AI Spending Fears Hit Tech; Banks Report Blowout Earnings | Daybreak Europe 7/23/2026

[00:00:00]LIZZY: LIVE FROM LONDON, THIS IS BLOOMBERG DAYBREAK: EUROPE. STATESIDE, ALPHABET SHARES SLIDE OVERNIGHT AS IT SAYS WILL LIKELY TOP UNPRECEDENTED $200 BILLION THIS YEAR. OIL GAINS AFTER GOOFY ATTACKS ON TWO TANKERS IN THE RED SEA THREATEN A NEW FRONT IN THE IRAN WAR -- AFTER HOUTHI ATTACKS ON TWO TANKERS IN THE RED SEA. A VERY GOOD MORNING.

[00:00:36]HERE'S THE PICTURE IN MARKETS THIS THURSDAY, JUST A SNAPSHOT, BUT A CONTRAST BETWEEN EAST AND WEST. SHARES HIGHER IN ASIA FUELED BY CHIPMAKERS ON EXPECTATIONS THEY WILL BENEFIT FROM AI SPENDING. BRENT HAS BEEN HIGHER AGAIN AFTER THE WHO SEES -- HOUTHIS ATTACKED TWO TANKERS IN THE RED SEA. IF WE LOOK TO THE RIGHT, THE 30-YEAR YIELD STILL STICKING.

[00:01:05]THE TREASURY YIELD HOLDING AT THAT CRUCIAL LEVEL.

[00:01:19]ALSO PUSHED HIGHER BY CONCERNS ABOUT AMERICA'S GROWING DEBT PILE. PLENTY TO BRING YOU, LOTS OF EARNINGS THIS MORNING. LET'S SET YOU UP FOR THE DAY AHEAD.

[00:01:39]WE BEGIN WITH BREAKING EARNINGS OUT OF FRANCE.

[00:01:49]THE EXPECTATION HAD BEEN THAT BNP PARIBAS WOULD BE ONE OF THE KEY EARNINGS DRIVERS. THE MARKET HAS BEEN THE BACKDROP FOR THE BANKS. THE QUESTION IS IF EU BANKS WILL EVER BE ABLE TO BENEFIT. WHAT WE ARE SEEING IS THE REDHEAD SEVEN COORDINATE INCOME COMING IN AT 3.45 BILLION EUROS.

[00:02:10]THE ESTIMATE WAS FOR 4.20 3 BILLION EUROS, SO IT IS A BEAT THEREFORE BNP PARIBAS. IF WE LOOK INTO A LITTLE MORE DETAIL OF WHAT WE ARE SEEING, BNP REPORTING NOT ONLY BETTER-THAN-EXPECTED PROFIT BUT ALSO REVENUE.

[00:02:27]STOCK TRADERS BLOWING PAST ESTIMATES, SO EQUITIES REVENUE RISING 43% FROM A YEAR EARLIER, AND THAT IS MAYBE A LITTLE SHY OF THE GAUGE REPORTED BY SOME OF THE BIGGEST WALL STREET FIRMS, BUT IT IS WELL AHEAD OF THE 1.1 BILLION EUROS FORECAST BY ANALYSTS, SO WE WILL BE SPEAKING TO THE CFO ON THE OPENING TRADE LATER THIS MORNING.

[00:02:50]THAT CONVERSATION COMING AT 7:15 A.M. LONDON TIME.

[00:02:52]ALSO GOING TO BE INTERESTING TO GET AN UPDATE ON SUDAN LITIGATION IF WE CAN, AND INDEED, VIEWS ON THE FUTURE OF EUROPEAN BANKING CONSOLIDATION. THAT, OF COURSE, IS ALSO A THEME FOR UNICREDIT. EARNINGS OUT OF MILAN DROPPING AS WELL THEY ARE. SECOND QUARTER NET INCOME COMING IN AT 2.90 ONE BILLION EUROS.

[00:03:18]ANALYSTS WERE EXPECTING UPGRADES TO THE GUIDANCE IN THE PAST 12 MONTHS. THEY SAY THE FULL YEAR IS WELL ABOVE FOR NET 11 BILLION EUROS, SO THEY ARE RAISING THEIR GOALS AS THE CEO PURSUES THIS COMMERZBANK DEAL.

