French Consumer Confidence Drops to 13-Year Low After Riots

>> TUESDAY THE 27TH. ANTHROPIC HAS FILED FOR AN IPO, U.S. TECH STOCKS BOUNCE, BUT ONLY A BIT. NASDAQ FUTURES ARE LOWER AND CURRENTLY FALLING. FUNDING AI BEGINS TO MOVE. META UPSIZING ITS STOCK OFFERING TO NEARLY 98 BILLION DOLLARS AND IT IS A BIG MORNING FOR EUROPEAN EARNINGS. HSBC MISSES AND IS DOWN IN HONG KONG. OLIVER: LET'S TAKE A LOOK AT THE MARKETS THIS MORNING, WE SHOULD SAY THIS SESSION BEGAN IN THE GREEN THIS MORNING. WE CAN NOW SEE FUTURES TRADING DOWN BY HALF OF 1%. UP ABOUT 1%, AND OF COURSE, BRENT CRUDE WE ARE WATCHING VERY CLOSELY. QUITE A MILD SESSION YESTERDAY. WE ARE NOW STABILIZING ABOUT $116 PER BARREL. THIS IS THE COUNTDOWN TO THE OPENING TRADE AND IT STARTS RIGHT NOW. GUY: GOOD MORNING. WILL IT, WON'T IT? IT WILL. ANTHROPIC IS GOING TO FILE FOR AN IPO, AND MASSIVE EVENT, POTENTIALLY A FORK IN THE ROAD FOR THE TECH TRADE. IT IS HUGELY SIGNIFICANT. IN TERMS OF WHAT HAS BEEN PUT IN THE S1, I THINK WE PARTLY LARGELY KNEW MOST OF WHAT WAS HAPPENING HERE. WE KIND OF BEEN TALKING ABOUT THOSE RISKS FOR A LONG TIME. THERE IS OWNERSHIP TO SUCH A STORY WHICH SEPARATES EFFECTIVE CONTROL FROM OWNERSHIP WHICH I THINK IS GOING TO BE DEBATED A LOT. I THINK THE OPERATING LINE LOOKS BETTER THAN I ANTICIPATED IT WOULD, BUT THIS IS A MASSIVE MOMENT FOR THIS MARKET. OLIVER: FOR ONE THING IT, YOU NOW GET THE PURE PLAY PROXY OF THE MARKET. THAT MEANS ALL THE POSITIVITY COME ALL THE NEGATIVITY CAN BE UNLEASHED ON THE STOCK. BUT A FEW THINGS WE DIDN'T GET, WE DIDN'T GET THE PRICE, WE HAVEN'T GOT THE VALUATION. WE HAVE SOME VAGUE PICTURES ABOUT WHAT THAT POTENTIALLY COULD LOOK LIKE. OBVIOUSLY NOW THE TIMELINE THAT WE ARE LOOKING AT IS THE ROADSHOW ON THE WEEK OF NOVEMBER 9. THEY LIKE TO TAKE IT TO MARKET FOR NOVEMBER 16 TO GET IT LISTED BEFORE THANKSGIVING. AGAIN, A VERY BUSY COUPLE OF WEEKS WATCHING ANTHROPIC BUT OF COURSE, THE REST OF THE ECOSYSTEM HAS TO GO UP. GUY: HAS TO GO UP. IF IT DOESN'T GO WELL, IT COULD BE REALLY SIGNIFICANT IN TERMS OF SENTIMENT FOR THE WHOLE OF THE AI TRADE, AND THERE'S LOTS OF LOCKUPS AND THEY COME QUITE QUICKLY IN TERMS OF THE SALES. THE FIRST FEW WEEKS CAN BE REALLY CHALLENGING. OLIVER: I WONDER IF WE LOOK AT THIS SORT OF LIKE SOME OF THE GOVERNMENT BUDGETS, YOU JUST NEED TO MAKE SURE YOU GET IT OVER THE LINE. DO NOT CREATE ANYTHING UNTIDY WITHIN THE MARKET BECAUSE SO MUCH IS PENT UP INTO THIS. THIS IS NOW GOING TO BE SEEN AS THE EMBLEM OF THE AI TRADE. GUY: THERE'S A LOT OF EQUITY COMING. THERE'S A KIND OF COMPARE AND CONTRAST. BROADCOM STRUGGLING TO GET A BIG DEBT RAISE OVER THE LINE. IT NEEDED ITS BALANCE SHEET. BUT YOU'VE GOT META-OUT THERE SELLING A LOT OF STOCK. I JUST WONDER WHETHER WE ARE AT THAT PIVOT POINT. OLIVER: INTERESTING THAT WE ARE TAPPING THESE DIFFERENT SOURCES OF CAPITAL IN ORDER TO GET THAT MONEY. SPACEX, $40 BILLION TO THE BOND MARKET. MOMENTUM CLOSE TO $100 BILLION ON EQUITY. BROADCOM, $65 BILLION. GOOGLE AND INTEL GIVING STOCK OFFERINGS. AND TO THAT WHAT WE ARE SEEING WITH CENTRAL BANKS AND WHAT WE ARE SEEING IN THE BOND MARKET MORE BROADLY. YOU HAVE TO HAVE THAT LIQUIDITY STORY. GUY: IT'S THE DIFFERENTIATION BETWEEN EQUITY AND DEBT. BROADCOM, A GREAT BALANCE SHEET. YET IT HAD TO SPEND SO MUCH EFFORT, SO MUCH ENERGY TO GET THIS DEBT OFFERING OVER THE LINE AND BANKS ARE GOING LOOK, WE SEE YOUR BALANCE SHEET AND APPRECIATE WHAT YOU'RE SAYING, BUT THIS IS A TOUGH ASK. ARE WE REACHING THE POINT WHERE IF YOU DON'T HAVE THE PERFECT BALANCE SHEET, IF YOU ARE NOT BACKED BY THE PERFECT BALANCE SHEET AND IN SOME WAYS, IT WAS, THIS COMES BACK TO THE POINT THAT MUST WAS MAKING EARLIER. NOW DO WE GO TO THE EQUITY MARKET? IF YOU SEE A LOT OF EQUITY COMING, WHAT DOES THAT MEAN FOR VALUATIONS? OLIVER: AND WHAT DOES THAT MEAN FOR OPENAI, THE ANTICIPATION BUILDING AROUND THAT. OBVIOUSLY WE WILL BE WATCHING VERY CLOSELY BUT GOING BACK TO THE BANKS, CAN BRING THAT TO THE EARNINGS STORY TODAY. ANOTHER THING WE'VE BEEN WATCHING CLOSELY WAS THAT GOLDMAN SACHS FRONTED THREE OF THESE MASSIVE DEALS. 210 BILLION DOLLARS OF DEALS OVER THE LAST COUPLE OF DAYS ACROSS THE METS S -- META STORY, ANTHROPIC STORY. THIS IS GOING TO BE INCREASINGLY STORY FOR THESE BANKS. GUY: THE CAPITAL MARKETS TEAMS ARE DOING WELL, BUT IS THERE MORE THAT COULD BE COMING? LET'S TALK ABOUT HSBC. 32% IN THE CORNER, PROFIT MISS. THAT IS NOT GOOD ENOUGH. STOCKS GETTING HAMMERED IN HONG KONG OVERNIGHT. WHAT DOES THAT MEAN IN TERMS OF THE FTSE OPEN THIS MORNING? IN TERMS OF WHAT WE ARE SEEING IN TERMS OF THE FTSE, THIS IS A HEAVYWEIGHT IN THE FTSE. SLIGHT UNDERPERFORMANCE COMING THROUGH. FTSE FUTURES ARE NOW DOWN BY 7/10 OF 1%. THE REST OF THE MARKET DOWN BY NEARLY 4/10 OF 1%. OLIVER: NOT A DRAMATIC MISS ON THE EARNINGS. AGAIN, SO IF KEEPING AN EYE ON THE OUTLOOK, A LITTLE BIT OF SKEPTICISM THAT MAYBE THE OUTLOOK IS ABLE TO ACHIEVE THAT. ANOTHER COMPANY WE ARE WATCHING THIS MORNING'S PORSCHE, A CAR COMPANY UNDER HUGE VOLUMES OF PRESSURE. I'M LOOKING AT THE MARGIN, THEY ARE STILL SEEING THAT THEY ARE A FULL YEAR OPERATING RETURN ON SALES IS THE KEY METRIC FOR A LOT OF THESE CARMAKERS. 5.5% TO SEVEN POINT 5%. FOR BROADER CONTEXT, IT COULD VARY COMFORTABLY IN THE DOUBLE DIGITS. A LOT OF RESTRUCTURING COSTS, AND A LOT OF QUESTIONS ABOUT WHETHER DEMAND IS THERE. SEEMS LIKE THEY ARE PIVOTING TO GET MORE EXCLUSIVITY, TRYING TO GAS OF THE MARGINS. THAT IS NOT CURRENTLY WORKING. 5.5% ON THE MARGIN FOR A COURSE, THAT IS WHAT WE WILL BE TALKING ABOUT. GUY: TO NORMAL TIMES. WE ARE GOING TO TALK, LOOKS LIKE A FEET AND A RAISE, THAT IS CERTAINLY GOOD. BUT SEPTEMBER WAS A DISASTER FOR THIS COMPANY. TWO BIG FAILURES COME THROUGH. WE'VE ALSO HAD THE DATA RELEASED FRIDAY, MAYBE SOME DISAPPOINTMENT AROUND THEM. WE'VE GOT A BIG UPDATE COMING IN THE MIDDLE OF NOVEMBER FROM THE COMPANY. WHAT ARE THEY GOING TO SELL IN TERMS OF THE LONG-TERM OUTLOOK? REALLY INTERESTING TO GET HIS TAKE ON WHAT THEY ARE SEEING. OLIVER: ALSO AN INTERESTING CONVERSATION AND QUESTION FOR HIM, OBVIOUSLY HE SITS ON THE BOARD OF ANTHROPIC, BUT THE EXISTENTIAL RISK TO HUMANITY WITH AI, JOB WHITEOUTS, ONE OF THE PROMISES IS MASSIVE BREAKTHROUGHS WITHIN THE MEDICAL FIELD. IS THAT ACTUALLY HAPPENING? GUY: GOLDMAN SACHS ASSET MANAGEMENT DEPUTY CIO JOINING US A LITTLE BIT LATER. AS I SAY, HE IS THE CEO OF NOVARTIS, JOINING US A LITTLE BIT LATER AS WILL MORGAN STANLEY'S CHIEF U.K. ECONOMIST. WE HAVE A BUDGET THIS WEEK HERE IN THE U.K.. OLIVER: SO I'VE HEARD. WE HAVE FRIENDS CONSUMER CONFIDENCE. I WONDER HOW THE FRENCH CONSUMER IS HOLDING UP AND THE PROTEST IN THE STREETS. THE ISRAELI ELECTION IS SOMETHING WE ARE WATCHING VERY, VERY CLOSELY. IN TERMS OF EARNING IT, ASM INTERNATIONAL, AND LATER IN THE UNITED STATES WE WILL HAVE OUR FOCUS OBVIOUSLY ON BOEING. LATER, DONALD TRUMP WILL SPEAK AT A RALLY IN WACO, TEXAS. ALL THINGS WE ARE WATCHING A LITTLE BIT LATER. I THINK THERE'S A TON OF QUESTIONS ABOUT WHAT IT'S GOING TO MEAN FOR THE EUROPEANS. IF YOU GET YOUR DOMESTIC AGENDA FOR DONALD TRUMP STUFF OF THE DEMOCRATIC HOUSE AND POTENTIALLY SENATE, HIS GAZE IS GOING TO GO ACROSS THE WORLD TO CEMENT HIS LEGACY. GUY: IT KINDA FELT LIKE IT ALREADY WAS. WE ARE GOING TO GO BACK TO GO BACK ABOUT AI TRADE. I THINK ROARING BACK MAYBE. ANTHROPIC HOSTING AI DEBT DEAL CERTAIN WITH A STORY YESTERDAY. THE NASDAQ WAS UP, FUTURES FADING PRETTY RAPIDLY. ISRAELIS GOING TO THE POLLS AND ONE OF THE MOST CONSEQUENTIAL ELECTIONS IN DECADES. WE WILL DISCUSS WHAT IS AT STAKE. UP NEXT WE ARE GOING TO BE JOINED BY NANNETTE HECHLER. GET IN TOUCH, JOIN US, WE BE REALLY HAPPY TO HEAR WHAT YOU HAVE TO SAY THIS MORNING. THIS IS BLOOMBERG. GUY: TUESDAY THE 27TH. 13 MINUTES PAST THE HOUR. THAT MEANS 46 MINUTES AND STILL WE SAW EQUITY TRADING HERE IN EUROPE. AS YOU CAN SEE THE FUTURES PICTURE IN EUROPE ACTUALLY BEGINNING TO FADE NOW. SO THERE’S A NUMBER OF FACTORS HERE ONE OF WHICH IS WE HAVE A WHOLE BUNCH OF EARNINGS, HSBC IS GOING TO BE PARTICULARLY IMPORTANT FOR THE LONDON MARKET, DEFINITELY SEEING A FADE IN THE TECH TRADE IN THE UNITED STATES. VERY MUTED BOUNCE YESTERDAY. NOW THAT BEGINS TO FADE. ASIA HAD A BETTER SESSION. ANTHROPIC OBVIOUSLY FRONT AND CENTER. OLIVER: ABSOLUTELY. FORMALLY FILED FOR ITS IPO OFFERING A MUCH NEEDED SENTIMENT BOOST FOR THE AI TRADE BOLSTERING SEMICONDUCTOR STOCKS IN SOUTH KOREA AND JAPAN. YESTERDAY, WE SAW THE NASDAQ RISE BY 1%. AND A MAJOR MILESTONE FOR THE AI INDUSTRY WHILE SETTING UP ONE OF THE BIGGEST TESTS YET FOR INVESTOR APPETITE FOR THE AI BOOM. FOR NOR LET’S BRING IN BLOOMBERG MARKET REPORTER ANTHONY STEPHENS. WHERE TO BEGIN. YOU’VE BEEN PORING THROUGH THE FILING AND WHAT DO WE NEED TO PAY ATTENTION TO THIS MORNING? >> YEAH. LET’S TAKE A LOOK AT WHAT’S ON THE TABLE FINALLY. WE HAVE VERY STRONG REVENUE FOR THE FIRST HALF. WE KNEW THAT FROM THE UNAUDITED NUMBERS FROM EARLIER IN THE MONTH AND THERE IS ENOUGH FOR BOTH THE BULLS AND BEARS IN THIS NUMBER. FOR THE BULLS, YOU SEE THE VERY STRONG REVENUE. YOU SEE THE DIVERSIFICATION OF THE CLIENT BASE. YOU SEE THE FACT THAT IMPROVEMENTS ON THE COMPUTER MARGIN, THEY’RE GETTING MORE DOLLAR OF REVENUE OUT OF THE COMPUTE. THEY ALSO ARE NARROWING THE OPERATIONAL LOSSES. THAT $82 BILLION NUMBER ON THE LOSS THAT IS BEING TURNED AROUND. MOST OF THAT IS -- TO THE