [47:32] At a headline level, though, let's see what's happening. [47:34] This is the opening trade, and we're not expecting it at an index level to deliver very much. [47:40] The FTSE 100, as Tom predicted, not doing very much. [47:43] We're down by one-tenth of one percent. [47:45] These are not big moves that we are talking about here. [47:47] The CAC your answer is expected to open in a similar sort of story. [47:51] Stock 600, basically that's just a reflection of the FTSE at this point in time, plus a few other single stocks. [47:56] We'll wait and see what happens there. [47:58] But nothing exciting to report. [48:00] But I can tell you that below the surface, exciting things are happening. [48:03] Single stocks are moving. [48:03] We're getting a lot of activity in terms of the corporate reports this morning. [48:06] So the AEX down by two-tenths. [48:08] The IBEX is up by four-tenths of one percent. [48:09] A little bit of outperformance coming out of Spain this morning. [48:12] The DAX, I'm wondering if the DAX will take a little while to get going this morning. [48:15] So we'll park that one for now and talk to Tom about what's happening in the sector story. [48:19] On the sector-by-sector story, then, energy not a big surprise, of course, [48:22] given the upside that we've seen in Brent in the session today. [48:24] So eight straight days, seven straight days of gains, and above $110. [48:27] About energy, seven-tenths of a percent. [48:29] That is the best-performing sector so far. [48:31] Basic resources up five-tenths of a percent. [48:34] Utilities gaining as well, just three-tenths of a percent. [48:37] In another way, of course, a headline flat market across the stocks, 600. [48:40] On the downside, health care. [48:42] So Novartis, a drag there. [48:44] On the broader sector, that is the biggest loss across your sectors, [48:47] is health care down seven-tenths of a percent at least so far. [48:51] Tech also lower by three-tenths of a percent. [48:53] Again, energy on the upside, biggest gain across your sectors, up seven-tenths of a percent. [48:58] And some individual moves that are pretty interesting as well, Anna. [49:01] Yeah, we've got Barclays down by 3.3 percent on the back of the numbers there. [49:06] Perhaps not necessarily getting the best of the gains for the thick traders that we saw for other Wall Street rivals. [49:13] BP is moving to the upside on the back of its strong trading performance. [49:17] So we've got two sides of that trading narrative. [49:19] So there's been a lot of volatility in who managed to make the most of it, I suppose. [49:22] BP winning out in terms of today's price movement, price action. [49:28] And Novartis down by 2.9 percent on the back of its numbers. [49:32] So that one just opened, actually, across the European markets. [49:36] So Barclays is being punished, which I think is interesting. [49:38] So I've seen two calls, one of which was higher, one was flat. [49:41] But it is down quite sharply, nearly 4 percent to the downside. [49:45] So Barclays under significant pressure this morning on the back of its numbers. [49:49] BP is outperforming the sector. [49:50] So the sector is higher. [49:52] You've got names like Total and Shell. [49:54] They're up by kind of six tenths of one percent, three tenths of one percent. [49:57] BP is outperforming. [49:58] It's up by two percent this morning. [50:00] So this is based on numbers. [50:02] This is not what we're seeing in terms of the commodity trade, which is interesting. [50:06] It is, though, getting a lift from that, too. [50:08] But it's interesting to see that we are seeing Novartis down. [50:11] But you've also got AstraZeneca soft this morning. [50:14] I just want to check that it's not one of the ex-divs, of which there are a few. [50:18] LVMH, Christian Dior, Henkel and Buig are ones that stand out. [50:22] So it looks like pharma is under pressure this morning as a sector. [50:25] And Novartis maybe is the catalyst for that. [50:28] Let's get another view on these markets then. [50:29] Geoff, you joins us, Senior Market Strategist over at BNY. [50:33] Geoff, good morning to you. [50:34] So I wonder whether you are, well, energy stocks once again to the fore, [50:39] energy prices moving higher, oil prices at 110 on Brent, up by another 2.4 percent this morning. [50:45] Do you see any reason not to lean further into energy names? [50:48] It's almost the safe haven sector right now. [50:51] If you look at our flow data, our holdings and figures, [50:53] what's interesting is some asymmetry coming through. [50:55] We've been tracking sort of how this gentle recovery has been taking place across sectors, [51:00] be it semis, even consumer staples and all of that. [51:04] But what's happened is even though you've seen a bit of a risk recovery across all themes, [51:09] energy hasn't come down. [51:10] So there's no rotation, let's say, out of energy and into some of the sectors [51:14] which have actually suffered. [51:16] People are staying there. [51:17] And I think this means they want that defensive hedge for oil prices [51:20] for many, many months to come at least. [51:21] Right, so for many months. [51:23] And so tie that expectation for energy stocks [51:25] to what your wider expectations are for European stocks then. [51:29] Well, for Europe, I think right now it's all about financial conditions [51:32] and the supply shock. [51:34] And to be frank, heading into Thursday, [51:37] the last thing that the ECB should be thinking about, I think, is tightening rates. [51:41] So I think the stock market heading into that decision [51:44] needs to be very cautious in terms of their outlook. [51:47] And I've seen a bit of a pullback in terms of their language, [51:49] I think, amongst the hawkish members of the governing council. [51:52] You don't lean into a demand contraction. [51:55] So I think from the earnings outlook, [51:57] both on the private side and also for corporate investment, [52:00] of course, they need to get the input side in place. [52:03] But they need to know that X energy, X supply, that financing, [52:07] what the ECB does, that is not an additional constraint. [52:10] And to be frank, that's what I'm worried about heading into Thursday. [52:12] You're worried that essentially the ECB makes a policy mistake [52:14] by hiking rates because of that single mandate on price stability. [52:19] That's a constraint for them. [52:20] Absolutely. And if you, again, go back to our flow data, [52:22] what's interesting is you've seen about 50, 75 basis points [52:26] being priced in a couple of weeks ago. [52:28] Well, more so, you know, for the BOE and the ECB. [52:30] OK, fair enough, right? [52:31] But then we also saw that divergence in terms of cable flow and euro-dollar flow. [52:37] The clients were hedging euro-dollar again, [52:38] not too keen on European exposure, but they were buying back sterling. [52:42] So you had this rare instance where the more aggressive central bank expectations become, [52:48] the more detrimental it was actually for the currency. [52:50] Normally, currencies don't behave like that, right? [52:52] So I think that was the market, or rather the equity market, [52:55] and certain parts of asset allocators hedging their equity flows [52:58] also telling the ECB this may not be the right approach. [53:01] How did that pound story play out then on the back of the BOE? [53:04] So that's, you know, where we'll see what the BOE signals, [53:08] but even from some of the hawkish members, [53:10] so, you know, maybe you get one or two hikes. [53:11] I think markets look for 8.1, you know, 7.2 at most. [53:14] But from the outset, if you look at the communication in March, [53:17] you know, for example, there wasn't that willingness to hike A and B. [53:21] I think a greater recognition, almost digital mandate, [53:24] you know, back to your point, a