SK Hynix Awaits US Debut, Trump Set to Travel to NATO Meeting — The Opening Trade 7/6/2026

[00:00:00] Speaker 1: Good morning. It is Monday, July the 6th. Here's what's on the agenda. A mixed start for stocks in a week of major tests for the chip trade. The end falls with Goldman eyeing 165. And fifth time's the charm. EasyJet agrees in principle to Castle Lake's $5.2 billion takeover [00:00:21] Speaker 2: bid. Okay, Tom, here we go. As you say, massive week for the chip sector. The Cosby choppy session today, going into the end of play, down by around half of 1%. We are waiting for Samsung. That's the big next metric we're going to be watching out for. Eurostoxx 50 futures, remember the U.S. was closed Friday, reasonably be calmed this morning. And that Goldman's call, 165, was it, on dollar-yen? We're already at 162.05. Dollar-yen up by half of 1%. Big week coming. Countdown to the opening trade starts right now. [00:00:56] Speaker 3: Good morning, everybody. It's another Monday morning. Have you had a good weekend? Did you watch the football? Have you recovered from the football? Plenty of European teams in action and some great performances over the weekend. European stocks at the end of last week also putting in a really strong performance. But where do we look for leadership today? We're without the U.S. leadership that we would normally have on a Monday morning, of course, from the Friday session. So perhaps we look even more than we have been doing to Asia. Maybe we should decant the show to South Korea to Seoul this morning, because it does seem as if this week we're going to be talking a lot about things happening there. You mentioned the Samsung earnings. They're front and center for the early part of the week. And we build our way towards the SK Hynix ADR listing in the United States on Friday. So in terms of the tech story, those are some of the stories we're dealing with. But the narrative overnight is a fairly weak Cosby down, [00:01:54] Speaker 2: as you said, three tenths of one percent, quite choppy. Yeah, that feels like a normal day to me on the Cosby. That's a small move. Small moves. And so many currents to think about. SK Hynix, what's happening with Samsung? Is China boosting the DRAM story? Is capacity coming? Is this industry still cyclical? We're still grappling with all of these questions. We have no answers. We're going to get [00:02:15] Speaker 1: some details, though, and maybe some answers from Samsung. So, of course, their earnings coming through tomorrow. We had Honhai coming through strong with their numbers. Samsung tomorrow, then, the expectation is they come through with profit in the quarter, about 55 billion U.S. dollars. That's 18 times, 18x, what they saw a year ago. Will they still see strong pricing? Will they still see strong still see strong demand? Or how far are they pushing that out to? Are they still signing long-term contracts? To what extent is that a test? And then, of course, SK Hynix with the ADRs looking to raise 29 billion U.S. dollars, which would be one of the largest international listings, secondary listings, [00:02:51] Speaker 3: of course, in the U.S. later this week. And we have our reporting that suggests that South Korea is now considering setting up some kind of sovereign wealth fund to decide what to do with some of the benefits of this AI build-out. And, you know, the same thing we've talked about with oil proceeds, windfalls in the past. Maybe we turn our attention to the tech sector for that focus as well. [00:03:11] Speaker 2: Does that mean they tax it more? Kind of, how does, how do they get the money? [00:03:15] Speaker 3: Well, wherever the benefits fall from this boom, how does the state get its hands on some of it, I suppose, [00:03:22] Speaker 2: is the question. Yeah. We'll kind of figure that bit out. But I think it's interesting, the state clearly saying some of that's ours. We want it. We want to take some of the AI dividend that's coming. There's also this NVIDIA story, which is floating around as well this morning, in terms of, so the Kyber is the rack. This is the rack for the Ultra Rubin. They're vertically stacked, I think, in the rack. And this is designed to produce some significant benefits. But they're struggling with that system to make it work. [00:03:46] Speaker 1: Yes. These are reports suggesting that the Kyber is delayed and by quite a significant period of time. Again, according to reports, but it has led to a sell-off to some of the suppliers to NVIDIA on the back of that reporting. So that is certainly one to watch. It's interesting that NASDAQ futures are still pointing to gains of eight-tenths of a percent. So there's the catch-up, obviously, as the U.S. comes back. But we'll be watching NVIDIA as well, pre-market. As we think about the Korean story, of course, it's also worth noting that the one is now trading 24 hours a day. There hasn't been a huge amount of movement, it seems, in the Korean currency today. But this is about trying to make this a, obviously, a more developed nation, a kind of trading infrastructure for the Korean won and to make that market more accessible to foreign buyers and foreign traders. Interestingly, there's been actually about $100 billion worth of outflows from Korean stocks by international foreign buyers. So we continue to watch the one which, of course, has been has been weak as a result, largely, of the high energy costs, even as there's been the significant enthusiasm for the equity markets and the stocks of South Korea. [00:04:50] Speaker 3: It's sometimes amazing to think about the companies, the countries and their companies that we talk about them so often, they don't have developed market status on some metrics. And that is what this is all about as well. So we talk about the yen also, because whilst we're in Asia and thinking about FX moves and how they are moving us around, interesting to think about the yen, because Goldman Sachs has lowered their yen forecast. 165 is where they see it against the dollar. This, of course, has a number of drivers. Part of it is dollar related. So if we're higher for longer on US rates, then what does that mean for the dollar/yen trade? But also yen related fiscal concerns and a very, very gradual interest rate hiking cycle seem to be in the minds of the Goldman team. And we'll talk to the Goldman [00:05:30] Speaker 2: last year in 2017 later on this hour. There's a slight tone shift around the dollar, though. The minutes are going to be really interesting this week to see exactly what's happening with Walsh. If the committee is signaling that it's coming out hawkishly, if the next meeting delivers a hawkish tone, what does Trump do about that? Does he get Walsh's back? Does he push the rest of the committee hard? Yeah. You look at front-end pricing just beginning to move a little bit [00:05:50] Speaker 3: on the rate story. Well, and the jobs report being as weak as it was, it has many people asking, well, did we overdo the hawkishness and the hawkish interpretation of Walsh? You know, are we ever going to see these hikes actually delivered? [00:06:01] Speaker 1: So the minutes come through, the FMC minutes for the month of June come through on Wednesday, and then you have CPI inflation next week as well, which will be additional detail around that story. [00:06:09] Speaker 2: Yeah. And in theory, that's what Walsh is pointing us towards in terms of what is happening. But you are seeing break-evens coming down a little bit. Let's talk about EasyJet. Let's talk about a corporate story. We don't have to do that at this time of the day, so it's interesting to talk about one. EasyJet. Looks like Castle Lake out of Minneapolis is going to be acquiring EasyJet. We're not there yet. The put up or shut up has basically been pushed forward into August. But we now have effectively what looks like a deal somewhere around 690. That's obviously a significant uplift on where the price is now. If it opens at that price, it'll be up at 24%. It won't open at that price. I'd be very surprised if it does. The market will put some – the arbitrage teams will be definitely putting some kind of expectation that this doesn't go through because there are reasonable risks around it. The main one being nationality, but there's all kinds of other factors that you need to bear in mind here as well. And we're still waiting for details on exactly how ultimately Castle Lake will get round that issue in terms of making the acquisition stick with EU nationals in the majority. Mark Breen, Peter Bellen are involved. How far does that take them? Is that going to be enough? What happens with the Stelios stake? There's lots of things going on around this. Anyway, basically, EasyJet looks like it could be broken up. The holiday business could be taken off, hived off. Is that going to be enough? What happens in terms of some of the slots? What happens with some of the aircraft? Anyway, so we're waiting to see what happens. Obviously, this all started with the profit warnings, which you basically can see at the beginning of [00:07:30] Speaker 1: this year on that chart. And our reporting pointing out the assets as you talk about the potential breaking up of EasyJet. So the assets including 356 Airbus A320s, an order book of 287 planes, an additional option to buy purchase rights of another 100 jets, those prime landing slots, of course, in London, Milan and Geneva. It's just some of the assets that Castle Lake and its partners will be no doubt looking at as well. Let's talk about some other [00:07:54] Speaker 3: news for UK PLC. We've got ITV selling its media and entertainment unit to Sky for up to £1.6 billion. So we'll watch what this does to the ITV share price at the start of the trading day and around an hour's time. The media and entertainment business is the commercial streaming part of the broadcaster in the UK, it would seem. So that is going to be something interesting to unpack. [00:08:15] Speaker 2: But how does this relate to the Comcast breakup as well in terms of what it's doing? Because obviously, this gets fed into that kind of bigger group. So it's going to be part of that narrative that we're seeing a bulking up maybe of that. So you feed into the US media narrative with this acquisition as well. Let's tell you what we've got coming up on the show. We're going to be talking about lots of the stories we've already discussed. Kamak Shah Travedi is going to be joining us. Goldman Sachs, Chief FX and Emerging Market Strategist, Obey Ejikemi, Karmonyak's Global Equities Fund Manager, Emily Turner, HSBC Innovation Banking, UK CEO, talking about the tech landscape [00:08:48] Speaker 1: and how fast it is evolving here in the UK. Here's what else we are watching and will be watching throughout this week. Then later today, the British Chambers of Commerce, the quarterly economic survey will come out on Tuesday. It is the NATO summit starting in Ankara. President Trump will be on his way, of course. The Paris court ruling of the appeal ruling in Marine Le Pen's trial could be very significant as we think about the election year, of course, next year, 2027 presidential election year in France. Samsung earnings come out as well. And on Wednesday, Unicredit will announce the results of its extended tender offer for Commerce Bank. On Thursday, EU finance ministers meet in Brussels and the UK Prime Minister. Nominations open with, at least at this point, only one name on the docket. And on Friday, SK Hynix makes that Wall Street debut, as we were discussing. [00:09:34] Speaker 3: And shall we think about NATO? This is going to be a big in the background conversation taking place through the week. It starts, kicks off in earnest tomorrow, doesn't it? But we have President Trump going to meet Erdogan. Does that set the stage? He's meeting somebody he has a lot of common ground with. Is that going to be something that sets the stage for the event? Then he goes on to meet Zelensky, somebody perhaps he has not got on with always in the past. Will success for the Europeans just look like, you know, what will success look like? Is it just something that we don't have any further falling out? Or is it just if the US continues to make its demands that Europe spends more on its defense? Is that okay? Is that that's what Europe is ready for? They just don't want any further [00:10:11] Speaker 2: deterioration in relationships? You'd expect Trump to push pretty hard and that tension to continue to be a real part of the landscape. And then you feed that into what that means for defense stocks. Europe clearly is trying to thinking about how to divorce itself from the US kind of industrial machine. How does it do it domestically? How quickly does that happen? What does that mean for the big primes in the United States? That is the underlying conversation that is going on sort of around all of this. Can Europe rebuild its defense infrastructure, but do it without the United States? And I think that is going to be the challenge that we are watching. Coming up on the [00:10:51] Speaker 3: programme then, signs of oil flows recovering in the Strait of Pormuz, a day after several vessels performed unexplained, unexpected U-turns. We will have the details. Plus, uproar at the World Cup after FIFA clears a suspended US star to play following a personal appeal by President Trump. More on that shortly. Up next, we will be joined by Tim Graff, who will be with us from State Street, EMEA macro strategy head. If you have any questions, if you want to get involved in these conversations, this Monday or any day, IB Plus, BBTV Go. That's the function on the Bloomberg terminal. This is Bloomberg. This is the opening trade. 