Oil Climbs With Iran Pessimistic About Trump Deal Before US Midterms

>> LIVE FROM BRUSSELS, THIS IS BLOOMBERG "DAYBREAK: EUROPE." I'M STEPHEN CARROLL WITH YOUR TOP STORIES. GLOBAL EQUITIES FAULT WE ONE-WEEK LOW AS TREASURY YIELD TO MULTIYEAR HIGHS. OIL GAINS IS IRANIAN OFFICIALS VOICED PACIFISM OVER A DEAL TO END THE WAR. TACKLING AUTHORITY ISSUES, ANDY BURNHAM LOOKS TO SET OUT HIS VISION IN HIS FIRST PARTY CONFERENCE SPEECH AS U.K. PRIME MINISTER. WE ARE LIVE FROM LIVERPOOL. PLUS, OPENAI SCRAPPED ITS LATEST MODEL AFTER A FAILED SAFETY TEST WHILE NVIDIA UNVEILS A NEW SECURITY SYSTEM IT SAYS WOULD HAVE PREVENTED RECENT ATTACKS. A VERY GOOD MORNING TO YOU, LET'S CHECK IN ON WHERE MARKETS ARE MOVING THIS MORNING. WE HAVE JAPANESE SHARES IN PARTICULAR ON THE TOPICS INDEX THIS MORNING. EVER SO SLIGHTLY HIGHER AT THIS POINT, ALL THE WALL STREET FUTURES ARE LOWER AFTER THE BIGGEST DROP SINCE AUGUST YESTERDAY. WE COULD TAKE A LOOK AT OIL PRICES AGAIN DRIVING MARKETS TODAY. BACK UP OVER $107 PER BARREL, THE BLOOMBERG DOLLAR SPOT INDEX SLIGHTLY STRONGER. CAME OUT WITH SOME HAWKISH LANGUAGE IN ITS STATEMENT IN AUSTRALIA, AND OF COURSE, YIELDS BACK IN FOCUS AGAIN. THINGS A LITTLE BIT MORE STABLE THAN THEY WERE YESTERDAY AFTER WE SAW THE 10 YEAR YIELD HIT ITS HIGHEST NOVEL SINCE 2007. IN TERMS OF THE KEY RISK EVENTS WE ARE WATCHING FOR YOU TODAY, WE DO HAVE THE LATEST MONETARY INFLATION NUMBERS AT THIS POINT EXPECTING TO SHOW A SLIGHT UPTICK IN SEPTEMBER. WE GOT ECB SPEAKERS NAGEL AND ALTMAN SPEAKING LATER ON AS WELL AT 1:00 P.M. U.K. TIME, 2:00 IN BRUSSELS, SAM ALTMAN DELIVERED THE KEYNOTE AT DEV DAY. THAT IS ALL TO COME. LET'S GET YOU SET UP FOR THE DAY AHEAD. STOCKS IN ASIA ARE RETREATING FOR A SECOND DAY. LET'S GET AN UPDATE FROM AVRIL IN SINGAPORE. MORNING. AVRIL: YAHAIRA: IT IS REALLY AS YOU SAY, THOSE ENERGY PRICES BEING ELEVATED NOT WITH YIELDS, HITTING SENTIMENT FOR A SECOND SESSION IN THE ASIA-PACIFIC. EVEN THE ASIAN CHIPMAKERS WHICH MANAGED TO CLOCK SOME GAINS EARLIER IN THE SESSION THANKS TO THESE POSITIVE HEADLINES SURROUNDING ANTHROPIC'S PLANNED SPENDING IN THE COMING YEARS, NVIDIA WITH THAT SHARE BUYBACK PLAN. EVEN THOSE GAINS HAVE ERODED. NOW FLIP THE BOARD. THE DEBATE IS THE EXTENT TO WHICH INVESTORS ARE SEEING THESE YIELDS AS AN ATTRACTIVE ENTRY POINT, AND WE ACTUALLY SAW IN THE ASIA SESSION A STEADYING OF SOME OF THESE BONDS INCLUDING IN AUSTRALIA. THIS WAS EVEN BEFORE THE RBA HIKES. BUT NO SURPRISES FROM THE CENTRAL BANK, SO WE WILL WATCH TO SEE WHAT SORT OF SIGNALING WE WILL GET ON THE PATH FORWARD. THAT ALSO SPEAKS TO WHAT YOU ARE SEEING IN THE FOUR-YEAR OPTION IN JAPAN WHICH PASSED THROUGH WITH THE HIGHEST MANNED METRICS IN A LONG, LONG TIME, WHICH SOME OF THEIR COLLEAGUES HAVE BEEN HIGHLIGHTING. MAYBE AN EARLY SIGN THAT INVESTORS ARE SCALING INTO DURATION GIVEN THE RIGHT YIELDS. STEPHEN: OKAY, THANKS VERY MUCH. BONDS, AS WE JUST HEARD ARE STABILIZING IN ASIA AFTER THE BRUISING SELLOFF THAT SENT U.S. TREASURY YIELDS TO FRESH, MULTI-DECADE HIGHS. WHISPERING IN DAVID SAVAGE FOR MORE. WE JUST HEARD ABOUT THE RBA RAISING RATES BY 25 BASIS POINTS AS HAS BEEN EXPECTED. WHERE DOES THE RBA FIT INTO THE GLOBAL INFLATION PICTURE NOW? >> I THINK IT'S VERY EMBLEMATIC OF THE INCREASINGLY HAWKISH TILT WE ARE SEEING FROM CENTRAL BANKS GLOBALLY, AND THAT IS REALLY PUTTING UPWARD PRESSER -- PRESSURE ON SHORT-TERM BOND YIELDS. THE RPA RAISED RATES AS WAS WIDELY EXPECTED, BUT HAS SIGNALED I THINK A LITTLE BIT MORE HAWKISH THAN THE MARKET HAD EXPECTED. THEY SIGNALED THAT THEY WERE WILLING TO RAISE RATES FURTHER IF NEEDED. IN SOME AGAIN, THIS KIND OF BRINGS UP THE OPEN QUESTION, HOW MUCH FURTHER OUR CENTRAL BANKS, PARTICULARLY ABROAD, WILLING TO RAISE RATES IN THE FACE OF ENERGY-DRIVEN INFLATION IN ORDER TO BRING DOWN THAT INFLATION? SO ULTIMATELY, THAT WILL HIT DEMAND AND CERTAINLY WE ARE SEEING EARLY SIGNS OF THAT IN AUSTRALIA WITH SOME OF THE PRESSURES IN THE HOUSING SECTOR. CERTAINLY THAT WILL MANIFEST IN PERHAPS A FLATTENING OF THE YIELD CURVE, BUT RIGHT NOW WE ARE SEEING YIELDS REALLY ACROSS THE CURVE MOVE HIGHER. STEPHEN: TURNING TO U.S. TREASURIES, YOU'RE ON WATCH TO SEE IF WE MAY ACTUALLY SEE THE YIELD CURVE INVERTING. HOW DOES ALL OF THAT FACTOR INTO THE U.S. DATA THAT WE ARE EXPECTING THIS WEEK? DAVID: IT'S A BUSY WEEK FOR U.S. DATA AND IF WE LOOK AT THOSE RATE EXPECTATIONS FOR OCTOBER, THEY'VE MOVED QUITE A BIT. WE ARE NOW OVER 70% PRICE FOR A HIKE IN OCTOBER. OF COURSE, IF WE DO HAVE A HOT PAYROLLS PRINT ON FRIDAY IN PARTICULAR, THAT PRICING COULD FIRM UP EVEN IF IT FURTHER. BUT I THINK REALLY THERE IS A CHANCE THAT WE START TO SEE MORE STEEPENING IN THE CURVE IN THE VERY NEAR TERM BECAUSE IT IS REALLY THE ENERGY COST