recognition that because the household [53:26] is in a very different place compared to 2022, [53:29] I just look at the savings rate in the UK, it's close to 10%. [53:31] In 2022, it was on the two-handle. [53:33] So households are far more retrenched, you know, compared to where we were, [53:37] and the BOE recognises that. [53:39] Is the Governing Council for the ECB recognising that going to acknowledge that? [53:42] I think that's going to be the key challenge for Thursday. [53:45] If the Fed cut rates, what would be the implication? [53:48] If the Fed cuts rates, the ECB hikes rates this year. [53:52] So that probably is actually going to be euro-dollar lower. [53:55] Right. [53:55] Again, because the Fed is, it's almost status quo, supporting the U.S. equity story. [54:01] So I've actually heard the phrase U.S. exceptionalism come back. [54:05] And what that means is stronger U.S. equities, firm flows into fixed income, [54:10] but crucially, the dollar strengthens as well, independent of what other central banks do. [54:16] That's the key element there. [54:17] So that is coming back into the lexicon, you know. [54:21] So January, February is all about hedging dollar, hedging your U.S. exposures. [54:25] That's sort of come off. [54:26] We've got to completely reverse that now. [54:27] Indeed, indeed. [54:28] The U.S. story, though, is predicated on the idea that the tech story continues. [54:32] Yes. [54:34] We've got this kind of weird situation where we've got rising oil prices globally. [54:38] The global economy is going to come under strain. [54:40] Yeah. [54:40] Yet the tech story appears to be independent of that. [54:43] Is it independent of that? [54:44] So I guess you can make a stronger argument for the time being on the U.S. side of it. [54:49] And I say this pointedly, the U.S. side of it, you know, given the U.S. is an energy exporter right now, [54:53] it's pretty much achieved energy independence, it's going to struggle less with the supply side of things. [54:59] And also, you know, tech has almost always been, let's say, inflation-neutral or input-cost-neutral [55:04] because it's a secular story. [55:06] I guess two to three months down the line, we haven't been talking about, you know, helium supplies, [55:11] you know, for fabrication for South Korea and Taiwan. [55:14] I think that side of things is what the market will need to lean a bit more to. [55:18] So it's not about the investment demand and the cyclicality of it. [55:22] It's more will supply constraints actually affect the actual manufacturing process and the fabrication process. [55:27] But I guess markets are just assuming that we'll have some kind of a deal [55:31] and the straits will open at some point. [55:32] If it doesn't, over the coming weeks or months, if the manufacturers, the fabricators, start to signal supply constraints, [55:39] I think that's where some readjustment of expectations will be needed. [55:42] But we're not there yet. [55:43] So interesting to see if those two stories do come together. [55:45] I mean, yesterday we were watching those headlines drop about META, [55:48] talking about getting its power from space. [55:51] I mean, getting it, you know, this is the extent to which this is a sector that does have power needs. [55:55] They're talking about investing in space. [55:57] It's quite the reach, isn't it? [55:58] It is. [55:59] It is, you know. [55:59] So you wonder whether these two stories will find each other. [56:02] So going back to where you were talking earlier on, Jeff, about FX then [56:06] and the way you're seeing these really interesting moves in FX markets. [56:08] So are FX markets not really moving on interest rate differentials then? [56:12] That's not the driver. [56:13] Is that the message? [56:14] I think it's policy optimality first. [56:16] If you look at some other, so names like Norway, for example, [56:19] maybe some are weakness heading into month-end rebalancing. [56:22] But Norgas Bank, they've signaled one hike. [56:26] The terms of trade situation for the commodity names in general, that overweighs that. [56:29] So for the commodity names in FX, for the carry trade, especially in Latin America, [56:33] again, that's another area where our clients along the FX, along the bonds as well. [56:37] It's almost priced for perfection. [56:38] That's where I'm seeing, I think, a bit of a recovery or rather a bit of an adjustment is needed [56:46] because the carry trade's gone a bit too far. [56:48] But for European economies in general, I think anywhere, if they hike, [56:54] leaning into a demand shock story on the back of a supply shock. [56:58] Just look at every single PMI print, consumer confidence print. [57:01] It's been really soft right now. [57:02] That probably is not the right way forward. [57:04] But having said that, in Asia, Southeast Asia in particular, [57:07] the Philippines last week, for example, [57:09] that's where you're starting to see tightening come through. [57:11] So they're more attuned to the balance of payments issues. [57:13] And that's where some divergence may come through as well. [57:15] So it's not about tightening per se, it's about tightening for the right reason or the wrong reason. [57:19] Jeff, on the earnings story around tech and U.S. big tech names reporting this week [57:23] through Wednesday and Thursday, Amazon, Microsoft, Alphabet, etc., through to Apple, [57:29] do the markets reward them if they start to suggest and point to a little bit of calling [57:35] in terms of the capex spend? [57:36] If they start to show that they're being a bit more conservative on the capex spend, [57:39] does the market reward them? [57:40] Or do they get punished because of fears that maybe the AI story is not coming to bear quite [57:46] as some had expected? [57:47] I think it's adjusting. [57:48] So addressing the right balance. [57:50] I don't think punish is the right word. [57:52] But I think there's going to be greater appreciation for your ROI. [57:56] So what is your case from the capex right now? [57:59] So if you can match your capex with a solid demand story, [58:02] I think there is a little path where markets can actually find the right way. [58:06] But also there needs to be some acknowledgement about wider circumstances. [58:08] It's like a Goldilocks moment, really. [58:10] Well, I think we're searching for that Goldilocks moment. [58:12] But again, Goldilocks is U.S. exceptionalism, right? [58:15] So is the market jumping back on that story, that AI-driven U.S. exceptionalism story, [58:19] a bit too early, you know, given what's going on? [58:22] It remains to be seen. [58:22] But we seem to be so... [58:23] Is the market just looking for somewhere to hide, though? [58:25] Because you've clearly got an energy crisis that is forming around the world. [58:29] Every day the Australia performance is closed. [58:31] And what do I invest in? [58:33] Probably the least affected sector I can find. [58:35] But there's an awful lot of money crowding into a space that is like the semi-sector, [58:39] very cyclical, historically, quite small. [58:41] And there's a lot of money going into that right now. [58:42] So I think history might show that safe havens are safe havens until they're not, right? [58:46] So it should be treating, you know, the AI theme and semiconductors as a safe haven right now. [58:50] If you look at your flows into South Korean equities, how they've recovered into Taiwan, [58:53] you know, that should still be seen, again, as a secular theme. [58:56] I think safe haven in the current environment is, as you say, [58:58] something that is insensitive to the energy shock or to price constraints. [59:02] But when financing becomes difficult, and crucially, if inflation in the U.S., [59:07] if inflation expectations start to pick up again, and then the Fed may need to, [59:11] OK, so subject to Walsh coming