Europe Early Edition - 12-May-26

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[00:00:17]Welcome to Europe early edition with me Ian King. Rita Gupta is outside number 10 Downing Street and Dan Murphy joins us from Abu Dhabi. Let's get into your headlines.

[00:00:28]Karma's leadership teeters on the edge as more than 70 MPs call for the prime minister to step down. London Mayor Sadi Khan tells me he wants to see change, but a new prime minister is not the answer.

[00:00:43]>> We got to be a bit careful about calling for change in the prime minister. I'm not calling for a change in the prime minister, but I am calling for a change in pace of delivery.

[00:00:54]>> Plus, Donald Trump rejects Iran's response to his peace proposal, describing Tyrron's demands as garbage and dampening hopes for a lasting ceasefire deal.

[00:01:05]I didn't even finish reading it. I said I'm not going to waste my time reading it. I would say it's one of the weakest right now. It's on life support.

[00:01:15]>> Fears of an on pass in the Middle East.

[00:01:17]See European futures called well into the red. And Wall Street around the flatline as attention turns to today's US inflation print. The last of Jerome Pal's tenure as Fed chair.

[00:01:40]Good morning and welcome to the show.

[00:01:41]Let's get right into our top story which is that K Starmmer's position as UK prime minister is resting on a knife edge this morning. Ministerial AIDS resigned from Starmmer's government and more than 70 of his own MPs told him to quit in a day full of political drama with the PM's make orb breakak speech yesterday morning failing to quell a growing rebellion. Well, today's crunch point will see Starmer hold a cabinet meeting this morning amid reports that cabinet ministers including the home secretary Shabbana Mammud have told him to lay out a plan to leave number 10.

[00:02:14]All of this just a day before the king's speech where his majesty king Charles will set out the government's agenda for the reopening of parliament. Well, guilt yields rose yesterday along with the number of MPs calling on Star to go with the 10-year back above 5%. Meanwhile, the yield on 30-year paper rose as much as 11 basis points on the day testing last week's generational high. Well, Rita joins us now from Downing Street.

[00:02:41]Rita, what's the uh vibe down there?

[00:02:46]Well, in the mood over here in 10 Downing Street, it's been tense. This is as there have been growing calls for the Prime Minister Kama uh over his leadership after those bruising local election results. There've been growing calls from uh Labour Party members for the Prime Minister to step down or set out a departure timetable, something that the prime minister said that he will not do. Now, the one-time challenger, Katherine West, she's dialed back her threat to trigger an immediate leadership challenge, but she is now collecting names for those who want the prime minister to step down by September. That gives time for the other candidates, notably uh Andy Burnham, to have time to replace him. Now, this comes after Starmmer, as you mentioned, made that make orb breakak speech on Monday, uh vowing to face up to the big challenges facing the UK. But there wasn't anything new on the policy front.

[00:03:38]The message seemed to fall flat uh for those who wanted to hear uh some big changes announced and one of those was the London mayor Sadi Khan who I spoke to uh in an interview. Now he's not calling for a leadership change but he did say that he wants Star to be bolder and braver particularly when it comes to uh new policies um such as closer ties with the EU. Now he says that he the party should pledge to rejoin the EU uh at the next general election. Take a listen.

[00:04:08]>> Those of us who are members of the Labor party have got to acknowledge and recognize how bad the results were last Thursday. This is more than a shellacking uh that you know that that we talk about in in politics. This was a rejection of all all the things that Labor government has done. Some of them are really good and we should be really proud of from supporting renters to supporting workers to supporting parents with uh children. Some of these achievements have been overshadowed by basic mistakes and mishaps. You know, we're talking about Peter Madison for the last six weeks rather than some of the Labor government's uh policies. But when I speak to people across the globe, whether they're investors, chief executives, venture capitalists or others, they look to the UK as somewhere that provides calm, stability, and certainty. Compare us to other countries. I don't want to name them because I don't embarrass friends in other countries. And so I think we going to be a bit careful about calling for change in the prime minister. I'm not calling for a change in the prime minister, but I am calling for a change in pace of delivery. I'm calling for a change in how we storytell in the policies we deliver. I think we should be much closer to the European Union. I want us to rejoin the customs union and the uh single market. I think it's really important to acknowledge uh what people across the country are saying, which is they want to see change, positive change much quicker.

[00:05:24]>> And you called there for bolder policies, including rejoining um the EU.

[00:05:29]Do you think that Starmmer needs to go big now um instead of waiting for the next general election, even if that does mean breaking certain manifesto pledges or else it will maybe it will be too little too late. I think you've articulated the the challenge and conundrum this government faces which is I think things have changed since July 2024.

[00:05:50]The manifesto the Labour Party put forward in July 24 was a good one but there's been big changes. We have a president of the USA who has introduced tariffs.

[00:06:00]>> We've got a war taking place in Iran and Ukraine which is affecting the cost of the fuels we rely upon. uh had a big impact on cost of living in this country. So we've got to acknowledge and recognize uh the headwinds coming from overseas which is why in my view we've got to be bold. We've got to be brave.

