US Strikes Iranian-Linked Oil Tanker, Anthropic Mega-Listing Nears — The Opening Trade 7/16/2026

[00:00:00] Speaker 1: Good morning. It is Thursday, July the 16th. Here's what's on the agenda. Chipmaker TSMC's earnings beat, boosted by solid global demand for AI chips. The U.S. launches fresh strikes on Iran, but oil dips below $85 a barrel. And the pound gains on reports that Shabana Mahmood will be the next U.K. chancellor. Well, Tom, let's take it straight to the markets [00:00:24] Speaker 2: and see how we're trading this morning. Focus on Brent crude. As you can see, they're just down under $85 a barrel. That sort of key threshold we've been watching down about $0.40. Looking at the Eurostoxx 50s futures just ahead of that open here in Europe, up about one-third of a percent. And we were looking for TSMC potentially to the rescue of that AI trade. You can see Nasdaq futures now turning from flat to basically up by one-tenth of one percent. The countdown to the opening trade starts right now. [00:00:57] Speaker 1: So we have some breaking lines crossing from TSMC. We're talking about the beat coming through for earnings. The reminder that the AI demand remains strong, of course, for this company that is the key foundry for the production of chips like NVIDIA's GPUs and AMD's chips. The redhead crossing the terminal right now. TSMC will be adding another $100 billion of U.S. investment. That is according to a U.S. official. We know as well that TSMC will be planning to spend $265 billion on its U.S. buildout as part of this deal with the Trump administration essentially. And this will include an additional $100 billion U.S. dollars. This is a reminder, of course, that number one, the Trump administration is trying to reshore or at least shore up the semiconductor infrastructure that it has onshore in the U.S. And we know that TSMC already has fabs in places like Arizona. They will continue to build those out. Some of those fabs are already producing chips and components for companies like Apple. But there is a priority for TSMC and for its partner governments as well, and you're seeing that in Japan, to continue to ensure that they have facilities and capabilities outside of Taiwan at a time when we have a reminder as well that the demand in terms of AI chips, at least from TSMC's perspective, in terms of their customers, is not showing any signs of waning. [00:02:25] Speaker 2: Absolutely. And you can see it in the downstream as well. I mean, we had ABB reporting a little bit earlier today. They're key, absolutely, to the data centers, to the electrification story. We spoke to the CEO 30 minutes ago. They've seen triple-digit growth in their electrification business, not just this quarter, but the quarter before. So, obviously, that story is very much intact. But when you see another headline crossing like this, well, first of all, the $100 billion, part of this, we know who the audience is, right? So you always have to be careful with those numbers, but also thinking about that's obviously a lot of money at a time when ASML is talking about jacking up prices. Intel willing to pay, TSMC maybe wasn't willing to pay. Are they going to have to sort of start looking at the cost side of things, which is something that... [00:03:02] Speaker 1: Yeah, that was really interesting reporting. We started the session yesterday with some really solid numbers from ASML, the maker of those lithography machines that go into the foundries of TSMC. The stock started up about 6% or 7% and ended up actually in negative territory by the end of the session for Europe's most valuable company. Part of that seems to be, to your point, the reporting suggesting that TSMC is pushing back on higher prices for the top end, for the top end lithography machines that ASML is producing. So just a really interesting dynamic in terms of the market reaction to ASML yesterday. So we'll see how ASML responds to this as well in the session today. [00:03:40] Speaker 2: Absolutely. And you're talking about higher prices. We'll talk about the sort of inflation trade. We'll take it to the Fed. We have Kevin Wurst talking overnight, saying that yes, AI is going to be inflationary, but he doesn't see it necessarily as long-term inflation impact. The question is, how does he see the long-term inflation impact of what we're seeing on oil, what we're seeing in the conflict in Iran? Obviously, all of the attention has been really on Brent, but I think something we're going to start talking a little bit more about throughout the next couple of weeks and months is the price of gas as well. You've seen it come higher, higher, higher here in Europe. You look at the storage levels for gas in Europe, it is very low compared to what it is over the 10-year average. And when you start to get towards that winter, you get policymakers in Europe getting a little bit nervous. You don't have the gas. Everyone was hoping this would be resolved by now. It obviously is not. [00:04:23] Speaker 1: This is the point. I think we have a terminal chart that shows this as well, that the story around Ukraine and Russia and the gas shortages there, the conflict, of course, the impacts on the refiners, the impacts on the energy infrastructure of Russia, and what that means for European gas. And you compare that to Brent, which is up about 40 percent. So it's not insignificant, but the gas prices are higher by a considerable margin higher. And you have such massive moves across the commodity market within fossil fuels that it's hard to also distinguish with everything that's going on under the surface. And you compare that to Brent, which is up about 40 percent, so it's not insignificant, but the gas prices are higher by a considerable margin higher. [00:04:53] Speaker 2: And you have such massive moves across the commodity market within fossil fuels that it's hard to also distinguish with everything that's going on under the surface. Another thing we don't talk that much about is all of these sort of downstream from crude oil. We talk about diesels, jet fuels, gasoline, those sorts of things. The war in Ukraine is still impacting that. Blowing up those refineries in Russia is going to have another massive impact. It's another part of the fossil fuel complex. We've got to keep that out. [00:05:16] Speaker 1: And let's just remind viewers of what's been happening. So the strikes, the U.S. strikes on Iranian infrastructure, particularly military infrastructure, particularly near the coast, of course, along the Strait of Hormuz, has continued. The Iranians putting out a statement out this morning, a couple of hours ago, saying that the U.S. needs to accept their demands in terms of their control of the Strait of Hormuz. President Trump saying that ultimately the Iranians will be defeated, "defeated very soon," the president says. And he expects oil to fall back to $55 a barrel. So we are still at that impasse as well. We also heard from the IEA executive director, Fatih Birral, telling Bloomberg it isn't months, it's weeks after which the strait needs to be fully open before the global economy is back in peril. [00:05:57] Speaker 2: And we should probably talk about the U.K. I don't know if you want to talk about England or you want to talk about the new chancellor. [00:06:02] Speaker 1: We'll move on from the football result and we'll focus on what's happening on the reported, the reported incoming chancellor, the current Home Secretary, Shabana Mahmood. According to reports in a number of publications, she is being tipped now to be the chancellor. A key, of course, appointment for incoming, likely incoming U.K. Prime Minister Andy Burnham, who is expected to take up that post on Monday, Andy Burnham. And we are hearing reporting that he will be telling members of his incoming cabinet about their roles over the weekend. So we'll see if and when that gets confirmed. We know that the risk for many investors, and we did a survey on this, the investor community have been cautious about Ed Miliband taking the chancellor role. And we know that many members of the left of the party on the Labour Party had wanted Ed Miliband, who's had experience in the Treasury. He worked very closely with Gordon Brown to take that position. But it sounds like the more centrist Shabana Mahmood, who does not have an economics or markets background, is now being tipped to be the chancellor. [00:07:00] Speaker 2: Yeah, and what's interesting is that you can do all the polling you want. People will speak very freely in there. The question is people putting their money where their mouth is. And you really see them doing that with sterling here. The pound up 1% from yesterday. That is a pretty big move over in sterling trading at 135 against the dollar this morning. Again, a bullish signal, I think, from the market in terms of moving away from Ed Miliband. [00:07:20] Speaker 1: Gilt's gained as well. Yields were down. And, of course, as you say, the pound rallied. And you're seeing a further strength in the pound today as well. We have some breaking news in terms of GDP out of the UK. Some macroeconomic data as we lead up to the change at the top when it comes to this new incoming government. And what we are seeing is that UK May GDP increased 0.1% month on month. The estimates had been for flat growth, so very, very modestly better than the estimates. But still a pickup in growth, just 0.1% month on month. Again, the estimates had been for no growth. That's for the month of May. GDP out of the UK. [00:08:00] Speaker 2: So slight outperformance there after last night's underperformance. Let's get to what else you're going to be watching throughout the day and throughout the show. We'll be speaking to Thierry Delaporte. He is the CEO of Sodexo. An important conversation about the turnaround for the catering giant. But, of course, also the question of food inflation. We've seen prices rise pretty dramatically over the last month. Sharon Bell from Goldman Sachs, the senior equity strategist, we'll be speaking to as well. And, of course, also a very interesting interview a little bit later in terms of the question of drones and drone warfare. The Ukrainian company, U-Force, will speak to the CEO of that a little bit later this show. [00:08:32] Speaker 1: Okay, let's look ahead at what else we are going to be watching throughout the day. NVIDIA CEO Jensen Huang will be speaking at the Japanese Ministry of Economy, Trade and Industry event in Tokyo. Apparently he's been eating pork skewers with some of his Japanese suppliers in the side streets of Tokyo. As ever, there's a lot of focus, a lot of attention on the CEO of NVIDIA when he is in town. The IEA, meanwhile, is set to release its global critical minerals outlook report. And at 1:30 p.m. UK time, U.S. retail sales and initial jobless claims. So further data and colour on the health of the U.S. economy after inflation data, both PPI and CPA, came in softer than expected. 9 p.m. on the earnings front, it's Netflix earnings, which will be interesting in terms of viewerships and whether or not they're getting more subscriber growth and in which parts of the world. And later, U.S. President Donald Trump will be addressing the nation. So, of course, we will be taking that for you. Of course, anything he has to say about the straightforward moves and Iran will be in focus. [00:09:33] Speaker 2: Yeah, I mean, the thing about Netflix, something that we obviously we talked about Netflix for a very, very long time in the sort of context of the sort of the massive sort of tech companies. Is Netflix still considered a tech company? When we think about the rotation now out into the A.I., into the sort of semiconductors and looking at these sort of these sort of streaming companies now seem to feel a little bit more like the sort of legacy companies of old, of the sort of broadcast and entertainment. Is Netflix legacy already? [00:09:57] Speaker 1: We might be. I don't know. [00:09:59] Speaker ?: You've got kids. [00:09:59] Speaker 1: You tell me. That's possibly where it is. It's still a member of our household. It's going to report second quarter results after the close, of course. Increasingly concerned, apparently, this is the preview from the Bloomberg, about the streaming TV leaders' growth prospects. So we'll see. The shares took a hit in April after they reported earnings. So we'll see if they can change that momentum. That competition is there. The pricing question is there, of course, and what new content they can put on the platform as they push into things like events and gaming as well. So that is the look ahead to Netflix. It's worth reflecting on what's happening right now. Let's get back to the TSM story, TSMC story briefly, Oli, because we have a fresh line coming through. And this is a crucial line for TSMC. It's the capex. And they see full year capex, 60 to 64 billion U.S. dollars. That is quite the upgrade from the previous forecast of at the top end of the previous range, 56 billion U.S. dollars. They are now looking at capex at the high end of 64 billion U.S. dollars. So almost 10 billion dollars higher. [00:11:05] Speaker 2: Yeah, that's almost 20 percent. I mean, that's a material increase, right, when you look at the sort of the ranges there. And obviously, something that we're focusing very closely on, obviously, with the ASML story, potentially sort of charging more. What I think is also interesting is we're hearing now from the CFO saying that obviously a lot