Caution Builds Ahead of Big Tech Earnings | The Opening Trade 7/22/2026

[00:00:01]GUY: IT IS THE 22ND. GOOD MORNING.

[00:00:08]THE WHITE HOUSE PLAYING DOWN IRAN TALKS.

[00:00:11]IT'S A BIG DAY PROTECT. AND WE SHOULD PROBABLY TALK ABOUT TOM'S PLANS TO RAISE GENERIC DRUG PRICES IN AMERICA.

[00:00:20]TOM: THAT'S THE OIL PRICE REACTION ON THE BACK OF THOSE COMMENTS COME UP TO YOUR POINT, SUGGESTING THEY MIGHT BE IN THE REGION FOR SOME TIME.

[00:00:31]THE JAPANESE YEN IN FOCUS, MORE COMMENTS FROM THE FINANCE MINISTER ABOUT BOLD ACTION, BUT BACK TO 1986 LEVELS IN TERMS OF WEAKNESS. A STRONG SESSION FOR THE NASDAQ 100 YESTERDAY AND THE KOSPI HAS GIVEN UP MUCH OF THE GAINS OF THE SESSION. MEMORY IS STARTING TO FAIL A LITTLE. THE OPENING TRADE STARTS RIGHT NOW.

[00:01:18]ANNA: WELCOME TO THE PROGRAM.

[00:01:26]IT'S JUST ON 7:00 IN LONDON, THE TECH STORY AND EARNINGS STORY OUT OF BIG TECH WILL BE DOMINANT LATER IN THE TRADING DAY.

[00:01:36]WE ARE AT $92 A BARREL ON THE BRENT PRICE, UP ANOTHER 1% AND THIS IS PRESIDENT TRUMP PLAYING DOWN THE PROSPECT OF TALKS.

[00:01:40]THIS CONTINUES TO BE THE QUESTION, WHAT DOES IT MEAN FOR TALKS? WILL WE GET THESE SIDES AROUND THE TABLE. FOR A LOT OF GUESTS, THEY THINK THIS DOESN'T RE-ESCALATE IN A MAJOR FASHION AND REMAINS CONTAINED. THE U.S. IS BOWING RETALIATION AGAINST THE HOUTHIS.

[00:02:06]IRAN SAYS MEDIATORS HAVE NOT REACHED OUT TO THEM FOR TALKS.

[00:02:11]GUY: THESE KEY LINES IN THE SAND, THE PRESIDENT TRUMP WILL PAY ATTENTION TO, WILL THEY LIMIT HIS CAPACITY TO GO FURTHER FROM HERE?

[00:02:22]I THINK THE MARKET IS HOPING THAT WILL BE TRUE.

[00:02:25]WHETHER OR NOT IT TURNS OUT TO BE TRUE REMAINS TO BE SEEN.

[00:02:28]THE MARKETS REORGANIZING AROUND THE IDEA THAT THIS CONFLICT WILL CONTINUE AND WE ARE POTENTIALLY, A GROUND CONFLICT IS POTENTIALLY BACK ON THE TABLE. TOM: THE CONSENSUS WE HEAR FROM MANY GUESTS IS ULTIMATELY THERE WILL BE A CONCLUSION TO THE CONFLICT AND THEY WILL BE ABLE TO SQUARE THIS AWAY BUT DO THEY HAVE TO ESCALATE TO DE-ESCALATE AND IF SO, HOW SHOULD INVESTORS THINK ABOUT POSITIONING AROUND THAT?

[00:03:01]GAINS OF AROUND 5/10 OR 6/10 OF A PERCENT, FUTURES MODESTLY HIGHER.

[00:03:11]EUROPE IS MORE EXPOSED TO THE ENERGY PRICE AND GAS PRICES ARE UP TODAY. ANNA: THE LAST COUPLE OF DAYS, THE THREAT FROM THE HOUTHIS TO BLOCKADE SAUDI ENERGY AND WE ARE WATCHING FOR SIGNS THAT'S IMPACTING BEHAVIOR IN THE RED SEA BECAUSE THAT ROUTE HAS BEEN VERY USEFUL TO THE SAUDIS.

[00:03:32]AND GLOBAL CONSUMERS OF ENERGY PRODUCTS.

[00:03:36]IT SEEMS WE ARE SEEING SOME VESSELS CHANGING COURSE, GOING BY SUEZ. WE WILL SEE IF IT HAS AN IMPACT ON THE RED SEA. GUY: YOU CAN'T CALL ON THE SPR'S AROUND THE WORLD'S BAIL US OUT.

[00:03:59]WE ARE MORE PRONE TO BIG SPIKES IN THE PRICE AND IS THAT OF VOLATILITY SOMETHING THE MARKET HAS TO MANAGE AND GET USED TO?

[00:04:05]ANNA: WE TALKED TO GOLDMAN SACHS ABOUT THEIR CONCERNS AROUND STORAGE OF GAS GOING INTO THE EUROPEAN WINTER AND THAT SOMETHING WE ARE WATCHING.

[00:04:19]TOM: THAT'S ONE KEY FACTOR AND I THINK THE OTHER IS THE EARNINGS SPACE. THE GAINS WE SAW FOR THE KOSPI AT THE START OF THE SESSION IN ASIA HAVE FADED.

[00:04:29]LOOKING AT ALPHABET, IT'S AN IMPORTANT TEST OF A NUMBER OF DIFFERENT THINGS. NUMBER ONE, THE STORY, THEY HAVE FORECAST SPENDING OF $190 BILLION OF CAPEX.

[00:04:48]AND MUCH MORE. THAT STORY WILL BE TESTED.

[00:04:53]WHAT'S HAPPENING WITH THE CLOUD BUSINESS WILL BE TESTED, CAN THEY SHIP MORE TO CUSTOMERS, WHAT IS HAPPENING WITH THE LATEST GEMINI MODELS?

[00:05:06]ARE THEY STILL HOLDING UP AGAINST COMPETITION?

[00:05:12]ALPHABET WILL BE REALLY KEY. GUY: IS IT WORTH IT?

[00:05:17]I THINK THAT'S WHAT MARKETS WILL ASK AGAIN. ANNA: THAT PERHAPS HINGES ON WHAT IS THE RIGHT LOOK FOR CAP ACTS, DO YOU WANT IT TO SHOW RESTRAINT, AND I DON'T KNOW IF IT'S THE SAME FOR DIFFERENT BUSINESSES. I'M INTERESTED IN, WE TALKED ABOUT IBM AND STOP DROP, WE WILL HEAR FROM THEM IN MORE DETAIL TODAY AND AI CROWDING OUT OTHER THINGS IN THE I.T.

[00:05:52]SPACE. IT'S NOT JUST IBM WITH MAINFRAMES AND SOFTWARE, WHAT ELSE MIGHT BE HURT?

[00:06:09]TOM: A FRENCH AMERICAN COMPANY, THE EMOJI, IT IS THE HUGGING FACE, WHICH I THINK IT STARTED AS A JOKE AND IT GOT TRACTION.

[00:06:24]YOU CAN LOOK AT MODELS AND DATA AND RESEARCH BUT IT'S THE GO TO PLACE IF YOU WANT TO LEARN ABOUT DIFFERENT MODELS.

[00:06:34]GUY: THESE ARE MODELS IN A SANDBOX CONTAINED FROM THE INTERNET, SOME OF THE PARAMETERS WERE MORE LOOSE, THESE ARE CUTTING EDGE MODELS AND THEY FOUND A WAY TO THE INTERNET AND HACKED HUGGING FACE. IT'S SCARY STUFF.

[00:06:58]TOM: THE SANDBOX IS THE IMPORTANT PART, IT WASN'T CONNECTED TO THE INTERNET, IT FOUND A CONNECTION TO HACK HUGGING FACE. THIS IS WHAT WE SEEN FROM ANTHROPIC'S MODELS AS WELL.

[00:07:17]THE TRUMP ADMINISTRATION IS NOW LOOKING AT THE SYSTEM, THEY HAVE TO ACCELERATE THAT.

[00:07:25]GUY: IS THE BIGGEST THREAT REGULATION?

[00:07:30]IF WE SEE MORE AND MORE OF THIS, IS THAT WHERE THE THREAT ULTIMATELY COMES FROM? ANNA: THE MARKETS LIVE EVENT WE DID A FEW WEEKS AGO, YOU ASKED WHAT BRINGS DOWN THE AI TRADE AND ONE OF THE THINGS THAT CAME OUT WAS THE CONCERN AROUND REGULATION. NOT JUST EUROPE BUT THE U.S.

[00:07:49]AS WELL. GUY: LET'S TALK ABOUT TRUMP'S PLAN TO RAISE PRICES IN AMERICA, FOR GENERIC DRUGS. YOU WILL GET WHACKED WITH MASSIVE TARIFFS IF YOU DON'T PRODUCE IN THE UNITED STATES ON GENERIC DRUGS. AMERICA RELIES ON GENERIC DRUGS.

[00:08:12]A LOT OF AMERICANS TAKE THESE DRUGS, THEY ARE RELATIVELY CHEAP COMPARED WITH BRANDED PRODUCTS AND A LOT OF THAT IS BECAUSE THEY ARE MANUFACTURED IN PLACES LIKE INDIA.

[00:08:27]IF YOU PUT TARIFFS ON THIS STUFF, PRICES WILL GO UP.

[00:08:30]IF YOU MANUFACTURE IN AMERICA, PRICES WILL GO UP.

[00:08:34]EITHER WAY IT LOOKS LIKE A SITUATION WHERE GENERIC DRUG PRICES, PART OF THE AFFORDABILITY DORI TRUMP IS TAKING INTO THE, WILL GO HIGHER. ANNA: HE WOULD ARGUE THIS IS ABOUT ON SHORING AND HE WOULD PROBABLY PUSH BACK. GUY: HE PROBABLY WOULD BUT ALL THE STORIES I'VE READ SUGGEST THIS IS NOT THE CASE, LIKELY THE REASON WHY WE ARE PRODUCING THESE DRUGS IN INDIA IS IT'S CHEAPER TO DO SO. IF YOU PRODUCE IN AMERICA, IT WILL GET MORE EXPENSIVE. THIS LOOKS INFLATIONARY TO ME.

[00:09:10]TOM: GENERICS ACCOUNT FOR 90% OF PRESCRIPTIONS IN THE U.S.. IT WILL TAKE MORE THAN TWO YEARS, WHICH IS THE TIMEFRAME THEY'VE BEEN GIVEN, TO BUILD OUT MANUFACTURING CAPABILITIES FOR GENERICS. THAT'S BEFORE WE GET TO THE QUESTION OF COST. IT TAKES THREE YEARS, THAT'S A PROBLEM AS WELL. ANNA: SHOULD WE DIVERT TO THE U.K.

[00:09:43]FOR A MOMENT, COST-OF-LIVING VERY MUCH IN FOCUS RIGHT NOW.

[00:09:50]CPI YEAR ON YEAR, 2.6%, THE ACTUAL NUMBER, JUST BELOW THE ESTIMATE, WHICH WAS 2.7%, SLIGHTLY LIGHT, BUT YOU HAD THE CORE CPI ABOVE THE ESTIMATE. SERVICE IS A BIG FOCUS IN THE U.K. AND IT'S A LITTLE ABOVE THE ESTIMATE AS WELL.

[00:10:09]THAT'S PERHAPS WHAT PEOPLE ARE EXPERIENCING IN AN ECONOMY THAT IS PREDOMINANTLY SERVICES. GUY: WE HAVE A LOT TO SAY ON THIS, WE WILL COME BACK ANOTHER TIME.

[00:10:21]WE HAVE CONVERSATIONS AND WE WILL TALK ABOUT INFLATION WITH OUR FIRST GUEST, RAISING PRICES, THE IN A LESS TACIT HE --IN-A LIST TO CITY.

[00:10:49]THESE GUESTS WILL JOIN US LATER IN THE PROGRAM. TOM: THE MEANING OF FOREIGN MINISTERS CONTINUES IN MANILA.

[00:10:59]WE WILL GET CPI INFLATION OUT OF SOUTH AFRICA.

[00:11:03]SAMSUNG WITH ITS GALAXY IMPACT EVENTS.

[00:11:09]EUROPEAN EARNINGS FROM THE LUXURY SPACE AND WE WILL BE WATCHING FOR EARNINGS AND RESULTS.

[00:11:16]COMING THROUGH FROM ALPHABET, IBM AND TESLA. ANNA: FRANCE MOVES TO BECOME THE FIRST MAJOR EUROPEAN COMPANY TO BAN SOCIAL MEDIA FOR CHILDREN. WATTS OF OTHER COUNTRIES HAVE PLANS IN THIS DIRECTION. AND WE WILL LOOK AT STOCKS TO WATCH AT THE OPEN. A SPANISH LENDER CONFIRMING GUIDANCE ABOVE EXPECTATIONS. CAN IT CONTINUE TO ADD NEW CUSTOMERS AT THAT RATE: AND WE WILL SPEAK WITH THE CEO OF A DUTCH PAINT MAKER. PLEASE GET IN TOUCH WITH US, WE LOVE TO HEAR FROM YOU.

[00:11:55]THE FUNCTION IS ON YOUR BLOOMBERG TERMINAL TO PUT YOU IN TOUCH WITH US AND THE TEAM. THIS IS BLOOMBERG. ♪ >> WELCOME BACK TO THE OPENING TRADE, EVERYBODY.

[00:12:15]7:15 IN LONDON. YESTERDAY WE SAW A CONTINUED RECOVERY STATESIDE IN SOME CHIP NAMES.

[00:12:26]TOWARDS THE END OF THE ASIA SESSION UP BY.1 PERCENT, NOT A HUGELY POSITIVE HANDOVER. NASDAQ FUTURES LOWER BY.7%, THE OVERALL VIBE GLOBALLY. EUROPEAN STOCKS FIND ROOM TO GO HIGHER. GUY: LET'S TALK ABOUT PAINT AND PRICING POWER, IT THEMES THAT SEEM TO GO HAND IN HAND AT THE MOMENT.

[00:12:54]AKZONOBEL NUMBERS THIS MORNING REAFFIRMING ITS FORECAST FOR THE FULL YEAR AFTER REPORTING SECOND-QUARTER RESULTS.

[00:13:01]FIRMLY OF THE BELIEF THE XL TO MERGER IS ON TRACK AND WILL CLOSE LATE 2026 OR EARLY 2027.

[00:13:11]WE HAVE THE CEO OF AKZO NOBEL JOINING US NOW.

