Bloomberg Markets In the present day time 04/18/2024

Good morning.Welcome to the program. We have a lot to talk about thismorning. And this is Bloomberg Markets today.We've got breaking news coming to you from the corporate sector.Will way that will ask questions around whether corporate earnings are goodenough to offset what we're seeing in the the macro story around interestrates and interest rate cuts expectations.Plenty to talk about then when it comes to the corporate earnings story.We're also, of course, focused on EU politics.We're bringing all of that to you.

Shortly.Markets today starts right now. Good morning.Thursday the 18th. We got a lot to talk about.TSMC numbers dropping within the last half hour.Remember, the chip sector has had a pretty bad run over the last few days.In fact, NVIDIA, you could argue down 10% is now in a correction process.So it's the Philadelphia Semiconductor index.We should probably talk about some of the corporate earnings that'll to bedropping as well. Good morning, everybody.It is a busy morning.

Let's start with TSMC and figure outwhat is happening there. So I'm kind of saying this in thecontext of what we got yesterday from ASML.ASML is kind of pointing us towards maybe weak demand coming out of Asia,weak demand coming out of Taiwan. That's not in some ways being reflectedin the numbers that we're seeing this morning from TSMC.No, it's not. And I think what's interesting, though,is that they have this outperformance in TSMC this week as a small there is kindof a lag effect, right? TSMC is really at the whim of thisiPhone demand being the only kind of.

Maker of smartphone processors at thewhim as well of the ASML kind of lithography machines that are going toend up in some of those TSMC plants. So there's almost a lag that perhapshasn't shown up in TSMC that ASML was warning about yesterday.Okay. Well, that's an interesting one to thinkabout, isn't it? Which is the most current story, whichis the most up to the minute story. And if it's ASML, then we're not toocomforted by what we're seeing from TSMC today.But he does ask interesting questions about the extent to which the AI boomcan offset weakness in other parts of.

The tech space.That's what we see with TSMC. Of course, big suppliers for Apple, butit's not the slowness in Apple demand that's weighing on the business.It's the strength in AI that stands out here.It is. And the question now is, does that nowrescue some of the stock performances we've seen coming out of the states?So I mentioned NVIDIA has been down quite sharply over the last few days.So it's down in correction territory. It's down by 10%.It's I think it was 20 for the 25th of last month when we hit a peak.It's since rolled over.

So has the semiconductor index.You saw that yesterday as well and SML was a big driver of that.Does this number out of TSMC put a floor under that story for the global chipspace right now and in particular the high end performers like in video?And I think that's what Wall Street's going to be looking at a little bitlater when it comes to these numbers. And that's the near-term effect.And you flagged a story this morning about the global effect as well.And specifically in the United States. I think you said that there was a grantgoing into Micron, but the one that caught my eye was the Samsung plant inTexas actually coming to mind, you know,.

And they didn't send me to Texas.But this is a plant that's supposed to be twice the size of the Korean plant aswell. And Gina Raimondo on the on the on theground there in Texas talking about this expansion that, again, isn't going tomaterialize for. Yeah, until the end of the decade.There are so many fascinating angles on this on this story around the U.S.putting more money, more government money behind chips in the United Statesto bring these home. Just on the Micron story.So you were talking about Samsung then, but just on the Micron story, $6 billionfor factories being planned for New York.

State and one in Idaho.This is just one company. And what they're planning to do.I was really struck by some comments from the CEO recently.This is of Micron saying that to make this happen, they need sufficientgrants, investment tax credits, local incentives to address the costdifferences with overseas. So that's where we are now on thisindustry. These companies want the costdifferences with with producing in emerging markets completely offset bygovernment. This interventionist industrial policyis the new reality.

It is.Thailand's been doing this for years, say Taiwan.It's been water, it's been what has been happening in terms of the grants thathave been available. It's been the land, it's beenelectricity. Taiwan's been doing this for a longtime, which is why it's had this lead. Everybody is now catching up with thisidea. Yeah.And I'll give you do you have to do it now?These companies are putting a lot of money to work here as well.This isn't just government money that is.

Going and these companies are making abig investment into this stuff, but it's going to be geographically separate.And it's interesting, they're talking about this on the T live with TSMC thismorning. TSMC has been very good at concentratingwhat it does in one place and that's given its advantages as we start tospread it out. So those advantages dissipates and do weget a less efficient system and therefore we get less progress?There's a labor story to all of us as well in that you can have as muchinvestment in terms of physical capacity in the United States or in Europe orwherever.

Do you have the labor to match it?I think there are some cost metrics that came out.Bloomberg Intelligence ages ago put it some out that the cheaper labor story,of course, on entry level engineers, for example, the availability and thetraining you get out of the likes of Taiwan in Asia is completely differentto the pay story. In the States, you have to have moretraining in the States, you have to also pay up for that talent when you get tothe mid and more senior levels than the pay matches.But the entry level story, especially working at some of these fabs, at someof these plants, does not match the.

Labor market story.There's an inflation story, of course, attached to all of the fiscal spendingwe're seeing coming out of the United States.But there were real lessons for Europe, lessons for other parts of the world andwhat the US is doing right now in chess. So I've been to a lot of these summits.They are not the most fascinating things in the world.I've spent a lot of hours sort of sitting there waiting for things tohappen. This summit, I feel actually this takingBrussels place in Brussels today I think is interesting.And I think it's inching for exactly the.

Reasons you lay out.Europe's got some real challenges that its got to deal with right now.It's got to pay for the green transition.How's it going to do that? Is it going to be joint funding?It's going to pay for weapons. It's got to rearm.How is it going to do that? How is it going to figure out theprocess that goes around? That is and this is a big push rightnow, is the Capital Markets union finally going to find a reason to exist?Europe only comes through in a crisis. And we've got a crisis, folks.And it looks like Europe might make some.

Decisions and these could be quite bigdecisions going very animated by these countries.Well, I'm going to take some of the credit for it.I came back from Brussels. I was like, Guys, everything ishappening in Brussels right now. It's not happening, but it's happeningin all the different kind of places around around Europe.But but those differences in those countries are getting smaller.And I think the if you go to these summits, there's no crisis, nothinghappens. Yeah, but during the Greek crisis, thatwas a crisis.

Things happened during COVID.There was a crisis. Things happened.The Ukraine war is a crisis. Joint debt happened.Exactly. Yeah.But you know where I think the hiccup is here?We've finally got Germany on the same page pushing for that, wherehistorically they haven't been on the page.But you don't have all of the EU members on board.This is really just the bigger economies and you need that support from the likesof I'm going to name a couple of.

Countries here, Luxembourg, the CzechRepublic, Cyprus. These are names I've never necessarilyread into 1 to 7 a.m. in the Monday morning, but they couldactually get in the way of what is really needed in Europe and thinkingabout what is needed. We've got some really interesting soundbites from Mario Draghi for me of the ECB, of course, but now working on areport around competitiveness. And this takes us back to what we'resaying about chips and the amount that the US are doing to bring chips home andto incentivise production and to encourage businesses to set up in theUnited States.

Let's listen to what Mario Draghi had tosay earlier on this week. China, for example, is aiming to captureand internalise all parts of the supply chain in green and advancedtechnologies. The United States, for its part.Are using large scale industrial policy to attract high value domesticmanufacturing capacity within their borders.We are locking in strategy for how to keep pace in an increasing costthroughout race. It requires us to act as a EuropeanUnion in a way we never have before. Okay.Perhaps a preview there from Mario.

Draghi of what he might say, what hemight recommend in that competitiveness report.But this just goes on. And he went on to underscore what's atstake here, to your point, guy, about how a crisis is required.He was saying that what is needed in Europe is something as drastic as we sawin the early 1950s when the coal and steel community was first put together.That is the level of of of new thinking he thinks is required.Industrial policy that in some ways was an industrial policy, I think wasdesigned obviously to deal with the aftermath of the Second World War, thecoal and steel union that was created.

And then ultimately led to the EU.But. But it's kind of that's where everybodyelse is going at the moment. We talked about Micron.We talked about what is happening in Texas.We talk about the industrial policy that is happening in China.Those are all areas that the EU needs to figure out what it's going to do.But but I think it's it's it's also something else.There is a existential crisis that exists in Europe in some ways with theconflict that is happening in Ukraine. And if that doesn't galvanize kind ofaction here, I don't know what.

Well, it was interesting.We were listening to the U.N. yesterday, but the Saab CEO was on airand he was talking about the fact that we need to figure out a way of takingthe technology, developing it, and then industrializing it.And the moment what we do in Europe is we don't industrialize and we buy fromthe Americans. So we develop the technology and thendon't do anything with it. We've got to figure out a kind of kindof start to finish process that allows the EU to actually take some of thistechnology and use it for its own good. Relevant on defense sounds like a numberof other industries and the European.

Experience.But but certainly the defense the defense point well made sourcingmaterials is such a big part of this as well, and that the timing of this iscrucial in terms of industrialization process when we eventually get there.Does Europe broadly even have the capacity to not only do that, but thenthe access to the materials need, think of aluminum, steel, etc.The very materials, by the way, that Russia makes and is the kind of dominantplayer in. How do you square the two when you'retrying to source the materials from that part of the world or find alternativesin other parts of the world, while also.

Building the defense to protect againstthat very country? I don't won't be too down on Europe.Europe's got some great technology. So SML is one company that is kind ofpivotal to all of this process and has been developed really strongly.We talk about the kind of the cortex that we watch in Europe.SCHNEIDER Technology is one of those companies that's on that list.It does grid technology does all the stuff that AI needs right now.Electrification, maybe. So.Isaiah Brown Bavaria is out with numbers this morning.Take a look at IBM's charts.

Over over the last few months.It's up 40% from the October lows. This is a company that people havefigured out is really important in new grid technology.It's great technology segments doing really well.The margins are looking really strong. So here is a company thatagain, Europe, these are the industrial companies that Europe has the potentialto develop. And investors in some ways arerecognizing this. Yeah, absolutely.And the AB story. Yeah, very much about electrification asyou say, and even even in the face of.

Some weakness coming through in theChinese market, they seem to be doing okay managing to offset with that,offset that with growth in Japan and in India and with all of these earningsstories, as I said at the top of the program is sort of asking whether thisearnings story is going to be enough this time around to offset the newreality around interest rates. And if that's putting downward pressureon stocks, can these earnings story stories help to reignite some upwardpressure, perhaps not in the stock market, it feels like at least seems tobe the consensus because you're still seeing these companies.Yes, they're they're catching up, but.