7.14 here in London. And the European futures picture looks [00:11:27] Speaker ?: well, flat to negative, I guess you'd say. But we did quite nicely thank you on Friday. European stocks at a new all-time high. Where are we looking for direction today? Well, over to Asia, because chip stocks in South Korea have been whipsawing ahead of a crucial week for tech investors. This is the opening trade. [00:11:46] Speaker 3: This is the opening trade. 7.14 here in London. This is the opening trade. 7.14 here in London. And the European futures picture looks, well, flat to negative, I guess you'd say. But we did quite nicely thank you on Friday. European stocks at a new all-time high. Where are we looking for direction today? Well, over to Asia, because chip stocks in South Korea have been whipsawing ahead of a crucial week for tech investors. Samsung is set to report preliminary earnings tomorrow, while SK Hynix is seeking to raise $29 billion in an ADR listing on Friday. For more, let's talk to Bloomberg's Anthony Stevens in Hong Kong. Anthony, it is going to be a big week. We're all here in Europe going to be tracking all of these Asia tech stories, of course, through the week. So we get Samsung earnings. Take us into SK Hynix, though, because there's an ADR listing due on Friday. Do you think this risks telling us something about being closer to the peak than a trough in this particular story around memory [00:12:36] Speaker 4: and around AI? Well, history suggests that it could be the case. Hynix is not one of these companies that really needs an ADR. It already does have GDRs actually that are listed on your side of the world that are loosely traded on screen, but people can market making them. Also, the Hynix next trade session extends quite a fair bit into London. And obviously, in the local market, it's an extremely liquid stock, not as liquid as micron, perhaps, but quite liquid. So it is a very opportunistic fundraise. There are pools of the U.S. liquidity that are not available to Korean issuers, namely U.S. retail, obviously, but also domestic U.S. money that is mandated to only use U.S. stocks, so hold U.S. stocks. So that's quite a powerful incentive for them to go there. Now, what's driving some of that search for liquidity is this massive capex that both Samsung and Hynix are planning on doing? That's around $200 billion in just the southeast of Korea alone. And this comes at a time where Samsung is being able to raise prices. They've raised prices approximately 20 percent, according to reporting. It's also coming at a time of a micron expanding supply. They broke ground in their factory in Japan. So this is a very complicated supply chain dynamic that is raising a lot of capital alongside. So that's why the market is so whippy. There's a huge debate that's going along. You know, is this capex coming at the wrong time and the wrong place in the memory cycle, as it has done so often before? If memory does turn out to be cyclical and not structural, this investment seems to be ill-timed. On the other side of things, we continue to see these kind of problems with capacity coming online in the GPU and LLM space. So you saw you what you guys were talking about the Nvidia rack that may be delayed. Now that is hitting stocks very hard in Japan. You have the MLCC space, the SPE space in Japan and Taiwan that is down anywhere from eight to nine percent. It's not really showing on the headline index, but there is quite a bit of pain underneath headline Asian indices. One reason for the lack of pain is the rotation on everything else. So industrials in Asia are doing quite well. And this is kind of ironically because the defense industry is gearing up for more macroeconomic volatility. So Korea and Japan are both restructuring their militaries, mostly along the lines of improving their navies. And that's got heavy machinery, heavy engineering up a lot. So we have Mitsubishi heavy, Kawasaki heavy, IHI, Hanwha systems. These names are all up more than five percent in what is a very choppy, very fast churning tape. Lastly, on the macro, we don't have any peace there either. As Korea goes into twenty-four hour trading and the yen is still on intervention watch as both those countries endure continuing FX weakness. In Korea, it will be fascinating to see whether we can do another another day of net foreign selling. We are on our eleventh day if foreigners have sold again today and they already breached the hundred billion dollar outflow mark year to date. [00:15:35] Speaker 2: Antony, complicated but comprehensive. Thank you very much indeed. Antony Stephens joining us with it is it is a very, very complicated picture right now. What do you do with it? How do you trade this? How do you invest in this more importantly? Here to answer that question. Tim Groff, head of macro strategy for EMEA at State Street. Good morning. There's a lot to unpack there. There is a lot to unpack. So what do you do? Genuinely, it's so noisy out there at the moment. Do I just put my fingers in my ears and stick with the tech trade? It seems to be working. I don't see obvious answers. [00:16:19] Speaker 5: Basically, yes. The word he said that I think is the key word right now is rotation. So literally everybody knows tech stocks are crowded and expensive. Fine. But they are still earnings juggernauts. And the fact that you still have rotation, I think, is the sign of a healthier or a healthy market. When tech pulls back, you get some rotation into what earlier this year was energy, obviously. He was talking about industrials. And what you don't want is you sell tech, but you also sell everything else. That higher correlation environment at either a single stock or a sector level. That's where you get these dangerous turns in markets. To get that, you really need sentiment to pull back. So we, of course, track sentiment quite a lot using flow data. And so far, what you see is that worst neutral sentiment. And in fact, right now, today, it's slightly positive. And so it's not to say people are necessarily chasing returns. And especially in IT, actually, there's an interesting rotation story going on within it, insofar as you are seeing a little bit of a rotation away from hardware, actually a strong rotation away from Korea, as you mentioned. Yep. You're seeing it go into software though, which got completely cleaned out earlier this year. The depositioning from the SaaSpocalypse took software holdings to their lowest level in five years. And that's where you're seeing rotation into right now. But you'll see it rotate back, probably assuming, you know, the broader narrative and the broader sentiment story stays positive. How much leverage is there? Within what I'm talking about is strictly real money. Okay. So that's, that's, that's a, there's no leverage there, right? You know, there's very little leverage being taken. How much leverage there is in the market? I don't, I don't really know the answer to that. I mean, conditions are as a consequence of past tightening, probably a little bit tighter. So I don't think it's people over their skis. [00:17:57] Speaker 3: That's the question. Yeah. Let me ask about FX markets, Tim. And I want to ask about your dollar view. Yeah. Because it seems we priced in some hawkishness on the first big appearance around the FOMC from Kevin Walsh. And then last week, we started to price in a bit of dovishness on the back of his Cintra appearance, the jobs report. Where are we now in that narrative? [00:18:15] Speaker 5: What does it do to your, your dollar expectations? The dollar is still, again, going back to some of the real money positioning data we have, it's still under owned. I think specs, the price action last week after payrolls, especially shows you spec money was probably long of dollars to a pretty extreme degree, because that was not that bad of a payroll report. And the dollar got crushed on the day. So that kind of tells you the point of pain short term was, you know, the positions were overweight. But that's not the case with longer term focused investors. They're still really underweight. And so I think the path of least resistance right now is that the US labor market, as I say, it looks absolutely fine. US consumption looks pretty good. Inflation is coming down. So you have this potential real income boost if the labor market stays relatively healthy, that I think carries the US in good stead relative to the rest of the world. So I think it's a, it's a continued short term, short to medium term grind higher for the dollar. [00:19:05] Speaker 1: Yeah. Is that, Tim, good morning. Is that dollar strength, another tailwind for European equities as we look at that rotation? [00:19:10] Speaker 5: Yeah, I think it can be, you know, it's certainly on a relative basis, they've underperformed the US over the last couple of months. And I think that that can potentially help when you get a weaker currency against the dollar and being so sensitive to it. Yeah. [00:19:21] Speaker 3: And in terms of the rotation then, where do we look in Europe to benefit from that? I mean, part of the rotation maybe is into Europe and away from some of the US and heavily played tech names in Asia. So maybe Europe just as a whole continues to benefit. We saw that a bit last week. Is it banks? Is it more cyclicals? What do we, what do we think? [00:19:37] Speaker 5: Uh, the cyclical story I'm a little less confident on just on, you know, kind of the dynamics with, with energy prices lately. And the sentiment has been dampened somewhat, but there is, there is recovery potential there. I think in the industrial story, you know, you look at somewhere like you talked earlier about defense spending, you know, Ryan Mattel was this classic case of, you know, the defense trade last year, and it's gotten absolutely hammered over the last six to 12 months. And so perhaps if that remains a story, and it's not kind of my area of expertise, but it is depositioned relative to the US especially. And so I think rest of world stocks [00:20:05] Speaker 1: maybe have, have some, some, some boost to come. You talked earlier about a sentiment and, and how that ties into, into the kind of relatively healthy dynamics that we're starting to see now as, as, as investors kind of reassess how far, particularly how far the hardware stories run. How, and what, what, what is the potential challenge to that sentiment story? [00:20:25] Speaker 5: I think in the days and weeks, quarters ahead. Sure. I think it, one could come from a hawkish Fed that is hawkish because inflation is getting out of control. And that's the scenario I don't worry about as much because we all know inflation is about to, to really fall when we see the official data. It's potentially, you start to see some of the, the, the, the, the tech stories that we've already been talking about. So I don't necessarily worry about this yet because we are talking about it, but the investment spending, you know, maybe being pulled back a little bit, you know, that narrative, it was referred to earlier as the tech story. And that's kind of it. This is a narrative driven market where anything that dents that narrative. And so far we've had higher debt issuance didn't really seem to bother it. You've had, you know, IPOs. That's classic sign of the top in the market. You have a lot of high profile IPOs so far that hasn't really dented it. So, you know, it's, it's, it's, it's kind of cliche to say it, but until you really see some of those adding up to really cause a pullback and ultimately crater earnings, that's really what it's all driven on. These earnings expectations that are so elevated, you know, again, you, it's, it's a question of rotation as opposed to complete de-risking or de-grossing. Okay. Timothy, thank you very much. [00:21:31] Speaker 1: Indeed. Really appreciate it. Thanks for coming in this Monday morning to kick things off for us, Timothy Graff, head of macro strategy for Amir at State Street Markets. Guy. [00:21:38] Speaker 2: What else do you need to know this Monday morning? Let's get you up to speed. Millions of people have turned out in Iran for the funeral of the late supreme leader Ayatollah Ali Khamenei. He was killed on the first day of the Iran war in February. Some 20 million people are expected to attend the week-long funeral. His casket will be taken through the streets of several holy cities over the next few days before being buried in his home city on Thursday. Germany plans to increase net new borrowing next year by 118 billion euros. Now that's around 7% more than projected back in April. Sources in the country's finance ministry say the increase reflects weaker tax revenues, higher debt servicing costs and more funding needed for unemployment benefits. The cabinet is set to approve the 2027 budget today alongside a package of reforms covering pensions, healthcare and taxes. And to apparently one of the main subjects we're watching this morning, FIFA has cleared America's star striker Folloran Balogun to play in tonight's World Cup match against Belgium. This follows a personal appeal by Donald Trump. Now Bloomberg understands the president phoned the FIFA boss Gianni Infantino after Balogun received a red card against Bosnia and Herzegovina. The card comes in theory with an automatic one-game ban which has now been removed. Belgium's team says it is quote astonished by FIFA's decision and is reviewing possible options [00:23:07] Speaker 1: to appear. So we got a red card. Wow what a nail-biter first of all. We'll take it. I think I think collectively I think we did we watch I mean I got about 15 minutes towards the end of England. [00:23:19] Speaker 