LIKES OF AMAZON. YOU TAKE AT THAT OUT AND THE OPERATIONAL METRICS ARE STARTING TO IMPROVE. ON THE BACK, YOU HAVE REVENUE COMING IN AT THAT TIME $16.3 BILLION AND UNAUDITED NUMBER $16.8 BILLION SO REVENUE IS LEVEL OFF. THIS COMES AS ANTHROPIC’S PRICE FOLLOWS THE CHINESE DOWNWARD. YOU ARE GETTING IMPACTED BY THE COMPETITIVE ELEMENTS. AND THEN THEY ALSO HIGHLIGHT THEIR KIND OF -- CONCERNS AND CONCENTRATION RISK TO BEFORE THEM THIS COMPUTE. AND LASTLY, THEY REMAIN REALLY FOCUSED ON TRAINING THE NEXT MODEL. AND PAYING OFF THAT IS GOING TO BE VERY IMPORTANT. BECAUSE THE CHINESE HAVE SWITCHED TO INFERENCE. THEY’RE STARTING TO GET MARGIN, RIGHT? AND YOU SAW THE GAP BETWEEN ANTHROPIC AND KO3.1 AND THE CHINESE ONLY TWO OR THREE POINTS AWAY FROM THE ABSOLUTE FRONTIER TIER OF AI AS DEFINED BY ARTIFICIAL INTELLIGENCE INDEX. THERE IS ENOUGH FOR BOTH BEARS AND BULLS. THE LAST THING THAT CAUGHT MY EYE IS THE EXTREME CONCENTRATION OF CONTROL. YOU ARE NOT BUYING SHARES HERE TO HAVE ANY SAY IN HOW THE COMPANY IS RUN. IT’S -- THE FOUNDERS KEEP VERY EXTENSIVE CONTROL OVER THE COMPANY. GUY: YEAH. THAT LAST POINT I THINK IS GOING TO BE REALLY INTERESTING. AS THE MARKET DIGESTS THAT. AND LET’S TALK ABOUT THE DEBT VERSUS EQUITY STORY. IT HAS FELT THE LAST FEW DAYS WE’VE HAD HUGE AMOUNTS OF DEBT COMING TO THE MARKET. I THINK THAT’S UNAMBIGUOUS. BUT IT’S FELT LIKE ALSO GETTING HARDER TO PUSH THAT DEBT INTO THE MARKET. AND IT’S INTERESTING THAT ARE WE NOW AT THE POINT WHERE WE ARE GOING TO SEE AND MAYBE MATTERS -- META IS AN EXAMPLE, WE’RE GOING TO SEE THE SHIFT FROM EQUITY -- FROM DEBT TO EQUITY? >> AT LEAST FOR THE ISSUANCE SIDE DEFINITELY FEEL LIKE THAT OPPORTUNITY IS THERE, RIGHT? YOU HAD META KIND OF UPSIZE THE OFFERING AFTER THE FIRST -- AND THAT’S ALSO IMPACTING SHARES IN ASIA ON THE BACK END OF OUR SESSION. WE CAUGHT THAT NEWS. SO IT LOOKS LIKE THE MARKET IS PRICING IN A FLOOD OF CAPITAL BACK TO THE U.S. TO FUND SOME OF THIS SHEAR RAISINGS. ON THE DEBT SIDE YOU ARE SEEING THAT PUSHBACK. SPOT ON, RIGHT? AND YOU’RE SEEING A LOT MORE CREATIVE FUNDRAISING. VENDOR FINANCING OR CIRCULAR FINANCING YOU CAN CALL IT. THERE’S A LOOT MORE PRIVATE EQUITY INVOLVEMENT AND A LOT MORE VENTURE INVOLVEMENT ON THE DEBT SIDE WHICH WOULDN’T BE NECESSARY IF TRADITIONAL LONG ONLY MONEY WAS NOT PUSHING BACK. ON THE OTHER END WE DO SEE BIG FUNDS TALKING ABOUT SOME OF THESE HIGH YIELDS IN AI BEING VERY ATTRACTIVE. AND ACROSS OUR SHOWS WE’VE HAD FIXED INCOME GUESTS SAYING SOME OF THOSE YIELDS ARE MORE INTERESTING OPPORTUNITIES THAN SOME OF THE MORE DISTRESSED SOVEREIGN STUFF THAT WE’RE SEEING. SO THERE IS THAT INTERESTING DEBATE. WHETHER THE YIELDS ARE HIGH ENOUGH TO JUSTIFY. BUT WE ARE IN A REALLY -- AN UNKNOWN TERRITORY HERE, RIGHT? AI DEPRECIATION IS NOT A THING. THAT ANYBODY IS REALLY -- THAT ANYBODY HAS STUDIED. PUTTING UP A DATA CENTER A TICKING TIME BOMB OF FINANCING COST GOES ALONG. THAT WAS NOT A THING UNDER A -- UNTIL A COUPLE OF YEARS AGO. SO A LOT OF DEBT RESEARCH IS BEING REWRITTEN BY THE ABSOLUTE STORM OF DEBT FINANCING THAT’S GOING ON NOW. GUY: YEAH. IT’S REAL INTERESTING. ONE OF THE CFO’S AND ONE OF THE BIG TECH COMPANIES WAS TALKING ABOUT WE HAVEN’T TURNED THOSE CHIPS ON. WE DON’T HAVE TO START AMORITIZING THEM. AND GETTING NERVOUS AROUND THIS SUBJECT. ANTHONY, GREAT STUFF. THANK YOU VERY MUCH INDEED. BLOOMBERG MARKETS REPORTER ANTHONY STEPHENS JOINING US NOW. THE CHIEF INVESTMENT OFFICER FOR EMEA AT LOMBARD EARLIER, NANNETTE, GOOD MORNING. NICE TO HAVE YOU ON THE PROGRAM. HOW IMPORTANT A MOMENT IS THE ANTHROPIC IPO GOING TO BE? >> I THINK IT’S -- AGAIN, SUCH A MOMENT LIKE THE SPACEX IPO HAS BEEN, IT’S A LARGE VOLUME. SO IT’S A GOOD GAUGE OF SENTIMENT AS WELL. AND CERTAINLY IT WILL INSTILL AS WELL FOR INVESTORS THE NEED TO MAKE UP THEIR MIND AROUND THE AI WAVE AND ITS -- AND THE PROFITABILITY OF THIS COMPANY. SO IT’S AN IMPORTANT MOMENT. GUY: IN TERMS OF YOUR TAKE ON THE DEBT, AS ANTHONY WAS JUST SAYING, LOTS OF COMMENTATORS ON OUR PROGRAM, RICK RIEDER IS ONE OF THEM AND BLACKROCK, TALKING ABOUT THIS. WHAT IS YOUR TAKE ON THE YIELDS THAT ARE NOW BEING OFFERED? ARE THEY ATTRACTIVE ENOUGH? ARE THEY GOOD ENOUGH NOW TO JUSTIFY SIGNIFICANT INVESTMENT AND ARE THEY MAYBE ACTUALLY LOWER RISKS THAN SOME OF THE SOVEREIGNS OUT THERE? >> OH, I THINK WE ARE AT AN UNUSUAL PERIOD HERE. WE HAVE ON THE ONE SIDE AN EARNINGS SEASON THAT IS RECONFIRMING AT THIS STAGE VERY STRONG EARNINGS GROWTH AND VALUATIONS FOR EXAMPLE FOR U.S. EQUITIES THAT ARE BELOW AVERAGE. SO EQUITIES SEEM ATTRACTIVE. BUT AT THE SAME TIME, A LOT OF FIXED INCOME INVESTMENTS ACROSS THE BOARD ARE OFFERING REALLY ATTRACTIVE YIELDS AS WELL. SO WE ARE IN THIS UNUSUAL MOMENT WHERE BOTH FIXED INCOME AND EQUITIES ARE OFFERING INVESTORS VERY GOOD VALUE. OLIVER: AND WATCHING WHAT’S DEVELOPING WITH THE AI STORY IN THE UNITED STATES, OBVIOUSLY YOU’RE ALSO FOCUSED ON YOUR INVESTMENT STRATEGY HERE IN EUROPE. HOW DO YOU ANTICIPATE THAT THAT IS GOING TO BEAR ON HOW YOU STRATEGIZE AND THE INVESTMENTS YOU MAKE HERE IN EUROPE GIVEN THE FACT THAT IT’S SO CONCENTRATED IN THE UNITED STATES? HOW DO YOU THINK ABOUT THAT? >> WELL, IN TERMS OF OUR REGIONAL PREFERENCES, AT THE MOMENT, VERY CLEARLY, WE CONTINUE TO FAVOR THE U.S. FOR EXAMPLE, OR JAPAN, IN DEVELOPED EQUITIES OVER EUROPE. AND THE SECTOR COMPOSITION AND EXPOSURE IS VERY DIFFERENT IN EUROPE. EUROPE HAS BEEN BENEFIT BENEFITING MUCH MORE FROM FINANCIALS AND WHAT IS DRIVING THE FINANCIAL SECTOR. WHILE THE OTHER REGIONS, THE U.S. AND JAPAN HAVE BEEN MUCH MORE LINKED TO TECH. SO AT THIS MOMENT, OUR PREFERENCE IS FOR U.S. EQUITIES. BUT OVER TIME, THIS MAY CHANGE. THE CYCLE IS CURRENTLY BROADENING. FOR EXAMPLE, FOR -- OF THOSE COMPANIES THAT HAVE REPORTED SO FAR, THERE IS A HIGHER PROPORTION THAT ARE BEATING -- BEATING EXPECTATIONS. SO IT’S A VERY CLEAR SIGN OF BROADENING AS WELL. AND IMPORTANT TO FOLLOW FOR THE NEXT YEAR. OLIVER: AND I WANT TO ASK YOU ABOUT SOME OF THE RISKS THAT ARE FACING EUROPE AND I JUST WANT TO BRING A COUPLE HEADLINES THAT WE ARE GETTING FROM THE CHINESE FOREIGN MINISTRY TALKING ABOUT CHINA SAYING THEY NEED DEEPER TRADE COOPERATION WITH THE EU THAT WOULD BENEFIT BOTH SIDES AND URGES THE EU TO NOT ABUSE TRADE REMEDIES CALLING FOR DIALOGUE. THIS COMES AS WE’VE BEEN REPORTING THAT THE EUROPEAN UNION IS GOING TO TAKE A HARDER LINE WITH CHINA THAT MAY PROVOKE SOME KIND OF RETALIATION. HOW DO YOU SORT OF GAUGE THAT KIND OF THREAT FOR YOUR KIND OF INVESTMENT CASE FOR EUROPE? >> FOR EUROPE, 2027, WILL BE A VERY DENSE POLITICAL YEAR. AND WHENEVER THERE IS POLITICAL CHANGE, WHENEVER THERE IS REALLY AN OPPORTUNITY TO RESET ECONOMIC POLICY, THERE IS ALSO RISKS. AND THEY GO BOTH WAYS. WE ARE THEREFORE REALLY GOING TO STAY VERY ALERT TO EUROPEAN RISK PREMIA BUT AT THE MOMENT FOR SURE, THE MARKET IS HAVING A CAUTIOUS APPROACH WITH RESPECT TO EUROPEAN ASSETS. GUY: NANNETTE, ARE YOU EXPECTING THE EURO TO CHEAPEN WITH SOME OF THESE RISKS THAT ARE GROWING? >> WE DO. FOR ONE, THE U.S. HAS BEEN CONSISTENTLY GROWING MORE STRONGLY THAN EUROPE. REAL YIELDS IN THE U.S., FOR EXAMPLE, ARE HIGHER. SO MUCH MORE THAN IN EUROPE. SO AT THE MOMENT, REALLY THE EURO HAS EVEN ECONOMICALLY IS SORT OF DISADVANTAGED VERSUS THE U.S. DOLLAR. ADD TO THAT, POLITICAL UNCERTAINTY AND RISK PREMIA THAT ARE ALSO REFLECTING IN THE CURRENCY. AND THIS ENDS UP IN A WEAKER EURO. GUY: IN TERMS OF YOUR OUTLOOK ON THE EARNINGS, WHAT HAVE YOU MADE OF THEM SO FAR? WHAT ARE YOU EXPECTING FROM EUROPE? >> EUROPE CERTAINLY WE ARE SEEING NOT QUITE THE SAME ENCOURAGING SIGNS AS IN THE U.S. BUT IT’S ALSO QUITE CONSISTENT WITH THE ECONOMIC PICTURE IN EUROPE. IT IS VERY FRAGMENTED. SOME COUNTRIES DOING MUCH BETTER THAN OTHERS. AND SO AT THIS MOMENT, WE ON AGGREGATE HAVE FELT THAT IT’S ABOUT TO TAKE OUR TIME WITH RESPECT TO EUROPEAN EQUITIES AND STRATEGY. WE STILL SEE THE EARNINGS GROWTH LAGGING BEHIND THOSE OF OTHER DEVELOPED MARKETS AND CERTAINLY EMERGING MARKETS AND AT THIS MOMENT, WE PREFER THE LATTER. OLIVER: AND ONE OF THOSE COUNTRIES THAT’S NOT DOING AS WELL IS OF COURSE FRANCE. I WOULD LIKE TO FOLD THAT OVER WITH WHAT WE’RE EXPECTED TO HEAR FROM THE ECB AND CHRISTINE LAGARDE LATER THIS WEEK. THERE HAS BEEN A LOT OF DISCUSSION ABOUT TPI POTENTIALLY AT SOME POINT DOWN THE LINE. HOW DO YOU EXPECT THAT TIGHTROPE TO BE WALKED BY LAGARDE AND WHERE DO YOU THINK THE THRESHOLD IS FOR SOME KIND OF ACTION FROM THE ECB OR EVEN JUST RHETORIC? >> I THINK THE THRESHOLD FOR ACTION IS GOING TO BE VERY HIGH. I DON’T EXPECT THE ECB TO USE INSTRUMENTS LIKE THE TPI UNLESS THERE IS REALLY THIS RISK OF CONTAGION AND DISORDERLY FUNCTIONING OF FINANCIAL MARKETS OR LIQUIDITY TIGHTENING FOR THE WHOLE OF THE EUROPEAN UNION FOR AS LONG AS THIS REMAINS AN IDIOSYNCRATIC FRENCH ISSUE RELATED TO FRENCH FISCAL METRICS, I THINK IT’S GOING TO BE A TALL ORDER TO EXPECT THE ECB TO ACT UPON IT. HISTORICALLY, THERE IS GOING TO BE SUPPORT FOR SURE IN TERMS OF THE STABILITY AND I DO EXPECT THAT THE DECISION BY RATING AGENCIES NOT TO DOWNGRADE OR HAVE A NEGATIVE RATING ACTION IS GOING TO PROVE HELPFUL AS WELL. OLIVER: WELL, NANNETTE, THANK YOU VERY MUCH. CIO FOR THE EMEA. GUY: WHAT ELSE WE NEED TO KNOW THIS MORNING. CHANCELLOR JOHN HEALEY POISED TO LIVE THE LIVING WAGE BY 4% IN THE BUDGET, 18-20 AGED WORKERS WILL RAISE BY THE