[00:03:48]UPGRADING THAT FULL-YEAR PROFIT GUIDANCE AND LIFTING ALSO THE MIDTERM PROFIT TARGETS AS WELL. REMEMBER, OF COURSE, A FEW WEEKS AGO, THEY COMMITTED THE TAKEOVER OF COMMERZBANK, PUTTING THEM ON TRACK TO CONTROL CLOSE TO 50% OF THE BANK, MARKING THE BIGGEST BANK DEAL IN ABOUT TWO DECADES, SO REALLY INTERESTING TO SEE THESE NUMBERS.

[00:04:15]WE ALSO NEED TO SWITCH OVER TO THE TECH SPACE BECAUSE WE HAVE RESULTS FROM NOKIA AS WELL COMING IN THICK AND FAST THIS MORNING. THE REDHEAD CROSSING THE TERMINAL THAT SECOND QUARTER ADJUSTED OPERATING PROFITS, SO A BIG BEAT.

[00:04:37]THE CEO SAYING THEY ARE STILL TRACKING SOMEWHAT ABOVE THE MIDPOINT OF THE GUIDANCE. OPERATIONALLY, THE FULL YEAR OUTLOOK IS UNCHANGED, THEY SAY. THIS WAS EXPECTED TO PROFIT FROM THE OPTICAL CABLE BUSINESS, WHICH SELLS COMPONENTS TO THE DATA CENTER INDUSTRY.

[00:04:57]LAST WEEK WE HAD RIVAL ERICKSON REVEALING THAT MARGINS WOULD BE UNDER PRESSURE IN Q3 FROM HIGH PRICES AS DATA CENTER CONSTRUCTION BOOM CONSTRAINTS THE MEMORY CHIP SUPPLY, BUT A BIG BEAT WHEN IT COMES TO ADJUSTED OPERATING PROFIT FROM NOKIA, SO A LITTLE BRIGHTER. STAYING IN EUROPEAN TECH, WE ALSO HAVE RESULTS FROM ST MICRO. THEY SAY THAT DATA CENTER REVENUE WILL BE WELL ABOUT $2 BILLION IN 2027.

[00:05:31]THEY HAVE RAISED THEIR AMBITION FOR DATA CENTERS, AND THE REDHEAD IS THAT THEY SEE THIRD QUARTER NET REVENUE AT 3.7 BILLION DOLLARS, WHICH IS JUST SHY OF THE ESTIMATE OF THREE.70 9 BILLION EUROS, SO SLIGHT DISAPPOINTMENT FOR ST MICRO, BUT THE CHIPMAKER LARGELY BENEFITING FROM STRONG AI DATA CENTER DEMAND AS WE SEE FROM NOKIA AS WELL.

[00:05:56]LET'S GET SOME ANALYSIS NOW.

[00:06:03]WE BRING IN OUR TECH ANALYSTS FROM BLOOMBERG INTELLIGENCE.

[00:06:05]I HAVE JUST RUN THROUGH THE TOP LINES, BUT WHAT STANDS OUT TO YOU? MATT: WITH ST MICRO, THERE'S THAT BIT OF MARGIN SOFTNESS, WHICH MAY BE TO BE EXPECTED, GIVEN THERE'S THE SAME INFLATIONARY PRESSURE, BUT AN OPPORTUNISTIC OUTLOOK, AND THAT COMES THROUGH NOKIA, AS YOU MENTIONED.

[00:06:29]BOTH COMPANIES ARE PERIPHERAL PLAYS, IF YOU LIKE, ON THE WHOLE AI DATA CENTER BOOM. NOKIA IS INVESTED HEAVILY IN THE OPTICS PART OF DATA CENTERS. SIMILAR STORY FOR ST MICRO.

[00:06:43]WHEN YOU LOOK AT THE KIND OF REVENUE OPPORTUNITY THAT THEY HAVE BEEN TALKING OPTIMISTICALLY ABOUT, SOME PRESSURE STILL ON PROFITABILITY. PERHAPS THE REVENUE OPPORTUNITY IS LOOKING BETTER, PERHAPS A LITTLE BIT SOFTER ON THE PROFIT SIDE. DEFINITELY BEEN AN ONGOING CONCERN.

[00:07:02]INPUT COSTS ARE A PROBLEM FOR THEM TO MANAGE, AND IT IS CONSTRAINING THE PROFIT OUTLOOK TO SOME DEGREE.