of the conversation around semiconductors has been bottlenecks on a capacity expansion sort of being clogged up. We hear from the CEO saying there are no bottlenecks for capacity expansion. So this is a wide open runway, it seems, from TSMC, the signal that they can actually build out this capacity to the degree that they need to and to meet that demand. Well, coming up on the show, the EU agrees to short-term extension of a price cap on Russian oil. Absolutely crucial from the European side to continue to put pressure on the Russians, but officials struggling to get that broader sanctions package over the line. We'll have details on that next, plus the tariff threat the U.S. is set to begin charging a 25 percent tariff on some Brazilian imports. We'll bring you the highlights from an exclusive conversation that we had with the U.S. Trade Representative, Jameson Greer. That'll be a little bit later on. And, of course, we'll be joined by John Turek, the CEO and founder of JST Advisors. If you have any questions for our guests, please send them to us through IB. IB plus BBTV Go is where you go on your Bloomberg terminal. And this is Bloomberg. Well, we are 44 minutes away from the opening trade. We are watching the markets very closely this morning. As you can see, futures there in Europe up about a third of a percent. And the FTSE looking a little bit different, trading to the downside by about half of one percent. But a flat session there, it seems, on the DAX a bit higher there on the cap. But, of course, the sort of main action that we're paying attention to across the world is out of Asia. TSMC this morning. And that key CapEx figure coming to $60 billion to $64 billion. That is a revision upwards, Tom, from what they saw previously at $52 to $56 billion. [00:13:11] Speaker 1: This guidance that we're getting from TSMC is reinforcing the view, Oli, that we are seeing incredible demand still when it comes to AI. We've just been getting lines dropping from the CEO of TSMC talking about guiding for sales growth of 40 percent for a company that has a market cap of about a trillion U.S. dollars. Here are the numbers, then, in the most recent quarter. And it was a clear beat in terms of what came through for the key foundry, of course, that produces the AI chips for the lights of NVIDIA, the GPUs for NVIDIA and AMD, but also for Apple and its smartphones. That was a weak spot. But here, in terms of the top line number, $706 trillion Taiwanese dollars. Again, a very solid beat. And just put the smartphone story to one side because it is all about that AI demand. Let's flip the chart and have a look at what's happening in terms of the growth story, then, and what is happening with net revenue. Here's the smartphone story that traditionally used to be one of the biggest drivers of growth for TSMC, actually contracting. And we know that prices are increasing and that maybe that is crimping sales of smartphones. Memory chips is a part of that story. But this is the key part, which is the high performance computing. This is the AI story. 20 percent is now what we're seeing in terms of the revenue growth. Auto is interesting at 15 percent, the consumer at 5 percent. But this is really what you want to focus in on if you are concerned or have questions about the demand around AI. And this is a reminder that that demand is not shrinking. So that is part of the story. This is a company that has margins of more than 67 percent. They are committing, according to our reporting, to another $100 billion of capex in the US. A total of $265 billion with 10 foundries planned, 10 foundries now planned in the US. And this is a breakdown in terms of the regional exposure by customers. So 78 percent of their customers now in North America. Let's broaden this out and bring in John Turek right now, founder and CEO of JST Advisors. John, we want to get your take on your views around how to position around the AI story. What we've heard from ASML yesterday, what we've seen from TSMC today, reports that Anthropik is planning its IPO possibly as soon as October of this year. How much conviction do you have in the AI story and how do you want to position around it? [00:15:23] Speaker 3: Yeah, no, I mean, it's a great question. I think these numbers are quite extraordinary, to be honest with you. You know, I think that, you know, right now, especially from a macro perspective, we sort of have these two different factors going on. We have one, what's sort of like the, you know, in the very short term, where is, you know, the puck going in terms of, you know, which model is preferred? How do we sort of weigh this, you know, token cost? I think that's sort of more of a micro question. And then sort of at the macro level, we have this question of, you know, how big or how much bigger is this AI CapEx cycle going to get? And, you know, we're coming off of numbers that are extraordinary to begin with. And if we project forward into 27 and seemingly even 28, it seems like these numbers are getting even bigger. So I think, you know, looking at the guidance today from TSMC, I think is a reinforcing factor that from a macro perspective, there's this clear tailwind in terms of capital expenditure and it's happening globally. Of course, it's sort of, you know, the priority is in terms of the US, but it's seemingly becoming a more global phenomenon. [00:16:26] Speaker 1: John, how are you thinking? I know you've been taking time to look at how to map the AI story onto the rate story. What conclusions have you come to? Have you been able to map that map that story for us and get some clarity in terms of how the AI spend is affecting inflation and the adjustments around rates? [00:16:46] Speaker 3: Right. No, I think we've entered this very interesting point from a macro perspective, because I think, you know, as you know, as macro people are used to sort of, you know, what is the central bank telling us what are fiscal policy makers telling us? And I think now a very equally important macro variable is sort of, you know, what are these, you know, hyperscaler technology companies telling us? Because in terms of a forward input, in terms of nominal growth, it's really hard to argue that anything is bigger. I mean, just at the current level, the estimates for, you know, the next 12 to 18 months of CapEx for these guys is over a trillion dollars. If we were to kind of curate that in terms of the fiscal spend, that would have macro markets attention, number one. So I think we're kind of in the same vein. It's just not sort of what we've been used to over the last, you know, 15 to 20 years. But I think you kind of have to assume that there is a very big tailwind of nominal growth coming from the technology sector. And then for interest rates specifically, I think now the interesting variable has been introduced over the last, I would say, six months, is that investment now is coming from the market and not from the corporate balance sheet. So that, you know, this has to be financed now. And that is a, you know, further competition in the lens of term premium that government bond markets now have to deal with that they haven't really dealt with so well over the last few years. So I think from, you know, a interest rate market perspective, now you sort of have this two lanes where you have this, you know, upward pressure on nominal growth, but also you have this competition for capital by term premium. [00:18:15] Speaker 2: And there's so much euphoria, obviously, around the story. And as you say, you know, it's just basically one story that seems to be in the driver's seat. Everything is sort of fading to the background a little bit. Obviously, I want to take you now to the risks that are included to that. It does feel like there is more runway sort of going forward. But imagining to trying to appraise the risks. Do you have a plan, for example, for when this, if this unwinds? What is this sort of what's the playbook there? [00:18:39] Speaker 3: Yeah. So I think now that this has become financing driven more so than out of free cash flow for these companies, I think from, you know, a big picture perspective, you sort of have to put a shot clock on it. Because the market, you know, even if they'll be surprised in two years or three years that this is still going at this rate in terms of the CapEx, the market won't assume that this is, you know, another six, seven years of incremental CapEx growth from these very lofty trillion dollar plus numbers. So I do think you have to now from a risk perspective, have to sort of map out now that there is there is a shot clock on this. And then I think, you know, even bigger picture than that, you know, the tails of the distribution probably get bigger in both directions. Right. Because I think the market will assume that given how big the numbers are and sort of a lot of large numbers, that if the decline does start, it won't be a linear one. Right. You're not going to slow CapEx from one point two trillion to one trillion. There'll be a little bit of a gap. And how sort of the economy digests that, I think, you know, given what how big a percentage the CapEx story has meant for, you know, [00:19:39] Speaker ?: U.S. growth over the last two, three years, I think it'll be quite meaningful. [00:19:42] Speaker 3: So I think there is there is a very there is very much a sequencing thing to this now. But I think, you know, the priority right now is over the next 12 months, it still seems, you know, if you're solving for the CapEx number, given how big it is and given what it means to growth, it still seems number likely bigger than number likely smaller. [00:20:02] Speaker 2: Well, yeah, well, John, we remember a phase when the adage was don't fight the Fed, not don't fight the CapEx. I want to take you to the Federal Reserve. What we've heard from Kevin Warsh over the last couple of days, again, maybe being eclipsed by what we're hearing in the story. What do you think we learned from the new regime of Kevin Warsh? And how does that change the picture for you more broadly? [00:20:20] Speaker 3: Yeah, it's it's it's been a very interesting one. I think, you know, we're in this very rapid handoff from a Fed that was very communicative, both in terms of its reaction function and its framework to a Fed that's been, you know, you know, communicative in either way over the last few weeks, especially going back to June. So, you know, I think it's a very new dynamic. I think the chair is sort of trying to toe this line between that. He wants to accommodate sort of what could be a very big productivity cycle of the U.S. sort of all of the 1990s. But at the same time, he seems based off what we've heard both in his Humphrey Hopkins testimony yesterday at the June Presser and even in Sintra that he really doesn't have any tolerance for inflation this much above target. So I think that, you know, it's sort of going to be a balancing act for him in terms of, you know, tactically how does he remain highly inflation credible, which I think the market has given him post the June meeting, but also sort of, you know, accommodate this story that he seems very enthusiastic about. I mean, I think one thing that was notable about his comments in Sintra is that he said he doesn't want to obstruct sort of the American boom. Yeah. [00:21:29] Speaker 2: Right. Well, JST Advisors founder and CEO John Turek, thank you so much for his thoughts there on the AI boom. But, of course, also the Fed, a no tolerance Fed at the time. And, of course, you heard from Kevin Wurst saying that inflation is a choice. I wonder if that'll come back to bite him. [00:21:43] Speaker 1: Let's get you up to speed on what else we have to think about this morning then. Defending champions Argentina have booked a place in the World Cup final after beating England two to one, two goals to one. Trailing one nil going into the 85th minute, Argentina rallied with goals from Enzo Fernandez and substitute Lotaro Martinez. They will play Spain in the World Cup final in New Jersey on Sunday. Bloomberg understands that Anthropic is seeking to meet investors ahead of its potential mega IPO. Sources say banks leading the offering is scheduling meetings with investors and the company in the coming weeks. It comes as JPMorgan CEO Jamie Dimon warns of the risk of making a sophisticated AI system like Anthropics Mythos model more widely available, comparing it to a ballistic missile. The European Union has agreed to preserve a price cap on Russian oil until July 23rd. That is according to an EU diplomat who spoke to Bloomberg. The one-week extension gives officials more time to reach an agreement on a new Russia sanctions package, which includes a more permanent freeze on the oil price cap. The price cap was set to rise in line with elevated global rates after Wednesday. Oli, you followed this story very closely. What is it the source of the tension when it comes to the EU? I thought now with a Hungary and a new government in Hungary that the Europeans would have a more aligned approach. [00:23:08] Speaker 2: Right, and who have been objecting the whole time to Donald Trump's approach, who have been basically the last ones still supporting Ukraine. And again, now we have these complications. So this comes down to some of the issues around LNG. They cannot get consensus around the member states, but also what to do with an Austrian bank that still has exposure in Russia. So again, we really get into the