Trump Rules Out Iran Attacks Before Midterms, AI Funding Rush Continues

GUY: THURSDAY THE NINTH. GOOD MORNING. HOW ARE YOU DOING? FRIDAY THE NINTH. I’LL GET THE DATE RIGHT. WHAT EXACTLY IS OPENAI’S ANNUAL REVENUE RUN RATE? THAT IS IMPORTANT. YESTERDAY IT WAS $50 BILLION. TECH STOCKS WENT DOWN. TODAY $70 BILLION. AND THEY’RE GOING UP AGAIN. OIL, THOUGH, DEFINITELY FALLING. TRUMP DECIDING HE DOESN’T WANT TO STRIKE IRAN BEFORE THE MIDTERMS. AND THE EU-CHINA TRADE TALKS CONTINUE. BEIJING SAYS ITS CURRENCY IS NOT UNDERVALUED, ANNA. ANNA: LET’S PUT SOME NUMBERS ON SOME OF THOSE STORIES, GUY. THURSDAY THE PICTURE ON OIL THEN. A LOT OF -- THIS IS THE PICTURE ON OIL THEN. A LOT OF FACTORS. WHAT’S WINNING OUT A BIG PUSH HIGHER WENT UP TO AROUND $106. COME DOWN TO $102.85 NOW. AND THAT IS ON THE BACK OF PRESIDENT TRUMP SAYING HE’S NOT GOING TO ATTACK IRAN BEFORE THE MIDTERMS. WE’RE ALSO WATCHING OF COURSE HURRICANE SEASON IN THE GULF OF MEXICO. A FEW THINGS TO WATCH ON TREASURY MARKETS, ON BOND MARKETS, MORE BROAD WILL, HERE IN EUROPE, INTERESTING TO WATCH HOW EGB’S OPEN ON THE BACK OF COMMENTS FROM CHRISTINE LAGARDE AND THE STRONG AUCTION IN THE UNITED STATES, ONE OF THE FACTORS WE WATCH WHEN IT COMES TO YIELDS ALONG WITH THE WEAKER OIL PRICE, EURO STOXX 50 FUTURES, U.S. STOCKS DROPPED AFTER WE SAW THE EUROPEAN CLOSE YESTERDAY. BUT WE’RE NOT LOOKING SET TO FOLLOW THEM. BECAUSE OF THE OPENAI STORY HAVING CHANGED, THE OIL STORY HAVING CHANGED, A LOT HAS CHANGED SINCE THE END OF THE EUROPEAN TRADING DAY YESTERDAY. THE COUNTDOWN TO "THE OPENING TRADE" STARTS RIGHT NOW. GUY: IT’S FRIDAY MORNING. I JUST WANT TO CLARIFY THAT. NOT THURSDAY, FRIDAY. FOR THOSE OF YOU WHO WERE WORRIED WHAT I SAID AT THE TOP OF THE SHOW. LET’S TALK ABOUT GROSS AND NET REVENUE. THIS IS GOING TO BE TO BE AN EXCITING CONVERSATION BUT I THINK IT’S QUITE RELEVANT TO WHAT’S HAPPENING IN THESE MARKETS RIGHT NOW. SO YESTERDAY, THE FT COMES OUT WITH A REPORT SAYING THAT OPE OPENAI’S REVENUE IS $50 BILLION. RUN RATE IS $50 BILLION. EVERYBODY FREAKS OUT. TECH STOCKS GO DOWN. THEY LATER CLARIFY IT. THE NET NUMBER IS $50 BILLION. THE GROSS NUMBER IS $70 BILLION. BASICALLY, THE MARKET -- EVERYBODY IS TRYING TO FIGURE OUT HOW YOU COMPARE ANTHROPIC AND OPENAI. WHAT THEY’RE BASICALLY DOING IS GROSSING UP, TRYING TO GROSS UP THE OPENAI NUMBER INTO THE ANTHROPIC NUMBER BECAUSE ANTHROPIC REPORTS A GROSS NUMBER WHICH INCLUDES THE KIND OF PARTNER REVENUE. SO EVERYBODY TRYING TO FIGURE OUT HOW TO DO THIS. IT JUST SHOWS YOU HOW WHIPPY THIS MARKET IS WHAT WE’VE GONE THROUGH THIS HUGE GYRATION IN TECH STOCKS AS A RESULT OF FEARS AROUND WHETHER OR NOT THE AI STORY IS ACTUALLY GOING TO DELIVER. BECAUSE THAT $20 BILLION APPARENTLY REALLY MATTERS. ANNA: YEAH. THE $20 BILLION REALLY MATTERS AND CERTAINLY MOVED MARKETS AND MORE RISK ON THEN AS WE GET THAT CLARITY. AND CONFUSING TOKER FOR TWO REASONS. ONE IS THE REASON YOU DESCRIBE THAT AROUND CLOUD REVENUES AND WHETHER YOU INCLUDE THOSE OR NOT. THE OTHER IS THIS IS A ROLLING NUMBER. WE’RE TAKING THE MOST RECENT PERIOD AND EX-TRAP LAYING. GUY: A RUN RATE. ANNA: EXACTLY. THERE ARE MANY WAYS IN WHICH YOU CAN DO THAT AND MANY PERIODS YOU CAN USE AS YOUR REFERENCE POINT TO FORECAST FORWARD. SO AS COMPANIES GROW SO QUICKLY, IT MUST BE VERY DIFFICULT TO GET THESE -- GET THESE NUMBERS EXACTLY RIGHT. SO THIS IS SOMETHING THAT IS CERTAINLY SET TO -- TO BE A FOCUS. I’VE BEEN WATCHING ALSO -- THIS AUSTRALIAN TATA CENTER -- FIRMUS THIS AUSTRALIAN DATA CENTER THAT PULLED ITS IPO AND THE REASON FOR THAT, VALUATION IS INCREASING TOO QUICKLY. THE OVERHANG FEARS FOR THE EXISTING SHAREHOLDERS, YOU KNOW, WHAT ARE THEY GOING TO DO WITH THOSE? SO LITTLE PROVEN TRACK RECORD FOR THE BUSINESS AND THE INCREASING YIELD ENVIRONMENT. SO ALL OF THOSE THINGS ADDING UP TO A COCKTAIL THAT THEY HAVE HAD TO PULL THE IPO. GUY: A BIG CHUNK OF THEIR DATA CENTERS HAVEN’T BEEN BUILT AND PEOPLE ARE CONCERNED ABOUT THE VALUATION AND ENTRY POINTS WILL MATTER AT THIS POINT. THE OTHER THING TO THROW IN AS WELL ON THE SOFTWARE SIDE IS SOFTBANK. TRYING TO RAISE $100 BILLION OUT OF THE -- MORE MONEY TO BE RAISED. AND ANOTHER BIG FIGURE BEING THROWN OUT THERE. ANNA: MORE FOR THE GULF AND WHAT’S GOING ON IN THE GULF, WE SHOULD TALK ABOUT WHAT’S GOING ON WITH ENERGY MARKETS. ENERGY PRICES COMING DOWN TODAY. $102 IS THE HANDLE ON BRENT JUST. PRESIDENT TRUMP SAYING HE WON’T ATTACK IRAN AHEAD OF THE MIDTERMS. CITING RICH DISCUSSIONS. AND "THE NEW YORK TIMES," THOUGH, HAD A RUNDOWN OF TARGETS THAT HE COULD HIT. AND AS IF SOME PLANNING, AT LEAST IN THE BACKGROUND, HAS GONE -- GOT TO A CERTAIN PLACE. SO WE’RE WATCHING THAT. IRANIAN REPORTS OF HEAVY EXPLOSIONS IN THE STRAIT OF HORMUZ, VESSELS BEING HIT BY MINES ALL OF THAT UNSUBSTANTIATED. STILL ADDING UP TO A BACKGROUND STORY OF AN UPTICK IN VIOLENCE FROM THE IRANIAN SIDE. IN THE GULF OF MEXICO. GUY: THE TIMES ARE SAYING THAT TRUMP IS HESS TAKING. AND THAT’S REALLY INTERESTING THAT HE’S -- THE -- THE PLANS IN PLACE FOR THREE DAYS OF STRIKES AND TRUMP IS HESITATING. YOU -- YOU CAN UNDERSTAND WHY. HE SAYS HE’S GOING TO STRIKE IRAN BEFORE THE MIDTERMS. OIL ROCKETS UP TO THE TOP END OF ITS RECENT RANGE. AND THE WHITE HOUSE LOOKING AT THAT GOING, FINE, THAT SOUNDS LIKE A VERY BAD IDEA AND LET’S NOT DO THAT. ANNA: AT A TIME WHERE HURRICANE SEASON IS FINALLY KICKING IN IN THE GULF OF MEXICO. GUY: SO WE’VE BEEN PRACTICING OUR PRONUNCIATION. ANNA IS THE EXPERT THIS MORNING. ANNA: I’M NOT SURE I WOULD GO THAT FAR. IESIAS SET TO MAKE LANDFALL FRIDAY INTO SATURDAY. ALABAMA TO FLORIDA. SO A WIDE AREA. BUT IT’S NOT AS IF THE MAJOR SORT OF PRODUCTION ARE GOING TO BE HIT. BUT 60% OF PRODUCTION IN THE GULF OF MEXICO HAS BEEN SHUT IN AS A RESULT OF THIS. SO WE’RE WATCHING THAT VERY CAREFULLY. GUY: AND WE HAVE JUST SEEN A REPORT FROM THE NATIONAL HURRICANE GROUP IN THE STATES I’M -- AND IT WILL APPROACH IT AS A DANGEROUS HURRICANE. I THINK. AND EU-CHINA TRADE TALKSION GOING. -- TALKS ONGOING. THE STATEMENT IN CHINESE AND ENGLISH SAYING ITS CURRENCY IS NOT UNDERVALUED. THE EUROPEAN UNION HAS AN ISSUE WITH KY NIECE CURRENCY BEING UNDERVALUED AND THE FACT THAT THE CHINESE ARE PUTTING THIS OUT AND PUSHING THIS SO HARD SUGGESTS THAT ACTUALLY, MAYBE WE’LL GET A FAIRLY TOUGH LINE FROM THE CHINESE WHEN IT COMES TO EU NEGOTIATIONS. I THINK THAT PROBABLY IS THE TAKEAWAY THIS MORNING. IN TERMS OF THE PROGRESS THAT SEFCOVIC MAY OR MAY NOT MAKE. ANNA: THE INTERPRETATION OF THE STATEMENT IN MARKET SEEMS TO BE THIS ISN’T JUST A TOUGH OPENING STATEMENT. THIS SUGGESTS SOME INTRANSIGENCE ON THIS POINT. AND SO MAYBE WE DON’T SEE ANY KIND OF MEETING OF MINDS ON THIS. BECAUSE BRUSSELS HAS BEEN VERY OUTSPOKEN IN THE PAST ABOUT SEEING THIS CURRENCY AS UNDERVALUED. SUPPORTED BY IMF ANALYSIS THAT SAYS THAT IT IS 12% TO 20% UNDERVALUED. THE STATEMENT IN BOTH LANGUAGES DOESN’T MAKE ANY REFERENCE TO THE DAILY FIXING AND DOESN’T TALK ABOUT THE ROLE OF STATE BANKS AND MANY IN THE MARKET WHO MIGHT SAY THERE IS SOME OMISSIONS TO THAT PARTICULAR -- GUY: WE TALKED ABOUT ONE IPO. LET’S TALK ABOUT ANOTHER ONE. ANNA: LET’S GO TO IPO’S A LITTLE CLOSER TO HOME AND TALK ABOUT AN IPO TAKING PLACE IN LONDON TODAY. SO WE GOT SOME HEADLINES ACROSS THE BLOOMBERG TERMINAL TELLING ME THAT THE FINAL OFFER DETAILS FOR AIRTEL MONEY WHICH IS THE COMPANY WE’RE TALKING ABOUT THIS MORNING HAVE BEEN RELEASED. THE -- THE AIRTEL MONEY OFFER SIZE WHICH IS 582 MILLION POUNDS INCLUDING THE IPO PRICE AT 196 A SHARE. LET’S TALK NOW I’M PLEASED TO SAY ON THE FIRST DAY OF TRADING IN LONDON. EXCLUSIVELY TO IAN FERRAO WHO IS THE CEO OF AIRTEL MONEY. REALLY NICE TO SPEAK TO YOU ONCE AGAIN. THANK YOU VERY MUCH. FOR COMING IN TO SPEAK TO US. SO 582 MILLION INCLUDING THE GREEN SHOOTS A BIT MORE THAN MAYBE HAVE BEEN EXPECTED BEING RAISED THERE. HOW DOES IT FEEL? WHAT IS YOUR RESPONSE TO THAT -- HOW IT’S GOING? >> AN AMAZING DAY. ABSOLUTELY AMAZING DAY. A BIG MILESTONE FOR AIRTEL AND ALL OF OUR KEY STAKEHOLDERS. HOW AM I FEELING? I’M RUNNING ON COFFEE AND ADRENALINE RIGHT NOW. A WHIRLWIND FOR A FEW WEEKS SINCE I LAST SAW YOU. PROUD OF WHAT WE HAVE ACHIEVED AND A DAY FOR MY EMPLOYEES AND TEAM. THE HQ TEAM, THE AFRICAN TEAM, THE TEAM ACROSS AFRICA AND INDIA THEY HAVE BUT AN ABSOLUTELY FANTASTIC COMPANY AND INVESTORS