They're still not trading at the guysfavorite word, multiples in the valuations of the states.And that would create a kind of, in theory, a little bit of more room forthem to maneuver. Take a look at the Bloombergintelligence analysis of AB. They're starting to talk about amegatrend, especially when it comes to this bid.They're saying that this is not just a short term one quarter to quarter thing.This is for the next decade. AB has been one of those businessesthat's been part of a megatrend since I've been sitting and reporting aboutthis for like 20 years.

Hasn't it happened?It was part of the robotics trend. They were part of the it was part of thekind of as we went into the e-commerce world, it played a part in that as well.When emerging markets were booming in the 2000, it was all about that firstwave of investment in infrastructure whilst the developed world werereinventing their infrastructure. So yeah, plenty of solid lines there.Let's talk about cars, though, because I mean, there's an electrification storythere once. Yeah, exactly.And so it seems as if withdrawal of subsidies in some countries continue tohave an impact on a slightly reduced.

Appetite for EVs.We've seen these car sales reduce this time.This is the second month and forward. We're seeing this drop a bit of aninfluence of Easter, but it does really tell a powerful story about the rolethat subsidies play in this industry, in any consumer facing industry, I suppose,and and the timing there for purchases. It does.And I think this is important that we kind of broaden this out, though,because even though kind of the last, I think couple of months or we've brokenthis particular data, you do see it and I think you're seeing on screen heresome drops, some weakness, a little bit.

Of a trip.But if you look at the net net numbers, there's still a massive kind of growthpicture here over a broader time frame. When you look at EVs, there are stillthat transition. When we talk to the commodity voices inon our show and in various parts of the world, there's still say that that's thetrend of their positioning for. Again, speaking of megatrends, but buthas it reached the subsidy story is very important if you want these things toprogress. We're talking about tip distributionaround the world kind of where we manufacture.Do you need to continue the subsidies?.

Have they pulled the subsidies back tooearly? You've kind of gone through the initialkind of beta testers, the high end consumers that are willing to take therisk on an electric car. It hasn't become a mass consumer productyet in the way that they had hoped to do so.And it's almost this phase that you need the subsidies to really kind of kick inthe high end consumer. They were going to do it anyway.They were probably going to do it anyway.And now you need that kind of larger industrialization kind of process tokick in.

And maybe the only way you do that, likeeverything else is with is with government money.Yeah. Okay.Lots to think about when it comes to autos and all of those other earningsstories that we've covered this morning. Let's just give you a quick briefing onwhat we're expecting to come through today.Incentive data and other sort of set pieces.130 UK telling us industrial sorry, initial jobless claims, of course we getexisting home sales from the states a little bit later, L'Oreal numbers, thosewill be out after hours throughout the.

Day.Of course, we'll be continuing to monitor what comes out of the G-20financial and central bank policymakers meeting in Washington, DC.A lot of lines from the IMF just last night around debt levels and beingconcerned around U.S. and Chinese debt levels.We'll also have lots of central banks speak, of course, for you.Speaking at these events will monitor the Bowis.Megan Green, Mario Santino from the ECB, the Fed's Michel Bowman.So a lot to think about. I just wanted to go back thinking aboutwhat's coming out of the G-20 and all.

These meetings.It underscores an interesting story that we're watching, and that is, again,intervention. We had an interesting trilateral meetingtaking place between the US, the Japanese, the South Koreans, and someare interpreting that meeting and the joint communique that came out of it asa U.S. toleration for intervention by theBeijing Finance Ministry. If and when we get there.And of course, we've got the BOJ meeting next week.We do. And I think this is important and thiswas actually flagged to me by a by a.

Viewer actually yesterday.If you look at the IMF growth forecasts, it's a no brainer of of why the dollaris doing so, so strongly right now and why people are positioning long for itdespite some of the concerns that they had initially had in previousiterations. You mark about currency intervention aswell. This is certainly something that theFederal Reserve is watching very, very closely.I love that. What guy keep saying it's our currency.Your problem. That definitely seems to be thementality there.

But a strong dollar is an issue as wellwhen it comes to things like exporting oil, exporting LNG.And if you look at some of the domestic policies within the states right now,they are actively trying to boost those exports while competing with theweakness you're seeing in the Japanese yen, in the Korean one, obviously theyuan as well. Yeah.How much tolerance there will be. We'll wait and see whether or notthere's an active involvement in the process, I think is probably maybe astep too far. But it does feel like the Japanese arejust buying time until that BOJ meeting.

Next week.You've got a big meeting coming up. Let's not do anything before that.It feels like there's a kind of date in the diary for next week on that.There has been some speak a little bit from not BOJ officials necessarily, butfrom the some of the kind of other fiscal authorities that are saying,well, maybe we maybe it's time to think about another hike as opposed to kind ofabout one and done mentality that we've seen in the last 30 days.That's something we talk about. We're going to watch the yen very, veryclosely, of course, in the coming weeks. We're also going to be watching cryptovery, very closely.

But a really interesting interview in acouple of charts by say so myself. Coming up, Finance CEO Richard Tinkjoins us from Dubai to get the latest from the crypto giant.Plus, a little bit more going on in the banking space.UBS up for a fresh round of job cuts as it migrates integrate excuse me, CreditSuisse. We'll get the details up next.So more Fed officials join Jay Powell in indicating a potential rate cut delaymay be on the table. We'll get back to the market story next.Of course, if you have any questions or any of your own for your guest, pleasesend them to us on eBay.

Plus, TV girl, stick with us.This is Bloomberg. In terms of where we see Europe goingforward. It is recovering and we are clearlyseeing signs of recovery now beginning timid and picking up in the course of24. And our forecast for 2526 is 1.5 1.6%growth. ECB president Christine Lagarde, ofcourse, speaking in Washington at the spring meetings of the IMF and the WorldBank. Let's get an investor perspective onEuropean growth debt. Stefan joins us CEO for AMIA and globalchief investment strategist at Deutsche.

Is private bank.Very nice to see you, Dirk. Thank you so much for joining us brightand early this morning. So let me start where Christine Lagardeleft off. She's talking about growth expectationsfor Europe, a growth recovery in Europe being factored in.Are you investing into a European growth recovery?Of course we do. I mean, being European, we have to beoptimistic about our own economy, even though admittedly as well, we have muchstronger growth. But we didn't really have a deeprecession or anything similar to that.

We also don't have a boom.So we really have to, you know, to to take the magnifying glass to see thatgrowth. But, yes, I would agree that it'sactually improving, and we are investing on that by our various sectors in theEuropean equity markets. Hmm.I wonder how much time do you spend thinking about Brussels?And I ask this in the context of the European meetings, European leadersmeeting to talk once again about competitiveness and about capitalmarkets, union and the like, and the way that Europe can stand up to competitionfrom the U.S.

With the Inflation Reduction Act, thechip stocks and everything that China throws at its industries.Does this move the dial for you at all? Anything Brussels can do, anythingEurope can do on a policy perspective? Is it is it enough to change thenarrative for Europe? I mean, I actually think that Europedoes many things, but the marketing efforts to really talk about that ismuch weaker than elsewhere. So if you look at the inflationreduction, these are very big numbers, of course, andit's the way it's rightly in the past. But if you look at the Europeaninitiatives, if you look at the budget.

And the next generation EU, forinstance, you add everything up, you also are talking about €2 trillion sofar for a few years. And now some recent developments goinglargely unnoticed, like, for instance, the payments that are now coming forPoland, where we talk about if everything goes according to plan withinthe next few years, about 18% of GDP. And we have actually a lot of growthstimulus also in Europe. But I would agree that elsewhere it'smuch easier and quicker to get the money, and that's why companies aremoving. But I think with the long term, theEuropean approach is probably the better.

One to do it.Okay. Well, yeah, it doesn't feel like thatright now, but maybe with with time maybe you can agree.I agree on that. Yeah.So. So given that given where the numbersare right now, let's talk about what we do with that.Am I selling U.S. bonds and buying European bonds?What is the compare and contrast in terms of the fixed income story oneither side of the Atlantic? The problem with that is always themarket itself, right?.

So there is quite a bit of pricingaction already that has happened. That's why we think we are probablyclose to something that's actually reflecting the most recent growthpatterns, which are more towards the US. And at some point I think this this willturn again. So we think most of the price action inthe US Treasury market is probably behind us.So for us, these levels we see in the US are actually above equilibrium.So over time probably it's a good idea to average in and buy these elevatedlevels. As for Europe, this could go on for awhile, but if you look at some parts of.

The Chinese economies and even inGermany, if you look at industrial production, for instance, then you couldmake the case just like like God said, that over time, very gradually we getbetter growth in Europe and that should be then also relevant for bond investorsto take into account. Dirk.It's crazy in London. What goes wrong here?It feels like the commentary in the markets is that because the consumer'sholding up fine, the ECB is going to handle what the European economy needs.What goes wrong? What breaks?I mean, I don't really get the question.

Because I think it's going more or lessaccording to plan. So as inflation is apparently slightlyless of a problem in Europe now compared to the U.S., So the ECB actually is inthe position that they they can cut rates, which would help certain sectorsin the European economy. And other than that, it's I saidinitially we only expect a very gradual improvement of growth because especiallyin the core, if you look at Germany, potential growth rate for only a barelyhalf a percentage point. So we shouldn't expect too much here.And if we get a little head on the second half of the year from the ECB,that that should also then smoothing out.

The problems here we have.Great to catch up. Nice to see you.Thanks for stopping by to see us. Stefan c o for EMEA, global chiefinvestment strategist, joining us from Deutsche Private Bank.Thank you very much indeed. Coming up, we need to talk about what'shappening in the world of crypto. We're going to speak to the CEO of oneof the world's or the world's largest crypto exchange.Our conversation with Richard Chang from Binance.That is coming up next. Gold.Crypto.

I think that's an interesting traderight now. It does feel as if maybe crypto is alittle bit more aligned to what we're seeing in terms of what was going on inthe Nasdaq right now. And we've also had this great run intoETFs. So we start to see a little bit ofprofit taking. Maybe that's the narrative that we'regoing to see developing over the next few weeks.So the halving obviously is tomorrow and that's maybe why we're talking aboutthis. Anyway, that is all coming up.European markets preparing for the open.

Little bit of corporate news to digest.This is Bloomberg. Thursday, the 18th of April, half anhour to go until we start trading here in Europe.Futures action for the bulk of the markets.Looks like we're going to be up around 8/10 of 1% euro stoxx 50, up by 8/10 of1%. Footsie is going to bounce back.CAC looks like it's going to be a little bit of an underperformer today.One of those a bit of lvmh action in the mix there.We'll come back to that story in a moment.In terms of corporate news, a, b, b.