[00:06:18]My experience over the last 10 years is there's no reward without risk. I think what the public don't want is an impression given that a leader is an administrator or a bureaucrat. Important though their skills are they want a change maker. And I think my criticism of my government as a Labor government I'm a Labor mayor is we've not been bold enough. we've not been brave enough uh and I think unless we do so we're in danger of losing the next general election pretty badly.

[00:06:48]>> And I also asked Sadi Khan about the changing political landscape about how the the era of of two party dominance may now be over. Take a listen to what he had to say on that.

[00:06:59]>> There's been a fragmentation of politics in this country. If we're speaking 10 years ago, 20 years ago, 30 years ago, two main parties, Labor and the Conservatives, um there's now five five parties in contention. Labor, Conservative, Lib Dems, Reform, and uh Greens. My view is to uh welcome uh this competition. I'm somebody who who thrives, you know, in competition, whether it's in politics uh in terms of which city is better, London, New York, Paris, Dublin. By the way, it's London.

[00:07:30]Um but competition is not a bad thing.

[00:07:31]whether you're a sports team, whether you're a mayor, whether you're a political party. And so we should welcome the competition, it should make us raise our game. So how do we as a political party nationally replicate what we've done in London, which is to persuade conservatives to let me their vote, persuade Greens, persuade Lib Dems? And that's what we got to be doing as a national party. Saying to somebody who's last Thursday voted green or voted reform or stayed at home, this is what I'm going to do to persuade you to lend me a vote next time. What are the concerns you've got? How can I address the concerns you've got? And there are two types of politician. There are those that address people's fears, and that's what us progressives should be seeking to do. Or those that play on people's fears. And my view is, you know, whether you're President Trump, whether you're reform, whether you're some of these other right-wing parties, you're playing on people's fears. You're not addressing them.

[00:08:25]>> So, as I mentioned then, Kahn urged caution about replacing Stara as a labor labor leader. He also talked about the fragmentation in UK politics today. what he said is that when he speaks to people across the globe, whether they're investors, uh, CEOs, venture capitalists, they all look to the UK, uh, for stability, to provide some certainty. And but Ian, what we saw in the markets is that yields have been rising and we saw that um, in after Star's speech yesterday with that 10-year yield rising back above 5%.

[00:08:56]There is concern about if Karma was to go, who would replace him? would they have a much looser uh fiscal policy? And we've seen that rise in those yields that's been building over the last few days because it doesn't feel like uh there's going to be any stability or stabilization anytime soon. Ian >> Ritica obviously the timing of this were karma to have to step down now. I mean, it really favors Wes Streeting the Health Secretary because his two other rivals, Angela Rain, has still got tax issues hanging over her head. And Andy Bernham, the great Manchester Mayor, isn't even an MP.

[00:09:34]>> Yeah, Ian, that's the the the issue here that many have been just talking about.

[00:09:38]If Karma was to leave, who would be replacing him? And you just outlined the three uh names there. West Streeting, Angela Raina, and Andy Burnham. Those are seen as the three potential challenges, but it's about timing as you mentioned because uh it's not necessarily none of the candidates are necessarily ready maybe apart from West Streeting if he does decide to launch a challenger uh bid um but none of the others are ready to just yet. So, as we had with Katherine West, the one-time challenger, she uh was going to d uh trigger this leadership contest, but she has decided that she's going to hold that now. and instead she's just going to collect names so that the prime minister uh to leave by September. That would then give those candidates more time, most notably the Greater Manchester Mayor Andy Bernham.

[00:10:28]>> Thanks, Rita. Much appreciated. And much more from Rita throughout the morning here on CNBC.

[00:10:35]Meanwhile, US President Donald Trump has said the ceasefire with Iran is quote on life support after rejecting Tran's latest counter proposal to end the war.

[00:10:45]It's unbelievably weak. I would say I would call it the weakest right now.

[00:10:52]After reading the piece of garbage they sent us, I didn't even finish reading it. They said I'm not going to waste my time reading it. I would say it's one of the weakest right now. It's on life support.

[00:11:04]>> Well, Dan joins us now from Abu Dhabi.

[00:11:06]Dan, obviously we've heard what Donald Trump has to say there. Where do things go from here?

[00:11:13]That's the question, isn't it, Ian? And President Trump made those remarks Monday morning before heading into a situation room meeting with his full national security team. The vice president Vance Secretary Rubio, Defense Secretary Hegsth, the Joint Chief's Chairman General Dan Kaine, the CIA Director Ratcliffe, and Envoy Steve Whit all reportedly in the room. And the topic was whether or not to resume military action against Iran. Axios reporting that President Trump is leaning towards some form of military action now to increase the pressure on Tyrron and force concessions on the nuclear file. The other options on the table here, according to Axios, include resuming Project Freedom to guide ships through the strait and also restarting the bombing campaign or perhaps even a special forces operation to secure Iran's enriched uranium stockpile. Now, Trump is reportedly hesitant on that last option given the risks involved, but Axios also said speaking to two officials that President Trump was not expected toward a military action before he returns from China on Friday.