HAVE REALLY LIKED WHAT WE PUT ON THE TABLE. ANNA: YOU SAY YOU HAD A POSITIVE RESPONSE FROM INVESTORS. WHAT ARE THE SHAREHOLDERS WHO ARE STILL HOLDING ON TO THEIR SHARES? WHAT ARE THEY GOING TO DO WITH THEM AND HOW LONG ARE THEY LOCKED UP FOR AND DO WE HAVE TO WORRY ABOUT OVERHANG HERE? IAN: YEAH. LOOK, SO THERE WAS A PARTIAL SELLDOWN FROM ALL OF THE FOUR MINORITY INVESTORS THAT CAME IN IN 2021. ALL OF THEM ARE REMAINING ON THE BOOK. AND I THINK ALL OF THEM WANTED TO REMAIN ON THE BOOK. WE HAVE A COMPANY THAT’S STILL GROWING VERY, VERY STRONG. THAT’S PROFITABLE. THAT HAS A DIVIDEND POLICY THAT’S VERY GENEROUS. AND I THINK THE -- THEY ARE LOCKED UP FOR 180 DAYS. ALL OF THE EXISTING SHAREHOLDERS. GUY: YOU PRICED AT 196. IS IT PRICED TO GO? THIS IS REALLY IMPORTANT. LONDON REALLY NEEDS SOME SUCCESSFUL IPO’S. HOW CONFIDENT ARE YOU THAT YOU GET WHERE ARE WE IN -- 52 MINUTES’ TIME THAT YOU GET ABOVE THAT 196? IAN: YEAH, LOOK, WE WENT WITH A FIXED PRICE LISTING AND MANY OF THESE ACROSS EUROPE AND WE WERE SAYING, LOOK, THIS THE PRICE. WE THINK IS A GREAT PRICE. STAKEHOLDERS -- GUY: LEFT ANYTHING ON THE TABLE DO YOU THINK? IAN: I DO THINK SO. THERE IS ALWAYS AN IPO DISCOUNT. YOU HAVE SEEN THE RUMORS OF WHAT THE VALUATIONS WERE. I’M NOT A VALUATION EXPERT. BUT SAPPELT THE MARKET IS GOING TO DECIDE WHICH WAY THIS GOES. I SEE UK FUTURES IS UP. HOPEFULLY THAT WILL HELP US TODAY. AND HOPEFULLY REALLY GOOD FIRST DAY OF TRADING. ANNA: OIL PRICE DROPPING BY 1% MIGHT HELP. I’VE SEEN REPORTED THAT YOU SAID YOU WANT TO BE THE REVOLUT OF AFRICA. CORRECT ME -- I’VE SEEN IT REPORTED THAT YOU SAID THAT. BUT REVOLUT WANTS TO BE THE REVOLUT OF AFRICA. SO I WONDER HOW YOU FEEL ABOUT THE COMPETITIVE ENVIRONMENT RIGHT NOW? IAN: YEAH. LOOK, COMPETITION IS GOOD. THERE IS SO MUCH OPPORTUNITY IN AFRICA. RIGHT? A FAST-GROWING ECONOMY. GDP GROWTH, POPULATION GROWTH, RISING MIDDLE CLASS, URBANIZATION, SMART PHONE PENETRATION, THERE’S ENOUGH ROOM FOR A LOT MORE COMPETITION. AT THE END OF THE DAY, WE’VE CREATED A VERY, VERY STRONG POSITION EARLY -- A VERY UNIQUE MARKET AS WELL. ALL OF THE MARKETS ARE VERY DIFFERENT TO THE WESTERN WORLD AND NEW BUSINESS FOR THAT AND WHY WE HAVE 2.3 MILLION AGENTS AND SPEND NEARLY HALF A BILLION DOLLARS ON COMMISSION TO THESE AGENTS. THIS IS UNHEARD OF. AND WE HAD TO EXPLAIN THIS STORY TO A LOT OF PEOPLE WHO HAD NEVER REALLY SEEN HOW AFRICAN FINTECH WORKS. GUY: YOU HAD TO EXPLAIN IT. I’VE HEARD QUITE TOUGH QUESTIONS, THOUGH. WHAT HAVE INVESTORS BEEN ASKING YOU? WHAT ARE THE KEY QUESTIONS THAT YOU’VE HAD TO ANSWER THIS WEEK THAT MAYBE YOU WEREN’T EXPECTING? IAN: LOOK, I WOULD HAVE ANSWERED MANY QUESTIONS. GUY: I’M SURE YOU HAVE. THE MOST RELEVANT ONES? IAN: QUESTIONS AROUND THE GROWTH, IS IT SUSTAINABLE? OF COURSE, WE BELIEVE IT REALLY IS. WE’VE GOT A TRACK RECORD OF THAT. THERE’S BEEN QUESTIONS AROUND THE LANDSCAPE, THE COUNTRIES, THE ECONOMIES, THE REGULATION, THE GOVERNMENTS. TRYING TO UNDERSTAND THE AFRICAN LANDSCAPE IN A LOT BETTER WAY. AND I THINK THERE’S ALSO OPPORTUNITY -- A LOT OF DISCUSSIONS AROUND RISKS OF FINTECH. WE’VE SEEN SOME OF THESE RISKS PLAY OUT. AND HOW DOES THIS HAPPEN ACROSS AFRICA? BUT ULTIMATELY, I THINK WITH THE BOOK THAT WE’VE DELIVERED, INVESTORS HAVE BOUGHT INTO THE FACT THAT THIS IS A SOLID, SOLID BUSINESS WITH A TRACK RECORD. GUY: I’M HOPING SOMEBODY CAN GET A SHO OF SHOT OF YOUR SHOES. ENTIRE TIME SHOWN UP IN THESE SHOES. AIRTEL. AND I FEEL UNDERDRESSED THIS MORNING. LOOK AT THOSE. ANNA: VERY SMART. IAN: MONEY-BRANDED SHOES. GUY: LIMITED EDITION. ANNA: THAT’S WHY IPO’S -- COME WITH THESE DAYS. BRANDED FOOTWEAR. GUY: NICE TO SEE YOU. IAN: THANKS FOR HAVING ME ON, GUYS. GUY: ARE YOU GOING -- ANNA: WE’LL SEE YOU SOON. GUY: LOOK FORWARD TO SEEING THAT. THE CEO OF AIRTEL MONEY AHEAD OF THE IPO IN -- YEAH. 49 MINUTES’ TIME. 48 MINUTES’ TIME. WE’LL SEE THOSE NUMBERS FLASHING ON THE SCREEN. ANOTHER KEY PLAYER IN THE FINTECH SPACE IS EUROPE’S MOST VALUABLE STARTUP REVOLUT. THE COMPANY IS TAKING ON PERHAPS ITS BIGGEST CHALLENGE YET CRACKING THE UNITED STATES. ITS CEO HAS BEEN SPEAKING EXCLUSIVELY TO TOM MACKENZIE. >> THE CVS MARKET, AND THE NEW IPO IN THE U.S. YEAH. TOM: SO DUAL LISTING. UK. U.S. BUT PRIMARY WOULD BE IN THE U.S.? >> YES. GUY: TOM WILL BE BACK AND GET MORE OF THAT INTERVIEW. AND ANNA AND I A SHORT DAY BECAUSE BLOOMBERG TECH EUROPE WHICH IS GOING TO BE EXPLORING AI IN THE BANKING SECTOR IS GOING TO BE LIVE. IT’S GOING TO BE FROM THE TECH CONFERENCE IN TURIN 8:30 AM LONDON TIME. ANNA: LET’S TAKE A LOOK AT THE OTHER EVENTS WE ARE WATCHING OUT FOR TODAY. EU FINANCE MINISTERS ARE MEETING. AT 10:00 AM THE NOBEL PEACE PRIZE ANNOUNCEMENT. 11:30 AM UK TIME. DELTA EARNINGS WILL COME THROUGH. SO PRE-MARKET IN THE UNITED STATES. 1:30 PM THE EU’S MAROS SEFCOVIC AFTER THE TRADE TALKS WE’VE BEEN TALKING ABOUT ALL THIS WEEK. A PRESS CONFERENCE ATTACHED TO THAT LATER ON TODAY. AND 3:00 PM UK TIME THE U.S. CONSUMER SENTIMENT CLOSELY WATCHED OF COURSE. GUY: VERY CLOSELY WATCHED. COMING UP, FRANCE SAYS IT’S DEPLOYING MORE TEACHERS TO SCHOOLS AS PART OF AN EMERGENCY PLAN TO QUELL THE STUDENT PROTEST AND MORE ON THAT STORY SHORTLY. JOINED AT THE OPEN BY THE HEAD OF ASSET ALLOCATION RESEARCH AT GOLDMAN SACHS. BUT UP NEXT, THE WTO SAYS GLOBAL TRADE IS ACTUALLY HOLDING UP MUCH BETTER THAN ANTICIPATED. HERE’S THE CLUE AS TO WHY. AI. WE’RE GOING TO BE JOINED BY THE ORGANIZATION’S CHIEF ECONOMIST, ROBERT STEGER. IF YOU HAVE ANY QUESTIONS FOR HIM OR ANY OF OUR OTHER GUESTS, IB+BBTV <GO> IS THE FUNCTION ON YOUR BLOOMBERG. THIS IS BLOOMBERG. ANNA: WELCOME BACK TO "THE OPENING TRADE." IT’S FRIDAY. THE AVOIDANCE OF DOUBT. EUROPEAN FUTURES GO HIGHER THIS MORNING. AND A FRIDAY FEEL TO IT. THIS IS BECAUSE OF THE CHANGING NARRATIVE AROUND OIL, AROUND WHAT’S HAPPENING IN THE MIDDLE EAST. AND INDEED AROUND OPENAI AND THE REVENUE OUTLOOK. ALL OF THAT CHANGED WITHIN THE SPACE OF 24 HOURS. ABOUT-FACE ON A NUMBER OF DIMENSIONS, GUY. GUY: ABSOLUTELY. IMPORTANT THESE COMPANIES ARE. THE WORLD TRADE ORGANIZATION HAS RAISED ITS OUTLOOK FOR TRADE IN GOOSE SAYING A SURGE IN -- YOU GUESSED IT AI DEMAND HAS OFFSET DISRUPTION CAUSED BY THE WAR IN THE MIDDLE EAST. WE’RE JOINED NOW BY ROBERT STAIGER, CHIEF ECONOMIST AT THE WTO. GOOD MORNING, BOB. SO AI IS RESCUING GLOBAL TRADE AS WELL AS EVERYTHING ELSE IT SEEMS AT THE MOMENT. CAN YOU GIVE ME SOME SORT OF SIZE AND SCOPE. HOW BIG OF AN IMPACT HAS IT HAD? ROBERT: YES. IN OUR EARLIER MARCH FORECAST, WE WERE FORECASTING 1.9% GROWTH IN MERCHANDISE TRADE FOR 2026. MORE THAN DOUBLED THAT NOW TO 3.9%. AND A LARGE PART OF THAT IS THE SURPRISING STRENGTH IN THE CONTINUED INVESTMENT IN AI AND AI-ENABLING GOODS. OUR ORIGINAL FORECAST EXPECTED THAT THE GREAT STRENGTH IN THAT INVESTMENT FROM 2025 TO BEGIN TO MODERATE IN 2026. IN FACT, THAT INVESTMENT HAS ACTUALLY ACCELERATED IN 2026. AND THAT IS DRIVING A LOT OF OUR INCREASED -- INCREASED GROWTH. THE OTHER THING THAT IS HAPPENING IS THAT THE MIDDLE EAST CONFLICT HAS HAD LESS OF AN IMPACT ON MERCHANDISE TRADE THAN ONE MIGHT HAVE ANTICIPATED. BECAUSE OF THE -- THE RESPONSE OF SUPPLY CHAINS AND OTHER SUPPLIERS TO THE MIDDLE EAST SHOCK. AND A GOOD STATISTIC FOR THAT IS OVER THE FIRST SIX MONTHS OF 2026, OIL EXPORTS FROM THE MIDDLE EAST FELL BY 24%. BUT GLOBAL EXPORTS IN OIL ONLY FELL BY 6%. THE REASON IS THAT OTHER COUNTRIES STEPPED UP. THE U.S., BRAZIL, MALAYSIA, NORWAY, AND SUPPLIED THE -- THE WORLD MARKET WITH OIL. AND THAT’S A GREAT LESSON FOR HOW -- A TRADING SYSTEM CAN HELP STABILIZE THE WORLD IN THE PRESENCE OF REGIONAL SHOCKS. GUY: CAN I JUST REWIND JUST A MOMENT? YOU SAID THE AI STRENGTH WAS SURPRISING. WHY IS IT SURPRISING? ROBERT: YES. IT’S SURPRISING TO US. AND I THINK TO MANY FORECASTERS AROUND THE WORLD BECAUSE IT WAS SO STRONG ALREADY IN 2025 THAT OUR EXPECTATION WAS IT WOULD NOT GO -- KEEP KEEP GOING AT THAT LEVEL. AND THAT’S WHY IN OUR MARCH FORECAST WE DID EXPECT SOME MODERATION. IT WOULD STILL CONTINUE. BUT AT A MORE MODERATE RATE. IN FACT, IT DIDN’T MODERATE. IT DIDN’T EVEN STAY AT THE 2025 RATE. IT ACCELERATED TO A MUCH HIGHER RATE OF GROWTH IN AI INVESTMENT. AND THAT’S -- THAT’S WHAT HAS SURPRISED US. AND THE OTHER IMPORTANT THING TO NOTE IS AI-ENABLING GOODS INVESTMENT IS A VERY TRADE-INTENSIVE INVESTMENT. MOST