Looks strong this morning.We're also watching the chip read across TSMC.easyJet out with numbers this morning as well.I'm going to flag this to really kind of crystallizing the impact of the MiddleEast crisis is having on their numbers. And it's going to be interesting to seekind of how how this affects the earnings season, kind of how many othercompanies talk about what is happening in terms of the geopolitics impactingwhat they're doing right now. So a lot of sectors to watch.We'll watch aviation with that in mind when watching mining stocks.BHP has been on the move during the.

Australian session.Watch chip companies, as you say, post TMC and post ASML.Crucially, because the sets up yesterday were so negative the way that the Nasdaqwas then down by 1.2% or so in session, the expectation around tech is is low orthe sentiment coming into today is low. Where does the leadership come from?Remains the question is this a tackle added let's action and Guy and I weretalking about this yesterday is this that ultimately luxury story in firmsLVMH, given the outperformance or the miners want to bring back to you and theminers, the metals, the commodity complex as a whole, when you're lookingat oil prices higher, but also in light.

Of the news we got in last 24 hours atpresent, Biden looking to perhaps imply or imply opposed is the word.I'm looking for even more steel tariffs on China.There's a read through there into the rest of the world.Yeah, and there's been some movement in Asian stocks as a result of that.Some of the steelmakers outside of China benefiting as a result of this.The the possibility that we go back to those conversations about more tariffs,I'm going to turn my attention to Bitcoin miners because they're about tohave an interesting few. What a smooth transitionas we get into the halving.

Obviously they get less in terms of theeffort they put in for that process. Now in some ways this has been frontrun. This is we've seen a big move already interms of Bitcoin. So so maybe you don't get the normaleffect that you would get from the halving.Let's carry on the conversation and talk more about what is happening in thecrypto space. Bloomberg's Vonnie Quinn is in Dubai.We need to talk more about this money. Guy.Thank you. Yes.Token 49 here in Dubai.

And we have a very special guest, theCEO of Binance, Richard Tang, was, of course, just in the job, not even sixmonths. There's a lot of history in the monetaryauthority of Singapore, also Abu Dhabi global market and much, much more.So we're delighted to welcome you. Guy was just talking about having.We'll get to that in a moment. First, any news to share on licenses?Thanks so much, Rodney. I think I'm very excited to share here,breaking it on Bloomberg that we have secured our full license with the Dubai,which I said regulatory authority and that allow us to serve the food to ourcustomers from institutions to high net.

Worth individuals to retail customerswith a much fuller three or four actually.So from sport to margin to end products. And we are looking forward to workingvery closely with both the regulators here as well as the partners here tobring about very vibrant ecosystem in Dubai.Right. And you know, crypto is a 24 sevenmarket where traditional markets are closed.People can still take investment strategy trading, hedging strategiesthat you see after markets and throughout the weekend.So we're very excited to serve the Dubai.

Market and beyond.Well, congratulations. Now, I know you were very close topicking a location for a headquarters, which you had promised and you hadnarrowed jurisdictions. Might Dubai be the new headquarters?Well, we are still in discussion with several jurisdictions on that front.And you understand that global headquarter issue is we have to gothrough quite a fair bit of deliberation.We have instituted our global board of directors, so I'm working very closelywith them. Going through the differentjurisdiction.

Give us a short list.Is Dubai is Abu Dhabi. I would set out the parameters forconsideration. I think that's more important for us.So he's very deliberate, as I mentioned. So we have to look at, you know, interms of jurisdiction, whether they have the regulatory framework to cater to oursuite of products and services, which is very white.Today. We have close to 188 million customersglobally. We are the largest exchange in theworld. So he's able to cater to that, able tocater to us in terms of, you know, we.

Are looking at things like doubletaxation agreement globally, whether we can base our key management in thosejurisdiction. So we are in deep conversation withseveral jurisdictions on different roughly how many.I wouldn't I wouldn't speculate on that front.But as and when we have news, we will break it.You just named a board of directors, as you said.Now, the chairman is a career diplomat from Barbados.And you have also three of the early employees, as you know, members of theboard.

What about this?Will give outsiders confidence that you are looking at things like complianceand changing your culture? Well, I have set out very clearly at thestart of my tenure as CEO that I make three commitments to the globalecosystem. First is continue to be user focused.Users are very important to us. As you can see, in the first quarter ofthis year, we have added 60 million new users onto the platform.So we stand at close to 188 million with assets being held by users close to 120billion today. Right.So the business continue to grow in a.

Very strong fashion.My second commitment is to working with global regulators to uphold globalstandards on that front, and that is working with both globally as well aslocal partners to support crypto adoption, which is still at a very earlystage of the value. So the promises are still intact.Bitcoin down about 14% in the last ten sessions roughly.Is this a halving event, halving obviously imminent?Well, I mean Bitcoin go through, I mean the crypto industry goes through a cycleis is to be expected. There's going to be market volatility.It doesn't only impact the asset front.

I mean given the geopolitical tension,given the interest rate environment that we are seeing, the inflationaryenvironment, the crypto industry is impacted like other asset classes.So but we are bullish long term because the institutions money are coming in,something that you have not seen before, 2022, 2024.So that is very bullish. We have clarity of rules in manyjurisdictions now that allow us to deploy.So the longer term trend is one less bullish.So that's true, but we have seen a lot of outflows out of some of the US ETFsin recent days.

And I know you think the cycle isdifferent in terms of where we will see the peak.Have we seen the 2024 peak? Well, I don't have a crystal ball.I can't predict on that front, but this cycle is indeed unique.Right. So normally you see an all time high interms of Bitcoin prices after the halving episode.But this time around, because of the liquidity of the user flow from the USETF, we saw the all time high in terms of Bitcoin prices happening before thehalving, but as I mentioned is bullish because I mean other than the US, youhave Hong Kong recently announcing.

Approval of Bitcoin ETF also has etherETF, right? And you see many other jurisdictiongoing to come under the bandwagon. A lot of institutions and almondfoundation are coming on stream and that's going to bring new user classinto this new in terms of regulations clarity.Your rules are going to give confidence to users into this asset class.So we are still at the beginning. Crypto adoption globally is only about5% today. So we are very confident that the paceof adoption over the course of the next five years is going to be much fasterthan the last five.

So you're going to bring a lot moreinvestors into this asset class. Can I ask when the last time you spokewith CC was? Well, I see these in the States now asthing. I think everybody knows that he's acontrolling shareholder of Binance as he has shareholders rights on that front.Right. We just have to observe the corporategovernance framework that we have put in place in Binance, which is the board ofdirectors, the other corporates through us of the company and driving thisenterprise going forward. What are the plans for him to divest orto take more steps away from any parts.

Of the company?I can speak on his behalf. I think those questions you shoulddirectors him as as a shareholder on that front.So he does still have a lot of control over decisions.He can't continue to be a controlling shareholder of the company.What are you doing in terms of discussions with the Nigerian officialsin the Nigerian government about the employee who's detained herein Gambianand the person has obviously fled and now in Kenya?I think there's I know the interest on that front.We appreciate interests, but this is a.

Sensitive matter.So we are in conversation with the Nigerian government.Our key priority is to get Teegarden home safely.Right. So Teegarden is a person of the highestintegrity, the highest professional. I think people that knows him knows thathe has work, is he has devoted his entire lifetime previously with USagencies and now as our head of financial crime, working with global lawenforcement agencies to fight illicit crime and fight financial crimes, we aregiving him and his family all the support needed and all key priority, allprevious, is to bring the home safely as.

Soon as possible.Richard, congratulations on the new license to operate in Dubai.And thank you for your time. Richard Tang, CEO of Binance CriticalCenter. Back to you.Boomers Vonnie Quinn. They're speaking to the CEO of BinanceGlobal Holdings. We thank you so much for bringing usthat interview. Look, I want to stick with the cryptospace here. Bring it right back to the macro becausewe're talking a lot about where does Bitcoin fall in the portfolio broadly,especially at a time we're seeing.

Outperformance in the stock market ingold especially. And that's really where I have a chartthat caught my eye. I want to bring it to your attention,Diana. This idea here that if crypto is the newdigital gold, how is it faring with regular gold?Is it actually kind of doing its job? So I've got a two panel chart here, getsa little wonky. Stick with me.In that first panel, you've got gold and Bitcoin.Two lines, very straightforward. They're on a logarithmic scale.They look pretty identical, but they're.

Moving on par.But if you break down the correlation, which is that second panel there on thebottom, it's a 40 day correlation. They're actually moving fairlypositively now, but that hasn't been the trend all year long.So if you're talking about gold right now at these record highs, does thatincentivize a Bitcoin bid as well? Of course, correlation is not going tobe causation, but right now they are moving in tandem.And I'm curious if that means Bitcoin is an inflation hedge or is being used asan inflation hedge, or is it being used as a risk appetite kind of dynamicrelative to the stock market?.

I don't know how to think about bitcoin,but I thought it was interesting that it's moving in line with gold.Are they? Well, and both of them can move with theFed. So are they both just functions that theFed same bias feels like it probably isn't the same sort of bitcoin that isprobably buying these two different products and maybe therefore people arebuying for different reasons and buying the products to satisfy very differentdemands. It feels like central banks are buyingpretty aggressively in the gold space ETF.Buying has not been that, whereas ETF.

Buying has been there in the cryptospace. Yeah and has come through and I wonderwhether or not that's where the essentially we've seen these big inflowsinto some of these ETFs. Are we about to see some outflows andprofit taking? It's been a really good run for cryptosince those ETFs were launched. So I think it's going to be one thing tokeep an eye on that chart, maybe that divergence that was there at the end.Both jaws maybe start to widen a little bit.And we should mention that the correlation I think is only a 2/10 of 1%correlation.

So the mark cut more in my head, thekind of double on my shoulder couple. I do I do that.So you don't want I know he's my boss. I can't help it but he would always say0.2% or 20%. The correlation is not enough to fortrying to it. So we have to wait for it to build alittle bit. But yes, he has in my head that we allneed challenge from wherever it comes. And we got two chips in Focus thismorning. And just on that subject, I'll justmention this red headline across the Bloomberg terminal, TSMC, sticking withits expectations around CapEx full year.

CapEx of 28 to $32 billion.I think this is interesting equity in the context of what you were sayingearlier about how, you know, is it ASML that's at the forefront of the chipstory or is it TSMC? So we're getting a better story out ATMmachine this morning. Yeah, Is it the tail wagging the dog orthe dog wagging its tail? Right.And that the proper, proper phrase. I Well, coming up on the program, we'regoing to talk about just that TSMC posting its first profit rise in over ayear. We'll discuss the semiconductor industryas companies ramp up that.