nitty-gritty with this stuff. But if you want to put your money where your mouth is and really support Ukraine, you've got to get this stuff over the line, particularly when you have the enthusiasm of the President of the United States, as he seems to have now in support of Zelensky. Well, coming up in the run-up to their capital markets, they will be speaking to the CEO of Sodexo, the catering giant out of France. An important and interesting conversation both about the price of food, which we've seen increase very sharply over the last month, but of course, also the World Cup. That interview is next, and this is Bloomberg. [00:23:54] Speaker 1: Welcome back. We are 30 minutes from the start of the opening trade. European futures pointing to gains of four-tenths of a percent after closing yesterday up just a tenth of a percent. A bit of divergence across your main indexes on the futures picture. The FTSE 100 pointing low by close to six-tenths of a percent, but gains flag for the cat current over in France pointing hard by three-tenths of a percent. And in Germany, the DAX is currently flat, but oil prices are stabilizing just below $85 a barrel, and that is giving a little bit of reprieve and some strength coming from TSMC. So we'll be watching the tech sector as well at the open, Ollie. [00:24:44] Speaker 2: Yeah, absolutely, Tom, and that's the sort of picture for equities this morning. Taking it to the bond market this morning, the picture you can see there, yields rising really across the continent up in Germany, in France, in Italy, relatively flat. The exception to that, of course, is the United Kingdom largely due to the expected announcement from the incoming Prime Minister for a less controversial, I suppose, as far as the market is concerned, Chancellor of the Exchequer. Let's take it now to the global food market. Global food prices have been moving higher as rising input costs and geopolitical tensions disrupt vital shipping lines. The rise in prices has put pressure on global food supply chain, including catering companies like Sodexo. Despite the challenges, the firm is out with new growth targets today, aiming to reach about 5% organic growth and above 5% operating margin by 2030, and we are very pleased to be joined by the chief executive of Sodexo, Thierry Delaporte, who joins us this morning from Paris. Thierry, thank you so much for joining us today. I want to get to food prices, but first I want to get with the strategy, this turnaround strategy that you've laid out for Sodexo. Talk us through these targets and when you're going to be able to reach them. [00:25:51] Speaker ?: Absolutely. [00:25:52] Speaker 4: Sodexo is a global leader in the food, but also in the facility management industries. We have presence in over 40 countries around the world. We are one of the largest employer around the world as well with almost half a million employees. If you want to know Sodexo, you're meeting Sodexo at pretty much every stage of your life, from, you know, schools to universities, from corporations to, you know, administration, from, you know, going to hospitals and going to stadium, going to events. Sodexo, this is Olympics. This is the Super Bowl. This is the French Open. This is 80 million consumers per day. That's Sodexo. Sodexo has been a fantastic growth story for years and has lost its way to growth over the last years. So my mandate, getting this company back to growth. Obsession for growth and driving it through our plan, Shift and Grow 2030, four years to get back in the game as, you know, a leader in our industry. [00:27:02] Speaker 2: And thinking about some of the difficulties that you may be facing, one of them is going to be potentially food prices. We've seen a very sharp increase to the agricultural indexes here, up about 10% over the last month. But just given the sort of what you've laid out there, Sodexo, how big a player it is, how sort of wide a vision you have of the price of food, what are you seeing happening across the globe? [00:27:24] Speaker 4: We are a global player. We are operating in many different countries, as I said, and the reality is that, you know, prices go up and down. We are adjusting to it. The solution for us is to be as close as possible to our clients, constantly understand their needs, respond to it, and focus on addressing it, providing more services, better services for the consumers. That's what we are doing every day, you know, be certainly focused on growth, but also work on our competitiveness, be more agile as an organization, and certainly deliver the best services to our clients. [00:28:04] Speaker 1: Thierry, with that focus on competitiveness internally, does that mean you are not passing on those additional costs to your customers, you're absorbing that, you're able to take that hit, or are you doing some cost pass on? [00:28:19] Speaker 4: No, we have clauses in our contract where we are reflecting, you know, inflation into those contracts. We are also adjusting. That's the power of our supply chain, to constantly adjust from a product to another one, swapping, you know, products based on the evolution of the price. So we are very agile as an organization to constantly respond to these, you know, changes in the macro environment. [00:28:43] Speaker 1: How do you balance the priority, Thierry, when it comes to major customers? You have announced you've got a new contract with Meta, I believe that's correct. Is your priority new contracts or renewing existing contracts? [00:28:58] Speaker 4: Our obsession is for growth, meaning winning new contracts, winning new relations, building new relations with clients. But of course, also continue to develop the relation we have, continue to expand it, build stronger partnership with our clients. That's what we are doing. We are closer to them. We are very intense, very, very proactive. We are leveraging technology. We are we have amazing chefs around the world who provide, you know, state of the arts or meals for clients. And that's how we are responding to these expectations. [00:29:38] Speaker 2: And thinking about that growth obsession, which is obviously your focus at the moment, when you think about the kinds of clients that you want to expand to, you've sort of laid out the kinds of clients you already work for. Are there other areas that are untapped where you're going to be able to find that growth? [00:29:53] Speaker 4: Today, we just announced the signing of a giant contract with Meta, one of the, you know, most, you know, giant brand, outstanding brand worldwide known. We are going to work for them across 30 countries in 130 sites, and we will be able to provide to Meta employees and partners, you know, the best of, you know, our services we can offer, you know, leveraging the power of Sodexo around the world with consistency and at scale. That is right at the heart of our strategy of growth. [00:30:34] Speaker 2: And you also operated a number of the stadiums for the World Cup in the United States. Obviously, this is an event that there was a huge amount of excitement for around the world. I was surprised how much excitement there was in the United States when I was there a couple of weeks ago. What kind of impact does that have on the bottom line? [00:30:50] Speaker 4: We have a long history of, you know, developing or having clients in the sports and leisure market. Indeed, we are a significant player in the World Cup right now in, you know, several stadiums where, you know, we have seen a lot of activity ongoing. It's certainly, you know, driving a nice volume of growth. And this market, sports and leisure, is one of our priority for the years to come. [00:31:22] Speaker 1: Jerry, it's your Capital Markets Day today, of course. What are you going to be detailing? Give us some hints about what you're going to be unveiling later today. How are you going to be meeting that revenue growth target of about 5%? How do you get there? Are you going to be ramping up investments? Give us a bit of detail. [00:31:37] Speaker 4: We are unveiling our shift and growth plan. That's our ambition for 2030. With shift and grow, it's a story of transformation. Where are we going to shift? We are going to transform part of our organization to get ready for growth and then accelerate our growth. The objective, my ambition, is to build a growth machine with Sodexo. Have an organization who can, indeed, drive 5% of growth and 5% of profit per year consistently, starting in 2030. [00:32:14] Speaker 1: Okay. Thierry, thank you very much indeed. The stock is up about 20% a year to date. It's Sodexo's CEO, Thierry Delaporte. Meanwhile, to the macro story. Bank of England policymakers say they are ready to act on rising prices, talking of increased food costs, if required. [00:32:29] Speaker 5: We have a softish economic outlook. We have slack in the labor market. Those two things mean that that shock is less likely to become embedded and lead to inflationary dynamics. And so we've had a tightening of financial conditions. And I think, in combination, that means we're in a good place to monitor very carefully what's happening. Of course, if it's clear that inflationary dynamics are becoming embedded, we'll act. [00:33:05] Speaker 1: That was Bank of England Deputy Governor Sarah Breeden speaking exclusively to Bloomberg. We're going to have more on how central banks are weighing the inflation fight later in the show. Stay with us. This is Bloomberg. [00:33:17] Speaker 6: A big uncertainty and the markets are nervous whether or not there will be a soon and lasting solution to the problem. And at the same time, many countries are taking some measures to avoid the worst case scenario. [00:33:54] Speaker 2: Fadi Birol there, the executive director of the International Energy Agency, speaking earlier at the Aspen in Aspen with Bloomberg's own David Gura. Oil has steadied after three days rally as the U.S. continues to strike Iran following the shipping attacks by the Islamic Republic. The escalating conflict has revived concern over the crucial Strait of Hormuz energy supply chain and all of the things in the trickle down associated with that. Let's bring in our Bloomberg managing editor for the Middle East and North Africa owner. And so listen, I think in the first part of this conflict, we were beginning to get secure with this idea that the Strait is open or it's closed. This is a binary scenario. We're now in a situation where it's much more ambiguous. Are ships getting through right now? [00:34:41] Speaker 7: That is true, Oliver. It is a lot more ambiguous. But I think it's fair to say after what happened over the past week and especially yesterday when the U.S. struck an unladen oil tanker that belongs to the Islamic Republic deep inside the Persian Gulf. The visible traffic through Hormuz as of this morning is very, very low. It's actually minimal. Over the last few days, we have seen a slump in oil loadings inside the Persian Gulf by Saudi Arabia, which was to begin with not as reliant on loadings from the area as others are because of its ability to pipeline its oil to the Red Sea coast. But we have also seen a drop in the so-called shuttle traffic, shuttle shipping, which was used by the likes of the United Arab Emirates. Although there has been no official change in the policy to rely on that method to get the oil out by that country, we are seeing a serious drop in the number of ships and especially in the amount of oil and gas going through Hormuz. [00:35:47] Speaker 1: Onar, if this becomes, if this is the new normal for the straight, what does that mean for the global energy markets? [00:35:56] Speaker 7: Well, just as IEA executive director Fatih Birol has just put it, it doesn't look good for the overall supply. We have seen strategic reserve releases sort of softening the blow, so to speak, from the disruptions in Hormuz. But as Mr. Birol already has said, people are counting on a reopening of Hormuz in weeks, not months, because any disruption that lasts longer than that is going to spell doom for oil markets. [00:36:31] Speaker 1: Yeah, the question is how you get to that point. Bloomberg's Onar Ann, thank you very much with that update on the energy markets, on what we're seeing around the straits as that conflict continues. At least military action between the two sides continues between Iran and the U.S. That is one of the key drivers and focuses of the markets today, as it has been throughout this week, as is, of course, the chip story and what's happening in South Korea. We've had that update, of course, out of Taiwan with TSMC showing strength. Let's turn now to today's markets in three minutes on the opening trade, the markets live executive editor, Mark Cudmore. And I know, Mark, you have an eye on what's happening in South Korea again. We're expecting maybe the government to step in or the regulators to step in to address the leverage ETF part of that story. Is that something to be welcomed? Is that's what's needed? There is this incredible volatility and the cost be down again today. [00:37:16] Speaker 8: So those announcements we're expecting in two hours time, they probably won't be game changing. They'll probably kind of raise the minimum deposit required, change how a little bit of the rebalancing happens. But I think what's important here, it's a Korean holiday tomorrow. So these announcements are basically coming at the end of the week when the cost be is closing kind of near the lows after