THAT WE ARE SEEING, NOT JUST CRUDE PRICES, BUT SOME OF THE TENSIONS AND ISSUES WE HAVE ACROSS SUPPLY CHAINS THAT ARE PUTTING UP UPWARD PRESSURE ON INFLATION, WHICH OF COURSE IS DRIVING UP LONG-TERM BOND YIELDS. IF WE SEE SOME OF THE RATE EXPECTATIONS IN THE SHORT-TERM FIRM UP FROM HERE, WE START TO SEE ENERGY COSTS CONTINUE TO PUT UNDER PRESSURE ON LONG-TERM BOND YIELDS, WE MIGHT EVEN SEE A VERY STEEPENING IN THE CURVE IN THE VERY NEAR TERM. STEPHEN: PLENTY TO WATCH OUT FOR, THEN. DAVID SAVAGE, THANK YOU VERY MUCH. OIL IS GAINING FOR A SECOND DAY AS PESSIMISM FOR A BREAKTHROUGH TO END THE IRAN WAR HAS WAGED THE RESUMPTION OF OIL FLOWS THROUGH A KEY PIPELINE. LET'S GET MORE NOW FROM ABEER. IRAN'S FOREIGN MINISTER HAS STAYED IN THE U.S. FOR NEGOTIATIONS. WHAT SIGNALS HAVE WE HEARD FROM THE TALKS? ABEER: NOT MUCH BEYOND THAT. WE KNOW THAT HE ACTUALLY STAYED BACK INTO NEW YORK TO MEET WITH QATARI MEDIATORS, SO THERE WAS NO U.S. INVOLVEMENT IN THAT MEETING WITH THE FOREIGN MINISTER. THIS REALLY IS KEY TO THE WHOLE WIDER NEGOTIATIONS PUSH BECAUSE IT IS SIMILAR TO WHAT WE'VE SEEN OVER THE PAST MONTHS, OF COURSE, WITH THE IRANIAN SIDE MEETING WITH MEDIATORS AND THE METEORS -- MEDIATORS DELIVERING A MESSAGE TO THE UNITED STATES. WE DON'T HAVE A CONCRETE CONCLUSION ON WHAT EXACTLY IS EXPECTED. WE KNOW THAT IRANIANS ARE HOPING TO HEAR A CONCRETE RESPONSE FROM THE U.S. SIDE BY TOMORROW. WE KNOW THAT PRESIDENT TRUMP HAD DENIED REPORTS THAT WERE CIRCULATING THE MEDIA ABOUT HIM WILLING TO GIVE FROZEN ASSETS BACK TO IRAN OR REMOVE SOME OF THOSE OIL SANCTIONS IN RETURN FOR A COMPROMISE ON THE NUCLEAR COMPONENT. ON THE OTHER HAND, WE HEARD FROM IRAN SAYING THAT IRAN'S POSITION HAS NOT CHANGED. THIS IS OF COURSE AFTER REPORTS THAT SUGGESTED IRAN MAY BE TILTED TO COMPROMISE ON THE NUCLEAR COMPONENT. FEENEY A LOT OF CONFUSION HAPPENING BETWEEN THE TWO SIDES, AND YOU ALLUDED TO THIS, BUT YOU ARE LOOKING AT THE MARKET THE REACTING TO THE LACK OF DIPLOMACY THAT WE ARE SEEING TAKING SHAPE AS OPPOSED TO THE POSITIVE PHYSICAL NEWS OF SAUDI ARABIA'S EAST-WEST PIPELINE COMING BACK AT LEAST PARTIALLY TO THE RED SEA. STEPHEN: LET'S TALK A LITTLE BIT MORE ABOUT THE RESTORATION OF SOME OF THE FLOAT THAT PIPELINE. 15%, WE ARE TOLD. HOW MUCH RELIEF DOES THAT PROVIDE FOR ENERGY MARKETS? ABEER: TO PROVIDE A LITTLE BIT OF RELIEF. OF COURSE, IS THE KEY PIPELINE SAUDI ARABIA HAS BEEN RESORTING TO, STAYING AWAY FROM THE STRAIT OF HORMUZ THAT HAS BEEN SHELTERED FOR A GOOD PART OF THE PAST 7, 8 MONTHS. SO THIS WAS A LIFELINE FOR SAUDI ARABIA AND THE FACT THAT IT WAS ATTACKED A FEW WEEKS AGO I GROUPS IN IRAQ REALLY WAS QUIT A FOR SAUDI ARABIA. THE FACT THAT IT IS NOW BACK TO 50% CAPACITY FALLS IN LINE WITH WHAT THE SAUDI GOVERNMENT HAS TOLD US BEHIND THE SCENES. THE FACT THAT 50% OF THE CAPACITY WOULD RETURN WITHIN A MATTER OF DAYS AND THAT FULL CAPACITY OF THAT PIPELINE WOULD RETURN IN A MATTER OF SIX WEEKS. SO IT PROVIDES INFO BIT OF RESPITE, BUT AS I MENTIONED, YOU ARE LOOKING AT THE MARKET REACTION, LOOKING AT THE PRICE REACTION, AND REALLY THE MARKET IS REACTING TO THE LACK OF BOTH PARTIES COMING BACK TO THE NEGOTIATING TABLE AS OPPOSED TO THE 3.5 MILLION BARRELS OR SO THAT ARE STARTING TO MAKE THEIR WAY ACROSS THE RED SEA. UNDER THE CRUCIAL WATER RIGHT HERE IN THE MIDDLE EAST. BUT AS I MENTIONED, SAUDI ARABIA HAS BEEN RESORTING TO IT. SO WHAT IS KEY FOR MARKETS, FOR CRUDE PRODUCTS, DIESEL IS KEY HERE AS WELL. IT IS A RETURN TO THE NEGOTIATING TABLE AND SOME CONCRETE SOLUTIONS, A RETURN TO SOMETHING EVEN BETTER THAN THE MOU CONCESSIONS THAT WERE SIGNED BACK IN JUNE BETWEEN IRAN AND THE UNITED STATES. STEPHEN: AND WE WILL WATCH TO SEE WHAT FURTHER DEVELOPMENTS MAY EMERGE. THANK YOU SO MUCH FOR BRINGING US UP-TO-DATE. STILL AHEAD, A SIGNIFICANT MILESTONE FOR STARSHIP AS THE SPACEX ROCKET REACHES ORBIT FOR THE FIRST TIME. BUT FIRST, WILL THE U.K. PRIME MINISTER SET OUT PLANS TO TACKLE SOME OF THE THORNIEST ISSUES FACING THE COUNTRY? WE WILL LOOK AHEAD TO ANDY BURNHAM'S FIRST SPEECH SINCE TAKING OVER AS LABOR LEADER. THAT'S NEXT. THIS IS BLOOMBERG. >> THESE LEVELS OF DEBT, AN ASSAULT ON OUR COMMON SENSE, THEY ARE AN AFFRONT TO OUR VALUES. THAT IS WHY THE PRIME MINISTER AND I ARE IN LOCKSTEP THAT WE WILL MAKE THE FISCAL RULES, THAT WE WILL MAINTAIN CONTROL OF BRITAIN'S FINANCES. STEPHEN: YOU CHANCELLOR JOHN HEALEY SPEAKING AT THE LABO UR PARTY CA . CONFERENCE ANDY BURNHAM EXPECTED TO SET OUT HIS PITCH FOR HONEST POLITICAL DEBATE IS THE ANTIDOTE TO POPULISM. WE ARE TOLD HE WILL SET OUT HIS IDEAS FOR TACKLING SOME OF THE THORNIEST ISSUES FACING THE COUNTRY. CAROLINE IS AT THE CONFERENCE FOR US THIS MORNING. WHAT ARE WE EXPECTING IN TERMS OF POLICY ANNOUNCEMENTS FROM ANDY