I spend that conversation next.This is Bloomberg. Welcome back to markets today.We are 15 minutes away from the start of cash equities trading here in Europe andthe futures picture points a little higher this morning.US futures also pointing higher. That has not been the direction oftravel over recent days, though. Let's talk about the markets in a fewminutes with Markets Live, executive editor at Mount Carmel who joins us now.Mark, good morning. Let's start with the latest rethinkingaround the Fed, because we've seen markets respond to this in the last fewdays, haven't we?.

A sort of rethink of the Fed's pivot inDecember? Did the markets get too carried away?I suppose one question that stands out to me is whether the Fed wants to seetightening of financial conditions, whether they'll be happy to see stocksretreat a little bit because then that means the Fed doesn't have to step upand tighten those conditions themselves. I think they will be happy with a littlebit of tightening of financial conditions.I think unfortunately, though, the Fed has lost control.The narrative, they were just so premature.They report in December repeating the.

Mistake of 2021 by being just way tooeasy in monetary policy terms, ravaged. The strength of the economy meansthey're losing credibility. They've lost control of the narrative.And what we saw this week was a concession by Powell, even that theyhave lost control of the narrative. So, really, you know, what we've seen inthe last couple of months is that the market got way ahead of the Fed as well.The market has kind of admitted that the data is too strong.Now the Fed is admitting the data is too strong.Both both the Fed and the markets are being bullied by the data here.And the data is saying there is no.

Chance of a rate cut any time soonunless things change drastically. And there is no hints on the horizonthat there is any kind of crisis brewing.Obviously, things can change, but they're not going to change it nextweek. We need a whole string of data to changethe narrative. So for now, the direction of travel forthe yields is still higher. Yeah.It seems precisely three inflation prints to change the narrative.That's perhaps what we've learned as well over the last few like the last fewweeks.

So with that in mind then, Mark, thedollar has been continuing to rise. Dollar strength the big talking point.Yen weakness weakness in other currencies as well of course.But that has put the yen in focus over a period.And we watched overnight as we see stories around maybe the US toleratingyen intervention. How does that set us up for next weekwhen we get to the next BOJ? Okay.I think the PGA is going to is going to get increasingly on the hawkish side.I think what's the interesting narrative this year is that we're going to have in2024 the BOJ move rates by more than the.

Fed.That seemed kind of fantastical at the start of the year when you're pricing inmore than six rate cuts from the Fed and the idea that the BOJ was not thecentral bank was still kind of a pipe dream, but it looks like the bank isprobably going to hike rates a couple more times this year.And obviously this yen weakness is going to kind of force them even more likelyinto kind of action. So I think the risk going to next week'sB.J. is slightly live and the risk is it'shawkish turn. Okay, Thanks so much, Mark BloombergMarkets live executive editor, Mark.

Cutmore with the latest thinking on themarkets. And remember, you can get up to dateanalysis and insight from Mark and the rest of the markets live Team MLV Go isthe functions you use to find the markets live blog on the Bloombergterminal. That's the function you want to use ifyou want Mark Cuban in your head. Basicallylike go, Mark's in your head. Let's talk about what's happening in thechip space. So we've seen the weakness over the lastfew days. Names like in video have been down,certainly off their highs and.

Potentially actually in correctionterritory 10% off the highs. So does TSMC start to change thatnarrative today, says this morning in terms of the delivery it's given us interms of the data that it expects revenue to rise as much as 30% thisquarter, it expects full year CapEx and think ASML here 28 to $32 billion.Now, ASML was talking about a pickup in the second half of the year.Is that what we're ultimately looking at there?Robert Lee, senior analyst at Bloomberg Intelligence, here to talk us throughwhat we need to know. Robert, we have seen some chip weakness.The stock has been down in video has.

Been down, ASML has been down.Does TSMC turn the tide? Is that what we should read into theseQ1 numbers? Um, I think that might be overstating ita little bit because obviously the market always looks ahead to some ofthese companies announced their monthly sales, so we knew where Q1 revenue wasand it was slightly above the mid range and guidance.So I think the market was expecting decent Q numbers, which is what we'veseen. So Q1 profit was three or 4% ahead ofexpectations. But as you know, it's all about theguidance and the outlook.

Well, that's the TSMC specific story.How much in terms of kind of that forward guidance do we pay attention tonot just the ASML story, but what's going on with Apple, what's going onwith Android as well? What are the leading indicators forTSMC? Okay, You mentioned our smell.So looking out to a much longer timeframe.Smells or order book to die for, really? So the EUV orders they talked intakethey talked about yesterday relate more to deliveries that would come throughthe tail end of this year and into 2025. So I think there is a question mark asto the demand outlook, you know, on that.

Longer or medium term time scale.But that has no relevance to TSMC in this current quarter, Q2 or for the yearas a whole. So coming back to a nearer termtimeframe, the call is ongoing as we speak.Q2 guidance is again about just under 5% ahead of expectations.So that's great. Unsurprisingly, driven by a I the grossmargin guidance because of some short term disruption from the earthquake andalso hiking electricity costs in Taiwan, that is a little bit lower.But I think the market should take that on its stride.But I think there are two of a question.

Marks there for TSMC, which you justreferred to. One of them is Apple.Well, our estimates, Apple's 20 to 25% of their revenue.I think a story on the China iPhone weakness is well known.So given up who is still a very large customer for them.That's one question mark there. And the other is automotives.It doesn't really get the headlines, but automotives is around 13, 14 theirrevenue. We are again seeing incremental weaknesson the EV side. So I think there's a question markthere.

The summary is or the question is, if Ileave you with that, is to what extent is this ongoing, you know, rampantdemand in AI likely to offset potential incremental weakness in other parts ofthat business? That seems to have been the case for Q1,which is reported. That seems to be the case for Q2.But will it still remain the case into the end of the year?So I think that's the key question people need to focus on.Okay. Thanks very much.Robert, good to speak to you. Robert Lee from Bloomberg Intelligencewith the latest on the space.

Really interesting that linked to theauto story which we were talking about here from a European car registrationperspective at the top of the last hour. Let's get a rundown of the stocks arewatching this morning. Joe Easton from our equities team has abriefing Joe. Morning.As we've got earnings out of Nokia today, the Finnish company beatingexpectations on their net profit for the quarter.But it is a bit more mixed than the initial headlines just because net salesare actually weaker than analysts expected, even as the company says thatthe network infrastructure orders are.

Improving, but that sales mixpotentially fading into concerns around some contracts going to the big rivalEricsson and also mobile phone firms cutting back.So it's a bit of a difficult one to rate here.We've got the two big rivals on the screen here.Nokia has been the underperformer, but I have seen a note from Citi today sayingthat potentially it has been another slow start.Citi is one of the very few analysts with a sell rating on Nokia.Keep an eye. We'll see where that one opens over inHelsinki today.

And we're also looking at demand.This is, of course, the big French consumer goods company, maker of yogurtand also water products. We got sales out of them and we weregetting an initial positive read on some of those headlines.A lot of that driven by the water business.Here's some of the numbers on the screen.The like for like sales across the group, up 4%, estimated three and ahalf, water sales up 8%. But they do warn of some impact.It issues with the shipping that has kind of eased recently, they said,calling it temporary.

Then we're going to look at Royal Mail.The owner idea is the subject of a takeover bid.News of this did come during the main market trading yesterday.However, right at the cuffs of trading close, we did get a statement from itgiving us the share price that was offered and it was 320 pence a share.They said they rejected it. Now the bid is coming over from theCzech Republic. The billionaire Daniel Kozinski, he hasa big stake in the firm already. He wants to buy.The whole company owns around 28% at the moment.The bid price would bring it up to about.

Here.Pier one Analysts reckon it's worth about 360, but if we take it back to thepandemic, that's still massively below where it traded at the peak as peoplebought more goods online. So potentially that is why they see thebusiness as undervalued. Royal Mail IDs in the headlines.Keep an eye on that one at the Open in London.Thanks, Joe. Yeah, I think the Brits are going tohave something to say about their speech and see kind of how the how the papersdeal with this one over the next few days.The Royal Mail being taken over.

Anyway, let's talk a little bit aboutwhere we are in terms of the market open this morning.I think we're looking at a fairly positive picture.Are we going to see a a early bid fading, I think, to kind of look at thatprice action in terms of the way it works throughout the day?It's important right now. This is Bloomberg. Welcome back to markets today.We're just a few minutes away from the start of cash equity trading.You are seeing futures in the green here.A little bit of outperformance right.

Here in the U.K.The FTSE 100 higher by about 5/10 of 1% for the euro.Stoxx 50 right on its heels as well. Corporate stories, it's the micro that'sin focus today. Yeah it is the micro and also mindful ofwhere we closed yesterday with technology stocks down by 2.8% such asthe downdraft here and also in the U.S. to some degree.And those numbers out of ASML, that that, you know, that's how we closethings out, feeling pretty gloomy about the chip sector.And then you add on top of that the TSMC story today, which has a brighter moodto it.

You wonder whether it had enough tochange the narrative because SNL certainly felt like a changed narrative,but it was a narrative that was already beginning to shift.It very has been down hard, semiconductors down hard.ASML is down hog. I keep coming back to this question doesdoes is does what we're getting from TSMC this morning change that narrativein a meaningful way to maybe put a floor under it?Because if it keeps falling, then the wider market story is going to become alittle uglier. And I think there's a very real isInfineon, I think is the one that I.

Really had my eye on in the Europeansession. Doesn't take the lead from ASML does itTake the lead from TSMC? And that's not one I quite happy.I take this cue from the auto sector. I would just say that.So you seen this this week? Auto sales numbers this morning.Is that so? Is Infineon highly exposed to that storyas well? Abe is going to be entering thismorning. I think easyJet is interesting thismorning as well. The fact that we're seeing a clearcrystalized impact from the Middle East.

Coming through in those numbers.Yeah, a reminder from our colleague at Bloomberg Intelligence that 13% oftsmc's revenues come from the auto sector to your point guy.So, yeah, putting together the weakness that we're seeing in EV demand with someof the chip sector, that may be also one that we need to watch.So let's talk talk, talk you through these markets.So a positive start is what is expected. So the Footsie 100 is expected to startup by kind of five, six, seven, 8/10 of 1%.The single stories aren't going to matter here.The cat looks like it's going to be.

