Trump to Offer Iran Financial Boost in Peace Deal — Daybreak Europe 6/17/2026

[00:00:00] Lizzie Burden: Live from London, this is Bloomberg Daybreak Europe. I'm Lizzie Burden with your top stories. Bonds gain and Asian stocks push higher for a third day as investors count down to Kevin Walsh's first decision as chairman. Oil, meanwhile, holds below $80 a barrel as Bloomberg learns that the draft deal between the U.S. and Iran will deliver a broad economic boost to Tehran. And as SpaceX rockets past Amazon to become the world's fifth largest stock, we'll speak to Europe's AI leaders throughout the morning at the VivaTech conference. Well, a very good morning. Welcome to Wednesday. And of course, it is Fed Day. So let's start cross-asset today. We have Brent below $80 a barrel this morning. 78 the barrel is where we trade, down 7 tenths of a percent. We're at a three-month low here, so down over 15% over four days on bets that the U.S.-Iran deal will get oil flowing again. Now, that easing concerns on inflation. So you've got bond yields dropping around the world. The 10-year U.S. Treasury yield down a basis point at 4.43% ahead of tonight's Fed decision. But rate strategists hugely split about how many hikes or cuts are coming this year. So let's just see how dovish the message comes from Kevin Walsh at his first presser as chair. Now, the dollar is range-bound in anticipation. Is it going to drop lower if the Fed sounds more dovish than expected? Currently down five basis points. And if we flip the board over to the equity picture now, you've got Asian stocks not doing a whole lot, up two-tenths of a percent at the moment. European stocks down about the same amount. And Nasdaq futures are up six-tenths of a percent. But, of course, this comes after a broad rotation out of tech into pretty much everything else yesterday. Now, let's have a look at the risk events on the docket for today. We have at 7 a.m. London time the U.K. inflation numbers before, of course, the Bank of England decision on Thursday. Then we have at 8.30 a.m. the Ricks Bank decision before at 7 p.m. As I say, the Fed decision with Kevin Walsh's first meeting, his first press conference as Fed chair. Let's set you up for the day ahead. We begin this Wednesday morning with Asian stocks looking to extend gains after a three-day rally already as we count down to tonight's Fed decision. Let's see how markets are faring in Asia. We could go to Averill Hong in Singapore. Averill, what are you looking at this morning? [00:02:43] Averill Hong: Yeah, exactly as you said, these Asia stocks look to be extending already a three-session rally even ahead of the Fed. And this is a performance that calms despite the 6% decline on the Philly Semiconductor Index overnight. So really not too shabby in the region. You can almost hear this collective sigh of relief going up, especially given oil at these levels. It's helping to calm fears about rate heights from regional central banks. So a supportive backdrop overall for Asia assets. And if you flip the board, I can show you another example of the sigh of relief in emerging markets. Today, the Indian rupee is somehow leading the pack in terms of Asia currency gains. This is a currency that's been battered amid the Iran war because of the country as a net oil importer. And certainly you are seeing a bit of range-bound trading in terms of FX. Now flip the board again as we focus on the Fed. It's also about other central banks in Asia. And that of China is in the spotlight. There is a high-profile financial policymaker meeting underway in Shanghai. And typically this is a platform for policymakers to signal policy shifts. So far, we've gotten some announcements that could help promote usage of the yuan overseas or renminbi internationalization and also signals from the PBOC to perhaps streamline the interest rate framework and focus on the overnight policy rate. So this would help bring things in line with other global central banks, the major peers in terms of streamlining the toolkit that the PBOC uses. So it's really central banks in the spotlight today. Lizzie? [00:04:26] Lizzie Burden: It really is. Averill, thank you very much. That's Bloomberg's Averill Hong in Singapore. And Bloomberg understands now to the geopolitics that Iran is set to receive broad financial incentives as part of its agreement with the United States. A draft of the deal seen by Bloomberg shows that Tehran will get the right to immediately sell oil, tap a $300 billion development fund, and eventually access its frozen assets. But President Trump reiterated Iran will never own a nuclear weapon. [00:04:55] Speaker 3: Here's what it says. Iran will never have a nuclear weapon. That's what it says. It won't have one to buy, to develop. They will not have a nuclear weapon. And I would say that's about 99.9% of what I wanted because we couldn't let that happen. You couldn't let that happen. And they won't have a nuclear weapon. But now in addition to that, the strait is going to be open toll-free. [00:05:21] Lizzie Burden: Let's talk to our Bloomberg Horizons Middle East and Africa anchor, Abir Abu Omar now. Abir, good morning. Just based on what we know of the terms of the deal, to what extent has Iran won the war? [00:05:35] Speaker 4: Good morning, Lizzie. Well, you alluded to it in your intro, right? You were talking about frozen assets unblocked, oil sanctions lifted, and a $300 billion, at least, of economic help to Iran alongside regional allies of the U.S. that will provide this development fund to Iran if some concessions are met. So it's a good question that a lot of people are looking into and are thinking, well, Iran gets all of this. And then the United States gets a 60-day period of negotiating Iran's nuclear program where Iran says it will not develop a nuclear weapon, which, by the way, is a statement that Iran has continuously maintained. It's always said it does not look to develop a nuclear weapon. And then the Strait of Hermuz reopens, and it was opened before the war. And so a lot of people are questioning what the U.S. is set to win out of this and then what Iran is set to win out of this. Now, this is a near final draft, Lizzie, that Bloomberg News has reported on. We still await to see what the actual official interim deal will look like. The signing ceremony is still supposed to take place later this week, headed by J.D. Vance, the vice president from the U.S. side, and Qalibaf, who is the Iranian parliament speaker from the Iranian side. But as things look right now, I was taking a look at this 14 provision list of items that is the MOU that we've been talking about for the past two or three months at this point. And a lot of it seems to be tilting more towards the Iranian side. Now, it includes ending hostilities across the region, including in Lebanon. It includes for the U.S. to remove its naval blockade out of the Strait of Hormuz over the next 30 days, and for Iran to do the same. But then the wider negotiations on the enriched uranium, for example, and what Iran is supposed to do when it comes to the highly enriched uranium, we don't have a lot of details on that. We'll have to wait and see what the shape of those negotiations looks like over the 60-day ceasefire period if Iran decides to destroy it or ship it to another country. Some details are still unclear, but again, we wait and see what the official signing ceremony will look like later this week, Lizzie. [00:07:52] Lizzie Burden: Yeah, what will Europe's role be in reopening the Strait, and how fast is that expected to happen? We know it's been a topic of conversation at the G7. [00:08:02] Speaker 4: Well, President Trump says immediately after the signing on ceremony, in reality, analysts, shipping experts, are telling us that the movement of the Strait of Hormuz, for that to go to its pre-war levels, that will take weeks, if not months, for us to see a return of those crude and other products, the shipments of those through the waterway. Now, how Europe can help, that's a good question. It is the week of G7. We heard from multiple European officials that questioned just how fast that movement could return to the Strait of Hormuz. For example, Giorgia Meloni of Italy said that Italy will not take an active part in demining the Strait of Hormuz. The processes of demining the Strait of Hormuz are also a big question right now. Until hostilities against Lebanon cease, Israel maintains that it will continue its incursion in the southern part of Lebanon. But when it comes to the European response, European officials are again questioning just how fast the Strait of Hormuz can reopen and just how fast we could get those energy shipments across the board. We have to wait and see how that looks like again after the ceremony and how the opening of the waterway will take shape. For Qatar, that is the biggest LNG shipper in the world or exporter in the world, it says that it can resume its LNG shipments within 50 percent capacity in the month following the signing ceremony and then to 80 percent capacity in the two months after the signing ceremony. And so that is something that we're looking for and just how rapidly those countries can get gas and oil shipments across the waterway. [00:09:44] Lizzie Burden: Abir, thank you for the update. That's Bloomberg's Abir Abu Omar, who will be back with Horizons at 5 a.m. London time tomorrow. Global bonds are gaining this morning with a 10-year Treasury yield holding near a one-month low after a rally triggered by those falling oil prices in the wake of the U.S. deal with Iran. Plenty of attention on the Fed later today with Kevin Walsh set his first decision and press conference as chairman. So let's get some analysis now. A bit of a preview. We can talk to Ven Ram, Bloomberg MLive strategist, who joins us now. So, Ven, how much is that U.S.-Iran deal and all the geopolitics Abir was just talking about? Is it enough to meaningfully change the outlook for the Fed or at least the commentary we'll hear tonight? [00:10:31] Speaker 5: Well, I think that, you know, more people on the, more policymakers on the FOMC are likely to exercise concern about what is going on with inflation, particularly with regards to gasoline prices in the U.S. And I think that, you know, look, I think that the markets are underpriced for an inflation overshoot or at least for the prospect of inflation staying higher for longer. And I think that, you know, we already saw that in the previous Fed meeting where more people were willing to drop their dovish buyers and get to a more neutral language. So I think the markets are kind of, if you look at the two-year yield, we are doing 405 and the 10-year yield as well below 450 doesn't seem to take into cognizance the fact that the U.S. economy is growing, is resilient, is looking