INVESTMENT, RESIDENTIAL INVESTMENT, HAS VERY SMALL TRADE CONTENT. BUT AI INVESTMENT HAS UP TO 70% OF EVERY DOLLAR SPENT ON AI INVESTMENT IS INVOLVED IN TRADE. SO WHAT HAPPENS TO AI INVESTMENT HAPPENS TO TRADE. ANNA: YEAH. REALLY INTERESTING DYNAMICS AROUND AI. I ALSO WANT TO ASK ABOUT GEOPOLITICS SHAPING TRADE RIGHT NOW. SO AFTER THE FULL-SCALE INVASION OF UKRAINE, YOUR REPORT SHOWED THAT COUNTRIES PULLED BACK A LITTLE FROM TRADING WITH RIVALS AND TRADED MAYBE MORE WITH FRIENDLIER NATIONS. AND IN A DYNAMIC, THOUGH, HAS SOFTENED IN RECENT TIMES. WHAT’S HAPPENING THERE? ROBERT: THAT’S RIGHT. THE DYNAMIC HAS SOFTENED. WE HAVE SOME CHARTS -- THAT DEMAND WAS GOING ON IN THE LAST DECADE. AND IT WAS BETWEEN GEOPOLITICAL BLOCS, THE TRADE WAS LOWERING, AND WITHIN THOSE BLOCS, IT WAS INCREASING. AND BY GEOPOLITICAL BLOCS, WE WERE MEASURING THE SAME WAY THAT MOST ECONOMISTS AND POLITICAL SCIENTISTS DO. AND THAT IS LOOKING AT VOTING BEHAVIOR IN THE UN AND ALLOCATING COUNTRIES WITHIN A BLOC IF THEY TEND TO VOTE THE SAME WAY. AND -- BUT NOW, THAT -- THAT TREND HAS STABILIZED AND EVEN REVERSED. AND WHAT IS NOW HAPPENING IS THERE IS A MORE OF A DIVISION BETWEEN U.S. AND CHINA. AND THAT BEGAN A FEW YEARS AGO. AND PEAKED IN 2025 WHERE U.S. AND CHINA TRADE IS DEFINITELY -- HAS DEFINITELY FALLEN OFF AND THEIR TRADE WITH THIRD COUNTRIES HAS INCREASED. AND THE OTHER INTERESTING THING ABOUT THOSE TWO ASPECTS IS THE GEOPOLITICAL BLOCS WERE LOWERING THEIR TRADE ACROSS BLOCS IN VERY SIMPLE PRODUCTS WHERE IT WAS EASY TO SHIFT SUPPLY CHAINS. BECAUSE THOSE SUPPLY CHAINS WERE NOT VERY COMPLEX. FOR THE -- FOR THE U.S. AND CHINA, IT IS ACROSS THE BOARD IN THEIR PRODUCTS INCLUDING VERY COMPLICATED SUPPLY CHAINS THAT ARE MORE -- MORE STICKY TO ADJUST. SO IN SOME SENSE A MORE -- POTENTIALLY LONG. ANNA: BOB, WHAT -- EUROPE AND CHINA ARE TALKING ABOUT TRADE RIGHT NOW. AND THERE’S A LOT OF DISCONTENT IN BRUSSELS AROUND THE VALUE OF THE CHINESE CURRENCY AND WHAT -- AND THE IMPACT THAT BRUSSELS SEES THAT’S HAG HAVING. AND THERE ARE OTHER FACTORS LEADING TO A HUGE TRADE IMBALANCE BETWEEN THOSE TWO TRADING BLOCS. WHAT ARE YOU WATCHING FOR FROM THESE TRADE CONVERSATIONS? WHAT’S YOUR EXPECTATION? DO YOU EXPECT ANYTHING TO CHANGE IN THAT RELATIONSHIP? ROBERT: AT THE WTO THERE’S AN AWFUL LOT OF ACTIVITY INVOLVED IN FORM THE RULES BY THE MEMBER GOVERNMENTS. AND THE FORM PROCESS IS A VERY IMPORTANT ONE AND WE ISSUED THREE WEEKS AGO A WORLD TRADE REPORT THAT WAS FOCUSED NOT ON THE REFORMS THEMSELVES BUT ON THE ISSUES AND CHALLENGES THAT THE WORLD TRADING SYSTEM IS FACING. AND THOSE CHALLENGES RELATE TO MANY THINGS. A LOT OF CHANGES THAT HAVE OCCURRED IN THE WORLD TRADING SYSTEM SINCE 1995 WHEN THE WTO WAS CREATED. AND MANY OF THOSE CHANGES WE ARGUE ARE ACTUALLY SIGNALS OF THE SUCCESS OF THE SYSTEM ITSELF. IT’S CHANGED THE WORLD. AND NOW THE RULES NEED TO CHANGE TO KEEP UP WITH THAT WORLD. AND THE KINDS OF THINGS YOU’RE TALKING ABOUT BETWEEN US AND CHINA ARE EXAMPLES OF THAT. BUT THERE ARE MANY AND I THINK THE IMPORTANT THING IS THAT AS THE -- AS THESE COUNTRIES DEAL WITH THE SHOCKS TO THEIR MARKETS, THAT THEY’RE DEALING WITH, THE BEST WAY TO RESPOND TO THOSE IS WITH A RULES-BASED COOPERATIVE RESPONSE. AND THAT’S WHAT THE WTO IS HERE TO HELP MEMBERS ACHIEVE. GUY: IS YOUR SENSE, THOUGH, THAT THE GLOBALIZATION PROCESS, THE DEGLOBALLIZATION PROCESS HAS FURTHER TO RUN? THAT WOULD CERTAINLY BE THE KIND OF VECTOR THAT WE’RE ON AT THE MOMENT AND IF SO, IF YOU WERE TO -- AS AN ECONOMIST LOOK AT WHAT THE INFLATIONARY IMPACT OF THAT IS GOING TO BE, WHAT IS YOUR BEST ASSESSMENT? ROBERT: YEAH. VERY INTERESTING QUESTION. I BELIEVE THE GLOBALIZATION PROCESS DOES HAVE FURTHER TO RUN. IN PARTICULAR, FOR SERVICES, UNLIKE TRADING GOODS WHICH WERE LIBERALIZED THROUGH THE GAAP SYSTEM THAT PRE-DATED THE WTO, TRADE AND SERVICES HAS BEEN MORE DIFFICULT TO LIBERALIZE AND I THINK THERE’S MUCH -- MUCH ACTIVITY THERE. THERE’S ALSO POSSIBILITIES FOR THE NEW MAJOR TRADING PLAYERS WHO DID NOT DO AS MUCH LIBERALIZATION IN THE PREVIOUS GATT YEARS ARE MAJOR PLAYERS IN THE SYSTEM. AND THERE’S POTENTIAL FOR MUTUALLY BENEFICIAL BENEFITS THERE. SO I THINK THERE’S A LOT OF POSSIBILITIES. BUT REFORM IS A CRUCIAL PART OF ACHIEVING THOSE POSSIBILITIES. AND IN THE WORLD TRADE REPORT, WE DO SEVERAL SCENARIOS, ONE IN WHICH WE EXPECT REFORM AND FURTHER INTEGRATION. THE OTHER IN WHICH WE HAVE SOME FALLBACK TO GEOPOLITICAL BLOCS OR FREE TRADE AGREEMENT BLOCS. AND WE ARGUE THAT THE STAKES ARE HIGH. ANNA: OK. ROB, THANK YOU, BOB, THANK YOU VERY MUCH FOR JOINING US. ROBERT STAIGER, CHIEF ECONOMIST AT THE WTO. GUY: FRIDAY MORNING. WHAT ELSE DO YOU NEED TO KNOW? IN THE UK THE GOVERNMENT LABOUR PARTY HAS HELD OFF A CHALLENGE BY THE GREENS AND RETAINED PARLIAMENTARY SEAT VACATED BY FORMER HOLDER KEIR STARMER. AND WON 45% OF THE VOTE. THE GREENS TRIPLED THEIR VOTE SHARE FROM THE GENERAL ELECTION IN 2024. THE FAILURE TO WIN STILL REPRESENTS A MAJOR SETBACK FOR PARTY LEADERS PALCZEWSKI THOUSANDS OF ADDITIONAL TEACHERS FOR UNDERSTAFFED SCHOOLS. A BID TO REIN IN THE STUDENT PROTESTS THAT LED TO CRASHES WITH RIOT POLICE IN RECENT DAYS. THE EDUCATION MINISTER IS IMPLEMENTING AN EMERGENCY PLAN TO ADDRESS STUDENT GRIEVANCES AND MORE THAN 70,000 PEOPLE ATTENDED RALLIES YESTERDAY. STUDENT LEADERS SAY IT IS NOT ENOUGH AND HAVE VOWED FURTHER PROTESTS NEXT WEEK. AND OFFSHORE OIL PRODUCTION THE U.S. GULF COAST HAS BEEN LARGELY SHUT DOWN AHEAD OF THE ARRIVAL OF HURRICANE ISAIAS. NEARLY 500,000 BARRELS A DAY OF REFINING CAPACITY ALSO SITS IN THE PROJECTED PATH WITH THE PRODUCT MARKET TIGHT EVEN A SMALL DROP IN REFINERY RUNS COULD HAVE A BIG MARKET IMPACT. SO OIL PRICES, GOING TO BE INTERESTING THE NEXT FEW DAYS WHETHER YOU GET SHIFTS IN AN OIL PRICE, BRENT PRICE, THAT IS AFFECTED BY WHAT DONALD TRUMP IS SAYING ABOUT IRAN. AND MAYBE A PRODUCT MARKET THAT CHANGES AS A RESULT OF THE HURRICANE STORY. ANNA: YEAH. ABSOLUTELY. THEY COULD BE IMPACTED BY DIFFERENT THINGS. DIFFERENT GEOGRAPHIES COULD BE IMPORTANT THERE AND JUST AS WE WERE WATCHING HURRICANE ISAIAS, WE’VE ALSO GOT MENTION OF A SIMON SLOWING DOWN AND MOVING NORTHWEST BUT EXPECTED TO BECOME A DANGEROUS MAJOR HURRICANE. WE HAVEN’T REALLY HAD -- WE HAVEN’T HAD MUCH IN TERMS OF HURRICANE ACTION SO FAR THIS SEASON. GUY: NO. AND STARTED MUCH LATER AND MUCH QUIETER. SO THAT HAS BEEN A POSITIVE FOR THE OIL MARKET. BUT YEAH. I THINK -- THIS WILL BE AN INTERESTING TEST. THERE’S ALSO SIGNIFICANT FLOOD WARNINGS ACROSS THAT ENTIRE COASTAL REGION AS WELL WORTH PAYING ATTENTION TO. ANNA: LANDFALL LATER TODAY INTO THE U.S. MORNING ON SATURDAY. COMING UP, WE’LL STICK WITH THE OIL STORY, OIL DROPPING THIS MORNING. WILL THAT PROVIDE SOME RELIEF TO EUROPEAN BOND MARKETS? WE’LL DISCUSS. FROM WISDOM TREE, WITH US NEXT. THIS IS BLOOMBERG. GUY: 30 MINUTES TO GO UNTIL WE START TRADING. THERE’S A BUNCH OF REALLY INTERESTING STORIES COMING TOGETHER THIS MORNING. WE’LL TALK ABOUT BONDS IN JUST A SECOND BUT THE FUTURES PICTURE. YESTERDAY, WE GOT DINGED IN THE MARKET BY WHAT WAS HAPPENING WITH THE STORY AROUND WITH OPENAI’S REVENUE RUN RATE. TODAY THAT REVERSES WHICH GIVES MARKETS A LITTLE BIT OF A LIFT ON THE EQUITY FRONT DESPITE THE FACT THAT ACTUALLY ANNA POINTED OUT EARLIER WE DIDN’T CLOSE NEAR THE HIGHS OF THE SESSION IN THE UNITED STATES. IT LOOKS FAIRLY POSITIVE THIS MORNING. FROM AN EQUITY POINT OF VIEW AT LEAST. ANEEKA: SHIFTING NARRATIVE ON OPENAI AND OIL ADDING UP TO RISK -- RISK-POSITIVE START TO THINGS FOR EUROPE IT SEEMS. AND IN TERMS OF THE BOND MARKET STORY, SAME BUT DIFFERENT. WE SEE SOME APPETITE FOR BONDS. YIELDS COMING DOWN. THIS AS A RESULT OF A FEW DIFFERENT DYNAMICS. SO LET’S COUNT THE WAYS THAT WE ARE SENDING YIELDS LOWER TODAY. WE’VE GOT LOWER OIL PRICES. THAT’S ONE OF THE FACTORS. THAT THEY WENT UP TO $106 YESTERDAY AND DOWN TO $103. ON THE BACK OF PRESIDENT TRUMP’S COMMENTS. SO THAT’S ONE FACTOR. CHRISTINE LAGARDE, REALLY INTERESTING STORY COMING AFTER THE CLOSE YESTERDAY THAT SHE TOLD A GROUP THAT THE ECB HAS THE TOOLS IF THEY’RE NEEDED, HAS THE TOOLS TO WORK WITH THE BOND MARKETS SO THOSE TWO THINGS ARE INTERESTING. AND ALSO POINTING TO SOME INTERESTING NEWS FLOW AROUND THE BANKING SECTOR. GUY: A THE BANKING SECTOR HAS BEEN HIT QUITE HARD IN EUROPE AND NOTING ON THE EQUITY