SAME AMOUNT AND PLEDGE TO CLOSE THE AGE PAY GAP AROUND MEASURES OF -- THE PANDEMIC AS LOCAL MARKETS RALLIED AFTER THE NATION DODGED A DOWNGRADE FROM MOODY’S AND YIELD INVESTORS DEMANDED TO HOLD 10-YEAR FRENCH BONDS OVER SAFER GERMAN DEBT FELL 14 BASIS POINTS TO 154. AND FLACHIO BOLSONARO ABANDONED CHALLENGES PLANS TO CHALLENGE THE DEFEAT WITH HIS LIBERAL PARTY FORMALLY CONCEDING DEFEAT. BUT BOLSONARO SAYS HE WILL FILE ANOTHER CASE TO HAVE LULA’S TICKET DISQUALIFIED OVER WHAT HE DESCRIBES AS FALSE INFORMATION AND BRAZILIAN MARKETS CRATERED FOLLOWING LULA’S RE-ELECTION WITH THE CURRENCY SLUMPING AND THE BENCHMARK STOCK INDEX RACKING UP DOUBLE DIGIT PERCENTAGE LOSSES. BRAHM’S, THE STORY YESTERDAY. AND LAST NIGHT IN SOHO? OLIVER: YES INDEED. SOMETHING HAPPENING. IN FOOTBALL AS I UNDERSTAND. GUY: I’M GOING TO MISPRONOUNCE IT. I WILL SAY GOLDEN BULL. BUT YOUR PRONOUNCEIATION IS BETTER. I GOT TOLD OFF. OLIVER: THANKS FOR INFORMING ME ON THAT. UK FOOTBALL AS -- SOMETHING I NEED EDIFICATION ON. SPENDING FOR THE AI BUILDOUT HAS UNLEASHED A GLOBAL DEBT BOOM. WE’LL DISCUSS WITH FIXED INCOME OPPORTUNITIES WITH GOLDMAN SACHS AS SIMON DANGOOR, THAT WILL BE NEXT. AND THIS IS BLOOMBERG. GUY: HALF AN HOUR TO GO UNTIL WE START EQUITY TRADING. LET ME SHOW YOU THE FUTURES PICTURE BECAUSE IT HAS BEEN DETERIORATING OVER THE LAST HOUR OR SO. TO A CERTAIN EXTENT, THE NASDAQ IS DOWN BY 4/10 OF 1%. THE LONDON MARKET LOOKS LIKE IT IS GOING TO UNDERPERFORM THIS MORNING AND IT CERTAINLY DROPPED SIGNIFICANTLY OVER THE LAST FEW HOURS. THERE COULD BE QUITE A DECENT HSBC HIT COMING THROUGH JUDGING BY WHAT WE'VE GOTTEN OUT OF THE BACK OF ITS NUMBERS THIS MORNING. OLIVER: LET'S TAKE A LOOK AT THE BOND MARKET AND SEE WHERE YIELDS ARE SHAPING UP THIS TUESDAY MORNING. THE GERMAN 10 YEAR, DOWN JUST ABOUT ONE BASIS POINT TO 3.34%. THE FRENCH 10 YEAR, YIELDS RISING EVER SO SLIGHTLY. CLOSE TO DEAD FLAT, YIELDING YOU 4.5%. WE DID TALK ABOUT THAT YIELD GAP CLOSING BETWEEN FRANCE AND GERMANY YESTERDAY. TECH GIANTS ARE SUCKING UP FUELING A DEBT BOOM AS COMPANIES LOOK TO BORROW HUNDREDS OF BILLIONS OF DOLLARS. CREATING SOME OF THE MOST ATTRACTIVE OPPORTUNITIES IN YEARS. >> ONE OF THE MOST EXCITING TIMES I'VE EVER SEEN. YOU TALK ABOUT THE FINANCING THAT IS COMING OVER THE LAST FEW DAYS FOR GETTING ON AN AIRPLANE, I SPENT THE ENTIRE WEEKEND LOOKING AT SOME OF THESE TRANSACTIONS, PARTICIPATING IN A PRETTY SIGNIFICANT WAY IN SOME OF THESE TRANSACTIONS. THE 10 YEAR NOTICED SORT OF TAKING A BACKSEAT TO WHAT IS HAPPENING IN THE FINANCE AND MARKETS BROADLY. OLIVER: THE 10 YEAR NOTE BACKSEAT. WE ARE JOINED NOW BY SIMON DAN GORE. THANKS SO MUCH FOR JOINING US TODAY, WE HAVE SO MUCH TO TALK ABOUT. SOME OF THE ACTION WE SEE IN THE BOND MARKET OVER THE LAST COUPLE OF DAYS. OVERLAY THAT ON THE BROADER BOND MARKET STORY WE'VE BEEN SEEING FOR THE LAST COUPLE OF MONTHS. >> THANKS VERY MUCH FOR HAVING ME. 10 YEAR YIELDS UP AT THE END OF LAST MONTH, WE'RE GOING TO GET TO THE OVERSOLD TERRITORY. NOW BACK DOWN TO 5%, WE'D BE A LITTLE CAUTIOUS HERE. IF YOU THINK ABOUT THE GROWTH PICTURE IN THE U.S., IT STILL LOOKS TO BE VERY STRONG AND WE SAW THIS MONTH THAT WHEN YOU GET CONCERNS AROUND DEMAND, YOU GET CONCERNS ABOUT THE AI TRADE, YOU CAN SEE A RALLY IN THE BOND MARKET BUT THE UNDERLYING GROWTH STILL LOOKS TO BE VERY GOOD. AND LET'S NOT FORGET THAT WE GOT A LOT OF INFLATION -- INFLATION UNCERTAINTY STILL. WHO KNOWS HOW THINGS ARE GOING TO PLAY OUT IN THE MIDDLE EAST AFTER THE MIDTERM ELECTIONS NEXT WEEK. WE WOULD STILL BE CAUTIOUS ABOUT U.S. VALUE STILL LOOKS TO BE BETTER. OLIVER: SO A LITTLE BIT TOO EARLY TO PANIC OVER IN THE U.S. TREASURY MARKET BUT POTENTIALLY WE COULD SEE THIS SURGE BACK. AND THE CATALYST IS INFLATION. >> EITHER INFLATION COMING LOWER OR GROWTH SLOWING, BUT WE SEE VERY LITTLE EVIDENCE OF THAT IN THE UNITED STATES. RESOLUTION OR AT LEAST MORE CLARITY AROUND THE FLOW OF ENERGY, STABLE FLOW OF ENERGY IN THE MIDDLE EAST OR OF COURSE A BIG TIGHTENING OF FINANCIAL CONDITIONS. WHILST WE'VE SEEN SOME WORRIES AROUND THE AI TRADE, THE UNDERLYING DRIVER OF JUST VERY STRONG, VERY STRONG DESIRE OF THESE COMPANIES WHO CAN RAISE CAPITAL, AND WE SEE META PIVOTS AND MAKE PROGRESS WITH THAT. WE THINK THAT IS LIKELY TO STAY IN TRAIN FOR SOME TIME AND KEEP THAT ECOSYSTEM GOING. GUY: ON THAT LAST POINT, HAVE WE REACHED THE POINT WHERE THE MARKET IS STRUGGLING TO DIGEST SOME OF THE CREDIT THAT IS COMING FROM THE AI TRADE? IT WAS REALLY INTERESTING LOOKING AT BROADCOM THAT BASICALLY HAD TO USE ITS IMPECCABLE BALANCE SHEET TO GET THE ANTHROPIC DEAL DONE. DOES THAT POINT TO THE FACT THAT ONLY THE VERY BEST CREDIT WILL GET IT DONE? >> I THINK THE MARKET IS TRYING TO FIND OUT HOW YOU CAN DIGEST SUCH A LARGE VOLUME IN SUCH A SHORT TIME, ESPECIALLY WITH LOTS OF NOVELTIES AROUND THAT THERE IS FINANCING STRUCTURES. WE'VE GOT THE FINANCE DATA CENTER SHELVES, FINANCE CHIPS, ALL OF THE HYPERSCALER COMPANIES THEMSELVES THAT WANT TO DO INVESTMENT TO THEIR BALANCE SHEET. WHEN YOU LOOK AT THE REVENUE GROWTH ASSOCIATED WITH THE INVESTMENT THAT HAS GONE IN ALREADY, IT LOOKS PRETTY GOOD TO US. AS LONG AS THAT REMAINS TRUE RE-THINK THERE'S GOING TO BE ENOUGH CASH FLOW IN THE SYSTEM AND WE CAN WORK THROUGH THESE VARIOUS DIFFERENT QUESTIONS. FOR SURE, THERE'S GOING TO BE SOME BALANCE SHEET THE END UP NOT WORKING IN THIS HIGH COST OF CAPITAL WORLD. BUT FOR THE BROAD FINANCING OF THE AI TRADE, WE THINK THE MARKET WILL FIND ITS PRICE AND AS I MENTIONED, SOME OF THE ENTITY'S WILLINGNESS TO EITHER ISSUE EQUITY OR TO GO TO SOME OF THE STRONGER CASH FLOW ENTITIES WITHIN THE SPACE AND YOU THEIR BALANCE SHEET IN ORDER TO STABILIZE THIS BUILDOUT PROBABLY MAKES IT MORE SUSTAINABLE. THAT SAID, THERE'S A LOT OF OPPORTUNITIES FOR BOND INVESTORS. THAT IS SOMETHING WE ARE SPENDING A LOT OF TIME LOOKING AT. GUY: JUST COMING BACK TO THE TENURE, ARE YOUR CLIENTS FIND THE TENURE BECAUSE THEY LIKE THE YIELD OR BECAUSE IT GIVES THEIR PORTFOLIO PROTECTION? >> IT'S MORE THE LATTER AT THE MOMENT. AS I SAID, I THINK AT THE MOMENT, YOU WANT TO BE A LITTLE CAUTIOUS ABOUT THAT. WE LIKE TO SEE MORE PROGRESS ON THE INFLATION OUTLOOK. CORE PCE IS GOING TO PRINT LATER THIS WEEK AT SOMETHING LIKE TWO POINT 9% ON THE THREE MONTH ANNUALIZED, SIX-MONTH ANNUALIZED. THE INFLATION PICTURE STILL ISN'T IN THE RIGHT PLACE THAT WOULD BE CONFIDENT HAVING A VERY BIG POSITION IN BONDS. IF WE SEE THAT PROGRESS ON INFLATION, WE THINK THERE WILL BE PLENTY OF DEMAND. BUT WE ARE NOT QUITE THERE YET. OLIVER: OBVIOUSLY WE'VE BEEN WATCHING THE FRENCH BOND MARKET VERY CLOSELY THE LAST COUPLE OF MONTHS. OBVIOUSLY A LOT OF CONCERN ABOUT THE FRENCH BOND MARKET, BUT THERE ARE DEGREES OF CONCERN. I'D LIKE TO HAVE AN UNDERSTANDING HOW YOU ARE THINKING ABOUT THE FRENCH BOND MARKET, THE SPREAD WITH GERMANY. HOW ARE YOU THINKING AT THE FRENCH PROBLEM AND THE YIELDS? >> THERE'S SPREADS AND THERE'S YIELDS. CLEARLY THIS REPRICING OF SPREADS IS HAVING AN EFFECT ON FINANCIAL CONDITIONS IN EUROPE AND THAT HAS A BACK INTO THE ECB. IF YOU THINK ABOUT THE TIGHTENING WE'VE HAD IN EUROPE SINCE THE SEPTEMBER MEETING, THAT IS PROBABLY WORTH ONE INTEREST RATE HIKE. THAT'S ACTUALLY SOMETHING WHICH IS FEEDING INTO A CONSTRUCTIVE VIEW ON BONDS IN GERMANY AT THE FIVE-YEAR PART OF THE CURVE. THE CHALLENGE FOR THE MARKET IN FRANCE IS TO CONSTRUCTIVE ON FRENCH DEBT, DEFINED A CLEAR PLACE FOR THE MARKET IS CLEARING, YOU'RE GOING TO NEED TO HAVE CLEARER SIGNAL FROM THE FISCAL AUTHORITIES OF FRANCE ABOUT WHAT THE MEDIAN FROM STRATEGY IS. IT'S JUST HARD TO SEE THAT THIS SIDE OF NEXT YEAR'S ELECTION. SO THINGS COULD BE CHOPPY. FROM THE LOOK AT THE VERY FRONT END OF THE FRENCH CURVE, THAT DOESN'T SEEM TO BE SOME VALUE JUST TO CARRY THE BONDS AND PORTFOLIOS THAT CAN DO THAT TRADE HERE. BUT YOU NEED TO TAKE A MEDIUM-TERM VIEW. GUY: WHAT IS PRICED INTO GUILT AT OF THE BUDGET? >> THE GOVERNMENT SEEMS TO BE COMMUNICATING TOWARD A DON'T ROCK THE BOAT BUDGET. I THINK WHEN WE GET THE OUTPUT OF THE BUDGET TOMORROW, WE WILL BE LOOKING ESSENTIALLY AT WHAT IS THE EFFECT ON GROWTH, THE EFFECT ON INFLATION AND LESS ABOUT THESE NARROW QUESTIONS OF WHAT SPECIFIC HEADROOM THIS STILL IN THE RULES. GUY: FIXED INCOME MACRO STRATEGIES HAD A GOLDMAN SACHS ASSET MANAGEMENT. COMING UP, BACK TO AI INVESTORS, GETTING BEHIND ANTHROPIC IPO PLANS. >> I THINK WHATEVER THE NUMBER IS GOING TO END UP BEING WE WILL SEE $100 BILLION IN THE IPO WILL DO JUST FINE. IT'S A SOLID COMPANY, AS YOU SAY THEY ARE GROWING RAPIDLY, THEY HAVE NICE REVENUE TRAJECTORY AND SO THEY WILL BE ABLE TO FINANCE THEMSELVES IN THE CAPITAL MARKETS WILL FUND THEM JUST LIKE THEY FUNDED OTHER TRILLION DOLLAR COMPANIES. GUY: THAT WAS OF COURSE MR. RICHARDS. THIS IS BLOOMBERG. GUY: 17 MINUTES TO THE EQUITY MARKET OPEN. THE COMPANY OUT WITH NUMBERS DELIVERING A BEAT AND ERASE THIS MORNING. SEEN GROWTH FROM NEWER MEDICINES INCREASINGLY OFFSETTING GENERIC COMPETITION. WE'RE JOINED NOW BY THE CEO. A BEAT AND A BEAT AND ERASE, I'M WONDERING IF THAT IS DOWN TO BETTER COST CONTROL. >> I THINK IT WAS A COUPLE OF THINGS. WE DID SEE VERY STRONG GROWTH ON SOME OF THEIR KEY BRANDS THAN OBVIOUSLY FLOWS THROUGH THE BOTTOM LINE AND THAT ALSO YOU SAW VERY GOOD PRODUCTIVITY MEASURES. THEY GIVE IT THE CONFIDENCE NOT ONLY IN Q3, BUT TO UPGRADE THE GUIDANCE FOR