[00:12:17]Meanwhile, Ian, a major revelation from the Wall Street Journal this morning that fundamentally changes the shape of this war as well. The Journal reports, citing people familiar with the matter, that the UAE has been conducting military strikes on Iran. The Journal also reporting that Abu Dhabi's military has carried out attacks on Iranian targets, including a strike on a refinery on Iran's Leavan Island in early April that sparked a large fire and knocked much of its capacity offline for months. Iran responded to that strike with a barrage of missiles and drones against the UAE and Q8. Now, it's important to point out the UAE has not publicly acknowledged these strikes and CNBC has also contacted the Foreign Ministry for comment. The UAE has also previously said that it has a right to respond militarily to hostile acts. And remember, as well, Iran fired more than 2,800 missiles and drones at the UAE.

[00:13:13]That's more than any other country in this conflict, including Israel. And those attacks have impacted UAE tourism and air traffic and its property market as well. Abu Dhabi has now concluded, according to Gulf officials that spoke to the Wall Street Journal, that Iran is ultimately a rogue actor that's bent on destroying the Emirates economic and social model, which might help to explain the reaction function on the ground here. The journal also notes that Iran's strategy of pulling the Gulf into the war has also exacerbated some of the political divisions that we see among Arab neighbors here. But in the case of the UAE, it appears, at least according to this report, if confirmed by the foreign ministry, that it has only hardened Abu Dhabi's resolved rather than broken it. Ian, it's back over to you.

[00:14:00]>> All right, Dan, thanks very much for that. And separately, the US strategic petroleum reserve has released another wave of emergency oil amid soaring gas prices from the war in Iran. Just over 53 million barrels were released. US President Donald Trump and several Republican lawmakers have floated suspending the federal gas tax.

[00:14:19]Currently, just over 18 cents a gallon.

[00:14:22]Prices at the pump are surging amid the war. A concern for lawmakers ahead of midterm elections in November.

[00:14:30]Well, coming up on the show, futures are called lower in Europe, while in Asia, investor attention is on Treasury Secretary Scott Besson's visit to Japan.

[00:14:37]We'll be breaking all that down next.

[00:14:38]Stay with us.

[00:16:50]Welcome back. Here's how uh European markets are being called this morning.

[00:16:54]As you can see, all of them in negative territory. The stocks 50 cooled off nearly 3/4 of 1% lower. Footsy 100 off by just over half of 1%. And in Germany, the DAX is being called down about 9/10en of 1%. Now very busy day for corporate earnings today in Germany. So we'll be keeping across that throughout the morning here on CNBC. Let me show you what's been going on in the FX markets. Uh dollar pretty strong ride across the piece as you can see. Euro weaker against the dollar. Sterling likewise. Dollar up a third of 1% against the yen and up a quarter of 1% or so against the Swissy just now.

[00:17:28]Interesting uh overnight on Asia. Let me show you some of the Asian markets. Bit of a mixed picture there the last time I checked there. You can see the Nicay up third of 1%, Hang Sang very slightly in positive territory. The Shanghai comp off half of 1% and the Cosby obviously hit another record high yesterday. It's given back some of those gains this morning. Currently off some 3 and 3/4%.

[00:17:51]Well, meanwhile, Japan and the US have reaffirmed their close cooperation in dealing with FX moves, including on currency intervention. Japanese Finance Minister Satsuki Katyama said she discussed currency moves with her US counterpart, Treasury Secretary Scott Bessant, but refused to confirm whether the two discussed the Bank of Japan's monetary policy.

[00:18:13]Cower and Joji fought this report.

[00:18:16]>> Foreign exchange markets were on tent hooks as to what US Treasury Secretary Scott Bessant would say as he gets uh on with meetings here in Tokyo today. first with the finance minister and then with the prime minister Sanaichi.

[00:18:31]Japanese prime min finance minister Katayama saying that the US and Japan have agreed to closely cooperate but not extending anything beyond those comments. The two she said discussed everything from rare earths to other supply chain bottlenecks in two rounds of meetings. First at a dinner after Scott Besson arrived here late yesterday and this morning at the finance ministry. But a lot is at stake of course. Scott Besson is making the rounds ahead of a trip to Seoul and then later to Beijing ahead of ahead of the superpower meeting between Beijing and Washington later on this week. And for Sana Takayuchi in particular, she is especially concerned about security guarantees regarding Taiwan at a time when diplomatic relations between China and Japan have been strained dearly for the last 6 months. That's the latest from Tokyo. I'm Kodi and Joji.

[00:19:23]Meanwhile, the US Treasury has sanctioned 12 firms and individuals, including some based in Hong Kong, the UAE, and Aman over the sale of Iranian oil to China. It also threatened to take further action against quote, "any foreign company supporting illicit Iranian commerce, including airlines and firms with connections to China's private oil refiners." Let me show you what the futures are for the uh US right now. All of the main indices are being called lower. No real surprise there given all the uncertainty overnight.

[00:19:55]Well, joining me now is Rebecca Mlan.

[00:19:57]She's investment director for developed market equities at Abedine. Rebecca, very good to see you this morning.

[00:20:02]Thanks for joining us. Um, have you been surprised at the extent to which markets are sort of looking through what's going on in Iran right now?