FRONT. BUT ALSO THIS STORY THAT THE EU BANKS FACING EXTRA CHECKS ON THEIR SOVEREIGN HOLDINGS. NOW, THOSE OF US WITH SLIGHT MORE GRAY HAIRS MAY REMEMBER THE DOOM LOOP, THE -- BECAUSE EUROPEAN BANKS HOLD OBVIOUSLY A LOT OF SOVEREIGNS AND TRADING PRICE QUITE QUICKLY AND THE IMPACT OF THAT IN TERMS OF THEIR BALANCE SHEET. SO THE REGULATORS JUST MAKING SURE AND ALSO A BIG QUESTION AROUND WHAT’S HAPPENING WITH REPO OPERATIONS AND TALKING ABOUT PLUMBING IN TERMS OF THE EUROPEAN FINANCIAL SYSTEM WHICH IS IMPORTANT. ANEEKA: MIGHT IT BE REASSURING? MAYBE THE LOOM LOOP ISN’T AS BAD AS -- GUY: IT ISN’T. ANEEKA: WHAT WE ARE TOLD BY GUESTS COMING ON THIS PROGRAM AND ONE OF THE VOICES IN THAT STORY POINTING OUT HIGHER NET INTEREST INCOME CAN COME FROM THE HIGHER ENVIRONMENT. GUY: BUT STOCKS HAVE GONE DOWN. EQUITIES HAVE GONE DOWN QUITE SHARPLY. AS YOU SAY THAT WOULD BE A POSITIVE BUT ACTUALLY THEY’VE COME DOWN WHICH WOULD SEEM TO SUGGEST MAYBE A LITTLE BIT OF FEAR AROUND. ANEEKA: AND A LOT OF DYNAMICS GOING INTO THE BOND MARKET STORY. AND ONE OF THOSE IS WHAT’S HAPPENING WITH ENERGY PRICES. LET’S LINGER ON THAT THOUGHT FOR A MOMENT. OIL AND GAS MOVING LOWER AFTER PRESIDENT TRUMP SAID THAT THE UNITED STATES WON’T ATTACK IRAN AHEAD OF THE NOVEMBER MIDTERM ELECTIONS. THERE HAD BEEN FEAR BUILDING THAT PERHAPS HE COULD DO THAT AND TRUMP’S COMMENTS COME DESPITE IRAN ERVING LAYING ATTACKS ON THE TANKERS IN THE STRAIT OF HORMUZ AND YEMEN, ENERGY FACILITIES BEING ATTACKED IN SAUDI ARABIA. THOSE TRENDS CONTINUE IN THE REGION. LET’S SPEAK TO ANEEKA GUPTA, MACROECONOMIC RESEARCH DIRECTOR AT WISDOMTREE TO PULL SOME OF THESE THINGS TOGETHER. AND ANEEKA, GOOD MORNING TO YOU. NICE TO HAVE YOU WITH US. AND WHAT DO YOU THINK IS -- THERE’S OIL PRICES DRIVING BOND MARKETS. THERE’S THE COMMENTS FROM CHRISTINE LAGARDE. WE’RE WATCHING ANY LINKS TO THE BANKING SECTOR. WHAT’S UPPER MOST IN YOUR MIND WHEN YOU LOOK AT THE BOND MARKET STORY HERE HERE IN EUROPE WHAT DO YOU THINK IS IN THE FRONT SEAT, THE DRIVING SEAT FOR THIS NARRATIVE RIGHT NOW? CHRISTIAN: YEAH. I THINK, YOU KNOW, WE ESSENTIALLY EQUITIES ARE SHRUGGING OFF THIS CONCERN OF RISING YIELDS THAT WE’VE SEEN SO FAR. AND I THINK, YOU KNOW, WITH A WE HAVE WITNESSED IS THE FASTEST SUSTAINED RISE IN LONG-TERM BORROWING COSTS SINCE 2022. AND I THINK WHAT’S REALLY IMPORTANT IS IT’S THE EQUITY MARKETS THAT ARE SHRUGGING OFF THIS RISE IN YIELDS. BECAUSE THE EARNINGS DO -- DENOMINATOR HAS BEEN GROWING FASTER THAN THE DISCOUNT RATE HAS ACTUALLY RISEN. BUT I THINK WHAT INVESTORS NEED TO BE A LITTLE BIT MORE LEERY ABOUT A CONCENTRATED PROFIT BOOM THAT’S FUNDING A MARKET-WIDE TOLERANCE FOR A MATERIALLY HIGH COST OF CAPITAL. AND I THINK THAT’S VERY IMPORTANT TO KEEP IN MIND TO THIS POINT IN TIME. ANEEKA: YEAH. AND SO THE AI STORY IS SUPPORTING EQUITY MARKETS, ANEEKA. DO YOU SIGH THEY CRACKS IN THAT STORY THAT ARE WORTH DWELLING ON RIGHT NOW? CHRISTIAN: YEAH. THERE IS A BIG DIVERGENCE TAKING PLACE WITHIN THE -- WITHIN AI. YOU HAVE ON ONE END, THE DISPERSION -- WE’VE SEEN THE SEMIS HAVE A FANTASTIC RUN. SINCE THE START OF THE YEAR. AND AT THE OTHER END, YOU KNOW, THE SOFTWARE COMPLEX HAS SPENT MOST OF THE YEAR FLAT TO DOWN. AND, YOU KNOW, THE PRIMARY REASON FOR THAT IS SEMICONDUCTOR FORWARD EARNINGS HAVE CONTINUED TO BE REVISED HIGHER. ROUGHLY 30%. WHILE IT’S THE SOFTWARE SECTOR THAT IS EFFECTIVELY SEEING NO REAL UPGRADE AND THE MARKET WAS RIGHT TO PAY FOR KNOWS REVISIONS OF THE BUT I THINK WHAT IS -- WHERE WE ARE SEEING A BIT OF OPPORTUNITY IS THE FEAR WAS THAT AI WOULD OBSOLETE THE SOFTWARE BUSINESS MODEL BY COLLAPSING THAT SEAT-BASED PRICING. INSTEAD, WHAT WE ARE SEEING IS SOFTWARE REVENUE PER EMPLOYEE IS BEING -- GROWING 15 TIMES FASTER THAN WHAT WE SAW IN 2022-2023. SO IT IS THAT OPERATING LEVERAGE RATHER THAN DISRUPTION. SO SOFTWARE HAS ACTUALLY POSTED ITS STRONGEST QUARTER NOW SINCE 2020. AND IT’S ACTUALLY RECOVERED TO ITS HIGHEST LEVEL SINCE LATE 2025. AND THAT’S LARGELY BEEN LED BY CYBER SECURITY NAMES WHERE ENTERPRISES ARE SPENDING TO DEFEND AGAINST THESE RISING AI-ENABLED THREATS. AND THERE IS A BIT OF OPPORTUNITY FURTHER AS WE MOVE INTO 2027. GUY: IF YIELDS CONTINUE TO RISE, CAN EQUITIES HOLD UP? CHRISTIAN: WELL, I THINK EQUITIES -- THERE’S QUITE AN INTERESTING OPPORTUNITY, ESPECIALLY IN EUROPEAN EQUITIES. I KNOW, YOU KNOW, AT THAT THERE’S BEEN A LOT OF CONCERN ON THE SOVEREIGN SIDE. BUT WHAT WE ARE SEEING IS IF YOU LOOK DEEP WITHIN THE EUROPEAN EQUITY LANDSCAPE, CLOSE TO TWO THIRDS OF EUROPEAN INVESTMENT GRADE NONFINANCIAL BONDS MATURING IN 2030 OR BEYOND. SO THAT REFINANCING WALL IS QUITE DISTANT. LEVERAGE ACROSS EUROPEAN EQUITIES IS RISING FROM SIAKAM LOSE ON A NET DEBT TO EBITDA BASIS. THE OVERWHELMING MARTIN OF DEBT IS FIXED COUPON BOND FORM RATHER THAN ACTUALLY FLOATING RATES. SO THAT PASS-THROUGH FROM RISING MARKET YIELDS TO THAT INTEREST EXPENSE IS QUITE LOW. AND EVEN IF YOU LOOK AT INTEREST COVERAGE. INTEREST COVERAGE HAS NOW MOVED ROUGHLY FROM FIVE TO SEVEN TIMES. SO IT’S HISTORICALLY ABOUT 10 TIMES WHAT WE SAW IN THE RECENT PERIOD. AND THAT JUST TELLS US THAT WHY WE ARE SEEING A LOT OF NOISE ON THE SOVEREIGN RENT FRONT, EUROPEAN EQUITIES WILL BE ABLE TO WITHSTAND THIS CONTAGION. GUY: OK. SO THE METRICS AROUND THE CORPORATES ARE MOVING IN THE RIGHT DIRECTION. BUT THE METRICS AROUND THE SOVEREIGNS ARE NOT. LET’S TALK ABOUT THE RELATIONSHIP BETWEEN THOSE TWO. THE BANKING SECTOR OVER THE LAST FEW DAYS HAS BEEN UNDER SIGNIFICANT PRESSURE. THERE ARE CLEARLY CONCERNS IN THE MARKET ABOUT WHAT RISING YIELDS ARE GOING TO DO TO BANK BALANCE SHEETS. IS THAT ONCE AGAIN POTENTIALLY A WEAK POINT IN THE EUROPEAN STORY? AND CHRISTINE LAGARDE IN THE PAST HAS SAID I’M NOT IN THE BUSINESS OF MANAGING SPREADS BUT SPREADS ARE MOVING REALLY QUICKLY AT THE MOMENT AND ABSOLUTE YIELDS ARE MOVING VERY QUICKLY. SO I’M WONDERING ULTIMATELY IF BANKS START TO STRUGGLE, WILL THE ECB AND OTHERS BE FORCED TO TAKE ACTION? CHRISTIAN: WE’LL, CLEARLY, YOU KNOW, CHRISTINE LAGARDE’S COMMENTS HAVE BEEN REASSURING TO THE MARKET. YOU KNOW, THAT’S WHAT WE’RE STARTING TO SEE. NOW, CLEARLY, THOSE HIGHER RATES REMAIN A NET POSITIVE VIA HIGHER DEPOSIT MARGINS. HIGHER INVESTMENT YIELDS. AND EVEN -- THE RESILIENT CORPORATE GROWTH THAT WE HAVE SEEN THE PRIOR TWO QUARTERS OF 2026. THE VOLUME RISK IS GREATER IN MORTGAGES THAN IN THE CORPORATE LENDING SIDE. BUT ON THE SOVEREIGN EXPOSURE, WHAT WE ARE SEEING IS THE MA MARK-TO-MARKET IMPACT OF THIS RECENT WIDENING ON CAPITAL RATIOS HAS SO FAR BEEN QUITE LIMITED. CLEARLY, WITH THE -- THE COMMENTS CHRISTINE LAGARDE HAS MADE, THAT SHOULD ALLAY SOME OF THE CONCERNS THAT HAVE BEEN RISING OF LATE. AND I WOULD SAY THAT IT WOULD TAKE A MORE PROLONGED PERIOD OF BOND MARKET VOLATILITY AND SPREAD WIDENING TO ACTUALLY DEREEL THE FUNDAMENTALS ON THE EQUITY SIDE FOR BANKS. ANEEKA: ANEEKA, STICKING WITH EQUITIES AND WHERE THE OPPORTUNITIES IN AI MIGHT BE, I MEAN, UTILITIES DON’T ALWAYS LIKE HIGHER YIELD ENVIRONMENT AND HIGHER INTEREST RATE COSTS. BUT SOME OF THEM AT LEAST WILL BENEFIT FROM THE ROLLOUT OF AI. HOW ARE YOU THINKING ABOUT THAT -- THAT SECTOR? CHRISTIAN: YES. THAT HAS BEEN A VERY BIG BENEFICIARY GIVEN THE EXPANSION OF CAPEX PLANS THAT WE HAVE SEEN FROM A LOT OF THE HYPERSCALERS. THE UTILITY SECTOR APPEARS TO BE ONE OF THE BIGGEST BENEFICIARIES GIVEN THEY ARE SUPPORTING THE INFRASTRUCTURE THAT IS LIKELY TO AID THE EXPANSION OF THESE CAPEX CYCLES. WE ARE VERY OPTIMISTIC ON THE UTILITIES FRONT. GUY: AND GREAT TO CATCH UP. THANKS FOR JOINING US THIS FRIDAY. ANEEKA GUPTA. RESEARCH DIRECTOR JOINING US FROM WISDOMTREE. FED OFFICIALS HINT AT MORE TIGHTENING TO COME. >> TO BRING INFLATION BACK TO TARGET IN A TIMELY MANNER, MORE MONETARY POLICY FIRMING WILL BE REQUIRED. YOU KNOW, IF A TIMELY MANNER IS SOMETHING LIKE 18 MONTHS, THAT KIND OF SUGGESTS THAT RATES OUGHT TO BE GOING UP FURTHER IN AN APPROPRIATE PERIOD OF TIME IN THE NEXT SIX TO NINE MONTHS. GUY: U.S. TREASURIES ARE A LITTLE HIGHER AND YIELDS ARE TICKING UP OVER THE LAST FEW MINUTES. WE WILL CONTINUE TO WATCH THAT STORY AND FACTOR IN WHAT IS HAPPENING ON THE EUROPEAN FRONT AS WELL. WILL INVESTORS BE WILLING TO BUY AT THESE MULTI-DECADE HIGHS? THAT’S A KEY QUESTION FLOATING AROUND THE MARKET. AND WE’LL TALK ABOUT IT NEXT. 40 MINUTES PAST HOUR. 20 MINUTES UNTIL THE MARKET OPEN. THIS IS BLOOMBERG. ANNA: WELCOME BACK, EVERYBODY. 