THE REMAINDER OF THE YEAR. GUY: CAN WE DID HAVE A QUICK CONVERSATION ABOUT WHERE GUIDANCE IS RIGHT NOW. I NAVE GOT AN EVENT COMING UP IN LONDON WHICH IS GOING TO GIVE US A LONG-TERM PICTURE ON WHERE WE ARE. BUT WITH A COUPLE DISAPPOINTING TRIAL RESULTS BACK IN SEPTEMBER, I'M JUST WONDERING HOW YOU'RE FEELING ABOUT THAT KIND OF MORE MIDTERM GUIDANCE, HIGH SINGLE DIGITS AND WHETHER THAT SHOULD BE IN QUESTION NOW. THE MARKET IS CERTAINLY BECOMING MORE CAUTIOUS ON THAT NUMBER BUT I'M WONDERING IF YOU ARE AS WELL. >> WE HAVE FULL CONFIDENCE WHEN WE LOOK AT OUR FIVE YEAR AND 5-10 YEAR GROWTH GUIDANCE. ON THE ONE HAND, HE ALSO HAD A VERY BIG WIN. DELIVERING EXACTLY AS WE HOPED IT WOULD, WE GUIDED TO BE A $4 MILLION PLUS MEDICINE. WE'VE ALSO HAD SOME STRONG OUTPERFORMANCE ON SOME OF OUR OTHER CLOSE DRIVERS THAT HAVE EXCLUSIVITY INTO THE MID-20 30'S, SO WE ARE MAINTAINING OUR GUIDANCE OF 5%-6% AT 2030 AND MID-SINGLE DIGIT GUIDANCE FROM 2030 AND BEYOND. WE WILL UPDATE THAT AT CAPITAL MARKETS TODAY BUT I THINK WHEN YOU LOOK AT THE SHARES AS WELL, THE MARKET RECOVERED BECAUSE I THINK PEOPLE HAVE STARTED TO FULLY MODEL IN THE UPSIDE FROM THE POSITIVE READOUT AND IT REALLY OFFSET THE NEGATIVE READOUTS. AND WE ARE STILL WE THINK THERE IS A PATH FORWARD FOR THIS MEDICINE AND IT COULD BE A MULTIBILLION DOLLAR DRUG. >> DOES THAT MAKE YOU MORE INCLINED TO THINK ABOUT GROWTH OUTSIDE GROWTH ORGANICALLY OR INORGANICALLY? >> ABSOLUTELY. WE REFLECTED ON THAT AND REALLY THOUGHT THROUGH. DOES THIS MAKEUS CHANGE OUR APPROACH? I THINK IT DOESN’T MOST OF OUR M&A IS IN THE SUB$2 BILLION RANGE. WE’RE ONE OF THE MOST ACTIVE COMPANIES IN THE INDUSTRY BRINGING ON EARLY STAGE INNOVATION. WE’RE VERY SELECTIVELY DOING YIELDS. WE HAVE TWO MEDICINES NOW THAT HAVE THE POTENTIAL TO COME TO MARKET IN THE COMING YEARS IN DMD AND THE OTHER CONDITION, AND I MENTIONED THE THIRD DRUG WILL HAVE TO DO SOME ADDITIONAL WORK. BUT STILL ON TRACK. WE DON’T SEE A REASON TO CHANGE OUR APPROACH AND GIVEN OUR CONFIDENCE AND OUR LONG RUN GROWTH OUTLOOK AND ALSO WE DON’T SEE THE NEED TO DO ANYTHING DRASTIC. WE WOULD RATHER DON’T BOLT ON M&A STRATEGY AND WE ARE CONFIDENT WE’LL DRIVE GROWTH INTO THE 2030’S. OLIVER: THERE ARE A NUMBER OF DIFFERENT SCENARIOS. A LOT OF THEM ARE NIGHTMARE SCENARIOS. A FEW ARE DREAM SCENARIOS AND THOSE TEND TO BE CONCENTRATED ON THOSE WHO SUPPORT THE AI BILL IN THE MEDICAL FIELD. ARE WE ABLE TO SEE SHOWS BENEFITS, DREAMING THE FUTURE HUMANITY. ARE YOU SEEING THOSE BENEFITS NOW FROM ARTIFICIAL INTELLIGENCE AT NOVARTIS? >> I THINK THIS IS GOING TO COME IN PHASES. WE HAVE SEEN THE IMPACT. CLINICAL PRACTICE. THE WAY PHYSICIANS PRACTICE MEDICINE ALREADY IS TRANSFORMED IN THE U.S. AND ALSO AROUND THE GLOBE. QUALITY OF CARE IS GOING UP. PHYSICIANS CAN ACCESS THE LATEST INFORMATION AT THEIR FINGERTIPS AND PROVIDE BETTER CARE. I THINK WE’LL START TO SEE THE IMPACTST OF DRUG R & D. THAT WILL COME IN STEPS. WE’LL SEE HOPEFULLY BETTER DRUG DESIGNED OVER TIME AS AI HELPS US UNTHROCKMORTON HUMAN BIOLOGY THAT WE DON’T FULLY UNDERSTAND, WE’LL START TO SEE MANY MORE DECISIONS BEING ABLE TO BE TREATED AND HOPEFULLY SOME BIG STEPS FORWARD IN PUBLIC HEALTH. THIS WILL TAME SOME TIME. GUY: CAN I COME BACK TO THE M.S. STORY YOU TALKED ABOUT A TIGHT END DATA YOU REVEALED IN TORONTO FRIDAY? TALKING TO A FEW PEOPLE ABOUT THIS? THIS SEEMS TO BE NOVARTIS DOES WELL WHEN IT COMES TO THE SAFETY PROFILE. THERE IS AN OPEN QUESTION ABOUT EFFICACY AND COMPETITION AGAINST THEIR RIVAL ROCHE. SHOULD WE FOCUS ON THE SAFETY SIDE? IS THAT WHERE YOU THINK THE DRUG WILL BE THE WINNER ULTIMATELY AND THEREFORE BE DELIVER FROM A COMMERCIAL POINT OF VIEW THE RETURNS THAT YOU’RE PREDICTING? >> I THINK WHAT IS REALLY IMPORTANT IS TO UNDERSTAND HOW PHYSICIANS THINK. I’VE HAD PERSONALLY AND THE COMPANY HAS BEEN -- FOR OVER 20 YEARS. WHEN THERE ARE SO MANY DIFFERENT OPTIONS AVAILABLE THE FIRST THING A NEUROLOGIST WANTS IS TO KNOW THEY HAVE A SAFE MEDICINE BECAUSE THEY HAVE OTHER SAFE OPTIONS FOR THESE PATIENTS AND THESE PATIENTS ARE ON THERAPY FOR DECADE. SAFETY HAS TO BE THE BEDROCK. REALLY A BEAUTIFUL SAFETY PROFILE. IS THE MEDICINE ABLE TO CONTROL THE DISEASE? THERE HAS BEEN A LOT OF FOCUS ON ONE OR TWO PARAMETER THEY ARES IN THE STOCK ANALYST COMMUNITY. WE KNOW FROM A CLINICAL STANDPOINT, CAN THEY CONTROL THE DISEASE? YOU CAN CONTROL THE DISEASE. TAKEN TOGETHER WE BELIEVE THIS COULD BE A $4 BILLION PLUS MEDICINE. WE HAVE ADDITIONAL CLINICAL TRIALS IN MULTIPLE SCLEROSIS. IT COULD BE A HUGE MEDICINE. ONE OF THE LARGE NEST -- LARGEST IN NOVARTIS HISTORY. IF YOU DON’T DELIVER SAFETY YOU’RE USUALLY RELEGATED TO A NICHE MEDICINE. GUY: THANK YOU. THE CEO OF NOVARTIS. WE HAVE BEEN SPEAKING, WE HAVE HAD OTHER DISAPPOINTING DATA OUT OF FRANCE. OLIVER: YOU MAY NOT BE SHOCKED TO DISCOVER, THE LOWEST SINCE JUNE OF 2013. AN ESTIMATE THAT WAS SUPPOSED TO COME IN AT 845. IT CAME DOWN AT 80. WE’RE TALKING ABOUT FRENCH CONSUMER CONFIDENCE ON THE FLOOR, THE LOWEST IT HAS BEEN IN 13 YEARS. GUY: CONFIDENCE IS EVERYTHING FOR AN ECONOMY. YOU CAN LOWER INTEREST RATES AND DO ALL KINDS OF STUFF BUT UNLESS YOU HAVE CONFIDENCE, IT IS REALLY HARD TO MAKE AN ECONOMY MOVE. OK. LET’S GET THE TAKE ON WHAT WE HAVE SEEN OVER THE LAST FEW HOURS FROM MARK CUDMORE FROM OUR MARKETS LIVE TEAM, EXECUTIVE EDITOR THERE. HAS ANTHROPIC DOMINATED YOUR TAKE? >> IT PROVIDED A RELIEF RALLY BECAUSE THEY CONFIRMED THAT THE IPO WILL GO AHEAD. THE BASE CASE EXPECTATION, WHICH IS WHY THE RELIEF RALLY IS TEPID GIVEN THE LOSSES WE HAVE SEEN RECENTLY. THERE WAS A BIT OF SPECULATION GIVEN THE AI CONCERN OVER THE PAST WEEK, PARTICULARLY FUNDING AROUND THE SECTOR. THE SMALL RISK THE ANTHROPIC IPO MIGHT BE DELAYED. THE FACT IT WAS CONFIRMED IT WAS GOING TO GO AHEAD. WE’RE NOT OUT OF THE WOODS YET. THIS IS NOT A BEARISH TAKE. THIS IS GOING TO BE DECIDED BY THE BIG TECH EARNINGS. THE BACK DATE OF BIRTH IS THE AI CAPEX SPENDING CONTINUES UNABATED. YOU SEE KOREAN EXPORT FIGURES, OUR COLLEAGUE OUTLINED HOW IT IS A GOOD LEADING INDICATOR FOR THAT AI SPENDING. THEY CONTINUE TO REALLY BE KIND OF GOING EXTREMELY STRONG. WE KNOW FROM ALL THE PLANS ANNOUNCED PEOPLE ARE STILL SPENDING FREELY. WE SAW META INCREASE THEIR SPENDING. THAT SHOULD DRIVE THE AI TRADE FURTHER. WHAT HAPPENED IS WITH THE EARNINGS THIS WEEK, PEOPLE ARE CONCERNED HOW ARE THEY VALUING THAT ANTHROPIC TRADE? HOW DOES THAT MEAN ON THEIR EXPECTATIONS FOR REVENUES VERSUS EXPENSES IF THE YEAR AHEAD. I THINK EARNINGS THIS WEEK DECIDE THE BINARY MOMENT WE’RE AT. THE CREDIT MORE SPECULATIVE END OF THE SPECTRUM STARTS GOING INTO THE MORE DEVELOPED END OF THE SPECTRUM. OR WE GET MOMENTUM INTO THE ANTHROPIC IPO THAT PROVIDES THE YEAR-END RALLY AND THE BUBBLE BURSTS. OLIVER: WHAT ARE YOU WATCHING FOR THE CENTRAL BANK STORY? THE ECB AND FED ON DECK. WHO CAN MOVE THE NEEDLE MORE THIS WEEK? >> YOU KNOW, WE HAVE A LOT OF MEETINGS ON DECK THIS WEEK. I DON’T THINK THEY ARE THE BIG STORY. THE BOND STORY IS REALLY ABOUT OIL MARKETS. OBVIOUSLY WE HAVE OIL MARKETS AT THE HIGHS NOW. THERE IS MASSIVE SPECULATION WE’LL GET FURTHER MIDDLE EAST ESCALATION AFTER THE ELECTIONS IN THE U.S. NEXT WEEK. THAT IS WHAT IS REALLY DRIVING THIS MARKET PACIFIC NORTHWEST THE TO SEE JUST ABOUT BRENT CRUDE. IT IS ABOUT ALL THE END PRODUCTS OUT THERE. IT IS WEIRD TO HAVE SUCH A HIGH LINEUP OF CENTRAL BANKS AND WE’RE LARGELY IGNORING THEM BECAUSE OF AI TRADE ALSO. AI TRADE AND OIL. NOT CENTRAL BANKS. GUY: MID-TERMS ARE NEXT WEEK. WHERE YOU SENSE THE MARKET IS POST THE MIDTERMS. SAY WE GET A SWEEP THAT FREESE UP TRUMP TO RETURN TO THE IRAN STORY. >> YEAH. I THINK BOTH CENTRAL BANKS AND MID-TERMS ARE GOING TO TAKE A LOT OF NEWS TIME OVER THE NEXT WEEK OR SO. BUT THEY ARE NOT GOING TO BE THE BIG DELIVER A YEAR END. IT IS STILL THE AI THEME MOST IMPORTANT WITH THE VOLATILITY AND WHAT HAPPENS IN IRAN AND ENERGY PRICES. GUY: OK. NEXT FEW DAYS WE’LL WATCH THOSE TWO THINGS. AFTER THAT, BACK TO WORK. MARK, THANKS VERY MUCH INDEED. YOU CAN CATCH UP WITH MARK’S VIEWS, TEAM’S VIEWS, MILV GO IS WHAT YOU NEED TO DO ON YOUR BLOOMBERG TERMINAL. EQUITYES INTO THE OPEN LOOK LIKE THEY ARE GOING TO BE A LITTLE BIT SOFTER. NASDAQ FUTURES HAVE CERTAINLY FADE OVERNIGHT. LOOKS LIKE SOME OF THE SINGLE STOCK STORIES ARE FASCINATING. HSBC IS ONE TO WATCH. OLIVER: AND I WONDER HOW MUCH OF THE MACRO STORY AND THE TURNAROUND WE’RE SEEING IN OIL THIS MORNING. NOW IN POSITIVE TERRITORY UP .25%. THAT IS PROBABLY PART OF THE DRIVING SENTIMENT WE HAVE SEEN FOR THE FUTURES STORY HERE IN EUROPE. ANOTHER INTERESTING THING. OUT OF CHINA, THE FOREIGN MINISTER BRIEFING. THE CHINESE ARE TAKING A VERY MEASURED APPROACH. THEY WANT A NEGOTIATION WITH THE EUROPEANS AND THEY DO NOT WANT TO ESCALATE YET. GUY: QUICK LOOK AT FUTURES BEFORE WE GET YOU INTO THE MARKET OPEN. FIVE MINUTES TO GO UNTIL GET THERE. AS YOU CAN SEE, I THINK WE’LL SEE SOME MOVEMENTS HSBC THIS MORNING. THE OPEN IS FIVE MINUTES AWAY. THIS IS BLOOMBERG. GUY: TUESDAY MORNING LESS THAN TWO MINUTES TO GO. THIS IS THE LEGACY THIS IS YESTERDAY IN THE UNITED STATES, QUITE A QUIET BACK END TO THE U.S. SESSION YESTERDAY, OVERNIGHT WE SEE FUTURES BEGINNING TO DIP A LITTLE BIT AS WELL. EUROPEAN FUTURES PICTURE, A FEW STOCK STORIES PAYING ATTENTION TO, DOWN BY AROUND HALF OF 1%. IT LOOKS LIKE IT WILL FARE A LITTLE