2: That was basically that was basically what felt like 15 minutes of extra time. Yeah. I mean yeah the [00:23:24] Speaker 3: highlights was enough for me. I don't think I could take a whole what was it nearly two hours of that. That would have been too much. Started late. A thriller is the word you're supposed to use [00:23:32] Speaker 1: to describe these. In the Azteca. In the Azteca. Beating them in the Azteca at altitude. So on the altitude the New York Times had a really interesting stat. So sports scientists have worked out that for every 1,000 meters of elevation it accounts for about half of a goal. And we were 2,200. So England started down 1-0. We got a red card. Let's see if we'll get that. Productive day in the UK I think today. South Korea back in focus for us. FX stay with us. This is Bloomberg. [00:24:14] Speaker 2: So we start trading here in Europe this Monday morning. At the moment the futures pitch is fairly mixed. To be honest with the U.S. out Friday probably not a clean read as to what we are kind of seeing. Well I think we'll wait for the U.S. to arrive a little bit later on. U.S. futures are positive. Nasdaq futures in particular are positive. But that's that's kind of off the Thursday session. Overnight you've seen a bit of choppiness in the Cosby. The main one to watch plus some of the other big indexes out of Asia. So quite a muddled picture this morning when it comes to equities. Europe's just kind of shrugging its shoulder and waiting to see what happens next. Yes. I mean and then on to [00:24:47] Speaker 3: the bond markets. We do have a bit of U.S. leadership there don't we? Because we've got U.S. Well in fact we've got the European bond market story just opening up. I should focus on that perhaps. But we've got yields dropping a little bit here in Europe but not by much. So a bit of appetite there for European debt. And the big story we've been covering this morning in fact I think you were talking about it earlier Guy. Germany planning to increase its net new borrowing for 2027. That's by about seven percent more than was projected in April. Doesn't seem to be having a noticeable impact on anyone's appetite for German debt right now. This higher German borrowing then reflecting weaker than expected tax revenue, rising debt servicing costs. So that's the German narrative at this point. Not really cutting through to that European bond market. There's so much going [00:25:30] Speaker 2: on this week in terms of what could change the narrative. We've obviously had payrolls which you've got to factor in. Then we've got the story around what is going to be happening with the minutes. The minutes could be really interesting and I'm really interested to see if you do get a hawkish slant there and I think you probably you expected you will how Trump responds to that. Are you going to start seeing pushback from the politicians on this idea that actually there are those on the on the on the on the committee that want rate hikes and the administration is not going to be happy about that and are they going to have washes back if wash wants to cut and wash will go you know what oil prices are coming down. We can maybe take a slightly more benign view of this. WTI is at 68.95. It's [00:26:06] Speaker 1: really interesting. I thought Tim Graff from State Street saying that we all know he said we all know that that inflation is coming down and coming down. I'm paraphrasing this bit but coming down hard in the U.S. So we have CPI next week. Do we all know that? Do we all know that inflation is the back of inflation is broken in the U.S.? Clearly the energy part has. Services, rents, housing, core has been a little stickier and was more than five years over that two percent target for the Fed. So to your [00:26:33] Speaker 3: question about where the Fed narrative goes then on the back of all of that I mean will we look back on this Fed period the early wash period and say well that the narrative came out hard he came out fighting and demonstrating independence and maybe the purpose of that was around independence and allowing the market to tighten a little to do its work for it and then end up with none of the hikes that we then priced in because that that's also what we saw in response earlier on in the year to the Bank of England and the ECB being pretty hawkish the market was quick to price in these hikes that then the market has spent more recent weeks pricing out again so you wonder where we end up with all of [00:27:05] Speaker 2: that. But you have a relatively solid U.S. economy you still have service sector inflation that is a factor in mind as well you have an AI build-out story that you look at the chip inflation rate that we're looking at at the moment and it's an extraordinary who was it this morning I think one of the big chip providers talking about 20 percent increase I'm sure I wrote it down somewhere in terms of where they see prices going next a 20 percent DRAM price increase in the next quarter 20 percent yeah on top of the [00:27:33] Speaker 1: inflation we've already seen in DRAM to the point where Apple of course as we were talking about last week yeah it's getting so concerned about it not only is it putting up prices but it's looking to suppliers to suppliers for some of this memory in China yes absolutely and what does that do to the [00:27:48] Speaker 3: geopolitics around memory and what does that do to the pricing around memory is something we'll certainly [00:27:52] Speaker 1: talk about this week. As we think about memory we think of course about what's happening in South Korea and the FX story in South Korea should be fascinating because despite of course that global strength and global outperformance we've seen in the equity markets of South Korea the currency has actually performed very badly the South Korean one seesawing today in the session against the dollar on the first day of 24-hour trading with authorities stepping up surveillance of the currency market let's bring in Kamisha Trevedi who is chief FX and emerging market strategist at Goldman Sachs. Kamisha thank you very much for your time let's start on the one we want to get your views on the yen as well of course and the role that that continues to play in the carry trade but on the one in 24-hour trading dynamics does it does it change fundamentally the appetite and the exposure that investors will want to have to that currency in light of recent weakness do you see this as a structural and significant change? I don't think it's a structural change in terms of the [00:28:47] Speaker 6: exposure that investors want but it certainly facilitates a kind of broader liquidity hedging processes and I think that's going to you know smooth out some of the volatilities and the jumps that we often saw in the one overnight after you know big things have happened in other markets so I think that's what it does I don't think it changes the fundamentals or overall I think [00:29:06] Speaker 1: for the one and the fundamentals are linked to energy but also also expectations that maybe some of the repatriation from SK Hynix ADRs and their listing later this week will support the sort of support the [00:29:16] Speaker 6: currency do you buy into do you see that happening? I think that is the expectation and I think that there is some sense in which as this uh you know these flows pick up that the one should strengthen from really some very weak levels it is one of the most undervalued currencies on our metrics I think it's quite the contrast between the strength in the equity markets and the weakness of the one I think it's not dissimilar to some extent to what is happening with the yen I think the one has been trading more and more like the yen over the years and I think that that feature of it is probably not going away anytime soon but in the short term I think some of these flows should be more supportive for the one and it has been trading on a better [00:29:55] Speaker 2: footing over the last couple of weeks already 162 yen this morning 165 coming how quickly do we get from [00:30:03] Speaker 6: a to b uh our forecast is that it's going to take a while to get there we have it in you know about 12 months 165 so you know there's there's some time and I think part of that is if it was just up to the macro influences it was just up to you know freely what is going on the impulses in global markets I think you'd get there quicker we do have to take into account that periodically you're going to see pushback from the Japanese policy authorities you're going to see interventions what does that do in my view what it does is it resets the level every time they do the intervention it kind of dampens volatility but it doesn't change the broader trend so you'll get there as if the macro conditions persist if we have no recession risk if the Japanese policy authorities are not super hawkish but I think it's going to take a while why stop there do we stop there well I think that you know whether we stop there or not depends again on you know what changes in the global macro conditions you know we've had we have a sort of possible look again the yen is one of the weakest currencies on our metrics you know I think the undervaluation that you're seeing on the yen is really historic and so partly those valuations forces stop there partly I think as you get towards 165 I think that's going to come alongside a pretty big increase also in Japanese yields that's been happening more gradually and as that happens and you compress that differential with the US I think you're going to see some repatriation flows in that direction as well all of these things though are not a discussion for today they're not even a discussion for a month from now I think it's going to take some time which is why I think the yen is going to be weaker and commercial on that interest [00:31:41] Speaker 3: rate differential we talked about well the boj clearly has a role to play that's the end side of things but what about the dollar side of things I mean what how do you we were just discussing before you came on how much hawkishness is actually yes we got quite a lot from wash a couple of weeks ago less last week more dovish the jobs report little weaker and where does that leave us in terms of expectations about interest rate hikes because that also is key for that interest rate differential with [00:32:04] Speaker 6: the end absolutely and I think you know the minutes this week will be interesting to see whether there is any more color around that you know our expectation is that you know most likely they're going to hold rather you know for a while you know at least for the for the remainder of the year rather than sort of you know jump into those hikes I think the you know there will be some premium in the curve but I just don't think that the kind of energy price moves we are seeing the kind of broader inflation dynamics are going to you know push them into a kind of very aggressive aggressive hiking cycle so I think that from that status from that standpoint I don't necessarily see a kind of very immediate pickup but I would also set that against the macro outlook we just took down our recession probability odds over the next 12 months back to kind of the you know long-term norm over the past week so things have moved in a better way in that sense and that I think is going to keep that rate differential somewhat wide okay and what [00:32:58] Speaker 3: do you expect the overall impact of these task forces to be I mean too early to judge I'm sure is the answer but do we have any clues yet I know you were at the Bank of England with Mervin when Mervin King was there and he is one name that we know is going to be attached to one of these uh task forces I mean [00:33:14] Speaker 6: I would make two observations first I think the the main impact is that it buys chairman watch time right I think that is I think the key the aim for these I think it gives you some time you know these things will probably report by the end of the year by then things might become clearer on the macroeconomic outlooks I think the first thing it does is it buys some time I think you're right the fact that you know again you know the fact that you know Governor King is going to be leading one of the task forces also suggests that you know you're going to have some relatively you know mainstream conclusions I mean he's not somebody out of the mainstream if you like in central banking he's actually one of the doyens of central banking in terms of leading this so I I think that you know again we may not end up you know some distance away but not a million miles away from where we are preferred carry trades at this point and you fund it with the yen I think yen is one of a mix of funders I think you would want to have just generally low yielding funders that includes the yen that includes the euro that includes the Swedish krona so a basket of those kind of within dm but it also includes other low yielding emerging market currencies the shekel the Chilean peso the Thai baht I mean if you look at it over the last two weeks these have been some of the worst performing currencies as that hawkishness from the fed has sort of you know move moved up a notch essentially and I think that that is how you want to fund them that buys you more carry it also buys you more resilience when you have those kind of hawkish shocks or risk off you know moments in the market on the other side there's a variety of longs I think starting from you know the Colombian peso where after the election people have become a lot more constructive on the Indian rupee that doesn't look so bad after the move down