[00:13:13]LET'S TALK ABOUT THE BIG PICTURE.

[00:13:16]CLEARLY THERE IS AN INPUT STORY THAT'S NEGATIVE.

[00:13:20]THERE IS AN OUTPUT STORY, A PRICING POWER THAT LOOKS POSITIVE. YOU SEEM TO HAVE PRICING POWER NOW. HOW SUSTAINABLE IS THAT? GREG: WE THINK IT IS SUSTAINABLE. THE WORLD -- STORY OF THE SECOND QUARTER IS THE WORLD IS A RESILIENT PLACE.

[00:13:38]IT IS UNPREDICTABLE, BUT RESILIENT. WE TOOK PRICES UP.

[00:13:43]WE HAD TO BECAUSE OUR MATERIAL BASKET WAS IN THE TEENS.

[00:13:47]WE INCREASED PRICES ENOUGH TO MITIGATE THAT.

[00:13:51]ORGANIC SALES FOR US ARE UP TO PRESENT ON THE ORDER.

[00:13:52]SO FAR, SO GOOD. TOM: IS THERE A DIFFERENCE BETWEEN THE TWO COMPONENTS ON THE EDGE OF THE BUSINESS? IF I LOOK AT THE MARGIN STORY IN HOUSEHOLD, YOU ARE BELOW CONSENSUS BUT IF I LOOK AT PERFORMANCE YOU ARE BELOW EXPECTATION.

[00:14:17]YOU HAVE GREATER PRICING POWER ON THE INDUSTRIAL SIDE?

[00:14:20]>> CONSENSUS FOR EVEN HARDER IS AT 392 AND WE ARE AT 398.

[00:14:25]SO WE ARE TRACKING REALLY WELL. YOU ARE RIGHT TO SAY THERE'S A DIFFERENCE BETWEEN THE TWO SIDES OF THE BUSINESS.

[00:14:32]THE COACHING BUSINESS, B2B BUSINESS, INDUSTRIAL BUSINESS HAVE A TENDENCY TO BE GDP DRIVEN.

[00:14:38]THE ADECCO BUSINESS, CONSUMER BUSINESSES HAVE A TENDENCY TO BE DRIVEN BY CONSUMER CONFIDENCE.

[00:14:48]YOU SEE OUR VOLUMES UP IN THE COATING BUSINESSES BY ABOUT 2%.

[00:14:53]OUR VOLUMES ARE DOWN IN THE DECORATIVE BUSINESSES BY ABOUT 4%.

[00:15:04]BUT IT'S CHINA CHINA AND EUROPE ARE DOWN A LITTLE BIT. UP SIGNIFICANTLY.

[00:15:32]IN EUROPE, WAS LACKING.

[00:15:40]TOM: TOM: WHAT DO YOU THINK WHERE THE FACTORS LEADING TO THE SPLIT IN EUROPE?

[00:15:49]>> OF CHINA IS NOT SHOWING SIGNS OF TURNING AROUND.

[00:15:58]OUR BUSINESS IN CHINA IS ABOUT A BILLION AND A HALF EUROS OF REVENUE.

[00:16:19]THE BUSINESSES MARINE POWDER AUTOMOTIVE'S ARE DOING WELL. DECORATIVE IS DEPRESSED BECAUSE THE REAL ESTATE MARKET IN CHINA IS DEPRESSED.

[00:16:31]IT WILL CONTINUE LIKE THAT FOR A WHILE.

[00:16:47]COMING BUT AT LEAST OUT.

[00:16:59]IN SOUTHERN EUROPE AGAIN. MARKETS.

[00:17:11]AFTER THE HOME BASE BANKRUPTCY LAST YEAR. FOR OBVIOUS REASONS.

[00:17:22]TOM: YOU TALKED ABOUT, GOING BACK TO YOUR FIRST ANSWER, EARLY LOW TEENS IS WHAT YOU SAID, GREG.

[00:17:33]IS THAT THE COST OF INPUT FOR THE QUARTER AHEAD? GREG: RAW MATERIALS, LOGISTICS DOES IMPACT.

[00:17:45]BUT THE BULK OF THE OBJECT IS RAW MATERIALS AND IT HAS TO DO WITH DISRUPTION IN THE STRAIT OF HORMUZ AND CHEMICALS.

[00:18:05]BEGINNING WITH WHAT IS IMPORTANT, THAT THE PRICE INCREASES HAVE NOT GONE THROUGH AND VOLUMES HAVE NOT BEEN IMPACTED.

[00:18:16]AND A YOU REJECTED AN EFFORT -- OFFER FROM JENNIE BOND -- NIPPON A PAYING FOR YOUR DECORATIVE PAINTS UNITS. ARE THERE OTHER CIRCUMSTANCES IN WHICH YOU WOULD CONSIDER AN OFFER?

[00:18:31]THERE'S NOT A LOT OF DETAIL ABOUT WHAT NIPPON STEEL IS OFFERING. GREG: NIPPON STEEL MADE AN OFFER FOR OUR DECORATIVE PAINTS BUSINESS ABOUT 30% OF THE COMPANY.

[00:18:44]THE MERGER AGREEMENT, ANYTHING LESS THAN 50% WE CANNOT CONSIDER CURRENTLY. EVEN IF WE COULD, WHAT DO WE HAVE IN COMMON WITH NIPPON STEEL?

[00:18:51]THE FACT THEY ARE ESSENTIALLY SAYING OUR DENCO BUSINESSES ARE REALLY GOOD. WE ARE SAYING WE AGREE WITH THEM. THEY ARE SAYING THE MARKET DOES NOT REALIZE THE FULL VALUE OF THESE BUSINESSES.

[00:19:05]WE AGREE WITH THEM. THEY MADE AN OFFER THAT DOES NOT REPRESENT THE VALUE OF THE BUSINESS, THAT IS NOT EVEN CLOSE.

[00:19:15]NOT ENGAGING WITH THEM IS NOT A DILEMMA RIGHT NOW, BUT WE APPRECIATE THE INTEREST. ANNA: BUT YOU STICK WITH EXCEL TO AND END UP MOVING YOUR LISTING TO NEW YORK. IS THAT PART OF THE MOTIVATION?

[00:19:33]GREG: THE INVESTOR BASE IN PAINTS AND COATINGS IS OVERWHELMINGLY A U.S. INDUSTRIAL BASE.

[00:19:40]TODAY THEY MAY HAVE MORE THAN 50% OF SHARES IN U.S.

[00:19:45]HANDS, SO IT MAKES SENSE.

[00:19:48]GUY: LOOKING AHEAD YOU ARE A CEO OF A EUROPEAN COUNTRY DEALING WITH A BIG COST STORY THAT YOU ARE TRYING TO MANAGE NOW. DO YOU THINK THIS IS JUST SOMETHING WE HAVE TO GET USED TO?

[00:20:00]THAT WE ARE SEEING AN INFLATION TREND WHICH WILL BE HERE FOR A WHILE? THAT WE ARE SEEING DEGLOBALIZATION, INCREASING CONFLICT? AS A CEO THAT HAS TWO MATTER -- MANAGE INPUT COSTS, IS THIS SOMETHING YOU ARE GEARING YOUR TEAM UP TO MANAGE ON A LONG-TERM BASIS OR DO YOU SEE THIS AS SOMETHING WHERE YOU CAN RAISE EIGHT FUEL PRICES HERE AND THERE AND THEN LOOK THROUGH? GREG: NO, IT'S A LONG-TERM ISSUE, AS YOU DESCRIBED.

[00:20:31]EUROPE WILL HAVE HIGH GAS PRICES FOR THE FORESEEABLE FUTURE. EUROPE WILL HAVE A HIGH ENERGY PRICES FOR THE FORESEEABLE FUTURE.

[00:20:41]A LOT OF OUR SUPPLIERS ARE ENERGY INTENSIVE.

[00:20:45]YOU HAVE A SUPPLY ENVIRONMENT IN EUROPE THAT WILL BE CHALLENGED FOR YEARS TO COME AND IT IS WHY THE EUROPEAN COMMISSION HAS TO HAVE AN INDUSTRIAL POLICY TO TACKLE THAT AND KEEP EUROPE COMPETITIVE.

[00:20:56]WE ARE A GLOBAL BUSINESS. WE HAVE GLOBAL SUPPLY AND THEREFORE WE ARE ABLE TO JUGGLE AND MITIGATE.

[00:21:04]BUT FOR EUROPE, IT IS VERY MUCH A SITUATION OF CONCERN.

[00:21:11]TOM: THE ACCENT NOBEL CEO, THANK YOU VERY MUCH INDEED. A LONGER-TERM STORY AND EUROPE HAS TO ADJUST TO HIGHER PRICES. GUY: PRESIDENT VOLODYMYR ZELENSKYY DISMISSED THE COMMANDER-IN-CHIEF OF UKRAINE'S ARMED FORCES.

[00:21:30]THE DEMONSTRATIONS WERE TRIGGERED AFTER ZIELINSKI REMOVED THE COUNTRY'S DEFENSE MINISTER THAT HAVE BEEN LOCKED IN A POWER STRUGGLE WITH THE MILITARY CHIEF.

[00:21:38]DOLINSKY PROMISE TO CHANGES OF THE CONFIGURATION OF MILITARY STAFF WITHOUT PROVIDING FURTHER DETAILS. WATCH THIS SPACE.

[00:21:45]A CHINESE CAR BRANDS SNAPPED UP MORE THAN ONE THIRD OF NEW PLUG IN HYBRID SALES IN EUROPE LAST MONTH ACCORDING TO DATA FROM ANALYSTS AT DATA FRO -- DATA FORCE.

[00:21:57]IT SAYS MANUFACTURERS LIKE BYD AND SHERRY ARE PUSHING SALES AHEAD OF ANY POTENTIAL EU TARIFFS.

[00:22:04]CURRENTLY ONLY FULLY ELECTRIC VEHICLES MADE IN CHINA FACE STEEP TARIFFS. AS WE WERE MENTIONING EARLIER BUT FRANCE PASSED LEGISLATION TO RESTRICT THE USE OF SOCIAL MEDIA FOR CHILDREN UNDER 15. CHILDREN WON'T BE ABLE TO ACCOUNT -- CREATE NEW ACCOUNTS FROM SEPTEMBER BEFORE A FULL BAN COMES INTO FORCE IN JANUARY FOR EXISTING PROFILES.

[00:22:28]FRANCE WILL BE THE FIRST EUROPEAN COUNTRY TO BRING IN SUCH A MOVE THAT MIGHT STRAIN RELATIONS WITH THE UNITED STATES, TECH COMPANIES, AND OF COURSE, PRESIDENT TRUMP. ANNA: A LIST OF OTHER COUNTRIES ARE INTERESTED, DENMARK, POLAND.

[00:22:48]IT LOOKS AS IF THIS IS A TURNING OF THE TIDE, PERHAPS, OR AT LEAST AN ATTEMPT TO. TOM: MORE COUNTRIES WILL LOOK AT THESE MODELS OF RESTRICTIONS.

[00:22:58]GUY: THE BIGGEST CHALLENGE HERE IS CHILDREN. CHILDREN ARE REALLY, REALLY GOOD GETTING AROUND WHATEVER RESTRICTIONS. TOM: COMING UP, SANTANDER SECOND-QUARTER NET INCOME BEATS ESTIMATES.

[00:23:21]WE SPEAK TO THAT BEEN A CEO IS NEXT. THIS IS BLOOMBERG.

[00:23:23]-- THE COMPANY'S CEO JOSÉ CANTERA NEXT. THIS IS BLOOMBERG.

[00:23:38]GUY: A FEW MINUTES BEFORE WE START CASTRATING IN EUROPE -- START CASH TRADING IN EUROPE.

[00:23:50]THE STORY I AM WATCHING THIS MORNING IS NASDAQ MINI FUTURES ROLLING OVER.

[00:24:01]THIS MORNING THEY WERE DOWN, AND THE STORY IS GETTING A LITTLE MORE NEGATIVE WHEN IT COMES TO THAT PICTURE AHEAD OF TECH EARNINGS. TOM: YOU'RE SEEING BRENT WITH THAT REFLECTED.

[00:24:18]YOU CAN SEE THE SOVEREIGN BOND PICTURE.

[00:24:24]SIMILAR PICTURE IN FRANCE, AS GERMANY.

[00:24:30]ANNA: LET'S TALK ABOUT EARNING STORIES OUT OF EUROPEAN CORPORATE SPIRIT -- CORPORATES. SANTANDER HAS BEATEN ESTIMATES.

[00:24:43]THEY SAY THEY'VE SIGNED ON 12 MILLION NEW CLIENTS IN THE LAST 12 MONTHS. WE ARE JOINED BY THE CFO.

[00:24:50]GOOD TO SEE YOU ON THE PROGRAM, THANK YOU FOR JOINING US.

[00:24:55]LET'S START WITH THE GROWTH IN CUSTOMERS.

[00:24:58]YOU BEATEN ESTIMATES AND SOME SUGGEST IT'S BECAUSE YOU KEEP ADDING CUSTOMERS. CAN YOU KEEP DOING THAT?

[00:25:05]WHAT IS YOUR EXPECTATION FOR HOW FAST YOU GROW? JOSE: GOOD MORNING, GREAT TO BE HERE AGAIN.

[00:25:15]TSP ADDED 4 MILLION CUSTOMERS. WE ARE AT 8 MILLION CUSTOMERS IN THE LAST FOUR MONTHS.

[00:25:30]THIS IS COMING FROM THE TRANSFORMATION AT THE BANK.

[00:25:34]MANY ANALYSTS AND INVESTORS LOOK AT THE TRANSFORMATION ONLY FROM THE COST SIDE BUT IT MEANS BETTER SERVICES AND BETTER PRODUCTS TO CUSTOMERS. OUR CUSTOMERS ARE REACTING TO THESE. WE ARE ACCELERATING THE ACQUISITION OF NEW CUSTOMERS RELATIVE TO PREVIOUS YEARS.

[00:25:53]ANNA: DOES THAT LEAVE ROOM TO TAKE GUIDANCE HIGHER IN THE FUTURE?

[00:26:05]YOU'VE GOT NET PROFITS, WITH A 20% RETURN ON TANGIBLE EQUITY, WHAT FLEXIBILITY IS THERE AROUND THOSE TARGETS? JOSE: THOSE WERE 2028 TARGETS, 2026 IS THE FIRST YEAR OF THE THREE YEAR PLAN.