[00:20:12]>> Yes, there's been a strong global um market recovery through April and into May. Um and I think that does speak to the point that markets um and participants are looking through the closures of the straight of hormuse as being temporary um and the impact on growth as being contained. Um and I think you know we need to point out that there are still risks. I mean the ceasefire is fragile. There's there's still some way to go in terms of getting the two parts to um agree in how to open up the strait. Um and so I think that does create risk particularly um as the duration continues. So I think you know the risks remain on the horizon for markets which do seem to be taking it in their stride.

[00:20:53]>> We've had a pretty strong earnings season particularly in the United States. Is this as good as it gets given that apart from the oil and gas companies we're likely to see some pressure on margins for a lot of businesses as a result of what's going on?

[00:21:08]>> It has been a positive earnings season.

[00:21:11]If you look at the US um Q1 earnings, 86% of companies beat their expectations, which is higher than normal. Um if you look at the earnings expectations for the S&P 500 and these have increased, but they've mostly been in those AI sectors and also in commodities, upgrades have been more muted elsewhere. I think what's particularly interesting though in looking at the the quarterly earnings is that there is more caution coming into the outlook statements. management teams are really, you know, struggling to get that conviction in terms of the outlook given the cost dynamics coming and also question marks about potential demand disruption. So I think we probably do need to see a resolution in the Middle East in order to see more optimism return outside of those AI and commodity sectors.

[00:21:58]>> Well, and quite so particularly given that if you look at valuations, they're pretty high right across the piece right now, apart from one or two markets like the UK.

[00:22:06]Yes, valuations are elevated. If you if you look at the price earnings multiples across different markets versus history, they are elevated and partly that's supported by superior earnings growth which are on offer. The UK does stand out having had a a couple of years of very strong performance. The index itself is still trading within its historical range. Um, and I think, you know, it's been an asset class that's been off investors radars. It adds something different in terms of sector diversification with heavy weights towards energy, basic materials and financials. It also offers superior income yield for those investors looking for dividends. So yeah, there potentially is a valuation opportunity within the UK market.

[00:22:47]>> To what extent, Rebecca, do you think there's political risk overhanging UK equities just now?

[00:22:53]>> Yeah, I mean the results of the local election last week are not the main story. Um and the initial market reaction really took the news in its stride given the losses were not worse than expected but the focus has changed towards leadership of the Labor party um over the weekend and into the start of the week. So I think that's really where the focus is. So far the market reaction has been limited. You can see more sensitivity in the guilt market with the UK 10-year guilts reaching 5% last week, but that takes them back to where they were um sorry yesterday. That takes them back to where they were last week. Um and I think partly what's happening here is it's a it's a question of positioning going into the event was already quite negative and UK assets do price in an additional risk premium for politics on top of what we're seeing in energy markets. Um and so so far there hasn't been a huge market impact from the um from the political situation but I think what markets are really focused on is that long-term borrowing costs for the UK government because that feeds through in terms of housing sector those rate sensitive sectors and also into the consumer spending too.

[00:24:10]>> Quite so. While you've been talking Rebecca we've been showing viewers the Footsie 100 and the Footsie 250. What's interesting is that the midcaps have actually outperformed the uh premier index for the last 6 weeks or so.

[00:24:21]>> Yes, potentially a change of leadership here. Over the last 5 years, the Footsie 250, which is those midcap companies in the UK, has lagged the large cap index by 8 percentage points a year. And this is really created a valuation gap whereby midcaps are now trading at a discount to their large cap peers where historically they would trade at a premium given superior um growth. that is typically offered from the midcap index. So you start to see that shift and momentum within the midcap space. Um and it started quietly but we've seen it over the last six weeks and I think it reflects that starting valuation. Um and it's something that we're watching closely.

[00:25:01]>> Quite a surprise in some ways to see this outperformance given the composition of the mid250 and the fact that it's got lots of house builders.

[00:25:08]We've had one or two profit warnings from that sector. One or two retailers under the kosh as well.

[00:25:14]Yes. Um I mean certainly when we look at some of those sectors which are struggling, you know, we named a couple there. Um you know the consumer sector was certainly seeing some weakness in the consumer. Um lack of confidence, facing higher prices, but also a weaker labor market. Um but you know there you can still find resiliency within these sectors. So within the consumer sector, I'd point out that the soft drink sector provides resilience. It's a it's relatively defensive. And I was speaking to the CFO of a soft drinks bottler last week who was talking about how they were managing input cost inflation and they've really built in more contingency into their businesses post the um Ukraine 2022 inflation spike um increasing their network of suppliers and also have come into the year with good level of hedging. So that should provide some support but certainly um you know these businesses are facing greater cost pressures and this will and this will be exacerbated if the um straight of Hammoose continues to be closed.

[00:26:15]>> Obviously Rebecca we've seen some big sell-offs this year in terms of businesses that investors feel may be disrupted by what's going on in AI. I think for example of Rellex or the London Stock Exchange Group. Are there still bargains out there from things that have been beaten up?