BIT WORSE, THERE'S ALSO GOING TO BE AN HSBC EFFECT WORTH WATCHING. STOCKS UNDER PRESSURE, IS THAT GOING TO TRANSLATE INTO THE LONDON MARKET SESSION AS WE GET IT GOING IN LESS THAN A MINUTE'S TIME. THE DAX WILL BE INTERESTING AS WELL DOWN BY 4/10 OF 1%. OLIVER: WATCHING PORSCHE, HSBC, HSBC OVER IN HONG KONG DOWN UP TO SIX PERCENT AFTER THE EARNINGS DISAPPOINTED JUST A LITTLE BIT THIS MORNING, I THINK THAT'S BROUGHT SOME DOUBT AS TO WHETHER HSBC IS GOING TO BE ABLE TO STICK TO THE GUIDANCE THEY MAINTAIN. WE WILL BE WATCHING VERY CLOSELY. A VERY DIFFICULT TIME FOR THE AUTO INDUSTRY OVER IN EUROPE. EARNINGS REPORT IS GOING TO BE SOMETHING THAT WILL NOT BE DISASTROUS IF THEY MANAGE HAVE PROFIT HOLDING WE HAVE CITI SAYING IT'S COMING IN AS EXPECTED. TRYING SOMETHING THAT'S NOT, DO TOO MUCH DAMAGE OF THE OPEN. APPLIED MATERIALS BOOSTING IN THE FELLOWSHIP EQUIPMENT MAKER ABOUT 20%. CALLED UP 7% ON TRADE. GUY: THANK YOU. LET'S TALK ABOUT THIS OPEN, EXPECTING A FADE THAT'LL WE ARE LOOKING FOR. WE ARE ACCEPTING EUROPEAN EQUITIES THERE'S A NUMBER OF SINGLE STOCKS WILL GET TO THOSE IN JUST A SECOND. THE FTSE FALLING FAIRLY -- DOWN BY 7/10 MAYBE 8/10 OF 1% RIGHT NOW. HSBC IS A BIG WEIGHT IN THE LONDON MARKETS. THINK ABOUT THE STORY VERSUS THE PERCENTAGE MOVES. CONSUMER DATA WE ARE SEEING THIS MORNING A SIMILAR AMOUNT. SO THERE'S A UNDERPERFORMING STORY COMING THROUGH FOR LONDON. FOLDED BACK IN TO THE NARRATIVE, WE GET THAT OPENING JUST A SECOND AND WE WILL WAIT AND SEE HOW THE DACS IS TRADING AT THE MOMENT THE NARRATIVE IS UNDERPERFORMANCE OUT OF LONDON AND I'M WONDERING HOW BIG OF AN EFFECT IT'S HAVING. OLIVER: YOU CAN SEE THE BANKS OF THE BIGGEST LOSER THIS MORNING DOWN BY 1.6%, UP ALL OF THE HSBC SHARES, WE CAN SEE HSBC TRADING THIS MORNING SOME SORT OF MATCHING WE SAW OVER IN HONG KONG A LITTLE BIT EARLIER AND APPLIED MATERIALS BOOSTING ITS STAKE IN THAT COMPANY ABOUT 20% YOU CAN SEE THAT STOCK IS NOW HALTED THIS MORNING POTENTIALLY I WOULD IMAGINE TO THE UPSIDE. WE WILL BE WATCHING CLOSELY SOME OF THE OTHER STORIES THIS MORNING ALWAYS WATCHING, TRYING TO PULL UP A PRICE ON THE DACS WHICH WE ARE GETTING IT WAS A BIT OF A DISAPPOINTMENT. GUY: NOVARTIS LOOKS LIKE IT'S HIGHER. WE'VE GOT A BIG CAPITAL MARKETS DAY COMING UP MID-NOVEMBER, POSSIBLY THE MARKET LOOKING TO FILL IN THERE BUT THE STOCK CONTINUING TO RISE NOW OVER TO PRETEND. -- RIGHT NOW OVER 2%. I CANNOT SEE THAT THAT MUCH. NOVARTIS STANDING OUT FROM THE CROWD WHEN HE COMES TO THE WIDER NARRATIVE. HSBC BIG DRAG THIS MORNING. OBVIOUSLY VERY BIG FOOTPRINTS, DOWN BY 3% THIS MORNING. THAT'S BEING TAKEN WITH STANDARD CHARTERED AS WELL. ON THE BACK OF MAYBE WHAT WE ARE HEARING FROM PORSCHE. OLIVER: MEDIA NUMBER ONE UP BASIC RESOURCES, HEALTH CARE AND TECHNOLOGY A QUARTER PERCENTAGE GAINS. WE ARE JOINED BY MADISON WHO'S A GLOBAL INVESTMENT STRATEGIST AT J.P. MORGAN PRIVATE BANK. THANKS FOR JOINING US THIS MORNING. I WANT TO BREAK DOWN WHERE WE GO FROM ANTHROPIC YESTERDAY AND HOW THAT CHANGES. FOR THE BEARS AND THE BULL'S OVERALL IT SEEMS THE BULLS ARE SORT OF ONE OUT. MADISON: I THINK WHEN WE ARE EVALUATING WHERE WE ARE WITH AI TODAY IT'S VERY MUCH OUR BELIEF WE ARE IN AN EXECUTION ERA FOR AI. WITHIN THAT THERE IS A HIGH DEGREE OF INVESTOR SCRUTINY AROUND WHETHER OR NOT THESE COMPANIES CAN CONTINUE TO GENERATE STRONG REVENUES AND CERTAINLY WHETHER OR NOT THEY CAN FUND FUTURE COMMITMENTS AND HOW THEY ARE DOING THAT. WHEN WE PIECE THIS TOGETHER WE ARE TAKING THIS AS SENTIMENT INDICATORS AND IT'S OUR BELIEF DESPITE THIS LEVEL OF SCRUTINY AND SOME OF THE SHORTER TERM VOLATILITY CONSTERNATION MARKETS ARE WORKING FROM IN TERMS OF DETERMINING WHO THE BENEFICIARIES OF THIS LONGER-TERM CYCLE CAN BE, WE BELIEVE ULTIMATELY AI WILL BE INCONSEQUENTIAL AND WE ARE MORE IN LINE WITH THE VIEW THAT AI WILL BE INDICATIVE OF A MEASURABLE AND DURABLE BOOST TO PRODUCTIVITY OVER THE LONG TERM. OLIVER: TALKING ABOUT A DURABLE UPLIFT AND PRODUCTIVITY OVER THE NEXT 10 TO 15 YEARS IN TERMS OF THE FORECAST HORIZON. WE HEARD FROM APOLLO YESTERDAY TORSTEN SLOK SAYING AI BENEFITS OF BEEN CONCENTRATED ALMOST ENTIRELY TO THE MAG SEVEN AND THERE'S BEEN NO DETECTABLE PRODUCTIVITY BOOST. YOU .26% SHOW UP IN SOME PRODUCTIVITY BOOST IN THESE COMPANIES? MADISON: THERE'S A DISTINCTION TO BE MADE BETWEEN MICRO LEVELS OF PRODUCTIVITY GAINS VERSUS ECONOMY WIDE AND MACRO PRODUCTIVITY GAINS. WHAT WE KNOW OVER TIME IS IT TENDS TO FOLLOW THE J CURVE IN THE IMMEDIATE TERM THAT BROUGHT ECONOMY PRODUCTIVITY COULD BE UNAMBIGUOUS IN TERMS OF THE SINGLES. WHEN YOU LOOK UNDER THE HOOD IN TERMS OF THE INDIVIDUAL TASKS THAT AI IS ABLE TO AUGMENT OR AUTOMATE I THINK YOU ARE SEEING THOSE MORE PROFOUND IMPACTS AS WE LOOK TOWARDS THE FUTURE ROUGHLY TWO THIRDS OF U.S. WORK TASKS ARE EXPOSED TO AI FIVE TO 6% OF THOSE TASKS ARE SEEING AI UTILIZATION TODAY. WE BELIEVE THAT WILL RISE TOWARDS 40% OVER THE NEXT 10 TO 15 YEARS. WHEN WE SPEAK WITH OUR CLIENTS WE ARE ALWAYS REALLY MINDFUL OVER CONCENTRATION RISKS MIGHT EMANATE FROM. BUT AT THE SAME TIME WE WANT TO ENSURE WE HAVE EXPOSURE TOWARDS US FUTURE AREAS OF GROWTH. FOR US IT'S NOT NECESSARILY ABOUT PLAYING AI AS TRADE IT'S MORE ABOUT THAT PATH. WE ARE IN THAT BUILDOUT PHASE THAT HAS BROUGHT TORSOS AI ENABLERS. AS AI DIFFUSES ACROSS THE ECONOMY. AND EVEN PROCESS THAT SHIFT SHOULD MOVE LESS AND MORE TOWARDS THE ADOPTERS. WE ARE NOT THERE YET WHICH IS OVERSEEING MORE MARKET FOCUS. EVEN THOUGH WE SEE NOT SPREAD OUT TO THE INFRASTRUCTURE AND POWER OF UTILITIES. GUY: BUT NOT ADVISING. MADISON: I THINK WE ALWAYS ADVOCATE FOR BALANCE. INDUSTRIES AND TECHNOLOGIES ALSO HAVE SECURITY AND JUSTICE OVERALL BROADENING CYCLE WE ARE LOOKING AT. WE ALSO ADDING AN ELEMENT OF WITHIN PORT SO LATE -- PORTFOLIOS. YOUR THINKING THROUGH TWO DIFFERENT TAIL RISKS ONE IS MORE OF A RISK BUT WE KEEP ADDING FOR HIGH-QUALITY CREDIT. WE SAW THAT INVESTORS. TREASURIES AND BONDS BROADLY DID A. AT THE SAME TIME IF YOU'RE WORRIED ABOUT INFLATION STICKINESS OR AI ECOSYSTEM CONTINUES TO EVOLVE. IT SHOWS THEIR WORTH. OLIVER: I KNOW THIS IS A VERY DIFFICULT QUESTION TO ENTERTAIN BUT WE THINK ABOUT THE HEADLINES OVER THE LAST COUPLE OF DAYS WE OF THE DUTCH GOVERNMENT SAYING THEY WILL CUT 25,000 CIVIL SERVICE JOBS DUE TO AI-RELATED INEFFICIENCIES. MICROSOFT TALKING ABOUT 60,000 JOBS ARE NOT LINKING TO DIRECTLY TO AI. HOW DO YOU THINK ABOUT THE POLITICAL RISK WHERE THE MIDTERMS ARE COMING UP IN THE UNITED STATES, AI IS FRONT AND CENTER IN THAT AS WELL. MADISON: IT IS OF COURSE IMPORTANT IN GOVERNMENTS AND CORPORATIONS ALIKE ARE INVESTING MORE HEAVILY IN TECHNOLOGY TO HELP MITIGATE SOME OF THOSE DOMESTIC CHALLENGES. I THINK THAT I WOULD BE CAREFUL TO CONFLATE THE POTENTIAL WITH AI ECONOMY WIDE JOB DISPLACEMENT. IT'S VERY MUCH OUR VIEW THAT THIS PROCESS OF AI DIFFUSION WILL BE A GRADUAL AND EVEN ONE. AND IT'S NOT GOING TO NECESSARILY THE ENTIRE JOB. WE THINK ABOUT THAT IS BEING FUNDAMENTALLY A COLLECTION OF TASKS. FROM THAT PERSPECTIVE IS A STEADY UPTAKE IN THE UNEVEN GRADUAL NATURE THAT WE BELIEVE LIMITS SOME OF THOSE EMPLOYMENT ECONOMY WIDE RISKS. OLIVER: THINKING ABOUT THE ECB NOT EXPECTING THEM TO RAISE. WE ARE RIGHT AT THAT LINE THE ECB TALKS ABOUT GETTING OUT OF A NEUTRAL RATE GOING INTO RESTRICTIVE TERRITORY WE SEE THE BOND MARKET ALREADY. WE SORT OF SEE IN TERMS OF THE RISKS AND EXPECTING TO RAISE IT IN DECEMBER. MADISON: EUROPE IS A MORE ENERGY DEPENDENT ECONOMY AND CERTAINLY WHEN YOU ARE LOOKING AT THAT RELATIVE THAT K-SHAPED IN THE U.S. ECONOMY. LOOKING AT ACTIVITY INDICATORS AND PURCHASING MANAGER INDICES WE HAVE A DEGREE OF RESILIENCE AND GROWTH. I THINK POLICYMAKERS IN THE ECB IN PARTICULAR HAS BEEN TRYING TO MOVE EARLIER RATHER THAN LATER AND TRY TO STAY AHEAD OF THE CURVE AS IT RELATES TO TRYING TO MAINTAIN CONTROL OF INFLATION EXPECTATIONS. I THINK THE MARKET HAS ALREADY DONE A LOT OF THAT ANTICIPATION ALREADY IN TERMS OF FACTORING THAT INTO A POLICY COULD LOOK LIKE. AS THE ECB IS LIKELY TO HIKE A COUPLE MORE TIMES A YEAR THAT'S ALREADY BAKED INTO CALCULATIONS. I WOULD NEVER RULE OUT FURTHER SPIKES ESPECIALLY AS WE ARE SEEING THAT ENERGY POLICY SHOPS AND FISCAL RISKS ARE BECOMING MORE SO FACTORED IN GROWTH EXPECTATIONS. AND I WOULDN'T RULE IT OUT BUT AT THE SAME TIME I THINK GIVEN THE CENTRAL BANKS ARE MOVING AND WE ARE LOOKING AT INFLATION EXPECTATIONS THAT ARE BROADLY CONTAINED WE DO THINK THERE IS CERTAINLY VALUE IN TERMS OF STEPPING INTO HIGHER-QUALITY CREDIT HERE. GUY: CONSUMER CONFIDENCE DATA IN FRANCE AND THE U.S. IS LOW, IT'S LOW IN THE U.K.. HOW DOES THAT ULTIMATELY TRANSLATE THE CONSUMER DOESN'T SEE INFLATION AS BEING LOW. THEY SEE THAT BUILT UP OVER TIME. MADISON: IT IS SOMETHING TO MONITOR. I THINK TO BRING IT BACK TO THE CONSUMER INFLATION WE ARE SEEING MORE PRESSURE WITHIN HEADLINE PRICES. IT HASN'T NECESSARILY TRANSLATED MEANINGFULLY INTO BROADER CORE MEASURES OF INFLATION. OF COURSE INFLATION IS ELEVATED BUT BY NO MEANS IS IT RUN AWAY OR REFLECTING THE SAME DEGREE OF PRESSURES AS HEADLINE PRICES ARE. THAT IS TO YOUR POINT SENTIMENT IS LOW. BUT IT COMES TO THINKING ABOUT YOU KNOW MARKET, THE MARKET FROM HERE. I THINK WE HAVE SEEN THE MORE PESSIMISM AND PRICED FOR STAPLES FOR INSTANCE. BECAUSE A MORE DURABLE GOODS AND AT RISK OF SOME OF THESE HIGHER PRICES. THAT'S ONE AREA WE MIGHT NOT