7:43 IN LONDON. IT’S FRIDAY AND THE EUROPEAN EQUITY MARKET SESSION LOOKS AS IF IT’S GOING TO START IN AN UPWARD DIRECTION. DESPITE WHAT HAPPENED AFTER THE EUROPEAN CLOSE OVER IN THE UNITED STATES, WE ARE AT PERHAPSENING LIFTED BY LOWER BOND YIELDS BY A LOWER OIL PRICE AND BY A REVISED GUIDANCE STORY. AROUND OPENAI. OR RISE EXPECTATIONS. GUY: HOW IS YOUR ACCOUNTING? THAT SEEMS TO BE THE KEY QUESTION THAT A LOT OF PEOPLE ARE HAVING TO DEAL WITH THIS MORNING. BLOOMBERG UNDERSTANDS OPENAI IS NOW EXPECTING TO REACH OR EXCEED $70 BILLION IN ANALYZED REVENUE BY THE END OF THIS YEAR. DRIVEN LARGELY BY GROWTH IN ITS ENTERPRISE BUSINESS. THIS IS MORN BECAUSE YESTERDAY, THERE WAS SOME PURPORTING FLOATING AROUND THAT NUMBER WAS CLOSE EVER TO $50 BILLION. THE MARKET DIDN’T LIKE THAT AND THIS MORNING $70 BILLION REASSURES PEOPLE. NEIL CAMPLING, BLOOMBERG’S SENIOR STRATEGIST HERE TO JOIN US TO TALK THROUGH WHAT WE HAVE LEARNED. IT’S BEEN A BIT OF A ROLLER COASTER, THE REPORT YESTERDAY AROUND $50 BILLION CLEARLY SPOOKED A LOT OF PEOPLE. IS THERE AN UNDERLYING STORY HERE ABOUT HOW NERVOUS THE MARKET IS AND HOW IMPORTANT IT IS THAT THIS REVENUE LINE AT THESE FRONTIER LABS CONTINUES TO KIND OF ACCELERATE RAPIDLY UPWARD? >> YEAH. GOOD MORNING, GUY. TOTALLY. YOU GOT TO EFFECTIVELY SHOW THAT THE PATH -- THE GLIDE PATH OF GROWTH ISN’T SLOWING IN ANY WAY AT ALL. NOW, THERE’S CONFUSION CLEARLY ON THESE VARYING STORIES THAT HAVE BEEN COMING OUT. PARTLY BECAUSE ANTHROPIC, OPENAI, ARE PRIVATE COMPANIES AND VERY DIFFICULT TO GET UNDER THE HOOD TO KNOW EXACTLY WHAT ACCOUNTING TREATMENT THEY ARE USING. AND IT’S NOT -- TRADITIONALLY ARR THAT THIS MEASURE HAS BEEN TALKED ABOUT IS AN YOU’LLIZED REVENUE RUN RATE IS SOMETHING THE SOFTWARE COMPANIES, TECH COMPANIES REPORT ON A QUARTERLY BASIS. HERE WE’VE BEEN LOOKING AT SOME OF THESE NUMBERS ON A MONTHLY RUN RATE BASIS. SO THAT IS AN ISSUE. NOW, I THINK THE FACT THAT SOME OF THESE AI BASKETS AND THE CHIPS, LIKE THE PICK AND SHOVELS, FELL DRAMATICALLY YESTERDAY ON THE BACK AND SHOWS YOU WHERE PEOPLE ARE POSITIONED INTO THE AI STORY FOR SURE. BUT, YOU KNOW, WHETHER IT’S 50 OR WHETHER IT’S 70, THOSE KIND OF DIFFERENCES DO MATTER WHEN YOU’RE LOOKING AT THE KIND OF VALUATIONS ABOVE A TRILLION DOLLARS THAT’S BEING ASCRIBED TO THESE KIND OF COMPANIES. SO IT DOES -- IT DOES MATTER FOR SURE. AND THE OTHER THING TO REMEMBER IS THAT ON THE ORIGINAL STORY THAT CAME OUT EARLIER TO LAST MONTH, TALKING ABOUT THE $70 BILLION RUN RATE, WELL, THAT WAS IN THE MONTH WHERE THEY HAD THE LAUNCH OF ATLAS AI. THAT WAS SUPPOSED TO BE THE BEST PRODUCT TO EVER COME TO THE MARKET IN AI AT THAT TIME. SO IF THEY WEREN’T AT THAT PARTICULAR RUN RATE AT THAT TIME AND PUSHED IT BACK, IT DOES RAISE MORE QUESTIONS. SO WE MAY GET A RELIEF TODAY ON THE BACK OF THE QUALIFICATION OF THE STORIES. BUT I THINK THE NERVOUSNESS OF POSITIONING AROUND AI AS A WHOLE IS NOT GOING TO GO AWAY. AND REMAINS FRONT AND CENTER FOR THE REST OF THIS YEAR. ANNA: YEAH. ABSOLUTELY. I MEAN, YEAH, IF YOU TAKE THE MOST RECENT MONTH YOU DO TAKE THE MOST RECENT QUARTER AND GET A RUN RATE OUT OF THAT? WHAT’S MOST HELPFUL IN WORKING OUT THE PATH INTO THE FUTURE, NEIL? LET’S THINK ABOUT ANOTHER STORY, THOUGH. IN THE AI SPACE. THAT’S BEEN REALLY FASCINATING. PLANS FOR THE AUSTRALIAN IPO OF AN NVIDIA-BACKED SOFTWARE INFRASTRUCTURE FIRM CALLED FIRMUS. NOW, THOSE IPO PLANS HAVE COLLAPSED AND QUITE A LOT OF REASONS FOR THE COLLAPSE. ONE OF THEM IS HIGHER YIELD ENVIRONMENT. WHICH WE HAD WONDERED WILL THIS UNSTICK THE AI TRADE OR THE EQUITY STORY IN ANY SENSE? SO WHAT DO YOU MAKE OF THIS AUSTRALIAN STORY? NEIL: A FEW THINGS THAT YOU MENTIONED GOING ON WITH THIS PARTICULAR IPO. NOW, THEY SEEM TO BE LOOKING TO COME TO -- THE EQUITY MARKET VERY EARLY IN THE -- IF YOU LIKE THEIR FINANCIAL HISTORY. BECAUSE AT THE END OF THE DAY, THIS COMPANY HAS ONLY -- ONLY SORT OF HAD FACTUAL REVENUE OF 51 MILLION. MILLION. IN THE LATEST FISCAL YEAR. AND WE’RE LOOKING TO RAISE MONEY $5.5 BILLION ON A $30 BILLION VALUATION. AND ALL ABOUT BUILDING FOR THE FUTURE. SO THE FACT THAT THEY CAN’T COME TO THE MARKET TELLS YOU THAT, THE MARKET IS NOT WILLING TO NECESSARILY BET ON EVERYTHING WITHIN AI. AND BECAUSE THIS IS A DATA CENTER-BASED COMPANY IN THE FUTURE BUILD OF DATA CENTERS, AND IN AUSTRALIA, THAT’S ALSO IMPORTANT OF COURSE BECAUSE AUSTRALIA IS WHERE THE BACKLASH HAS BEEN TO THE OPENAI BREACH THAT WE SAW BEING ANNOUNCED LAST MONTH IN -- BY THE GOVERNMENT. AND ALSO THERE’S A BIG BACKLASH TO DATA CENTER BUILDS BY THE PUBLIC IN AUSTRALIA AS WELL. SO IT’S GOING TO BE A TOUGH ASK TO BEGIN WITH. BUT CERTAINLY WHEN THIS COMPANY WAS RAISING MONEY AT A $10 BILLION VALUATION JUST TWO MONTHS AGO, THAT STEPPED TO $30 BILLION WITHIN TWO MONTHS. WITHOUT ANY FINANCIAL REASON FOR THAT. TELLS YOU THAT IT WAS TOO MUCH TOO QUICKLY. AND WAS A STEP TOO FAR. ANNA: NEIL, THANKS VERY MUCH FOR THE ANALYSIS. BLOOMBERG’S NEIL CAMPLING BRINGING SOME OF THOSE TECH MEMES TOGETHER. WHERE DOES THAT LEAVE OVERALL MARKET SENTIMENT THEN? LET’S TURN TO THE MARKETS IN THREE MINUTES ON THE OPENING TRADE. WITH MARKETS LIVE EXECUTIVE EDITOR MARK CUDMORE. MARK, GOOD MORNING ONCE AGAIN. WHAT DO YOU MAKE OF THE PRICE ACTION THE PAST 24 HOURS? SHIFTING NARRATIVE AROUND OPENAI, DOES IT HELP US UNDERSTAND THE PROSPECT FOR THIS SECTOR? MARK: NO T DOESN’T HELP US AT ALL, ACTUALLY. AND THAT’S PART OF THE PROBLEM OUT THERE. THERE IS A LOT OF CONFUSION AS NEIL OUTLINED, THERE’S A NERVOUS ATTITUDE. AND THAT NERVOUS ATTITUDE IS NOT GOING TO GOAWAY. WE HAVE AN INCREDIBLE AI CAPEX BUBBLE AND VALUATION HAS GOTTEN QUITE STUPID AS A RESULT OF THAT. THE IS IMPORTANT -- TWO THINGS, ONE IS OVERALL, VALUATIONS ARE NOT CRAZY OR STUPID OUT THERE. THERE’S A LOT OF LIQUIDITY IN THE MARKET. AND THE OTHER THING IS WHAT IS THE TIME LINE FOR THIS BUBBLE COLLAPSING? SO I’M KIND OF WITH NEIL AND I THINK THIS NERVOUSNESS WON’T GO AWAY PARTICULARLY THIS SIDE OF MIDTERMS. AND THE EXPECTATION THAT THE MIDTERMS WILL RESULT IN A NEW U.S. KIND OF BALANCE OF POWER THAT WILL BE HARDER FOR DATA CENTER BUILDERS IN THE U.S. BECAUSE CERTAINLY A BIG PUSHBACK WE’RE SEEING. IN MANY PLACES AROUND THE WORLD BUT THAT’S WHERE THE DYNAMIC IS GOING TO CHANGE BECAUSE THE ELECTION. THIS AI NERVOUSNESS WILL NOT GO AWAY. IS THIS THE BUBBLE COLLAPSEING? NO. I DON’T THINK IT IS. AND I THINK THAT ULTIMATELY, THIS IS JUST -- A MID BUBBLE PAUSE OR A LATE BUBBLE PAUSE BECAUSE I DON’T THINK WE ARE MID. WE ARE LATE IN THE CYCLE. BUT I DON’T THINK IT’S YET. AND EARNINGS SEASON WILL BE STRONG. SHI IF WE DO GET WEAKNESS IN OCTOBER, IT WILL BE BOUGHT. NOW, THE BIG QUESTION IS, HOW BIG MIGHT THOSE BOUTS OF WEAKNESS? I REALLY DON’T KNOW. BUT MY BIAS IS STILL A LOT OF MONEY WAITING TO STILL BUY STOCKS AT THE MOMENT AND NOT LOOKING TO PANIC. GUY: SO STILL IN BUY THE DIP. THAT IS STILL THE PARADIGM? MARK: I THINK SO. BECAUSE OF EARNINGS. GLOBAL GROWTH IS GOOD. AND THE YIELDS STORY WILL EVENT WILLING WEAL BE VERY PROBLEMATIC AND HURTING LARGE PARTS OF THE MARKET BUT NOT HURTING THE OVERALL INDEX LEVEL. THE OVERALL ECONOMY LEVEL BECAUSE GLOBAL GROWTH IS STILL VERY RESILIENT. WE’RE ACTUALLY SEEING U.S. GROWTH PROJECTIONS GET UPGRADED AND GERMAN GROWTH PROJECTIONS UPGRADED AND ALMOST EVER AROUND THE WORLD WE’RE SEEING GROWTH PROJECTIONS GET NUDGED UP. THE UNDERLYING STORY REMAINS STRONG. OF COURSE IT’S ALL GOING TO BREAK HARD AT SOME POINT. ARE WE AT THAT BREAKING POINT? NO. SOME POINT INTO 2027. ANNA: AND THE RATE STORY, MARK, LOOKING AT EUROPEAN RATES COMING DOWN. WE HAD SOME PERHAPS HELPFUL COMMENTS FROM CHRISTINE LAGARDE IN THE PAST 24 HOURS. AND A WEAKER OIL PRICE DOESN’T HURT AS WELL WHEN IT COMES TO BRINGING DOWN THOSE YIELDS. WHAT ARE YOU WATCHING? MARK: YEAH. WITH THE DISCLAIMER THAT AS YOU KNOW, I GOT TREASURIES HORRIBLY WRONG A FEW WEEKS AGO AND MY CREDIBILITY IN THE SHORT-TERM VIEW IS BEING COMPLETELY UNDERMINED. I STRUGGLE TO BE AGGRESSIVELY BEARISH BONDS HERE. GIVEN THE NEGATIVE CARRY AND GIVEN YOU NEED TO PICK YOUR MOMENTS TO BE BEARISH BONDS. BECAUSE IT’S EXPENSIVE. STRUCTURALLY, I STILL -- AS I HAVE FOR THE LAST FIVE YEARS, BELIEVE WE’LL SEE HIGHER YIELDS NEXT YEAR. IN ALL THESE GLOBAL BOND MARKETS BUT