[00:26:31]>> We think so. We have been hunting in those baskets of companies that have been left behind. You've seen a huge level of diversion in the performance within the technology sector. So semiconductors and equipment um manufacturers have gained strongly this year. And on the other side, software businesses um have declined with a with a with a big degree of dispersion. Um and I think it's now time really for an opportunity for stock pickers because within those companies that have been left behind there are businesses which um could harness the power of AI in order to drive returns for their companies. Um so you've mentioned LSE.

[00:27:07]This is a company which has um last set of results spoke about an acceleration in data demand driven by LLMs. Another company I'd mention is a UK midcap called softcat. It is a value added reseller of technology. The shares have derated over the last year, but if you look at their earnings transcripts, they are seeing an an acceleration in demand from AI driving demand for networking, data security, and data centers as really corporates have to invest increasingly in order to respond to the shift that we're seeing in the market from a technological perspective.

[00:27:42]>> I'm glad you mentioned softcat there.

[00:27:43]Much overlooked stock there, Rebecca.

[00:27:45]That's all we've got time for, I'm afraid. Good to talk to you this morning. Thank you. That's Rebecca Mlan.

[00:27:49]She's investment director of develop market equities at Abedine. Well, coming up on the show, Seaman's Energy announces it will accelerate its share buyback this year. We'll be speaking to the chief executive, Welcome back. You're watching Europe Early Edition with me, Ian King. Here are your headlines this Tuesday morning.

[00:30:07]Karma's leadership teeters on the edge as more than 70 MPs call on the British Prime Minister to step down. London may Sadi Khan tells his program he wants to see change, but a new PM is not the answer. We going to be a bit careful about calling for change in the prime minister. I'm not calling for a change in the prime minister, but I am calling for a change in pace of delivery. Donald Trump projects Iran's response to his peace proposal, describing Tran's demands as garbage and dampening hopes for a lasting ceasefire deal.

[00:30:37]>> I didn't even finish reading it. I said, I'm not going to waste my time reading it. I would say it's one of the weakest right now. It's on life support. Fears of an on pass in the Middle East see European futures called well into the red. Meanwhile, Wall Street is around the flatline as attention turns to today's US inflation print. The last of Jerome P's tenure as Fed chair.

[00:31:12]Seaman's Energy says it will accelerate its share buyback after posting a 42% rise in pre-tax-free cash flow in the second quarter. The company said it has seen high demand for data centers to power AI tech. Well, joining me now, I'm pleased to say, is Christian Brook. He's the chief executive of Seaman's Energy.

[00:31:30]Doctor, good morning to you. A lot of people are just going to say this is all about data center demand. Is is there more to it than that?

[00:31:38]>> Good morning Ian and thanks very much for having me. No, it's not. Right. I mean if you look on our orders particular in gas turbines which is obviously in the center of the attention roughly 2/3.

[00:32:07]It is actually classical tradition and we are very careful also to make sure we have a diversified backlog and view on it. If you look on on orders backlog in gas it's around roughly roughly 25% is related to data centers. It's a lot less on the grid technology side. So it's a great segment coming up with high demand but at the end the underlying strong demand and electrification is much more important. talk to talk to me about the geographic mix of the order book just now.

[00:32:40]Yeah, I mean what you have seen over the last quarter and also that is something what we tried to steer quite diligently is that roughly roughly Europe, Middle East Africa which is one big region for us and Americas which is largely North America and US is roughly the same size of the order book and then you have 15%ish then roughly also sitting in Asia. So this is a balance we are trying to keep between the different regions. Obviously on the one hand benefiting from the strong US market with a very good pricing environment but we are very careful to keep a diversified backlog and portfolio of the projects.

[00:33:18]>> You recently announced a strategic partnership with Tata Consultant Services in uh in India. How big is the Indian market going to become for you in growing years?

[00:33:29]>> Look this was a this is a relationship which is twofold. The one thing is about the Indian market and this is particular on the grid side becoming an increasingly important market for us and keep in mind we are at the moment also um changing the setup of the business between seammen's a still but it is obviously particular on transformers on grid equipment enormously important and growing fast at the same time Tata consulting is for us a partner in terms of driving AI through our processes but also through our offerings so it's not just about the Indian market It's also how do we deploy AI in everything what we are doing >> as I mentioned in the introduction you're accelerating the pace of your share buyback program you're not actually increasing the size of it though >> well step after step I mean first of all what we announced back on a very good cash flow and also on the back of uh really the trust in what is to come on the share um we said we're going to buy 1 billion euros more this fiscal year and then obviously we're looking forward to quarter 4 when we will give a little bit more outlook into the future in terms of how we intend to allocate capital but step after step >> obviously a lot of focus on seaman's gsa just now what are you saying about that business this morning >> yeah first of all I'm super pleased that we see really uh light at the end of the horizon in terms of really making it break even and the team is done doing a fantastic job of turning it around you see a muted order environment at the moment particular in offshore that is a lot of shifts coming. I do strongly believe in these projects they will come but it's obviously um later than we originally anticipated but I would say so far so good for us it is all about turning it around getting cost down making sure we derisk the project that is working well and obviously on the order side I expect a lot of the orders rather coming next year and not this fiscal year. You mentioned their weakness in offshore. That's been a particular concern in the United States.