in and all of that, [59:14] they may need to adjust, you know, their views on where financing comes in, [59:17] where the cost of money comes in. [59:19] That's when things change, right? [59:20] It wasn't that long. [59:21] They were pricing in two cuts. [59:22] Indeed, yeah. [59:23] Jeff, nice to see you. [59:24] Always a pleasure. [59:24] Thank you very much indeed. [59:25] Jeff Hughes, Senior Market Strategist, joining us on BNY. [59:27] Call 6 looks like this this morning. [59:29] It's definitely a morning for single stock stories to watch out for. [59:32] In terms of the numbers we're watching, LVMH is XD today. [59:35] Defense stocks are a little higher. [59:37] The chip space is mixed this morning. [59:38] Nordic Semi is certainly having a good day. [59:41] Elsewhere, the pharma space is under pressure. [59:43] Let's get some more details. [59:44] Barclays is having a tough morning on that thick miss. [59:47] We'll talk about that. [59:48] We've also got BP out with a trading story as well. [59:51] Charlie Wells, what do you got? [59:52] Good morning, guys. [59:52] So it really is a single stock day, and these are the sort of mornings that I really live for. [59:56] Let's start with BP, right? [59:58] They're up over 2.5%. [59:59] This is on the back of a really strong earnings report. [1:00:03] We knew going into this that their oil trading was going to be up. [1:00:06] BP has had a really good past couple weeks because they have that limited footprint in the Middle East. [1:00:13] So again, this looks like it's positive news coming from that trading front. [1:00:16] This is a boost for their fourth CEO in the past six years. [1:00:20] So again, is this a different trajectory for this company? [1:00:23] At least this morning, that is what we're seeing. [1:00:25] Different story when you go to Barclays. [1:00:27] Let's bring that up and see how the market is digesting their earnings report that just broke in the past hour. [1:00:32] Barclays is down almost 3%. [1:00:33] And this was, again, a story of trading, but a story of trading that didn't bode as well as a lot of its peers in the United States. [1:00:39] So we know that market volatility had been really good for a lot of trading desks. [1:00:44] But at Barclays, we saw weakness coming from their fixed income side. [1:00:47] We saw an OK quarter for their equities trading. [1:00:50] They beat compared to last year, but they just didn't have that bonanza that a lot of these big Wall Street banks had. [1:00:56] So a challenging day for Barclays, especially as we think about some of their exposure to that non-bank lender market financial solutions. [1:01:03] Buyer also in the red down over 4%. [1:01:06] This is interesting. [1:01:07] So this seems to be the market interpreting the comments that we were getting yesterday at the Supreme Court in the United States. [1:01:14] Buyer faces a lot of litigation risk from Browned Up, which is that weed killer. [1:01:20] There are allegations that it should have listed it as cancerous. [1:01:24] That is a case that's going through the Supreme Court right now. [1:01:27] It was mixed results coming from some of this commentary. [1:01:29] So this seems to be the market not liking what it was hearing out of the Supreme Court. [1:01:33] Let's flip and take a look at Novartis in the pharmaceutical space because they had a negative earnings report this morning, down over 4% here. [1:01:42] And again, they face some competition from generic drugs. [1:01:45] That kind of stands in contrast to their strategy. [1:01:48] They really have this cliff, this patent cliff coming up, the biggest in history for them. [1:01:54] So again, struggling there. [1:01:55] A lot of this competition coming from generic drugs at Novartis. [1:01:59] Let's end on PostNL. [1:02:01] So again, this is an interesting read on the market right now. [1:02:03] It's a really interesting read on kind of the geopolitical situation right now because they are down. [1:02:08] They also had a disappointing earnings report. [1:02:10] And their management was talking about the environment that we're operating in, this challenging macro environment, consumer confidence down, right? [1:02:17] Consumers not buying and spending as much, so not shipping as much. [1:02:20] And then also fuel costs coming into focus. [1:02:22] So again, today we're getting a lot of that energy. [1:02:24] We're getting pharmaceuticals. [1:02:26] And we're also getting shipping. [1:02:27] But we're seeing how they're really linked. [1:02:28] Charlie Wells, thank you very much indeed. [1:02:31] We're also going to focus in on Nordic Semiconductor because that stock is up close to 6% after a beat in the first quarter. [1:02:38] Executives there talking about their exposure to AI and edge computing, devices, Internet of Things typically is where this company has exposure. [1:02:46] And they're growing that expansion. [1:02:47] But they're talking up that AI edge story. [1:02:49] The margin is looking pretty healthy as well. [1:02:51] Gross margin for Nordic Semiconductor in the first quarter at 52.1%. [1:02:55] And there's a stock up close to 6% in the session today. [1:02:57] How close are we to the point at which the market has, how much more, these companies have got to deliver a lot of good news going forward? [1:03:03] Yes. [1:03:04] And these companies need to, and this is having an impact on where value is being found or where market cap is being found around the world, isn't it? [1:03:16] So we've got, yes, the European story here, but a lot of the Asia, a lot of the tech enthusiasm right now is in Asia, right? [1:03:23] It's in South Korea and it's in Taiwan and we've seen the South Korean market now become larger than the UK's. [1:03:31] And this follows after the Korean stock exchange, sorry, the Taiwanese stock exchange became larger as well than the UK. [1:03:38] You just have to look, back in 2024, the UK market was twice the size of the South Korean market. [1:03:43] And now the South Korean market above 4 trillion with that growth of around 40%, 45% this year versus 3% for the UK market. [1:03:49] So, yes, we've been eclipsed again. [1:03:51] Old economy, new economy. [1:03:52] Okay. Quick line out of Governor Ueda that's coming right now. [1:03:57] A hike is possible, Governor Ueda says, this is the press conference, it's ongoing, if the economy doesn't have a big slowdown, which I think is really interesting. [1:04:05] So is he focusing on the hit that could come from higher oil prices, higher energy prices, higher prices more broadly, and that is a tax effectively and a slowdown, i.e. [1:04:15] it is going to slow the economy down rather than worrying about the inflationary story, which will potentially come from it as well. [1:04:21] Well, that's the kind of the dual mandate debate that is going to be happening around the world. [1:04:24] Maybe not at the ECB, but elsewhere, certainly. [1:04:27] And that's what they're trying to balance right now. [1:04:29] They see the inflation, but they also see the risk of a growth slowdown. [1:04:32] Really complicated picture. [1:04:33] I will say that the dollar-yen is entirely flat now as a result of this press conference. [1:04:36] So he's said a lot of things, and that one recently pushing the dollar-yen back to flat. [1:04:43] Coming up on the program then, we will talk about BP and its share price performance this morning. [1:04:48] This is one of the beneficiaries of strong trading over the past quarter. [1:04:52] BP's earnings jumping. [1:04:53] The Iran war, of course, leading to a surge in profits. [1:04:56] Its trading arm doing very well, particularly around oil. [1:04:59] This is Bloomberg. [1:05:19] BP's stock up 2.7% right now. [1:05:21] It's reported numbers this morning. [1:05:23] First quarter pickup led, of course, by the disruption that has been caused as a result of the situation in Iran. [1:05:30] Oil