in oil prices but even I think moving along that dynamic I think you know in frontier markets the Egyptian pound remains one [00:34:59] Speaker 3: of our favorite carry currencies as well lots to choose from Kamakshia thank you very much Kamakshia Trivedi chief FX and emerging market strategist at Goldman Sachs really great to get your views on the program Donald Trump prepares to head to a NATO summit in Turkey this week with doubts still remaining about [00:35:14] Speaker 7: the president's commitment to the alliance we are not living in happy times at the moment and that's zooming out from Europe and looking globally and therefore the need for the U.S. to rebalance its commitments is not something of the last few weeks or months it's it's been a factor for years the second point I would make is and I am responsible for uh for sourcing uh forces for sakura is that European allies have definitely stepped up in terms of backfilling the adjustments [00:35:52] Speaker 3: that was air chief marshal john stringer deputy supreme allied commander for europe we will go live to ankara for a preview of the nato summit later in the program this is blink back [00:36:24] Speaker 1: south korea is looking to create an investment fund using excess tax revenue from its semiconductor industry to finance long-term economic growth south korea of course being home to chip giants samsung and sk hynix both of which are forecast to bring in record profits for more let's bring in seoul bureau chief cat barton with the details um cat really intriguing a kind of reminder that maybe chips are the new oil as as many have previously said what do we know about this plan [00:36:53] Speaker 8: we don't know that much but uh this is lee jai-myung president lee jai-myung's policy chief who has come out and said that they want to use these excess tax revenues uh primarily obviously from samsung and sk hynix to fund bold investments so it's another sign as you say that lee jai-myung is really looking to capitalize on um the huge tax windfall they're looking at ahead to future-proof south korea's economy also to leave a legacy of his own time in office so the record profits we're talking about really are very significant both samsung and sk are on track to post huge uh record operating profits this year so we could be looking at over a hundred trillion won which is about 65 billion us dollars and um that's actually about what the government thought it was going to receive for its entire corporate tax revenue for 2026 and now it looks like they might get that just from samsung and sk hynix so it's huge amounts of of money and they're looking up to to start a conversation and now potentially a fund to use that money to to invest in south korea's future um the cosby was down at some points today but but analysts that we've spoken to are saying that this fund in itself is not a negative um but it does kind of indicate that south korea is moving away from being a pure ai play into being a bit more of a kind of policy [00:38:14] Speaker 3: driven uh move here uh cat thank you very much thanks for the updates uh good to get you on the program with that we'll continue to watch how these things develop then um joining us there from sol cat barton sole bureau chief for bloomberg of course let's turn our attention to the wider market story then in three minutes on the opening trade with bloomberg asia markets executive editor paul dobson and we were just hearing there uh from cat about some of the dynamics around the asia tech story uh paul but we're going into a really busy week for asia tech aren't we with samsung earnings sk hynix adr at the end of the week how does sentiment feel this monday yeah good morning anna so three two is the [00:38:54] Speaker 9: score on everybody's lips this morning but for south korean equities at least it's more to all and going into extra time a couple of positive points for the bulls out there one we had uh decent earnings and read across from taiwan's hon hai um the technology company uh still you know kind of pushing forward those very large increases in sales and two we had some local reports that samsung is going to be raising its prices for its chips again in the third quarter so those are a couple of things that have been on the positive side samsung stopped up a little bit today but on the negative side as cat was talking about this uh talk of a possible uh tax on excess earnings for south korean chip makers you know it doesn't have to be a bad thing because if they're reinvesting that money in infrastructure and so on to support the businesses it could be good but i think investors hear tax and think oh and also um there's been more and more consternation about these leveraged etfs uh on the single stocks in south korea people calling the cost be something like a casino uh which if you've been covering it day today it certainly does feel a little bit that way sometimes so to all what's the extra time the tiebreaker is samsung's earnings which we get tomorrow very lofty expectations but if it can match them or exceed them then maybe the market takes heart from that okay let's put another score [00:40:03] Speaker 2: up 165 uh dollar yen uh we've just had um kamakshar trevedi on the show from goldman sachs that's their target he thinks they get there relatively that we get there relatively slowly paul is that what you're hearing elsewhere are we still gonna see upward drift in in dollar yen and what is the pace [00:40:26] Speaker 9: yeah it's a good question isn't it i think that what the boj oh sorry the mof and the japanese authorities have managed to do uh through their rhetoric and their threats of intervention is slow the pace of declines at least for the yen although it continues to push lower so the goldman sachs call of 165 for a year from now is not very far from where we are now but it is still pointing to that sort of bearish um direction and we have hedge fund positioning net short positions um the biggest and the most extended since 2017 so that tells you that the market is also looking for more weakness in the yen um goldman sachs is recommending it as a funding currency for carry trade so that's not so much leaning on the idea the yen will depreciate uh but that because its interest rates are extremely low you can make money by borrowing the yen and investing it in higher yielding currencies elsewhere [00:41:10] Speaker 1: paul on energy we're looking at brent at 72 dollars a barrel what is the level of conviction in the markets that oil remains at or below these levels yes so i think if you're bearish on the yen if you're [00:41:22] Speaker 9: looking for market sentiment much more bearish on crude oil uh we had the the symbolic opic uh meeting again talking about um increasing production over the weekend uh we've got uh pressure from uh short-term levels because of the amount of crude that's flowing out from the straight of hormuz and production elsewhere as well um we've got uh the front end of the curve i think back into contango which tells you that there's plenty around at the moment for people and the city group coming in with quite a radical call looking for 60 dollars by year and so uh plenty of fodder for the bears there too paul thompson [00:41:54] Speaker 1: bloomberg's asia markets executive editor thank you paul let's get your stops to watch this monday and bring in chloe meli standing by chloe starting on easy jets yes good morning tom after weeks and weeks [00:42:05] Speaker 10: of playing hard to get easy jay has finally accepted a fifth proposal from castle lake so it's agreed in principle to a takeover offer of more than five billion pounds and so initially easy jay had called the offer and the approach highly opportunistic but it had started to change its turn as the offer got sweeter and sweeter and it seems that now it is just sweet enough and so we had seen as we can see here up here on the board a huge rally as their takeover rumors were circulating and we could see this uh acceptance this morning really boost the shares even further this morning so definitely there will be some movement there that we'll be watching out for moving on to some more mna and we've got in the defense sector talis buying excel technologies in a bill in a deal worth 3.9 billion euros excel is a company that makes a submarine drones it competes with the likes of kongsberg and asab in that space and so fatales that means really getting those capabilities accelerating those capabilities in that space some analysts have said this is a deal that is looking quite expensive but that it makes a strategic sense so we'll see how the market reacts to that this morning and finally continental has also agreed to sell its industrial tech business conti tech to loan staff funds at a 4 billion euro valuation this now completes uh continental strategy of becoming a tire only business after listing its auto parts business omovio also recently and so we'll see how the market reacts to this new [00:43:31] Speaker 3: streamlined version of continental this morning chloe thanks chloe meli with the stocks to watch we'll add to that list then with itv as well because this is a really fascinating uh transaction it's been a perennial takeover target on the london market hasn't it talked about for so many years as potentially an acquisition well now we've seen them spinning off a large part of the business in fact this is the free to air and the streaming side which will now go to sky which as you pointed out earlier is owned by comcast so this puts a lot more of the uk broadcasting landscape into u.s hands it would seem at least that's one of the dimensions as a result of this and itv becomes then a studio a maker of programming uh just just that part of the business remains listed and shareholders are going to get a a big return of cash so certainly one that we will watch this morning what is interesting [00:44:17] Speaker 2: about this is comcast is also breaking itself up it's just announced that it's going to be doing that the parent company of sky yeah parent company of sky um i effectively brought cable and and studios and nbc and all together under one roof and it's now basically going in the other direction um you've got the kind of connectivity side of the comcast side then they're going to put the rest of the business into into another group which is going to effectively be spun out into nbc universal so itv's going to become part of that so this is a huge group that it's becoming part of and you do wonder where the synergies are going to lie on what nbc has been really positive about its sky acquisition what is it going to get from the universe from the itv acquisition that is going to bolster that so it's going to be interesting to see kind of what the the logic around this looks like it's the [00:45:04] Speaker 1: further forward as well as the shift to streaming uh and and cable cutting as well uh in the us and another reminder that their assets uh that us investors still still value here in the uk as we think about easy chat as well a very different sector uh there's value here in the uk and and even if uh [00:45:19] Speaker 3: the public markets aren't showing that yeah who was it last week who kept telling us about you know all these international investors think that the uk is cheap but the public markets don't necessarily seem to put the same value on on these assets as as foreign investors do um european futures then looking pretty what flat flat negative record highs on yeah record highs on friday yes which [00:45:40] Speaker 2: was a response to thursday but we now don't have the guidance coming out of the united states so i think we sit and wait and look for a catalyst doesn't look like it's come out of asia be interested to see how the tech trade works but we basically need to look forward to the united states session a little bit later on to give us some guidance maybe yeah a lot of news then set to come out of [00:45:55] Speaker 3: asia this week from samsung earnings to the sk hynix adr at the end of the week we'll keep across those as well as the european market open that's coming next this is play back [00:46:22] Speaker 2: elated but tired is probably the overriding sentiment in europe this morning something to do with the football maybe not to do with the markets thursday feels like a long time ago that was when the u.s last close so i'm not going to show you that chart i'm going to show you this chart this is s p futures on the day we're up by around three tenths of one percent and then asex up even more how does that influence the european picture this morning i'm not sure that much uh the u.s feels like it's still in the rearview mirror we need that next catalyst the future's telling us much i'm not sure they are they're telling us they're going to get a positive session over in the united states but some of that simply catch up tom yeah that catalyst is going to be the fomc [00:46:54] Speaker 1: minutes is it going to be samsung's earnings on tuesday is it going to be sk heinix the adr's and what that does to the chip trade towards the end of the week european futures right now are flat but again in the context of record highs by the close on friday ft100 futures currently pointing down by four points tax futures also a little just by 13 points right now it is it seems a future set up looking for that next driver for these equity markets could some of that come in the shape of [00:47:21] Speaker 3: transactions mna we've got quite a bit of that this monday morning then tom let's go to some of that and how that's looking to influence the market so on the subject of easy jet we have the airline