[00:07:11]>> WHEN YOU TALK ABOUT EUROPE, THESE COMPANIES BEING ON THE PERIPHERY OR FURTHER DOWN THE SUPPLY CHAIN, THE BOOST WE SEE IN ASIAN STOCKS FOLLOWS THE RESULTS WE SAW FOR THE MEGA CAPS YESTERDAY IN ASIA LOOKING TO BENEFIT FROM THIS, BUT THE WORRYING FOR SOME OF THESE MEGA CAP PLAYERS.

[00:07:29]IF WE START WITH ALPHABET FIRST OF ALL, DOUBLING DOWN, LIFTING SPENDING OUTLOOK, THAT IS CONCERNING, IT SEEMS, TO INVESTORS.

[00:07:38]>> YES, AND I THINK IT IS CONCERNING BECAUSE ALTHOUGH THE TOP LINE PRINT WAS A BIT BETTER-THAN-EXPECTED, THE PROFITABILITY ON THE SERVERS WAS A LITTLE BIT WEAK, BUT ARE ON THE CLOUD SERVICES SIDE. ALTHOUGH THE BUSINESS AS GROWING NORTH OF 20% YEAR ON YEAR, IT HAS BEEN A GROWING THOSE LEVELS FOR QUITE SOME TIME WITHOUT THESE MASSIVE CAPITAL EXPENDITURES, BUT I THINK THE MARKET IS LOOKING TO SEE MORE TO BALANCE AGAINST THE SPEND, AND IT IS PUSHING THE SPEND -- AGAINST THE CAPEX SPEND AND IT IS PUSHING THE CAPEX SPEND, AND IT KEEPS GETTING BIGGER AND YOU START TO GET THIS IRRATIONAL SPEND COMING THROUGH.

[00:08:31]I CAN REMEMBER MARK ZUCKERBERG TALKING ABOUT WE DO NOT KNOW IF WE WILL MAKE ANYTHING BACK ON THESE INVESTMENTS BUT WE HAVE TO DO IT BECAUSE IF WE DON'T, WE ARE NOT IN THE GAME ANYMORE.

[00:08:39]IT ALMOST FEELS LIKE WE ARE GETTING A LITTLE BIT BACK TO THEIR, AND I THINK THAT IS WHAT BOTHERS INVESTORS.

[00:08:47]>> YOU WONDER IF EVERYBODY IS PUTTING MONEY INTO CAPEX, THE BIGGER WORRY WOULD BE IF THEY WERE NOT DOING THAT.

[00:08:52]I WANT TO PLAY A LITTLE BIT OF WHAT ELON MUSK SAID BECAUSE WE ALSO HAVE TESLA RESULTS BUT SHARES ON A TEAR THERE, TO, ON THE BACK RESULTS.

[00:09:05]>> WE SHOULD BE SPENDING ON AS FAST AS WE CAN -- WE SHOULD BE SPENDING ON CAPEX AS FAST AS WE CAN WITHOUT IT BEING TOO WASTEFUL.

[00:09:19]I'M AN ADVOCATE FOR -- I'M NOT AN ADVOCATE FOR EXTREMELY HIGH EFFICIENCY SPEND BECAUSE THAT WOULD SLOW THINGS DOWN.

[00:09:28]A BALANCE BETWEEN CAPITAL EFFICIENCY VERSUS TIME.

[00:09:34]LIZZY: WHY IS THAT NOT REASSURING TO INVESTORS? MATT: A COUPLE OF THINGS.

[00:09:39]HE EVEN PUT "WASTEFUL" IN HIS RESPONSE.

[00:09:45]IT IS A QUESTION INVESTORS HAVE. WHY IS ANY OF THIS CAPEX WASTEFUL? THERE'S QUITE A DIFFERENCE BETWEEN TESLA AND A GOOGLE, AS MUCH AS THERE IS UNCERTAINTY ABOUT THE OPPORTUNITY FACING GOOGLE, IT IS LESS CLEAR WHAT THE OPPORTUNITY IS FOR THEM. FOR TESLA, IT IS ABOUT HUMANOID ROBOTS, ROBOTAXIS, SELF DRIVING CARS. THERE'S LOTS OF QUESTIONS, PARTICULARLY AROUND THE HUMANOID ROBOT.