trading, certainly a big beneficiary of that. [1:05:32] Bloomberg, big oil reporter. [1:05:34] Big oil reporter. [1:05:36] Mitchell Furman. [1:05:38] It just came out weirdly. [1:05:40] I'm sorry. [1:05:42] Trading did well. [1:05:43] Yeah, it was an exceptional quarter as BP characterized it. [1:05:47] And, you know, this is big for the company as their rivals saw some of their operations in the Middle East disrupted [1:05:55] and production offline in that region. [1:05:58] And BP was able to escape more of that than most of their peers. [1:06:03] And because of their trading operation, they were really able to kind of capitalize on these market disruptions. [1:06:08] What does this mean for the relatively new CEO then, Meg O'Neill? [1:06:13] I mean, to what extent does this bolster her prospects? [1:06:15] This is a company that's had to kind of rethink its strategy a number of times. [1:06:19] She's now at the head of the operation, trading performing well. [1:06:22] They're benefiting. [1:06:23] It's uncomfortable truth, but they're benefiting clearly from the disruption in the Middle East. [1:06:27] How does that set her up? [1:06:28] Yeah, a lot of work to go for the new CEO. [1:06:30] But analysts are characterizing this as a positive start and a strong debut. [1:06:34] You know, this is a tailwind as she seeks to repair the balance sheet and bring down debt. [1:06:40] Debt did rise in the quarter. [1:06:42] That is partially a result of a working capital build. [1:06:46] But no doubt earnings more than doubled from a year earlier. [1:06:51] Clearly the focus very much on the strength in the trading area, Mitchell. [1:06:55] I was looking through the statement, and every time they mention trading, [1:06:58] the word exceptional is somewhere in the text, somewhere around that. [1:07:01] So clearly that's done well. [1:07:02] Are there execs in the industry, though, in big oil who are concerned about demand destruction [1:07:08] if prices stay this high? [1:07:09] Or are they just happy to take these kind of prices? [1:07:12] Yeah, no. [1:07:12] I mean, look, at these higher prices, there are other issues that are introduced, right? [1:07:17] The companies themselves have to pay higher prices for products. [1:07:20] You know, BP mentioned today in the statement that refining margins, [1:07:24] which were strong in the quarter, but they remain sensitive to the Middle East uncertainty. [1:07:31] And, you know, as BP, you know, they need to pay more to source their products. [1:07:36] Mitchell, thank you very much indeed. [1:07:38] Bloomberg's Mitchell Furman on the results for BP and how that sets the company up for the quarters ahead. [1:07:43] Now to what's happening in the tech space. [1:07:44] OpenAI reportedly missed its own user and sales goals. [1:07:49] This, according to reports in the Wall Street Journal, suggesting that it's fueling internal concerns [1:07:54] that the company may struggle to support its astronomical spending on AI infrastructure. [1:07:59] Neil Campling, Bloomberg's senior strategist, joins us now. [1:08:03] Neil, the context is that OpenAI has promised to invest or to be involved in about $1.4 trillion [1:08:09] of infrastructure spending. [1:08:11] It's worth noting that those, not all of those, are lock-solid concrete commitments. [1:08:15] It's more of an aspiration. [1:08:17] But nonetheless, it's causing some concern. [1:08:19] We saw that reflected in the SoftBank stock today. [1:08:22] That's a clear read on OpenAI. [1:08:24] There is concern amongst investors that maybe OpenAI is not getting the traction needed to support that spend. [1:08:31] Very fair. Fair summary. [1:08:33] I'm not even sure why you need me here. [1:08:35] The additional context, Neil, on how investors are looking at this. [1:08:38] Is that the right read on this? [1:08:41] And is this a question about competition versus Gemini and Anthropic or something else going on here? [1:08:45] I think it is highly likely to be about competition. [1:08:49] Anthropic, which the developers came out of OpenAI originally. [1:08:52] So let's look at the context here in that OpenAI put out a statement at the end of March [1:08:58] saying they were running $2 billion of revenue a month. [1:09:03] Bloomberg News reported last month that Anthropic were already running $20 billion a year. [1:09:09] Where they're only a fast follower. [1:09:11] So they're already catching up really quickly with OpenAI. [1:09:15] The question is asked if they haven't reached the $1 billion of active weekly users at OpenAI, [1:09:20] whether that's reflective of these competitive challenges. [1:09:23] I suggest the answer is yes, it is. [1:09:25] And if you look at the stocks involved in these various AI complexes, the Google AI models, [1:09:33] which have not had a recent update, but they've had a fantastic run. [1:09:38] You've seen a lot of the whistle of SOX index, as we've mentioned before on the show, [1:09:43] that has had this record run, which came to an end yesterday. [1:09:45] So I think there are definitely questions about, back to the old questions, [1:09:50] are we going to see the return on investments from all of these massive AI spends? [1:09:55] And that question remains to be seen. [1:09:57] But leadership changes so quickly in check. [1:10:00] Where do you justify the trillion dollars of spend that's coming through? [1:10:03] Pre-to-ware batteries, CATL, overnight raising money in Hong Kong. [1:10:07] Had to price it at the, this is a private placement, this is a stock that's listed, [1:10:10] this is a private placement, but they priced it at, what, a 7% discount, bottom of the range. [1:10:16] Why did they have to price it at the bottom of the range? [1:10:20] It's a huge, it's a huge raise for one thing. [1:10:22] And the returns investors are going to get on this particular product is a long term out [1:10:28] because what are they mainly using the money for? [1:10:30] Guess what? [1:10:31] It's AI related, it's data centers, it's storage, it's energy storage for the data centers. [1:10:37] So again, it's not like, it's not like we're going to get a quick return [1:10:41] on any of these kind of investment cycles. [1:10:43] It's a very long dated, the AI data centers, [1:10:47] some of them are taking five to 10 years to actually come up to sort of commercial viability. [1:10:52] So I think you have to price this at a reasonable discount [1:10:55] because the investors are going to take a long time to get returns on those investments. [1:11:00] Neil, thank you very much. [1:11:01] Thanks for joining us. [1:11:02] Bloomberg Senior Strategist, Neil Campling. [1:11:04] Coming up on the program, we'll check on Barclays [1:11:06] and discuss European bank earnings. [1:11:08] Chris Hallam will be with us, head of European Financials Group [1:11:11] at Goldman Sachs Global Investment Research. [1:11:14] What do we take away from the Barclays numbers [1:11:16] in terms of the performance at the top line versus Wall Street? [1:11:20] It seems as if that is something that is weighing on the share price today. [1:11:24] What do we know about the rest of the European bank earnings season? [1:11:27] We're about to get some other earnings this week. [1:11:29] We'll get into that as well. [1:11:31] This is Bloomberg. [1:11:31] Welcome back. [1:11:47] This is the opening trade, 30 minutes into Tuesday's session. [1:11:49] And it's a negative one, but just down by a tenth of a percent or so. [1:11:52] So that's the overall picture on the stock, 600. [1:11:54] The DAX is one of the worst performers of the major markets, down by a quarter of one percent. [1:11:58] Bayer is one of the stocks under pressure on the German market. [1:12:01] The CAC is pretty flat. [1:12:02] The FTSE 100 also pretty flat. [1:12:04] But just to the upside, energy and utility stocks, Guy, [1:12:07] no surprise that those are moving higher