BURNHAM TODAY? >> GOOD MORNING. HOPE COMES FROM HONESTY, THAT IS WHAT WE ARE EXPECTING FROM ANDY BURNHAM IN HIS FIRST SPEECH TODAY AT CONFERENCE AS PARTY LEADER. HE WANTS A BREAK FROM THE PAST DECADE FOR BRITAIN. THAT IS GOING TO BE HIS MESSAGE. IF WE HEARD YESTERDAY FROM THE CHANCELLOR JOHN HEALEY ABOUT HOPE, TODAY IS GOING TO BE ABOUT MORE HONESTY FROM THE PRIME MINISTER. HE HAS ALREADY MADE A NUMBER OF ANNOUNCEMENTS ABOUT HELPING WITH YOUTH UNEMPLOYMENT, FIRST-TIME HOMEBUYERS. WE ARE EXPECTING MORE DETAIL TODAY IN THE SPEECH AROUND SOCIAL CARE WHICH IS THE BIG PUSH THE PRIME MINISTER IS EMPHASIZING. IS THAT GOING TO MEAN A CHANGE IN TERMS OF TAXATION AND THEN MAYBE SOMETHING ON THE SIDE OF REFORMING PENSION BENEFITS ESSENTIALLY FOR OLDER PEOPLE? THAT WILL BE THE BIG QUESTION FOR ANDY BURNHAM. WE KNOW HE'S A GREAT COMMUNICATOR. FOR EXAMPLE, HIS LATEST SOCIAL MEDIA POST HAS BEEN ABOUT WHAT BRINGS HIM HAPPINESS. HE WAS TALKING TO A VIRAL CONTENT MAKER. HE SAID IT WAS ABOUT RUNNING. NOW HE'S RUNNING THE COUNTRY. AND IS HE GOING TO BE ABLE TO MAKE VOTERS HAPPY WITH THIS KIND OF PITCH? STEPHEN: IT IS INTERESTING TO THINK ABOUT THE STYLE BECAUSE SOME OF THE CRITICISM THAT HAS COME FROM THE OPPOSITION PARTIES IS THAT ANDY BURNHAM IS RELYING ON VIBES. HE WANTS TO TALK ABOUT THE KIND OF POLITICAL DEBATE HE WANTS IN THE U.K. AT A TIME WHEN MANY COUNTRIES LIKE EUROPE ARE DEALING WITH RISING POPULISM. CAROLINE: ABSOLUTELY. BUT IT HAS TO BE SAID IN DEFENSE OF THE GOVERNMENT THAT VIBES ARE MEETING REALITY NOW. YOU'VE GOT RECORD HIGH DIESEL PRICES IN THE U.K. AND THE GOVERNMENT IS TRYING TO NEGOTIATE BEHIND THE SCENES WITH THE UNITED STATES TO AVOID ANY DIESEL EXPORT RESTRICTIONS TO THE U.K.. YOU'VE GOT PEOPLE AT THE HOME SECRETARY, THERE MAY BE TWEAKS ABOUT THE LENGTH OF TIME PEOPLE ARE GOING TO NEED IN ORDER TO BE ABLE TO GET CITIZENSHIP AND GET PERMANENT RESIDENCY IN THE U.K. THERE ARE ISSUES THAT ARE CRYSTALLIZING, EFFECTIVELY. YESTERDAY, WE ALSO HEARD FROM THE CHANCELLOR JOHN HEALEY ABOUT BEING IN LOCKSTEP IN TERMS OF THE FISCAL RULES BETWEEN THE PRIME MINISTER AND THE CHANCELLOR. THIS IS THE REAL POINT. THE REALITY IS GOING TO BE IN THE BUDGET. I WAS SPEAKING TO A LOT OF BUSINESS LEADERS YESTERDAY. THE CBI REALLY DOES NOT WANT TO SEE, FOR EXAMPLE, AN INCREASED BURDEN ON TAXES, BUSINESSES. I TALKED TO THE HEAD OF U.K. PRIVATE CAPITAL YESTERDAY. HE ONE OF THE IDEA OF HIGHER CAPITAL GAINS TAXES TO BE SNUFFED OUT IN HIS WORDS. THE REAL TEST IS COMING. IN FOUR WEEKS, WE MAY GET A PREVIEW FROM ANDY BURNHAM TODAY AS WE DID YESTERDAY FROM THE CHANCELLOR. BUT THE SUBSTANCE, THE REALITY IT WILL COME IN ON THE BUDGET ON OCTOBER 28. STEPHEN: WE WILL BE WATCHING WHAT SIGNALS WE GET FROM THE PRIME MINISTER AS WE COUNT DOWN TO THAT ALL-IMPORTANT BUDGET. CAROLINE, THANK YOU VERY MUCH FOR JOINING US. OUR COVERAGE FROM THE CONFERENCE CONTINUES THROUGHOUT THE DAY ON BLOOMBERG. CAROLINE WILL BE SPEAKING TO THE U.K. ONLINE AND A PRIME MINISTER. COMING UP, A PROMISE OF SAFETY. GLOBAL AI GIANTS HOLD BACK SOME OF THEIR NEWEST MODELS. WE BRING YOU THE DETAILS NEXT. THIS IS BLOOMBERG. ♪ STEPHEN: WELCOME BACK. OPENAI IS HOLDING BACK A VERSION OF ITS ASTRA AI MODEL AFTER THE SOFTWARE FAILS TO PERFORM AS WELL ON SAFETY EVALUATIONS AS THE CURRENT ITERATION. IT COMES AS NVIDIA INTRODUCES A SECURITY SYSTEM IT SAYS WOULD HAVE PREVENTED RECENT HIGH PROFILE BREACHES BY OPENAI'S MODELS. LET'S BRING IN NEIL CAMPLING FOR MORE. NVIDIA'S AS THEY CAN STOP BREACHES WHILE OPENAI ARE TALKING ABOUT HOLDING BACK NEW MODELS. HOW SIGNIFICANT ARE THESE DEVELOPMENTS FOR THE ONGOING DEBATE ABOUT AI SAFETY? NEIL: I THINK NVIDIA'S ANNOUNCEMENT YESTERDAY IS A POSITIVE IN TERMS OF NOT BEING -- AND NOW THEY HAVE THE SECURITY SOFTWARE EMBEDDED WITHIN THE SYSTEM. IT HAS ONLY BEEN ANNOUNCED SO IT COMES TO LATE FOR SOME OF THE RECENT ITERATIONS OF THE AI MODELS. AS FAR AS OPENAI IS CONCERNED, THIS DELAY FOR THE 6.1 MODEL WHICH COMES A FEW WEEKS AFTER DARIO'S PLACING THE FRONTIER ESSAY, IT WOULD HAVE BEEN A BIGGER DEAL IF ASTRA 6.0 HAD BEEN DELAYED, WHICH IT WASN'T. THE FACT THEY DELAYED THIS BECAUSE OF SOME OTHER SECURITY CONCERNS THAT DIDN'T MATCH THE SECURITY PROTOCOLS OF THE ORIGINAL VERSION IS SOMEWHAT OF A CONCERN. ON THE OTHER HAND, IT IS ALSO GOOD THAT WE ARE SEEING SOME OF THE, PUTTING THE BRAKES ON SOME OF THE LATEST MODEL RELEASES FIT DOES NOT MEAN THE COURSE OF THE AI TRAIT IS OVER OR GETS REVERSED. IT IS A POSITIVE STEP THAT THEY ARE SLOWING THE ROLLOUT OF SOME OF THE LATEST MODELS UNTIL THE SECURITY IS AS TIGHT AS IS NEEDED BY THE VARIETY OF AUTHORITIES. STEPHEN: THERE'S ALSO THE QUESTION OF THE CLEANUP OPERATION THAT IS NEEDED AFTER SOME OF THESE RECENT BREACHES, PARTICULARLY