[00:26:30]WE ARE ON TRACK TO MEET OR DO BETTER IN THE KPIS IN THE FIRST YEAR OF THE THREE YEAR PLAN SO WE ARE STARTING ON A GOOD FITTING -- GOOD FOOTING.

[00:26:42]TOM: GOOD MORNING. THE U.S.

[00:26:48]AND U.K. ARE KEY MARKETS FOR SANTANDER.

[00:26:53]ARE YOU STILL AT THE POINT WHERE YOU ARE INTEGRATING THOSE BUSINESSES OR ARE YOU LOOKING FOR FURTHER ACQUISITIONS?

[00:26:58]WHERE ARE YOU IN THAT STORY? JOSE: WE JUST INCORPORATED TSP IN THE SECOND QUARTER AND WE EXPECT TO INCORPORATE MORE IN THE SECOND -- IN THE SECOND HALF OF THE YEAR.

[00:27:20]WE NEED TO INTEGRATE THESE TWO BANKS.

[00:27:27]WE ARE GOING TO PUT OUR RESOURCES ON INTEGRATING THESE COMPANIES IN THE NEXT TWO YEARS. TOM: DOES THAT ALLOW YOU TO THINK ABOUT RETURNING CASH TO SHAREHOLDERS ABOVE AND BEYOND THE ANNOUNCED AMOUNTS?

[00:27:43]JOSE: AT THE INVESTOR DAY, WE MADE A FEW CHANGES TO POLICY.

[00:27:56]WE INCREASED CASH FROM 2027 ONWARD AND 20% OF PROFITS TO 35% OF PROFITS AND WHEN CAPITAL GOES ABOVE 13%, THE EXCESS CAPITAL ABOVE 13% WILL BE DISTRIBUTED TO SHAREHOLDERS.

[00:28:17]GUY: GOOD MORNING. FOR EVERY EURO YOU INVEST IN AI, WHAT IS YOUR RATE OF RETURN? JOSE: IT'S VERY EARLY DAYS, I DON'T THINK I CAN GIVE YOU A NUMBER.

[00:28:33]WE ARE PUTTING AI IN ALMOST EVERYTHING WE DO.

[00:28:45]OUR SYSTEM ALREADY INCORPORATES AI CAPABILITY BENEFITS FROM THAT. WE ARE REDEPLOYING AI IN EVERYTHING WE DO.

[00:29:04]GIVEN THAT IT IS IMPOSSIBLE. GUY: WHY IS IT IMPOSSIBLE?

[00:29:13]WHY CAN'T YOU GIVE ME A RATE OF RETURN, IF YOU INVESTED IN SOMETHING ELSE, YOU WOULD BE ABLE TO GIVE ME A RATE OF RETURN ON THE INVESTMENT. WHY IS AI DIFFERENT?

[00:29:23]COMPANIES ARE USING IT AND DEPLOYING IT BUT THEY STILL CAN'T GIVE NUMBERS IN TERMS OF WHAT IT WILL DELIVER BACK TO THE BUSINESS. JOSE: WHEN I BUY A BUILDING, I SPENT A FIXED AMOUNT OF MONEY ON THAT ASSET.

[00:29:46]AI HAS BEEN REDEPLOYED ACROSS THE GROUP.

[00:29:52]WHEN THEY DO CAPITAL ANALYSIS OR REDO THE PORTFOLIO ANALYSIS, WE YOU AI. IT IS AN EXPENSE AT THAT TIME AND ALLOWS US TO DO THINGS WE WERE NOT ABLE TO DO BEFORE.

[00:30:10]CONNECTING THE TWO IS NOT THAT EASY, NOT AS EASY AS DOING IT FOR A FIXED ASSET LIKE A BANK OR BUILDING. ANNA: INTERESTING.

[00:30:22]WE WILL UNDENIABLY TALK MORE ABOUT THAT SUBJECT. THE SPANISH ECONOMY DOING WELL BY EUROPEAN STANDARDS, BOOSTED BY DIFFERENT POLICIES, BOOSTED NO DOUBT BY THE WORLD CUP WIN. JOSE: IT WAS GREAT TO SEE SPAIN WINNING THE CHAMPIONSHIP, WE ARE PROUD OF WHAT THE TEAM ACHIEVED. HOW WILL THIS TRANSLATE INTO ECONOMIC IMPACT? I THINK IT WILL NOT BE THAT GREAT.

[00:30:58]WE EXPECT SPAIN TO DO A LOT BETTER THAN THE AVERAGE EUROPEAN OR MAJOR EUROPEAN ECONOMIES.

[00:31:12]SPAIN IS DOING WELL AND WE EXPECTED TO CONTINUE TO DO WELL AND RELATIVE TO OTHERS TO DO BROTHER -- DO BETTER. TOM: WHAT ARE YOUR EXPECTATIONS AROUND THE ECB AND FURTHER RATE INCREASES IF AND WHEN THEY COME? JOSE: I THINK LAGARDE WAS CLEAR, IT APPENDS ON THE OUTCOME IN THE MIDDLE EAST AND HOW THAT TRANSLATES INTO INFLATIONARY PRESSURES OR NOT.

[00:31:48]SO FAR, THIS TRANSLATION IS VERY MODERATE.

[00:31:52]WE NEED TO SEE HOW THIS DEVELOPS.

[00:31:58]HAVING SAID THAT, WE EXPECT ONE MORE RATE INCREASE IN SEPTEMBER AND I THINK THE ECB WILL REACT TO DATA.

[00:32:05]I THINK THAT'S THE RIGHT WAY TO DO THINGS AT THE MOMENT. GUY: A FINAL QUICK QUESTION, DO YOU EXPECT TAXES IN THE U.K.

[00:32:13]TO GO HIGHER? WE HAVE A NEW GOVERNMENT, IT'S ON THE AGENDA, JAMIE DIMON IS TALKING ABOUT IT WOULD BE A REALLY BAD IDEA. WHAT DO YOU THINK? JOSE: WE HAVE BEEN THE LARGEST INVESTOR IN THE U.K., FINANCIAL INVESTOR IN THE U.K. FOR OVER 20 YEARS AND WE'VE JUST ACQUIRED ANOTHER BANK. WE THINK IT'S A GREAT PLACE TO BE AND DO BUSINESS.

[00:32:47]THE GOVERNMENT HAS BEEN FORMED, IT'S VERY EARLY DAYS.

[00:32:52]WE SAID THIS MANY TIMES. WE BELIEVE INDIVIDUALS AND COMPANIES MUST PAY A FAIR AMOUNT OF TAX.

[00:33:05]WHEN TARGETING A PARTICULAR SECTOR, THE BANKING SECTOR, UTILITIES, ANY SECTOR, WITH SPECIAL TAXES, THEY NEED TO ASSESS CAREFULLY THE CONSEQUENCES OF THAT.

[00:33:15]THERE MIGHT BE UNINTENDED CONSEQUENCES.

[00:33:20]THE BANKING SYSTEM IS PARTICULARLY SENSITIVE BECAUSE IT PROVIDES THE LEVERAGE TO THE ECONOMY TO GROW.

[00:33:27]WE BELIEVE THAT ATTACKS MUST BE FAIR TO ALL COMPANIES -- THAT A TAX MUST BE FAIR TO ALL COMPANIES. GUY: THERE YOU GO. THANK YOU VERY MUCH FOR YOUR TIME. DEFENSE LEADERS ARE WEIGHING IN THE LAST COUPLE OF DAYS ON HOW THE U.K.

[00:33:49]AND EUROPE CAN BOOST SOVEREIGN CAPABILITIES.

[00:33:53]>> IS IT ABOUT MONEY OR GETTING THE CAPABILITY AT SPEED?

[00:33:56]IT'S A BIT OF BOTH. WE ALL RECOGNIZE TO BE RELEVANT IN THIS DAY WE NEED TO MOVE FASTER.

[00:34:04]THE SOLUTION IS TO EXPAND OUR CAPACITY.

[00:34:08]THE INTERSECTION WE ARE LOOKING FORWARD TO IS EXPANDING THAT CAPACITY LOCALLY IN THE U.K. OR ACROSS EUROPE TO GET AFTER BOTH SPEED AND INTEGRATED, INTEROPERABLE ALLY CAPABILITY THAT WILL HELP NATIONS FEEL SAFER. GUY: THAT IS ORLANDO SANCHEZ FROM LOCKHEED ROCK -- LOCKHEED MARTIN. HE HAS A COOL RESUME, HE USED TO RUN SKUNK WORKS.

[00:34:39]NEXT, WE WILL DISCUSS THE ONGOING WAR IN IRAN, PRESIDENT TRUMP PLAYING DOWN THE PROSPECTS OF THE DEAL.

[00:34:44]WE WILL TALK ABOUT THAT NEXT. THIS IS BLOOMBERG. ♪ TRUMP: WE ARE DOING VERY WELL. WE ARE DEGRADING THEM AT LEVELS NOBODY THOUGHT WAS POSSIBLE.

[00:35:10]THEY ARE BEING DEGRADED REALLY SO SERIOUSLY.

[00:35:11]THEY DID SLIP SOMETHING THROUGH IN JORDAN.

[00:35:16]WE HAD OTHER OPERATORS, YOU KNOW, WONDERFUL.

[00:35:20]THEN IT WOULD NOT HAVE HAPPENED, UNFORTUNATELY.

[00:35:23]BECAUSE WE HAVE THE BEST IN THE WORLD.

[00:35:29]GUY: U.S. PRESIDENT DONALD TRUMP SPEAKING FROM THE OVAL OFFICE YESTERDAY. BRENT, TOM, TRADING HIGHER AND HIGHER. TOM: 9285, THE CLOSING IN ON SUNDAY THREE DOLLARS PER BARREL.

[00:35:44]IT HOSTILITIES EXTEND ACROSS THE MIDDLE -- ESCALATING HOSTILITIES EXTEND ACROSS THE MIDDLE EAST. IN THE RED SEA HOUTHI ATTACKS TO IMPACTED OTHER KEY SHIPPING ROUTE FOR OIL. LET'S BRING IN PAUL WALLACE FOR CONTEXT AND ANALYSIS. WHAT IS THE CURRENT STATE OF THE ENERGY MARKET RIGHT NOW? WHAT IS THE OUTLOOK?

[00:36:09]HOW HAS THE OUTLOOK BEEN ADJUSTED BY THOSE IN THE SPACE, IN THE SECTOR ON THE BACK OF WHAT TRUMP HAS BEEN SAYING SUGGESTING HE IS MAYBE NOT IN A BIG RUSH TO END THIS?

[00:36:22]PAUL: I THINK, IF ANYTHING ENERGY MARKETS ARE MORE BULLISH THIS MORNING.

[00:36:28]BRENT NOW ABOVE $92 PER BARREL, SIX-WEEK WEEK HIGH ON A CLOSING BASIS.

[00:36:36]REFINED FUEL PRICES CONTINUE TO GO UP.

[00:36:39]LOOK AT EUROPEAN DIESEL PRICES. THEY ARE SOARING.

[00:36:44]IN THE U.S., GASOLINE PUMP PRICES, PETROL PRICES ARE BACK ABOVE FOUR DOLLARS A GALLON. THE ENERGY MARKET AND ENERGY TRENDS ARE VERY MUCH LOOKING AT THIS WITH A LOT OF WARINESS.

[00:37:01]I RAN IS NOT BACKING -- IRAN IS NOT BACKING DOWN.

[00:37:02]FOR ALL PRESIDENT TRUMP IS SAYING D IS REPUBLIC IS BEING SERIOUSLY DEGRADED, THERE IS LITTLE EVIDENCE OF THAT.

[00:37:11]IRAN CONTINUES TO RETALIATE AGAINST U.S.

[00:37:19]ATTACKS LIKE BAHRAIN AND JORDAN WHERE THE U.S.

[00:37:20]HAS ATTAINED THREE SERVICEMEMBERS KILLED IN THE PAST WEEK OR SO, NOT TO MENTION ANOTHER SOLDIER KILLED IN NORTHERN IRAQ IN THE SAME TIME. THINGS SEEM TO BE ESCALATING.

[00:37:39]THE FOCUS IS ON THE STRAYS POP -- STRAIT OF HORMUZ.

[00:37:50]AS I SAID, THERE IS LITTLE SIGNS THAT IRAN WILL BACK DOWN.

[00:37:53]WE KNOW. WE HAVE SEEN THIS FROM THE START OF THE WAR IN LATE FEBRUARY THAT IRAN HAS A HIGH PAIN THRESHOLD AND IT SEES THE CONFLICT AS EXISTENTIAL FROM THE THEOCRATIC ISLAMIC REPUBLIC. IT IS SIGNALING IT IS WILLING TO TAKE MUCH MORE IN THE WAY OF U.S.

[00:38:19]ATTACKS AND CONTINUE STRIKING IN THE REST OF THE REGION. GUY: OK. WE HAVE TO LEAVE IT THERE. THANK YOU FOR YOUR TIME, PAUL WALLACE JOINING US OUT OF DUBAI ON THE ENERGY MARKETS. ANNA: LET'S TURN TO BROADER MARKET CONVERSATION WITH ADAM LINTON FROM THE BLOOMBERG MARKETS LIVE BLOG.

[00:38:41]LOOKING AHEAD TO TECH EARNINGS WE ARE DEALING WITH A VOLATILE AI STORY AND I DON'T KNOW IF TECH EARNINGS WILL CALM DOWN ON THAT FRONT. WHAT IS AHEAD FOR YOU THIS TRADING DAY?

[00:38:54]ADAM: ALPHABET EARNINGS AFTER HOURS KICK OFF THINGS FOR HYPERSCALERS BEFORE THINGS GET BUSIER NET TWEAKS. ONE DAY VOLUME ON A HYPERSCALER EARNINGS DAY IS HIGHER THAN ON AN FOMC DAY.

[00:39:05]THIS IS BIG TO LOOK OUT FOR. A LOT OF FOCUS WILL BE ON THE CAPEX SPACE. WE SAW AN $80 BILLION EQUITY RAISE THAT SET THE SHARES LOWER. THERE IS HIGHER SENSITIVITY TO WHAT WE ARE HEARING ON THE CAPEX AND THERE A LOT OF FOCUS ON HOW CAN THEY THREAD THE NEEDLE?

[00:39:26]WE DON'T WANT TO SEE TOO HIGH AT CAPEX CAN THERE -- BECAUSE THERE CAN BE FEARS OF OVERBUILDING.

[00:39:34]AT THE SAME TIME, WE NEED TO SEE EVIDENCE OF MONETIZATION.