today. [1:12:09] And they cushion the FTSE 100 from the worst of the downside, [1:12:13] given that oil prices are higher. [1:12:14] Basically, indexes aren't moving very much this morning. [1:12:17] And you can see the reason why right here. [1:12:19] This is the stock 600, 290 stocks up, 289 down. [1:12:25] Basically, kind of one for one in terms of what we are seeing. [1:12:28] Obviously, there's a weighting issue, and that is a factor. [1:12:30] Volume is, once again, slightly weak. [1:12:33] And that is a consistent theme that we see in these markets, [1:12:36] which are struggling, I think, to get full interest from all of the normal investment groups. [1:12:43] And that is why you're getting that number. [1:12:45] But we're basically in a balanced market. [1:12:47] So let's talk about the leaders and the laggards, because it's a single stock kind of day. [1:12:50] Nordic Semi is having a great day on the back of its numbers. [1:12:52] It is rising sharply. [1:12:54] It's off its earlier highs, but still up by 6.5%. [1:12:56] BP has had a very solid day as well. [1:12:58] You can kind of understand why with what is happening with the oil price in terms of the kind of the basic, [1:13:03] we are a producer of hydrocarbons business story. [1:13:07] But actually, the story here is about trading, and the trading has done very well. [1:13:10] BP up 3% on the back of that. [1:13:12] Anglo is also rising. [1:13:14] So commodities are having a good day. [1:13:16] We're up by 1%. [1:13:16] It's got numbers out this morning. [1:13:18] Downside. [1:13:19] Let's talk about the downside. [1:13:20] Novartis. [1:13:21] I wasn't expecting this this morning, but we got it. [1:13:23] The numbers look weak, and the market is reacting quite negatively to Novartis [1:13:27] on the back of those sort of numbers, and it's dragging the entire farmer space with it. [1:13:32] Farmer is definitely under pressure this morning. [1:13:34] Buyer is also under pressure. [1:13:35] This is a ruling from the Supreme Court, which obviously relates to the Monsanto acquisition. [1:13:39] It is down by 3.41% on the back of that. [1:13:42] That's a big drag on the German market. [1:13:44] Barclays is the interesting one today, and the narrative here basically is not as good as Wall Street. [1:13:49] Seems to be the story. [1:13:50] Equities did pretty well, but it's the thickness that seems to be actually the factor that is concerning people here on the trading side. [1:13:56] But there are other elements which we'll get into in a few minutes' time. [1:13:59] But Barclays on the back of this is down by 3.3%. [1:14:01] Basically, what you've got today on the FTSE is the commodity side of things and what is happening on the farmer side of things. [1:14:09] And both of those two are kind of offsetting what we're seeing in the FTSE 100. [1:14:13] But Barclays is down 3.4%. [1:14:15] I think the call with NCAT is ongoing as we speak. [1:14:18] Anna, what do you got? [1:14:19] Yeah, let's talk about some of the other stories we're covering then this morning. [1:14:22] The Bank of Japan left its benchmark interest rate unchanged in a split vote. [1:14:26] The 6-3 vote represents the biggest divide under Kazuo Ueda's governorship, suggesting swelling pressure to normalise policy. [1:14:35] With traders seeing a 74% chance now of a rate hike when the BOJ next sets policy. [1:14:40] That'll be in June. [1:14:42] Bloomberg has learned that Blue Owl investors have rebuffed a share buyout offer led by Saba Capital's Boaz Weinstein. [1:14:48] Sources say holders tendered less than 1% of shares in Blue Owl Capital to Saba and Cox Capital Partners, which had offered to buy them at a steep discount. [1:15:01] It suggests the malaise in private credit has its limits with investors. [1:15:05] And nine jurors have been seated in the trial between Elon Musk and OpenAI chief Sam Altman, a case that could determine the future of the AI company. [1:15:14] Musk accuses co-founder Sam Altman of abandoning the company's altruistic principles and converting to a for-profit company. [1:15:22] Altman and the company say that Musk is trying to undercut competition for his own AI startup. [1:15:27] Musk is seeking $134 billion. [1:15:30] Tom. [1:15:31] Let's get back to the banking space right now and what's happening with Barclays. [1:15:34] Barclays shares lower, as we were marking this morning after the company reported that traders struggled to capitalise on a volatile quarter with returns falling short of their U.S. rivals. [1:15:43] Let's bring in Chris Hallam now, head of European Financials Group at Goldman Sachs Global Investment Research. [1:15:48] Chris, thanks for joining us. [1:15:50] I want to start on the fixed income story for Barclays then that Guy and Anna have been zeroing in on. [1:15:54] By comparison, so JPMorgan's FIC trading came in 21% increase, Morgan Stanley's 29% increase, Citigroup 13% increase, Barclays 1% rise in FIC year on year. [1:16:06] How much of a problem is this for them longer term? [1:16:08] I think there are two things to think about within the print this morning. [1:16:10] And as Guy mentioned earlier, Barclays is a little bit lower with a P&L that's a slightness versus expectations. [1:16:15] But before we come to that FIC point specifically, there are a few different elements within the P&L to consider for the first quarter. [1:16:21] So they had a motor finance top up. [1:16:22] They had an expected provision on a one-off name in the IB. [1:16:25] And they had a slightly higher level of underlying OPEX, which they're sort of talking about as accelerated investment. [1:16:30] If you exclude those things, then the P&L is a little bit better than people thought it would be. [1:16:33] It's sort of very easy, though, to say if you remove all the bad news, there's good news left over. [1:16:38] So I think that's something to consider. [1:16:40] Specifically within FIC, I think it's really difficult to read into one quarter. [1:16:43] We need to look at one quarter, you know, first quarter last year, two years ago, three years ago. [1:16:47] There is a broadening narrative, though, about capital intensity within the markets businesses. [1:16:50] Broadly, we're seeing a narrative across the IB space that the markets businesses are holding up really well. [1:16:55] But it is a competitive world. [1:16:57] There's more balance sheet being put to work. [1:16:58] You can clearly see that from Barclays, not just in FIC, but in equities as well. [1:17:02] And to what extent can these banks keep up with some of the competition, particularly when you've got certain banks, Barclays is one of them, [1:17:08] that self-imposes a cap on how much of their group balance sheet they want to put to work within the IB versus the UK versus the U.S. consumer business, for example. [1:17:15] So today's market reaction is an overreaction or it's fair? [1:17:17] I think today's market reaction is an early reaction, I think, to begin with. [1:17:21] It is a pretty messy P&L, I think, if you dig through all those different line items I talked about. [1:17:26] And then I'd also say, you know, This Is Bank has been an unbelievably good story for the last 18 months or so. [1:17:30] Very strong capital markets day beginning this year, multifaceted business plan. [1:17:34] Big, I think, focus on the potential for shareholder distribution to exceed how it's been guided to. [1:17:40] So people looking for upside in that regard. [1:17:41] But your question on competition within FIC actually speaks to capital intensity of your growth. [1:17:46] So if your growth is becoming more capital intense and the narrative in part around the story is increased capital flexibility, [1:17:51] those two things, to a degree, stand in contrast to one another. [1:17:54] And so we need to sort of digest whether overall capital flexibility is being reduced by some of these dynamics you