through all these troubles and is growing pretty well and at any rate above trend. And you've got inflation that's higher for longer. We have missed, we've been missing the inflation targets for the better part of five years now. So there is absolutely no room for the Fed to be cutting rates here. And that's the point that markets aren't, are still glossing over really. [00:11:38] Lizzie Burden: And of course, there's a lot of focus on Kevin Walsh's communication. What are you going to be watching out for, listening out for in his press conference? A lot of speculation about whether his dot will be on the plot. [00:11:51] Speaker 5: Yeah, absolutely. He could just drop his dot on the plot, as you said. But I think what I'm expecting is more of a transition to a Greenspan-style Fed rather than a Powell's, a style Fed, because we know that Kevin Walsh is not a big fan of forward communication and forward guidance. And I think that I wouldn't be surprised if he came on to the presser today and said that, look, these presses are not a given. I mean, it was just about a decade and three years ago when the Fed started having these regular press conferences. We could go back to a world where he says, look, I'm not a big fan of these press conferences going forward and we may do it once a quarter. He may say that, look, I'm not in favor of dot plot either because we've been abysmal at forecasting the evolution of interest rates. So I want to ditch the dot plot and he could do away with the summary of economic projections as well. So I think that the rates market is completely oblivious of this risk. And if you look at rates, rates, volatility pricing, I think that the markets are thinking this is business as usual. I don't think it's going to be business as usual. It's going to be business unusual. [00:13:04] Lizzie Burden: And without his dot, how much weight is put on all the other dots and how much volatility does that create? Ben, we'll have to see tonight. Ben Ram, Bloomberg MLive Strategist. Thank you for the preview. Now, let's go to Paris, where Amazon founder Jeff Bezos is expected to be speaking this morning. Our Bloomberg Tech Europe anchor Tom McKenzie is on the ground for us. So, Tom, give us a preview of what's coming up today. [00:13:28] Speaker 6: Lizzie, good morning. Yes, from what is billed as Europe's largest tech and startup event. At a moment when SpaceX is a reminder of the capital strength, the AI strength, the tech leadership coming from the U.S., and frankly, the ambition as well, the question here is, how does Europe respond? At a moment where we have export controls on Anthropics' most cutting-edge models, how does Europe compete and ensure sovereignty? So, we will hear from the founder of Vivitech, of course, Maurice Levy. He's going to be speaking to me in about half an hour's time. And then, as well, the most valuable company in Europe, ASML. I'll be speaking to the CEO on the sovereignty front, on the role that Europe plays. We'll be speaking to one of the co-founders of AMI Labs on world models, whether or not Europe has skin in the game there. And, yes, Jay Bezos will be on the stage in a couple of hours' time. Modi from India tomorrow, along with President Macron. There's a lot happening here at Vivitech in Paris. This is Bloomberg. [00:14:43] Lizzie Burden: Welcome back to Bloomberg Daybreak Europe, 6.16 a.m. here in London. Now, SpaceX jumped for a third straight day yesterday, overtaking Amazon in value to become the fifth largest stock in the world. Shares closed 4.8% higher, pushing its market cap to $2.65 trillion, roughly $8 billion higher than Amazon's. I'm joined now by Neil Campling, Bloomberg's senior strategist for some analysis. Morning, Neil. I just keep wondering when this hype's going to wear off. So much of the stock is owned by retail investors. Is this sustainable? What's most likely to be the trigger for a share price drop if one's going to come? [00:15:23] Speaker 7: Sure. I think, morning, Lizzie. I think a couple of factors we need to be aware of. One is that there will be some passive funds who are tracking indexes when it goes into the NASDAQ, as an example, and MSCI indices who will be tracking and looking to position accordingly. Once that is passed, that could be a one trigger point to keep an eye out for. The second thing, and I find it slightly concerning, is that we started options trading yesterday. So there's people taking the bets on where they think the stock will trade on certain points in time. But the worry is that there were some short-term options, so ones expiring at the end of this week, where people are placing expectations the stock may be at $300 a share or $380 a share compared to the $200 type close that it came through. So that's people expecting to have significant gains in a very short space of time. So that could be an issue as well in terms of that effect. So there is certainly a concern. I think there's definitely a factor in play at the moment where it's clearly not based on fundamentals. But, you know, it's certainly a risk, I think. [00:16:33] Lizzie Burden: Well, on that point, everyone talks about how people are betting on the Musk hype. Does that mean that there won't be that much of a read-across for the Anthropic and OpenAI IPOs? [00:16:44] Speaker 7: It's interesting that this is, I think, very much, as you say, it's a Musk trade. And actually, there was a three-times