a large correction in the last few weeks. And we're going to get the reaction in lower liquidity futures or U.S. ADRs or U.S. based two times ETFs, et cetera. So there's the Hong Kong two times ETF, which will trade. So I think there's a chance for kind of a very misplaced and oversized reaction, even though this won't be game changing. And I think technically it's not looking great that we're kind of closing this week at the low because we are closing those because there's no trading tomorrow in the benchmark index. So I think that the price action in semis and chip stocks is remaining globally extremely poor. And I think cost is the leading light for that. So I think we probably got a bit more pain in that section next week. [00:38:11] Speaker 2: And Mark, I want to take it to the oil market because I was just listening to owners speaking there and thinking a little bit about how the dynamic now on the Strait of Hormuz is a little bit different than it was in the first half of this conflict. And the question of the sort of binary nature of the open or close of the Strait of Hormuz. When it's closed, the market can freak out. It can sort of push prices higher and higher and higher. That puts pressure on Trump. When you don't have clarity on that, the market is going to have a much harder time pricing that. What kind of risk do you think is associated with that kind of condition? [00:38:36] Speaker 8: Yeah, I think there's two things here. I think it's not just that the change narrative on the Hormuz. We've talked about that quite a bit this week about how, you know, people now are realizing there needs to be a structural higher premium oil. But it's what's happening in Russia, Ukraine. Arguably that's, I won't say it's more important, but it's as important because it's happening at the same time as people are realizing that Hormuz is not going to normalize this year. I mean, it might have periods of higher flow, but we're not going back to the way it was. We saw this before with what happened around the Houthis and around the Red Sea. So, you know, that normalization doesn't come through. So oil prices are going to be slightly higher than we were thinking maybe a couple of weeks ago. However, the one other facet is that we've realized that there are a lot of fossil fuels out there and the supply is large. [00:39:18] Speaker 1: Do you think that's why, because the market reaction to the producer prices and consumer prices that's backward looking, looking to June, was positive. And we saw yields down. We saw repricing the Fed. And yet we know that what is happening, what you've detailed, is real and material. Is there a disconnect or are the markets seeing that this is still an oversupplied energy market globally? [00:39:37] Speaker 8: I mean, we've got to remember, this is a supply side shock for inflation. And therefore, like, you know, if we're going to have inflation purely because of supply chain disruption is the whole COVID debate. Do you want to be hiking rates anyway? So it's easier for the Fed to argue to kind of look through that and kind of dismiss the fact that they haven't had inflation anywhere near target for a gazillion years. So I think it's more about the Warsh Fed reaction function, which people are still trying to work out and what the overall committee reaction function is. I'm still in the camp that they're going to try doing nothing for as long as possible. And, you know, ultimately, we might get a hike in September, but that's assuming the market's still super strong. And I think there's more fragilities out there in the market. [00:40:16] Speaker 2: And I remember Mark Cudmore before the AI boom, before that was the conversation that was dominating the stable. I'm much more sort of bearish, a little bit more worried about the risks on the horizon. Thinking about this AI boom, it seems everything we're hearing today in the last couple of weeks, it's got more runway. We've been talking about it here. What about the risks that are building out under the under the surface? How are you guys taking a view of sort of that unwind if and when it comes? [00:40:37] Speaker 8: So my story hasn't really changed for the last kind of year. So that like I think the bubble keeps on fading until an earnings season change. And what I'm looking for in earnings season is a slash in capex. So I think it is a tremendous AI capex bubble. I think it's going to be very painful when it happens, but I don't think you can preempt it. And I think it's I think, you know, is this is this a turning point now? I don't think so. But like I'm open minded, but like basically I think you've got to stay underlyingly positive until we get that capex reduction. However, as we discussed since May, I think we're in the much more volatile stage. And I think the volatility we see in the last two months is what we're going to get for the next months. But like the prior bubbles, that volatile stage lasts about six months. So to me, you know, my base cases were another earnings season away always. But I'm going to be open minded to every single hyperscaler earnings report. As soon as capex gets slashed, that's game over. [00:41:25] Speaker 1: Okay, that's the one to watch. Bloomberg Markets Live executive editor Mark Cardinal. Mark, thank you. Remember, you can get up to date analysis and insight from Mark and the rest of the team. Just go to MLiveGo on your terminal. Let's bring in Chloe Mellie at this point with your stocks to watch this Thursday. [00:41:38] Speaker 9: Chloe. Good morning, Tom. We are starting with ABB this morning. So we've got both earnings and M&A from ABB. So on the earnings front, we've got the company raising its sales guidance once again and orders coming in way above expectations. And then on the deal front, we've got ABB buying the British industrial components company Rotork in a $5.5 billion deal. And that will allow ABB to expand its electrification and automation businesses, which have been really big beneficiaries of this huge investment made into AI data centers. And so we could see this, both the earnings and the deal are really lifting the shares this morning for ABB. As we can see up here on the graph, ABB has been one of those really big winners of this AI boom. Moving on to Nordea in Finland, the bank has reported fee income above expectations and also said that assets under management hit a record. And the CEO said this is thanks to Nordic corporates continuing to invest, which has really supported the private banking business for Nordea, which is one of those strategic growth areas for the bank. And so we could see that lifting the shares this morning. We're up about 5% already year to date. And finally, we're ending with a publicist in the advertising sector with the company coming out with quite a resilient print this morning. It narrowed its sales guidance to the upper end of the range and the earnings. The sales also came in above expectations. It seems that publicist has been better able to weather this downturn in advertising spend. That's been really weighing on that sector because of this uncertainty, this lack of business confidence and consumer confidence. And so we could see publicists continuing to outperform its closest rival WPP as it has been for a while now. And so this is also going to be one of those companies in focus this morning. [00:43:23] Speaker 1: Chloe, thank you very much indeed. Chloe Mellie with your stocks to watch this Thursday. Interesting to think about publicists being at one end of the of the AI impact stack arguably in terms of how advertising is affected by AI and how they re-engineer the workflow around AI. And right at the bottom of course of that AI stack, the foundational layer is TSMC. Right. And we've been talking about that this morning because the numbers are coming through very strong. They've revised up their expectations for sales growth, potentially 40% for a trillion dollar market cap company. You're talking about margins of 67, 67.7%. We were talking to Sodexo earlier. They're looking at margins of three or four percent. TSMC is looking at margins of six gross margins of 67.7% and ramping up capex spending as well. It's just it's just another reminder that at least. And Mark Koppel was saying we've got to watch the hyperscalers for when they cut capex. Yeah, yeah. But but so far TSMC is signaling that their customers are nowhere close to doing that. [00:44:18] Speaker 2: I mean, listen, from everything that we have learned in the last sort of 24 hours, it's still a very sort of bullish story. Everything is still very intact. There's no sort of cracks in it. I'm always looking for the risks. And as far as we could tell, you know, the going forward, this is going to look very this is looking very, very positive. But again, Tom, I think that with such a big story again, which is so difficult to price, you saw it in the ASML reaction yesterday. You open up seven percent on a blockbuster earnings. By the end of the session, you just trickle down, not even a big move in either direction. And then you ended up just sort of just negative to the downside. This sort of speaks to the difficulty that the market has in pricing this. And I'd like to just combine that with that other story. We're talking about commodities, fossil fuels, the difficulty in pricing this, getting the right sort of prices across from this, because we have the Iran story and then you have in the background this Russia, Ukraine story about the refined goods, all of those sorts of things, all of these things happening beneath the surface that I think it's very hard to get a read on. And of course, we're getting, you know, headlines just as we speak that the Ukrainians are striking more Russian crude oil ships. Again, thinking about the disruption to that market. [00:45:14] Speaker 1: Yeah. Brent still around that $85 a barrel level. President Trump says he will ultimately defeat Iran. The Fed's Kevin Walsh saying on the AI story that essentially he does not think that in the near term AI is inflationary. He thinks it's an adjustment in prices, but it's not inflationary. So he sticks to his view on AI. Let's check in then on the futures picture for Europe after the gains of about a tenth of a percent by the close yesterday. European futures now pointing to upside of three tenths of a percent. So it's modest but looking to looking to build on the story yesterday. FTSE 100 is, though, lower by 557 points, pointing lower by five tenths of a percent. The counter on over-information point gains of 12 points. Oliver Crook, thank you very much indeed for joining us on set this Thursday. Our Brussels correspondent, of course. Coming up, it is the open trade. Futures pointing higher. This is Bloomberg. We are a few minutes to go until the opening trade this Thursday. Let's reflect on the session yesterday stateside then. The S&P 500 ending up, what, around four tenths of a percent. It was a relatively decent session for the NASDAQ 100 as well, up six tenths of a percent. The chip story has been put into question over in Korea, but you've had decent numbers coming through for TSMC. This was a picture for the S&P 500. The yellow line indicating where Europe closed out with modest gains of a tenth of a percent. And that is the rest of the journey for the S&P 500. Kevin Walsh downplaying inflation risks around AI. You had producer prices that came in below expectations, so that was also something of a catalyst. Inflation has been conducive and you've pushed back expectations for rate hikes from the Fed as a result of both CPI and PPI. That was the session yesterday. Let's check on the future story right now for Europe, with oil at around $85 a barrel hovering around that level, but not picking up in the session today. That's giving a bit of a lift, it seems, to the European futures story. Again, the strength in the AI demand being signalled for TSMC. We'll see how the tech sector responds to that. Futures pointing higher then by 0.3%. FTSE 100, though, is a little lower. You've got gold and silver prices weaker, so miners could be under pressure. And oil a little weaker. Maybe that's going to be a drag on the energy sector. Currently at 10,468. DAX futures largely unchanged. Here are your stocks to watch. We will be watching, of course, tech stocks on the read across from TSMC. Really interesting price movement across ASML yesterday, ending in negative territory. Having started with a pop of 7%. ABB coming through with a deal. There's an M&A there and some decent numbers in the second quarter for that company that is exposed to the AI story, to data centers and electrification. And Publicis, interestingly, in the advertising space, coming through with a decent set of numbers as well. So we watch Publicis for that reaction. We are nine seconds, eight seconds away from the open. It is again a story about energy. It's a story about the chip momentum, about the AI story and how that filters in, of course. In terms of Fed expectations, markets have now pushed out a 25 basis point hike until around October. So still expecting a hike, but not until October. The FTSE 100 is currently down about a tenth of a percent. And that is partly down to, you would suspect, a little bit weaker on oil. $84 about down four tenths of a percent. But again, you've got iron ore, you've got gold and silver a little softer. So it's possible the miners are a bit of a drag for the FTSE 100. Currently down five tenths of a percent. Across