IN AUSTRALIA. OPENAI APOLOGIZING OF THE AUSTRALIAN GOVERNMENT WEBSITE AND TALK ABOUT THE NEW TASK FORCE SET UP ADDRESSING ISSUES LIKE THESE. HOW MUCH SHOULD WE BE ADDRESSING -- EXPECTING TO SEE MORE OF THIS AS THE CONVERSATION AROUND AI SAFETY EVOLVES WHERE COMPANIES HAVE TO CLEAN UP THE MESS IS HAVE CREATED ALREADY? NEIL: THAT IS TRUE. THE OTHER FACTOR, WE MENTIONED AUSTRALIA. THEY ONLY TOLD THE GOVERNMENT A LONG TIME AFTER THE BREACH HAD TAKEN PLACE SO THOSE KINDS OF MEASURES AND SAFEGUARDS HAVE TO BE PUT IN PLACE BUT WE ALSO NEED TO ENSURE THAT THESE TASK FORCES ARE ACTING WITH SPEED IN TERMS OF MAKING SURE AUTHORITIES KNOW ABOUT THESE EVENTS. WE HAVE THE OPENAI DEVELOPERS FORUM LATER TODAY. THAT'LL BE INTERESTING TO SEE WHAT SAM ALTMAN HAS TO SAY. WE HAVE THE WHITE HOUSE LUNCH WITH A RANGE OF CEOS WITHIN AI MEETING WITH TRUMP LATER. WE NEED TO SEE -- FOR THE GOVERNMENT HAS PUT IN PLACE AND THE AI LEADERS PUT IN PLACE AND WHAT PROTOCOLS ARE NEEDED FOR THESE TOOLSETS. ALL OF THESE THINGS ARE NECESSARY BECAUSE OF THE FAST PACE THAT THE TECHNOLOGY HAS IN THE MODELS ACROSS THE GLOBE. STEPHEN: WE ARE ALSO LOOKING AT THE REPORTS AROUND ANTHROPIC'S IPO, PROSPECTUS. TALKING ABOUT $42 BILLION LAST YEAR AND PLANS TO SPEND MORE THAN 500 BILLION DOLLARS ON CLOUD COMPUTING AND INFRASTRUCTURE. WHAT DO THESE NUMBERS TELL US ABOUT THE FIRM'S POSITION AS WE LOOK AHEAD TO THE IPO? NEIL: THE FACT WE ARE GETTING THESE REPORTS SUGGEST THERE IS IPO DOCUMENT OUT THERE THAT IS ALMOST READY TO COME TO MARKET. CLEARLY, THESE NUMBERS YOU MENTIONED SUGGEST THEY NEED THE IPO TO COME TO MARKET TO RAISE CAPITAL BECAUSE THEY ARE BURNING THROUGH A HUGE AMOUNT. AT THE SAME TIME, THAT INCREMENTAL -- THE OBLIGATIONS THEY HAD, $518 BILLION FOR THE COMING YEARS, IT SHOWS THE SIZE OF THE NETWORK BUT THE LOSSES ARE CLEARLY HUGE AS THEY ARE SCALING UP, WHICH MEANS THEY NEED TO HAVE THAT CAPITAL. BUT THE SHEER SIZE AND SCALE OF THESE FRONTIER MODELS ARE SIMPLY STAGGERING. THE OTHER THING IS AS THE MARGINS, THE PROFITABILITY NEEDS TO SHIFT MORE TOWARDS THESE FRONTIER MODELS WHEN THEY ARE CLOSE TO THE END CONSUMER WHICH NORMALLY HAPPENS IN TECHNOLOGY. BUT IT HASN'T HAPPENED YET WITH THESE AI MODELS. ALL THESE NUMBERS BEING LEAKED IN NEWS REPORTS SUGGESTS WE ARE NOT LONG IN TERMS OF WAITING FOR THIS REALLY HIGHLY ANTICIPATED IPO TO COME TO MARKET. STEPHEN: INDEED. MUCH INTEREST IN ALL OF THOSE DETAILS AS THEY EMERGE. THANK YOU FOR BRINGING US THE LATEST, NEIL CAMPLING. NOW TO OTHER TOP STORIES WE ARE FOLLOWING THIS MORNING. CONSULTING FIRM BAIN SAYS THE GLOBAL AI INDUSTRY NEEDS TO GENERATE $6 TRILLION IN ANNUAL REVENUE BY 2031 TO JUSTIFY INVESTMENT IN DATA CENTERS WORLDWIDE. EXISTING CONSUMER AND ENTERPRISE AI SERVICES MAY CONTRIBUTE AS MUCH AS $1.8 TRILLION, LEAVING $4.2 TRILLION IN NEW REVENUE NEEDED IN AREAS INCLUDING ROBOTICS, DRUG DISCOVERY AND ENERGY GENERATION. AMD HAS AGREED TO A DEAL TO BUY WORLD LABS FOR $8.2 BILLION. THE AGREEMENT GIVES AMD A TEAM OF LEADING AI RESEARCHERS AND THEIR MODELS. WORLD LABS WAS FOUNDED BY INDUSTRY PIONEER FEI-FEI LI. THE TWO PIONEERS SPOKE TO BLOOMBERG ABOUT THE SIGNIFICANCE OF THE DEAL. >> THE MORE YOU UNDERSTAND END TO END, THE BETTER A SYSTEM YOU WILL BUILD. THAT IS WHY WE ARE ACQUIRING WORLD LABS, TO HAVE ACCESS TO THE WORLD-CLASS TALENT THAT FEI-FEI HAS BROUGHT TOGETHER AND BRING IT TOGETHER WITH AMD'S COMPLETE CAPABILITIES AROUND HARDWARE, SOFTWARE AND SYSTEMS. AND BUILD THE FUTURE OF AI. STEPHEN: GOLDMAN SACHS IT HAS WERE POORLY DISCUSSED A PLAN FOR ITS CHIEF OPERATING OFFICER JOHN WALDRON TO SUCCEED JOHN SOLOMON AS SOON AS NEXT YEAR. WALL STREET JOURNAL CITES ANONYMOUS SOURCES SAYING WALDRON COULD TAKE OVER BY THE END OF 2027 OR IN 2028M, WITH SOLOMON MOVING INTO AN EXECUTIVE CHAIRMAN ROLE. LAST YEAR, GOLDMAN GAVE WALDRON A RESTRICTED STOCK PACKAGE NOW WORTH NEARLY $120 MILLION TO STAY FIVE MORE YEARS. LET'S GIVE YOU A QUICK CHECK OF WHERE THINGS ARE LOOKING ON MARKETS THIS MORNING. ANOTHER DAY OF LOSSES ON ASIAN EQUITIES. JAPAN SHARES WEIGHING ON THAT. EUROPEAN STOCK FUTURES HOLDING ONTO SOME SMALL GAINS TOWARDS THE CASH SESSION. S&P FUTURES STILL IN THE RED. COMING UP, TREASURY YIELDS AND MULTIYEAR HIGHS AS OIL PRICES CONTINUE TO CLIMB. WE WILL DISCUSS THE MARKET OUTLOOK NEXT. THIS IS BLOOMBERG. ♪ STEPHEN: LIVE FROM BRUSSELS, THIS IS BLOOMBERG DAYBREAK: EUROPE. GLOBAL EQUITIES FALL TO A ONE-WEEK LOW AS TREASURY YIELDS HIT MULTIYEAR HIGHS. OIL GAINS AS OFFICIALS VOICED PESSIMISM OVER A DEAL TO END THE WAR. TACKLING THE THORNY ISSUES. ANDY BURNHAM SUBSTITUTE PUT OUT HIS VISION ON HIS FIRST PARTY CONFERENCE AS PRIME MINISTER. PLUS, OPENAI SCRAPPED ITS LATEST MODEL AFTER IT FAILS SAFETY TESTS, WHILE NVIDIA UNVEILS A