[00:39:38]SOME SIGNALS HAVE NOT BEEN POSITIVE.

[00:39:42]WE HAVE SEEN DELAYS TO GEMINI AND TOP TALENT LEAVING.

[00:39:43]THOSE ARE THE KEY THINGS TO WATCH.

[00:39:48]AND WHAT HAPPENS WITH TECH AS A WHOLE?

[00:39:53]WE HAVE SEEN TIME AND TIME AGAIN, THE RATIO OF SEMICONDUCTORS TO HYPERSCALERS. DO WE SEE FURTHER ROTATION INTO THAT? WHAT HAPPENS WITH AI VALUE INTO GROWTH. GUY: U.K.

[00:40:09]INFLATION OUT A 15 MONTH LOW NOW ON THE BACK OF DATA THAT CAME OUT AT 7:00 A.M.. YOU HAVE THAT AND THE STORY OF A PRIME MINISTER DETERMINED TO DRIVE PRICES LOWER AND YET THE MARKETS ARE PRICING ON A 40 BASIS POINTS OF HIKES BY THE BOE. DOES THAT NEED TO BE RETHOUGHT?

[00:40:27]ADAM: THE INFLATION REPORT WE SAW THIS MORNING WAS ABOUT 50 BASIS POINTS BELOW WHERE THE BANK OF ENGLAND EXPECTED TO BE.

[00:40:41]I THINK TODAY'S DATA IT GIVES YOU A STARTING POINT FOR WIND ENERGY PRICES GO HIGHER AND HIGHER.

[00:40:49]BLOOMBERG ECONOMICS, WE ARE ABOUT 3% ON INFLATION FOR THE BANK OF ENGLAND IS RELATIVELY GOOD NEWS.

[00:40:58]3.4%-5% IS WHERE THEY SEE INFLATION.

[00:41:02]EVEN AT THE PEAK OF CRISIS, THE BANK OF ENGLAND WAS PRETTY RETICENT TO DELIVER RATE HIKES.

[00:41:10]GUY: OUR EUROPEAN EARNINGS EXPECTED TO BE GOOD ENOUGH TO OFFSET HIGHER OIL PRICES? ADAM: THAT APPEARS TO BE THE CASE FOR NOW.

[00:41:18]EVERY TIME I WALKED INTO THE OFFICE I SEE PRICES HIGHER.

[00:41:24]THE EURO STOXX 50 FUTURE IS RESILIENT.

[00:41:25]EARNINGS ARE STRONG ENOUGH. THEY ARE EXPECTED TO REMAIN STRONG ENOUGH IN TERMS OF THE KEY SECTORS LIKE ENERGY, FINANCIALS, CONSUMER STAPLES.

[00:41:38]IF WE SEE NEGATIVE TECH TODAY THAT IS ALSO POSITIVE IN EIGHT EUROPEAN EQUITY CONTEXT. TOM: GET UP-TO-DATE ANALYSIS FROM ADAM AND THE REST OF YOUR TEAM. GO TO MLIV <GO> ON THE TERMINAL.

[00:41:53]CHLOE: TARIFFS ARE BACK ON THE AGENDA WITH TRUMP SAYING GENERIC MANUFACTURERS NEED TO MOVE PRODUCTION TO THE U.S. WITHIN TWO YEARS OR FACE OF ONE HUNDRED PERCENT TARIFF STARTING FROM 2028 THAT COULD DOUBLE THE FOLLOWING YEAR. WE WILL KEEP OUR EYES ON ALL THE NAMES ON THE BOARD, THE GENERIC DRUG MANUFACTURERS IN EUROPE. FOR THESE COMPANIES THE POTENTIAL TARIFFS WOULD MEAN A HUGE INCREASE IN COST. AND THEY ARE ALREADY OPERATING ON VERY THIN MARGINS. FOR CONSUMERS THIS WOULD MEAN HIGHER PRICES AND POTENTIAL SHORTAGES FOR VERY IMPORTANT PAINKILLER MEDICINES AND CANCER MEDICINES OFFERED BY GENERIC DRUG MANUFACTURERS.

[00:42:37]MOVING ONTO THE BANKING SECTOR, SANTANDER OF REPORTING PRETTY GOOD EARNINGS THIS MORNING, BEATING ESTIMATES, ADDING BILLIONS IN CUSTOMERS. THE BANK HAS BEEN TRYING TO EXPAND IN THE U.S. AND U.K. THROUGH THE ACT WAS THROUGH ACQUISITIONS. IT SEEMS TO BE PAYING OFF.

[00:42:55]IT HAS ALSO BENEFITED FROM SOME AI PRODUCTIVITY GAINS.

[00:43:01]WE HAVE SEEN SENTIMENT THERE, OUTPERFORMERS ON THE GRAPH.

[00:43:03]THEIR BROADER BANKS INDEX CONTINUING TODAY ON THE BACK OF STRONG EARNINGS. FINALLY, AIRBUS.

[00:43:16]PLANNING A 5 BILLION DAUGHTER -- 5 BILLION EURO BUYBACK AS WELL AS A DOUBLING OF PROFIT OVER THE NEXT THREE YEARS.

[00:43:24]THIS COULD BOOST THE STOCK THIS MORNING AFTER A PRETTY WEAK PERFORMANCE SO FAR THIS YEAR. J.P.

[00:43:31]MORGAN ANALYSTS SAID THIS IS EXACTLY WHAT IS NEEDED FOR THE STOCK TO RALLY. WE DID SEE THAT HAPPENED THIS MORNING. WE WILL KEEP OUR EYES ON AIRBUS AND THE POTENTIAL BASED OF SHARES.

[00:43:45]ANNA: A RUNDOWN OF STOCKS IN FOCUS.

[00:43:52]JD WEATHERSPOON, THE CHAIRMAN THERE AND TIM MARTIN WHO ALWAYS HAS A LOT TO SAY ON EARNINGS SAYS PROFITS ARE LIKELY TO FALL POLO EXPECTATIONS. I DON'T KNOW IF HE WAS EXPECTING BETTER OF THE ENGLAND FOOTBALL TEAM.

[00:44:11]>> ENGLAND DID QUITE WELL. THIRD PLACE.

[00:44:17]>> QUITE LATE IN THE EVENING.

[00:44:18]>> 8:00 KICKOFFS WOULD HAVE BEEN BETTER.

[00:44:29]WE ARE WATCHING THOSE STOCKS. THE BROADER PICTURE IS A DETERIORATION IN NASDAQ FUTURES. U.S. FUTURES AS WE HAVE HEADED CLOSER TO THE EUROPEAN TRADE. TOM: WHEN WE CAME IN THE SESSION WAS LOOKING BRIGHTER.

[00:44:47]NASDAQ FUTURES NOW LOWER BY ALMOST 1% AFTER A 2% GAIN AT YESTERDAY.

[00:44:49]THE FTSE 100 STILL HIGHER BY ABOUT.2%.

[00:44:55]WE WILL SEE IF THAT HOLDS. OIL, NO DOUBT, PLAYING HIS PART FOR THE FTSE 100. GUY: LISTENING TO THE AKZONOBEL SEE ALL TALKING ABOUT THE IMPACT ENERGY COSTS WILL HAVE, WHAT IMPACT WILL THIS HAVE ON EUROPEAN PROFITABILITY GOING FORWARD?

[00:45:14]FIVE MINUTES FROM THE OPENING TRADE THIS MORNING.

[00:45:17]FUTURES MIXED. U.S. FUTURES NEGATIVE.

[00:45:21]WE LOOK AT THE NUMBERS NEXT. THIS IS BLOOMBERG.

[00:45:39]>> COUPLE OF MINUTES TO GO UNTIL WE START TRADING IN EUROPE. I'M NOT SURE THIS CHART GIVES US VERY MUCH IN TERMS OF A SENSE OF DIRECTION.

[00:45:48]THIS IS WHERE YOUR CLOSED OUT ON THE S&P SESSION YESTERDAY.

[00:45:51]THERE WAS NOT MUCH ACTION IN THE BACK HALF OF THAT SESSION, BUT SINCE THEN, IF YOU WERE TO EXTEND THAT CHART, YOU WOULD SEE U.S. FUTURES, PARTICULARLY NASDAQ FUTURES, ROLLING OVER. TOM: TALKING ABOUT ROLLING OVER, THE SHOW MIGHT TALK ABOUT THE RESILIENCE OF YESTERDAY AND THAT NOW POINTING HIGHER. YOU ARE STILL LOOKING AT GAINS FOR THE FTSE 100, AND OIL WILL PLAY A ROLE WITH PRICES UP TO PERCENT CLOSING IN ON $93 A BARREL.

[00:46:31]INTERESTINGLY, GOLD AND SILVER -- HANNAH: WE WILL KEEP AN EYE ON THE PHARMACEUTICAL SECTOR, THE GENERIC DRUG SPACE IN PARTICULAR. PRESIDENT TRUMP TALKING ABOUT 100% TARIFF ON SOME GENERIC DRUGS INTO THE UNITED STATES.

[00:46:52]THERE ARE SOME EUROPEAN PLAYERS IN THIS SPACE, SO WE WILL KEEP AN EYE ON THIS SPACE. SANTANDER IN FOCUS.

[00:46:59]WE HAD THE CEO ON EARLIER AND HE SAID THE COMPANY IS ON TRACK TO MEET OR EVEN DO BETTER THAN SOME OF THE KEY PERFORMANCE INDICATORS THEY SET OUT FOR THIS YEAR SO WE WILL KEEP AN EYE ON THE PERFORMANCE OF THAT PARTICULAR BUSINESS.

[00:47:13]TIM MARTIN HAS SAID THAT FULL-YEAR PROFIT WILL BE BELOW EXPECTATIONS, ONLY MARGINALLY, BUT WE WOULD EXPECT TO SEE THAT A LITTLE WEAKER AT THE OPENING. GUY: ABSOLUTELY.

[00:47:23]HERE WE GO, LET'S SHOW YOU SOME NUMBERS, GIVE YOU AN IDEA WHAT'S GOING ON.

[00:47:34]THE FTSE 100 MAKING A BOOST, FACTORS COMING INTO PLAY WITH THE MAJORS, BP, SHELL, ETC., SO WE WILL WATCH OUT FOR THAT.

[00:47:42]THERE'S A NUMBER OF SINGLE STOCKS YOU WANT TO KEEP AN EYE ON. THE AIRBUS NUMBERS LAST NIGHT, THE OUTLOOK THEY GAVE, THEY CAME OUT OF FARNBOROUGH INTO LONDON TO UPDATE INVESTORS AND IT WAS A REALLY POSITIVE PICTURE, I HAVE TO SAY, HAVING READ THROUGH SOME OF THE DETAILS THAT CAME THROUGH. FTSE IS ABSOLUTELY FLAT.

[00:47:59]CAC DOWN BY.1%. IT WILL BE INTERESTING TO SEE WHAT THE MARKET IS SAYING ABOUT SANTANDER THIS MORNING.

[00:48:09]CERTAINLY LOOKS LIKE A BIT OF AN OUTLIER.

[00:48:12]WE WILL COME BACK TO THAT IN A MOMENT. TOM: TOP OF THE LIST IS ENERGY, NOT UNEXPECTED.

[00:48:22]UP.4%, THE BIGGEST GAIN OR ACROSS YOUR SECTORS RIGHT NOW.

[00:48:23]INDUSTRIALS, SOME OF THE DEFENSE NAMES MODESTLY HIGHER.

[00:48:30]JUST FOR SECTORS SO FAR IN POSITIVE TERRITORY.

[00:48:31]THE REST SEEING DOWNSIDE PRESSURE.

[00:48:32]THE BIGGEST LOSSES COMING THROUGH FOR TECH.

[00:48:36]THAT SECTOR CURRENTLY DOWN 1.4%, SO CHECK THE BIGGEST LOSER. CONSUMER PRODUCTS AS WELL.

[00:48:45]BIGGEST LOSSES FOR TECH, BIGGEST GAINS FOR ENERGY RIGHT NOW. ANNA: YESTERDAY, TECH WAS THE BIGGEST PERFORMING SECTOR IN EUROPE. PICKING UP ON THE GLOBAL NARRATIVE, ONLY FOR SECTORS IN POSITIVE TERRITORY AS YOU POINT OUT. WE JUST GOT THE OPENING PRICE FOR SOME OF THOSE GENERIC DRUGS MAKERS, AND IT IS A DAY WHERE WE SEE MARKETS DOWN BY.3% AND WE SEE SOME UNDERPERFORMANCE BY SEND US, WHICH IS DOWN 1.7%. WE WONDER HOW MUCH OF THIS THREAT BY PRESIDENT TRUMP TO PUT 100% TARIFFS ON GENERIC DRUGS THAT IS HAVING AN EFFECT. SENT AND DARE TO ANSWER YOUR QUESTION DOWN BY 1.2 PERCENT, DESPITE THE FACT THAT HE SOUNDED QUITE BRILLIANT ON THE OUTLOOK -- QUITE BUOYANT ON THE OUTLOOK. GUY: I SPOKE TO THE AIRBUS CEO WHO PAINTED QUITE A POSITIVE PICTURE, BUT LAST NIGHT, THEY HAD A BIG INVESTOR UPDATE AND TALKED ABOUT THE FACT THAT THEY WILL PUT THE ENGINE ISSUE THAT HAS BEEN A BIG FACTOR FOR THIS COMPANY BEHIND IT PROBABLY BY 2028. THEY PAINTED SOME POSITIVE PICTURES IN TERMS OF THE OUTLOOK FOR DEMAND.

[00:49:58]THE MARKET IS REALLY RESPONDING AND RAISING THAT STOCK THIS MORNING. WE ARE UP BY NEARLY 5% ALREADY ON AIRBUS. BIGGEST POINTS GAINER BY A SIGNIFICANT MARGIN. ANNA: LET'S WIDEN THE LENS AND TALK TO THE CHIEF INVESTMENT OFFICER AT BROOKS MCDONALD, GET HIS VIEW OF THE WORLD THIS MORNING.

[00:50:15]THANKS VERY MUCH FOR COMING IN. WE ARE STANDING ON THE PRECIPICE OF ANOTHER EARNINGS SEASON FOR BIG TECH IN THE U.S.

[00:50:23]THIS FEELS IMPORTANT GIVEN THE VOLATILITY WE INHERIT DAILY FROM ASIA AND THE TECHNOLOGY SESSION THERE AND TO SOME DEGREE, VOLATILITY IN THE U.S. TECH SPACE AS WELL.