the benchmark stock 600, very modest gains of about just shy of a tenth of a percent. It's a slightly brighter picture over in the Netherlands with the AEX up three tenths of a percent. So we'll bring up the pricing for ASML shortly. The cat current over in France is currently flat. And the IBEX in Spain is up two tenths of a percent. In terms of the sector breakdown, we're just going to bring that for you because yesterday the story was a story of luxury stocks gaining on the back of some strong earnings coming through from Richmond. On the downside, you had telecoms today. Top of the list is media. So publicists is playing in the role there. Media is up nine tenths of a percent. Tech is getting a lift as well. So tech as a sector is one of the best performers up six tenths of a percent. On the downside, it's a reversal of what we saw yesterday. Consumer products down six tenths of a percent. And you've got personal care products also down around a similar level. Again, on the top side, for your sectors, the gain is coming through. Media up eight tenths. Tech currently around six tenths of a percent is the gain there. In terms of the movers, ASML putting in a print of two and a half percent. That is the gain right now. It's in the context, again, of a volatile session for ASML yesterday, but arguably getting a lift from the upside in capex spending coming through from TSMC in the forecast there. So ASML is up three percent right now. Now, Siemens is getting one percent. Process on the back of stories around Delivery Hero and Uber's potential acquisition of that company, for which Process has a stake and will be offloading that stake, is up eight tenths of a percent. On the downside, Total Energy on slightly softer oil in the session down 1.8% is one example as well. Let's get a broader perspective right now on these markets and how to think about positioning. Sharon Bell, senior European equity strategist over at Goldman Sachs. Sharon, fantastic to get you in the studio. What is standing out to you right now? What is top of mind as you look at the European equity space? How constrained are we on energy? How vulnerable are margins as we enter earnings season? How much conviction do you have that we will be able to get double-digit earnings for European equities? [00:50:34] Speaker 10: I actually think earnings will probably be pretty good this year. And you might be surprised at that because an energy crisis is not normally conducive to European growth. Given Europe doesn't have energy independence, we import so much. But on the other hand, we've got a lot of commodity stocks in the index. We've also got resources companies, mining companies, we've got energy companies, utilities companies that tend to benefit from higher energy prices. But yes, there is an offset because some of the consumer names suffer with higher costs. But as we've seen, some of the luxury goods companies are printing quite well. So it's a mixed picture, I would say. [00:51:08] Speaker 1: Okay, it's a mixed picture. How are you thinking right now about, we've had this update for CSMC, we've had an update from ASML. Not asking you to name names, but in terms of how you think about the trajectory around AI spend. Is the door still open for European companies that have exposure to data centers and AI infrastructure? Has that story got further to run, do you think? [00:51:27] Speaker 10: We do think it's got further to run. I mean, yes, I can see why the market's nervous, because these have run up quite a lot. Not so much in Europe, but in the rest of the world in particular. You've had some very strong performance, but really based on earnings coming through. And we still feel that the hyperscalers will be upping their capex again in 2027. And we're looking for reasonably good earnings. And that's absolutely coming through in the print so far. So good earnings driving, not necessarily higher valuations, but higher performance by these stocks. [00:51:58] Speaker 1: What is giving you the conviction that hyperscalers continue to spend and increase capex in 2027? [00:52:04] Speaker 10: Yeah, I mean, in many cases, they've already said that this is what they plan to do. So I think it's following that. It's following those signals. And you are starting to see some returns from the AI spend as well. So a combination of better returns from this and plans already in place means that you start to get some. [00:52:22] Speaker 1: Do you think executives in the earnings season will be under more pressure to give more detail on the token cost, the spend on tokens and the ROI? Is that something that analysts are going to be looking and pushing for more? [00:52:37] Speaker 10: I think people will push for it. I don't think we will necessarily get all those details, unfortunately. I mean, I think it will take time. I mean, we think ultimately this will be a big productivity gain for GDP in aggregate. But we won't even see that really in terms of the productivity numbers until the earliest 27 in the case of the US, probably even a little bit later than that for Europe. So it takes a while for these things to come through. But I'm sure there will be pressure to report gains on the basis of it. [00:53:05] Speaker 1: Do investors have the patience to look into, to hold until 2027, to continue this investment theme until 2027 if we don't get that? [00:53:13] Speaker 10: Well, we kind of know that investors are nervous because the hyperscalers haven't done particularly well actually in the last six months or so. It depends on the exact window you look at. But the big performance has been the ones which have been seeing clearly the gains from the capex spend because we kind of know that is coming through. So investors are nervous about the returns of it. They are also nervous about the funding as well. Because a few years ago, the big hyperscalers were funding it all out of their cash flows. So they were very cash rich companies. They still have incredibly strong legacy businesses. So they funded a lot of that. But now we're getting to the point where they have to tap the market more. Equity market, debt markets. So that also makes investors a bit nervous. [00:53:53] Speaker 1: And that has benefited the banks. It has been one of the catalysts for this incredible run of results for the banking sector in the US. But the volatility, the geopolitics has been a factor. The energy story, the trading volatility, and clearly trading desks performing incredible record hauls from the top US banks. What is the read across to European banks? We've had a number of guests come on and say they quite like European banks. Is that a sector you would look at? [00:54:16] Speaker 10: Yeah, we do like European banks as well. Not necessarily because of trading volumes, et cetera, although I do think they are at the margin helpful for some of the European banks. I think it's just the fact that European banks are printing pretty good return on tangible equity now. Much better than they were a few years ago. Rates are higher. They're likely to stay higher. It's not just corporates fueling capex spend, which are fueling this rise in debt and equity issuance. You're also seeing governments issue more pushing up and keeping bond yields relatively high. So the whole sort of rates complex being a little bit higher, that helps the European banks as well. [00:54:49] Speaker 1: Sharon, you also have a recommendation for focusing on halo, halo stocks, heavy assets, low obsolescence. Detail that trade for us. That trade. [00:54:58] Speaker 10: So this is a trade that was very unloved for many years. After the financial crisis, people only wanted software companies, media companies, business services companies that generally were not heavy assets. They were capital light. Capital light businesses really was the area that performed incredibly well. Not so in recent years. These heavy asset companies, which I would include amongst them some of the tech hardware names, but also energy stocks, renewable stocks, defense stocks, aerospace stocks, telecom stocks. All of these put in a lot of capital. Capital, of course, is a protection against AI disruption to some extent, unlike, say, for example, capital light businesses, which are more likely to be disrupted. And then also all this need. I think we spent too little on infrastructure for a long time. And now we're realizing we being both corporates and government that we need to spend more on infrastructure. So those things coming together and meaning these things. [00:55:51] Speaker 1: Yeah, you said on the halo trade, the first phase is largely done. Now we enter the second phase. What is the second phase? [00:55:59] Speaker 10: So the first phase was a re-rating because these stocks were trading at very low valuations. No one wanted to touch them, as I said. And everyone wanted the capital light businesses. We've seen a bit of a decline in valuations of capital light businesses. Not that much, but a little bit. We've seen a big re-rating up in the valuation of the heavy asset businesses. Now we think what we need is the earnings. The earnings coming through. And we do expect not just double-digit earnings, but high teens earnings growth for this year for those kinds of capital-heavy businesses, I guess you could say. And that's what we see as driving performance. [00:56:31] Speaker 1: How do you think about UK stocks right now? The city came out with a view they've downgraded UK stocks and partly that's down to what they describe as a broadening of the leadership and maybe less focus on what's happening with commodities. How are you thinking about where UK assets, UK equities should sit in your basket? [00:56:49] Speaker 10: Yeah. I mean, probably within the context of Europe, roughly neutral. I don't have a very strong positive view nor a negative view on the UK stocks. I do think they look at value. And you are seeing foreign investors still accumulating a little bit more UK. You are seeing more M&A into the UK as well. You are seeing more buybacks from UK companies, all these big energy and commodity companies who are making good money buying back shares. Some of the banks are doing relatively well. Good return on equity by the UK banks too. So all of that is good. But on the other hand, domestic investors are very wary. And you are still seeing outflows from domestic investors. There is still a lot of political uncertainty. And you are right. I mean, ultimately, as we go into next year, we would expect commodity prices to come down. And the UK is very commodity heavy. And then also, the UK is a big dollar earner. And sterling has been a little bit stronger recently. [00:57:37] Speaker 1: Well, we saw that yesterday, didn't we, on the reports that Shabama Mahmoud would be made the chancellor in the next government. The rate story for Europe, expectations the ECB raises rates again. Is that priced in at this point across the equity markets? Or is that potentially a hurdle? [00:57:55] Speaker 10: Yeah, I think it's a bit of both, really. I mean, I don't think it is good for the equity market to see it, other than maybe for the banks. It's not particularly good news to see another rate hike by the ECB. We do think they will likely do another rate hike. But also, another rate hike comes with it, my guess would be, an environment where you've still got higher commodity prices, which is unhelpful for European growth. So, at the margin, unhelpful, but I do agree with you as well. It's probably priced. It's what the market expects now. They also, by the way, think that the ECB will cut rates in 2027. So, these are hikes, but they will basically give them back next year. Okay. [00:58:32] Speaker 1: That's interesting on the interest rate cycle for the ECB. You mentioned luxury as a sector, and we saw that performance yesterday and the Richemont earnings coming in strong and benefiting from a very strong US consumer at the top end for jewellery and watches. Do you have a view on whether the luxury story is turning around in a meaningful way, given that China remains a challenge? [00:58:56] Speaker 10: Yeah, China has been a challenge for the luxury companies, probably will stay a challenge. I mean, the recent data on the consumer side from China remains on the relatively weaker side. Having said that, luxury companies are potentially benefiting from a stronger wealth effect. We've just been talking about the strength of global indices in recent months. So, in Asia and in the US, you've had quite a strong wealth effect. So, I think there's a balance for luxury companies. We'll see how the results continue to pan out. And as with a lot of these sectors as well, there's a kind of overall sector, but there's also which companies are taking the correct path, as it were, and growing their businesses. In the end, we think the key thing this year, because valuations are already quite high across all sectors, not just luxury, is earnings growth actually delivering. [00:59:42] Speaker 1: Do you think the automakers can deliver earnings growth in Europe? [00:59:45] Speaker 10: I think it's very tricky for them. We would be underweight autos. We have been for some time. I think the issue for the autos companies, as we know, I mean, there are plenty, but it's China competition is the absolutely key one. They can try to cut costs, but that in itself is costly and difficult. That's a tricky path. So, they can try to cut costs. They've got new models coming through. That may be a