talked about. [1:18:01] Is it unfair to compare European banks to Wall Street banks just in terms of the capital rules that they both work with? [1:18:06] I think comparisons are never perfect. [1:18:08] You're right. [1:18:08] And look, I think the direction of travel was quite clearly in two different directions for a lot of the last six to 12 months. [1:18:13] You've seen in the last six weeks or so a little bit of news flow that may be supportive of an easier approach from the European side. [1:18:21] We had a proposed rule change effectively delayed last week. [1:18:24] So that makes it easier for some of the European trading operations. [1:18:27] The UK has always been slightly more accommodative. [1:18:29] I think less so on the regulatory side, but also just clearly in terms of scale. [1:18:33] Right. [1:18:33] So you look at the banks, which are number five, six or seven in some of these markets businesses. [1:18:38] The banks, which are the top three, are sort of double or three or four times the size of those. [1:18:42] So it's just economies of scale to consider here as well. [1:18:46] European banks have had a great run over the last few years. [1:18:49] But I'm looking at PMI data. [1:18:50] I'm looking at economic data. [1:18:51] And that's telling me that maybe we're seeing an economic slowdown. [1:18:54] The oil price could be a big factor in that, but there's other stories to plug in as well. [1:18:58] Do I want to own banks in an environment where you are seeing PMIs rolling over pretty sharply, [1:19:04] where I am seeing economic growth rolling over? [1:19:06] What is it going to take to get European banks in terms of the upward trajectory we've seen in share prices back on track? [1:19:12] Can they do that with this macro backdrop? [1:19:16] So I think history would tell you you absolutely do not want to own banks in periods where the macro news is getting weaker or rolling over. [1:19:22] But I think today is a little bit different to where it's been in the past, and we can talk about that. [1:19:26] I think we've said, is there value in this sector and is this sector resilient? [1:19:30] There's clearly value in the sector. [1:19:31] The sector trades at 10 times earnings. [1:19:33] European equities are at 15 times. [1:19:34] They're paying out effectively all of their earnings. [1:19:36] So you get paid best part of 9-10% a year to own a European bank on average today. [1:19:41] Are they resilient? [1:19:42] So there's two question marks there. [1:19:43] One is, what have you been lending over the last four or five years? [1:19:45] And what's your risk on credit losses, to your point? [1:19:47] Higher energy prices, higher unemployment, etc., etc.? [1:19:50] We think that risk is much lower than it's been in the past, partly because the lending patterns have changed so much in the last five to ten years. [1:19:56] So the balance sheets of themselves are less risky. [1:19:59] The balance sheets are less committed to lending than they've been in the past. [1:20:03] So loan-to-deposit ratios have come down. [1:20:05] Actually, banks make a lot of money off their liability income. [1:20:07] You've seen that with Barclays this morning, increasing their hedge income. [1:20:09] So they're less reliant on lending to generate a unit of revenue. [1:20:13] That means they're less susceptible to credit risk increasing because they're doing less lending. [1:20:17] And then you've got things like the growth of the SRT market, which enables them to sort of push risk into other areas of the financial system and not sit on all of it themselves. [1:20:25] Chris, good morning. [1:20:26] Do you ever worry about that SRT reflex, the sort of removing it from your own balance sheet and put it somewhere else? [1:20:32] So in theory, I worry about it a little bit, yes. [1:20:35] I think there's different ways to worry about it. [1:20:37] First, does it all fall apart? [1:20:39] No. [1:20:39] We don't worry about it from that perspective. [1:20:41] These are very well-structured deals. [1:20:42] I think, do some banks become more reliant than they should be on SRTs to provide them with regulatory capital? [1:20:49] And then what do they do with that? [1:20:50] If you do an SRT, your capital ratio goes up, simplistically. [1:20:53] How much of that are you doing? [1:20:54] How much are you inflating your capital ratio? [1:20:56] If we get into a weaker macro scenario, to Guy's point, do you then end up with less of an SRT market to keep using and keep relying on for that capital? [1:21:04] That's where I think we think about it. [1:21:06] But no bank is getting close to that level yet. [1:21:08] So the yet is doing a little lifting in that sentence. [1:21:10] OK, so it's quite a marginal activity at the moment for these banks. [1:21:13] What about the overall interest rate environment then, to Guy's point, about watching these PMIs roll over, in particular on the services side, in the Eurozone, I'm thinking here. [1:21:21] And now there's a real intense focus on how the ECB is going to play this. [1:21:27] Are they going to hike because inflation matters so much? [1:21:30] Are they going to not hike because they're worried about growth? [1:21:33] Are they going to do both but into different time horizons? [1:21:35] How are banks thinking about that? [1:21:36] So I think banks are thinking a lot about that. [1:21:39] And we've got 20 banks reporting this week. [1:21:41] So we'll know a lot more by the end of the week than this morning. [1:21:44] But I think there are two things to think about. [1:21:45] Are these hikes good or bad? [1:21:46] They're good mechanically for the P&L because net interest income rises a little bit because of the higher rates, as you mentioned. [1:21:52] But there are reasons as to why they're doing that. [1:21:54] And those sort of concerns can show up elsewhere in your P&L. [1:21:57] I think, and Tom and I have discussed before, I think there has been a sweet spot assumption that 2% to 3% on a Euro policy rate is sort of the sweet spot. [1:22:04] So if you look at market implied forward policy rates, we're going from 2% to 2.70%. [1:22:09] So there's sort of two and a half hikes kind of embedded into the curve. [1:22:11] That is still within our sweet spot. [1:22:13] So not so high that you're going to start to squeeze some credit exposure, but not so low that you're going to start to see really your P&L collapse from having lower net interest income. [1:22:21] Rest of the week, what are you looking for? [1:22:23] What are the big names that stand out? [1:22:24] Where do you think the surprises could come from? [1:22:27] If I knew that, my job would be a lot easier. [1:22:31] There's 20 banks reporting. [1:22:32] There's going to be a lot of news. [1:22:33] I think the consistent message is going to be from a consistent question. [1:22:37] How are you considering the impact of higher rates to this question earlier? [1:22:40] And what are you seeing on the credit side, if anything, that gives you cause for concern? [1:22:44] I think the growing debate as well is how does the real economy respond to an extended period of uncertainty? [1:22:51] And in theory, you'd say lower activity, lower growth, lower lending. [1:22:55] But when we've seen this happen in the past, particularly in 2022, you saw restocking. [1:22:59] You saw companies buying more inventory at elevated prices. [1:23:01] And actually, you saw loan growth increase slightly. [1:23:04] So if we go into the back half of the year. [1:23:05] That was where the demand was strong. [1:23:07] The economic cycle feels different this time. [1:23:10] Last time we had strong demand. [1:23:11] This time we don't. [1:23:12] Yeah, I think. [1:23:13] So the economic cycle definitely feels a little bit, I mean, never feels the same in two different downturns. [1:23:17] But I would say, simplistically, because these banks have, on a