leveraged product in London listed. The ticker is Elon Space LN. And yesterday, that rose by 60% at one point in time on the one day. So there's very much around that. So the read to Anthropic and OpenAI is limited in that sense. However, when investors start to look at the various AI models, they will probably see that Anthropic is far larger than where SpaceX has in its AI footprint. [00:17:20] Lizzie Burden: OK, interesting. I also just want to talk about this decision by Musk to buy the AI coding startup Cursor yesterday. $60 billion. It's one of his first moves for SpaceX since the IPO. What does that tell us about his strategy going forward for SpaceX? [00:17:36] Speaker 7: It confirms that SpaceX's future driver is on the AI side. Interestingly, again, and it brings it back to the Anthropic and OpenAI discussion, is Cursor's revenue run rate is about 1 20th the size of Anthropics. So Anthropic is far greater in terms of its scale and size currently. But SpaceX need to be in a space. They're very small in terms of their footprint. And actually, their CapEx, and you mentioned at the top of the segment about Amazon, Amazon's CapEx this year is likely to be four to five times greater than the entire SpaceX ecosystem. So they're playing fast catch up, but they are still way behind where other hyperscalers and AI plays are at the moment. [00:18:23] Lizzie Burden: We also had the Bloomberg scoop about the U.S. Commerce Secretary, Howard Lutnick, writing to Anthropic last week and warning that it would need government permission to grant foreign nationals access to most of its AI models, the most advanced ones, or face criminal or civil penalties. How likely is that to affect the Anthropic IPO? [00:18:44] Speaker 7: Well, I think if we remember, the OpenAI example was that they didn't file for IPO before they went to got a court resolution with Musk. So I think Anthropic is unlikely to come to the market if there are sort of concerns or government intervention at any point in time. They would need a clean slate to then really come to the market, I think. So I think it's certainly a case of not yet, given that situation. But this is a sort of a hot potato in terms of political discussions, because some people at the G7 yesterday were talking about real big concerns that one nation can literally unplug AI's access for other nations, given that AI is so important in terms of global growth today. So it's a big concern, I think. [00:19:33] Lizzie Burden: Well, we're going to be discussing that tech angle on the G7 later in the programme. We'll have Oliver Crook on the ground for us in France. But for now, Bloomberg's Neil Campling. Thank you very much. Well, coming up on Daybreak Europe, BMW plans to cut more costs after worsening demand in China. We'll get you more on that next. This is Bloomberg. Welcome back to Bloomberg Daybreak Europe. Now, BMW has slashed its profitability forecast for the year following, worsening demand in China, its biggest market, as well as negative sentiment from the war in the Middle East. It's also expanding a cost-cutting programme, leading to a one-time negative impact in the second half. So let's get more detail now with Bloomberg's transport reporter, Danny Lee. Danny, good morning to you. Just talk us through what we can expect from this cost-cutting programme. [00:20:38] Speaker 8: Well, good morning, Lizzie. So, BMW is revising its profitability outlook in car making. That will go from about 1% to 3% in returns. That's from its highest 6%. And that revision has come so soon after first quarter earnings in early May under the previous CEO, Oliver Zipsa. But now, under new CEO, Milan Nedeljkovic, he is setting the scene for shareholders of more realistic expectations. So what we will see likely is a deepening in restructuring in terms of more structural savings and efficiencies. But we've already seen BMW tackle savings and investments in R&D and efficiencies. So there is a doubling down. But it does raise the question whether there will be job cuts, which the company has not specified what this structural savings it's going to pursue will mean. [00:21:34] Lizzie Burden: And just tie this into the broader story for European autos, Danny. How is the deterioration of the Chinese car market impacting Europe and the US as well? [00:21:46] Speaker 8: Well, China is going through a multi-month slump in car sales. That also affects EVs with the loosening of support for EVs and therefore consumer sentiment is weaker. This means not just foreign automakers, but Chinese automakers are struggling as well. And we have seen already in the prior years the intensifying competition that has really affected foreign automakers, particularly the Europeans. And so when you look at how BMW is producing its new class EV lineup, which has cost billions in euros, this may complicate its effort. But we have already seen the likes of Mercedes and Porsche, for example, who are all struggling in China as well. But the difference between BMW and the likes is that Mercedes and Porsche are seeing better sales overall from its lineup or they're doing earlier, deeper restructuring to ensure they have the cost savings, whereas BMW is going to see sales that are going to decline. So very much that China context is important and it's going to be a struggle for BMW in the months and maybe the foreseeable future to come. [00:22:53] Lizzie Burden: OK, Bloomberg's Danny Lee in Hong Kong. Thank you very much for that analysis. Now, to some of our top corporate news this morning. Bloomberg has learned that Apple is planning to launch camera-equipped AirPods late next year as part of a flurry of new releases. Sources say it aims to unveil the device around the same time as a next-generation foldable phone and a fresh iPhone model to mark its 20th anniversary. Elsewhere, Goldman Sachs has advised on more than $1 trillion worth of mergers and acquisitions so far this year, the fastest any bank has ever reached that milestone. That's according to data from DealLogic. So that's just a couple of our top corporate stories this morning. But coming up, Ukraine on the agenda. We'll get the details of Trump's meeting with Zelensky at the G7 next. We'll go to our chief Europe correspondent, Oliver Crook, who is on the ground for us in France. That's next. This is Bloomberg. Live from London, this is Bloomberg, Daybreak Europe. I'm Lizzie Burden with your top stories. Bonds gain and Asian stocks push higher for a third day as investors count down to Kevin Walsh's first decision as chairman. Oil holds below $80 a barrel as Bloomberg learns that the draft deal between the U.S. and Iran will deliver a broad economic boost to Tehran. And as SpaceX rockets past Amazon to become the world's fifth largest stock, we'll speak to Europe's AI leaders throughout the morning at the VivaTech conference. Well, a very good morning. Welcome to Wednesday. Let's take a look at these markets this morning. It is Fed Day. We've got a lot of geopolitics happening. And you're looking at Brent now below $80 a barrel. It's a three-month low, down over 15% over four days on these bets that the U.S.-Iran deal is going to get oil flowing again. Now, that is easing concerns on inflation. So you've had bond yields dropping around the world. The 10-year Treasury yields, as you can see, they're at 4.42%. But really, strategists divided on how many hikes or cuts are coming from the Fed this year. Are we even going to see a dot on the plot from the new Fed chair, Kevin Walsh? It is his first meeting as chair. We'll hear from him tonight. How dovish a message are we going to hear at this press conference? The dollar range-bound in anticipation. Will it drop lower if the Fed sounds more dovish than expected? Now, flip the board over to the equity and futures picture. We've got Asian stocks up four-tenths of a percent now. So doing better than at the start of the program. European futures, though, down two-tenths of a percent nearly. And NASDAQ futures looking for a bit of a retracement of yesterday's losses. We had that broad rotation out of tech into pretty much everything else. So now NASDAQ futures up six-tenths of a percent. That's what's happening in markets. Let's talk at the front pages now. And we'll start this morning with the Financial Times. They lead with a story describing investors flocking back to the U.S. dollar, saying that investors are betting the AI boom will support the country's economy and force the Fed to keep rates high. Meanwhile, if we look over to the Wall Street Journal, it focuses on SpaceX confirming this $60 billion deal to buy coding startup Cursor, as we were discussing with Neil Campling, saying that Elon Musk is using his war chest on the acquisition in a bid to target enterprise customers. So not the consumer, more enterprise customers. Meanwhile, let's take a look at the French papers this morning. Le Mans leading on the World Cup, of course, after France's 3-1 victory over Senegal, in which a headline describes a team with two speeds overcoming a slow start to secure victory. And you can get a roundup of all the stories you need to know to get your day going in today's edition of Daybreak, which tell my subscribers can find by going to D-A-Y-B-Go. Well, let's go to the G7 now because the U.S. could soon reimpose sanctions on Russian oil shipments after President Donald Trump and fellow leaders at the G7 met to discuss the war in Ukraine. shadowed by the Iran war, the focus now is shifting back to Ukraine. [00:27:24] Speaker 3: We were focused on Iran. That's going to be in the back, in the rear view mirror. They go to this front and they get blown up. And Ukraine is losing a lot of people too. I mean, the whole thing is ridiculous. So, yeah, I'm going to do whatever I can. [00:27:43] Lizzie Burden: Let's go straight to the summit now. Oliver Crook, our chief Europe correspondent, joins us now for more. Oli, good morning. We heard Trump there saying that he'll do whatever he can for Ukraine. So, what does President Zelensky need from the G7? [00:27:58] Speaker 9: So, he needs quite a few things from the President of the United States if he can manage to get it. And we should say that this was the opportunity for President Zelensky to meet with Donald Trump. He hadn't really had any sort of face-to-face interaction with the President of the United States in almost four months. And so, we had that sort of broader meeting with G7 leaders that included the President of the United States. It seems like they also got some one-on-one time on the sidelines of that event. I mean, they need really two things. One is for this sort of re-engagement of the United States in the peace process. We've since, you know, the United States sort of tapped out of that peace process a couple of months ago. There's been some more