[00:50:33]WHAT LOOKS LIKE GOOD PERFORMANCE TO YOU?

[00:50:36]WHAT ARE THE RIGHT MESSAGES FOR BIG TECH TO BE GIVING?

[00:50:46]>> IT IS A FASCINATING JUNCTURE. WE'VE HAD A BACK-AND-FORTH BETWEEN THOSE WHO ARE THE BENEFICIARIES OF THIS GIANT SPLURGE AND THOSE WHO ARE SPLURGING.

[00:50:57]WE HAVE SEEN THIS INCREDIBLY VIOLENT MARKET UNDERNEATH, UNDERNEATH MORE SERENE INDEX LEVELS. WE ARE OBVIOUSLY, LIKE EVERYONE ELSE, WATCHING WHAT HAPPENS WITH CAPEX GUIDANCE.

[00:51:11]THE FIRST THING TO POINT OUT IS THAT JUST LOOKING AT THE MAJOR BANKS THAT REPORTED EARLIER IN THE SEASON, THE READ ON THE MACROECONOMY IN THE U.S. IS PRETTY CONSTRUCTIVE, I WOULD SAY. AN AMAZING QUARTER FOR CORPORATE LOAN GROWTH, YOU ARE SEEING CONSUMER DELINQUENCY LEVELS QUITE MODERATE. I THINK LOOKING FORWARD, GETTING BACK TO YOUR ORIGINAL QUESTION, REALLY, THE BIGGEST QUESTION NOW ARE USE CASES, AND THIS WILL DOMINATE THE REST OF THE YEAR I SUSPECT. I SAW YOU INTERVIEWING EARLIER SANTANDER AND ASKING HOW YOU WILL MONETIZE THIS, WHAT THE RETURNS WILL BE. ANNA: AND IF THE COST AND BENEFITS ARE VERY DISTRIBUTED, ACROSS THE P&L, VERY DIFFICULT TO PIN DOWN, BUT YOU DON'T THINK WE ARE IN A BUBBLE?

[00:52:00]>> NOT YET.

[00:52:07]IN A WAY -- GENERALLY, WE LIKE TO OVEREMPHASIZE THE REGULARITY OF BUBBLES. BUBBLES ARE MUCH RARER THAN COMMONLY BELIEVED, I TEND TO THINK.

[00:52:17]THAT DOES NOT MEAN THERE'S NOT AREAS OF FROTH, BUT WE SAW THAT WITH THE LEVERAGE PLAY ON MEMORY STOCKS, BUT THAT SEEMS TO HAVE DEFLATED A LITTLE BIT. IF YOU LOOK AT THE MAG 7, THEY HAVE BEEN UNDERPERFORMING A BIT FOR MOST OF THE YEAR, SO I DON'T THINK THERE IS ANYTHING I WOULD WORRY ABOUT TOO MUCH, AND THAT'S NOT TO SAY THAT WE HAVE NOT HAD A VERY INTENSE BULL RUN THIS LAST THREE YEARS, BUT YOU ARE STILL IN THE MIDST OF THIS INDUSTRIAL REVOLUTION IN AMONGST AND INFORMATION REVOLUTION. IT'S HARD TO WORK OUT UP OR DOWN THIS PERIOD. BACK TO THE QUESTION TO, THE SANTANDER QUESTION AND ALL THE OTHER QUESTIONS YOU WILL BE ASKING CORPORATE INVESTING IN AI, THE KEY MOMENT WILL BE IT'S NOT JUST WHEN YOU BUY AND ADOPT AND SEE SOME SORT OF CHANGES IN USE CASE AND VARIOUS BITS AND BOBS AND EFFICIENCY GAINS.

[00:53:08]IT IS WHEN, AS IN ELECTRIFICATION, YOUR FACTORY MANAGERS CHANGE THE PROCESSES OF A FACTORY AROUND THIS MORE POWERFUL GENERAL PURPOSE TECHNOLOGY THAT REALLY MATTERS.

[00:53:20]WE ARE STILL UNDECIDED IN TERMS OF GENERATIVE AI, THE EARLIER BROTHER OF MACHINE LEARNING, BUT PRODUCTIVITY GAINS ARE MORE ABOUT MACHINE LEARNING. TOM: YOU MENTIONED THE HYPERSCALERS.

[00:53:34]DOES THE RECENT SELLOFF WE HAVE SEEN -- IS THAT AN ATTRACTIVE OPENING FOR YOU?

[00:53:40]>> I THINK IT IS NOT. WE ARE STILL FOCUSED ON TRYING TO LOOK TO THE NEXT STAGE OF THE INDUSTRIAL REVOLUTION.

[00:53:47]AS SUCH, THEY ARE FOCUSED ON THE ADOPTERS, AND THAT IS REALLY KNOWLEDGE SECTOR PLAYERS IN A SENSE, SO YOU ARE LOOKING A LOT AT -- IN THE U.K., BANKS, LEGAL SERVICES, ALL THOSE PLACES WHERE YOU ARE POTENTIALLY ENTERPRISE DATA HEAVY BUT REVENUE POOR. AT THIS TECHNOLOGY REACHES ITS POTENTIAL, THEN A LOT OF THE REWARDS TO STOP HACKERS WILL BE IN THE AREAS WHERE YOU CAN GET AHEAD OF THE GAME.

[00:54:15]WE ARE STILL IN MARKET TERMS, AND MOST OF THE EXCITEMENT IN MARKET TERMS IS IN THE PICKS AND SHOVELS PLAYS.

[00:54:21]THERE'S TRADE-OFFS BETWEEN HYPERSCALERS AND MEMORY STOCKS AND THE SUPPLY SHORTAGES AND THAT'S WHERE THE SCARCITY IS, BUT AS WE MOVE DOWN THE NEXT STAGE OF THIS INDUSTRIAL REVOLUTION, TECHNOLOGY REVOLUTION, THAT IS WHERE A LOT OF THE INTEREST IS FOR US AND THE EVALUATION APPEAL IN TRYING TO GET AHEAD OF THE GAME. TOM: HOW ARE YOU LOOKING AT EUROPEAN STOCKS THROUGH THE LENS OF ENERGY? AT WHAT LEVEL OF RENT?

[00:54:51]$100, ONE $120, THAT IS WHEN IT BECOMES A PROBLEM?

[00:54:57]>> I THINK WHAT YOU ARE SEEING IN EUROPE, AND THIS IS SOMETHING YOU POINTED OUT EARLIER IN THE SHOW, IS THAT PARTS OF EUROPE ARE PICKING UP A LITTLE BIT AND CURRENT ACTIVITY INDICATORS ARE LOOKING MORE ATTRACTIVE IN EUROPE IN PARTICULAR. NOT SO MUCH THE U.K., THOUGH, WHICH SEEMS TO BE BUMBLING ALONG.

[00:55:14]THE OIL PRICE STORY, I DON'T KNOW IF I WOULD GO FOR SCENARIO ANALYSIS OR INSURANCE IN A SENSE.

[00:55:20]WE STILL FEEL THAT YOUR LOOKS WORTHY OF SOME PART IN PORTFOLIOS BUT NOT A DOMINANT PART.

[00:55:27]OH YOU ARE OVERWEIGHT IS IN U.K. EQUITIES AT THE MOMENT STILL.

[00:55:31]TOM: VERSUS THE U.S.?

[00:55:33]>> VERSUS THE U.S. WE NEVER THAT TWO YEARS AGO.

[00:55:40]WE NARROWED IT THREE MONTHS AGO. I THINK WHAT IS UNDERESTIMATED STILL ABOUT THE U.K. ECONOMY AND PARTS OF THE U.K.

[00:55:50]CAPITAL MARKETS COMPLEX IS THAT THE U.K.

[00:55:54]IS A KNOWLEDGE SECTOR SUPER POWER.

[00:55:57]THIS IS ONE OF THE AREAS WHERE THE U.K.

[00:55:59]HAS INCREDIBLE COMPARATIVE ADVANTAGE ACROSS AN ARRAY OF KNOWLEDGE SECTORS. AS I SAY, IF THIS TECHNOLOGY REACHES ITS POTENTIAL. TOM: VALUATIONS IN THIS COUNTRY ARE RUBBISH.

[00:56:10]WE NEED TO GET THEM HIGHER. THEY DON'T TRADE AT THE SAME MULTIPLES. YOU ARE TALKING ABOUT NARROWING IT.

[00:56:19]>> WE MOVE 3%. IT WAS A VERY HEAVY OVERWEIGHT, WHICH PAID OFF, BUT I CANNOT TAKE ANY CREDIT FOR IT BECAUSE THAT WAS MY COLLEAGUES BEFORE I ARRIVED, ALTHOUGH OBVIOUSLY, THAT'S WHAT WE LIKE TO DO, TAKE CREDIT UNARMED -- UNEARNED PEER EVALUATION IS A LONG-TERM INDICATOR, NOT A TACTICAL SIGNAL YOU CAN TURN AROUND. HOWEVER, ON A FIVE-YEAR VIEW, IF YOU ARE LOOKING AT WHERE YOU WANT TO DEPLOY YOUR STOCK-PICKING, FUN-PICKING POTENTIAL, I WOULD SAY THE U.K.

[00:56:51]IS A HAPPY ZONE TO START LOOKING AROUND MORE ACTIVELY.

[00:56:56]GUY: THERE'S A LOT OF TAKE OUT AT THE MOMENT AND YOU SEE THAT HAPPENING ON AN ALMOST DAILY BASIS, SO YOU HAVE TO HOLD AND WAIT FOR THE MOMENT WHEN THE COMPANY GETS TAKEN OUT. IS THAT THE STRATEGY HERE IN THE U.K.?

[00:57:11]>> AS YOU KNOW, MARKETS -- AND YOU GUYS KNOW THIS BETTER THAN ANYONE ELSE -- MARKETS CAN MOVE IN LONG-TERM KIND OF FADS, AND THE U.K. HAS BEEN OUT OF FAVOR FOR SOME TIME. PART OF THAT IS THE SECTOR MAKEUP.

[00:57:24]PART OF THE -- PART OF IT IS THAT THE U.K.

[00:57:28]WAS JUST WHACKED TO THE FLOOR FROM THE FINANCIAL CRISIS IN PARTICULAR AND HAS NEVER GOT OFF THE CAMPUS -- CANVAS UNTIL MAYBE COVID. IT MIGHT TAKE SOMETHING MORE SHOCKING IN TERMS OF EARNINGS GROWTH AND PROVEN RETURN ON EQUITY, ALL THE REST OF THE THINGS, TO START GETTING PEOPLE ALLOCATING MORE PERSISTENTLY TO THE REGION BECAUSE THE U.S.

[00:57:48]HAS BEEN THE STORY, AND NOW IT IS ASIA WHICH IS TAKING OVER A LITTLE BIT. I WOULD SAY PART OF OUR JOB AS INVESTORS IS TRYING TO LOOK THROUGH THE FADS AND TRY AND ALLOCATE AHEAD OF WHERE THE NEXT FAD MIGHT MOVE, AND MY SUSPICION IS U.K. IS UNDERAPPRECIATED.

[00:58:07]REMEMBER, IF YOU ARE LOOKING AT TRANSLATING WHAT YOU ARE SEEING IN THE UNIVERSITIES IN PARTICULAR IN THIS COUNTRY, AND THIS IS UNDERAPPRECIATED, IS YOU ARE MOVING FROM KNOWLEDGE TO SEED CAPITAL, AND IT IS STARTING TO MOVE A BIT FASTER IN THE VARIOUS REGIONS. ANNA: IT'S INTERESTING TO ME THAT YOU LOOK AT A KNOWLEDGE ECONOMY AND SAY THAT A SECTOR GAIN FOR AI. OTHERS LOOK AT A KNOWLEDGE ECONOMY AND SAY THAT LOOKS VULNERABLE TO AI.

[00:58:37]WHAT IS THE KEY TO YOUR VIEW?

[00:58:38]>> YOU COULD LOOK FOR INSTANCE IN THE PART OF THE INDUSTRY WE OPERATE IN. YOU CAN THINK ABOUT ADVISORS, FOR INSTANCE, AND HOW THEY ADVISE CLIENTS ON FINANCIAL SITUATIONS, TAX PLANNING, ALL THOSE KIND OF THINGS.

[00:59:00]ONE ARGUMENT -- IF YOU LOOK AT PAST INSTANCES OF TECHNOLOGICAL CHANGE, IT'S MORE LIKELY YOU GET SUPER REDUCING YOUR MARGINAL COST TO SUPPLY YOUR SERVICE SO YOU CAN SUPPLY MORE PEOPLE WITH IT. WE ARE SEEING THAT ALREADY FROM OUR ADVISORS. A LOT OF THE ADMIN ASSOCIATED WITH SERVING AN INDIVIDUAL CUSTOMER WAS FORCING THEM UP THE SCALE IN TERMS OF WEALTH.

[00:59:22]AS AI OR MACHINE LEARNING DOES MORE OF THAT ADMIN COST FOR YOU, YOUR ABILITY TO PROVIDE THOSE SERVICES IS GREATER AND WIDER, AND ECHOES AT THE SAME TIME AS THE COUNTRY AND THE WIDER WORLD GETS WEALTHIER. GUY: ALWAYS APPRECIATE IT.

[00:59:38]LET'S GIVE YOU AN IDEA OF WHAT WE ARE WATCHING IN EUROPE.

[00:59:42]GENERALLY A FAIRLY NEGATIVE PICTURE, PARTICULARLY AROUND THE TECH SPACE. NASDAQ FUTURES ROLLING OVER, ASML A VICTIM OF THAT. IT IS NOT LIMITED TO TECH.

[00:59:58]SEEKING SOME SAFETY IN NESTLE THIS MORNING.

[01:00:00]WHAT ELSE ARE WE WATCHING? BACK TO THE AIRBUS STORY.

[01:00:03]THE UPDATE LAST NIGHT REALLY HAS ELECTRIFIED INVESTORS AROUND THIS SPACE. THE STOCK IS A BIG THIS MORNING.

[01:00:12]CHLOE: GOOD MORNING. WE ARE SEEING AIRBUS FIRMLY IN THE GRAIN THIS MORNING, UP ALMOST 6% AFTER UNVEILING THOSE AMBITIOUS TARGETS LAST NIGHT, SAYING THAT IT WILL HAVE A 5 BILLION EURO BUYBACK, THAT IT WILL DOUBLE PROFITS, AND ALSO THAT THE ENGINE ISSUES THAT HAVE BEEN PLAGUING OPERATIONS WILL SOON START TO FADE, SO WE ARE SEEING THAT REALLY DRIVE THE STOCK THIS MORNING. WE ARE ALMOST 6% FOR AIRBUS THIS MORNING. ON THE OTHER HAND, WE HAVE WEATHERSPOON'S, WHICH IS FIRMLY IN THE RED.