[00:35:34]Do you have any optimism that attitudes in the US are going to change anytime soon?

[00:35:40]>> Well, our current planning doesn't uh foresee at the moment any shortterm new offshore orders in the US. I think this would be unrealistic for the next years to come. We look very much on Europe and Asia. Uh and you know, offshore is a business which is operating in a selected amount of countries. Europe is strong but obviously also then investment decisions need to be taken.

[00:36:02]Um and we also have seen obviously orders in Japan, Korea and Taiwan. This will continue but the US would not be in the focus for offshore on our side.

[00:36:12]>> What are you seeing right now in terms of cost obviously inflation is a concern for everyone right around the world just now.

[00:36:20]>> Well absolutely the geopolitics are a challenging environment to maneuver through. What I have to say is and you see it that every business could increase profitability. We are maneuvering well through it but we s see it obviously in terms of underlying material costs in terms of transport costs the impact of the geopolitical tensions but also of the high demand. A lot of the suppliers also our suppliers are in high demand and we see it in inflationary effects. Luckily the pricing environment on our products is good so that this can be compensated but fundamentally it increases the cost for energy infrastructure buildout and that is something what we need to watch. Even more important it is then to really make sure that we do the things as effectively as possible and this is why we are driving so much AI into our processes and try to get better every day in terms of operational excellence.

[00:37:11]Give me an idea Christian if you be so kind as to how you are incorporating AI into into your processes. What sort of things does that mean in practice?

[00:37:20]>> I mean that means in practice really uh taking the assumption that AI always can do the job and it really means taking out certain task uh out of people hands and really automate it. It also means um more intelligence into the way on how we do pricing. It means also more intelligence on how we evaluate suppliers for example in the procurement process. Um and obviously what you also have seen us doing is we deployed now let's say grids AI software package which we call NODRA um which is helping to make the grid more capable smarter to autonomously react on certain boundary conditions and these are the things where we also try to generate new revenue coming out from AI solutions we are at the beginning very clearly we are learning every day like a lot of companies but I'm awfully excited about what is to come there.

[00:38:14]>> I think uh you've said a recent uh earning statement. So you expect electricity to uh compress. It's currently 22% of global energy consumption. I think you've said uh you expect that to be 29% by 2040. Have events in the uh straight of form of late strengthened that conviction?

[00:38:34]>> Yeah. No, absolutely. I I I we will see this continuing. Um I would say we have to be careful also on the current uh environment to overrate the the short-term effects. I mean we see a high oil price, we see high gas prices. I mean all in all um we have to see on how this play out. But in the long term I'm very convinced that electrification will continue to grow. Let it be in the mobility sector, let it be in chemicals, let it be in other industrial applications on top obviously of the general increasing demand by just population and and growing. So I still see this continuing in terms of the growth rate and that is not just a cycle. It's really a structural change what we are believing in.

[00:39:18]>> Very busy morning fuse sir. We do appreciate you spending the time to talk to us today. Thank you very much indeed.

[00:39:24]That's Christian Brook, the chief executive of Seaman's Energy, third largest company, of course, now on the DAX 40. Well, Steve spoke to Christian Brook a couple of months ago for CNBC's executive decisions podcast. You can check out some of the highlights on cnbc.com.

[00:39:41]Meanwhile, Tissen has said it remains cautious on its revenue outlook due to geopolitical uncertainties. Second quarter sales at the German conglomerate slipped to 8.38 billion euros but beat analyst expectations. Order intake was up 32%.

[00:39:57]And buyer has reported 13.4 billion euros in first quarter sales while net income more than doubled to€ 2.8 billion euros. The company has backed its fullear outlook. Meanwhile, staying in Germany Unipair has posed €231 million in adjusted net income in the first quarter. The German utility company said it was well shielded against energy price rises amid the Iran war and it kept its outlook for the full year unchanged.

[00:40:24]Well, power demand around Europe is increasingly becoming a hurdle for the development of data centers. Operators are focusing new projects on areas with cheaper energy and available grid connections like the Nordics and Liberia. However, challenges remain as Gail Grant has been investigating for CNBC explains. Data centers electricity demand worldwide is expected to double by 2030.

[00:40:46]>> Data centers used to mainly be built where the population and the industry are in Europe. And that means in the center of the heart of Europe, the so-called flap D, Frankfurt, London, Amsterdam, Paris and Dublin. They go to where electricity is available.

[00:41:04]>> Across Europe, major hubs like London have become saturated and are increasingly facing restrictions. So where to build?

[00:41:11]>> If I take our data center in London for example, we had our power connection a firm offer and it was then moved by a decade. So how can you move forward into a you know multi-billion pound project with a customer contract? Now data centers are migrating to the edges on the one hand to the Iberian Peninsula.

[00:41:29]There's lots of renewable cheap energy there. And then the very other extreme of Europe, the Nordics, also cool air, lots of renewables, wind, hydro, and great quality grid as well.