BE AS CONSTRUCTIVE AND WHY WE ARE MORE ALIGNED WITH STRATEGIC SECTORS IN THE EQUITY MARKETS LIKE TECHNOLOGY, LIKE UTILITIES AND INDUSTRIALS. AND IF YOU WANT A CYCLICAL PLAY WE ARE MORE FOCUSED ON FINANCIALS. GUY: GLOBAL INVESTMENT STRATEGIST AT J.P. MORGAN PRIVATE BANK. BANKS UNDER A LITTLE BIT OF PRESSURE THIS MORNING, -- THIS MORNING. WE DO HAVE ASML COMING UP TECH TRADE AT LEAST ON THIS MORNING BOUNCING A LITTLE BIT, THIS LAYS A LITTLE SOFTER. AND THAT TRADE IS CERTIFIED. LET'S GET SOME DETAILS ON THIS IN THE MUSIC SECTOR. OLIVIA IS HERE WITH MORE. OLIVIA: NOT EVEN ON THE BUSIEST EARNINGS DAY OF THE WEEK YET. KICKING OFF WITH UNIVERSAL MUSIC GROUP. IT WAS ACTUALLY STATE -- SLATED TO OPEN UP ACCORDING TO TRADE GAINS. THAT COMES AS BLOOMBERG REPORTS THE COMPANY HELD PRELIMINARY TALKS WITH PRIVATE EQUITY TYPES INCLUDING APOLLO AND BLACKSTONE ABOUT POTENTIALLY GOING PRIVATE. THOSE TALKS ARE SAID TO HAVE ULTIMATELY LEAD NOWHERE BUT ANY MENTION OF THE POTENTIAL TO TAKE PRIVATE USUALLY HELPS THE STOCK IT IS HELPING UNIVERSAL TODAY. MOVING OVER TO SOME OF THE TECH TRADE YOU GUYS HAVE BEEN SPEAKING ABOUT. IT IS UP MORE THAN EIGHT AND A HALF PERCENT WHICH COMES AS APPLIED MATERIAL RAISED ITS STAKE IN THE COMPANY TO ROUGHLY 20% THEY ALSO SAY THEY PLAN TO ENHANCE COOPERATION GIVEN THE LEADING POSITION IN AI AND ENERGY EFFICIENT COMPUTER. OBVIOUSLY THE AMOUNT OF ENERGY THESE MACHINES USE IS BEING FOCUSED -- IS A BIG FOCUS OF THE MARKET. UNLIKE THE FLIPSIDE OF THAT TRADE IS HIGHER BY MORE THAN 5% AFTER SPAIN'S EASING RULES THAT WOULD ALLOW DATA CENTERS TO USE MORE ENERGY. SO ONE IS HELPING WITH THE ENERGY EFFICIENT TRADE AND THE OTHER IS HIGHER TO USE MORE THAN ENERGY TO POWER DATA CENTERS. IT'S NOT EVEN THE BUSIEST EARNINGS DAY BUT WE HAVE EARNINGS AND FOCUS, HSBC OVER 30% JUMP IN PROFIT STILL NOT MEETING ANALYST EXPECTATIONS THEY ARE. WE ALSO HAD A MESS ON THEIR CAPITAL RATIO AND THE NET INTEREST INCOME. THAT SEEMS TO BE OUTWEIGHING THE FACT THEY HAVE DECENT WEALTH MANAGEMENT INFLOWS AND $1 BILLION SHARE BUYBACK PROGRAM BUT ALL TO NO AVAIL SEEMINGLY DOWN MORE THAN 6% RIGHT NOW. PORSCHE IS HIGHER. JUST -- SALES PARTICULARLY OF THE 9/11 HELPED KEEP THEIR GUIDANCE OF THE YEAR BETTER THAN FIAT RESULT FOR PORSCHE. MORE THAN 10%, THEY HAVE DISAPPOINTING EARNINGS RESULT BUT ONE OF THE THINGS TO THINK ABOUT WHEN IT COMES TO THE RESULT IS THE FACT THAT THEY CITE A SUPPLY SHORTAGE AND GETTING SOME COMPONENTS AND THAT SOMETHING WHICH ALSO ANNOUNCED EARNINGS TODAY MENTIONED AS A CONCERN FOR THEM IT MEANS THAT HAD TO PUSH OUT SALES NEXT YEAR THAT'S ULTIMATELY SOMETHING REPEATEDLY MENTIONED. THEY ARE DOWN SIX AND A HALF PERCENT, NOT A POSITIVE STORY TODAY, THIRD QUARTER LIKE SALES AND THEY HAD TO LOWER THEIR FOUR-YEAR GUIDANCE. THAT IS NOT A CONSUMER ISSUE WHICH IS QUITE INTERESTING IT'S A MANUFACTURING ISSUE THEY ARE STRUGGLING TO GET LYSOL TO THE CONSUMERS WHO WANTED. FINALLY THE EARNINGS WE HAD NOVARTIS CEO SAYING THEY DON'T THINK THEY NEED TO BE REALLY PUSHING GROWTH, WHAT I TOOK AWAY FROM THAT IS IT SEEMS TO BE COMING NATURALLY AND THAT'S WHY THE STOCK IS UP 2%, THEY RAISED THEIR FULL-YEAR GUIDANCE AND THAT'S LARGELY DUE TO THE OUTPERFORMANCE OF NEWER DRUGS OUTWEIGHING THE UNDERPERFORMANCE OR RATHER THE EATING INTO THEIR PROFIT SHARE FROM SOME OF THE GENERICS. UP THEY WERE -- THEY HAD A REALLY BLOCKBUSTER RESULTS BEAT ALMOST EVERY METRICS IN THE THIRD QUARTER AND RAISE THEIR FULL-YEAR GUIDANCE. OLIVER: THANK YOU VERY MUCH FOR THAT ROUND UP OF THE STOCKS MOVING THIS MORNING. COMING UP NEXT WE WILL BE TALKING ABOUT YET AGAIN THE BIG STORY LAST 24 HOURS. ANTHROPIC FILING FOR ITS IPO A BIG QUESTION OF WHETHER THE STOCK GETS TO MARKET. THREADING THE NEEDLE FOR THE AI STORY. THIS IS BLOOMBERG. OLIVER: WELCOME BACK TO THE OPENING TRADE WE ARE 19 MINUTES INTO THE SESSION. A SESSION THAT IS OVERLY SELLING SESSION FOR EQUITIES IN EUROPE. THE EURO STOXX 600 DOWN BY ONE THIRD OF 1%. THE DAX ON THE SHALLOW END OF THAT DONE BY 1/10 OF A PERCENT. THE CAC 40 DOWN BY 4/10 IN THE FTSE 100 DOWN BY 1% THERE. A LOT OF THAT STORY WILL BE HSBC WHICH OPENED DOWN MORE THAN 6%. GUY: A QUICK LOOK AT WHAT EUROPEAN TECH IS DOING. UP BY NEARLY 9% THIS MORNING. THIS IS AS THEY BOOST THE STAKES. AN IDIOSYNCRATIC STORY WHICH IS HAVING AN EFFECT THERE. ELSEWHERE, WILL YOU CALL -- ASML INTERNATIONAL IMPORTS AFTER THE BELL. YOU ARE SEEING SOME GAINS THIS MORNING WITHIN THE TECH SPACE. NOW WHAT YOU ARE ALSO DOING IS A SLIGHT FATE ON THE NASDAQ FUTURES THIS MORNING. EQUITIES -- EVERY TRYING TO JUDGE AT THIS STAGE WHAT WILL BE SEE AND WHAT EFFECT ARE GOING TO GET FROM THAT IPO. THE PROCESS IS UNDERWAY. THE IPO PROCESS HAS STARTED. POTENTIALLY THIS IS A FIRM BUT COULD RAISE MORE MONEY THAN ANY COMPANY IN HISTORY. NO PRESSURE. WHAT YOU THINK SO FAR? THERE'S SO MANY TAKES OUT THERE IN TERMS OF WHERE PEOPLE ARE FOCUSING THEIR ATTENTION SHOULD THIS COMPANY BE -- THERE ARE SO MANY WAYS, WHICH WAY YOU LOOKING AT IT. >> ONE OF THE THINGS THAT'S FASCINATING TO ME IS THE FACT IT'S A PUBLIC BENEFIT CORPORATION. THEY HAVE THAT SAME STRUCTURE AS OPENAI. WHICH MEANS IT'S BALANCING THIS DUAL MANDATE OF PROFIT MAXIMIZATION AND SOCIAL BENEFIT. AND VERY CLEAR THAT THEY HAVE TO MAKE DECISIONS THAT INVESTORS MIGHT FIND CURIOUS. GUY: IT IS NOT A GOOD STARTING POINT FOR A PUBLIC LIST OF COMPANY? OLIVER: -- MATTHEW: I THINK IT'S INTERESTING FOR THE BROADER TECH SPACE BECAUSE IF YOU HAVE COMPANIES LIKE ANTHROPIC AND OPENAI BUT ARE MAKING BIG BETS THEY CONTINUE TO MAKE THOSE BIG BOLD BETS AND THAN HAVE TO INVEST EARLY TO SCALE, THAT HAS RAMIFICATIONS. FOR META, GOOGLE AND AMAZON WHICH I HAVE THAT SOUL PROFIT MAXIMIZING MANDATE AND DIDN'T HAVING TO COMPETE WITH COMPANIES THAT DON'T HAVE THAT THEY PERHAPS THEREFORE DON'T CREATE THE SAME RETURN ON INVESTMENT WHICH IS THAT DUE TO THE INDUSTRY IT TO PRODUCE THE OVERALL RETURN OR PUTS PRESSURE ON OPENAI TO CHANGE THE CORPORATE STRUCTURE OVER TIME. IMAGINE THERE WILL BE PRESSURE ON THEM OVER TIME TO SHIFT PROFIT MAXIMIZATION. THAT IS THE INTERESTING FRICTION TO WATCH. OLIVER: I WANT TO TALK ABOUT THE RISK REWARD BEING THE FIRST AI PURE PLAY TO THE MARKET. YOU CAN SET A LOT OF PRECEDENTS AND BENCHMARKS. YOU CAN IN MANY WAYS GOVERN ON YOUR OWN TERMS BUT YOU ARE THE MAIN PUNCHING BAG IF THINGS DON'T GO WELL. WE WERE TALKING ABOUT THE IRAN WAR THIS IS A VERY DANGEROUS TIME TO BE AN IPO COMPANY. MATTHEW: THESE ARE COMPANIES THAT NEED HUGE AMOUNTS OF CAPITAL THEY'RE LOOKING TO KIND OF RAISE THE WHOLE SECTOR NEEDS CAPITAL PERSPECTIVE. THE SECOND, THIRD OR FOURTH. WE NEVER KNOW WHEN THE MARKET MIGHT CLOSE AND TO RAISE THAT MONEY WE THINK YOU'RE BETTER OFF TAKING THAT. MATTHEW: HOW DOES A BEAR ON THE OAK -- OLIVER: HOW DOES A BEAR ON THE OPENING AI IPO. MATTHEW: IT'S AN EDUCATIONAL PROCESS FOR INVESTORS. IT'S AN OPPORTUNITY FOR INVESTORS TO BETTER UNDERSTAND TO THE OPPORTUNITY. WE SAW MASSIVE GROWTH FOR ANTHROPIC. SO WHEN OPENAI IT ACTUALLY COMES FROM WHEN THEY DO AT LEAST THERE'LL WILL BE EVALUATION MULTIPLIER OUT THERE. GUY: ALWAYS APPRECIATE THE INPUT, MATT BLOXHAM ON THE UPCOMING IPO IN THE ASML INTERNATIONAL CEO LOOKING FORWARD TO THAT CONVERSATION -- ASM INTERNATIONAL CEO. OLIVER: THEIR PROFITABILITY HELD UP DESPITE ANOTHER SHARP DECLINE IN VEHICLE SALES, DEMAND FOR THE COMPANY'S TOP END 911 CARS. WE ARE JOINED BY WILL, LET'S BREAK DOWN THIS EARNINGS REPORT IT SEEMS THERE'S SO MUCH ATTENTION IN NEGATIVE NEWS AROUND THE AUTO SECTOR PARTICULARLY IN EUROPE AND YET PORTIA WAS ABLE TO WITHHOLD THAT -- PORSCHE WAS ABLE TO WITHHOLD THAT. WILL: PORSCHE IS UNDER PRESSURE IN CHINA UNDER PRESSURE FROM TARIFFS BUT HAS MANAGED TO HOLD ITS FORECAST HERE MAINLY BECAUSE THE PREMIUM STRATEGY WHERE IT'S TRYING TO SELL FEWER AND VEHICLE -- SELLING FEWER VEHICLES BUT IS SELLING THE VEHICLES THAT IT IS OUR MANAGING TO RAISE PRICES. THE CHIEF ONE IS THE PORSCHE 911 AND SELLING HIGHER PRICED VARIATIONS LIKE THE TURBO MODELS IN LIMITED-EDITION MODELS. THAT'S HELPING THEM GET THROUGH THIS STORM AT THE MOMENT. GUY: INTERESTING TO HEAR THE CEO SAY THEY ARE NOT LOOKING TO UTILIZE THIS NEW PLANT USED IN THE UNITED STATES, DOES PORSCHE HAVE TO BE BUILT IN GERMANY IS THAT KIND OF THE USB AND IF THEY DIDN'T WITHOUT BE DILUTED. WHAT'S THE THINKING AROUND THIS, WHERE INVESTORS TALKING ABOUT THIS. WILL: A LOT OF INVESTORS THINK IT WOULD MAKE SENSE TO MAKE SOME OF THE SUVS THEY MANUFACTURE IN PERHAPS THE U.S.. IT'S A COMPLICATED PUZZLE. I THINK THE 911 OR THE NEW MODEL THEY SHOWED LAST WEEK THEY WOULD ALWAYS WANT TO SELL WITH A MADE IN GERMANY CHASSIS. BUT THEY ARE PART OF THE VOLKSWAGEN GROUP AND THESE PRODUCTION DECISIONS DON'T ALWAYS FOLLOW PURE ECONOMICAL BUSINESS LOGIC. YOU HAVE TO GET UNION APPROVAL YOU HAVE STATE INTEREST IN GERMANY SO IT'S NOT QUITE SIMPLE A SAYING WE WANT TO IT WOULD MAKE THE MOST FINANCIAL SENSE TO MOVE ESPECIALLY SUVS VEHICLES TO THE U.S.. BUT IT WOULD BE INTERESTING TO SEE HOW THINGS DEVELOP IN THE COMING YEARS IF THEY REMAINED UNDER COST PRESSURE. THEN I THINK WE WILL SEE SOME OF THESE DEBATES BUT FOR NOW THERE ARE NO PLANS TO MOVE PRODUCTION TO THE U.S.. GUY: GREAT UPDATE, THANK YOU VERY MUCH INDEED. COMING UP, A LOT GOING ON THIS WEEK. WE WILL DISCUSS WHAT WE SHOULD EXPECT. MORGAN STANLEY GOING TO BE JOINING US NEXT, 20 SIX MINUTES PAST THE