diplomatic efforts on the European side. But there's also been some sort of radical changes to the equation for the Ukrainians. You'll remember the first half of the Trump presidency with that catastrophic meeting with Zelensky in the Oval Office. The real mantra for President Trump was Zelensky, you have no cards. Now, since then, things have changed radically on the battlefield. The Ukrainians have gained momentum on the battlefield. But they've also finally got this 90 billion euro loan from the European Union that had been blocked by the Hungarians to sort of tilting the valance of power. So for Zelensky, this is an opportunity to re-engage, A, to the president of the United States, but B, to do it in sort of the terms that are favorable to the Ukrainians. And that is exactly what he'd like to get from the president of the United States. He would like to see those oil sanctions reinstated on the Russians that were sort of lifted in order to ease some of the supply shock that we got from the war in Iran. It sounds like the United States is now open to doing that. And, of course, the all-important permanent question of military hardware and, of course, air defense. The air defense will be in very sort of high demand across the world because, of course, all the Gulf countries will want to get their hands on it as well. But potentially now, with the hostilities in Iran ceasing, some more supply of that American hardware that the Europeans can buy and then send over to Ukraine. [00:29:40] Lizzie Burden: OK, so that U.S.-Iran deal hopefully opening a bit of bandwidth to focus back to Kyiv. Meanwhile, another focus is tech because you've got AI executives planning to attend the summit today. What can we expect there? [00:29:55] Speaker 9: Yeah, that's absolutely right. Yesterday was really the geopolitics day. The focus today will move to the sort of corporate side and, of course, the future economy and artificial intelligence really at the center of things. So you've got the CEO of Anthropic, OpenAI. You've got leadership from Google and a number of the European tech companies meeting with G7 leaders in order to have the conversations about what the sort of collective approach globally will be on AI. It comes, Lizzie, at a very interesting moment as we've been reporting over the last couple of days where you're starting to feel a bit of that AI nationalism where you have the United States basically freezing out foreign nationals for using some of the most advanced anthropic models. That obviously will be sort of front and center for these leaders and for these CEOs as they discuss that a little bit later today. There was also some reporting from Reuters that potentially what some of these countries would like to see is to get sort of favored status in order to gain access to some of those models so that maybe potentially that circle can be drawn a little bit wider than the United States. But that will be some of the conversation that will be focused today before President Trump then jets off to Versailles for that sort of one-on-one state dinner with President Emmanuel Macron in the gilded halls of Louis XIV. [00:31:02] Lizzie Burden: Oli, thank you for your coverage. That's Oliver Crook, our Chief Europe Correspondent in Evian, who will be speaking to the Synthesia CEO and co-founder later this morning from the sidelines of the G7, a key tech conversation there. And coming up, we'll return to Paris. We'll be speaking to Maurice Levy, the VivaTech founder and Emeritus Chairman of Publicis Group. So that conversation coming up next. This is Bloomberg. Welcome back to Bloomberg Daybreak Europe. Just coming up to 6.40 a.m. here in London. And let's head right back to Europe's biggest tech event, VivaTech, which kicks off in Paris today. Tech leaders, startups and investors are meeting to discuss artificial intelligence, the economic payoff and issues of sovereignty and ethics. We can go back to Bloomberg's Tom McKenzie. He is at the summit for us. Tom, you've got a special guest with you. The first of many today. [00:32:10] Speaker 6: Lizzie, thank you. Yes, very pleased to say I'm joined by the chair emeritus of the publicist group and the founder, of course, of VivaTech, Maurice Levy. Maurice, good morning. Thank you for your time. This is the 10th anniversary of VivaTech. We were talking in the break about the journey that you've been on with this event and this happening at quite the moment when it comes to how we think about AI, how we think about sovereignty and how we think about Europe's place in tech. [00:32:36] Speaker 10: First of all, thank you for having me and good morning. It is the moment. It is the moment on every single aspect of technology, AI, transformation of society, the way consumer will behave, the transformation of corporation. And VivaTech is playing a very important role as a catalyst of energy and also the fact that we are inviting people with contradictory point of views in order to push the envelope in those discussions. And clearly, AI will be a defining innovation for the future of Europe. And today, sovereignty is a key word for all European head of states. [00:33:33] Speaker 6: Let me follow on the sovereignty question then, Maurice. How significant was that decision by the US to impose export controls on anthropic models? How is that being received in Europe? [00:33:44] Speaker 10: What should the response be if you