[00:41:41]>> While data center power capacity is still growing in Europe's traditional hubs, newer markets like the Nordics and Southern Europe are expanding at a much faster pace. In addition to access to power, access to the electrical equipment has come up as the number two biggest concern for large data center operators. And in there, you're also seeing investment go in capacity expansion for the manufacturer of everything from gas turbines to electrical equipment like transformers, switch gears, etc. >> Traditionally, the electricity grid is considered a public utility that should be funded from public money. And then we have these questions. Well, should we use this much public money to build infrastructure which is then used by a small number of uh very large data center operators.

[00:42:24]>> And that demand isn't just impacting local grids.

[00:42:27]>> A lot of the data center construction is basically foreign direct investment. So it's large multinational companies investing in the Nordics. And as they do that, their political weight also increases. Even if it's physically located here, a lot of the times in terms of ownership and investment and in terms of technology, it's still very much reliant on us in particular.

[00:42:55]>> The European Commission estimates€1.2 trillion e investment will be needed by 2040 to modernize the continent's electricity networks and a cloud and AI development act will be proposed by the end of May to enhance digital sovereignty on the continent.

[00:43:12]And to see the full episode of CNBC Explains, check out cnbc.com.

[00:43:18]Well, coming up on the show, Novo Nordisk finds a new home for its Parkinson cell therapy program. We'll be speaking to the chief executive of Cellular Intelligence about the deal after this short break. Don't go away.

[00:45:41]Welcome back. A new episode of Executive Decisions is out today. In it, Steve Sedick speaks with James Reed, chairman and CEO of the Reed Group. The defining moment of Reed's career didn't take place in a boardroom, but on a mountain, where a near-death experience changed him and the way he thinks about his business.

[00:45:58]I sort of bullheadedly wanted to get to the top of the Mat Horn. Um, so we carried on and then we didn't get to the top because the weather got worse and worse. There was icy winds and we could see the top, but we decided to head back. And it was later after the next morning on the way down we abs sailing or I was absailing and I was the end of a long rope went off at an angle to join Stefan slipped and then I found myself at the end of what's called a pendulum fool. So if you put 100 kilos at the end of a long rope and swing it swings from and I ended up dangling off the mat on this occasion and I'd gone around a corner. I remember Stefan's shouting are you all right? And I thought well I'm still alive. So I said yeah I'm all right. He said, "Are you sure?" I said, "Yes, but I've broken my leg." And he said, "How do you know you've broken your leg?" And I said, "Because my foot's pointing in the wrong direction."

[00:46:50]So I was sort of dangling there high up on the mat horn. And so he got a rope to me, pulled me to a ledge and called the air ambulance and this wonderful crew from Valdosta in Italy came up, took me up the mountain, saved my life.

[00:47:04]>> Am I right in thinking they wouldn't let your son watch one of these? One of the other climbers just turned.

[00:47:08]>> Yeah. No, the first fall. Yeah. when we we nearly went off the the slope, he he turned Harry's face away so he wouldn't s see us fall off. It was that close. So So but why was this my defining moment?

[00:47:21]Well, it was some you I came back and I was smashed up and I I was um in hospital for a bit then in a wheelchair and it gave me lots of time to think >> and and I was thinking you I suppose having turned 50 about very much about the second half of my life and I decided I really wanted to live it purposefully and I wanted our business to make as big an impact as it could. Um and that's when we settled subsequently on improving lives through work as our purpose. And then I've subsequently written a book about valuesled um purpose-driven businesses called, as you kindly mentioned, karma capitalism.

[00:47:53]>> Yeah.

[00:47:53]>> And I'm trying to encourage other companies to become philanthropy companies like us where 10% or more of the shares are owned by a charity because that really helps give them a superpower, I would say.

[00:48:05]>> Dramatic stuff where you can listen to the whole episode with James Reed right now in the usual podcast places and you can watch it on our YouTube channel and on cnbc.com. The episode will also air this weekend right here on CNBC.

[00:48:18]Now, Cellular Intelligence has acquired the global rights to Novo Nordisk's Parkinson's program after the company shut down its cell therapy unit last year. The startup, which is backed by Meta's CEO Mark Zuckerberg, says it aims to use AI to help accelerate the development, manufacturing, and an eventual path to commercialization for the treatment. Misha breaks down is chief executive of cellular intelligence and joins us now. Misha, very good to see you this morning. Um, as a part of this transaction, Nova Nordist is is going to be taking an equity stake in the business. How much of the business are they going to own going forward?

[00:48:55]>> Uh, yeah, that's part that's confidential. Thanks for having me this morning. It's a pleasure to be here. But I think uh if we can focus on the disease itself and the huge unmet need, you know, there are 11.8 8 million people worldwide that are suffering from this disease and this opportunity is is truly um fantastic one for us and hopefully for patients as well.

[00:49:16]>> And I understand you're reluctant to talk about the terms of it, but is is actually money changing hands as part of this transaction?

[00:49:24]>> Uh yeah.

[00:49:26]>> Okay. And what about the milestones and royalties to which Novo are going to be entitled going forward? How does that shape out? Those are also confidential.

[00:49:37]>> All right, I'm not going to get very far if I carry on like this, am I? Um, tell me about uh your technology. What are you going to be able to do that uh Novo won't necessarily be able to?