Potentially an area of weakness.So we're going to watch out and maybe see what happens with some of the theluxury names this morning. There's also some downgrades comingthrough those LVMH numbers. And right out of the gate, you haveequity, of course, coming out of Stockholm.One of your biggest weights on the Stoxx 600.This coming off after a wave of downgrades despite the fact and this wasdowngrades yesterday after the bell despite the fact that they were actuallyhaving a you and outperformance in a lot of their funds as well.Interesting though with the market not.

Viewing that as the positive thismorning I'm keeping an eye on the mining sector looking for an open on some ofthese mining companies this morning. BHP outweighs that.Production numbers lifted the stock during the Asia session.We also have during the Asia session strength coming through in some of thebasic metals. Metals themselves.Iron ore prices, for example, were stronger and this was about iron oreproduction. So we'll see whether we get somemovement higher. Basic resources as a sector do seem tobe higher this morning.

It smells bouncing back quite nicely.Maybe we're starting to get an answer. Maybe the TSMCCapEx story is in. It got battered yesterday.So there's there's kind of do you buy the dip in?I smell. But it's interesting, Schneider's alsogaining as well. I've yet to see a price on Abe.We'll see when that comes through. I've yet to see an opening price comingthrough on ABX came through in yesterday's session into the numbersquite strongly. So we'll see what the market reactionthere is.

But Schneider is up.Some of the drug stocks are coming through as well quite nicely.But the but the oil stocks after yesterday's big move in terms of theseinventory numbers of the states and down pretty hard, a shell BP total allweighing on the market. Yeah, we saw a drop of 3% in oil pricesin yesterday's session. And of course, they rallied on the backof geopolitical tensions. But, you know, maybe that was evenlimited to some degree in the very near term because we sort of factored a lotof that in. But yeah, they did for yesterday week ofChinese industrial data, parts of the.

Story also, as you mentioned, go there.Yet the US crude inventories which I with these airlines I'm surprised thatyou haven't mentioned this yet easyJet that give give gave a second easyJethire by about four and a half percent IAG higher as well.The easiest story is really interesting to me because they talk about thisweight in the Middle East, but they're still saying that volumes are higher,bookings are trending higher. It's all positive outside of that oneregion. We heard that similar kind of commentarycoming on Ryanair out of United, even that this regional fact.Yes, it's a temporarily a wait, but.

Things are good.Look, this is we're back to the Taylor Swift economy.I feel like haven't spoken about that for a while.It's the Enrique Iglesias economy. Please.Okay. We can call it that if you you reallyWell, here is this. If you really have to do that sorrycurrency that was you're notso happy with the story. 2024.Explain yourself. These are bad when Ana works out.Yeah, and I have no right to correct.

Anybody, so I just just put that outthat Yes, I'm going to go now to the corner and just shoot myself.But but people are spending money. People still want to travel.And that's the expectation for the some of the people are still wanting to spendmoney. And this comes back to the I think itwas you had to ask this question a little bit earlier on.Do you need this is. Maybe related to the states, but doesthe Fed need to crack the stock markets in order to take away some of the sourceof funding that it generated out of that December pivot that people arecontinuing to spend?.

And it goes back to the crypto?Sure, it goes back to everything else. So in order to maybe loosen sorry itstightened financial conditions, do you need to crack the the stock market togenerate that? Would the Fed be happy to see a littlebit of that they've already created and happy to see them?I don't know. Just you have to point out, I'm I'mmaking a hard pivot because I'm still reeling.Shake sorry I make the joke, but he loved way too much.It's because I just guy it's fine. It's fine I it was do is everything andnailed it we go back to okay I'm going.

To I'm going to pivot Jean-ClaudeTrichet made this point on the stock market, particularly today.He said that he was concerned about what was going on on both sides of theAtlantic. And I and I and that's I think the firsttime I've heard really even a former kind of Fed or ECB monetary policyofficial talk about it in that way. The last person was Greenspan, I think,when he was in Rome. Yeah.And it's a weird market we're looking at today.So although you look at the overall moves and it looks kind of positive,doesn't it?.

We're up a quarter of a percent, notmuch, but there is a sort of positivity here.US futures pointing higher as if we're trying to.But the losses of yesterday and the weakness behind us.But then if you look at the sector breakdown, utilities is the bestperforming sector. It doesn't fill you with any kind ofrisk on confidence, does it? No, but yields down, that maybe kind oftakes us in that direction as well. Yeah.Which I think is which I think is an interesting kind of part of that story.Very yield sensitive as are obviously.

The real estate sectors.We are seeing yields coming down. So we've seen this really and it's beenthe rate of change that I think in the bond market that has caught everybody onthe hop. It's been this very, very sweet, swiftacceleration to the upside. What do you now do with those bonds?Do you take profits on them? And I think maybe there's some someevidence of that, or are we in a position where we actually want to startlocking in these yields? Well, we asked Kristen Mueller Guzmanover at Goldman that very question. Take a listen to what he had to say.We've been through a few geopolitical.

Tensions.The market has maybe become a bit desensitised.If you have a serious escalation, the bond market would react.And with regards to the auctions you were mentioning, I think that's aconcern we've had since the summer of last year that there is a lot ofissuance coming and investors need to be incentivized to buy these bonds.The incentive can come via a flight for safety bit or it can come via the yieldyield. The Goldman Sachs head of AssetAllocation research, Christian Miller Glassman speaking there.In terms of what the box is for a bond.

Market, that doesn't seem to beattracting a lot of buyers. Let's get a little bit more perspectivehere. Tatiana Grill Castro Castro excuse menews national public Markets co had joins us this morning.I said thank you. Good morning.Thank you for coming in. Where do you stand on the bond story?Is a 4.6% yield attractive to you? Yeah.Yeah. Good morning.I mean, it is there are so many conflicting sort of few points at themoment and also tensions.

Right.So his flight to safety clearly would be one argument where we would go and say,well, actually we need to position for that because, you know, there is a bigtail risk that something nasty could materialize.Having said that, we also see that I think it's now a four times increase inthe number of treasuries outstanding. So I think that is something thatshouldn't be underestimated, that you need a large buyer base.It is a not buy a market. The other thing is what is yourpositioning for? So is it a very short term positioning?And yes, there are CTAs that trade very,.

Very short dated, but then other assetowners that there would be longer dated. Is this now the time to come in to be along term holder in long term, meaning, you know, three months or even longerthan that? And so those are those conflictingsounds. What we stand here is 4.6 is clearlybetter than 4.2. But at the same time, is it you know, isit is it screaming buy you? Probably not.You want to have some positioning because you want to hedge your bets withregards to the tail risk. But at the same time, is it going to bea screaming buy?.

And there I think you should always makesome calculation. So, for instance, 4.6%, let's say itgoes to 5%. That's 40 basis points on the ten yearwith for, let's say seven year duration 40 basis points time seven is 4.8%.That's a negative return, right? Sorry, 2.8%.That would be a negative return. So you start with 4.6, you subtract 2.8.All of a sudden, while my full return for the year is, you know, is about 40%less than what's on the ten four points, you don't make 4.6%.Right. So the downside, I think is still thereat 4.6.

But you should make a positive returnfor this year, but you wouldn't make a significant positive return.Well, that's on the assumption that yields will ultimately go.That would be high. Yes, exactly.So what is the other What is the other? So there there I think we should be lessfocused on where interest rates will go for 2024.But what is your terminal rate and when do we get to the terminal rate?So if you get to the terminal right oh 926 perhaps, or the end of 25, clearlythat has an influence of the rest of the curve.So what is the timing of the terminal?.

Right.And then is where do we go with the terminal rate?And, you know, if we go with the terminal rate just below 4%, let's saythree and a half, three and three quarters.Yeah. And you think that generally it's about70 basis points higher from that. If you if you said of 2 to 3 months tothe ten year, then all of a sudden. Yes.You know, you have you come from 4.6 to 4.2 same calculations.Right. It's the same 40 basis points.So you add 4.8.

Yep.So and that gets you below a double digit return.Do you really want to take that risk to, you know, And then the thing is, is areyou getting paid enough for that upside? And I think that's that's I think thethe way we like to look at it. Okay.And so if you're thinking about when you know, when the timing of when you get tothat terminal rate, you're thinking about how sticky inflation is.Tatiana And you raise an interesting point, which I think is worth mentioningabout the repeated increases in minimum wage that we've seen in variouseconomies.

And that takes us back to somethingwe've been talking about over recent months about real wages and how realwages are more of a story of 2024. Even if we even when with well, maybebecause we're past peak inflation, as if the wage story is catching up with theinflation that we've that we've seen previously, how does that play out then?It continues to keep inflation higher for longer.I think generally it is sort of underestimated how many people are atminimum wage or close to minimum wage and how many people get affected by, youknow, that very sharp increase in the UK, in Europe, in the US of minimumwage.

And then clearly how many companies,especially smaller companies, rely on workers with minimum wage.Right. So.So then those companies will be forced to put a price increase through.And and there is still this ability also, I think there is little push backyet to to go and say, no, no, no, you know, I'm not going to accept higherprices. So there is still, I think, thisinflation expectation and the acceptance that things have become more expensive.And yeah, and therefore the products need to be more expensive.I think that is still playing out.

This is a group of people with highpropensity to consume, perhaps. So does this bode well for consumptionfor consumers? Exactly.Exactly. So that would be the demand, you know,sort of would also be stimulated by that.So. So it sounds like a rate cuttingeconomy. But I mean, I know we're not talkingabout a particular geography here. It's more of a global.Yeah, yeah, yeah, yeah, yeah. I think it is a global trend.And so, so so yes I think, you know, so.

Being cautious around duration.And the other thing is oftentimes, you know, we had a sense that investors wereblindly going into the recession, that they didn't really do theircalculations. We just very loosely, you know, sort ofpointed to just earlier where it just seemed it almost seemed like, you know,there was duration and it was like a almost seemed like, you know, thelemmings that blindly go in following duration without really without reallycalculating what is the return potential, what is the return it youknow, when it was inverted, when you have an upward sloping curve, when youhave a low carry, you don't get the.

Total return because of the slope of thecurve. It helps me a little bit better.Is cash better? Why am I coming out of cash right now ifif I'm just what you're saying right now, it doesn't seem to be so.So cash to arguments for cash. I mean, clearly it's an argumentoftentimes is it has tax advantages. And, you know, and, you know, we weresaying that the carriers the the best the really at the the cash curve.So the only argument would be that you have areinvestment risk. But that reinvestment risk would only beif you think that rates are going to.