[01:00:42]WE ARE DOWN ALMOST 10% AFTER THE PUB OPERATOR ISSUED ITS FOR-PROFIT MORNING -- FOURTH PROFIT WARNING THIS YEAR.

[01:00:53]IT HAS BEEN DEALING WITH COST INFLATION AND ENERGY PRICES REALLY WEIGHING ON PERFORMANCE, AND AT THE SAME TIME, IT SEEMS THERE HAS BEEN PERHAPS LOWER DEMAND THAN EXPECTED.

[01:01:02]MAYBE THE WORLD CUP BOOST WAS NOT AS BIG OF A BOOST AS THEY HAD HOPED, SO WE SEE SHARES DOWN VERY STRONGLY THIS MORNING.

[01:01:17]MOVING ON TO THE RECRUITMENT STORY, SOME QUITE POSITIVE RESULTS WE HAVE.

[01:01:24]MANPOWER IN THE U.S. MAYBE INDICATING THIS INDUSTRY THAT HAVE BEEN IN TROUBLE FOR QUITE A WHILE THE LAST FEW YEARS IS STARTING TO SEE SOME OF THOSE GREEN SHOOTS, SO WE ARE UP ABOUT 7% THIS MORNING.

[01:01:40]WE HAVE DANNON BEING DOUBLE DOWNGRADED WITH ANALYSTS SAYING THERE WILL BE A LOT OF COMPETITION IN THE U.S.

[01:01:46]MARKET AND CHINESE MARKET, BOTH MARKETS BEING VERY IMPORTANT FOR THAT COMPANY, SO WE SEE THAT WEIGHING ON THE STOCK THIS MORNING, DOWN MORE THAN 2%. FINALLY, AKZONOBEL, THE PAINT MAKER, IS UP TO PERCENT AFTER POSTING SOME RESILIENT EARNINGS, AND IN PARTICULAR, IT HAS SOME RESILIENT PRICING WHICH HELPS IT ABSORB COST INFLATION, AND ALSO VOLUME GETTING BETTER IN THE COATINGS DIVISION. TOM: THANK YOU VERY MUCH INDEED WITH SOME OF THE STOCKS ON THE MOVE.

[01:02:20]COMING TARGETS GENERIC DRUG MANUFACTURERS THREATENING TO RIFTS OF UP TO 200%. WE LOOK AT THE POTENTIAL IMPLICATIONS NEXT. THIS IS BLOOMBERG.

[01:02:46]>> 2026 IS THE FIRST YEAR OF THIS THREE-YEAR PLAN AND CLEARLY WE ARE ON TRACK, OR EVEN, YOU KNOW, ON TRACK TO MEET OR EVEN DO BETTER IN SOME OF THE KTI'S WE GAVE FOR THE FIRST YEAR OF THIS THREE-YEAR PLAN SO WE ARE STARTING ON A VERY STRONG FOOTING.

[01:03:07]AND WE ARE VERY CONFIDENT WE CAN DELIVER ON THE NUMBERS WE GAVE FOR THE NEXT THREE YEARS. GUY: SANTANDER'S CFO SOUNDING QUITE POSITIVE, THE NUMBERS SOUND QUITE POSITIVE. THE STOCK IS DOWN BY 0.5%.

[01:03:21]IT IS UP QUITE A LOT THIS YEAR WHICH MAY ACCOUNT FOR THE FACT THAT IT IS DOWN A LITTLE BIT THIS MORNING.

[01:03:27]TOM METCALF JOINS US TO TALK ABOUT THIS.

[01:03:29]THESE NUMBERS LOOK OK. TOM: I THINK CONTEXT, AS YOU SAY, SHARES ARE A PRETTY STRONG OVER THE PAST YEAR SO I THINK IT IS A SLIGHT DIP IN THE SHARES BUT PROBABLY BECAUSE THEY ARE MEETING THOSE EXPECTATIONS.

[01:03:45]ACROSS THE BOARD, IT IS PRETTY STRONG, PERHAPS A BIT LIGHT ON THE TRADING SIDE. NII WAS UP. THE BANK HAS GOT A LOT OF EXECUTION TO GET THROUGH. WITH THAT, PERHAPS IT IS A REMINDER UNTIL DAD'S KIND OF ALL CLEAR THROUGH, IT'S NOT NECESSARILY GOING TO BE EASY SAILING. TOM: TSP AND WEBSTER IDIOSYNCRATIC TO SANTANDER BUT ARE THERE OTHER PARTS OF THE STORY THAT WE CAN TAKE AS WE LOOK AHEAD TO OTHER EUROPEAN BANK EARNINGS?

[01:04:16]>> THE CORE BUSINESS LOOKS GOOD FOR OTHER SPANISH BANKS.

[01:04:20]NII IS UP. IT IS GOING TO READ ACROSS TO THE OTHER BANKS OF THE WORLD.

[01:04:27]YOU LOOK OUT FOR THOSE PROVISIONS, THOSE NASTY SURPRISES OR SIGNS OF DISTRESS, NOT REALLY SEEING THAT AGAIN IT STILL LOOKS LIKE A BUSINESS AS USUAL TYPE ORDER WITH A FEW IDIOSYNCRATIC THINGS FOR EACH BANK. ANNA: SINCE WE HAVE YOU HERE, WE HAVE GOT A NEW CHANCELLOR IN THE U.K., AND SOME OF WHAT HE MIGHT OR MIGHT NOT DO WITH THE U.K.

[01:04:46]ECONOMY AND BANKING SECTOR MIGHT BE OF INTEREST. I WONDER HOW THE FINANCE INDUSTRY HAS BEEN RESPONDING TO HIS APPOINTMENT SO FAR.

[01:04:53]>> BROADLY SPEAKING, HE SEEMS RELIABLE, A SAFE PAIR OF HANDS, COMMON SENSE CHOICE SO DEFINITELY A SIGH OF RELIEF IN THE CITY. 'S FIRST DAY WAS YESTERDAY BASICALLY, SO THERE'S JUST GOING TO BE A LOT OF SPECULATION ABOUT WHAT EXACTLY, YOU KNOW, THEY ULTIMATELY COME TO DO WHEN THERE'S A LOT OF DIFFICULTIES HERE. ANNA: J.P. MORGAN, JAMIE DIMON HAS SPOKEN ABOUT THEM PUSHED BACK IN CASE THERE IS ANY INCLINATION TO INCREASE TAX ON THE BANKS.

[01:05:23]>> A VERY WELL-TIMED RELEASE PODCAST. WE THINK BANKS ARE OVERTAXED, WE THINK IT IS UNFAIR THAT A U.S. BANK LIKE A J.P.

[01:05:33]MORGAN HAS HAD A SURCHARGE HONEST EVER SINCE THE GLOBAL FINANCIAL CRISIS, WHICH AT LEAST IN THEIR VIEW NOTHING TO DO WITH JAMIE DIMON OR J.P. MORGAN.

[01:05:40]QUITE CAREFULLY WORDED, NOT SAYING I WILL DO A, B, C IF TAXES COME IN. THERE'S NO EASY CHOICES HERE, THERE IS NO POT OF MONEY THAT THE STARMERS OF THE WORLD. GUY: ED MILIBAND. ONE OF THOSE THINGS DOES SOUND LIKE POSITIVE TO ME, THEY SOUND LIKE ED MILIBAND.

[01:06:04]>> THAT'S PROBABLY THE BIGGEST TAKE AWAY, CLEARLY BURNHAM IS AWARE OF THE NEEDED TO REASSURE THE BOND MARKETS AND REASSURE THE CITY, AT LEAST ON THAT KIND OF CRITICAL POINT. ANNA: THANKS FOR JOINING US. TOM METCALF WITH A LOOK AT THE FINANCIAL SERVICES SECTOR, INCLUDING SANTANDER EARNINGS.

[01:06:23]AND OTHER CORPORATE NEWS, PRESIDENT TRUMP SAYS GENERIC DRUG MAKERS HAVE TWO YEARS TO MOVE PRODUCTION TO THE UNITED STATES OR FACE A 100% TARIFF FROM AUGUST 2028.

[01:06:34]THAT LEVY COULD DOUBLE A YEAR LATER TO 200% IN AUGUST OF 2029 IF THESE GENERIC DRUG COMPANIES DO NOT MOVE PRODUCTION TO THE U.S. LET'S BRING IN DEIRDRE HIPWELL.

[01:06:48]WE CAN DISSECT THIS FROM A WHOLE NUMBER OF DIFFERENT ANGLES. THANKS FOR JOINING US. WHAT KIND OF IMPACT COULD THIS HAVE ON U.S. CONSUMERS, U.S. PRICES?

[01:06:56]WE WERE TALKING ABOUT WHETHER THIS JUST LOOKS AS IF IT PUSHES UP PRICES. WHETHER YOU MAKE THEM A BROAD OR IN THE UNITED STATES.

[01:07:05]>> ABSOLUTELY. IT COULD HAVE A HUGE IMPACT BECAUSE OF THAT 90% OF DRUG PRESCRIPTIONS AND AMERICA ARE GENERIC DRUGS, AND THAT IS EVERYTHING FROM ANTIBIOTICS, PAINKILLERS, CHOLESTEROL DRUGS, CANCER DRUGS EVEN.

[01:07:18]AS EVER WITH TRUMP, HE MAKES THESE BIG ANNOUNCEMENTS BUT THEN THE DEVIL WILL BE IN THE DETAIL.

[01:07:27]I THINK WHAT WE COULD SEE IS WHAT HAPPENED WITH THE BRAND DRUG MANUFACTURERS, AS WE MIGHT SEE SOME CARVE ORDEALS WHERE GENERIC COMPANIES TRY TO COME TO AGREEMENTS ON PRICING SO WE WOULD HAVE TO BE ON THE LOOKOUT FOR THAT.

[01:07:39]PART OF ME THINKS HE'S TRYING TO GET DEALS BECAUSE GIVING THEM TWO YEARS, IF YOU WANT TO GET A MANUFACTURING PLANT UP AND RUNNING, IT'S GOING TO TAKE AT LEAST THREE YEARS SO IT'S NOT GIVING THEM MUCH TIME SO THEY ARE GOING TO HAVE TO HUSTLE IF THEY THINK THIS IS REALLY GOING TO COME INTO EFFECT. TOM: HAS HE HAD SOME SUCCESS IN ARM TWISTING THE PHARMA INDUSTRY TO BUILD ADDITIONAL CAPACITY IN THE U.S.?

[01:08:06]>> HE IS DEFINITELY ARM TWISTING, THAT'S FOR SURE.

[01:08:09]WHETHER OR NOT HE IS LOWERING PRICES FOR AMERICANS WILL TAKE SOME TIME TO ANSWER. WE SAW PFIZER, AS STRUCK, ALL THE BIG -- ASTRA, ALL THE BIG DRUG COMPANIES DID DEALS WITH HIM AND SECURED GRACE PERIODS FOR TARIFFS.

[01:08:25]THERE IS A QUESTION OF WHETHER THIS IS ACTUALLY LOWERING PRICES FOR AMERICANS BECAUSE THE DRUG SUPPLY CHAIN HAS BEEN BUILT UP OVER MANY YEARS AND IT IS A VERY COMPLICATED SUPPLY CHAIN SO I THINK IT IS NOT CLEAR YET THAT PRICES ARE ACTUALLY LOWER FOR AMERICANS. GUY: WHO WOULD LOSE OUT HERE?

[01:08:43]IN SEEMS LIKE AN OBVIOUS CASE -- INDIA SEEMS LIKE AN OBVIOUS CASE.

[01:08:53]>> INDIA WOULD BE THE BIGGEST LOSER.

[01:08:53]ABOUT 40% OF THEIR EXPORTS ARE PHARMACEUTICAL AND I THINK IT WOULD BE VERY DIFFICULT FOR THEM BECAUSE THEY ARE ALREADY FACING LEVIES ON STEEL, ALUMINUM, AUTOS, SO THEY WOULD POTENTIALLY BE A BIG LOSER. BUT ALSO COMPANIES IN EUROPE, A HUGE GENERICS MANUFACTURER, AND THEY HAVE VERY LITTLE FACILITIES IN THE U.S. SO THEIR CEO ALREADY WARNED LESTER THAT IF TRUMP MOVED ON GENERIC DRUG MANUFACTURERS, IT WOULD LOWER CHOICE FOR AMERICANS, BECAUSE SOME MIGHT JUST CHOOSE TO WITHDRAW FROM THAT MARKET AND FOCUS ON MORE LUCRATIVE MARKETS. ANNA: YOU SAY FOR THE OBVIOUSLY THIS IS AWAY FROM THE GENERIC DRUG SIDE BUT THE WIDER TRADE TARIFFS DRUG STORY, A LOT OF THE BIG NAMES HAVE DONE DEALS.

[01:09:35]HAS THAT MEANT WE HAVE A BIT OF CERTAINTY AS TO WHAT TYPE OF TARIFFS THEY WILL FACE INTO THE UNITED STATES?

[01:09:41]>> QUITE A FEW OF THEM HAVE SECURITY DEALS, THEY'VE GOT GRACE PERIODS. TRUMPRX WAS THE DIRECT TO CONSUMER PLATFORM THAT WAS LAUNCHED WHICH DISCOUNTED PRICES.

[01:09:54]CERTAINLY, TRUMP WILL HAVE SOME THINGS HE CAN POINT TO AS VICTORIES AGAINST THE PHARMA SECTOR AHEAD OF MIDTERM ELECTIONS BECAUSE THIS HAS BEEN A BIG PUSH HE HAS MADE.

[01:10:02]HE HAS OFTEN BEEN VERY UPSET ABOUT THE FACT THAT HE THINKS PEOPLE LIKE EUROPEANS AND OTHER COUNTRIES THAT PATIENTS THERE ARE GETTING MUCH LOWER PRICING THAN AMERICANS.

[01:10:12]HE HAS A LOT TO POINT TO. I THINK THE WIDER QUESTION WILL BE HOW LONG-TERM THIS EFFECT WILL BE AND IS IT REALLY DAY-TO-DAY LOWERING PRICES FOR RECORDS? TOM: DEIRDRE HIPWELL.