I’M NOT CONVINCED A STORY FOR THIS SIDE OF CHRISTMAS. I WANT TO BE TACTICALLY BULLISH BUT DON’T HAVE CREDIBILITY ON THAT VIEW BECAUSE I WANTED TO BE TACTICALLY BULLISH AT YIELDS 25 BASIS POINTS LOWER THAN HERE. SO I DON’T HAVE A STRONG VIEW FROM HERE. BUT 2027 WE’LL SEE HIGHER YIELDS AGAIN IN THE GLOBAL BOND MARKETS. GUY: MY LORD, ARE WE TALKING ABOUT CHRISTMAS ALREADY? MARK, THANK YOU VERY MUCH INDEED. BLOOMBERG MARKETS LIVE EXECUTIVE EDITOR MARK CUDMORE. MLIV <GO> IS THE FUNCTION ON YOUR BLOOMBERG TERMINAL FOR MASH’S VIEWS AND THE REST OF THE TEAM OF COURSE. LET’S START OFF WITH TELL TELECOMS AND LOUISE MOON. LOUISE: TELECOMS ARE IN FOCUS TODAY. WE SAW MOVES IF YOU TAKE A LOOK AT THE NEXT SCREEN IN U.S. MOBILE PROVIDERS OVERNIGHT AFTER HOURS. AND YOU CAN SEE THEY ALL DROPPED QUITE HEAVILY INTO THE RED. THAT’S ON NEWS OF SPACEX SAYING THEY BOUGHT UP LOW BAND SPECTRUM THAT MEANS THEIR SATELLITES CAN BECOME MOBILE PROVIDERS. THIS HAPPENED OVERNIGHT IN THE U.S. YOU EXPECT THAT TO PLAY THROUGH INTO EUROPEAN TELECOMS AS MARKETS OPEN. THIS IS HOW THEY PERFORMED OVER THE PAST YEAR. AND WE’RE ALREADY SEEING SOME OF THEM DROPPING IN PREMARKET TRADING. SO WE WILL BE KEEPING AN EYE ON THEM AS MARKETS OPEN. NOW, NEXT UP, LOOKING AT RHEINMETALL. THEY’VE BEEN DOWNGRADED BY ANALYSTS THIS MORNING. OBVIOUSLY, THEIR SHARES HAVE ABSOLUTELY SOARED OVER THE PAST FEW YEARS. YOU CAN SEE THAT PLAYING OUT HERE. BUT THERE’S SOME DOUBT ABOUT THEM MEDIUM TERM OUTLOOK. SAYING THEY NEED MORE CONTRACT WINS AND SIGNIFICANT CONTRACT WINS TO BE ABLE TO HAVE A MORE CERTAIN OUTLOOK AFTER 2030. SO THAT’S ONE DOWNGRADE THERE. BUT THEY ARE STILL AT 24 BUYS, FIVE HOLDS, AND ZERO SELLS. SO STILL SIGNIFICANTLY ON THE BUY END. BUT THERE WAS THAT NOTE THERE WITH SOME CAUTION. AND THEN LASTLY, WE ARE LOOKING AT THE STEEL INDUSTRY. A NOTE BY UBS NOTING THREE BIG STEEL COMPANIES IN EUROPE. THESE THREE HERE YOU CAN SEE HOW THEY FORMED OVER THE PAST YEAR. SOME BIG GAINS FOR THESE -- FOR ALL OF THEM REALLY. AND THIS NOTE HERE, SAYING THAT AS TIGHT -- TIGHTER STEEL IMPORTS COME INTO PLAY AND FALLING INVENTORIES THAT SHOULD DRIVE A RECOVERY IN EUROPEAN STYLE PRICES WHICH SHOULD BENEFIT THEM. THERE’S BEEN THAT NOTE OVERNIGHT. AND EXPECT THAT TO BENEFIT THESE STOCKS AS THEY OPEN TODAY. ANNA: LOUISE, THANK YOU VERY MUCH. LOUISE MOON MOON WITH THOSE STOCKS THAT ARE EXPECTED TO BE ON THE MOVE. THE FUTURES PICTURE LOOKING PRETTY BUOYANT. A COMBINATION OF LOWER YIELDS. LOEWER OIL PRICE AND ALL LIVING SENTIMENT. AND THE OPENAI STORY SHIFTING AROUND QUITE CONSIDERABLY. A BIT OF A CHANGE FROM YESTERDAY. GUY: YEAH. I THINK OIL PRICES ARE SIGNIFICANT. I THINK THAT STORY ON WHAT IS HAPPENING WITH OPENAI IS SIGNIFICANT. THERE’S QUITE A LOT OF SINGLE STOCK STORIES THAT ARE WORTH PAYING ATTENTION TO. ANNA: YOU ARE WATCHING THE LUXURY SPACE. GUY: I SPEND TIME THINKING ABOUT CREATIVE DIRECTORS AND LUXURY HOUSES AND THE CREATIVE DIRECTOR FOR SELERON WILL LEAVE AND MAY DELAY A RECOVERY IN THIS SPACE AS -- AND BEEN WRITING ABOUT QUITE SIGNIFICANTLY RECENTLY. SO KEEP AN EYE ON THAT. TELECOM STORY WAS REALLY INTERESTING AS WELL AND MISSED THAT ONE IN TERMS OF THE FACT THAT WILL HAVE. ANNA: AND SPACEX. ABSOLUTELY. WE WILL WATCH THAT SECTOR AT THE MARKET OPEN. ON "THE OPENING TRADE" THAT MARKET OPEN. FUTURES ARE POINTING HIGHER. AND A CORK TAIL EFFECT WE’RE SEEING ADDING UP TO MORE RISK ON SENTIMENT THIS FRIDAY OCTOBER 9. THE OPEN IS NEXT. THIS IS BLOOMBERG. GUY: FRIDAY MORNING. GOOD MORNING. FUTURES POSITIVE IN EUROPE. LET ME EXPLAIN SOME OF THE REASONS WHY THAT IS HAPPENING. THIS IS WHERE WE WENT OUT YESTERDAY. THAT IS THE U.S. SESSION. THAT IS WHERE EUROPE WENT OUT. THE REASON WE ROLLED OVER, CONCERNS AROUND AI AND ITS REVENUE LINE. SINCE THEN, THERE HAS BEEN CLARIFICATION, AS A RESULT OF WHICH STOCKS ARE LOOKING MORE BUOYANT. OIL PRICES WERE CIRCA $104 THIS TIME. THEY ARE LOWER BECAUSE APPARENTLY THE PRESIDENT HAS DECIDED FOR THE MIDTERMS HE IS NOT GOING TO ATTACK IRAN AGAIN. ALL THAT POSITIVE IN TERMS OF THE FUTURES PICTURE. WE ARE UP BY 0.6% ON THE EURO STOXX 50. A MUCH MORE POSITIVE PICTURE THEN YOU WOULD HAVE ASSUMED LOOKING AT THE U.S. SESSION YESTERDAY. ANNA: EUROPEAN TELECOMS COULD BE UNDER PRESSURE TODAY. SPACEX HAS SAID IT HAS ACQUIRED LOW BAND SPECTRUM THAT WILL ENABLE IT TO USE ITS STARLINK SATELLITES TO BECOME A MAJOR MOBILE CARRIER. THAT IS IN THE UNITED STATES. THAT WEIGHT AFTER HOURS ON U.S. TELECOM COMPANIES. THERE WAS SOME READ ACROSS TO EUROPE THAT WE ANTICIPATE. OMV AND THE ENERGY SPACE REPORTING PRODUCTION OF REFINING MARGINS IN THE THIRD QUARTER THAT BEAT THE AVERAGE ANALYST ESTIMATES. COULD THERE BE SOME UPSIDE THERE? WE DO HAVE A WEAKER OIL PRICE. AND WE ARE WATCHING SALZGITTER, AN ANALYST RAISING TO BUY FROM NEUTRAL. GUY: LET'S GIVE YOU AN IDEA OF WHAT THIS SESSION LOOKS LIKE. THERE IS AN IPO WE NEED TO FACTOR IN, AIRTEL. WE ARE EXPECTING IT TO BE UP 0.6%. OIL STOCKS COULD BE QUITE INTERESTING AS OIL PRICES MOVE A LITTLE LOWER, BUT NOT BY MUCH. WE ARE UP BY 0.4%. THE STOXX 600 UP 0.3%. STEEL STOCKS ARE GOING TO BE INTERESTING AS WELL. INTERESTING TO SEE HOW THE TECH TRADE IS AFFECTING ASML AND OTHERS THIS MORNING. WE HAVE A DATA CENTER IPO BEING PULLED IN AUSTRALIA. HOW DOES THAT FACTOR INTO OUR THINKING AS WELL? THERE'S A LOT GOING ON. THE EQUITY MARKET IMPORTANT IN ALL THIS AS WELL. SO FAR, SO GOOD. SPAIN UP BY 1.1%. THE IBEX IS A LAGGARD. THE COCKEREL UP BY 0.8%. THE STOXX 600 UP BY 0.7%. ANNA: I KNOW YOUR HUNCH WHEN YOU SEE THE AEX TO THE DOWNSIDE, YOU WOULD THINK TECHNOLOGY, AND YOU WOULD BE RIGHT TO. IT IS NOT A HUGE AMOUNT BUT VERY MUCH UNDERPERFORMING THE MARKET. IT IS A BIG HEAVY WEIGHT ON THE STOXX 600, SO WE TAKE THAT INTO ACCOUNT. TECHNOLOGY IS NOT DOING THAT WELL TODAY. IT IS ONE OF THE WEAKER THREE SECTORS TODAY. BUT WEAKER THAN THAT, ENERGY, BECAUSE OIL PRICES LOWER, SO THAT MAKES SENSE. AND TELECOMS. VODAFONE DOWN 3.7%. ON THE BACK OF THESE LATEST REVELATIONS ABOUT THE COMPETITION THAT COULD COME THROUGH FROM SPACEX. THAT STORY U.S. FOCUSED, BUT MAYBE THERE IS READ ACROSS INTO THE EUROPEAN MARKETS. THAT IS WHAT WE ARE SEEING IN TELECOMS. BASIC RESOURCES OF HIGHER BY 1.6%. HEALTH CARE, EVERYTHING ELSE BASICALLY. GUY: HEALTH CARE IS DOING A FAIR BIT OF LIFTING. ROCHE IS A BIG GAINER. NOVARTIS, ASTRAZENECA UP QUITE STRONGLY AS WELL. YOU HAVE SOME OF THE MORE STAPLE STORIES ALSO DOING FAIRLY WELL. UNILEVER AND NESTLE BOTH POPPING HIGHER IN TERMS OF POINTS PER PERFORMANCE. SOME OF THE BANKS COMING BACK AS WELL, WHICH IS INTERESTING, TOO. BBVA IS UP, HSBC IS BOUNCING BACK. SANTANDER IS BOUNCING BACK. A MORE POSITIVE STORY COMING OUT OF THESE EUROPEAN BANKS TODAY. ANNA: A POSITIVE SESSION UNDERWAY FOR EUROPEAN STOCKS. BOUNCING THIS MORNING. THE STOXX 600, OF 0.7%. LET'S GET SOME PERSPECTIVE. OUR GUEST JOINS US. GOOD MORNING TO YOU. IT HAS BEEN QUITE A JOURNEY FOR THE PAST 20 FOUR HOURS. OPENAI AND EXPECTATIONS HAVE RUN REVENUE NUMBERS, LEADING MARKETS ON A MERRY DANCE. WHAT ARE WE LEARNING ABOUT THE AI STORY AND WHAT DOES THAT TELL US ABOUT YOUR APPETITE FOR STOCKS AT THIS POINT? >> I THINK THE BIG PROBLEM IS MARKETS HAVE BEEN NERVOUS ABOUT AI SINCE THE SUMMER. YOU HAD THAT BIG MOMENTUM UNWIND. SINCE THE SUMMER, EARNINGS COMING THROUGH REALLY WELL, BUT THERE IS THIS SKEPTICISM ABOUT AI CAPEX CONTINUING TO DRIVE THIS WHOLE SPECTRUM AND HOW IT WILL BROADEN OUT TO AI MONETIZATION. EVERY TIME THERE'S REVENUE IN THE END PLACES OF THE AI SPACE, WHICH INCLUDES OPENAI, THE MARKET IS VERY FOCUSED ON THAT. THEY TRY TO UNDERSTAND HOW THE CAPEX WILL BE PAID FOR. OUR EXPECTATION IS THE Q3 EARNINGS SEASON WILL PROBABLY GIVE US SOME GOOD INSIGHT INTO AI MONETIZATION. COMPANIES WILL BE VERY FOCUSED ON THAT. IT IS ABOUT THE APPLICATION LAYER AND POTENTIAL FIRST SIGNS OF ADOPTION. THE PROBLEM IS ANYTHING LINKED TO AI CAPEX SPEND DOES NOT SEEM TO LIFT A MARKET ANYMORE. WE HAVE SEEN THAT LIKE TSMC RESULTS WERE VERY GOOD. ANNA: THERE IS THAT THEORY THAT ONE OF THE REASONS WHY THE FRONTIER LABS ARE TALKING ABOUT WANTING TO PACE THE FRONTIER IS THEY CAN'T STOP THE TRADE THEMSELVES. THEY WOULD LIKE A REGULATOR TO STOP IT FOR THEM. I WONDER IF THAT REFLECTS SKEPTICISM FROM INVESTORS THEY HAVE BEEN TALKING TO ABOUT THE AMOUNT OF MONEY BEING SPENT ON THE FRONTIER IN