relative basis, been growing that lending slower than they have done, let's say, than deposits have been growing. [1:23:24] They've got the headroom to be there for clients. [1:23:25] They've got the capital headroom and the liquidity headroom. [1:23:28] So they can lean in a little bit. [1:23:29] We talked about fixed balance sheet, you know, capital consumption. [1:23:32] If they do lean in, the P&L in the second half becomes more aligned on lending. [1:23:36] You lose a little bit of RWA flexibility that will feed into slightly lower capital. [1:23:40] I keep this conversation going for ages. [1:23:42] We didn't talk about private equity and private capital. [1:23:44] There's all kinds of other things that we need to talk about. [1:23:45] Fantastic to see you. [1:23:46] Thanks for stopping by to see us. [1:23:47] Chris Allam, head of European Financials Group at Goldman Sachs Global Investment Research. [1:23:51] Thank you very much indeed. [1:23:52] Coming up, we're going to take you back to the oil price and talk about what is happening there. [1:23:55] The oil price continues to tick higher. [1:23:57] This is the number you're looking at on the screen in front of you. [1:24:00] Still got a straight up onwards that is closed. [1:24:02] Apparently, the U.S. is weighing another proposal from Iran. [1:24:04] We'll have the latest for you next. [1:24:06] This is Bloomberg. [1:24:27] Welcome back. [1:24:28] This is the opening trade. [1:24:29] Brent crude prices heading higher once again. [1:24:31] It's the seventh day where we're seeing this. [1:24:33] We're actually over 111 now on the Brent price. [1:24:36] This as traders weigh the next steps towards peace talks, [1:24:39] with the United States discussing a proposal from Tehran, we understand. [1:24:43] For more, we're joined by our Middle East energy reporter, Anthony DePaola. [1:24:46] Anthony, good to speak to you. [1:24:48] So what do we know about the proposals put forward by Iran [1:24:51] and whether they are likely to have any impact to be agreed to? [1:24:58] Good morning. [1:24:58] Yeah, we have heard from the White House yesterday that they are discussing these proposals. [1:25:03] Obviously, meetings didn't go ahead over the weekend between U.S. envoys [1:25:08] and the Iranian foreign minister who had traveled to Pakistan. [1:25:12] There, he apparently delivered some of those proposals to his Pakistani counterparts [1:25:19] before then traveling on to Russia. [1:25:21] So what we're hearing about that are plans to potentially talk about opening up the Strait [1:25:28] of Hormuz as kind of a way station to then discussing the broader issues of the nuclear [1:25:35] program of a potential nuclear deal. [1:25:38] So from what we're understanding is that the Iranians have proposed potentially allowing vessels [1:25:46] to pass through Hormuz if the U.S. lifts its blockade, which is interdicting any kind of [1:25:52] Iranian vessels, Iranian linked ships or ships that have called that or are going to Iranian ports. [1:25:58] So Iran wants to be able to move its vessels in return for allowing other ships to go through. [1:26:03] That's, of course, a key factor for the global economy. [1:26:06] But a lot of the producers inside the Gulf will be loath to resume production, ramp up fields, [1:26:13] start refineries, unless they know that this is going to be kind of a lasting opening, [1:26:17] unless they'll be able to keep oil flowing out of the Gulf and keep getting tankers into the Gulf. [1:26:23] So Iran does retain that that kind of threat there. [1:26:26] And that's something that the Gulf countries really don't want. [1:26:29] Of course, this is a problem that didn't exist before the war. [1:26:34] Iran closed the Strait of Hormuz during the war. [1:26:37] And this is the first time they've really been able to do that and impose these kind of restrictions [1:26:41] and threats on global shipping. [1:26:45] But the idea that that would be kind of a temporary agreement to reopen travel there [1:26:51] and then allow the U.S. and Iran a longer period of time to discuss the nuclear program, [1:26:58] potentially things like missiles or proxies, which the U.S. wants to discuss, [1:27:02] but Iran doesn't want to discuss. [1:27:03] So right now, the U.S. is reviewing that. [1:27:06] Trump is talking with his top advisors. [1:27:08] We'll have to see if they decide to move forward on that basis or propose something else. [1:27:15] Anthony, thank you very much indeed. [1:27:16] Anthony DiPaolo joining us out of the Gulf, talking about what is happening with the energy story. [1:27:20] Let's get from one energy producer to another energy producer. [1:27:23] I want to take you from the Gulf to Norway. [1:27:25] The ramifications of the conflicts in the Middle East, I suspect, [1:27:28] are top of mind at Norway's Sovereign Wealth Fund annual investment conference, [1:27:32] which is taking place today. [1:27:34] There to be part of it is Bloomberg's Francine Lacroix, [1:27:37] who joins us now from Oslo. [1:27:40] Fran, I'm assuming that the energy story, the Gulf story, is top of mind. [1:27:44] You've got a good range of guests today to talk about that. [1:27:47] What are you expecting to hear? [1:27:48] What are the early indications from this event? [1:27:52] Good morning, Guy and everyone. [1:27:56] Look, I think this event is perfect to take stock of what's really going on. [1:28:01] It's trying to understand, to read between the lines on what happens next. [1:28:05] So, first of all, I'm very excited to speak to Nikolai Tengen. [1:28:08] You know, he's in charge of the world's largest fund, Sovereign Wealth Fund. [1:28:11] It hasn't gone great just because of the volatility. [1:28:14] If you look at the first quarter, look, they disappointed, you know, investors a little bit. [1:28:19] They're worth $2.2 trillion. [1:28:21] It was down to $1.9 trillion. [1:28:22] This also was an impact because the Norwegian Krona was one of the best-performing currencies amongst the G10. [1:28:29] But the question, the broader question, is really, there seems to be a mismatch, and I know you, Guy and Anna and Tom talk about it every day, [1:28:37] between inflation expectations, what central banks do, and equity stocks. [1:28:41] Now, again, they own so much of these equities, especially in the U.S., they can't really change so much because they're long-term investors. [1:28:48] But I really want to try and understand how he sees the future, what positioning looks like, and whether he thinks big is better. [1:28:54] And then we have Ken Griffin here, of course, from Citadel. He'll be on stage. We'll be hearing from Jamie Dimon. [1:28:59] And then we'll look into the world of sports with Stefano Domenicali, the chief executive of Formula One. [1:29:05] They may have, you know, races to reschedule in the Middle East, so we'll try and get an answer on that, too. [1:29:11] OK, fantastic. A fantastic lineup of guests. We'll be across all of those, of course, over the next few hours. [1:29:15] Bloomboats, Francine Lamquart, on the ground for us from Oslo. [1:29:18] Francine, thank you. Here's what else to think about then throughout the day. [1:29:22] King Charles III and Queen Camilla in the U.S., of course, for their first state visit. [1:29:26] And at 9 a.m. U.K. time, euro area banking lending survey that crosses in a little under five minutes or so, a little over five minutes. [1:29:33] 11 a.m. U.K. time, Norway Wealth Fund Investment Conference begins. [1:29:37] Of course, Francine was on the ground for us with a fantastic lineup of guests. [1:29:40] And this is a tantalizing one. Get out your popcorn because it's Musk versus OpenAI and Sam Altman. [1:29:44] That trial begins also later. [1:29:46] Earnings from Airbus and out of the U.S., Starbucks, Visa and Robin Hood. [1:29:51] Let's bring in Skylar Mongoria-Cunning now from our Bloomberg MLive