NEW SECURITY SYSTEM THAT SAYS WILL PREVENT RECENT HACKS. QUICK LOOK AT WHERE MARKETS ARE LOOKING PAID UP GLOBAL STOCKS AT THE ONE-WEEK LOW. EUROPEAN STOCKS VIEWERS -- FUTURES POINTING SLIGHTLY HIGHER. S&P FUTURES IN THE RED AFTER WE SAW THE BIGGEST ONE-DAY DROP SINCE AUGUST. OIL PRICES RISING AS WE MENTIONED ON THE LATEST HEADLINES FROM THE MIDDLE EAST. A LACK OF PROGRESS AND DIPLOMACY PUSHING BRENT CRUDE CLOSER TO THE $108 A BARREL LEVEL. WE HAVE A SLIGHTLY STRONGER BLOOMBERG DOLLAR SPOT INDEX. DOLLAR YIELDS UP ANOTHER TWO BASIS POINTS AS WE SAW THE 10 YEAR HIT THE HIGHEST LEVEL SINCE 2007. NOW THE LATEST CPI DATA FROM ACROSS THE EURO AREA KICKS OFF WITH SPAIN'S READING LATER THIS MORNING. CLOSELY WATCHED FOR SIGNS OF HOW THE ENERGY SHOCK IS FEEDING THROUGH TO CONSUMER PRICES. LET'S BRING IN ALL FOR MORE. WE HEARD FROM CHRIS YESTERDAY AND THE EUROPEAN PARLIAMENT. LOOKING AT HER LATEST COMMENT LOOKING AHEAD TO THOSE INFLATION FIGURES. OLIVER: IT IS ALWAYS A PRIVILEGE. SHE WAS GRILLED BY MEP'S. THEIR MAIN FOCUS AND EVERYBODY WHEN LISTENING TO THE PRESIDENT OF THE ECB IS THE INFLATION FORECASTS AND THE GROWTH FORECAST AS WELL. WE GOT SOME OF THE SAME MESSAGES WE HEARD FROM THE ECB SO FAR FROM THE SEPTEMBER MEETING A COUPLE WEEKS AGO WITH A COUPLE DIFFERENCES. THE THINGS THAT WERE THE SAME IS THEY WERE NOT GET SECONDARY EFFECTS. IN TERMS OF THE INFLATION SHOCK, IT IS RESTRICTED TO THE ENERGY SECTOR. IT IS NOT IMPACTING WAGES WHICH IS SOMETHING THAT THEY ARE WATCHING CLOSELY. GROWTH IN EUROPE SO FAR IS RESILIENT AND SHE EXPECTS GROWTH TO REMAIN RESILIENT IN THE THIRD QUARTER. IT IS IN THE OUTLOOK WHERE THINGS GOT MORE INTERESTING. THERE WERE TWO POINTS WORTH PAYING ATTENTION TO. THE PRESIDENT OF THE ECB ACKNOWLEDGING WE ARE THE UPPER END OF THE NEUTRAL RATE FOR THE ECB AT 2.5%. THAT MEANS ANY ADDITIONAL HIKE BEYOND THAT BRINGS US EXPLICITLY INTO ECONOMICALLY RESTRICTIVE TERRITORY. THE SECOND, THE BOND APOCALYPSE, THE RISING YIELDS ON THE FAR END OF THE CURVE. >> GROWTH HAS BEEN RESILIENT. NO QUESTION ABOUT IT. WE HAVE UPDATED OUR PROJECTIONS FOR 2026 AND 2027. WE HAVE SEEN NEW DEVELOPMENTS, PARTICULARLY AT THE LONGER END OF THE CURVE. AND LONG-TERM INTEREST RATES HAVE DRIVEN -- RISEN NOTABLY. THAT WILL HAVE AN IMPACT ON GROWTH. IT WILL PROBABLY SLOW GROWTH AND REDUCE PASS-THROUGH BY MORE THAN PROJECTED IN OUR EXERCISE. STEPHEN: COMBINING THOSE TWO IDEAS -- THE FACT WE ARE AT THE UPPER END OF WITH THE NEUTRAL RATE IS, ANYTHING IN ADDITION TO THAT WILL BRING US INTO RESTRICTIVE TERRITORY. OLIVER: NOW A FEELING FROM THE ECB THAT BOND YIELDS ARE BECOMING A PROBLEM FOR GROWTH AND REDUCING THE GROWTH OUTLOOK WHICH MEANS ANY ADDITIONAL HIKE INTO THE FUTURE WILL BE A HIGH BAR FOR THE ECB TO CLEAR. WE SAW THE BETS ON THE OCTOBER RATE HIKE DIMINISHING SLIGHTLY. ABOUT 35% WHEN WE SPOKE YESTERDAY. THAT BRINGS THE DECEMBER RATE HIKE INTO FOCUS AND THE IMPACT THAT WILL HAVE ON GROWTH IN EUROPE. OLIVER: THINKING ABOUT THE LATEST INFLATION PICTURE. STEPHEN: WE WILL GET THE SPANISH DATA WHICH WILL START THE WEEK OF WHAT WILL GIVE US A PICTURE IN THE EURO AREA. OLIVER: NOT A TERRIBLY REASSURING PICTURE. SPAIN, 4.9% INFLATION FOR THE MONTH OF SEPTEMBER. THAT IS WELL ABOVE WHAT THE ECB'S RATE IS OF 2%. IT IS EXPECTED TO GO BY 3.2% IN GERMANY. ON FRIDAY, THE EURO ZONE INFLATION EXPECTATION WHICH WAS 3.7%. MOVING IN THE WRONG DIRECTION. STILL SEGREGATED INTO THE ENERGY SECTOR. AS THE CALL YOUR ATTENTION TO NOT JUST THE BOND YIELDS BUT SOME OF THE FISCAL ISSUES WE ARE WATCHING IN EUROPE AND THAT SPREAD BETWEEN FRANCE AND GERMANY IN 10 YEAR YIELD HAS BLOWN OUT TO OVER THREE DIGITS TO 100 BASIS POINTS. ALL OF THESE THINGS WILL MAKE THE PICTURE A LOT MORE COMPLICATED FOR THE ECB GOING FORWARD. STEPHEN: OLIVER CROOK, THANK YOU. THE RISING BOND YIELDS ARE PART OF THE PICTURE WE ARE MONITORING A GLOBAL MARKETS TODAY. SURGING OIL PRICES ON FURTHER FEDERAL RESERVE INTEREST RATE HIKES THAT ARE DRIVEN TREASURY YIELDS THE MULTIYEAR HIGHS BUT ALSO BLOGS IN EUROPE AS WELL. TO DISCUSS, WE SPEAK TO THE GLOBAL HEAD OF PRIVATE CAPITAL ADVISOR AT RAYMOND JAMES. GREAT TO HAVE YOU ON THE PROGRAM. THERE HAS BEEN SO MUCH FOCUS ON WHAT IS MOVING ON BOND MARKETS BUT I AM WONDERING WHY DO YOU THINK EQUITY MARKETS HAVE REMAINED SO RESILIENT THROUGH ALL OF THIS AND WHAT SHOULD WE WATCH OUT FOR THAT COULD CHANGE THAT PICTURE? SUNAINA: I THINK EQUITY MARKETS ARE CONTINUING TO HOPE AND PRICE THEIR SECURITIES ON THAT HOPE THAT THIS IS A TRANSIENT IN THE ENERGY RELATED MACRO SHOCK TO THE SYSTEM AND THAT ONCE THE GEOPOLITICAL CRISIS IN IRAN ABATES, THAT ENERGY PRICES WILL REVERT AND SO WILL DISCOUNTS AND VALUATIONS ACROSS SECURITIES, ESPECIALLY EQUITY RELATED SECURITIES. THAT IS THE