[00:10:12]THE CAPEX FOR TESLA FEELS A LOT MORE SPECULATIVE THAN IT IS FOR GOOGLE. THE WHOLE INDUSTRY HAS A LOT OF QUESTIONS STILL TO ANSWER ABOUT THE RETURN PROFILE ON THESE INVESTMENTS, AND I DON'T THINK WE HAVE ANY CLEARER ANSWERS.

[00:10:30]LIZZY: A LITTLE MORE SCI-FI PERHAPS WHEN IT COMES TO TESLA. APPRECIATE YOUR REACTION.

[00:10:39]THOSE EXPECTATIONS FOR INCREASED HYPERSCALER SPENDING ARE BOOSTING TECH STOCKS, AS I SAY, IN ASIA.

[00:10:47]LOOKING AT THE MSCI INDEX UP NEARLY 1% THIS MORNING.

[00:10:52]WHAT SHOULD WE BE WATCHING THIS MORNING?

[00:10:53]>> GOOD MORNING. AS YOU MENTIONED, IT IS INTERESTING TO SEE THAT DIVERGENCE IN TERMS OF REACTION TOWARDS ALPHABET'S EARNINGS FROM U.S. INVESTORS IN ASIA.

[00:11:04]AS YOU MENTIONED, IT SEEMS IT'S MORE THE EXCITEMENT OF HOW THE MASSIVE SPENDING CAN POTENTIALLY TRICKLE DOWN TO THE SUPPLY CHAINS IN OUR REGION.

[00:11:22]IT IS GETTING MORE THAN 7% OF SALES FROM ALPHABET AND WE ARE SEEING THE GAINS IN THE JAPANESE EQUIPMENT MAKERS, WHICH ARE LIKELY ALSO GOING TO BENEFIT FROM THE MORE SPENDING OF THE U.S. HYPERSCALERS. FURTHERMORE, WE TAKE A LOOK AT THE BROADER ASIAN MARKET BECAUSE GAINS BEING LED BY TECH, WE SEE MSCI ASIA UP FOR A THIRD SESSION, IT'S LONGEST SUCH STREAK IN ABOUT THREE WEEKS.

[00:11:47]WE HAVE SOUTH KOREA'S KOSPI UP MORE THAN 3%, SEEING ANOTHER DAY OF FOREIGN INVESTORS BUYING. WE ARE SEEING FOREIGN INVESTORS BUYING EVERY SINGLE DAY SO FAR THIS WEEK, COMING AFTER NET SELLING FOR THE PAST FOUR WEEKS, SO THAT NET INFLOW FROM INVESTORS ARE ACTUALLY BOOSTING THE SOUTH KOREAN WON.

[00:12:06]HERE STRENGTHENING BY.7 PERCENT, OUTPERFORMING ALL THE OTHER ASIAN PEERS, ALSO BEING SUPPORTED BY THE BETTER-THAN-EXPECTED GDP NUMBERS THAT HAVE REINFORCED BETS ON FURTHER RATE TO COME. WE TAKE A LOOK AT JAPANESE ASSETS BECAUSE STILL, ALL EYES ARE ON THE JAPANESE YEN, WHICH IS STILL TRADING ABOVE THAT 163 LEVEL AGAINST THE DOLLAR, AROUND ITS WEAKEST LEVEL IN FOUR DECADES.

[00:12:32]YESTERDAY, WE DID LEARN THAT THE BANK OF JAPAN IS OPEN TO RAISING RATES FASTER THAN WHAT THE CONSENSUS IS EXPECTING, AND THAT EXPECTATION NOW FOR A MORE HAWKISH TILT FROM THE BANK OF JAPAN IS ALSO RAISING THE TWO-YEAR YIELD HIGHER.

[00:12:50]WE ARE SEEING THE CURVE FLATTENING FURTHER WHILE THE 10-YEAR YIELD IS SLIGHTLY HIGHER, TRACKING THOSE MOVES FROM THE TREASURY'S OVERNIGHT.

[00:13:02]LIZZY: THANK YOU VERY MUCH. TWO ANOTHER CORNER OF THE MARKET, LOOKING AT BRENT TRADING UP 2.2%.

[00:13:12]THIS IS -- AS YEMEN'S HOUTHIS SAY THEY HAVE TARGETED TWO OIL TANKERS AFTER THREATENING TO OPEN ANOTHER FRONT IN THE IRAN WAR.