[00:49:49]>> Um, I think what we bring to the table is the ability to build novel foundation models. Uh, think of a few years ago pre-Chat GPT moment. So, uh, biology is, uh, nearing that and our ability to generate data and train huge models that are actually able to predict how cells behave, um, how they will, uh, respond to signals and ultimately how we can control them is something that will unlock uh, huge opportunities in across regenerative medicine and beyond.

[00:50:20]>> You talked earlier about the the number of people living with this condition right now. I mean, h how big do you see the addressable market becoming in years to come?

[00:50:31]>> Yeah. So, first uh let me note that this hits very close to home. Uh my grandpa Jerry died with Parkinson. So, I know how bad this uh can affect families. Um when we went through when we applied the diligence, we estimated that um you know, there's as I mentioned 11.8 8 million people suffering from Parkinson's and I think the number is around $52 billion in terms of financial burden. Uh so we estimated the market to be at least three bill $3 billion a year at peak sales and potentially significantly larger.

[00:51:05]>> Is this all about containing the condition of Parkinson's or is it actually about eliminating it ultimately?

[00:51:13]>> Thank you for that question. It's excellent. Um today there's a huge unmet need. Uh as far as I know there's not a single disease modifying therapy out there. Parkinson's is a horrible disease that uh starts when neurons these are brain cells in the body in the brain die. Um and what this therapy does is replaces those those neurons and with uh uh once you inject those neurons into the those cells into the brain uh uh functions that were previously lost can be regained. So this is still an investigational drug of course um but we're very hopeful that this can actually change uh the trajectory and the course of disease for patients.

[00:51:55]>> And what specifically is it the uh function of the neurons that you're you're seeking to replace? It's all to do with dopamine production I understand.

[00:52:03]>> Correct. Correct. Um these neurons are called dopamineergic meaning they produce um uh dopamine and they help control uh the fine motor skills.

[00:52:12]Correct.

[00:52:13]>> How are health care systems around the world set up to deal with patients suffering from Parkinson's?

[00:52:20]Yeah, it uh varies tremendously depending on the geography obviously and this type of therapy is one that will um hit um uh in obviously more developed markets earlier on. Um but uh we think that this is really the future of um therapeutics namely not only containing the diseases you asked but also ultimately um transforming um the course of the disease.

[00:52:47]How rapidly do you think you're going to be able to move with this therapy to phase two trials?

[00:52:54]>> Yeah. So the nice thing about being an AI native company is that we move very quickly and I think this new blood is part of what Novo got very enthused about. You know, Novo is a world pioneer in metabolics and one of the most respected pharma companies worldwide.

[00:53:08]We're extremely proud to be working with them. I think what we bring to the table other than the AI is this culture of moving extremely quickly. You know, we have three values at the company, one of them is urgency. Um, so we are pushing as quickly as possible and uh with some luck we'll be in phase two by end of year and with a little less luck early next year.

[00:53:29]>> And I mean I know we're entering the realms of the hypothetical here, Misha, but how rapidly do you think if all goes well you can bring this product to market?

[00:53:38]Yeah, it's too early to to say. Um, you know, uh uh hopefully within five years or so, but I I you know, I don't have a crystal ball. So, um we're going to what I can promise is we'll move as uh as fast as humanly and beyond possible.

[00:53:54]>> Now, for people who don't know you, this is not your first startup. You've been active in this space for quite a while.

[00:53:59]What do people need to know more broadly about cellular intelligence?

[00:54:03]>> Um thank you for asking. I think cellular intelligence is um operating in a new kind of um is a new kind of company. It's an AI native company on the one hand but it has roots that in deep science um and it uh aims to be a fully integrated pharma company namely it offers the full solution. It won't be just a model that predicts something but it will actually allow us to build things and touch patients. So the hope is to actually build and provide one day a cell signaling model that can help us understand how cells behave, predict their behavior and ultimately control their behavior. So uh yeah, so that's what we hope to bring.

[00:54:43]>> And how much of uh your time personally is this project going to take up because you have a lot of fingers and a lot of pies.

[00:54:50]>> Uh I have a single pie other than my my wife and my two girls and maybe my dog, there's nothing else that I'm doing.

[00:54:56]This is uh everything, you know, I uh I work 18our days at least and this is this is everything for me other than family.

[00:55:05]>> All right. Well, you've uh spoken very clearly there and uh and plainly about the the personal uh motivation for you here in this project. We wish you the best of luck with it. Misha Breaks down.

[00:55:16]Thanks very much indeed.

[00:55:17]>> Thank you so much for having me this morning. It's a real pleasure.

[00:55:20]>> Thank you. Just before I go, here's a look at how the futures are panning out.

[00:55:24]We're just under an hour away from the European open. All of the main indices in Europe being called lower right now, though coming off uh uh slight lows there. DAX now being called some four fifths of 1% lower. Footsy 100 off just over half of 1% lower. In the US, everything being called lower just now.

[00:55:42]Again, albeit slightly less aggressively than we were an hour or so ago. Dow Jones being called more or less flat right now. S&P another record high last night, being called slightly lower just now. Well, that's it for today's program. I'm Ian King. Sportbox Europe is coming up next with Karen and Ben.

[00:55:59]Don't go away.