THESIS OF THE MARKET TODAY. THERE'S ANOTHER THESIS IN PLAY. THAT PERHAPS THIS BECOMES STICKIER THAN JUST AN ENERGY RELATED SHORT-TERM SHOCK. THAT IT FLOWS THROUGH INTO CONSUMER PRICES, AND TO BUSINESS OUTLOOKS, EARNINGS AND SO FORTH IN WHICH CASE EQUITIES WOULD HAVE TO REPRICE. IN TERMS OF THE EARNINGS, WE HAVE RELATIVELY LITTLE GUIDANCE ON INFLATION IN THE LAST SET OF EARNINGS AMID A STRONG SET OF EARNINGS. I WONDER HOW YOU EXPECT THAT CONVERSATION TO CHANGE AS WE GET THE LATEST UPDATES FROM COMPANIES. SUNAINA: I THINK AT THE MOMENT, COMPANIES ARE WRITING THIS RECORD BOOM OF EARNINGS AND FOR THE REMAINDER OF THIS CALENDAR YEAR FOR MOST COMPANIES, IT IS KIND OF IN THE BAG. THEY KNOW HOW THEY WILL PERFORM ESPECIALLY IN THE NEXT QUARTER. CHRISTINE LAGARDE ALSO SAYS IT IS WHAT HAPPENS AFTER OCTOBER AND NOVEMBER THAT REALLY MATTERS GOING INTO NEXT YEAR. THAT IS WHERE THE OIL PRICE WILL BE FOLLOWED CLOSELY BECAUSE THEY CANNOT KEEP SUSTAINING HIGHER INPUT COSTS, SHIPPING COSTS, ENERGY INPUTS FOREVER. THAT IS WHEN THE EQUITY STORY MAY START TO CHANGE. IS THERE MORE DOWNSIDE RISK THAN UPSIDE TO THE EQUITIES PICTURE AROUND THE WORLD? NO QUESTION. IN CONJUNCTION TO THAT, WE HAVE TO LOOK AT WHAT THE FINANCING MARKETS ARE SAYING WITH THE BOND YIELDS WHERE THEY ARE. IT WILL BE TIGHTENING IN A VERY NATURAL WAY, AS A NATURAL FOLLOW-THROUGH OF THE BOND YIELDS AND THAT WILL ALSO HURT COMPANIES AS YOU COME INTO THE MEDIUM-TERM PICTURE. STEPHEN: WHERE WOULD YOU BE MOST CONCERNED ABOUT AN INCREASE IN CREDIT STRESS AT THIS MOMENTW? SUNAINA: AT THE MOMENT, CREDIT MARKETS ARE NOT SHOWING REACTION TO WHERE BOND YIELDS ARE BUT THAT REMAINS A QUESTION MARK AS TO WHERE YOU SEE SPREADS WIDENING AND STRESS COMING THROUGH. ANY INTEREST RATE LINKED ASSETS AND ENERGY LINKED ASSETS WILL SHOW THE STRESS FIRST. ANYTHING WITH HIGHER INPUT COSTS THAT ARE ENERGY LINKED. ANYTHING THAT REQUIRES REFINANCING, SO ALL OF THOSE TYPES OF SECTORS BECOME VERY SENSITIVE TO WHAT HAPPENS IN THE LONG END OF THE CURVE BUT ALSO LINKED TO WHAT'S HAPPENING WITH THE IRAN CRISIS. ONE OF THE PLACES WE ARE PARTICULARLY WATCHING IS WHAT HAPPENS AT SOME OF THE MORE CONSUMER CENTRIC STORIES. THE LOWER END OF THE CONSUMER SPECTRUM WILL BE THE FIRST TO SUFFER IF THIS FLOWS THROUGH INTO MAIN STREET TO WASH -- TO WALL STREET FROM MAIN STREET. STEPHEN: WHEN WE ARE THINKING ABOUT THE PORTFOLIO CONVERSATION AT THIS STAGE, THE LEVEL OF YIELDS OF WHERE WE ARE FORCES A RETHINK IN TERMS OF HOW THEY SIT IN A PORTFOLIO. JIM BIANCO IS TALKING ABOUT YIELDS AS A VALUE PLAY. IS THAT HOW WE SHOULD BE VIEWING THEM GIVEN WHERE THE YIELDS ARE AT THESE MULTI-DECADE HIGHS? SUNAINA: INDEED, THE RISK TERM PREMIUM IS AN INTERESTING BUYING OPPORTUNITY TO ADD BUYING EXPOSURE INTO PORTFOLIOS. AND MANY INSTITUTIONS AS WELL AS RETAIL PLAYERS ARE DOING THAT, TAKING THIS OPPORTUNITY TO TAKE ADVANTAGE OF ALL HIGHS IN THE BOND MARKETS TO ENTER AND AVAIL OF THOSE YIELDS AND IF THE PRICING MECHANISM SHOULD THOSE YIELDS FALL. SO,G IT DOES BRING THAT 6040 PORTFOLIO THAT MANY IN THE MARKETS PUT TO THE SIDELINES A FEW YEARS A GIVEN THE INCREDIBLE RUN-UP IN EQUITY MARKETS AND OTHER LINKED STORIES. THAT PICTURE OF I SHOULD HAVE SIGNIFICANT FIXED INCOME EXPOSURE COMES BACK INTO FOCUS IN THE PAST COUPLE OF MONTHS. STEPHEN: WE HAVE THE 40 YEAR JAPANESE AUCTION EARLIER TODAY, THE STRONGEST DEMAND RATIO SINCE 2020. I WONDER WHAT IS YOUR READING OF RISK APPETITE AMONG INVESTORS NOW GIVEN WHERE WE ARE IN EQUITIES, GIVEN THE LEVEL OF YIELDS WE ARE LOOKING AT, GIVEN THE LACK OF PROGRESS TOWARDS A RESOLUTION IN IRAN -- IS THIS SOMETHING WE SHOULD BE THINKING ABOUT A BIG SHIFT FROM INVESTOR MENTALITY? SUNAINA: RIGHT NOW, THERE IS PLENTY OF TECHNICAL FLOW IN THE SYSTEM. THAT MEANS THAT INVESTORS STILL HAVE A LOT OF CASH SEEKING YIELD THAT THEY ARE PUTTING TO WORK IN TWO DIFFERENT PLACES. . HERE? FIRST, THEY ARE HOLDING THE EQUITY EXPOSURE WHERE YOU ARE SEE EQUITY MARKETS HOLD UP. YOU ARE ALSO SEEING IN THE JAPANESE AUCTION ENTRANCE INTO THE BOND MARKET TAKING ADVANTAGE OF THE LONGER TERM YIELDS. WHAT REALLY STARTS TO BREAK THIS MODEL, IF THERE'S ANY SHOCK TO THE SYSTEM THAT CAUSES STRESS AND THAT STRESS WILL CAUSE FEAR CONTAGION AND THAT WILL CAUSE A PULLBACK OF THE TECHNICAL FLOWS BACK TO CASH OR SAFE HAVEN ASSETS LIKE GOLD. WE ARE NOT SEEING THAT AT THE MOMENT. WE ARE SEEING INVESTORS SAYING WHERE CAN I GET A BETTER INTO EVALUATION? EQUITIES REMAIN INCREDIBLY EXPENSIVE. THIS IS WHERE PRIVATE EQUITY, PRIVATE CREDIT, YOU HAVE SEEN PRIVATE CREDIT OUTFLOWS STABILIZE NOW BECAUSE INFLOWS ARE STILL CONTINUING INTO THE ASSET CLASS. PERHAPS THESE ARE BETTER ENTRY VALUATIONS THAN I AM GETTING IN THE PUBLIC MARKETS TODAY. STEPHEN: OK. SU NAINA AT