Rally and you need to come in to ratesbefore that rally happens. Yeah, if there is a continued selloff,the pool. Exactly.Exactly. If there is a continued selloff, isthere continued steepening, then actually you take that the steepeningmeans the short end performs well and you still have time to at durationcredit credit. So there's two things.One is when everybody talks about credit spreads being tight, we always pointout, well, you know, you never go and say the Treasury has a yield of whateverit is.

You always point to the different pointsin the curve. But when we talk about credit spreads,we just take credit spreads. We don't point to the different points.And to talk me through the points then. So best value is actually in the belly.In the short end, the worst value is in the long end.This is where everybody was buying duration and it has dipped significantlylower to the long term average. The long term average in Europe is stillcheap in the belly and in the short end of the curve versus the ten year averagein the US, it's slightly you know, inside the long term average, we clearlynever are at the average.

So so yeah, we still see value in the inthe short end, particularly European investment grade is still value.So look at different points in the curve when you talk about credit spreads, notjust one point. In terms of credit, though, is thereappetite? Are you seeing growing appetite for someof the riskier parts of the market or is it still a stick with quality, etc.?I'm specifically referring to the kind of the high yield market.Triple C's, etc.. You're seeing risk appetite in the stockmarket. You're seeing risk appetite even inparts of the space.

Does that translate to higher yield?Yes. To the extent that if people go intohigh yield, you know, they would be buying a high yield strategy withinthat. So our portfolio managers are definitelystill of quality focused in default. Rates haven't gone up as much as theycould have if they had gone through restructurings.But now we see actually even in the bond market that there is not full, fullscale restructurings. So they're not necessarily classified asa default. But nonetheless, you have to take ahaircut.

This an investor.And so that is a new phenomena. You know, we talk about the credits oncredit, the violence, where, you know, there are some creditors that form agroup and they've already agreed a restructuring with the company.And then they come out and they push other credit is down the value chain.So just lots of those things, little games going on it the most attention tothe details session. Yes.Nice to see you. Thank you very much.Good to see you. Good to see us.Tatiana Castro, co head of public.

Markets and portfolio manager atBusiness and co. Thank you.Live bond math on an always loved. Let's talk about what's happening withthe with the cool six this morning. This is what we're seeing a reactionobviously in some ways to the TSMC numbers with ASML it's up by around 6/10of 1% but not an enormous bounce back from yesterday.Look at what's happening with Schneider. You got Abe out with numbers thismorning. Nestlé kind of so-so, but the continuingdeclines, it's been a few days now. Novo Nordisk has been soft.LVMH comes back to being soft as well.

Yesterday, we saw a little bit of a pop,but things turning around. So that's the picture with the kind ofthe core of this market. What else are we watching is going tosettle my favorite subjects last year. So we will start on airlines becausethey are getting a decent pace this morning following that report fromeasyJet, the company is saying that summer bookings are strong, The excesscapacity has come down slightly and they've redeployed some of the capacitythat was supposed to be used for the Middle East given the geopoliticalsituation there. But the other thing, of course, is thedecline in the oil price that we've seen.

Since yesterday's close and thereforepotentially reducing short term fuel concerns for these companies, Ryanair,IAG, with all of those stocks getting a decent move, all green this morning interms of the airlines. Then we'll look at a couple of otherearnings stories. We had a few of them and stocks towatch. Nokia, as we mentioned, Citi wasdescribing this as a weak start to the year in the telecoms business.5G mobile network firms still not putting in as many orders has some hadhoped. And a big decliner this one is StadiumSartorius Stadium down 16%.

Now.This is the maker of lab equipment. They supply a lot to China and that'swhere the weakness is coming from, its medical lab equipment, agriculturalequipment as well. And we're seeing that stock down 16%today as their sales disappoint. Analyst.Now, Deliveroo, a strong report from them.More than 17 million delivery orders placed in the last quarter.That's a lot of fast food and that stock is gaining 6% at the moment.It has had a bad run, as we've discussed on the show before, but it's gainingstay recovering slightly.

The best performer on the Stoxx 600 isIke strong. This is a national rival.It's a maker of chip machinery. They've got a big order from a UScompany called wolf speed. Breaking news on the terminal just comeout now stock up around 7%. It's listed over in Germany.As I say, the best stock on the Stoxx 600 this morning.Then we will take a look at a couple of m&a stories.Firstly, international distribution services, the owner of royal mail comingdown off that 28% gain yesterday. They have got a rejected takeover bid at300 $0.20 a share, certainly trading it.

To 70.You might expect it might come a bit higher.If people think that deal will go through, then we're going to continuewith the 2000 music subject that you discussed now, because Hipgnosis SongsFund one that we don't tend to look at too much.This is a company that owns the royalties to Shakira, Red Hot ChiliPeppers, all these groups, and they've got a takeover bid from a US firm.It's valuing them at more than ,000,000,000.It is a big mover on the London market is up 31% for a hipgnosis my favoriteticker as well song and on the ticker.

For that one.Then a couple of morning calls to bring you ASML.Now. Now, you were talking about it earlierand your Super six guy and we have got the first negative rating on that stockas Santander goes underweight. It's the only sell on the stockfollowing that 6% decline that we saw in the shares yesterday.But it's coming up very slightly today, up 0.4%.As I say, Santander underweight on Ash. Now, then, hey, and finally, is thePanadol and paracetamol maker here in London spun out of GSK a couple of yearsago.

HSBC reckons you should be buying thatone. Right?1% is a 307. The pence price target, trading at 3 to3, helium slightly higher in London. Okay, thanks very much Jack Jamieson forequity C middle of the nineties music references that you need to just theyjust keep coming this morning. I'm enjoying it.I'm in my element. These are music references.I can reference, I can understand and recognize.So I'm happy to be fed. My kids sing a lot of songs because Iplay them in the eighties and nineties.

All the movies have great soundtracksthese days and they're all from the eighties and now we see private equitygoing after the after the money behind those those catalogs.Really interesting, hard pivot back to corporate credit.Not sure how I'd do that one, but really interest heats up.You need some sort of musical interlude. It's getting really interesting to hearfrom Tatiana Grill Castro talking about corporate credit spreads there and tyingin with the conversation we had earlier about maybe whether the Fed is going tobe a little happy to see some pullback in financial conditions right now.I actually took that line from something.

Brown Brothers Harriman was saying.The Fed wants the market to do the tightening for them.Financial conditions remain. To lose some combination of widespreadsticking is about to settle on a higher yield, stronger dollar, lower equitiesis needed to tighten conditions. Maybe that's what we watch for as wewait for the next messaging from the Fed.The markets are in a really tricky and almost overly powerful, some would sayposition here, because on the one hand, you look at these kind of creditmarkets, valuations are looking pretty good.On the surface, it looks like there are.

Some really healthy companies.But then tailwinds just making that point.If you look below the surface, there are pieces, there is strains being put evenon investment grade companies. You haven't seen that default cycle lookso traditional. But then to your point about kind of themarkets and where where you position, there's still so much cash on the frontend of the curve and the markets are in charge a little bit is on my side of theinterest rate story, more so than the Fed markets talk about earlier.The Fed's lost control of the narrative. And there's a nice piece on the on theBloomberg as well this morning talking.

About the fact that basically the Powellpivot is responsible for kind of where we are.This reacceleration. He came out in December.He's like, we're good to go, folks. We're going to be cutting surprisingly,you know, I remember a lot of people remembering December.That was a big surprise. And and as a result of which financialconditions eased dramatically, how do they tighten them?Maybe the markets got the power to do that.Okay. The banking sector clearly watchingthis, just like many others.

They're coming up more cost cutting atUBS. We'll get the latest on the Swiss bankas it continues to trim headcount at the global investment bank post theabsorption of Credit Suisse. That's next.This is Mike back. So by the banking sector, UBS apparentlyplanning the next round of job cuts, part of the integration with CreditSuisse. The bank is said, remember that it'saiming to save around 6 billion in self costs over the coming years.This is part of the ongoing process. Tom Metcalf joins us now.Tom, what does this tell us about where.

We are in the process of integration?Yeah, it shows you head count is still very much one of the things executivesare focused on. And, you know, this is one of themseries of cuts. I think for me, the focus from ourreporting seems to be on the investment bank.Again, that makes a lot of sense, right? Management have been very clear.They're not particularly big fans of the investment bank they took on from CreditSuisse. So, you know, is that sort of targetedlook there that we do understand this may well sort of bleed across intowealth management and also even the.

Market side.But it's a good question. Sort of back in last year, the chairman,Kelleher, said, you know, the easy part of an integration is actually the jobcuts. The hard part is what is coming in 2020for all these sort of technical mergers and all that sort of the nuts and boltsof a massive merger. How does this stack up to other banks?Morgan Stanley Barclays, for example, has been talking about layoffs as well.Is this just part of the trend? Yeah, I mean, certainly you look back at2023, there are plenty of banks cut in and a pretty terrible year if you're adealmaker, basically.

I think for me, what's interesting maybeabout the timing is, you know, in the last few days you've seen a few US bankscome out and basically say, you know, dealmaking, we expect to come back.So, you know, that really helped Goldman's results.It really helped Morgan Stanley's results.So it's interesting, You know, it goes to show, I think, back to the strategythat UBS is doing. They're not trying to be, you know,Goldman Capital markets focus their wealth management.So are investors focused on these job cuts?So they focused on whether they missed.

Up on the miss out in the upside in eBayor what are they focused on, Tom? I think for me, it's something totallydifferent. It is this sort of capital requirementsthat, you know, the Swiss government is sort of starting to move.So, you know, this is expected. You know, you knew the politicians weregoing to be looking at this. But what came out recently was, youknow, for me, quite a strident stance from the Swiss government that theycaught me by surprise. I thought it was, you know, moreaggressive than I thought. So we're understanding that that mightbe a 20 billion capital hit.

So, you know, that puts everything elsein the shade. Right?It's a question of, you know, how do they sort of raise that money and doesthat impact stuff like buyout buybacks or in other things?Tom, thanks for updating us to Metcalf joining us on what the latest is outfrom UBS. Up next, we'll get back to the monetarypolicy story. Cleveland Fed President Loretta Mestersays the Fed shouldn't be in a hurry to cut rates.We're going to get more on that story. Michael JPM, Bank of America GlobalResearch is going to be joining us next.

This is Bloomberg. In an environment where the geopoliticalrisk premium is high 5 to 0 per barrel.If you don't get headlines with a materialization of geopolitical risk, Ithink the path of least resistance for that plenum is to drift drift lower.In our central case of no geopolitical hits to supply $90 per barrel should bea ceiling on Brent prices this year. The head of oil research over at GoldmanSachs. They're talking about $90 a barrel beingmaybe the peak that we get in oil prices at a time when some of their peers sayof J.P.