little bit helpful. But, yeah, I think it's the competition, the pressure on prices. These businesses, they look cheap on a P/E basis, but I don't see them growing. [01:00:16] Speaker 1: Okay, Sharon. Sharon Bell, thank you very much indeed with the insights on these markets. Sharon Bell, senior European equity strategist at Goldman Sachs. This is something we've been watching for as well, is an update around how South Korea and the regulators there are thinking about these leveraged ETFs. So, redhead across the terminal right now. South Korea will temporarily halt new single stock leveraged ETFs. That is the redhead across the terminal. South Korea will temporarily halt new single stock leveraged ETFs. They will continue monitoring. They seek to stabilize the market soon. They will be banning new single leveraged products from listing. Korea as well. Hiking the minimum deposit requirement for chip leveraged ETFs. That was expected and that has been confirmed. That South Korea will be hiking the minimum deposit requirement for chip leveraged ETFs. South Korea's FSC regulator announcing these measures on single stock leveraged ETFs. So, that is important given the volatility, of course, that we have seen in the COSPI that closed the session down 6.4% today. A reminder of the volatility in today's session and that is the detail. We've seen this coming, of course. We've expected some announcements and now we have the details around part of the story in Korea that has caused at least been attributed to some of that volatility, which is these leveraged ETFs exposed, of course, to the chip story in South Korea. Let's check in on the Core 6 right now in Europe. The focus talking of chips on the likes of ASML, of course, on the back of the strong demand and upgrade to capex spending coming through for TSMC. How much of that capex will be flowing to ASML and its lithography machines. That company right now, the stock is up 2%. On the downside, a little bit of pressure in the defence space. Ryan Mattel is down 1%. LVMH in the luxury space down 0.4% after luxury performed well yesterday. Novo within Health gaining 1.2%. Schneider Electric a little weaker by 0.3%. And Nestle consumer staples down 0.6%. Let's get a check on some of the individual stocks on the move with Chloe Mellie. Chloe. [01:02:16] Speaker 9: Good morning, Tom. Well, at the open, we had all of those tech names up in the green, but now we only have ASML up in the green. This was off the back of those TSMC numbers, which came in quite strong with TSMC hiking its outlook for spending and for sales as well, which is a sign of this growing, this continued AI spending and AI demand. And so this is particularly good news for ASML, given that it is a key supplier to TSMC. But then we are not seeing that reflected in the shares of some of those other tech names this morning. Moving on to Publicis, which is in the green this morning after narrowing its guidance to the top of the range and also sales came in ahead of expectations. It's an advertising company that has been able to better weather the downturn in advertising spend and has also been able to push back against those concerns around AI on the media industry by integrating AI into its own business. And so we're up slightly this morning for Publicis. For Nordia, however, in the banking sector, we are seeing some weakness this morning. It was down a little bit a little bit more strongly earlier. It had free income beating estimates, but then net income actually missing estimates. And so this is a part of all of those Nordic banks reporting this week. And we've seen quite a mixed picture so far. So we'll see what the other banks, the other big banks reporting next week, tell us about the health of that sector moving forward. Moving on to ROTORC and ABB. We have this M&A story, of course, with ABB buying ROTORC, the industrial components, a company from the UK in a $5.5 billion deal. We are seeing that really, really boost the shares in ROTORC this morning up more than 66 percent. But some weakness for ABB this morning on the back of this deal. And finally, let's move over to DeLonghi, which is an household appliance manufacturer, has been rated a new buy by Goldman Sachs analysts, with the analysts saying that the company is going to be really benefiting from this exposure to coffee and to how much people are loving those luxury espresso machines. And so we're up about 4 percent on the back of this new buy rating from Goldman Sachs. [01:04:22] Speaker 1: Chloe, thank you very much indeed for some of the stocks on the move this Thursday. Chloe Mellie coming up. Incoming Prime Minister Andy Burnham here in the UK, of course, reportedly making his pick for the next chancellor. We discussed that and the potential market implications. That's coming up. This is Bloomberg. The data center is the fast growest segment of ABB. [01:04:41] Speaker ?: Last year, it accounted for about 9 percent of our company revenue, but it is growing in the first quarter and in the second quarter, more than 100 percent of triple digit growth. [01:04:52] Speaker 11: When we talk with customers, so we're large customers, the pipeline is very strong. Also, so the outlook in this sector for the next quarter and years is very strong. It's a whole trend of electrification of everything. [01:04:59] Speaker ?: That's a long-term trend. That's a long-term trend. A long-term trend. [01:04:59] Speaker 11: ABB CEO Morten Verold. A long-term trend. [01:05:01] Speaker ?: ABB CEO Morten Verold. Speaking with Bloomberg. After reporting on Bloomberg. A long-term trend. [01:05:01] Speaker 11: ABB CEO Morten Verold. Speaking with Bloomberg. After reporting earnings. The stock is currently down 2.2 percent. In the first quarter and in the second quarter, more than 100 percent of triple digit growth. When we talk with customers, so we're large customers, the pipeline is very strong. Also, so the outlook in this sector for the next quarter and years is very strong. It's very strong. It's a whole trend of electrification of everything. That's a long-term trend. [01:05:24] Speaker 1: A long-term trend. ABB CEO Morten Verold. Speaking with Bloomberg. After reporting earnings. The stock is currently down 2.2 percent. Let's stay on that strong AI demand. Shares of ASML higher this morning after TSMC raised its capital spending and revenue projections for the year. Let's bring in Bloomberg senior strategist Neil Campling to walk us through the market implications for this. What we've been seeing. The European reaction then to what looked like very, very strong numbers for TSMC in confirmation that that AI demand story continues to hold up. [01:05:55] Speaker 12: Yeah, Tom, I think no one will be surprised by the AI demand story, but it's rare to see companies of a trillion dollars growing revenues of 40 percent. It's pretty amazing. Then they also talked about on the call the capex and obviously they're talking about an incremental hike in the capex bend. Positive read for ASML who are a key chip equipment provider for them. So a bottom of the narrative is certainly positive. The AI demand is very strong. There was one small negative in the print that I did notice this morning and that is that smartphones were the only segment to decline year on year. I think TSMC's biggest customers away from Nvidia are the smartphone makers, Apple and Huawei, for example. And if that division is in decline, then it suggests maybe that what's happening is that the units of smartphones are going lower. And that's probably because of the cost inflation of memory chips and the AI chips, et cetera, which wonders whether we're going to feel that in our pockets as consumers later in the year. [01:06:55] Speaker 1: OK, so that's a potential potential fly in the ointment, at least for at least for consumers. Some changes being announced by South Korea's regulators around these leveraged, these leveraged ETFs, single stock leveraged ETFs. How significant is it? Does this put a cap on the volatility that we've seen in the cost fee? That would be nice. [01:07:13] Speaker 12: The one thing to mention on this is it says new ETF products. What happens to the existing ones? Because there's a lot of existing ones already in the market. We've seen some other similar products that are very large in terms of size. So it's great that there is some movement that's taken place to prevent that. But if we look at even within the US, look at the NASDAQ. Apple has a market volatility compared to the index of one. Micron, here to Hynex in South Korea, has a market volatility that's twice the size of the market. So volatility is a key issue, not just in Korea, but also in tech and particularly in memory. So all measures to cap that, I think, are a positive sign. [01:07:55] Speaker 1: It doesn't sound like this will necessarily solve the volatility in its entirety, but it's a step maybe in that direction. Neil Kaplan, thank you very much indeed. Bloomberg's senior market strategist, of course. From volatility in what's happening around semiconductors to volatility in UK politics, incoming UK Prime Minister Andy Burnham is reportedly set to name Home Secretary Shabana Mahmood as his chancellor. Let's bring in Bloomberg markets today editor Sam Unstead, in fact. Sam, we'll make sure we get your name right. First off, this was welcome. There were reports of this yesterday, Financial Times and others. And it was welcomed by investors, at least when we looked at the reaction to the pound and gilts. [01:08:35] Speaker 13: Yeah, so it was. I think you have to put a bit of nuance into how it was welcomed, because what had been speculated upon for quite a lengthy period of time is that Ed Miliband was going to get the job. Yeah. And in the Market Slide Pulse survey over the course of the last week, that was the least market-friendly option. That had been kind of bubbling around in the market. So I think what you saw yesterday with the pound going up and, you know, gilts were a bit weaker today, but they also had a little bit of a rally yesterday, is more a reaction to it not being Ed Miliband rather than it being Shabana Mahmood. Because at the moment, we don't actually know a huge amount about what Mahmood would be like as a chancellor. Yeah. But she's on the sort of right side of the Labour Party, what would be seen as a more fiscally conservative part of the Labour Party, and it reduces some of the worries that people may have about Bernie. [01:09:21] Speaker 1: Described, yeah, as a centrist, blue Labour. Blue Labour, yeah. Am I right in thinking, are the markets, because the markets could be getting this wrong. She doesn't have any, I think my understanding is she doesn't have any economics credentials and hasn't worked in the market. Miliband worked in the Treasury. He knows how to operate in the Treasury. He worked with Gordon Brown. He has that experience. There's a risk that investors may be getting this one wrong, no? [01:09:44] Speaker 13: Oh, there's risks all over the place with it, you know, because I think, so as I say, I think you're seeing a sort of short-term reaction. What you now need, and what we've needed throughout the whole process really, is more detail once Andy Burnham's in position, once all the appointments are made, about what may actually happen. And from what we have at the moment, as I say, there's not much history to go on, you know, in terms of what kind of Chancellor Michael Wood would be in terms of actual policy. It's just that from the political standpoint, the much broader political standpoint, as you say, it's the blue Labour side, it's not the left side, so there's a little bit less concern. [01:10:14] Speaker 1: Whoever's the Chancellor, will they be inheriting a better and stronger UK economy? [01:10:19] Speaker 13: Maybe marginally, although, you know, one thing about the, you know, the GDP data today back from May was a little bit better than expected, but it's not spectacular, you know, it's okay, it's resilient. I think that resilience has actually remained pretty much the case over the course of the last couple of years, you know, where there have been a fluctuation in either direction. But in the end, the UK at the moment still is pulled around by lots of global factors that are way out of its control, you know, and so even borrowing costs this week, there was a really significant shift in borrowing costs after the US inflation data, right? You know, guilt yields have been up all day, that completely got wiped out by inflation data from a completely different country, and then you've got, obviously, oil prices, that's been sending guilt yields a bit higher over the course of the last few weeks, two things over which the UK has very, very little control. So that picture, which has been the case for Rachel Reeves and for Keir Starmer over the last couple of years, is the same. [01:11:12] Speaker 1: Where does this leave the BOE, Sam? What are expectations right now? You've seen Lackawas speaking to Sarah Breeden, Deputy Governor yesterday. How are traders, how are markets thinking about the BOE? [01:11:23] Speaker 13: So, with the oil price going up, bets on rate hikes went up again. They are now hovering sort of 50-50 between there being two this year. That was already a bit hotter than what I think a lot of economists had thought about where the market is. So, probably, it doesn't change the picture too much just yet. But, really, the dependency is all about the oil