[01:10:28]COMING UP, TALKING OF THE COST OF DRUGS AND WHAT IT DOES TO INFLATION, INFLATION AND THE U.K. FOLLOWING.

[01:10:33]WE ARE GOING -- FALLING. WE WILL DIG INTO THE LATEST DATA. THAT IS COMING UP. THIS IS BLOOMBERG.

[01:10:43]♪ TOM: WE ARE 30 MINUTES INTO THE WEDNESDAY SESSION.

[01:11:06]HERE'S THE PICTURE ACROSS THE BENCHMARK, ESSENTIALLY FLAT MIGHT GAINS IN THE U.K. UP 1/10 OF 1%.

[01:11:12]THE ENERGY SECTOR PLAYING ITS ROLE.

[01:11:15]CAUTION MORE BROADLY IN THE MARKETS BECAUSE OF A AT 93 BORROW -- DOLLARS PER BARREL.

[01:11:25]THE DAX UP 40 POINTS.

[01:11:34]DECENT GAINS IN THE CAC, UP ALMOST 25 POINTS.

[01:11:37]YOU ARE LOOKING AT DETAIL. GUY: 320 ONE DOWN, 200 D EIGHT UP.

[01:11:47]INTERESTING STOCK STORIES, AIRBUS WITH A BIG INVESTOR UPDATE, THEY DID IT AT THE FARNBOROUGH AIRSHOW, THEY ARE PUSHING BEYOND AND PAINTING A POSITIVE PICTURE.

[01:12:07]THERE WERE HINTS OF THIS AT FARNBOROUGH BUT CONFIRMED BY THE TEAM AT AIRBUS.

[01:12:19]RAMSTAD OUT WITH -- RANDSTAND OUT ALSO, AND EQUINOR, BOTH UP.

[01:12:33]THE LAGGARDS, JD WEATHERSPOON DOWN BY ABOUT EIGHT AND A HALF PERCENT.

[01:12:45]A BIG PROBLEM FOR BIG PUB CHAINS IN THE U.K. IS TAXATION.

[01:12:51]IT'S BECOMING MORE AND MORE ONEROUS AND YOU CAN SEE IT REFLECTED IN THE NUMBERS.

[01:13:01]SANTANDER IS DOWN 7/10 OF A PERCENT, THIS STOCK HAS DONE VERY WELL THIS YEAR.

[01:13:13]ANNA: INDIVIDUAL STOCK MOVERS, LET'S GET AN UPDATE ON MOVERS THIS MORNING.

[01:13:26]PRESIDENT TRUMP TALKING DOWN DISCUSSION WITH IRAN.

[01:13:33]TRUMP DID NOT SPECIFY HOW IT MIGHT -- THEY MIGHT REACT TO THE HOUTHIS IN THE RED SEA.

[01:13:44]EARNINGS SEASON THIS WEEK WITH ALPHABET KICKING OFF MAKE A CAP RESULT LATER TODAY AND INVESTORS WILL WATCH CLOSELY FOR EVIDENCE THE COMPANIES MASSIVE INVALIDATION -- MASSIVE INVESTMENT IN ARTIFICIAL INTELLIGENCE HAS PAID OFF.

[01:14:00]INVESTORS ARE EYEING EMERGING PRODUCT LINES INCLUDING AUTONOMY AND ROBOTICS EFFORTS. IN THE U.K., INFLATION FELL TO THE LOWEST LEVEL IN A YEAR ON CHEAPER MOTOR FUEL AND FOOD.

[01:14:12]THE RESPITE MIGHT BE BRIEF. TOM: TALKING OF INFLATION, A REDHEAD CROSSING THE TERMINAL, THE BOJ IS SAID TO BE OPEN TO RAISING RATES FASTER THAN EVERY SIX MONTHS. THE YEN GETTING A POP, CURRENTLY AT 162, CROSSING THROUGH THE 163 LEVEL, UP JUST 1/10 OF A PERCENT.

[01:14:44]THE BOJ OFFICIALS SEE RECENT IN WEAKNESS AT LEVELS WE HAVEN'T SEEN SINCE 1986 AS AN UPSIDE INFLATION RISK.

[01:14:49]JAPANESE OFFICIALS FROM THE FINANCE MINISTER THIS MORNING TALKING ABOUT BOLD ACTION BUT INCREASINGLY INVESTORS AND TRADERS HAVE BEEN JAWBONING AND THE EXPECTATION HAD BEEN IF THE YEN WAS TO HAVE A FLOOR UNDER IT, WE WOULD HEAR FROM THE BOJ.

[01:15:10]ANNA: IT LOOKS DRAMATIC, NOT A BIG MOVE BUT QUITE A BIG STORY.

[01:15:17]A LOT OF PEOPLE HAVE SAID THE GOVERNMENT, THE MINISTRY OF FINANCE COULD INTERVENE A LOT. BUT IT'S NOT UNTIL THE BOJ STEPS IN, UNTIL THEY INCREASE THE PACE OF HIKES WE GET SUBSTANTIAL BACKSTOP. TOM: -- GUY: HOW FAR THEY NEED TO GO TO STABILIZE THIS?

[01:15:39]GET BACK TO LEVELS THE GOVERNMENT FEEL ARE APPROPRIATE?

[01:15:45]THE IMPLICATION IS WE ARE NOT ONE OR TWO MORE DOWN, THERE COULD BE MANY MORE RATE HIKES TO COME. ANNA: SOMETHING TO KEEP ON THE RADAR AND LOOK AHEAD TO LATER IN THE PROGRAM. U.K. DATA OUT THIS MORNING AND OUR EDITOR IS JOINING US WITH A LOOK AT THE INFLATION STORY OUT OF THE U.K., THE INFLATION PICTURE, TALK US THROUGH THE DATA, WHAT HAVE WE LEARNED TODAY? SAM: YOU ACTUALLY KIND OF MENTIONED THIS EARLIER BUT THE DATA TODAY HAS BEEN A LITTLE OVER TAKEN BY EVENTS THAT HAVE HAPPENED SINCE.

[01:16:24]ALMOST ALL OF THE SLOW DOWN INFLATION DOWN TO PETROL PRICES, WE STARTED WITH OIL PRICES AROUND $71 AND WHEN I GOT TO MY DESK THEY WERE AROUND 94.

[01:16:44]THE HEADLINE RATE IS RELATIVELY BENIGN FOR THE BANK OF ENGLAND BUT TEMPORARY RELIEF IS LIKELY.

[01:16:59]THEY HAVE A LOT OF STUFF THEY NEED TO LOOK THROUGH, A LOT OF DIFFERENT INPUTS AND IT PROBABLY DOESN'T PROVIDE THE BANK OF ENGLAND WITH MORE TIME TO KEEP WATCHING.

[01:17:08]THE CORE INFLATION AND SERVICE INFLATION DIDN'T COME DOWN AS MUCH AS ECONOMISTS EXPECTED. ALL OF THESE FACTORS GIVE THEM A LITTLE TIME AND SPACE TO KEEP WATCHING AS YOU SEE WHETHER YOU GET MORE EFFECTS FROM THE INITIAL ENERGY SPIKE COMING THROUGH. THE COSTS START TO GO FROM THERE.

[01:17:27]WHILE PRICES CONTINUE TO GO UP, HOVERING AROUND $90 A BARREL AGAIN. THAT'S ANOTHER CONSIDERATION.

[01:17:43]TOM: WE'VE JUST ROQUE AND THROUGH 94 ON BRENT, -- JUST BROKEN THROUGH 94 ON BRENT, TO YOUR POINT.

[01:18:03]LET'S BRING IN OUR GUEST FROM RBC.

[01:18:08]LET'S START WITH U.K., TRADERS TRADING -- PRICING ABOUT 40 POINTS OF HIKES FROM THE BOJ -- FROM THE BOE.

[01:18:24]>> WE EXPECT THEY WILL BE ON PROLONGED HOLD THIS YEAR.

[01:18:33]INFLATION DATA HAS SHOWN SIGNS OF POSITIVITY BUT WE EXPECT INFLATION TO TRACK HIGHER AND PEAK IN Q4.

[01:18:40]WE ARE NOT EXPECTING THEY WOULD NECESSARILY REACT TO DATA TODAY, BUT WE LOOK AT THE LACS DATA AND IS STARTING TO SHOW THERE'S WEAKNESS IN EMPLOYMENT. WAGE DATA IS TRACKING LOWER.

[01:18:52]WHEN WE LOOK AT FORWARD-LOOKING DATA, IT'S THE DECISION-MAKING PANEL AND AGENT DATA, IT'S POINTING TO LOWER EMPLOYMENT AND WAGE INFLATION. LABOR MARKETS ARE NOT AS STRONG AS THEY WERE IN 2022 AND THAT WILL BE A FACTOR THAT KEEPS THE BOE ON HOLD. THE OIL STORY CONTINUES TO BE A RISK AND THAT COULD BE THE POTENTIAL FOR A HIKE TO COME THROUGH BUT 40 MIGHT BE OVERDONE. TOM: OK, ARE YIELDS RELATIVELY CAPTURED, POLITICAL UPHEAVAL PRICED IN, WHAT ARE YOUR VIEWS ON GILT YIELDS?

[01:19:44]>> WITH CROSSED OVER 5% ON THE 10 YEAR.

[01:19:47]PART OF THAT WILL BE COMING FROM THE OIL STORY.

[01:19:52]IF WE KEEP HITTING ESCALATION LIKE WHAT'S HAPPENING IN THE MIDDLE EAST, IT WILL FIGURE INTO GILT.

[01:19:59]WE THINK THE POLITICAL PREMIUM IS BAKED IN.

[01:20:05]AS WE LOOK AT POLITICAL RISKS SURROUNDING WHAT'S HAPPENING AT THE MOMENT, THE BOND MARKET WILL LOOK AT WHAT IS THE FISCAL MESSAGE. WE KNOW THE FLEXIBILITY, INTRODUCTION OF LANGUAGE, THE BOND MARKET DIDN'T LIKE THAT AND THAT WILL BE THE CASE OF WHAT WILL BE THE POLICY ANNOUNCEMENTS FROM HERE AND WHAT DOES THAT LOOK LIKE FOR FISCAL HEADROOM AS WELL? ANNA: WHAT IS THE PREMIUM FOR U.K.

[01:20:36]DEBT OVER EUROPE, WHAT IS IT ABOUT?

[01:20:40]REFLECTING UNDERLYING FEARS? WHAT COULD THE NEW GOVERNMENT LEADERSHIP DO TO BRING DOWN THE SPREAD?

[01:20:53]>> WHEN WE LOOK AT THE U.K. FISCAL PICTURE, IT DOESN'T HAVE THE HIGHEST LEVEL OF DEBT COMPARED TO OTHER G-7 NATIONS, BUT IT'S HIGHER THAN OTHER COUNTRIES.

[01:21:08]OUR INFLATION DOESN'T COME DOWN SLOWER BECAUSE OF ENERGY CAPS.

[01:21:17]THERE'S THE LINGERING EFFECT, ALSO FEEDING INTO GILT AS WELL.

[01:21:23]THE BOND MARKET WOULD WANT TO SEE PHYSICAL PRUDENCE, STICKING TO THE RULES AND SETTING UP PLANS AND FISCAL CONSOLIDATION THAT IS REALISTIC AS WELL. ANNA: AND GETTING SOME OF THAT DONE, WILL THAT BE A FOCUS? THAT WILL BE A LASER FOCUS FOR DEBT MARKETS?

[01:21:47]>> ULTIMATELY DEBT MARKETS WILL ACCEPT CONSOLIDATION CAN HAPPEN OVER A LONGER TIME BUT WHEN YOU HAVE REVERSALS AND INSTANCES WHERE FISCAL HEADROOM IS DIMINISHING CONSIDERABLY, THE BOND MARKET IT'S WORRIED. WHEN WE LOOK AT THE PROSPECT OF ANY FISCAL MEASURES, WHAT DOES IT MEAN FOR ISSUANCE?

[01:22:07]WE LOOKED AT PUBLIC FINANCES AND BORROWING HAS BEEN HIGHER BUT THE CASH REQUIREMENT WASN'T AS HIGH UP YOUR -- HIGH.

[01:22:21]GUY: HOW DO YOU FEEL ABOUT FRANCE AT THE MOMENT? I WONDER WHAT POINT THE BOND MARKET STARTS PAYING ATTENTION.

[01:22:32]>> WE'VE SEEN SPREADS AND FRIENDS TRACKING HIGHER AND WE'VE SEEN THAT AS WE APPROACH THE ELECTIONS FOR NEXT YEAR.

[01:22:38]THE BOND MARKET IS SOMEWHAT PRICING THAT IN ALREADY BUT I THINK IT STARTS TO BECOME MORE OF A VOLATILE PERIOD BUT WE'VE BEEN UNDERWEIGHT FRANCE BECAUSE OF POLITICAL UNCERTAINTY AND WE THINK OTHER POCKETS IN EUROPE THAT ARE STILL INTERESTING WHERE YOU HAVE LESS OF A RISK, AREAS LIKE SPAIN, THAT'S INTERESTING, PORTUGAL. ITALY LESS SO.

[01:23:09]WE THINK BUNDS COULD TRACK HIGHER SO WE ARE BEING CAUTIOUS ADDING TO THOSE AT THE MOMENT. TOM: CAN WE MOVE TO CREDIT?

[01:23:23]HOW CAUTIOUS SHOULD WE BE ON CREDIT GIVEN THE RECORD ISSUANCE WE ARE STARTING TO SEE? >> FROM A VALUATION PERSPECTIVE, CREDIT SPREADS ARE TIGHT, IT LOOKS PRETTY EXPENSIVE BUT ON A BREAKEVEN BASIS IT LOOKS ATTRACTIVE AND I THINK THAT IS THE ALLURE TO GO INTO CREDIT.

[01:23:45]DEMAND HAS BEEN PRETTY ROBUST. WE ARE NOT EXPECTING THE SAME PIECE OF ISSUANCE IN THE SECOND HALF OF THE YEAR ESPECIALLY OUT OF THE U.S.. TOM: WHY IS THAT?

[01:23:54]>> A LOT OF THE FINANCING HAS BEEN DONE IN THE FIRST HALF OF THE YEAR BUT THERE COULD BE UPSIDE SURPRISES AND WE COULD SEE NEW DEALS ON THE TABLE. ULTIMATELY WE'VE SEEN THE EFFECT OF THE U.S. TECH ISSUANCE.