Morgan, for example, saying 100 may beon the table, not their base case, of course, but you're starting to see alittle bit of contrarian take there coming out of Goldman, which you seekind of it is premised on the idea that we don'tget any more geopolitical tension. So that I think is probably the firstthing that we need to kind of factor in if it doesn't materialize that maybe theoil price does go down. So I think we are all still ontenterhooks. I don't think we've spoken about itsince the weekend very much kind of what happens next.We're waiting to see what the Israelis.

Are going to be doing.David Cameron, the British foreign secretary, was talking about thisyesterday. He does expect a response.So I think the jury's still out very much on kind of what ultimately happensthere. And if we do get a significant response,maybe does push kind of to the upper end, The GFC argument is premised onnothing really happening. Yeah, that's that that's made clear,isn't it? On heat, they talk about five or 0being priced in for geopolitical risk still, and therefore why that might besome some some risk to the downside.

We are showing pictures of the EuropeanLeaders Summit, which is currently taking place in Brussels.Enrico Letta, of course, the Italian politician in charge of coming up with acompetitiveness briefing, I suppose, planned for today.We know Mario Draghi is working on a competitiveness report.Well, he's it's Enrico Letta. He's currently with Charles Michel thereof the European Council at talking about what's on the agenda at that meeting.I mean, dealing with energy challenges is part of what they're doing there inBrussels, because the legacy of those the reminder that we got of thevulnerabilities of the European economy.

When war started in Ukraine, Russia'swar in Ukraine, you know, that's just one of a number of challenges,competitiveness challenges that Europe's dealing with right now.Yeah, and it's looking around the world and it's looking at China, It's lookingat the United States. It's looking at what is being done interms of fiscal policy, industrial policy.And and Europe finally is grasping the nettle.It's going to have to make some significant changes here.How does that happen? Does it joint issuance, how do we workthrough an industrial policy on a sort.

Of multi-country basis?I think so. This summit actually feels moreinteresting in terms of what we're looking at here.And the compare and contrast across the Atlantic is the kind of the basis forthis in terms of the the outperformance we're seeing from the US economy rightnow. And how the Fed deals with that I thinkis is a really live subject at the moment.We've seen yet another Powell pivot over the last few days, finally acknowledgingthe idea that the market's already graphed, that actually rate cuts aregoing to become more challenging from.

Here.This is what Michelle Bowman had to say yesterday on this subject.We've seen over the past first few months of 2024 anyway, is that inflationprogress on inflation has slowed and and I expect maybe it's even stalled at thispoint. Okay.Stalled. So what do you do with that?You certainly doesn't feel like you're in a right cutting environment, does it?Let's get Michael Goldman's take on this.He is the head of U.S. economics at Bank of America.Global Research is here in London.

Nice to see you, Michael.Thanks for having me on. No landing.That feels increasingly like the scenario we're in.And that presumably means no rate cuts, at least for the time being.Yes, I think the message you heard from Governor Bowman and the others isthere's enough firmness in inflation that we don't have confidence to cutright now. So the view is you stay pat where youare and look for more evidence. So, yes, I think you can argue that a nolanding outlook, which is where we are, gives you enough firmness in inflationthat rate cuts are delayed.

So let's talk about a few weeks ago, wewere in a scenario where and the dots kind of back this up and we wouldn't getthree cuts this year and we're going to get three cuts next year.Do I push that six those six rate cuts into next year, i.e.we get none this year, but get a lot next year?I were in a kind of no landing this year, but a hard landing next year.So our our view is that probably not that what you would get is you get ashifting back of the start, but you may get fewer cuts in total.Okay. So we took we slid from June to Decemberon the on the CPI data for the start,.

But we took both of those cuts out ofthe forecast. So we have a higher terminal at 3.50 to3.75. So we think the message would be latercuts, but also policy over the forecast horizon the next three years.That needs to be tighter on average to get inflation where the Fed wants it togo. Good morning to you, Michael.Thanks for coming to talk to us in London.Bringing your your US experience very useful right now, thinking aboutfinancial conditions and where they are at this point.Do they feel too loose for the US.

Economy as it is at the moment?Do you think the Fed is going to want the market to tighten those conditionsin some form to do its work for it so it doesn't have to deal with some of themore extreme scenarios? I think I think broadly that's right.We would say financial conditions are modestly or maybe at most moderatelyrestrictive. The policy rate may be well intorestrictive territory. That may be accurate.But the broader set of financial conditions I think is only modestlyrestrictive. So I think what you're getting from theFed is a little bit of forward guidance.

Action here, later cuts, maybe fewercuts on hold for longer, but they still believe the supply side will keep theeconomy in a disinflation trend and they see policy as a as restrictive.So the answer there is you just hold that restrictive policy for longer.But by changing your forward guidance, you do hope financial conditions tightenand do that work for you as opposed to having to come back and raise rates,which would be highly disruptive. And one way that they could tighten isby stocks falling, of course. And I want get your economics hats onthe the the wealth effect from stocks being as strong as they have been in therecent cycle.

What has that caught people by surprise,do you think? Well, I think the magnitude has caughtpeople by surprise and that wealth in the US is up about $39 trillion sincethe onset of the pandemic. So asset markets as well as is realestate valuations. And that is underpinned a very strongconsumer. Yes, you know, the wealth effect isstill there. It works.I think what has surprised us all has just been the magnitude and the sheersize of that increase. It's about one and a half times of GDP.Where does the bond market fall into all.

This?You've got $6 trillion sitting in money market fund, sitting in cash, drivinginflation expectations. In terms of the trade, how does thatfactor into the actual effect that a cut or a hike would have from the FederalReserve? So in the sense that if you raise rates,it increases returns on savings balances.Yes. So I think in some ways, if you if youraise short term rates, it helps some savers, but it's going to depressactivity elsewhere. So on net, you think it slows thingsdown.

But yes, the higher pool of cashsavings, whether it's on household balance sheets or corporate balancesheets. Right.Makes it a little trickier to set your your policy accurately.So net you'd think higher rates would reduce activity, although you can't denythat some savers are benefited. But the yields picture are still much,much stronger and much, much higher. And I respect you're an economist, not amarket strategist, but there is a dynamic in the market.There's a conversation in the market right now that because there is so muchcash on the sidelines, specifically in.

Money market funds, that the markets areactually driving some of the financial conditions, not just the stock, butthrough the bond market and has more of a direct effect and more of a near-termeffect on the rates picture than the Federal Reserve has.Does that conversation have any merit to it?Yes, in the sense that what the Fed controls really is its real policy rate.Right? So it controls the, you know, theovernight nominal rate. And given where inflation is, the realpolicy rate, financial conditions broadly are determined by financialmarkets where where yields are, where.

Spreads are, where the dollar is, whereequity equity markets are. So many things that.You were just mentioning geopolitical risk moving oil markets.Right. There's many factors that can move thosefinancial conditions differently. So the Fed has influence, but not soleinfluence on that. So market expectations matter.Market views matter. Other risk factors matter.So when the markets fight the Fed, which is exactly what's happening right now,one would argue it feels like that they're more in charge of the interestrate picture.

Markets are always in charge of theinterest rate picture, more so than the Federal Reserve, though, controllingkind of the narrative, more so than the Fed.Has the Fed lost the narrative then? No, I think I think the Fed agrees withwhat the market is saying. I think the the speakers that have comeout from Jefferson to Bomb and to Powell, I think all agree we all movedafter the CPI data saying I doubt that gives them comfort and confidence.Therefore they should delay. And the Fed came out and said, yeah, weagree we should delay. So I think right now the market and theFed are on the same page when the facts.

Change until the facts change.Yeah, they feel like they have and continue to keep changing, which ismaking this so difficult to to navigate right now.There's a lot of surprises in there. The Europeans feel like they're on amuch more and in a very different place right now.Bank of England yesterday Bailey talking about rate cuts he's got a confidenceinflation that is coming down. You've got the ECB talking about asimilar narrative. How far can they diverge and becausethere is there is a kind of gravitational effect between bothmarkets both the.

How far can they diverge, do you think?I think they I think they can diverge. But I think the premise of your questionis they can only diverge so far. And I would agree with that.So if the question is if the Fed's delayed and we're we don't really knowwhen they're going to start, can the ECB start in June?Yes. The question is how many cuts could theyget in and how far they can they go? And obviously the how the currency moveswill be a very strong influence on that decision.So my view would be, yes, you can get some divergence, but I would questionhow much,.

How many rate points, 75 basis, 50, 75basis points could do that? Yeah, I think so.That'll be about, I think, the limit of what you could do this year.Okay. And that taps into what we were havingfrom Andrew Bailey overnight talking about how Europe is on a differenttrajectory in terms of the data, the inflation data.And there's a greater justification for cuts in Europe than there is in theU.S.. I would agree with that.And Bailey was referencing in particular a relative lack of demand driveninflation in Europe and saying that that.

Is still strong in the U.S..That's right. What are you looking at when it comes tothat demand driven inflation in the U.S.?What interests you, the sort of forefront of your research at Michaelabout about where that goes next, that that demand driven story?Yeah, that's the that's the interesting thing for me I agree with.So the no landing scenario is premised in part on this supply response rate.The labor force has rebounded. It's increased potential growth in theshort run, which gives you higher actual growth but still declining inflation.I agree with that.

That narrative, the Fed has bought intoit, but what I would say is I only pushed that so far because the storythat starts with a rebound in the labor force ends with greater employment,income and spending. So what I would look at honestly is justwhen we're adding a few hundred thousand jobs a month, that's a tremendous growthin labor market income which will ultimately lead to spending.It's not so easy to slice it and say, Oh, this is all supply.And supply is going to do all the work for us.Yeah, So I would just say keep it simple.Look at income generation out of the.

Labor market and that will tell youwhere the demand side effect is in the US.Is the U.S. outperforming because of fiscal policyand how does that fiscal policy change around the election, do you think?I think it's primarily outperforming from this labor market story.And then the secondary effect, which is still important, is thatthere's a there's a kind of immigration story.But but the fiscal policy presumably is having an effect as well.You see it in the payroll data in terms of government spend, in terms of kind ofwhat's happening with the labor market.

But most most of that coming out of thelabor market is at the state and local level, and it's hiring around educationand health. Yeah.So it has the same feeling of an economy that's still reopening from COVID whereemployment and and education and health is still below pre-pandemic levels.So I would qualify some of that under what we're calling it, the catch upeffect still in hiring. And obviously you need a labor supplystory to allow that to continue. So I'd put that under the supply.But in terms of just fiscal contribution to growth, it's been very high in recentyears.