of course agreeing to castle lake's latest bid the fifth one topping five billion pounds so we'll keep an eye on that one itv similarly a transaction taking place there they've agreed to sell their media and entertainment arm to comcast that's all the free to air broadcasting that's all the streaming at itv leaves itv as its listed entity being all about the studios and production and then we'll keep an eye on what happens with talis in the defense space talis is said to agree to buy a 35 stake in excel technologies a maritime robotics company and it plans to acquire the rest of that [00:48:03] Speaker 2: business as nato meets this week guy yep plenty going on plenty to factor in index level very quiet below the surface some quite significant mna taking place this morning we'll track all of that we'll work out what it's all going to mean but i think from the get-go this morning not a lot of action in the european equity space nil nil is kind of where we are right now the footsie 100 is barely budging some of the action actually in terms of the mna stories that anna was talking about in the 250s so maybe watch that market this morning for a bit more action uh the stock 600 going nowhere i'm not expecting anything from any of these major markets this morning i'm interested to see uh what we see in the tech story this morning after the narrative coming out of asia but actually i think the mna story is going to provide us maybe with the highlights of the monday morning session tom sectors right now you talked [00:48:50] Speaker 1: about technology that is leading the losses as a sector down six tenths of a percent but having been amongst the strongest by the close on friday in europe basic resources also weaker by five tenths of percent utilities which have been near top of the list on friday also a little weaker by five tenths of a percent autos so far top of your list in terms of european sectors and performance with gains of almost one percent travel and leisure also up by eight tenths of a percent anna yeah looking for movement [00:49:17] Speaker 3: then in some of the individual stock names that we were talking about we have some of them opening up already actually and so in the defense space talus is down by 1.4 percent exhale which is the business that talus is buying 35 percent of and then maybe the rest of at some point a maritime robotics company that stock is up by 2.9 percent this morning both of those are french listed so that's a defense deal we talked about defense mna just last week didn't we and with nato on the horizon that is certainly an interesting place uh to think about where more mna opportunities might come to fruition itv interestingly not really moving all that far on the back of the deal news it would seem up around two tenths of a percent so not much movement there an easy jet yet to open it closed at five five eight twenty and the deep the the the fifth offer from castle lake coming in at lots higher than that so we would expect it to go higher but will the market still continue to be a little bit skeptical skeptical about sort of [00:50:13] Speaker 2: you know whether this can actually come to pass august the third is now the next date in terms of the kind of the put up or shut up um deadline so that's obviously still looming uh but yeah 690. so in theory we could be up by 24 25 this morning yeah so we're not going to be subject to some [00:50:30] Speaker 1: execution risk subject to some execution risk other airlines others in the travel space are doing quite relatively well so so we'll see we don't have that print yet on easy jets or ryanair is up 1.7 uh you've got aag gaining 1.5 and tui travel up 3 as well all prices are coming down so that's [00:50:45] Speaker 3: another kind of thing to bear in mind yeah something else for the mix let's bring in this monday morning obi edukemi who is a global equities fund manager over at carmeniak and the perfect person to take stock of the global equities trends that we're seeing right now obi nice to see you thank you for coming in it's a kind of complicated picture right now because we've got the uh the overall narratives we've got plenty of rotations to talk about whether that's within tech or between tech and other things or between different geographies what set us up with your overall kind of the overall landscape for [00:51:15] Speaker 11: global stocks at this point this monday morning good morning and i look i think that the big picture story here is how is this year going to finish you know we've had a first half of very focused trades around you're going to say it's a game of two halves it could be yeah a game of two halves um yesterday felt like it was game of four halves yeah um look i think uh it's it's we've had a first half which has been very focused on one specific narrative um and you know the stocks have done pretty well as a result of that but i think what's key is who takes the battle into the second half is what we saw last week this sort of like momentum reversal which felt like a bit of repositioning by the fund management community is that the start of a bigger trend or is it just a a one-off and i think you know what we should all be really thinking about is if this trend of ai and and the growth story of ai has been the main story of the first half of the year can it really persist into the second and if it doesn't actually it's quite optimistic because there's a lot of stocks that have [00:52:06] Speaker 3: been left left behind so last week you flagged this that last week if you're looking at factors that the market is trading on that momentum was pretty weak yes uh last week if we're looking at stock 600 momentum was pretty weak and we saw instead the market preferring things that were heavily shorted and some growth more cyclical names what do we take away from that experience last week and bring that into the second half of the year look i think it's a bit more simplistic than [00:52:29] Speaker 11: that actually it was a sort of anti-ai anti-tech trade and everything else that's sort of not really taken part in the rally this year so a bit of a comeback and i think that's the risk for the second half of the year and primarily because expectations in this ai boom story are extremely high uh to the point where we're seeing levels of optimism that we haven't seen for for many many years and as a result i think the risk to those stocks remains quite significant there is no room for disappointment so what the market did last week is essentially say we're going to take a bit of chips off the table from the optimistic side and put a bit of money into some of the the lagar parts of the market where there hasn't been uh such a a great story that sounds really straightforward you just got to sell a bit [00:53:08] Speaker 2: of that takes a profit by a bit of this where it's it's really really said doesn't the whole index [00:53:12] Speaker 11: just come down if tech gets battered no no i don't know i think that's why i'm i'm somewhat more optimistic than the average person i think we look the tech sector and the ai part of the market is a dominant part of the market but actually i think it's sucked in so much capital that there is actually a risk that as money starts to move out it goes into so many other areas of the market and don't forget like there are some parts of the market that really haven't participated the consumer hasn't participated participated we've seen all prices come down recently yep all these things are a net catalyst to stocks which really haven't seen much of a run so so the u so so index kids can [00:53:44] Speaker 2: maintain their current multiples even if we sell tech i think we're coming back to a stock picker's [00:53:51] Speaker 11: market and less of a narrow theme market yeah i think actually because so many stocks have been left behind here it's actually going to be quite a good news story so you've seen all the charts of the equal weighted s p so strip out the big names and how it started to turn a bit versus the market cap weighted index i think that's going to be the story of potentially the story of the second half is we go to more stocks less narrowness and that could be where does europe sit in that story well ironically because europe doesn't have as many of the ai theme stocks within its index it's been one of the laggards so the money's been sucked into the emerging markets which i still think is a good long-term trend but actually the the relative story here could be some of that money comes back into europe into areas where there hasn't been such a buoyant tech fee is that also making an assumption that the growth [00:54:38] Speaker 1: story in europe starts to improve that the consumer starts to look a little bit more resilient you mentioned lower oil prices and how maybe investors haven't really seen that read across to consumer space is that part is that part of the thesis for europe as well look i think on the margin these are all [00:54:52] Speaker 11: helpful things and they've all they've all been headwinds i mean we saw when we had the problem around geopolitics and the oil price going up it was a sell europe sell the exporters story so as a result actually if we start to see a bit of a reversal of that trend i think on the margin europe could become more interesting it's just because these stocks have been sort of left behind so there's a [00:55:09] Speaker 3: chance for a bit of a reset so if we see pullbacks in memory names which in the second quarter was the area of the sort of most excitement not the hyperscalers but if we see a pullback there we don't think up should we not think about that as a broad de-risking then we should see that as more of a broadening of markets will we be able to keep our heads and think that do you think i think it will [00:55:28] Speaker 11: be challenging and of course every single time we have one of these little pullbacks it will feel a bit more violent than it has in the past partly because these stocks have gone up a lot and so you know i think you have to be selective and that's what we're doing we're selectively looking for the names that i think will will be the long-term trend but at the peak of a growth cycle and that's what we're talking about here cyclically these stocks have grown phenomenally this year we think they're going to slow as we go into next year so on the margin you can't own the same proportion of those stocks as you did when they were growing at the fastest rate so i think that's all that's going to happen and a bit of a of money has been taken out of those stocks and you want to be a bit more [00:56:00] Speaker 2: selective are stocks going to be the best hedge against tech or are there other areas of the market that you want to look at bonds traditionally have done this but it looks like the kind of the bond stock correlation story is maybe reversing how do i what else do i do in a portfolio to hedge maybe a rollover [00:56:17] Speaker 11: in tech um look i think because the tech narrowness and i'm actually i'm being a bit be careful about the tech narrows the ai tech narrowness even within tech obviously there's the software part which has completely done the opposite of the ai part i think that the problem has been there's so much money has gone into that part the rest of the market actually is now becoming the natural hedge the beta of or the volatility of all other stocks in the market versus then the the nasdaq and the ai sort of theme is actually quite low so your natural hedge is actually becoming just focus on areas outside of [00:56:47] Speaker 3: the ai theme and obi give us your thoughts on mna right now i'm not sure what conclusions to draw from the wave of mna that we've got i mean a couple of uh spring to mind and i don't know which you favor but uk assets are maybe still too cheap is that is that one of the conclusions we've got uh easyjet we've got itv asset sales taking place there um or or you weave in the defense sector where we're seeing some deals taking place as well and this is a broader theme what do we take away from the mna sort of [00:57:13] Speaker 11: flurry that we have this morning yeah i'm going to put mna and the ipos all into the same bucket i mean this just shows you that there's a level of confidence around the investor market at the moment and that typically happens when the stock markets are at the high we're getting closer to later cycle than we were earlier in the cycle so i think it's all tells us about investor confidence but you know i guess i guess it's back to the theme that we've been discussing this morning that confidence has been primarily been driven by a very narrow theme or thematic within the market this ai theme and i think you know the the the fact that the other parts of the market haven't really participated means that i think this is kind of relatively healthy you know if it was a full bull market and every part of the stock market was participating in this i'd be a bit more concerned but the fact that [00:57:51] Speaker 1: there's still room to run in other stocks it's quite specifically on uk equities is mna a catalyst that we should be thinking about if if you want to get exposure to uk stocks how much of that is is [00:58:03] Speaker 11: is part of the story yeah look the uk stock market suffers from what we have we don't have or what we have in other parts of the market so it doesn't have the growth story so if it's acquisitions for growth i think that's a great thematic to latch on to and that's one of the areas that the uk stock market typically because it's an income focused uh return focused market i think it's where it kind of lacks so if