[01:24:11]IN EUROPE, THEY TECH ISSUANCE IS FOUR TIMES HIGHER IN THE LAST FOUR YEARS. WE ARE SEEING THE ISSUANCE OUT OF THE U.S., ITS FILTERING TO OTHER MARKETS. ANNA: I WONDER HOW MUCH YOU THINK ABOUT THE CHANGING NATURE OF THE COMPANIES ISSUANCE, THAT'S BEEN A BREAK FROM THE PAST. THEY ARE ISSUING A LOT OF DEBT IN THEY HAVE GOOD BALANCE SHEETS STILL, THEY ARE NOT STRETCHED.

[01:24:44]HOW MUCH DOES THAT CHANGE THE METRICS WE NEED TO LOOK AT?

[01:24:49]>> WHEN WE LOOK AT THE QUALITY OF THE INDEX, BECAUSE SOME OF THEM ARE IMPROVING THE QUALITY OF THE INDEX, IN A WAY, BUT IF WE LOOK AT THE TECH SECTOR, THE CURVE HAS STEEPENED BECAUSE OF ISSUANCE SKEWED TO LONGER DATA DEBT. THAT'S CHANGING THE MAKEUP OF THE SHAPE OF THE CURVE. ON BALANCE WE THINK IT'S NOT EVERY ISSUER IS MADE THE SAME, IT'S IMPORTANT TO LOOK AT THE FUNDAMENTALS. THERE'S A LOT OF CASH ON THE BALANCE SHEET SO THAT NET LEVELS ARE PRETTY GOOD.

[01:25:29]IT'S AN AREA WE CONTINUE TO WATCH OUT FOR BUT WE THINK IT'S AN AREA TO BE SELECTIVE IN CREDIT BUT WE STILL THINK THERE ARE POCKETS OF OPPORTUNITY EVEN IN TECH. GUY: LET ME TAKE YOU BACK TO THE BOJ, RATES RACE, HIGHER IN JAPAN, IS THERE A NEGATIVE EFFECT FOR EUROPE?

[01:25:53]>> WE ARE LOOKING AT THE ATTRACTIVENESS OF BOND MARKETS.

[01:25:57]IF YIELDS ARE HIGHER THAT'S MORE ATTRACTIVE FOR DOMESTIC INVESTORS. POLICY EFFECTS MAKE IT MORE ATTRACTIVE AS WELL. IT LOOKS MORE ATTRACTIVE FOR CAPITAL TO FLOW TO JAPAN.

[01:26:16]THAT COULD CHANGE THE MAKEUP OF WHERE TO INVEST. IT'S A YIELD HUNTING ENVIRONMENT, A LOT OF ISSUANCE IN THE MARKET. GUY: THANK YOU VERY MUCH FOR GUY: RUFARO CHIRISERI, RBC WEALTH MANAGEMENT HEAD OF FIXED-INCOME EUROPE.

[01:26:34]ALPHABET KICKS OFF THE START OF THE REPORTING SEASON FOR BIG TECH LATER TODAY. WE WILL DISCUSS WHAT INVESTORS SHOULD BE LOOKING FOR IN ALL OF THIS. WE WILL DO THAT NEXT.

[01:26:43]THIS IS BLOOMBERG. ♪ ANNA: WELCOME BACK TO "THE OPENING TRADE." 49 MINUTES INTO WEDNESDAY'S SESSION AND THE OVERALL MARKET DIPPING BY 0.1 PERCENT BUT NOT PERHAPS IN THE MAJOR MARKETS WHERE WE SEE A LITTLE BIT OF RESONANCE. FTSE 100 MAY BE BEING FLATTENED BY ENERGY BUT NOT DOING TOO MUCH TO FLATTENED THAT.

[01:27:24]OIL PRICES NOT FLAT, UP BY 3.9% THIS MORNING. TOM: TECH EARNINGS AND FOCUS, ALPHABET -- IN FOCUS, ALPHABET, OF COURSE, KICKING OFF THE FIRST SET OF MAKE CAP RESULTS LATER TODAY. INVESTORS WILL BE LOOKING FOR CLUES ON HOW AI SPENDING IS RESHAPING TECH.

[01:27:44]STRONG START TO THE SESSION IN ASIA. THAT FADED.

[01:27:48]LET'S GET MORE FROM MATT BLOXHAM.

[01:27:51]WHAT PARTS OF THEIR EARNINGS STORY FOR ALPHABET ARE GOING TO BE DRAWING YOUR SCRUTINY TODAY?

[01:27:57]>> QUITE A LOT TO BE HONEST BECAUSE IT IS A BROAD RANGE OF BUSINESS. FIRST IS THERE AS A BUSINESS WHICH IS BY FAR AND AWAY THE BIGGEST PART OF THEIR CASH FLOW -- ADS BUSINESS WHICH IS BY FAR AND AWAY THE BIGGEST PART OF THEIR CASH FLOW. THEY HAVE DONE A GOOD JOB OF BLENDING GEMINI INTERNET. A LOT OF FOCUS -- GEMINI INTO THAT. A LOT A FOCUS ON CAPEX. THEY SAID NEXT YEAR WILL BE HIRING AN. I THINK NOT SO MUCH MAY BE NOT CAPEX ITSELF BUT HOW THEY ARE GENERATING RETURNS.

[01:28:36]A LOT OF SCRUTINY ABOUT, ARE THESE BIG INVESTMENT STARTING TO PAY OFF IN TERMS OF AD REVENUES, GEMINI SUBSCRIPTIONS, AND THEIR ABILITY TO PENETRATE THE ENTERPRISE MARKET WITH GEMINI? THERE'S MORE BEYOND THAT BUT IT'S GOING TO BE THE BIG FOCUS FOR SURE I THINK. GUY: LET'S GET YOUR TAKE ON A STORY THAT CAUGHT ALL OF OUR ATTENTION THIS MORNING, AND THAT IS THIS OPENAI STORY.

[01:28:56]A COUPLE OF OPENAI MODELS MEANT TO BE IN THE SANDBOX CUT OFF FROM THE INTERNET. THE AI MODELS FIGURE OUT A WAY TO GET ACCESS TO THE INTERNET AND THEN THEY TRY TO ANSWER THE QUESTION THEY HAVE BEEN POSED AND THEY DO THAT BY BASICALLY GOING AND HACKING HUGGING FACE, ANOTHER COMPANY'S SITE.

[01:29:16]THIS IS ALARMING, ISN'T IT?

[01:29:19]>> IT IS ALARMING AND I GUESS IT SHOWS YOU HOW POWERFUL THESE MODELS ARE. THIS IS NOT ANYTHING THAT NEW IN THE REALM OF CYBERSECURITY. TECHNOLOGY ADVANCES MAY BE THE BAD ACTORS GET ACCESS TO IT FIRST AND THE GOOD ACTORS HAVE TO CATCH UP AND MAYBE PREEMPT WHAT'S HAPPENING.

[01:29:36]IN THIS CASE, AN A GENTEX SYSTEM, AS YOU SAY -- AGENTIC SYSTEM, AS YOU SAY, WITH THE GUARDRAILS LOWERED, WAS INCREDIBLY SUCCESSFUL AND HACKED HUGGING FACE.

[01:29:50]HUGGING FACE USED ITS OWN AGENTIC AI SYSTEMS TO COUNTER THAT. GUY: IT GOT OUT OF THE SANDBOX.

[01:29:57]IT WASN'T MEANT TO ACCESS THE INTERNET.

[01:30:00]>> THAT'S WHAT HAPPENED WITH MYTHOS EARLIER THIS YEAR.

[01:30:05]IT DOES PROVIDE A VERY CLEAR WARNING THAT THIS TECHNOLOGY POTENTIALLY DOES HAVE A LIFE OF ITS OWN AND THERE DOES NEED TO BE KIND OF QUITE CLOSE AND CAREFUL SCRUTINY OF HOW THIS STUFF IS RELEASED INTO THE WILD, IF YOU LIKE.

[01:30:22]WE HAVE ALREADY SEEN SOME POLITICIANS COME OUT AND SAY ADD MORE PRESSURE TO THE NEED TO REGULATE AND GOVERN THESE THINGS. I THINK IT IS GOING TO KIND OF HAVE EFFECTIVE REGULATION AROUND THIS BUT IT IS GOOD TO SEE. I THINK TO SOME DEGREE, THESE COMPANIES ARE ACTING RESPONSIBLY, BEING OPEN AND TRANSPARENT ABOUT WHY THAT'S HAPPENED, HOW IT HAPPENED, AND YOU ARE SHARING INFORMATION WITH COMPANIES SO THEY CAN KIND OF BE MORE PREPARED FOR THIS GOING FORWARD. ANNA: AS WE SAW WITH MYTHOS, MAYBE AXCTS AS AN INADVERTENT SALES PITCH. WE ARE LOOKING AT CAPEX, THE REGULATORY IMPULSE, ALSO LOOKING OAT THE CROWDING OUT THAT AI IS DOING IN TECH. ARE YOU THINKING ABOUT THAT CROWDING OUT? WE ARE TALKING ABOUT AI SO MUCH, BOARDS ARE THINKING ABOUT INVESTING IN AI SO MUCH.

[01:31:21]>> THIS MAY WELL BE AN INCREMENTAL THEME THAT COMES OUT NOW. WHAT OTHER AREAS HAVE WE MISSED, IF YOU LIKE, IN TERMS OF WHERE SPENDING IS SHIFTING AWAY FROM? TO SOME DEGREE, WE HAVE SEEN THIS ALREADY IN SAY SOME OTHER BIG I.T. SERVICES.

[01:31:38]FOR EXAMPLE, ACCENTURE HAD VERY SOFT NUMBERS.

[01:31:44]PUBLICIS, THEY ARE SEEING WEAKNESS.

[01:31:47]NOT JUST A DIVERSION OF HARDWARE BUDGETS TO SPECIFIC AREAS I THINK IT'S A DIVERGENCE OF SOFTWARE INTO AI.

[01:31:53]EVERYTHING IS AI. IF YOU ARE NOT AI RELATED, THEN YOU ARE GOING TO GET DE- PRIORITIZED AND I THINK WE ARE SEEING THIS ACROSS EVERY SECTOR OF THE INDUSTRY. ANNA: MATT BLOXHAM, BLOOMBERG INTELLIGENCE SENIOR ANALYST.

[01:32:08]EVERYTHING IS AI, WHICH IS WHY WE FIND IT DIFFICULT TO PINPOINT THE RETURN ON INVESTMENTS IN SOME OF THESE P&L'S AND DEBT BALANCE SHEETS. GUY: THAT WILL BE A USEFUL USE CASE MAY BE.

[01:32:24]WANTED TO QUICKLY RECAP WHAT WE HAVE BEEN SEEING IN TERMS OF ONE OF THE BIG STORIES THROUGHOUT THE MORNING, AND THAT IS THIS MOVE HERE. A POSITIVE PICTURE EMERGING FOR THE JAPANESE YEN TODAY. INDICATIONS COMING OUT OF THE BANK OF JAPAN THAT IT IS PREPARED TO MAYBE UP THE CADENCE OF RATE HIKES. WE HAVE SEEN A LOT OF JAW BONING, A LOT OF INTERVENTION, AND HAS NOT WORKED FOR THE JAPANESE AUTHORITIES.

[01:32:51]T EDITOR OF MARKETS TODAY JOINING US NOW AROUND THE TABLE. THAT IS BASICALLY IT, ISN'T IT?

[01:32:59]WE HAVE WAITED FOR THE JAPANESE. THEY HAVE TRIED EVERYTHING ELSE AND NOW THEY'VE GOT TO DO THIS, RAISE RATES MORE AGGRESSIVELY.

[01:33:07]>> THEY SAID THEY WILL DO SO, THEY ARE PREPARED TO DO SO AND THAT IS BY MORE THAN ECONOMISTS HAVE BEEN FORECASTING.

[01:33:13]WE HAVE SEEN A MARKET REACTION NOW.

[01:33:18]WE HAVE SEEN THE END RECOVER AFTER IT WAS DOWN -- THE YEN RECOVER AFTER IT WAS DOWN.

[01:33:31]I THINK THE QUESTION IS. HOW LONG THAT WILL LAST IT'S ONE THING TO TALK ABOUT RAISING RATES JUST AS THE AUTHORITIES INDICATED THEY WILL BE PREPARED TO STEP IN TO SUPPORT THE CURRENCY BUT WE ACTUALLY NEED TO SEE THAT HAPPEN I THINK FOR THAT TRADE TO CONTINUE. GUY: THE MARKET IS CONVINCED YOU ACTUALLY HAVE TO GET THE RATE RISES?

[01:33:43]>> I THINK YOU DO BECAUSE AT THE MOMENT THE OTHER FACTORS ARE STILL AT PLAY. OIL PRICES ARE RISING AS YOU SPEAK.

[01:33:53]THAT DOES NOT SEEM TO BE ANY -- THERE DOES NOT SEEM TO BE ANY LET UP IN THE ESCALATION IN THE MIDDLE EAST. WE ARE SEEING A CONTINUATION OF THAT TREND THIS MORNING. ANNA: OIL PRICES ARE STRONGER, UP BY 3.6% NOW.

[01:34:07]THIS IS CONTINUING TO RAISE QUESTIONS ABOUT INFLATION PUSHING YIELDS HIGHER.

[01:34:10]>> EXACTLY. THAT IS SOMETHING WE SEE AROUND THE WORLD AS WELL BUT PARTICULARLY IN JAPAN BECAUSE OF THAT SENSITIVITY, YOU KNOW, THE DOLLAR HAS BEEN BENEFITING FROM THIS INCREASED CONFLICT. THAT DOES NOT SEEM TO BE SHOWING ANY SIGNS OF ABATING AT THE MOMENT. ANNA: THANK YOU VERY MUCH.

[01:34:28]ON THE SUBJECT OF THOSE OIL PRICES, IRAN SAYING AN EXCHANGE OF MESSAGES AS POSSIBLE WITH THE U.S.

[01:34:33]BUT CURRENTLY NO NEGOTIATIONS WITH THE U.S.

[01:34:36]THOSE COMMENTS NOT MOVING THE OIL PRICE THAT MUCH.

[01:34:40]IT IS STILL SUBSTANTIALLY HIGHER. GUY: A CONVERSATION WE GOT, CHARLIE SCHARF IS GOING TO BE ON OUR SHOW LATER ON.. HE IS THE WELLS FARGO CEO.

[01:34:51]LOOKING FORWARD TO THAT CONVERSATION.

[01:34:54]THANKS FOR WATCHING. THIS IS BLOOMBERG.