team. [1:29:55] And surely and certainly earnings will be part of your focus. [1:29:58] But also what's happening here in the U.K. as we build up to that BOE decision. [1:30:03] We had the BOE just standing, Pat, so we have to think about how much there's a read across to other central banks. [1:30:08] But gilts are selling off again today. Yields are up. [1:30:11] How are you thinking about about U.K. gilts and the BOE decision later this week? [1:30:16] Yeah, I mean, absolutely. [1:30:16] It's kind of this perfect negative storm for gilts in that energy shocks are much worse for the U.K. market. [1:30:22] We've seen there's a much higher correlation between bonds and energy prices than equities and energy prices because we know there'll be a central bank reaction because we'll know they'll feed into inflation. [1:30:32] And so that means higher yields. [1:30:33] But for England in particular, in the U.K., rather, it has a large proportion of its debt that's inflation linked. [1:30:39] So if you go back to 2022 and you look at net interest payments as a percent of GDP, that, like, followed inflation up and then followed inflation down. [1:30:47] And so it's very bad from a fiscal perspective. [1:30:50] And at the same time, in the background, you have these worries around whether or not you'll get a new prime minister, whether that means more fiscal loosening. [1:30:57] Politics isn't going to stop being a negative driver into the future. [1:30:59] And then you have the Bank of England later this week, where last time around we had a very, very hawkish shift. [1:31:05] You went from expecting a cut in March to, you know, very aggressively towards expecting hikes. [1:31:12] And I think that's the risk we get from this meeting as well. [1:31:14] You'll get new projections. [1:31:15] So inflation is likely to be revised up. [1:31:17] We've had stronger activity data also. [1:31:19] That's largely a seasonal thing. [1:31:21] But because Q1 GDP was stronger than expected, that means also likely a revision up in growth forecasts and a risk that you'll see a couple of members vote for hikes. [1:31:29] Yes, it's certainly going to be a busy news day in the UK context, isn't it, with the king over in the United States, with hearings at select committees that sort of distract the politics quite a bit. [1:31:40] So there'll be a lot of headlines. [1:31:41] We'll see if anything moves the conversation on or whether we wait for the Bank of England. [1:31:44] We're also waiting for the ECB then, Skyler. [1:31:47] We had an interesting conversation with Geoffrey Yu earlier. [1:31:48] He was saying his fear is that the ECB is going to be more tempted to hike than he would like them to be. [1:31:55] And he doesn't think that hiking into a growth slowdown is a good idea. [1:31:59] I mean, I don't think it's a good idea either. [1:32:01] I think there is a large temptation to do that because there is a recency bias, right? [1:32:05] We've just had a very big inflation shock where you had a supply driven shock, particularly in Europe. [1:32:10] It was much more supply driven in 2022 than demand driven. [1:32:14] And it fed into inflation persistence. [1:32:16] And the worry is that you'll get that now. [1:32:18] And particularly for this meeting, because a hold is expected, there's no reason to lose optionality for hiking in June, which is, I think, the expectation from quite a lot of analysts. [1:32:26] And then you do one or two hikes and you're not actually that far away from kind of even the middle of your neutral range. [1:32:32] And it can be OK. [1:32:33] And it's signaling things to the market that you shouldn't have inflation expectations de-anchor. [1:32:37] But certainly at this point, there's no reason to lose optionality. [1:32:40] We've had a month of data. [1:32:41] You've seen input costs rise significantly. [1:32:44] Yes, growth has also come under pressure. [1:32:46] But we've had another month of higher energy prices. [1:32:48] So there's no reason to be less hawkish than the last meeting. [1:32:52] The high of the year on Brent is 112. [1:32:55] We're at 111. [1:32:55] We're rocketing higher as we speak. [1:32:58] How much longer can risk assets, I'm talking about equities here, just ignore the oil price? [1:33:04] The two have gone in different directions over the last few days. [1:33:08] Do we start to see a reconnection maybe at some point soon? [1:33:11] I don't think this week, in particular because we have earnings. [1:33:15] So that's a story that can come to the fore. [1:33:16] If they come in strongly, that will certainly drive the U.S. equity market higher. [1:33:19] I think eventually you need to focus on growth because it'll come through in the data. [1:33:23] It'll come through in earnings. [1:33:25] But, you know, we're still three months away from second quarter earnings season, which is when you'll see it there. [1:33:29] So you can just party until then. [1:33:30] Well, like you're just seeing most markets focus on inflation rather than growth. [1:33:34] We've just talked about it for the Bank of England and the expectation for hikes. [1:33:38] If rates were thinking about growth more, then you'd see hikes followed by cuts. [1:33:42] Even if you look at currencies, the Norwegian crone and Canadian dollar, they're energy exporters. [1:33:47] They've benefited, but they've beat out the dollar more recently because it's this positive risk sentiment. [1:33:51] When realistically, if you have a supply shock, that's very negative for these economies, even though they're energy exporters still. [1:33:58] So everywhere, the focus is very much on inflation rather than growth. [1:34:01] And you need to see it coming through the data to see that shift, I think. [1:34:05] I guess the question is, if you think that the growth story is going to be eroded and therefore the equity story gets derailed at some point, [1:34:11] maybe that's the second quarter story. [1:34:12] How much of a pullback do you see when the lights are turned off, when the chandelier crashes to the floor and the music is stopped? [1:34:17] How much do you pull back? [1:34:18] Wow, you've got to some great parties. [1:34:20] It's been a while. [1:34:22] I'm rejected. [1:34:24] See ya. [1:34:26] I don't know. [1:34:27] That is the question. [1:34:28] And then you start, we were talking to Michael Gapen about this in the first hour, then you get the ripple through into the U.S. economy. [1:34:33] There's so much spending being driven by the relationship with the equity market and just this wealth effect that is being created. [1:34:38] So if you do see that start to come under pressure, you see a big effect. [1:34:42] And we're always looking for headlines, aren't we, that could move the oil price. [1:34:46] So, you know, you're always aware of that as well. [1:34:48] I mean, President Trump might be distracted by the royal visits today. [1:34:50] So I wonder if you get any progress. [1:34:53] But certainly we're always alert to the possibility that the narrative just turns, doesn't it? [1:34:59] It does, and quite quickly. [1:35:01] And we've seen that certainly a few weekends ago. [1:35:04] Was it Friday afternoon when it was all clear and the oil price came down really sharply? [1:35:07] Scarlett, nice to see you. [1:35:08] Thank you very much indeed for stopping by to see us. [1:35:09] We've got some great interviews lined up. [1:35:11] Airbus' CFO is going to be joining us a little bit later on. [1:35:14] Airbus has got numbers out after the close today. [1:35:16] That's one of the great interviews we've got lined up. [1:35:18] It is a big day for markets out there. [1:35:20] Really, a lot of corporate news to price in and deal with. [1:35:24] And it's going to continue throughout the rest of the week. [1:35:26] And we've got some great coverage. [1:35:27] Francine is in Norway. [1:35:29] The Pulse is next. [1:35:29] This is Bloomberg.