are a CEO in Europe and you are running a business, for example, CEO of a big bank, and you are using cloud and the anthropic tools or open AI tools, chat GPT, whatever. And suddenly, you are cut off from those tools, which are the brain of your system. The nervous system of the bank is that tool. And suddenly, you are cut off. What do you think? How can you imagine that a CEO can think that one day it's like somebody we can switch off electricity, and it's switching off AI? Now, you doubt about the future. You doubt about your supplier. You have some doubt about how you will be running the business tomorrow, and you have to think about some alternatives. And head of state say, oh, the solution is clearly that we control our data, that we control new tools, Mistral AI, or Amilabs, OH, whatever, and that we develop our own AI system in order that we have the tools which give us our own right to grow, to develop, to sustain our development for the future. So clearly, it has not been well received, to put it mildly. [00:35:25] Speaker 6: It hasn't been well received, to put it mildly. It has not been well received. This has been a catalytic moment then, it's catalyzed a response, and you expect Europe to response. Is it full-stack sovereign AI that Europe needs, or is it controlling some of the bottlenecks so that Europe can have a seat at the table? [00:35:44] Speaker 10: Well, I think the more you go into the detail of what AI will be doing and the role of AI in every single operation, you see that it will be essential for space, it will be essential for defense, it will be essential for industry, with the robotics, you cannot do robotics tomorrow without AI. And therefore, the question is to have the control, not only of the data, but also on everything, the whole range of tools. What is the biggest impediment to that ambition right now in Europe? The biggest impediment is money. In fact, to be very honest with Europe, even if we have made a lot of progress in taking risk, and if there has been a change in culture for the risk-takers, it's clear that we are not sitting with the same kind of bulk of investment that the US has. Yeah. So how do we unlock that? I think you read and recall a report, you read the Mario Draghi report, and you have the solutions. And one of the solutions, which has been decided recently, which is the 20th country. Unfortunately, UK was that 20th country, but it's no longer there. So this virtual country where there are rules, which are softer, and this could be the beginning of a change in attitude and in change of behavior. [00:37:40] Speaker 6: Let me ask about your advertising industry. Are there fewer or more workers in advertising in five years' time? [00:37:47] Speaker 10: I think there will be a big change in creativity, a big change in the way we are operating our own operations. And I think that the idea that we will lose a lot of jobs is maybe exaggerated a little bit to speak like Greenspan. I think that there will be some changes, but there will be new jobs. Probably more expensive jobs. So I don't believe that all in all, we will be very different in the future in terms of size of jobs. [00:38:28] Speaker 6: What do you expect to hear from President Macron tomorrow? What should be front of mind for him? [00:38:34] Speaker 10: Okay. Okay. President Macron is in the last year of his presidency. He is on many fronts and he has a limited power today because he has not a clear majority at the Assemblée Nationale. So therefore, what he can do is relatively limited. And I think what he can really, where he can have an impact and make a chance is at European level to convince his colleagues that we should have one Europe united. And as long as we have 27 countries and an idea of Europe, we will not be as powerful as we can because we have the largest consumer country of the world. We have also the capacities and the possibilities of being a fierce competitor to China and to the US. So therefore, we should a little bit think a bit less about our own sake and more about Europe's sake. And we will be much stronger. [00:39:57] Speaker 6: Horace Libby, thank you very much. Indeed, Chair Emeritus of the Public Business Group and, of course, founder of VivaTech. Lizzie, thanks to you. [00:40:03] Lizzie Burden: Tom, thank you very much for that interview. And our coverage of VivaTech continues from Tom McKenzie, with more great guests throughout the day joining us from Paris, including the L'Oreal Deputy CEO, the Chief Executive of Pascal and the Managing Director for EMEA at Amazon Web Services. Well, let's come back to the UK now. Nigel Farage's Reform Party, currently ahead in the national opinion polls, is being challenged by a right-wing upstart called Restore. Led by Rupert Lowe, who was ejected from Reform UK, the party has attracted the attention even of ex-owner Elon Musk. With a highly anticipated by-election in the Northern England constituency of Makerfield coming tomorrow, the party is splintering the right-wing electorate. Labour's Andy Burnham is the favourite to win, but Restore's candidate is on 7%, equal to Burnham's margin over reform. Let's get a breakdown of all of this now. We can speak to Bloomberg's UK politics reporter, Lucy White. She joins me now in studio. So, Lucy, maybe the international audience isn't familiar with Restore. Just talk us through how it's creating a headache for Farage's reform