So yes, I think it's been an importantcontributor, but maybe a secondary contributor for sure.The election. How does that change?Does that how are you changing your models in your thinking in terms of howthat election is going to affect? Well, I think that the question we allhave to answer and we don't obviously know it right now is do you get sweepoutcomes? Yeah, the risk I think that that themarket would point to is to say sweep outcomes where you get an all Republicanoutcome or an all Democratic outcome. The feeling is that could be more fiscalexpansionary.

So you'd have to worry about maybefirmer demand, firmer inflation, fewer cuts in that world.But obviously, the you know, the election in the U.S.is is very close. I don't think anybody has a good view onthat. We're not here to predict it.So I think that's uncertainty we have to deal with later.But the risk is around those sweep outcomes.Okay. And that would give more power to dothings which might be fiscal. Michael, thank you very much.Thanks for joining us.

We get to speak to you.Michael Gaping, head of US economics at Bank of America Global Research passingthrough London and joining us here on set as he does so.Coming up on the program, Europe is watching as industrial policy in Chinaand the United States threatens to leave the continent behind.We're watching live pictures of EU leaders arriving for a summit inBrussels where they're talking about all of these really global challenges takingon board some of the fiscal spend we were just talking about out of theUnited States and the policy environment around industrials that we're seeingthem arrive right now.

We'll be back to Brussels shortly for anupdate. That's just been back. This is my case today.We're 47 minutes into a European trading session which shows some upside thismorning, up by around 3/10 of a percent on European stocks now.Europe is watching as industrial policy in China and the United States threatensto leave the continent behind. That's the backdrop for EU leadersmeeting in Brussels today who face tough decisions on keeping the regioncompetitive. Let's get more with Bloomberg's OliverCrook, who's on the ground as we see.

These leaders arriving for thesemeetings. So you could say only that alarm bellsare ringing. If you look at what's happening inChina, has been for a long time, of course, and more recently in the UnitedStates, The European leaders, they're arriving now with a listening to whatwe're hearing from the U.S. and and crafting a response accordingly.Yeah, exactly. I mean, you mentioned China, and Chinais an easy enough topic to address here in this forum, Right.To say that there's overcapacity, to say how unfairly European companies aretraded and the tariffs need to go on.

Chinese goods.That's easy enough. What's more difficult, Anna is lookingin the mirror and saying, how can Europe itself be more competitive and lookingin the mirror? They might see a familiar face.And that is one of Mario Draghi who has been tasked with coming up with a reportto how to make Europe more competitive. And maybe it's just my training, havingbeen at Bloomberg for as long as I have, but when Mario Draghi speaks, we listen.And here's what he had to say about that.China, for example, is aiming to capture and internalise all parts of the supplychain in green and advanced.

Technologies.The United States, for its part. Are using large scale industrial policyto attract high value domestic manufacturing capacity within theirborders. We are locking in strategy for how tokeep pace in an increasing cost throughout race.It requires us to act as a European Union in a way we never have before.And so Mario Draghi. Mr..Whatever it takes, what it takes today in Europe is a radical change.He calls it a change that is comparable with the really the founding of theunion, the compact that had to do with.

Steel and coal 70 years ago by thefounding fathers of the EU. Unfortunately for Europe, this is tendsto be the sort of thing that they are not great at a massive change that iscoming, one that takes a long time. There isn't the kind of urgency thatit's tomorrow. It's really that slow walk towardseconomic obsolescence, which makes it very difficult to crack with politicalconsensus here in Europe. So, Ali, walk us through what's actuallyon the table when it comes to what these measures look like.What are we looking at? Right.So we're thinking about how to leverage.

Europe's sort of strengths.You know, it's not going to outspend the United States.It's not going to have a top down economic and industrial policy likeChina. They really need to leverage what EnricoLetta said, which he did deliver 147 page paper that now the EU leaders arediscussing is to leverage the single market.How do they do that? One is through defense spending and thatis going to be through euro joint debt. That is what he has suggested.And of course, the Capital Markets Union, which we've talked about forreally almost a decade here in Europe.

But could this give it the impetus toget that money flowing across Europe? Yes, for the defense industry, but forinvestment more broadly, that is the sort of money that needs to be tapped inEurope to get this stuff moving. We spoke to the defense chiefs yesterdaywho say, listen, we need stable and predictable and large investment in thisindustry if you really want to get the capacity up.And really, there's a still a huge amount of debate.Where will the Capital Markets union be supervised?Will it be out of Paris? We know that joint debt is a massivequestion.

And there's also one last thread here,guy, is that basically you have this EU election and in individual member statesyou have this rising sort of nationalism and euro skeptical view that is notgoing to make this any easier. Ollie, I feel like we've been talkingabout some of these subjects for a very long time.We generally do need a crisis to make progress.Is the crisis sufficient enough to make progress?And how far away from seeing that progress do you think we are?Listen, I think that there is a degree to which we could make some progress,certainly on the Capital Markets Union.

I mean, we heard Enrico Letta walk andwe heard a couple of leaders saying that they were actually optimistic that wecould make meaningful progress, even potentially today.I think that when you are faced with this, I mean, Olaf Schulz just returneda couple of days ago from China. He touched down initially in a city of32 million people. Right.One that many Germans have never heard of.This is the sort of scale that Europe is facing now.And if they want to remain competitive, they need to figure out how to unleash.And the Capital Markets Union seems to.

Be potentially one that is the mostwithin reach. Optimistic when you hear the wordoptimistic coming out of Brussels to maybe put a face on it.Thank you very much, indeed. We've heard a lot of optimism over theyears. Only crooked Brussels forest coveringthe summit plane will still to come from him.We got some great coverage also coming up out of Washington a little bit lateron, IMF and World Bank spring meetings are taking place.The ECB Governing Council member class note is going to be joining us.The South African Reserve Bank governor.

At the center Kananga is going to bejoining us. Plus the IMF managing directorKristalina Georgieva and Eurogroup president Pascal Donohoe is going to beon Bloomberg a little bit later. It's a busy morning.It's a busy day coming out of D.C.. Okay.I was about to go through a list of other things that are happening, but Ithink I'd just watch those. I think that sounds that's enough, isn'tit? Sounds like a good thing to do.We do have some U.S., of course, jobless claims, existing home sales after hours.We'll also get numbers out from L'Oreal.

So a bit of a focus on the consumer thatwe had interesting conversations about real wages due to the consumerconfidence consumer story with Tatianna, Goyal Castro earlier, but also all infocus. ECB's Mario Santino will be speakingmore from Michelle Bowman, the Bank of England's making.GREENE We'll be talking. We've had a lot from Michelle Bowman.I'm making Green recently, but we'll continue to bring you all of thoselatest latest thoughts. I'll also add that we have Netflixearnings after the bell in the States. And the reason I really like Netflix inparticular.

Yes, that's an American company.Yes. We all want to know when Bridgerton iscoming out. That's my investment.But it's also a currency story, something something in the past you tothink about. Yeah.So old school I refuse to for a for a bygone.I refuse to stare into this Yeah we're going to leave Kristy alone on hernineties means yes I'm going to go find like my words after the show.Let's talk about the currency picture though, because Netflix growth is moreglobal now.

It's hitting the emerging markets ishitting Asia. That's their next leg of growth.So the currency impact on the stock and what they do in terms of their currencycommentary to me has always been kind of this weird macro indicator that nobodyreally looks at Netflix. Well, it's not one that's been on myradar and then you've put it that crazy. So now I will focus on that inBridgerton. I would do find, though, when you talkto CEOs about facts, they well, you know, there are industries where you cantry and take structural actions, kind of exposures.But other than that, they just say we.

Try and look after the things that wecan control and we can't really control that one.So we just leave it alone. But Netflix is everywhere, isn't it?So presumably some of this is going to even itself out.Some currencies are strong, some currencies are weak.That's the natural hedge that you're talking about.Unless you are a predominantly gold based, dollar based investor.It's different. For example, and you see this withMcDonald's, you see this with Starbucks and Microsoft, for example, where somuch of their business comes out.

Externally.Netflix doesn't have that yet. They're still a majority U.S.company that is growing elsewhere. So if you have a subscription that'sworth 3 in the states, hypothetically, it's worth for it's priced far less in,say, India, for example, and that exchange rate ends up meaning a lot lessrevenue. It takes us nicely into that real wagesstory as well, real wages for 2024. You know, if they're going to hold up,then that'll put less pressure on people and consumers to ask whether they reallyneed a million streaming services is a nice story.I think it's a tough call.

Yeah.They're talking about in the story this morning about how times have gotten somuch cheaper in Japan recently because the currency has been moving so fastthat the retailers haven't caught up. So there's an awful there's anopportunity as an opportunity and luxury goods potentially around some of thiscurrency. My birthday's coming up.I'm just learning, you know. Yeah, we're continuing to please don'topen the doors. We we got jokes.We got, we got we we took a deep dive into European politics early with rightlate because we had we've got these EU.

Leaders still arriving for this event.I was told that Olaf Schulz was just arriving, but he's disappeared fromcamera short, so we can't show you that one.But he is arriving and and clearly a lot of pressure on Germany right now becauseyou've got all of these other leaders lining up to say, come on, this issomething of a crisis. We need to do something revolutionary.What does that usually mean? That usually means joint debt, andthat's usually something the Germans are not fans are fond of.But he's just come back from China. Yeah.What did he see in the challenge?.

Maybe.Maybe. Maybe he's got kind of recent experienceof the challenge. He's going to be briefing the otherleaders on what he saw, what he heard in terms of what the Chinese are going tobe doing. That could be an interesting kind ofchange of heart, maybe from from his point of view.And he sounded that the fear was that he would undermine the Europe, the kind ofthe tough European line. He didn't do that.He was actually fairly tough in terms of the language that he was using outthere.

Well, you've got Germany on board,hypothetically. Now, I got to convince all these smallerstates that are worried that the bigger European countries have this advantagebecause the markets are relatively bigger.They're so worried about this U.S. competition, the real threat from China.And do you have to convince some of the periphery still about the still aboutthe infighting? Perhaps that is it for markets today.We will leave you with plenty of programming coming out with the IMF.We just showed you some of the great guests that are coming up later on inour programming.

European equity markets making modestgains up by 3/10 of 1%, reversing some of the losses in tech of yesterday.US futures pointing a little higher. Have a good day, everybody.The pulse is up next. This is Bring back.

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