AI. CHRISTIAN: I THINK THERE IS A SHIFT WHERE PEOPLE DON'T NECESSARILY WANT TO SEE BETTER AND BETTER AI AND MORE ADVANCED MODELS, BUT THEY WANT TO SEE APPLICATION OF AI. I THINK WHAT BECOMES CLEAR AS WELL IS FOR A LOT OF THE THINGS WE ARE POTENTIALLY SEEMING AS REVENUE OPPORTUNITIES IN AI, YOU DON'T NEED TO BEST AI -- YOU DON'T NEED THE BEST AI. YOU MIGHT NEED IN CERTAIN CASES, BUT A LOT OF THE EXISTING MODELS, INCLUDING THE OPEN SOURCE MODELS, ARE ALREADY GOOD ENOUGH TO GET SOME TYPE OF MONETIZATION. SO IT IS A MULTI-APPLICATION LAYER, LIKE HAVING THE APPLICATIONS TO THE CONSUMER TO MONETIZE. I THINK THE MARKET WILL BE VERY FOCUSED ON THAT. ANNA: VERY INTERESTING WHEN THINKING ABOUT THE PROSPECTS FOR AI, WHAT IT MEANS FOR CORPORATE SPENDING. OUR GUEST BUT THIS OTHER THOUGHT IN MY HEAD. SHE WAS TALKING ABOUT HOW SOFTWARE REVENUE PER EMPLOYEE HAS INCREASED BECAUSE COMPANIES HAVEN'T SPENCE -- HAVE SPENT SO MUCH ON CYBER. AT THE SAME TIME THEY'VE INCREASED THE PRODUCTIVITY PROSPECTS FOR CORPORATE, WE'VE ALSO INCREASED THE CYBER THREAT. GUY: JAMIE DIMON WAS TALKING ABOUT A TENFOLD INCREASE AS A RESULT OF WHAT WE'VE SEEN IN TERMS OF THE SHIFT THAT AI HAS CREATED. TALKING OF SHIFT, LET'S TALK ABOUT EUROPE. WHY DON'T YOU LIKE EUROPE? WOULD ANYTHING CHANGE THE WAY YOU LIKE EUROPE? ALEX: CHRISTIAN: ON THE FACE OF IT, WE HAVE TWO BIG HEADWINDS, AND AS A RESULT EUROPE HAS THESE DRAGS. THEY ARE NOT EASY TO FIX IN THE NEAR TERM. I THINK EUROPE HAS PERFORMED VERY WELL THE LAST FEW MONTHS BECAUSE IT HAD A FEW WORK HORSES LIKE BANKS AND ENERGY BOOSTING EARNINGS AND ALSO BOOSTING THE MARKET. BUT I THINK THOSE WERE COURSES ARE GETTING A BIT TIRED. FROM THAT PERSPECTIVE, WE ARE STRUGGLING TO GET TOO EXCITED ABOUT EUROPE. AND YOU HAVE DOWNSIDE RISKS IN CASE OF THINGS ESCALATING. GUY: ARE THEY GETTING TIRED, WHAT ARE THE APPLICATIONS OF THAT, AND WILL THEY GET MORE TIME BECAUSE OF THE WAY THEY WILL BE CARRYING AS A RESULT OF THE SOVEREIGN STORY? IF THE SOVEREIGN'S RAID GETS WORSE, IS IT BECOMING A BANKING STORY? CHRISTIAN: THAT IS PART OF THE STORY. YOU DEFINITELY HAVE THIS WEALTH MOVEMENT VERY FEW PEOPLE EXPECTED THIS YEAR. THE FIRST HALF OF THE YEAR, MAJOR ACCELERATION OF NOMINAL GROWTH. THAT IS GOOD FOR BANKS. THEY HAVE LUNG GROWTH, THE PROFIT FROM THE INTEREST MARGIN WITH HIGHER RATES. BUT I THINK YOU GET TO THE POINT WHERE HIGHER RATES ARE STARTING TO HURT THINGS. YOU START TO SEE CREDIT STRESSED PICKUP. YOU MENTIONED THE SUMMER. ALL OF THIS IS TO SOME EXTENT AND EXPRESSION OF THE SAME PROBLEM. THE COST OF CAPITAL IS MOVING UP AND IT PUTS MORE RISK PREMIUM ON THE PLACES WHERE THE MARKET MIGHT WORRY. IN EUROPE, WE HAVE AN AREA. THE GOOD NEWS IS, COMPARED TO THE EURO AREA CRISIS, WE HAVE AN INSTITUTIONAL FRAMEWORK THAT IS MUCH BETTER, AND YOU COULD SAY THE SYSTEM IS ALREADY MORE ROBUST. FOR EXAMPLE, THE AMOUNT OF SOVEREIGN BONDS FRENCH BANKS OWN IS MUCH LOWER COMPARED TO WHAT THEY OWED IN THE PAST AND COMPARE TO WHAT IN ITALIAN BANMKS SAW IN SOVEREIGN CRISIS. YOU CAN'T COME TO A SEVERE OUTCOME, BUT IT BECOMES A HEADWIND. I THINK THAT IS WHAT WE ARE SEEING. ANNA: IT IS LESS DOOMY NOW, SO THAT IS MAYBE REASSURING. IF ANYTHING BREAKS THE AI TRADE, AND I KNOW THAT IS AN IF, ARE BONDS A HAVEN, A PLACE TO HIDE OUT, OR ARE THEY NOT? CHRISTIAN: WE HAVE BEEN SAYING FOR A FEW YEARS, AS YOU KNOW, THAT 60-40 AND THESE BALANCED PORTFOLIOS ARE NOT THE SAME AS THEY WERE BEFORE COVID AND YOU NEED TO WORK MUCH HARDER AS A MULTI-ASSET PORTFOLIO MANAGER. BUT THAT DOESN'T MEAN BONDS DON'T HAVE A ROLE. I THINK THE LAST FIVE YEARS IF YOU LOOK AT THE ALLOCATION, IT WAS CLOSE TO ZERO. IT HAD A REAL DRAG. NEGATIVE RETURNS, POSITIVE EQUITY BOND COALITION, GETTING MORE VOLATILE. THE MORE YOU LOOK OUT NOW, IT IS CHANGING A BIT. THE RELATIVE RETURN, THE RELATIVE RISK, ALL OF THESE THINGS ARE LOOKING A BIT BETTER FROM HERE. ANNA: YIELDS ARE JUST MORE ATTRACTIVE? CHRISTIAN: THAT IS THE RELATIVE RETURN. YIELDS ARE HIGHER. BUT ALSO THE RELATIVE RISK. YOU GENERATE MORE KERRY. THAT MEANS THE LESS RISKY AN ASSET BECOMES. THE BENEFIT IN THE NEAR TERM IS NOT THERE OF COURSE BECAUSE OF THE MIDDLE EAST WAR DRIVING BONDS AND EQUITIES. BUT THE MIDDLE EAST WAR THE FURTHER OUT YOU LOOK, THE MORE YOU WANT TO START THINKING ABOUT FADING THAT. FROM THAT PERSPECTIVE, WE ARE WARMING TO THE CONCEPT OF BONDS. ALSO WHAT I SAID EARLIER WITH REGARDS TO THE BOND MARKETS STARTING TO BREAK THINGS, IT IS ALSO SOMETHING YOU NEED TO CONSIDER IN PORTFOLIO CONSTRUCTION. IF BOND YIELDS KEEP PUSHING HIGHER, YOU SEEK SMALLER MID-CAPS UNDER PRESSURE. RATE SENSITIVE EQUITIES. THE S&P IS FLAT BUT UNDERNEATH THE SURFACE THERE IS A LOT OF SECTORS AND COMPANIES THAT ARE REALLY SUFFERING. YOU SEE CREDIT SPREADS WIDENING. THAT ALL TELLS US WE ARE REACHING AT LEAST THE LOCAL SPEED LIMIT. IT DOES NOT TELL US IF 10 YEAR YIELDS CAN'T GO HIGHER IN THE COMING YEARS TO REFLECT SOME OF THE STRUCTURAL ISSUES, AI CAPEX, AI CAPEX, AI FINANCING, FISCAL CONCERNS. BUT LOCALLY, WE ARE STARTING TO SEE A BIT OF A SPEED LIMIT. GUY: BUT I AM HEARING HIS CLIENTS ARE TURNING TO GET NERVOUS. JUST BROADLY, INVESTORS ARE STARTING TO GET WORRIED ABOUT THE AI TRADE. WHEN THAT QUESTION GETS ASKED, WHAT DO YOU SAY BACK TO THEM? I AM SURE THESE QUESTIONS ARE NOT DIRECTED TO YOU, BUT IN ANGER, IS THERE AN ARGUMENT FOR STAYING INVESTED IN THIS SPACE? IS THERE SIGNIFICANT A MORE UPSIDE IF THERE IS A BUBBLE? BUBBLES TEND TO INFLATE FOR A VERY LONG PERIOD OF TIME. THEY GO BANG EVENTUALLY, BUT THE RIDE BEFORE THAT IS WHEN YOU WANT TO BE PART OF. HOW AM I JUDGING THE SPEED LIMIT HERE OF WHAT IS HAPPENING OR WHERE WE ARE IN THAT PROCESS? ULTIMATELY, IT WILL PROVE IMPORTANT. BUT I DON'T KNOW WHEN TO MAKE THOSE BIG CALLS. CHRISTIAN: YEAH. THE FIRST THING I WOULD SAY IS WHAT YOU JUST MENTIONED ARE IMPORTANT. PEOPLE ARE WORRIED, AND THAT IS NOT A SIGN OF A BUBBLE. USUALLY WHEN YOU'RE IN A BUBBLE, THERE'S A LOT OF EXUBERANCE AND PEOPLE HAVE A FEAR OF MISSING OUT. CURRENTLY -- GUY: SO THERE IS NO BUBBLE AT THE MOMENT? CHRISTIAN: I WOULD SAY NO. WE DEFINITELY DON'T HAVE A VALUATION BUBBLE. IF YOU THINK ABOUT IT YEAR TO DATE, THE 12 MONTH FORWARD PE RATIO IS DOWN 20%. YOU HAVE DERATED IN TERMS OF VALUATIONS. GUY: YOU ARE CONFIDENT THE E IS SUSTAINABLE. CHRISTIAN: THAT IS THE CHALLENGE. PEOPLE WE SPEAK TO ARE VERY WORRIED ABOUT THE SUSTAINABILITY OF THE AI RELATED EARNINGS, AND VERY SKEPTICAL ABOUT THE REVENUE POTENTIAL THAT AI DELIVERS IN THE NEAR TERM. WE ALL KNOW THE FAMOUS J CURVE. YOU START WITH A LOT OF INVESTMENT INTO TECHNOLOGY AND IT TAKES A LONG TIME FOR REVENUE AND PRODUCTIVITY TO COME THROUGH. THAT IS THE BASELINE A LOT OF PEOPLE HAVE. AS A RESULT, YOU ARE IN A BETTER SPOT COMPARED TO THE TECH BUBBLE WHEN PETE PUT FORWARD A LOT OF POTENTIAL BENEFITS OF THE TECHNOLOGY AND VALUATIONS ACTUALLY KEPT GOING UP. TO YOUR QUESTION, WHAT TO LOOK OUT FOR, WE GENERALLY ARE STILL IN THE CAMP THAT AI, THE EARNINGS GROWTH IS CONTINUING TO DELIVER. IF EARNINGS MOMENTUM FOR THE CAPEX SPACE STARTS TO TURN MORE NEGATIVE BEFORE YOU SEE THE REVENUE POTENTIAL, THAT IS A RED FLAG. SO, WE THINK THAT IS WORTH WATCHING. THE OTHER THING IS YOU NEED TO KEEP WATCHING THE APPLICATION LAYER AND THE ADOPTION. FOR EXAMPLE, WHEN YOU LOOK AT THE Q3 EARNINGS SEASON, WE NEED TO UNDERSTAND IF CORPORATE'S ARE STARTING TO QUANTIFY COST SAVINGS. ON THE FLIPSIDE, ARE THEY STARTING TO TALK ABOUT COSTS RAPIDLY GOING UP BECAUSE OF AI IMPLICATION BUT THEY DON'T SEE THE BENEFITS? OR ARE THEY STARTING TO LAUNCH? THESE ARE THE THINGS THAT NEED TO COME THROUGH IN ORDER TO KEEP THE BALANCE BETWEEN THE AI CAPEX EARNINGS CONCERNS AND THE OPTIONALITY'S. GUY: AND I'S CHECKLIST FOR THE UPCOMING EARNINGS SEASON. --A NICE CHECKLIST FOR THE UPCOMING EARNINGS SEASON. THE CORE SIX LOOKS LIKE THIS. I WANT TO SHOW YOU ASML. IT IS INTERESTING THAT NAMES LIKE NESTLE ARE DOING HEAVY LIFTING TODAY BUT TECH IN DEFENSE IS DOWN. RHEINMETALL DOWNGRADE, WHICH I'M SURE LUIS WILL TELL US ABOUT -- LOUISE WILL TELL US ABOUT. LOUISE: THE MAIN TELCO COMPANIES, ALL DRAGGING LOWER. THIS IS ON NEWS THAT SPACEX AND ITS SATELLITE STARLINK'S SATELLITES COULD BECOME A MAJOR PHONE CARRIER. WE SAW THAT HAPPENING IN AMERICA OVERNIGHT AFTER TRADING AND SIMILAR MOVES IN EUROPEAN TELCOS. SPEAKING WITH ANOTHER