and really making the Conservatives pale in comparison to either. [00:41:17] Speaker 11: Yeah, it's incredibly interesting because, you know, up until recently we were thinking of reform as this sort of challenger, upstart party, and now we're looking at an even more challenger, even more upstart party that's now essentially throwing Nigel Farage's own rulebook back at him, playbook back at him. So, you know, it's incredibly difficult for Farage because we're seeing Restore take a huge amount of their votes, potentially, enough that, you know, it could potentially mean that reform doesn't win in this northern by-election. And it's cannibalising that kind of right-wing vote. I mean, Labour essentially can just sort of sit back and watch this play out and say, well, you know, we don't really need to do that much because these guys are kind of taking each other's vote and splitting it. [00:42:04] Lizzie Burden: So, it's helping Burnham. If he wins, how soon could we see a leadership challenge to Keir Starmer? [00:42:09] Speaker 11: I think it will play in Burnham's advantage if he wins to move as quickly as he possibly can. I mean, the longer we see this drag on for, the worse it's going to be for the Labour Party. And the less is going to happen in terms of getting legislation through, having any kind of plan that the country can get behind. And, yeah, the worse is going to look for the government. [00:42:32] Lizzie Burden: OK. Well, let's see how it plays out. We most Lucy White all across that election for us. And as we have been discussing, voters in Makerfield in Greater Manchester will be going to the polls tomorrow in this by-election to select a new member of Parliament. A full list of candidates standing in the election is on your screen now. So, just take a look at this, how many there are on this screen. But as we say, it is a crucial vote that could lead to the next Prime Minister of the United Kingdom. Meanwhile, London Mayor Sadiq Khan has declined to support Keir Starmer, staying on as PM until the next General. Khan is a member of Starmer's Labour Party, of course. The mayor welcomed the potential run to Parliament of, return to Parliament of Manchester Mayor Andy Burnham, who is, of course, one of Starmer's main rivals. [00:43:22] Speaker 12: I wish I was knocking on doors in Makerfield in this by-election. I love campaigning. Andy Burnham is a good friend of mine. So is the Prime Minister Keir Starmer. It's waiting to happen on Thursday. I'm really hoping. I'm sorry, Andy, I can't be there helping you in Makerfield. I'm really hoping that Andy Burnham and Labour wins in Makerfield. But also I can see the strengths of Keir Starmer, the Prime Minister. He's currently in Evian, in France, at the G7, showing the difference stability he makes in terms of whether it's NATO, whether it's the importance of working with our European partners, whether what we've seen in the last couple of days, the peace deal. [00:43:57] Averill Hong: So you have the view that Starmer should be leading Labour in the next general election? [00:44:01] Speaker 12: I think it's really important for us to focus on one thing at a time. The focus for the Prime Minister should be the G7 summit. The focus on those of us who aren't at the G7 summit if we're in the UK, if we're Labour, is to go to Makerfield and help Labour win that seat. I think, and I speak as somebody who's done this for the last 10 years, when you're a leader, you want your most talented people around you. And I think Andy Burnham is incredibly talented. I want Andy Burnham, because he wants to return to Parliament, back in Parliament, helping the Labour government. [00:44:30] Lizzie Burden: The London Mayor Sadiq Khan speaking there to Bloomberg's Averil Hong in Singapore. Plenty more still to come. Stay with us. We just don't know. [00:44:40] Speaker 13: So that's the reason why the market, of course, has been used to having very well-anchored expectations around the dot plot. The dot plot has been around now for 15 years almost. The ACP, meaning the forecast, has been around for almost 20 years. So most people in financial markets have grown up with very anchored expectations about the economic outlook and very anchored expectations about what the Fed will do. [00:45:15] Lizzie Burden: Apollo Partner and Chief Economist Torsten Slock there on the lack of clarity on the Fed outlook. Of course, the Fed decision tonight will be the big focus for markets later on today. But in anticipation, in advance, let's bring you some other terminal charts to frame your day ahead. Yesterday, we saw more of this rotation out of U.S. tech. You can see here on this chart the spike in volatility on the Nasdaq compared to the broader stock market. So it just really underscores the concentration in big tech. So the question is, are we at a turning point where we see even more of a shift away from big tech and into a wider range of companies, pushed partly by the oil price falling? Now, flip the board over and you can see how the Mag 7 has been lagging the Russell 2000, this U.S. small cap index, of course. And that's partly because of the Iran war, but it's also because the benefits of the AI investment boom are broadening out. Now, we've got plenty more for you today. We will have some big interviews from Viva Tech throughout the day. Anna and Guy will take you all the way to the European Cash Open. This is Bloomberg.