it's acquisitions for growth investment in the future i think that's a good story [00:58:27] Speaker 2: if we're late cycle why would why would we rotate into the rest of the economy if we're heading towards a late cycle why why is the rest of the the market going to benefit the bull markets always end with [00:58:41] Speaker 11: the laggards of the trade or the laggards of the cycle being the best stocks and so you know if we are getting closer to the end of the cycle you've got to look for the stocks that haven't really participated when you think the end of the cycle is how far away do you think we are well if you were just talking about the ai and the tech growth you would argue that we're certainly closer to the highs but i used some examples earlier on consumer confidence around the world is near near record low levels you've got oil prices you're just coming up high so actually there are parts of the market you could argue that they're actually very early cycle so you know it depends how this plays out if we see the consumer start to recover all prices come down inflation starts to be a bit less of a problem than actually we could be could be at the beginning of a bull market in the consumer so [00:59:20] Speaker 2: not as late as even i'm suggesting okay we'll leave it there a bit education here global equity fund manager joining us from carmen yak um quick scan of the situation at the moment you've got easy jet up we'll talk about that in just a moment the call six looks like this uh you are seeing a more mixed picture tech is down you've got asml under a little bit of pressure defense is up ryan mattel is up by eight tenths of one percent uh let's find out where we are watching this m a story play out uh most aggressively this morning close got all the details of that good morning guy indeed we are seeing easy [00:59:51] Speaker 10: jet jumping this morning we're up more than 10 percent after accepting this latest fifth bid from a castle lake and so this is a takeover of more than five billion pounds after weeks and weeks of easy jet calling the approach highly opportunistic it seems that now the deal was just sweet enough for easy jet to accept it and so we're seeing investors react very positively to that this morning and work very strongly we're also seeing that read across into european airlines more generally we've got the british airways owner iag ryan and tui all up in the green this morning this is obviously a sector that's been struggling quite a bit with higher fuel prices and consumer confidence being knocked down a little bit but now those oil prices are coming down and this might be also a bit of enthusiasm around a potential a deal wave that might be coming for that sector and so we're all up in the green there we're also going to be watching out for another m a story which is the talus and excel deal so talus has agreed to buy excel technologies in a deal worth 3.9 billion euros this is boosting the shares for excel a little bit this is a submarine uh a drone making company marine robotics etc but for talus we're a little bit weak because potentially the price tag is looking a little bit steep even though it does make strategic sense so we've got this happening now we've also got continental down a little bit after agreeing to sell its industrial technology unit conti tech to loan star funds at a valuation of four billion euros this is now a streamlined company that is focused only on tires but it seems that is something that investors are not reacting to super super strongly this morning we're down about 2.6 percent there and finally let's just have a quick look at tech companies here because all those ai related companies tech companies in europe are seeing uh quite a lot of weakness actually we saw a lot of that caution around the sustainability the durability of this ai driven rally and that led to a bit of weakness in asia that is now spilling over into europe and we can see b semi in particular down actually more [01:01:54] Speaker 1: than seven percent this morning chloe chloe meli with stocks on the move this monday coming up shipping in the strait of homo show some signs of recovery days after unexpected u-turns and unexplained u-turns and detours we bring you the details and the latest next this is bloomberg [01:02:32] Speaker 3: welcome back to the opening trade monday morning monday the 6th of july and this is the picture on european stocks flat really it's not flat to negative though that's what the futures picture had suggested there's a little more positivity but it really is pretty flat isn't it u.s futures are pointing a little bit higher that's catch up nasdaq futures up by one percent and we have around two thirds of sectors guy in positive territory this morning led by media we'll take the positive story [01:02:55] Speaker 2: the itv narrative let's fold in another mna story as well and that is surrounding easyjet so here's what easyjet shares are doing right now we're trading at 617 we're up by 10 and a half percent the offer price from castle lake though is 690 so we're way away from that so why is the question what is the market seeing here that it's concerned about we've got a takeover offer in principle um kenton jarvis looks like he's kind of on board and pushing this so why aren't we trading at 690 why are we trading at 615 let's try and answer that question let's bring in bloomberg transport reporter danny lee danny what [01:03:30] Speaker 12: do you make of this it's a real head scratcher i think there are one of two reasons at the very least whether uh the offer is not high enough for some key investors particularly when you look at founder sustainers who has uh still a huge affection for easyjet and what he built up over many many decades and then you've also got the competition commission both in the uk and in europe where will they land effectively on this takeover approach from castle lake a u.s investment firm they're not european citizens or european entity and they will need a partner in all of this so at the end of the day uh whether the market is reading this the share price jump of 10 as uh this could still have more hurdles with this uh takeover uh in principle offer uh is a real question mark so i i think there is still a lot that the market and investors and shareholders are looking to wait and see uh have more clarity on uh over the next coming month as we do get to that next uh put up and shut up offer [01:04:33] Speaker 3: on august 3rd yes interesting then does that take us some way to answering the question around what happens what needs to happen to actually get this deal done then um danny you've referenced a few things they're getting key shareholders on board satisfying regulators bringing in or or perhaps solidifying the position of these european-based uh individuals who've been brought into the mix former easyjet employees i think in one case to try and get this over the line that's still quite a long [01:05:02] Speaker 12: list isn't it yeah well i i think when you look at the the the now and until then we will see castle lake do its due diligence i think they will have taken already a close look and they've already got experts like the former easyjet executive peter belly on board help steer and guide them but you know as you said there is a still a lot that raises questions about who exactly castle lake may partner with but at the end of the day the momentum in the european airline m a space is quite significant we've already seen the likes of uh luftanza and and air france uh klm be very active with the likes of ita sas scandinavian we've still got tap air portugal uh still yet to be resolved and so with the likes of easyjet coming into the fray and the prospect and the the overhanging question of the future of easyjet as a as an entity okay um there's a lot that remains to be seen okay so danny what do they [01:05:58] Speaker 2: do with that i spoke to carlson spore um a few days ago i spoke to lewis gallego a few days ago um they both run uh luftanza and iag i spoke to ben smith who runs air france they're interested in bits of this business is that the future of easyjet is this a breakup now i think when you look at the the [01:06:19] Speaker 12: bigger rivals who are circling at the end of the day i think that the the the kind of conclusion is easyjet is more valuable as a sum rather than as a whole when you look at how uh you can carve out particularly the the uk and the the potentially the swiss parts of the business um and you know maybe iag could be interested in just the continental europe parts aside from switzerland then you could see some like luftanza or air france klm looking at um other parts of shore pits parts of the business where it's weak in europe and in the uk you do see a lot of the european airlines the larger european airlines looking at the attractive slots the runway slots in europe that easyjet has access to and potentially that order book there's a big question around this huge order book that easyjet has over almost 400 aircraft and then obviously this fleet size of around 350 aircraft it's a big size and with the supply chain pain you've seen in the airline industry uh and also just the the how hard it is to get new aircraft i think for these larger carriers they'll be looking quite excitedly at the prospect of maybe breaking apart a really successful european budget carrier danny thank you very much indeed with that [01:07:30] Speaker 1: update and we'll see of course how that potential deal progresses danny lee uh with that uh offer being accepted at least in principle from easyjet uh castle lake around 5.2 billion u.s dollars meanwhile oil prices and this was part of the story of course in terms of the challenge for easyjet oil prices are fluctuating this morning in a narrow range as flows through the strait of humus continued and opec plus signaled higher supplies let's bring in steven stupchinski bloomberg's asia energy reporter and leader team leader i should say steven where are we in terms of recovery of tankers through the through the waterway what have we seen over the weekend what does it tell us about the appetite uh in terms of the risk appetite of of those shipping companies where do things stand currently [01:08:14] Speaker 13: yeah i mean at the beginning of the weekend there were some fears that maybe you would see a tightening of hormuz transit because we had some unexplained u-turns on the omani route out of the persian gulf through hormuz there were also reports about how iran was sending radio transmissions that the the strait is closed only to their route it's open and you need to have permission to go through which maybe would have scared or spooked some captains or suppliers or owners to kind of get their ships away but then we saw some more ships go through the omani route um yesterday and things are kind of status quo we are not you know you see this chart on the screen we're not nearly anywhere uh at towards a pre-war level but we are you know higher we're elevated since the u.s and iran uh signed their interim peace deal and i think there are there is an expectation that we will continue this gradual increase upwards um i think the fact that uh we're sort of in this level we're higher not super high but but trending higher um this does indicate potentially um some some ease in the market i think there is some expectation that this will continue and ramp up as more ships come to the region but of course we're going to have to really wait and see uh carefully i would i would characterize um the the ship owners and those around are cautiously optimistic you're not seeing a rush but you are seeing more ships go through than they normally would and i know we've got some interesting reporting as [01:09:40] Speaker 3: well steven around the uae and its ability to uh to to shuttle some of its products out of the strait or out of the gulf via the strait of poor moves to other vessels that are waiting uh interesting using some of the tactics that we've seen uh by some of the more you know the dark ships around the world using some of their tactics to to get through the strait during times of war during times of tension and i guess this speaks to the resilience of the flow even though it was much reduced during the time of war [01:10:13] Speaker 13: yeah i mean i think there's that's a very interesting thing to point out because you know they adopted these new tactics they figured out ways around it and while you know we had the chart on the screen a moment ago those are ships that we can see there might be a lot more dark transit happening that we just aren't aware of right now and that was the case for for many weeks in the war adnock was shuttling in and out its vessels um all dark same not just oil liquefied natural gas as well they were getting it in and out but not not just uh are we talking about ships these companies have found ways other ways as well i mean you have uh saudi arabia also using its east west pipeline kind of shipping more of its oil into the red sea and through the bab al-mandeb strait as an alternative to get its oil flows to its asian customers so when you take those alternatives you take the dark shipments and then you take the flows that we can see we are painting a much brighter picture um you know there are some suppliers that are their output saudi arabia for example is is much nearer to the pre-war levels than we were weeks ago because of the all these alternatives because they're allowing their super tankers to go through hormuz again um so we i think the the market is pricing that in and that's why oil prices are back down to those those pre-war