HOUR. THIS IS BLOOMBERG. OLIVER: THIS IS THE OPENING TRADE WE ARE 30 MINUTES INTO THE SESSION LOOKING AT EUROPEAN STOCKS IN THE RED FOLLOWING THAT SESSION. YOU CAN SEE THE STOCKS EUROPE 600 DOWN BY ONE THIRD OF 1%. THE TAX ON THE SHALLOW END DOWN BY 1/8 OF A PERCENT. THE CAC 40 OVER IN FRANCE DOWN ABOUT 4/10 OF A PERCENT IN THE FTSE 100 DOWN MORE THAN 1%. WE WILL GET INTO THAT STORY VERY SHORTLY. >> LET ME SHOW YOU WHAT'S HAPPENING WITH THE INTERNALS. A DEFINITE DOWNSIDE BIAS IN THIS MARKET. A LITTLE BIT OF A LIGHT STORY ON THE VOLUME SIDE. THE AGGRESSIVE ROTATION WE SOMETIMES SEE ON THESE DOWNSIDE DAYS. A FEW INTERESTING STORIES WORTH FOCUSING ON. INCREASING ITS STAKE. FEELS IDIOSYNCRATIC ACROSS TO THE WIDER NARRATIVE. THAT STOCK IS UP BY NEARLY 9% ON THE BACK OF THAT. PORSCHE IS UP. THAT SEEMS TO BE ENOUGH FOR THE MOMENT, BEATING MARGIN GUIDANCE HELPING THAT STOCK OUT AS WELL PAID UP A 12% ON THE NARRATIVE. THERE ARE SOME HEAVYWEIGHT MRS.. TALKING MORE ABOUT HSBC BULIMIA TREE WITH THE STOCK IS DOING IN THE U.K.. DOWN BY NEARLY 7%. IT IS HAVING A BIG IMPACT ON THE FTSE 100. RECORD IS DOWN 6% AS WELL -- RECKITT IS DOWN 6%. SHORTAGES SEEM TO BE ONE OF THE ISSUES THEY ARE FACING. -2.8%, THE STOCK DOWN. OLIVER: META IS SEEKING TO RAISE NEARLY $98 MILLION FROM SELLING COMMON AND PREFERRED STOCK SUPPORTING ITS OF ELEMENT ARTIFICIAL INTELLIGENCE WITH ONE OF THE LARGEST EQUITY OFFERINGS IN HISTORY. THE COMPANY SOLD $12.5 BILLION WORTH OF PREFERRED SHARES AND 25 MILLION OF COMMON STOCK. IT PLANS TO RAISE AS MUCH A $60 BILLION IN AN AFTERMARKET SHARE PROGRAM. VOTING IS UNDERWAY AND IS IN THE COUNTRY'S FIRST NATIONAL ELECTION SINCE THE OCTOBER 7 ATTACK ALMOST THREE YEARS AGO. IT PITS BRIAN -- PREMINGER BENJAMIN NETANYAHU AGAINST HIS MAIN CHALLENGER. FRENCH CONSUMER CONFIDENCE PLUMMETED TO ITS LOWEST LEVEL IN 13 YEARS IN OCTOBER AS HOUSEHOLDS RECKONED WITH MULTIPLE SHOCKS FOR A BOND MARKET SELLOFF TO PROTEST THE DESCENT INTO RIOTING. IT SHOWED HEIGHTENED INFLATION EXPECTATIONS AS THE NUMBER OF HOUSEHOLDS WHO EXPECT PRICES TO INCREASE IN THE NEXT 12 MONTHS ADVANCED. GUY: LET'S TALK ABOUT THE OIL MARKET RIGHT NOW SPIKING HIGHER AS WE SEE NEWS OUT OF SAUDI ARABIA THAT IS LOOKING TO CONTAIN A FIRE NEAR THE OIL HUB, THAT IS THE REACTION YOU ARE GETTING IN CRUDE ON THE BACK OF THAT. WE HAVE SEEN CRUDE MAY BE FADING A LITTLE BIT IN THE LAST 24 TO 48 HOURS. THAT NOW TURNS AROUND AND BECOMES A LOT OF HEADWIND FOR THE STOCK MARKET WE ARE UP TO HALF OF 1% ON THE CRUDE CONTRACT. OLIVER: WE WILL BE WATCHING THAT VERY CLOSELY. FOR NOW WE ARE WATCHING HSBC SHARES AS THEY ARE LOWER AFTER REPORTING THIRD-QUARTER EARNINGS THAT FELL SHORT OF ESTIMATES. ALSO ANNOUNCING A BILLION-DOLLAR SHARE BUYBACK, LET'S GET MORE WITH CHARLIE WELLS. DOWN 7%. TAKE US THROUGH THAT. CHARLIE: IT WAS A SLIGHT MESS, THAT'S THE IMPORTANT THING TO FOCUS ON HERE. I'M SURE HSBC MANAGEMENT IS THINKING ABOUT IT WAS A 32% PROFIT INCREASE FROM THE YEAR BEFORE. THEY MISSED IT WAS 9.6 THE ESTIMATE HAD BEEN 9.7. THIS IS AN EXAMPLE OF THE MARKET MAY BE GETTING A LITTLE BIT AHEAD OF ITSELF ON THIS PICTURE. WHAT WE KNOW HIS INTEREST RATES ARE STAYING HIGHER FOR LONGER AND A LOT OF JURISDICTIONS GLOBALLY. ANALYSTS SEEMED TO BE RAZOR FOCUS THIS MORNING SENDING THAT SHARE DOWN INTRADAY RAZOR FOCUS ON NET INTEREST INCOME BECAUSE THAT MISSED. NOT BY A LOT BUT IT DID MESS. IN THIS ENVIRONMENT THAT IS DISAPPOINTING MARKETS EVEN THOUGH HSBC ANNOUNCED ANOTHER BILLION-DOLLAR BUYBACK FOLLOWING THE SECOND QUARTER EVEN THOUGH WE KNOW THEY ARE IN THE MIDST OF A RESTRUCTURING, THAT SEEMS TO BE GOING WELL BUT THE MARKET REALLY FOCUSING ON THIS TODAY. GUY: THAT'S QUITE A BIG REACTION. I'LL BE GETTING ANY SENSE OF WHY WE ARE GETTING THIS OUTSIZED REACTION? CHARLIE: IT SEEMS TO BE A CASE OF THAT OUTLOOK. THEY MAINTAIN THEIR OUTLOOK THEY ARE TARGETING FOR I BELIEVE 17% RETURN ON EQUITY THROUGH 2028. 17% IS PRETTY GOOD GLOBALLY SPEAKING. THE THINGS WE TALK ABOUT ON THE SHOW A LOT IS CAN YOU COMPARE THE EUROPEAN BANKS TO THE AMERICAN BANKS ANYMORE. AS THIS AN APPLES TO ORANGES TYPE SITUATION. THE THING ABOUT THIS, THAT 17% RETURN ON EQUITY IS PRETTY STRONG. IT PUTS THEM IN THAT GLOBAL RANGE AND I THINK IT IS AGAIN WE SAW THIS WITH THE U.S. BANKS AS A COMPARATOR, WHEN THEY REPORTED EARNINGS A FEW WEEKS AGO FAIRLY SOLID. SOME OF THE RATES TRADING BUSINESSES WE SAW WEAKNESS BUT AGAIN THIS WAS THE MARKET GETTING AHEAD OF ITSELF BEING TOO OPTIMISTIC ON THE BANKING SECTOR. OLIVER: IT'S ALSO A LITMUS TEST FOR WHAT WE ARE SEEING IN THE MACRO STORIES GLOBALLY WE HAVE DEUTSCHE BANK OUT TOMORROW. OBVIOUSLY WE WANT TO SEE WOOD VOLUMES ARE DOING IN TERMS OF GERMANY AND RATES ARE UP MOVING POTENTIALLY FROM TRADING TO NET INTEREST INCOME. WHAT ARE WE LEARNING FROM THE BANKS? CHARLIE: ONE OF THE FIRST QUESTIONS WAS WHAT ARE YOU GOING TO DO IF THERE IS A BIG BANK ATTACKS. THAT REALLY HAS BEEN IN THE ETHER. U.K. BANK EARNINGS RELEASES AND THE CFO SAID WE ARE U.K. DOMICILED. IF THERE'S A BANK TAX WE ARE NOT GOING TO MOVE. THE BIG BANKS THIS IS INTERESTING HAVE BEEN RELATIVELY SANGUINE ABOUT THIS POTENTIAL TAX COMING DOWN THE PIPELINE SO AGAIN THAT'S THE U.K. PICTURE. SOMETHING ELSE IN DO IT. HSBC IS REALLY EXPOSED TO REAL ESTATE IN HONG KONG. WHAT WE SAW IN THIS EARNINGS REPORT WAS CREDIT RISK FOR LOWER THAN EXPECTED AND ON THIS CALL TALKING ABOUT HOW SHE IS SEEING STABILIZATION IN THE HONG KONG PROPERTY MARKET. GUY: CHARLIE, VERY NICE. ON WHAT WE ARE SEEING WITH HSBC. LET'S STAY IN THE U.K.. THE BUDGET TOMORROW. THE U.K. CHANCELLOR JOHN HEALEY IS POISED TO RAISE THE UK'S NATIONAL FLOOR -- PAY FLOOR. THE ANNOUNCEMENT IS EXPECTED FOR PART OF HEELYS FIRST U.K. BUDGET TOMORROW ALONGSIDE EFFORTS TO HELP WITH THE COST OF LIVING. WE ARE JOINED BY OUR BLOOMBERG -- OUR CHIEF U.K. CORRESPONDENT FROM MORGAN STANLEY. WHAT ARE YOU LOOKING FOR. BRUNA: I'M LOOKING FOR A BIT OF A LOW-KEY BUDGET. AS A REMINDER IN OCTOBER OF 2024 AND NOVEMBER 2020 FIVE THOSE BROUGHT 65 MILLION POUNDS IN BUDGET RAISING MEASURES. MOST OF THE CLIENTS I TALKED TO THEY ARE LOOKING FOR REVENUE RAISING MEASURES IN THE RATE OF FIVE TO 10 BILLION POUNDS OF MOST. I WOULD SAY A LOT MORE LOW-KEY THAN WHAT WE SAW IN OCTOBER AND NOVEMBER. COST-OF-LIVING MEASURES PRESENTED AS PROBABLY TEMPORARY AND TARGETED AND I WOULD SAY WITH ONE EYE TOWARDS SPENDING NEXT YEAR WHICH WILL HAVE TO BRING A BIT OF A RECALIBRATION. GUY: FEELS LIKE A WAIT-AND-SEE MOMENT. WHAT ARE DEFICITS GOING TO LOOK LIKE YEARS DOWN THE ROAD. IS THAT WHERE WE ARE? BRUNA: IT IS A CHALLENGING MOMENT FOR THE TREASURY AND THE CHANCELLOR IN THE SENSE GILT YIELDS ARE ELEVATED. PART OF IT IS A REFLECTION OF ENERGY PRICES WHICH WE TALKED ABOUT OIL PRICES. I SUSPECT THERE IS AN ARGUMENT TO BE MADE PERHAPS LET'S SEE WHERE WE ARE IN SIX MONTHS TIME, ADDITIONAL DEBT SERVICING CALLS MIGHT NOT BE THERE IN SIX MONTHS TIME TO A YEAR. THIS IS PERHAPS NOT THE MOMENT MAKE LARGE-SCALE DECISIONS GIVEN THE GLOBAL HEIGHTENED MACRO UNCERTAINTY. OLIVER: WHAT WOULD A BULL CASE FOR THE U.K. ECONOMY SOUND LIKE? BRUNA: NOT SO HARD IT ALL THIS YEAR IT TURNS OUT. THE ECONOMY HAS REALLY RUN IN TWO TRACKS. BUSINESS-TO-BUSINESS SERVICES TECH SECTOR PROFESSIONAL SERVICE SECTORS. THESE HAVE NOT BEEN RESILIENT. WE ARE TALKING ABOUT A YEAR ON YEAR GROWTH AROUND SEVEN TO 8% IN TECH AND PROFESSIONAL SERVICES SECTORS. THESE ARE SECTORS THAT ARE VERY EXPOSED TO THE AI BOOM. TECH ADOPTION BY U.K. CORPORATE'S AS OPPOSED TO U.S. GROWTH. AND THEY ARE DOING WELL. OTHER SECTORS LIKE CONSUMERS I WOULD SAY THEY ARE RESILIENT BUT NOT STRONG AND IF THEY MOVE INTO THE STRONG CATEGORY THEN I THINK THAT IS STILL THE CASE. OLIVER: THERE'S BEEN A LOT OF DISCUSSION ABOUT THE FUTURE OF THE RELATIONSHIP BETWEEN THE U.K. AND E.U.. HOW SERIOUSLY SHOULD WE BE CONSIDERING THAT STORY THROUGH THE POLITICAL WILL FOR SOME KIND OF STRONG PUSH POLL BETWEEN THE U.K. AND EUROPEAN UNION IT DOESN'T ACTUALLY MOVE THE DIAL ECONOMICALLY. ONE THING I'M STRUCK BY HIS ALL THESE FREE-TRADE DEALS THE ESTIMATES OF WHAT HAS FOR THE ECONOMY ARE MICROSCOPIC. BRUNA: U.K. AND E.U. ARE GEOGRAPHICALLY VERY CLOSE OUR SUPPLY CHAINS ARE INTERTWINED AND SO WHATEVER TRADE DEAL YOU STRIKE WITH THE EU IT WILL BRING MORE ECONOMIC GAINS THAN TRADE DEALS WE STRUCK WITH SMALLER ECONOMIES THAT ARE A BIT FURTHER AWAY. SO IN THAT SENSE I THINK EASING SOME OF THE FRICTIONS WE'VE SEEN INTRODUCED IN THE AFTERMATH OF BREXIT CAN HAVE A MEANINGFUL IMPACT ON THE ECONOMY PARTICULARLY ON THE MANUFACTURING SECTOR WHERE THE VOLUMES ARE STILL MEANINGFULLY BELOW 2011. SOME OF THIS IS DUE TO ENERGY PRICES AND A LOT OF US DUE TO SUPPLY CHAINS. IT SEEMS LIKE THE PRIME MINISTER IS OPEN TO A WIDE RANGE OF DEBATE AROUND THINGS LIKE FREEDOM OF MOVEMENT AS WELL SO I GUESS WE WILL HAVE TO SEE WHAT THAT BRINGS. I WOULD REMIND IT TAKES TWO TO TANGO SO WE HAVE TO HEAR WHAT BRUSSELS THINKS AS WELL. A LOT OF INVESTORS ARE VERY FOCUSED ON THAT SO FOCUSED ON THE BUDGET WHAT WILL THE BANK OF ENGLAND THINK ABOUT HOW THE BUDGET MIGHT ADD TO AGGREGATE DEMAND, WE THINK THE SLOWDOWN IS GOING TO BE PRETTY MINIMAL SO WE ARE SEEING 20 BASIS POINTS, NOT A GAME CHANGER. AND THEN THE SECOND ASPECT IS WHAT YOU JUST MENTIONED A NATIONAL LIVING WAGE. WE THINK THE 4% ANNOUNCEMENT IS BROADLY IN LINE WITH WHAT THE CORPORATE HAD