RAYMOND JAMES, THANK YOU SO MUCH FOR YOUR ANALYSIS. MICHELLE BULLOCK, THE GOVERNOR OF THE RESERVE BANK OF AUSTRALIA, IS SPEAKING AFTER THE BANK RAISED INTEREST RATES BY 25 BASIS POINTS. ASKING THE QUESTION WILL FOUR HIKES BE ENOUGH? HER ANSWER, I DON'T KNOW. THAT IS HAPPENING IN SYDNEY NOW. EUROPE IS HEADING INTO WINTER WITH THE NICKEL -- LIQUEFIED NATURAL GAS INVENTORIES AT ITS LOWEST EVER FOR THIS TIME OF YEAR AND FEARS ABOUT A TIGHT LNG MARKET HAVE BEEN MADE WORSE BY THE IRAN CONFLICT THAT HAS CHOKED OFF CRUCIAL SUPPLIES FROM THE MIDDLE EAST. LET'S GO TO RACHEL MORRISON FOR MORE. HOW BAD IS THIS SITUATION IN TERMS OF LNG STORAGE IN EUROPE? RACHEL: WE ARE GOING INTO THIS WINTER WHICH THE HEATING SEASON STARTS ON OCTOBER 1 WITH THE LOWEST STOCKS WE HAVE HAD ON RECORD. THERE ARE SOME COUNTRIES THAT ARE SLIGHTLY WORSE THAN OTHERS. GERMANY AND THE NETHERLANDS AT PARTICULARLY LOW LEVELS BUT OVERALL, EUROPE IS NOT IN A GOOD PLACE. THAT ACTED AS A BUFFER DURING THE WINTER SO WHEN IT GETS VERY COLD, WE USUALLY USE GAS FROM STORAGE TO BRING TO THE MARKET SO WHEN PEOPLE ARE HEATING THEIR HOMES, IT SOFTENS THAT PRICE BELOW SLIGHTLY. WITHOUT THOSE BUFFERS, THOSE STOCKS, IT MEANS WE WILL BE MUCH MORE EXPOSED TO EVEN HIGHER PRICES THIS WINTER. STEPHEN: HOW WORRIED DO WE NEED TO BE ABOUT POTENTIAL SUPPLY SHORTAGES? THERE ARE QUESTIONS ABOUT EL NIÑO AS WELL. WILL IT BE A WARMER WINTER THAN EXPECTED? HOW BAD COULD THE SITUATION GET? RACHEL: WE HAVE HAD ONE LETTER FROM JORGENSEN IN THE EUROPEAN COMMISSION TALKING ABOUT ENCOURAGING, ASKING MEMBER STATES TO ENCOURAGE PEOPLE TO USE ENERGY WISELY. WE ARE STILL LONGER WAIT -- LONG WAY AWAY FROM WHERE WE WERE IN 2022 WHERE GOVERNMENTS WERE ASKING PEOPLE TO JUST USE LESS. A LOT DEPENDS ON THE WEATHER, IF IT IS GOING TO BE VERY COLD, WE MIGHT GET TO THAT POINT. THEY ARE CONVERSATION STARTED TO BE HAD FOR THIS WINTER AND ABOUT WHETHER GOVERNMENTS NEED TO STEP IN BECAUSE AT THE MOMENT, GAS STORAGE IS DONE ON A COMMERCIAL BASIS. IT IS JUST UP TO TRADERS ON WHETHER IT IS PROFITABLE OR NOT. WHETHER GOVERNMENTS NEED TO TAKE CONTROL AND SAY WE WANT THIS STORAGE FOR OUR OWN COUNTRY AND WE WILL PAY TO DO THAT. WE ARE STARTING TO SEE THOSE CONVERSATIONS HAPPEN. THE TOPIC IS VERY LIVE AT THE MOMENT ACROSS EUROPE AND THE EUROPEAN COMMISSION. EVERYBODY IS STARTING TO LOOK AND SAY WINTER IS BEGINNING AND WE ARE NOT WHERE WE WANT TO BE. STEPHEN: THIS IS, AS YOU SAY, ANOTHER SHOCK TO THE EUROPEAN ENERGY COMPLEX AFTER 2022, AS WELL. COULD THIS PROVIDE A FURTHER TURNING POINT TOWARDS OTHER SOURCES? WE KNOW THAT EUROPE HAS BEEN RAMPING UP RENEWABLES FOR MANY YEARS NOW, BUT DOES ANOTHER SQUEEZE ON GAS PROMPT A RE-THINK AROUND NUCLEAR OR OTHER PAIR RESOURCES -- POWER SOURCES THAT CAN BACK THAT UP? RACHEL: I THINK THAT'S RIGHT. IT IS AWFULLY SLICK SLING A SECOND TIME -- IT IS NOT IN CLOSE SUCCESSION WHERE PRICES HAVE BEEN PAINFULLY HIGH. WE KNOW THAT INDUSTRY IN EUROPE IS SUFFERING FROM HIGH ENERGY PRICES. THIS MAY BE IN SOME CASES WHAT PROMPTS THEM TO EITHER TAKE UP CLEANER SOURCES OF ENERGY OR ELSE JUST LOOK COMPLETELY AT SOMETHING ELSE. INDUSTRY IS ONE OF THE PAIN POINTS FOR EUROPE OF HIGH ENERGY PRICES. BUT AS YOU'VE BEEN TALKING ABOUT THROUGH THE PROGRAMMING, INFLATION AS WELL, IT WILL BE A HUGE DRIVER OF THAT THIS WINTER. WE ARE SEEING AS WELL AS THE UPTICK IN RENEWABLES, COAL IS RUNNING PROFITABLY AND WERE COUNTRIES HAVE COAL THEY ARE USING IT BECAUSE IT HAS BECOME RELATIVELY CHEAPER THAN GAS, WHICH IS OBVIOUSLY NOT QUITE THE DIRECTION EUROPE WANTS TO GO. WHEN IT COMES TO FUTURE INVESTMENTS, PEOPLE ARE NUCLEAR -- LOOKING AT NUCLEAR. ALTHOUGH IT TAKES A LONG TIME. IT STILL GIVES THAT EUROPEAN PUSH TO REALLY BUILD OUT RENEWABLES TO REPLACE FOSSIL FUELS. THE WHOLE ARGUMENT OF HOMEGROWN ENERGY IS MUCH MORE RELIABLE. STEPHEN: RACHEL, THANK YOU VERY MUCH. COMING UP, ONE GIANT LEAP FOR SPACEX AS ITS STARSHIP ROCKET REACHES ORBIT FOR THE FIRST TIME. WE HAVE THE DETAILS NEXT. THIS IS BLOOMBERG. ♪ STEPHEN: WELCOME BACK. SPACEX'S MASSIVE STARSHIP ROCKET HAS REACHED ORBIT FOR THE FIRST TIME, DEPLOYING 26 UPGRADED V-3 STARLINK SATELLITES. THE TEST WHAT MARKS STARSHIP'S FIRST SUCCESSFUL SATELLITE DELIVERY AND A MAJOR STEP TOWARDS ROUTE -- ROUTINE LAUNCHES TO EXPAND THE STARLINK NETWORK. BUT THE MISSION WAS NOT WITHOUT ITS PROBLEMS. LET'S GET MORE FROM DANNY LEAVE WHO JOINS US FROM HONG KONG. THIS WAS A MILESTONE FOR SPACEX WHAT -- BUT WHAT WERE THE CHALLENGES THE MISSION FACED? DANNY: THIS IS A NEW STARSHIP ROCKET WHICH IS HEAVIER AND MORE POWERFUL SO WITH THAT IN MIND, IT WAS ABLE TO HAVE THIS NEW VERSION FOR A STARLINK SATELLITE SO IT IS MUCH MORE POWERFUL THAN VERSION ONE AND TWO. IT IS EQUIVALENT OF 40 SATELLITES SO MUCH