levels for both brent and wti yeah 71.85 on brent right [01:11:32] Speaker 3: now steven thank you very much steven sapchinsky bloomberg's asia energy team leader and interesting then the opec plus over the weekend stuck to its plan to raise output although you know some of that's coming from the gulf and we do and don't have a handle on how much is coming out with with their transponders but some of that's supposed to come from russia as well and we know uk ukraine has been taking aim at some of that infrastructure so that's certainly something to watch but apparently we're [01:11:54] Speaker 2: headed for a glass a lot of oil potentially on the market yeah i've seen that kink in the curve uh we'll watch that very carefully uh what we got coming up we're going to focus on ai in the uk [01:12:04] Speaker 3: specifically new report out of hsbc this is bloomberg [01:12:23] Speaker 1: happy monday this is the only trade we are 30 minutes into today's session you're up a tenth of a percent across the european benchmark so building on the record highs that we got by the close for european stocks on friday very strong session or at least a strong session i should say over in france with the cat current adding 36 points up four tenths of a percent also some strength here in the uk the footsie 100 up 37 points up three tenths of eight percent travel and leisure is certainly playing its part the dax gaining just 39 points so far in the session guy okay so a little bit of [01:12:50] Speaker 2: momentum when it comes to the index levels beginning to pick up a little bit of pace 378 up 207 down so a reasonable ratio certainly on the upside but volume remains light we are missing the united states the us will be back a little bit later maybe to provide some guidance the overnight story out of asia weakness in the tech space you can certainly see that on the stock 600 but at the upper end of the stock 600 and the broader markets you've got some really interesting m a stories as well that are worth focusing on uh easy jet is one of them it is up this morning but it's not at the castle lake offer price so that is signaling uh maybe the merger arbitrage uh kind of story still suggests some risk is out there that this transaction won't happen we're trading at 6 11 but we are incrementally continuing to push higher and higher excel is being taken out by tales that stock within the french market up by nearly four percent and leonardo the defense space is up this morning but leonardo is outperforming um and the reason appears to be that we have reports in the italian media this morning that italy is maybe looking to up its defense spend and that is being factored back into obviously one of its big primes which is leonardo it is up by 4.4 percent yeah important week for defense with the nato meeting [01:13:59] Speaker 3: taking place let's get an update though on some of the other stories we're following this morning chip stocks in south korea whipsawed in today's trade ahead of a crucial week for tech investors samsung is set to report preliminary earnings tomorrow while sk heinix is seeking to raise 29 billion in an adr listing that's due on friday easy jet as we've just been hearing has agreed in principle to a takeover offer of more than five billion pounds from castle lake which swooped in as the uk budget carrier was reeling from soaring jet fuel prices and suppressed demand after the iran war so this fifth offer seems to have been accepted but the stock not trading at the offer price just yet and over in football the u.s star striker for lauren balagan will be allowed to play against belgium after fifa reversed his one match ban bloomberg understands it follows a phone call between president trump and the fifa boss gianni infantino belgium's team it says is quote astonished by fifa's decision and is reviewing possible options to appeal top okay let's turn to tech right now ireland's economy is [01:15:01] Speaker 1: uniquely dependent on jobs from u.s tech companies more than six percent of the workforce is employed in the tech sector higher than the eu average but now many like meta are culling jobs as they invest in ai creating widespread employment anxiety joining us now is olivia fletcher our dublin bureau chief reporter who's been looking at this for us um olivia so concerns about what ai is doing the investments in ai by some of the big hyperscalers and meta's uh example of course and what that does to the jobs market in in ireland how just how exposed is ireland is that nation and its economy to ai disruption [01:15:42] Speaker 14: i mean yeah ultimately it is more exposed than a lot of other countries um and the reason that is is because like you say there's this kind of informal arrangement that ireland has with a lot of these multinationals you know over the past few decades companies like meta apple uh amazon google have all set up in ireland um and you know they pay a lot of tax here um but also in return you know they really boost ireland's economy you know without them ireland would be in a fiscal deficit you know they also have brought thousands of jobs um what's changed in the last few years is that you know a lot of these companies have kind of been restructuring you know after the pandemic a lot of jobs were cut these companies um and you know the companies kind of attributed that to overhiring during the pandemic but you know in the last year or so a lot of jobs that are being cut is because you know these companies are saying they're investing billions of dollars worth into ai efficiencies so they're no longer going to need certain roles that ireland happens to have a lot of content moderation legal trust and safety um you know those are the kind of roles that are being impacted that ireland has a lot of obviously it has some core engineering jobs although perhaps not as many as yeah you know la or tel aviv and so you know it's hugely worrying for the irish economy okay so so we're then [01:17:07] Speaker 3: wondering how ireland's labor market will be impacted by all of this will there be more unemployment will there just be churn and i guess the government is going to be focused on this as well what can the [01:17:17] Speaker 14: irish government do in this context yeah i mean the the irish government it produced a strategy in the last few months um to try and figure out how it's going to you know kind of combat this issue it's probably going to be one of the first governments that's having to deal with this a quite you know the significant scale that it is you know in the report the kind of key takeaway was that it wanted to re-skill and and upscale um and you know to try and create that next kind of stack of higher quality research and development jobs that ireland would like more of but also on the flip side ireland wants to kind of see this as you know as a benefit as well obviously it recognizes it's going to be disruption but also it really wants to try and harness this opportunity and you know it's hosting this summit in autumn um it's inviting cfos like sarah fryer we've reported this morning from open ai and you know these companies um you know we've reported last year for example that open ai and anthropic actually are expanding in ireland and you know that is with some kind of core engineering roles so you know there were kind of two sides of the coin ireland probably will be impacted by a lot of these jobs but it really has to try and climb up the stack and like create these next kind of uh high value jobs and you know whether it can or not is another question but it's really important because it just cannot be understated how much ireland relies on these companies that have totally transformed the economy so it really needs to kind of up the game and kind [01:18:43] Speaker 1: of create this kind of next level of jobs okay olivia fletcher our dublin bureau reporter thank you for that meanwhile in the uk startups raised 17 17 17 billion dollars in venture capital funding during the first half of 2026 marking the strongest opening to a year since 2022 that is according to new analysis from hsbc innovation banking uk and deal room ai startups raised 12.6 billion us dollars setting a new annual record in just six months joining us now is emily turner ceo of hsbc innovation banking uk emily thank you for joining us so we have an update we have significant inflows and investments particularly in ai does the momentum continue what are you seeing yeah it's this is a [01:19:30] Speaker 15: great time to be in the innovation economy in the uk when i think about the 17 billion that you just referenced there's really two parts of it one is scale and that's ai as you mentioned two is maturity not only is it that we're seeing scale in the number of deals but we're importantly seeing scale in the size of deal for many years there was a question around could the uk support larger and larger deals and we've seen that in the first half alone we saw 28 companies raise over 100 million dollars and four companies raise a billion and it wasn't just a billion for late stage companies we actually saw the first seed stage billion dollar raise in this market which puts us on the stage with every other market in the world yeah i think you're referencing ineffable [01:20:09] Speaker 1: intelligence with that with that seed round of over a billion u.s dollars how reliant though are we on [01:20:14] Speaker 15: dollar funding still for these deals so at the end of the day in that entrepreneurs need funding and funding is globally mobile and i think that's a good thing and so yes at seed stage we've seen 77 of rounds led by uk-based investors but it goes to only 16 percent if you look at 250 plus so there is indeed a real tailing off of the uk ability to participate and to lead rounds as you go later and later and importantly larger and larger that said the fact that money is coming in speaks to the quality of talent the quality of businesses being built here and their ability to scale is the second derivative changing is this accelerating i definitely think this is accelerating the trend that we're seeing i think we're seeing that in in two ways so one is if we look at the uk market 68 of of funding came from large deals if we look at the us that's 91 and we're moving in that direction so i think in the uk we have to assume that we're moving in that direction where a larger number of large deals happen and they are at larger and larger amounts and so that will create more and more concentration in the market but the market will grow across it two is the trends that we're seeing globally meaning deep tech ai really research and discovery driven companies that plays to the strengths of the uk be it in deep tech areas like quantum as well as in things like biotech and importantly this is university related so the the uk is you know universities in the uk are a huge strength um we've seen over the past few years 20 percent of companies raising venture capital coming out of uk universities which is a real standout on the global stage importantly as well we have some of the best universities in the world that said universities are not the only place that we see startups coming from and one of the key things back to your earlier question around is this continuing we're seeing what i think of as founder factories so if you take a company like deliveroo 57 new companies have come out of people who came from deliveroo we're seeing the same thing with deep mind you know tom mentioned ineffable um you know the founder there comes out of deep mind so more and more we're seeing companies not just have great outcomes themselves but the founders and the employees not just the founders have learned the skills have proven themselves and they can attract the capital to then go off to the next company [01:22:16] Speaker 3: and emily is ai sovereignty is it a thing that is discussed at this level at this uh this size of business that you're talking about here i mean tom was recently in paris and uh a lot of executives quite alarmed by the way the u.s administration had been managing certain rollouts certainly around anthropic is ai sovereignty something that is energizing the sector here or alarming it how how what's the [01:22:40] Speaker 15: read i think it like any market that's very active you're going to see people at all ends of the spectrum overall though i think that the tone is very bullish um ai sovereignty here you can see steps like the launch of the sovereign ai fund which is becoming quite active as well as a number of other steps that's super important and what we see in the uk but also in europe is that uh public sector money plays a real role in these markets and so that's a driver that we don't see in other markets [01:23:04] Speaker 3: okay so thinking about the public sector takes me to the next thought which is that we've got i mean not a new government i suppose but a new leader coming in at some point and we have a pretty good idea who that's going to be there's all kinds of reporting about things they might be tempted to do big changes to the tax system not to do with tech but it might impact tech and and entrepreneurialism i suppose and many governments have wrestled with ways to get the pension industry in the uk to better fund startups and innovation i mean where should the [01:23:33] Speaker 15: government be focused in your mind yes i mean i think um to your point there's still a lot that we don't know but two things that we do know are one that over the last few years there's been investments in things like the british business bank um giving them more uh balance sheet more ability to invest to [01:23:48] Speaker 3: the public sector and investing and has that been material is that something to continue so that is [01:23:52] Speaker 15: definitely something to continue i mean the british business bank invests both directly and through funds in this market and so that is something that we see to continue and very much support the market but so that's one part where you say office of foreign investment british business bank the industrial strategy all of those things have laid out a real path for growth and are creating real tailwinds for this market too as you say and to your point sort of we don't know what is coming but if we look at what's happened in manchester in the recent past there's been a real commitment to things like skills education and infrastructure and if i think about what's needed to succeed in venture capital and importantly in venture capital startups in this country those are three important drivers so if we keep skills infrastructure um and that's where broader push for growth in mind that supports here so some [01:24:35] Speaker 1: manchesterism that uh maybe the text it's interesting that you reference matches because you do hear in the ecosystem right now real anxiety that burnham is going to come in and kill the goose that lays the golden egg i mean do you do you think that's overwrought in terms of some of some of the concerns that have been flagged by by pretty prominent names in in our eco startup system here in the uk you know i think [01:24:59] Speaker 15: it's too early to tell what's going on but i do think we've got tailwinds we've got the macro trends and ultimately as i said before capital is global in nature as is talent yeah and between the fact that we've got great science to to the question before on universities we've got great discovery here and then we've got huge demand i think all of those things will be driving the market so ultimately [01:25:23] Speaker 2: when when you when we next see you okay so so what are the what are the trends that you're watching out for kind of what comes next as this thing starts to gather pace and evolve what are the things that you're looking for what's the next key milestone that you're going to be watching for well thank you [01:25:36] Speaker 15: for saying that you're going to invite me back you seemed surprised when you came a moment ago you're like i'm back so you know so i'll take that first but you know i think i think it's a few things so one is we need to see a pace of new company formation so in the first half of the year we saw just over 800 companies formed or getting their first venture capital generally speaking we're on a track for 1.6 000 a year so we're hitting that target yep two is this late stage that i talked about um right now we have 217 unicorn companies in this market um where 18 of them are new year to date we need to see that continue and importantly not just at unicorn valuations but we need to see those companies attracting real revenues and showing real traction on a global scale so those are the things that people should be looking out for how many companies are not just valued highly but also have enduring customer relationships that they're able to really capture value not just from customers here but [01:26:24] Speaker 2: around the globe emily you're always welcome nice to see you thank you very much for coming to see us we appreciate it emily turner hsbc innovation banking uk ceo what have we got coming up defense tech uh is is another part of this story as well uh we'll turn our attention to what is happening at nato president trump heading for the nato summit is taking place in turkey uh obviously we are watching this very carefully on a number of fronts clearly the story around ukraine is part of that we think there's going to be a meeting with ukrainian president vladimir zelensky all of that to be discussed next this is bloomberg welcome back 48 minutes into the equity market session and europe is actually a little higher than what we first thought it would be this morning uh you've got anything between kind of two tenths and nearly half a percent in terms of the upside that we're getting plenty of mna out there that we're folding into the narrative as well this morning defense mna uh in france you've got the easy jet narrative playing out in the footsie 250 as well so there's some interesting themes running through the market as we await the arrival the real the re-emergence of the united states yeah with nasdaq [01:27:47] Speaker 1: uh 100 futures pointing up by more than one percent right now let's look ahead to what else we are watching throughout today then and this week later today the british chambers of commerce quarterly economic survey will come out on tuesday it is the nato summit starting in ankara there's also the paris court of appeal ruling in the marine le pen trial potentially very significant for the politics of france samsung earnings as well on tuesday significant for the chip story and on wednesday uni credit will announce the results of his extended tender offer for commerce bank on thursday eu finance ministers meet in brussels the uk prime minister nominations open as well and on friday sk heinix makes its wall street debut let's return to the defense theme which will run uh throughout [01:28:32] Speaker 3: this week we are working our way towards a nato summit president trump is traveling to turkey to confront wary allies and meet with the ukrainian president vladimir zelensky about ending the war with russia tensions are high due to friction over european defense spending the war in iran and president trump's persistent interest in acquiring greenland let's head to ankara now where piotra skolomovsky is our central and eastern european team leader and has decamped there to cover the summit for us uh piotra good morning so what can we expect then from the talks with zelensky we've you know this comes with some baggage some history as we know but i think many european leaders would like to see plans made to return some focus to the ukraine conflict [01:29:17] Speaker 16: good morning yes indeed so zelensky is going to meet trump when uh both of them arrive for the nato summit tomorrow um zelensky has basically two goals one is obviously he wants to get the the peace process started we we've been we've seen that because of the war in iran um the talks have been pretty much stalled so there were no talks um whitkoff and um and kushner was were were busy um trying to to negotiate the other peace plan and right now the idea is let's let's sit down and try to resume those talks whether that's going to happen it's it's not very clear at this point um trump talked to uh president putin over the weekend and obviously um but it doesn't seem like russia is ready to to negotiate or ready to to actually give up anything or or or talk about any concessions another thing that that's really pertinent and and really really urgent for for zelensky when he meets trump is um air defenses ukraine has just um went through a very massive strike overnight from russia a second one massive strike uh in less than a week this time when we saw when we look at the numbers uh in terms of the ballistic missiles they interested literally zero which means air defenses have really been depleted and they rely on u.s produced patriot missiles to to shoot down russian uh russian ballistic there's no better missile better weapon to actually shoot down russian um russian ballistic missiles so he will definitely push for for us to provide them and push for other allies to to chip in as well and he's already been talking about this this morning that this is a topic that he's going to not only talk to trump about but also to other european allies who apparently have those uh u.s patriot u.s made patriot missiles in their stockpiles yeah building them is the huge bottlenecks in building [01:31:07] Speaker 2: those patriots right now um let's talk about five percent defense spending how fast does do the americans want europe to get there and how fast is europe capable of getting there [01:31:21] Speaker 16: well of course europe literally has no chance well they have no option not to get there because at this point americans are are obviously the goal is to get to that point by 2035 that was the agreement at the hague summit last year but what we're hearing from the americans recently is they want this to to happen quickly some allies are definitely over the line um and they are ahead of the schedule we talk about the baltics poland where where five percent has already been reached with others it's uh it's more of a patchy picture but but as i said i mean there is really no choice in front of europeans to not to do that and not to do that quickly because we're already seeing very clear signs from us that it's pulling out of europe first of all they're reviewing troops so over the next six months we'll know how many troops are going to stay um in in europe secondly we've already seen signals of for example um capabilities being um reduced when it comes to um forces that nato has in terms of a crisis so that's uh that's where us is also pulling out and they've already said that they are not going to deploy long-range um capabilities or long-range strike capabilities the germany which was planned for for next year so all of that shows that europe has really no choice but to go to five percent as quickly as they can it's going to stress a few budgets piotra thank you [01:32:44] Speaker 2: very much indeed piotr skolomowski joining us from anchor ahead of the nato summit um let's turn back to what we see in markets this morning joining us now scala montgomery kerning from our m live team good [01:32:53] Speaker 17: morning you're still interested in the end yes absolutely um i think it's quite interesting because it's well appreciated that authorities don't want a significantly weaker currency and that the currency is kind of stuck between this weak fundamental backdrop and intervention on the other side with the bias just being the slow drift up as people continue to use it as a funder as volatility is low into the summer but i think what's maybe underappreciated is that authorities also don't want a very strong yen or a sharply stronger yen and the reason for that is that it's detrimental to the equity market right if you have a stronger currency that means that exports are more expensive for foreigners buying it means your equity is more markets more expensive and it also means foreign earnings once translated back into the end aren't as strong and there's been a very big push to support the equity market and it's been very effective i think the other bit is that it's just inflationary and so you know we're looking for what pushes it lower or higher or and i think the path of least resistance is just kind of the slow boring trend which maybe isn't as exciting would you go as far as saying managed depreciation at the end um i think yeah that's certainly the direction that we're looking at um in that all of the policies seem to be wanting to support the equity market in terms of this kind of structural push that you've had for equities to not have as much cash hoarding in japan to have return on equities and it means that you have this like shift that japan's going a different direction than everyone else where for example the u.s has this increasing demand for capital but japan is increasing buybacks it's increasing dividends and that's a structural support [01:34:29] Speaker 3: that the government's pushing for this is still a big change that's unwinding quite slowly isn't it that's kind of when the boj started hiking rates a lot of people said this is a big moment because this the carry trade has been this uh cheap source of funding for so many in global markets for a long time and you thought that gap might close quickly but then actually the gap has been uh it hasn't closed that quickly and there's still big interest rate differentials between japan and the united states so it's sort of a story that keeps on keeps on we keep we keep on talking about it doesn't go away [01:34:57] Speaker 17: yeah i think part of it is through the 2010s you didn't have big interest rate gaps you didn't have carry as a consideration in the same big way that you do now but if you think about it if i'm a foreign investor buying japanese stocks buying japanese bonds more likely um if i am buying in dollars then the differential is in favor of me hedging that flow and so it's the same way if i'm a japanese investor buying stocks abroad then it's very much against the yen because it's a 300 basis point hedge that you're having to pay and that's a big difference and i think it's something that's underestimated as well in terms of currency performance that we're seeing in that the pound was the best performing currency in the second quarter and that's very much supported by high policy rate and it seems unlikely [01:35:42] Speaker 3: that changes anytime soon okay skyla montgomery coning thank you very much for our markets live team talking of the pound makes me wonder if anybody is working in london this morning i think we should [01:35:50] Speaker 2: play an extra 12 minutes here to be honest like we're coming to the end of the show okay we'll just do [01:35:54] Speaker 1: an extra i mean i'm doing the pulse anyway as fraught as those 11 to 12 minutes were it was meant to be 11 felt like well it felt like a historic victory yes anyway i know who's playing extra time [01:36:05] Speaker 3: i am playing extra time yes portugal and spain's on later as well just public service announcement the pulse is next this is bloomberg [01:36:20] Speaker ?: Thank you.