price. And, again, not in the UK's control. [01:11:44] Speaker 1: Sam, thank you very much indeed, as ever. Sam Amstead, of course, from our Markets Today team. Coming up, Ukraine continues to innovate in drone technology in its war with Russia. We're going to discuss with the CEO of defence tech firm, U-Force. Well, that is next. [01:11:59] Speaker ?: This is Bloomberg. Welcome back. [01:11:59] Speaker 1: This is the opening trade. We are 30 minutes into today's session. [01:12:01] Speaker ?: European stocks, having been flagged for a positive session, actually turning a negative now. Down a little over a tenth of a percent. The FTSE 100 is falling 37 points. The cat current is off. The FTSE 100 is falling 37 points. The cat current is off. The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. [01:12:21] Speaker 1: The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. The FTSE 100 is falling 37 points. The cat current is off by about 19 points as well. And over in Germany, the DAX currently falling two-tenths of a percent. Again, reversing some of the earlier modest, modest optimism. Brent is at 84.80. Oil is currently down around two-tenths of a percent. You're seeing yields up here in the UK. Gilt yields up between two and three basis points. But again, across equities, a little bit more negative versus what we saw at the start of the session. Let's get you up to speed on some of the geopolitics right now. We've been talking, of course, about what's happening in the Strait of Hormuz. But we should not turn our attention away from Ukraine and Russia as well, given Ukraine's attacks on energy refineries and infrastructure in Russia. We have an update crossing right now. In the last couple of minutes, Ukraine's army saying that six Russian tankers, six Russian tankers have been struck in the black. And as of seas, that is according to Ukraine's army. So an update there in terms of, of course, what Ukraine would see as success in terms of targeting those Russian tankers in the black and as of seas as well. We know energy shortages are a real challenge right now for Russia as a result of some of these attacks by Ukraine into Russian territory. It comes as Russian gasoline and diesel prices, of course, have surged further due to those drone attacks, Ukrainian drone attacks. Regional authorities across the country introducing fuel rationing to address panic buying. Moscow has retaliated by targeting dry cargo ships at Ukraine's key shipping ports. Let's bring in Tony Halpin, who leads Bloomberg's Russia economy and government coverage. Tony, what is the economic impact right now in Russia of these Ukrainian attacks? [01:14:12] Speaker 14: Well, it's becoming increasingly serious and perhaps more importantly, increasingly visible to ordinary Russians. As you've noticed, many are spending hours a day now simply to fill up their vehicles in some regions where agriculture is an important industry in Russia. Local officials are saying that they need deliveries of diesel in order to ensure that the harvest is brought in on time. Otherwise, long term, there may be threat to food supplies. So it's having a cumulative and snowballing effect. And it's very difficult for the Kremlin to see what it can do about it because ultimately it's down to the fact that Ukraine is attacking Russian oil refineries, fuel storage depots. They've shown that it's quite possible for them to evade Russian air defences to continue those strikes. And that therefore the problem may continue to grow. And that's going to present a big problem for Putin as they go into autumn and winter. [01:15:06] Speaker 1: Does Washington pose another problem for Putin? Is the U.S. getting closer to another sanctions package on Russia? Does Trump administration have appetite for that? What have we been hearing from Jameson Greer and others about this? [01:15:20] Speaker 14: Yes, that's clearly another vulnerability for Russia. They depend very heavily on oil sales in particular. That's why we're seeing Ukrainian attacks, for example, on vessels in the black and Azov seas to try and disrupt that sort of trade. And the U.S. now with the proposed bill that would give President Trump the right to impose as much as 100 percent tariffs on countries that the largest five largest purchases of Russian oil that threatens to further undermine Russian income and Putin's ability to fuel the war machine. It has to be said, though, that there's been some sort of reluctance to go too hard on this kind of sanction in the past, not least because, as we've seen, global oil markets are disrupted by what's going on in the Middle East. [01:16:07] Speaker 1: Tony, thank you very much indeed, Tony Halpin, with that update in terms of the impact on Russia and its economy. Staying with the defense story, let's bring in Oleg Roginski then, CEO of defense tech firm U-Force, which, of course, has a portfolio of autonomous attack vehicles, both sea and air and land, being used in Ukraine. Do you know if it's your drones that have been used in these latest attacks on six Russian tankers? [01:16:32] Speaker 15: I can't comment on the most recent operations, but I know that our sea drones have been the most popular sea drone in the Black Sea operations for many years now. [01:16:42] Speaker 1: OK. Are we seeing a paradigm shift in terms of Ukraine's ability to strike targets inside Russia? And what does that mean? [01:16:47] Speaker 15: Yeah, absolutely. What we're seeing is the first time Ukraine is employing a completely autonomous multi-domain set of operations, where they combine sea drones that get to Crimea and overseas, because Sea of Azov as well, and then launching air drones from the sea drones. And so what you're seeing, for example, in the combination of products like U-Forces, where you can replace the effect of a Tomahawk missile by having a cheaper boat get to the beach and then launch a cheap drone from it and then hit an air defense system that's worth half a billion dollars with 20,000 drones at 1,000 kilometers away. And that used to be the only job of a Tomahawk missile, but now you can do it for $20,000. Has Ukraine out-innovated Russia? Oh, definitely. Ukraine has been... Can you maintain that gap? If we are continuing to employ the same workflows, same ways to operate at same shoestring budgets, we'll continue innovating. [01:17:41] Speaker 1: Okay, that's interesting. Have you out-innovated the U.S.? Are you seeing U.S. demand? Are you in conversation with the Pentagon? Is the U.S. interested in your technology? [01:17:50] Speaker 15: I cannot comment on conversations, but U.S. demand has been extremely strong in terms of signal. And what I'm really excited about is that with all the changes that U.S. is delivering right now in terms of their purchasing structure, like the new DRPM office, the Defense Autonomous Warfare Group, etc., they have centralized all of the budgets for autonomous systems in a way that is now moving capital extremely efficiently at large scale to things that really, really matter. The drone dominance program, there's a number of programs for unmanned surface vessels, there's programs for sensors, communications in the non-environments, etc. All of that is obviously really good for U-Force. [01:18:31] Speaker 1: And you're confident you'll be able to get access to some of those contracts and some of that funding? [01:18:35] Speaker 15: We are setting up our U.S. operations in a way that treats us as a U.S. subsidiary with SSA, which basically is the same way as BAE or Consberg or Saab is operating in the United States and gives them advantage. [01:18:48] Speaker 1: The U.S. has recently used Corsair unmanned boats, drones, in Iran for the first time. There's Anduril, of course, as well. And on the software side, there's Palantir in the U.S. How do you see the competitive landscape in the U.S.? What is your USP versus some of those competitors? [01:19:05] Speaker 15: Well, the U.S. has also used U-Force products, reportedly according to the U.S., in the Pacific, which we think is a much more strategic region versus what's happening in the Middle East right now. But overall, the competitive side is there's a lot of ocean on the planet and all of that will need to be covered by autonomous systems that are not only keeping a watch on military assets. But how many 20,000 Chinese fishing vessels and so on and so on? There is a ton of assets to cover. There is a ton of assets to defend against. And there is 20,000 islands in the first island chain to secure. [01:19:44] Speaker 1: So that requires scale. How do you scale? How do you build out your drones, your sea drones, your air drones, your land drones at capacity? What are the constraints? What are you doing to ensure you can scale? [01:19:56] Speaker 15: So we are making sure we are present in terms of sovereign manufacturing in as many NATO countries as we can be, because that is where the real bottlenecks come from. When you are deploying a system across a theater like Paycom, for example, you need to get to tens of thousands of units and also soldiers who are on the front lines could be on an island or somewhere to have a limited capacity to learn 10 different systems. So there is inherent stickiness built into this market where once your system is better proven, it's done what our systems have done across 250,000 missions with flu, a number of Russian warships that we sunk. And then it is your opportunity to become a system that militaries will use for, I would say decades in this world, but at least years. OK, so that's the stickiness. How many units are you producing now? How many units can you produce next year? We produce thousands of sea drones and we'll continue growing that. And then in terms of aerial drones, it's hundreds of thousands and ours are big. These are not small. What are the biggest constraints, the supply chain constraints? Batteries coming not from China and especially for extreme environments. You need batteries that don't reduce the drone capacity to fly far in minus 60 to plus 60 degrees because the combat operations these days are happening in all kind of extreme environments. [01:21:17] Speaker 1: Are you able to source outside of China? Are you sourcing components from China right now? [01:21:21] Speaker 15: We are trying not to source components from China for our U.S. and European sales. There is absolutely no Chinese components because that's the that's the world we live in. But what's really difficult is, and very focused, is building up our own vertically integrated supply chain that only depends on European or American components. There is that. We're already operating like that. But the technological advantage and experience of the Chinese side suppliers has probably years to cover for the European and American. [01:21:51] Speaker 1: What do Middle East orders look like? Is there a world in which we can use drone technology, sea drone technology to open up the strait at some point in the future? Is that unrealistic? What are the dynamics you're seeing at play in the Middle East right now? [01:22:02] Speaker 15: I actually see sea drones and similar technologies, especially sea drones used as a platform like our Magura sea drones, setting up a fully autonomous security, a kill web across Middle East. So imagine the Gulf with hundreds of boats just loitering there in the predefined locations. Some of them carrying counter drone, counter Shahid capabilities. Some of them carrying ISR and rescue capabilities. Some of them carrying strike capabilities. And so this kill web just sits there. And whichever threat comes its way, it can go autonomously and either strike into the inland Iran or take out the submarine or take out the ship or a boat that's coming at them. And you can set that permanently, fully autonomously, no humans on the line whatsoever. And that will create multi-layered defense for any kind of threat that will originate from Iran. Okay. [01:22:54] Speaker 1: This is a kill web that you're describing, Oleg. It's a terrifying prospect. Maybe it's a necessary prospect when it comes to some regions of the world. Do you see consolidation in the drone sector? There's hundreds, at least over a hundred startups just in Europe alone focused on drone technology. Is there a bubble? Is there going to be consolidation? There will definitely be consolidation. [01:23:18] Speaker 15: I'm not sure all the investors fully understand how government procurement works and how the scale works when you end up being in a program of record. And so there will be definitely a time when hundreds of these startups will go on for sale because we couldn't raise full on capital. And that's where I guess... Are you looking at acquisitions? We're definitely looking at acquisitions at least five right now. Five acquisitions you're looking at right now? Yes. [01:23:43] Speaker 1: In Europe or globally? [01:23:44] Speaker 15: In Europe mostly. In Europe. Mostly around supply chain because supply chain is key. But then we're seeing these companies coming out of Ukraine that are extremely effective, still haven't reached scale, and they do one thing extremely well. But at this point, both in the Ukrainian battlefield and abroad, you've got to have a portfolio that's fully integrated, multi-domain, fully autonomous, just like we do it with U-Force. [01:24:06] Speaker 1: Oleg, thank you very much indeed. I appreciate you coming to the studio this Thursday to walk through what is happening in terms of the