EXPECTED WITH CONVERSATIONS WITH CORPORATE'S SO WE DON'T NECESSARILY SEE A REFLECTION IN THOSE PAY SETTLEMENTS. SO THEY ARE GOING TO CONTINUE TO COME IN AROUND THREE AND A HALF PERCENT WHICH I THINK THE CORE PROBABLY SEES AS SUFFICIENT TO GET INFLATION BACK TO 2%. GUY: WHICH BITS OF DEMAND DO YOU THINK WILL BE AFFECTED. BRUNA: THE QUESTIONS ARE ON GOVERNMENT SPENDING WILL BE LIFTED. I WOULD SAY THEY ARE VERY FOCUSED ON THAT AND THEN ANY KIND OF COST-OF-LIVING MEASURES THEY SUPPORT HOUSEHOLD INCOMES AND SHIELD HOUSEHOLDS FROM THE HIGHER ENERGY INFLATION. WE ARE TALKING ABOUT A VERY SMALL IMPACT BUT THOSE OF THE PARTS OF THE ECONOMY. GUY: NICE TO SEE YOU. MORGAN STANLEY'S CHIEF U.K. ECONOMIST. THE OPENING TRADE HAS RECOVERED ON THE U.K. BUDGET. A SPECIAL PROGRAM ON THE CHANCELLOR'S ANNOUNCEMENT AND ANALYSIS TOMORROW. THE OPENING TRADE WILL DIG INTO WHAT IT MEANS FOR THE ECONOMY ESPECIAL SHOW IN FRONT OF A LIVE STUDIO AUDIENCE AFTER THE BUDGET THURSDAY 8:15 A.M. LONDON TIME. YOU CAN FIND OUT MORE ON BLOOMBERG.COM/EVENTS. OLIVER: STILL AHEAD ON THIS PROGRAM VOTING IS UNDERWAY IN THE CLOSELY WATCHED ISRAELI ELECTION. THE FIRST SINCE THOSE ATTACKS OF OCTOBER 7. WE BRING YOU THE LATEST HOW THAT MIGHT BEAR ON THE WAR IN IRAN. THIS IS BLOOMBERG. GUY: 47 MINUTES INTO THE EQUITY MARKET SESSION, WE ARE UP A LITTLE BIT FOR THE BULK OF EUROPE. THINGS ARE LOOKING OK. LONDON IS GETTING WHACKED THIS MORNING BY HSBC, IT'S A HEAVYWEIGHT SHOCK IN THAT MARKET AND YOU SEE THAT EFFECT THIS MORNING. OLIVER: WE ARE ALSO GOING TO WATCH A NUMBER OF OTHER THINGS AS THE DAY AHEAD PROGRESSES. THE ISRAELI ELECTION GOING ON THE FIRST SINCE OCTOBER 7 AND LATER IN THE SESSION WE WILL GET ASM INTERNATIONAL EARNINGS AT 5:00 P.M. U.K. TIME. EARNINGS OVER IN THE UNITED STATES AND THEN LATER DONALD TRUMP SPEAKING AT A RALLY IN TEXAS WITH THOSE MIDTERMS ABOUT A WEEK AWAY. LET'S FOCUS ON THE ELECTION IN ISRAEL. VOTING IS UNDERWAY IN THE COUNTRY'S FIRST NATIONAL ELECTION SINCE THE OCTOBER 7 ATTACKS BY HAMAS THREE YEARS AGO. BENJAMIN NETANYAHU AGAINST HIS MAIN CHALLENGE OF THE FORMER MILITARY CHIEF EISEN CODE. WE ARE JOINED BY BLOOMBERG'S MANAGING EDITOR FOR THE MIDDLE EAST AND AFRICA AND JOINS US. A HIGHLY ANTICIPATED ELECTION ESPECIALLY FOR BENJAMIN NETANYAHU WHOSE TIDE THE FATE OF THE NATION WITH HIS OWN. WHAT ARE THE OUTCOMES WE COULD SEE FROM THIS ELECTION? PAUL: BROADLY SPEAKING THERE ARE THREE OUTCOMES. ONE IS THAT NETANYAHU AND HIS COALITION WHICH IS MOSTLY THE CURRENT GOVERNMENT MANAGED TO WIN AND GET TO 60 SEATS IN THE PARLIAMENT, THE KNESSET WHICH IS WHAT YOU NEED FOR A MAJORITY, THE OTHER MOST LIKELY OPTION IS THE MAIN OPPOSITION BLOC BROADLY SPEAKING LED BY THE FORMER GENERAL, THAT THEY WIN AND MANAGED TO GET TO A MAJORITY, OR WE HAVE A VERY INCONCLUSIVE ELECTION SCENARIO IN WHICH NETANYAHU'S BLOCK GETS BETWEEN 50 AND 55 SEATS AND EISENKOT'S BLOCK GETS THE SAME. IN THAT SCENARIO WE WILL PROBABLY GO TO WEEKS OF HORSETRADING BETWEEN THE POLITICAL PARTIES TO TRY AND SEE IF SOMEONE CAN FORM A GOVERNMENT AND IF THEY FAIL TO ISRAEL WILL PROBABLY BE GOING BACK TO THE POLLS AND ABOUT THREE OR FOUR MONTHS SO BROADLY SPEAKING THOSE OF THE THREE OUTCOMES LIKELY TODAY. GUY: THE REST OF THE WORLD IS WATCHING TO SEE HOW THIS ELECTION COULD AFFECT ISRAEL'S APPROACH, WHAT DO WE KNOW COULD HAPPEN? PAUL: BROADLY SPEAKING, ISRAELIS THE WAR AGAINST IRAN WAS POPULAR AMONG ISRAELIS UNLIKE IN THE U.S. WHERE THE WAR QUICKLY BECAME UNPOPULAR IN LARGE PART EUROPE AND ELSEWHERE AROUND THE WORLD WITH THE SURGE IN ENERGY PRICES. IT ISRAELIS DID NOT LOOK AT THIS WAR THROUGH THAT PRISM, THEY SAW THROUGH THE PRISM OF IRAN BEING AN EXISTENTIAL THREAT, MANY OF THEM DID BELIEVE OR DO STILL BELIEVE THAT IRAN WANTS TO BUILD A NUCLEAR WEAPON AT SOME POINT, SO IN THAT SENSE THE WAR ITSELF BROADLY SPEAKING WAS POPULAR. HOWEVER NETANYAHU HAS BEEN HURT BY THE FACT THAT THIS WAR CONTINUES WE ARE NOW EIGHT OR NINE MONTHS INTO IT, THERE WAS STILL NO END. THE ISLAMIC REPUBLIC IS STILL VERY MUCH STANDING IN IRAN SO THOSE THINGS WERE NOT GOOD FOR NETANYAHU STANDING AMONG ISRAELI VOTERS. ONE THING THAT IS INTERESTING IS THE DIVIDE BETWEEN EISENKOT AND NETANYAHU WHICH IS BECOME MORE PRONOUNCED, BENJAMIN NETANYAHU SAYS UNAMBIGUOUSLY THAT HIS AIM AND THE AIM OF ANY GOVERNMENT THAT HE LEADS HIS REGIME CHANGE IN TEHRAN. HE SAYS THAT IS WHAT HE WILL AIM FOR. EISENKOT HAS BEEN MORE CIRCUMSPECT AND ESSENTIALLY SAID THAT THAT IS NOT NECESSARILY THE GOAL THAT ISRAEL SHOULD AIM FOR, IT SHOULD VERY MUCH STOP IRAN EVER GETTING NUCLEAR WEAPONS OR EVEN HAVING THE CHANCE TO BUILD NUCLEAR WEAPONS BUT HE IS SAYING THERE ARE OTHER ROUTES TO GETTING THERE AND IT DOES NOT NECESSARILY MEAN ISRAEL HAS TO GO FOR REGIME CHANGE WHICH HE IS SAYING IS PRETTY UNLIKELY. SO THAT'S THE MAIN DIVIDING LINE ON THAT PARTICULAR POINT. GUY: PAUL, THANK YOU FOR THE UPDATE LOOKING FORWARD TO THE CONTINUING UPDATE. A CONSEQUENTIAL ELECTION COMING UP OUT OF ISRAEL. WILL THIS GIVE US A RESULT THOUGH IS THE QUESTION. LET'S TALK ABOUT THESE MARKETS AND FIGURE OUT WHAT'S HAPPENING HERE. OIL PRICES ARE TAKING HIGHER. CERTAINLY HAVE AN IMPACT, HSBC STORY TO FOLD IN VIEW OF THE BUDGET THAT'S COMING UP. WHERE ARE YOU FOCUSING YOUR ATTENTION? >> IT FEELS LIKE LAST WEEK WAS VERY MUCH DE-RISKING. RATHER THAN GETTING AWAY FROM IT ENTIRELY YOU HAD EARNINGS, AND STRONGLY BUT YOU HAVE THIS EVENT RISK AHEAD OF US THAT IS QUITE WORRYING. WE HAD THE BIG DEVELOP AN OVERNIGHT BE THE ANTHROPIC IPO AND THAT IS ENCOURAGING BECAUSE THAT WAS MASSIVE. IT TELLS YOU THE DEMAND IS TRANSLATING INTO SALES. THAT'S NOT UNCOMMON FOR THIS KIND OF IPO UNDER AT THE SAME TIME YOU HAD META AND BROADCOM DO SOME RAISING AS WELL. SO THE BIG COMPANIES AREN'T MOVING AWAY FROM FINANCING ALTOGETHER WHICH IS ENCOURAGING BECAUSE THAT SPENDING EVENTUALLY FEEDS DOWN LOWER. I THINK THE ISSUE IS WE HAVE HAD 26% EARNINGS GROWTH THAT WE ARE ON TRACK FOR BUT THE BIG NAMES ARE STILL AHEAD OF US. WE HAVE A LOT OF CENTRAL BANK MEETINGS AND PART OF THE ENCOURAGING PART OF WHAT WE SAW LAST WEEK WAS THAT WAS MET WITH LOWER BOND YIELDS SO IT ALSO MEANS IF YOU'RE WARY IS FINANCING AND THAT FINANCING WHERE HE MEANS THE RATE COMES IN LOWER IT KIND OF BECOMES SELF SOLVING. THAT'S GOING TO PUSH BACK AGAINST THAT IDEAL PARTICULARLY WHEN OIL PRICES ARE SO HIGH. AND ALSO MIDTERMS ARE BEING TIED TO OIL THE AI TRADE MORE BROADLY. OLIVER: THINK ABOUT THE EVENT RISK YOU'RE TALKING ABOUT WERE STILL WAITING FOR THE ANTHROPIC THE PRICE RAISE THE VALUATION OF THE COMPANY THAT WILL KICK OFF AFTER THE MIDTERM ELECTIONS. THEY STILL WANT TO GET THAT TO MARKET BEFORE THANKSGIVING. DOESN'T MAKE A DIFFERENCE IN THE MARKET IF IT'S A $2 TRILLION COMPANY OR A $1 TRILLION COMPANY. THERE'S A LOT OF SPACE BETWEEN THOSE NUMBERS. SKYLER: BUT WE SAW WAS YOU HAD THIS TERM FOR THE MARKET. A LOT OF MONEY NEEDS TO COME FROM SOMEWHERE SO YOU END UP GETTING SELLING ELSEWHERE GOING THERE ESPECIALLY IF YOU GET EARLY INDEX WHICH WE ARE STILL NOT SURE ENTIRELY ON THAT PLAYS OUT HERE. BUT I DO NOT THINK IT REALLY MATTERS IN TERMS OF WHO IS BUYING THAT. PEOPLE ARE BUYING IT FOR THE IDEA FUTURE PROFITABILITY. SAYING HOW DO I SEE THIS GOING, WHAT DO I THINK FIVE YEARS FROM NOW LOOKS LIKE. AND THERE'S A LOT OF UNCERTAINTY THERE. ON THE DAY OF IPO'S TEND REGARDLESS. WHAT IS THAT INSIDER SELLING, THROUGH. YOU ARE VERY MUCH SEEING THIS KIND OF REASSURANCE THEY ARE STILL SAYING WE CAN COME TO MARKET, BUT HASN'T DETERIORATED SO MUCH THAT IT WON'T HAPPEN. GUY: CONFIDENCE IS THE SECRET SAUCE OF ECONOMIC GROWTH. FRANCE DOESN'T HAVE THAT, HOW BIG OF A PROBLEM IS THAT. >> THERE'S BEEN SOME NUMBERS OVER HOW MUCH POLITICAL UNCERTAINTY FEEDS NEGATIVELY INTO YOUR GROWTH. WE SAW THAT FROM CONSUMER CONFIDENCE THIS MORNING COMING IN VERY LOW. THE ISSUE IS THE LOWER GROWTH YOU HAVE THAT MEANS LOWER TAX RECEIPTS LOWER REVENUE FOR THE GOVERNMENT AND IT MAKES THIS FISCAL CONCERN EVEN WORSE. ON TOP OF THAT YOU VERY HIGH INFLATION. FRENCH INFLATION IS SET TO TAKE UP NEARLY 4% ANNUAL HIGH INFLATION THAT WEIGHS ON CONFIDENCE MORE. IN THIS BACKDROP THAT IS VERY WORRYING FOR YOUR DEBT PERSPECTIVE PARTICULARLY WHEN THE ECB IS EXPECTED TO HIKE MORE AND THAT POLICY RATE IS TIED TO THE ENTIRE ECONOMY OF EUROPE. OLIVER: THAT'S ONE OF THE CRITICISMS YOU CAN GET MAY BE GEARED TOWARDS SPAIN BUT OBVIOUSLY SOMETHING WE WILL BE WATCHING WITH CHRISTINE LAGARDE LATER. THANK YOU VERY MUCH SKYLER MONTGOMERY KONING. GUY: SO IT'S OBVIOUS SOME OF THE BIG SET PIECES OF THE WEEK SO WHAT ARE YOU GOING TO BE LOOKING FOR. IS IT ABOUT THE RATE STORY, CHRISTINE LAGARDE. OLIVER: GREAT STORY, WHERE IS INFLATION. THAT'S GOING TO BE THE MAIN QUESTION. THERE IS THIS QUESTION ABOUT DEPARTING FROM WHAT WE CONSIDER THE NEUTRAL RATE AT A TIME WHEN THE OUTLOOK FOR THE EUROPEAN ECONOMY VERY UNSTABLE. WE DON'T HAVE A SUCCESSION PLAN FOR CHRISTINE LAGARDE. THERE ARE THREE MAIN JOBS UP OF THE EXECUTIVE BOARD NEXT YEAR. OF COURSE THERE IS THE BIG QUESTION ABOUT WHETHER RATES ARE GOING BUT THOSE WILL BE THE BIG QUESTIONS OF COURSE FOR THE FUTURE OF FRANCE. GUY: LOOKING FORWARD TO THE COVERAGE COMING OUT OF FRANKFURT LATER ON THIS WEEK. THE GOLDMAN SACHS VICE CHAIR WILL BE JOINING SURVEILLANCE THAT CONVERSATION COMING UP AT 12:00 P.M. LONDON TIME. OIL IS UP, THE BRIEF IS NEXT, THIS IS BLOOMBERG.