MORE CAPABLE. HAS THIS DEAD LIFT OFF OVERNIGHT, THERE WAS A PROBLEM WITH ONE OF THE BOOSTERS. THEY ANALYZED IT AND DIDN'T FEEL IT WOULD COST YOU MANY ISSUES. AS A RESULT, THIS ROCKET DID GO SUCCESSFULLY INTO ORBIT AND DELIVERED ITS PAYLOAD, ITS FIRST REVENUE PAYLOAD OF 26 NEW VERSION THREE STARLINK SATELLITES. REALLY IMPORTANT MILESTONE. THEY DID, BECAUSE OF THE ISSUE, CURTAIL THE ISSUE SO IT ENDED AFTER THREE HOURS INSTEAD OF THE EXPECTED 10 HOURS. ANALYSTS ARE STILL HAPPY WITH WHAT THEY THOUGHT BECAUSE BY THIS, THE STARSHIP ROCKET WILL BE ABLE TO SCALE UP AND BE MORE CAPABLE OF DELIVERING BIGGER PAYLOADS AT THE END OF THE DAY. STEPHEN: WHAT NEXT FOR THE STARSHIP PROGRAM THEN? DANNY: WE ARE GOING TO SEE MORE FREQUENT LAUNCHES, AND JUST FOR THE ROCKET ITSELF, THE FACT THAT SPACEX LOOK TO MAKE THIS A REASONABLE ROCKET. AND BECAUSE OF ITS ABILITY TO DELIVER MUCH HEAVIER PAYLOADS AND MUCH POWERFUL SATELLITES FOR THE INTERNET FROM SPACE COMPANY, IT WILL HELPED DELIVER A SURGE IN EARNINGS. ELON MUSK FLAGHED THAT IT EXPECTS TO SEE -- FLAGGED THAT EXPECT TO SEE A JUMP IN REVENUE.IT HAS GRAND PLANS FOR EVERYTHING FROM MOBILE FROM SPACE COVERAGE AND ALSO JUST THIS ORBITAL DATA CENTERS AS WELL. THIS A LOT MORE SATELLITES THEY WOULD NEED IN THE SKY TO ACHIEVE THAT. THIS IS REALLY THE FIRST STEP ON A MUCH WIDER GRAND PLAN. STEPHEN: DANNY LEE, THANK YOU FOR BRINGING US THE LATEST. COUNTING DOWN TO THE EUROPEAN OPEN. FALLING ON TRADE GATE -- THIS WAS DOWN -- CHOCOLATE MAKER IS DOWN BY 4.7% AFTER THE COMPANY CUT ITS SALES GROWTH GUIDANCE FOR A SECOND TIME THIS YEAR CITING WEAK DEMAND IN KEY MARKETS LIKE GERMANY, SWITZERLAND AND AUSTRIA, AND SUBDUED CONSUMER SENTIMENT. APPARENTLY A HEAT WAVE WAY ON SALES OF CHOCOLATE IN EUROPE. LINDT IS A SHARE TO WATCH COUNTING DOWN TO THE EUROPEAN OPEN. JULIUS BAR ZEST REGULATORS FOR A BUYBACK TEST THE REGULATOR FOUND SERIOUS SUPERVISORY VIOLATIONS INVOLVING PRIVATE DEBT LOANS AND CLIENTS LINKED TO TWO RUSSIAN POLITICALLY EXPOSED PERSONS. JULIUS BAR WAS A 250 MILLION SWISS FRANCS OF CAPITAL FOR APPROVAL FOR SHAREHOLDER PAYMENTS THROUGH 2032. PRESIDENT TRUMP HAS CRITICIZED THE U.K.'S DECISION TO A RELEASE ON BAIL FIVE MEN OVER AN ALLEGED TERROR PLOT AGAINST THE ROYAL AIR FORCE BASE. A U.K. OFFICIAL SAID AN INVESTIGATION FOUND NO VIABLE EXPLOSIVES THAT THE SCENE OF THE ARREST. COUNTERTERRORISM POLICE ARE STILL EVALUATED WHETHER THE INCIDENT INVOLVED ACTIVITY COMMITTED BY PROXIES OR INDIVIDUALS WORKING ON BEHALF OF A FOREIGN STATE. THE U.S. IMPORT BAN ON SOME CANADIAN PRODUCTS HAS COME INTO EFFECT IN THE LATEST ESCALATION IN THEIR TRADE WAR. IMPORTS OF CANADIAN MOTORCYCLES, ALCOHOLIC BEVERAGES AND PRODUCTS HAVE BEEN BLOCKED IN RESPONSE TO TARIFFS IMPOSED BY MARK CARNEY'S GOVERNMENT. PLENTY MORE COMING UP NEXT ON THE MARKETS. STAY WITH US. THIS IS BLOOMBERG. ♪ >> THE WAY TO DO GROWTH LOOKING FORWARD IS RIGHT NOW, OUR ESTIMATE FOR PRODUCTIVITY GROWTH IS ABOUT 2.5% AND OUR ESTIMATE FOR WHAT WE ARE GETTING OUT OF CAPITAL IS .7% OR .8%. LABOR SUPPLY MAY BE ABOUT THE SAME. THAT MEANS THE BASE CASE, NO DISRUPTIONS TO THE -- FROM THE OUTSIDE WORLD. WE WILL TALK ABOUT THOSE. WE SHOULD BE CRUISING AROUND 4% INSTEAD OF 3%. STEPHEN: KEVIN HASSETT, DIRECTOR OF THE NATIONAL ECONOMIC, SPEAKING THERE. AS WE ARE SEEING ANOTHER DAY OF THOSE BOND YIELDS CREEPING SLIGHTLY HIGHER THIS MORNING. TAKE A LOOK AT SOME OF THE CHARTS ON THE BLOOMBERG TERMINAL THAT GIVES YOU MORE CONTEXT ON THE MARKET MOVEMENTS, PARTICULARLY THE LACK OF VOLATILITY IN EQUITIES VERSUS BLONDE VOLATILITY. THIS IS THE LOWEST POINT IT HAS REACHED SINCE THIS YEAR. WE HAVE BEEN TALKING ABOUT EQUITIES STILL REMAINING RESILIENT. WE DID SEE THE NASDAQ HIT ANOTHER RECORD HIGH LAST WEEK. THE RISE IN YIELDS SO FAR APPEARS TO BE LEAVING AT LEAST ON THE GLOBAL STOCKS BASIS EQUITIES RELATIVELY UNBOTHERED. NOT QUITE THE CASE IF WE LOOK AT THE SMALL CAP FIRMS IN THE U.S. AND THE RUSSELL 2000 INDEX AS WELL. THIS IS AS WE'VE BEEN TALKING ABOUT EQUITY MARKETS BEING DRIVEN HIGHER AND LED BY THE CONCENTRATED GROUP OF FIRMS, THE AI FRONTIER LABS, THE HYPERSCALERS THAT HAVE HELPED DRIVE THE EQUITY INDEX IS HIGHER. NOT SO THE CASE FOR THE HIGHER CAPS THAT ARE FEELING THE PRESSURE FROM THOSE HIGHER BOND YIELDS. THIS IS SOMETHING THAT IS AN INTERESTING FACTOR TO WATCH. MORE FRACTURING AND EQUITY MARKETS AS WE SEE THE CONCENTRATION RETURNING TO THOSE KEY AI RELATED COMPANIES WITH POTENTIALLY AT RISK TO THE BROADER MARKET AS WE THINK ABOUT THE RISE IN FINANCING COSTS FACING THOSE COMPANIES AS WELL. COMING UP NEXT, DON'T FORGET OUR INTERVIEW WITH THE U.K.'S A PRIME MINISTER LIVE FROM THE LABOUR PARTY CONFERENCE AT 9:45 A.M. IN LONDON. THE OPENING TRADE IS NEXT. THIS IS BLOOMBERG. ♪