defense space, of course, from U-Force. Oleg Roginski, CEO of U-Force. Meanwhile, U.S. Trade Representative Jameson Greer says stability in ties with China remains a top priority. His comments coming ahead of the expected visit of President Xi Jinping to the U.S. in September. Greer says the two sides will take stock of Beijing's commitments during the summit. He spoke exclusively to Bloomberg at the Aspen Security Forum. [01:24:38] Speaker 16: So China's compliance with the rare earth elements of our agreements, it's not perfect. I think everyone knows that. You can read that in the paper. That being said, we are getting a flow of rare earths. We don't have factories shutting down because they don't have it. But again, we really want to be in a position where we were, you know, in 2024 and 2023, in President Trump's first term, where we had a regular flow of rare earths. We also know that the Chinese, they use rare earths for economic coercion. They did it in 2010 and 2011. They're doing it now. So it's not necessarily surprising. But we're continuing to, you know, to have some flow. And where we have gaps, where we have problems, the Secretary of the Treasury and I, you know, we work with our counterpart in China to try to loosen that flow up. Sometimes we're more successful than others. One important thing is we're moving forward in the U.S. on rare earth production. One of the things I'm doing on my trip out west here, I'm going to Utah to visit a facility where we've already, they've discovered rare earths in the Utah desert. And they're refining them and further manufacturing them at a facility in Utah, which is a great development for U.S. national and economic security. You've got rare earths. [01:25:46] Speaker 17: There's huge pharmaceutical dependence as well. And I wonder how you're thinking about that, the way that you can kind of curb our reliance on Chinese pharmaceuticals and ingredients. [01:25:54] Speaker 16: Yeah, we think about this a lot. This is really critical because at the end of the day, if somehow you lose access to Chinese inputs, it can be a huge challenge for our own manufacturing base. And some people will say, well, what about India? Fine. But a lot of the inputs that India uses also come from China. One great thing that we're seeing as we try to encourage companies to reassure is we actually have commitments from 17 pharmaceutical companies, you know, the most, the largest and the most major pharmaceutical companies, not only to lower prices of medication here in the U.S. Because pharmaceutical prices have gone down by 2.5 percent, but they've also agreed to to reassure here and to manufacture here. And so we have companies like Eli Lilly and Novartis and others actually pouring concrete and superstructures going up in new facilities in North Carolina and Indiana and Southern California. [01:26:47] Speaker 17: There's a long way to go until this meeting in September when the Chinese president comes to the United States. But let me ask you lastly sort of how you're thinking about that. You were so integral to conversations that took place in Beijing. What are you expecting deliverables wise to come out of that meeting in Washington in a couple of months? [01:27:00] Speaker 16: Well, the number one deliverable we always have between President Trump and President Xi is to continue the stability of the relationship. Both of these leaders are very committed to having a strong and solid personal relationship. Now, that doesn't mean we don't have issues in the broader relationship. Obviously, we do. China is a big challenge for the U.S. in a lot of ways. But we want to make sure we're delivering stability. There's never been a situation where the U.S. side or even the Chinese side has gone out and said everyone should expect a comprehensive agreement that resolves all issues. Like, no one's ever promised that. So that's not what we expect. We will have an opportunity to take stock of Chinese commitments with respect to purchases of soybeans and other agricultural products. We'll take stock on the rare earth issues we decided. So I think it will be a moment for stock taking, you know, confirming the relationship, making sure that China is complying with what it's agreed to do. That's really what we're looking forward to in this meeting. [01:27:54] Speaker 1: U.S. Trade Representative Jameson Greer speaking exclusively with Bloomberg's David Gurra. Coming up, Wall Street is back on top. Goldman Sachs leads a record banking haul. We break down the numbers next. And this is Bloomberg. Welcome back to the opening trade. We are 49 minutes into the Thursday session. And sentiment has turned negative. Currently down five tenths of percent on the European stocks 600. U.S. futures also in negative territory now. A couple of hours ago you were pointing to gains in the U.S. And futures in Europe pointing a little to some upside as well. But it has turned around. And you're looking at NASDAQ 100 futures pointing low by four tenths. S&P E-mini is pointing low by a tenth of a percent. That's despite the fact that the earnings season is coming through with some decent strength. Particularly when it comes to Wall Street banks. We're gaining their swagger. Goldman Sachs stock pricing and that price jumped to its highest ever level. As it led the way to a record smashing $100 billion in profits. That's across the sector in the first half. For more, we are joined by Stephen Aarons, our EU finance team leader. Stephen, we also got Morgan Stanley yesterday to round things out from the big U.S. banks. Where do things stand? How much strength have we seen across the U.S. bank earnings? [01:29:26] Speaker 18: I mean, yeah, I think you just mentioned the biggest figure here. $100 billion in profits for half a year. I mean, that's absolutely insane. I don't think it's ever been like that before. They're, you know, they're smashing all records. As you've probably seen, the trading units in those banks are performing. Firing in all cylinders. And the investment banking and the capital raising units are also doing extremely well. So all of these things are coming together for, I think, a very strong moment for U.S. banks, including Goldman, of course, Morgan Stanley, J.P. Morgan. All of these are having their big moment in the sun. [01:30:00] Speaker 1: What does it mean then? Can we expect that European banks are going to perform well as well? That the profits, particularly for the trading arms and the investment bank divisions, are going to perform well? [01:30:14] Speaker 18: So, yes, I would say so. But there's a but. It's the past quarters or especially the first quarter have shown that European banks tend to have benefit a little less from all these trading boom than the American ones. And I guess that trend is likely to continue to continue to continue to continue in the second quarter. So, yes, you know, all the volatility in the markets is driving people to trade equities, you know, hedging and that kind of business, which boosts the trading units in those banks. Also the European ones and all the capital raisings we've seen have boosted the investment banks. So, again, European banks have benefited, I'm sure, but maybe not quite as much as the U.S. ones. [01:30:55] Speaker 1: Stephen, Stephen Harris, thank you very much indeed on the U.S. bank earnings and the strength that's coming through and the potential read across to European lenders as well. Let's look ahead to what else we're watching throughout the day. NVIDIA CEO Jensen Huang is in Japan. He's been and will be speaking at the Japanese Ministry of Economy, Trade and Industry event in Tokyo. So, a lot of eyes on him right now. The IEA is set to release its global critical minerals outlook report. Meanwhile, and at 1:30 p.m. UK time, we'll get U.S. retail sales and initial jobless claims. So, some important data out of the U.S. later. 9:00 p.m. UK time. Meanwhile, on the earnings front, it is the streaming company Netflix coming through at 9:00 p.m. UK time. And later, U.S. President Donald Trump will be addressing the nation. Let's get back to the broader markets right now. Bring in Skylar Mangarami-Koning. And Skylar, I want to start actually on U.K. assets and the pound. Seeing some strength yesterday on reports that maybe traders, maybe the investment community might be getting the Chancellor they want in Shibana Mahmood. Does that mean a significant repricing of U.K. assets? Is this going to be sustained? [01:31:59] Speaker 19: Yeah, I mean, I think this is one of those that you have to look at the pound move as a confluence of factors, right? So, yesterday, we also had dollar weakness that's contributed. That's post weaker inflation data. Europe isn't looking so hot right now, given where gas prices are. And you're also seeing from a risk perspective, you know, Kerry is doing much more positively. And I think, yes, you know, politics can feed in there. But if you look at the move in relative rates, yes, the U.K. gilt market outperformed yesterday. But the relative outperformance at the long end is by no means massive. It's very muted, I'd say. And so I think politics is less of a driver there than those other factors. And I'd point to Kerry in particular as being important. Kerry needs a couple things to do very well. It needs significant interest rate differentials and it needs low volatility. And we have both those right now. FX volatility in particular is in the doldrums. And you have central banks that have divergent policy paths. And one way you can see that influence is just plotting what the last two weeks of currency moves in G10 are versus the expected policy rate 12 months from now. And the R squared of that is something like 60%. And that doesn't look like it's going to change. And I think particularly for the U.K. because you had short positioning that was pretty extended. As you have those moves and you don't have a negative catalyst within the horizon that you're looking at, it's very expensive to hold onto those shorts if the policy rate is high and expected to stay at that low. [01:33:22] Speaker 1: And we're seeing flows as a result of the Kerry trade into the pound because of the higher rate. And you're funding that from cheaper currencies, lower yielding currencies. And you're putting that to play in an environment where you have rates of around 4%. Yeah, absolutely. [01:33:34] Speaker 19: And I mean that's one of the things that really weighs on the yen. I think something that's unexpected more so recently is the way that it's also put on the Swiss franc. Because the Swiss franc had been this haven people were going to. And now it's not looking so great because risk sentiment is a little bit more positive. That is a risk given the U.S.-Iran tensions that you have. But it looks like the markets become numb to that in the same way that it's become pretty numb to political risk unless something goes very wrong in the U.K. [01:33:58] Speaker 1: And you've been talking about you're kind of pushing on this idea that markets are becoming somewhat immune at least to some of these dynamics. And particularly around Iran. I mean Brent is still around $85 a barrel. There's no resolution in place or in sight. And yet the equity markets are not completely freaking out. I mean a little bit of downside pressure today. Yeah. But is this an equity market? Is this a broader market that is going numb to what's happening in the strait as well? [01:34:27] Speaker 19: I think absolutely. Some of that is there are mitigating factors. Right. On the supply side you've had exports from the U.S. You have reserves being drawn down. On the demand side you have China not consuming as much as it was previously. But there is a limit to that. Right. And the risk is that if you have all these factors going in the one way and that there's also an expectation that Trump won't want to escalate even though it's not entirely in his control. The risk is that moves higher especially as you continue down this path in negotiations where stuff isn't actually flowing through the strait of Hormuz. And something I'd point to as a worrying sign is that you do have markets that have higher levels of concern. So gas markets for example have a higher level relative to oil or if you're looking at something like refined products. Yeah. We are seeing that differentiation within the equity market and that European equities are trading more highly correlated to commodity prices in oil than say the U.S. is. [01:35:20] Speaker 1: Do you have conviction right now on what Fed Chair Kevin Walsh and his biases are just briefly. Do we do we do you have clarity on where he stands on rates. [01:35:29] Speaker 19: I mean inflation fighting credibility is the clarity. Right. I think you know that I did have my view change slightly on the inflation data that we've had. You need a series of softer prints to see that shift. I think it makes sense that we've pushed out hikes rather than eliminated them. But it was certainly a softer print. Okay. [01:35:45] Speaker 1: Interesting. Skylar thank you very much. That is it for the opening trade. Checking back in briefly on your European benchmark right now. The stock 600 is down five tenths of percent. So the negativity is is there. U.S. futures also pointing low. The S&P even is off by two tenths. Nasdaq 100 futures pointing low by five tenths of a percent. That is it for the opening trade. We'll see you on Friday. The Pulse is up next. This is Bloomberg.