SECTOR MOVE, BUT WE ARE LOOKING AT STEEL. THIS IS AFTER A NOTE BY UBS AND IT IS REALLY HELPING THESE THREE STEEL COMPANIES IT MENTIONED. ALL HIGHER INTO THE GREEN. IT UPGRADED THOSE STOCKS. THIS IS ON NOTING THERE WILL BE HIGHER STEEL IMPORTS AND FALLING INVENTORIES, THEY WILL EXPECT IT TO BOOST STEEL PRICES AND BENEFIT THESE THREE COMPANIES ACROSS EUROPE. NEXT UP, RHEINMETALL. AS YOU MENTIONED, JUST SLIGHTLY UNDER THE RED. BERENBERG SAYING MORE CONTRACTS ARE NEEDED FOR BETTER CERTAINTY PAST 2030. SLIGHTLY WEIGHING ON RHEINMETALL. LOOKING AT HELEN BERG MATERIALS --HEIDELBERG MATERIALS. ANNA: THANK. LOUISE MOON WITH THE STORIES. CHINA REJECTS CLAIMS THAT ITS CURRENCY AS UNDERVALUED AS THE EU SEEKS TO ADDRESS ITS TRADE WITH CHINA. WE HAVE MORE ON THOSE TALKS COMING UP. THAT'S NEXT. THIS IS BLOOMBERG. ♪ >> WENT WITH THE FIXED PRICE LISTING. THERE HAVE BEEN HALLOWEEN THOSE ACROSS EUROPE. THIS IS THE PRICE. WE THINK IT IS A GREAT PLACE. THERE IS ALWAYS A DISCOUNT. YOU HAVE SEEN WHAT THE VALUATIONS WERE. I’M NOT A VALUATION EXPERT. ULTIMATELY THE MARKET WILL DECIDE WHICH THEY WITH GOES. ANNA: CHIEF EXECUTIVE OFFICER AT AIRTEL SPEAKING EARLIER. LONDON’S BIGGEST IPO IN FIVE YEARS IT SEEMS COMING TO MARKET TAKING ITS TIME TO DO SO THIS MORNING. WE’RE AWAITING THE FIRST TRADE OF THAT STOCK IN LONDON. LET’S GET TO PABLO, BLOOMBERG’SECM REPORTER TRACKING THIS IPO FOR US. GOOD MORNING. WHAT SHOULD WE EXPECT FROM AIRTEL? WE’RE WATCHING THIS ONE CAREFULLY AS IT GETS READY TO IPO. NO TRADE YET. WHAT IS THE TIMING OF ALL OF THIS? WHAT SHOULD WE EXPECT? >> ANY MINUTE NOW. SEVEN GOING TO BE WATCHING THIS CLOSELY. IT IS THE BIGGEST IPO IN FRONT FIVE YEARS. SERVE GOING TO BE WATCHING FOR SIGNS OF APPETITE FOR LONDON IPO’S. TO BE FAIR TO THEM, IT IS NOT THE EASIEST MARKET TO DEBUT INTO IT GIVEN WHAT HAPPENED LAST NIGHT WITH OPENAI. A NUMBER OF IPOS HAVE POSTPONED THEIR LISTINGS RECENTLY BECAUSE IT IS A BIT JITTERY. HOPEFULLY IT TRADES WELL TODAY BUT WE HAVE TO REMIND OURSELF IT IS THE START OF A JOURNEY AND HOW IT TRADES IN RECENT MONTHS WILL BE EQUALLY IMPORTANT. GUY: HOW IMPORTANT FROM A LONDON STOCK EXCHANGE POINT OF VIEW? >> IT IS IMPORTANT. WE NEED POSITIVE STORIES. WE NEED POSITIVE STORIES IN LONDON. THE CLOSING PRICE TODAY WILL BE AGAIN CLOSELY WATCHED. WE JUST NEED TO KEEP REMINDING OURSELVES IT IS NOT NECESSARILY A REFLECTION OF HOW THE SHOCK THE DO. WE HAD A COUPLE OF P.O.W.S EARLIER THIS YEAR THAT HAD A BUMPY START AND NOW ARE UP 30%. SOMETIMES THE MARKET CHANGES. OTHER TIMES THE COMPANIES DO REALLY WELL. ANNA: THE FTSE 100 AT SOME POINT. THANK YOU LET’S LOOK AHEAD TO WHAT ELSE WE’RE WATCHING THROUGHOUT THE DAY. IN CHINA TALKING ABOUT TRADE. E.U. FINANCE MINISTERS ARE MEETING TODAY. 10:00 A.M. U.K. TIME WE GET THE NOBEL PEACE PRIZE ANNOUNCEMENT. THEN WE’LL HEAR AT 1:30 P.M. AROUND THE CHINA TALKS AND A LITTLE BIT LATER, 3:00 P.M. U.K., THE U.S. CONSUMER SENTIMENT FOR THE UNIVERSITY OF MICHIGAN. GUY: LET’S TALK ABOUT WHAT’S HAPPENING IN CHINA NOW. WHAT IS GOING ON. CHINA’S CENTRAL BANK PUTTING OUT A STATEMENT THIS MORNING REJECTING CLAIMS IT IS UNDERVALUED. A BIG SIGNAL TO EUROPEAN UNION OFFICIALS. OFFICIALS BLAMED TRADE IMBALANCES ON THE EXCHANGE RATE. CHINA SAID THEY WERE NOT STRUCTURAL IMBALANCEDST IN THE GLOBAL ECONOMY. HOW SIGNIFICANT ARE THESE COMMENTS ON THE EXCHANGE RATE? HOW IMPORTANT ARE THEY IN SETTING THE OPEN THE ABOUT HOW THE CHINESE FEEL ABOUT THESE TALKS? >> I THINK IT IS SIGNIFICANT THAT THE PEOPLE’S BANK OF CHINA PUT OUT THIS ESSAY DEFENDING THEIR POSITION ON THE EXCHANGE RATE FOR YUAN AND SAID THEY DON’T HAVE A GREAT DEAL OR EXCESSIVE INFLUENCE ON THE RATE AFTER YOU HAD A LOT OF CRITICISM NOT JUST FROM THE EUROPEANS BUT THE AMERICANS SIGNIFICANTLY. ONE OF THE MANY PRONGS THEY ARE SUGGESTING THE CHINESE DO THINGS THAT ARE UNETHICAL TO BOOST THEIR EXPORTS. YOU CAN ADD TO THE LIST THE QUESTION OF INTELLECTUAL PROPERTY AND THE TRADE BARRIERS THAT EXIST, THE STATE SUBSIDIES AND ALL OF THOSE THINGS. IT HAS GOT AN NUMBER OF CRITICISMS FROM A NUMBER OF PEOPLE INCLUDING THE CHANCELLOR OF GERMANY WHO HAS BEEN OUTSPOKEN SUGGESTING THE YUAN IS UNDERVALUED BY 25-30%. LAST YEAR IT WAS UNDERVALUED BY 12% TO 20%. THESE ARE CLAIMS THAT ARE REJECTED BY THE CHINESE WHO ARE SAYING FOR TRADE, THE F K IS NOT THAT IMPORTANT TO THEM IN TERMS OF MAKING THAT TRADE. I FOUND IT INTERESTING LOOKING AT THIS STATEMENT. I’LL QUOTE FROM THE PEOPLE’S BONING CHAINS, ATTRIBUTING THE MAX YON’S DECLINE, WEAKENED FISCAL DISCIPLINE TO OTHERS EXCHANGE RATE IS SHIFTING ADJUSTMENT ON TO OTHERS AND DODGING ACCOUNTABILITY THAT FEELS LIKE NOT SO VEILED COMMENT ON WHAT IS GOING ON NOW IN EUROPE PARTICULARLY IN THE BOND MARKET WHEN WE THINK ABOUT THE FISCAL DISCIPLINE LACKING IN FRANCE. HOWEVER THAT HAS LED TO A WEAKENING OF THE EURO VERSUS THE YUAN IN THE LAST 10 YEARS. POTENTIALLY A BAD OMEN FOR THE FRENCH BOND MARKET. GOOD NEWS FOR THE SILVER LINING. THE P LOSING SOME VALUE AGAINST YUAN. ANNA: PART OF WHAT MIGHT BE DISCUSSED IN CHINA AS THE EUROPEANS VISIT. WHAT ELSE IS BEING TALKED ABOUT? HOW ELSE ARE THEY TRYING TO ADDRESS THIS HUGE TRADE IMBALANCE? >> I DON’T THINK HE IS NECESSARILY HOPING TO GET A WHOLESALE REEVALUATION FROM THE PEOPLE’S BANK OF CHINA THE THOSE WALKS THE CHINESE. HE IS TRYING TO FOCUS ON LIMITING SOME OF THE IMPORTS COMING FROM CHINA INTO EUROPE, WE HAVE BEEN TALKING A LOT ABOUT IT. HYBRID CARS OVER THE LAST COUPLE OF WEEKS WHERE WE HAVE SEEN THE CHINESE TAKE A HUGE MARKET SHARE OVER THE COMING MONTHS AND THE SECOND IS TRYING TO OPEN UP THE CHINESE MARKET FOR A NUMBER OF EUROPEAN COMPANIES AND MAKING IT EASIER FOR THOSE COMPANIES TO OPERATE LOCALLY ARENA WITHIN CHINA. WE’LL GET A READOUT IN THREE HOURS TIME AT 2:30. WE’LL GET AN IDEA HOW MUCH BALL THERE IS TO PLAY BETWEEN E.U. AND THE CHINESE DIPLOMATICALLY ON TRADE AND THAT WILL THAT WILL KICK IN NEXT WEEK WHEN WE HAVE THE EUROPEAN COUNCIL MEETING WHERE ALL E.U. LEADERS ASEMI TO BELIEVE DISCUSS HOW THE APPROACH THIS SITUATION CHINA. THERE IS MORE APPETITE TO TAKE ON CHINA. THAT BEING SAID, THE CHINESE HAVE BEEN VERY CLEAR IN THEIR REACTION MECHANISM TO EUROPEAN ACTION AND THREATS. THEY TEND TO BE VERY, VERY FIRM IN THEIR RESPONSE THOUGH THEY TEND TO BE MEASURED. I THINK THE CHINESE COULD FEEL COMFORTABLE ABOUT THE CARDS THEY HOLD VERSUS THE EUROPEANS AT THIS STAGE. GUY: IN TERMS OF WHAT COMES NEXT, HOW DOES THE PROCESS UNFOLD FROM HERE? >> IT IS GOING TO BE THESE CONVERSATIONS OF E.U. LEADERS. I’M SURE THE IMBALANCES CONVERSATION WILL COME UP BETWEEN THEM. THEY WILL BE GETTING THIS COLLECTIVE APPROACH TOWARD CHINA WHICH OVER THE LAST COUPLE OF YEARS HAS BEEN SOMETHING REALLY HARD TO SETTLE ON. YOU HAVE HAD COUNTRIES LIKE SPAIN CHA THAT WANT CLOSER ECONOMIC RELATIONSHIP WITH CHINA. THEY ARE LESS CONCERNED ABOUT THE NATIONAL SECURITY ISSUES THAT MANY OTHER COUNTRIES ARE FLAGGING. THEY HAVE BEEN UNTHE GERMANS HAVE BEEN UNWILLING TO TAKEN TO CHINESE ON TRADE BUT DON’T WANT TO GET SHUT OUT OF THE MARKET BUT GERMAN AUTOMAKERS CONTINUE TO LOSE MARKET SHARE IN THE CHINESE DOMESTIC MARKET THAT IS LESS OF AN INCENTIVE. MORE AND MORE THE GERMANS AND THE POLITICIANS IT IS NOT JUST ABOUT PRESERVING ACCESS TO THAT MARKET. IT IS ABOUT KEEPING SURVIVAL AND PRESERVING THE MARKET HERE IN EUROPE. ANNA: OLLIE, THANKS VERY MUCH. OLIVER CROOK, BLOOMBERG’S CHIEF EUROPE CORRESPONDENT. THAT TRADE CONVERSATION CARRIES ON THROUGH FRIDAY. FORWARD TO THE WEEKEND, GUY. THINK ABOUT THE THINGS COMING U UP. PLENTY OF SPORT AS USUAL. BFIFILM FESTIVAL AS WELL. OUR COLLEAGUES IN SINGAPORE HAD A CONVERSATION WITH THE GRAND PRIX ORGANIZERS WHO SAID WE’LL STILL GO AHEAD DESPITE AN INDONESIAN WILDFIRE. GUY: A LOT OF TALK ABOUT THIS DURING WEEK. VISIBILITY DIFFICULTY. IT IS SMOKY THERE. THAT’S WHAT IT FEELS LIKE. THAT IS GOING TO BE A FACTOR IN TERMS OF WHAT’S HAPPENING THERE. PREMIER LEAGUE, IN TERMS OF THE FOOTBALL. ARSENAL LEAGUE, GOING TO BE A GOOD GAME. BFI FILM FESTIVAL. THERE IS AMERICAN FOOTBALL. ANNA: I’M GLAD YOU EXPERIENCED THAT TO ME GUY: NOT PROPER FOOTBALL. ANNA: WE HAVE UPSET SOMEONE THERE. THAT IS IT FOR THE OPENING TRADE. STICK WITH US FOR THE NEXT HALF-HOUR. TOM MCKENZIE BRINGS THE LATESTEPISODE OF BLOOMBERG TECH EUROPE. WE’LL FLARE CEOS OF REVOLUT AND JPMORGAN. THAT IS NEXT. THIS IS BLOOMBERG.