[00:13:25]MEANWHILE, AS THE U.S. COMPLETED A 12 STRAIGHT NIGHTS OF ATTACKS ON IRAN, PRESIDENT TRUMP POSTED ON SOCIAL MEDIA THREATENING TO BOMB ONE BRIDGE OR POWER PLANT FOR EVERY TIME IRAN SHOOTS A SHIP IN THE STRAIT OF HORMUZ.

[00:13:39]LET'S UNPACK THIS WITH BLOOMBERG'S PAUL WAUL IS.

[00:13:46]WE HAVE TWO FRONTS HERE OPENING UP.

[00:13:49]THE WAR WIDENING, IT SEEMS. HOW MUCH DOES IT REDUCE THE CHANCE THAT THE U.S. AND IRAN ARE NOT GOING TO COME BACK TO THE NEGOTIATING TABLE?

[00:14:01]>> I THINK WE CAN NOW SAY WE DO HAVE A NEW FRONT HAVING OPENED ON THE RED SEA COAST BECAUSE THE WHO THESE A FEW DAYS AGO EFFECTIVELY THREATENED TO ATTACK SHIPS IN THAT PART OF THE WORLD BUT HAD NOT DONE SO UNTIL THESE CLAIMS LAST NIGHT.

[00:14:19]WE STILL HAVE TO GET THEM CONFIRMED.

[00:14:21]ONE OF THE ATTACKS SEEMS TO HAVE BEEN CONFIRMED BUT NOT THE OTHER. NONETHELESS, THIS IS A WORRYING DEVELOPMENT FOR SAUDI ARABIA, FOR THE U.S., AND ITS ALLIES, AND IN TERMS OF GETTING IRAN AND THE U.S.

[00:14:34]BACK TO THE TABLE, IT SEEMS LIKE IT MAKES THAT EVEN LESS LIKELY. IRAN AND THE U.S. HAVE REALLY BEEN SIGNALING IN THE LAST FEW DAYS THAT THEY ARE NOT READY FOR A NEW ROUND OF NEGOTIATIONS. OF COURSE, WE HAD THE 12 NIGHT OF -- 12 NIGHT IN A ROW OF U.S. STRIKES ON TO CONTINUE TO HIT COUNTRIES LIKE BAHRAIN, JORDAN, KUWAIT, AND ALSO SHIPS IN THE STRAIT OF HORMUZ.

[00:15:07]IT SEEMS LIKE THE SIGNS ARE POINTING TOWARD ESCALATION RATHER THAN ANY EASING OF TENSIONS. LIZZY: INTERESTING TO SEE THE U.S. AND SAUDI ARABIA FINALIZING THEIR NUCLEAR TECHNOLOGY SHARING DEAL.

[00:15:22]SURELY THAT RISK IS SPARKING A NUCLEAR RACE IN THE MIDDLE EAST WHEN THE U.S. IS GIVING SAUDI ARABIA EXACTLY WHAT IT WENT TO WAR TO PREVENT IN IRAN.

[00:15:30]GOOD TO GET YOUR TAKE ON THIS. LET'S TAKE A LOOK AT THE RISK EVENTS FOR THE MARKETS.

[00:15:41]THERE WILL BE IN ECB DECISION OUT OF FRANKFURT.

[00:15:46]DO WE GET MORE HAWKISH HITS. WE WILL BE DISCUSSING THIS LATER IN THE SHOW.

[00:16:01]ABOUT TO BE THE LAST LEVEL OF LAST WEEK.

[00:16:04]WE ALSO HAVE MORE EARNINGS FROM SAP OUT OF GERMANY.

[00:16:08]THE SOFTWARE COMPANY HAS THE BAR A BIT LOWER FOR EXPECTATIONS GIVEN THE AI WORRIES.

[00:16:16]GIVEN THAT WARNING EARLIER THIS MONTH.

[00:16:20]STILL AHEAD, THE ECB EXPECTED TO HOLD RATES.

[00:16:27]SPEAKING OF CENTRAL BANKS, HOW KEVIN WARSH IS LEAVING TRADERS SCRATCHING THEIR HEADS, GUESSING THE FED'S NEXT MOVE.

[00:16:35]WE WILL GET YOU ALL THE DETAILS COMING NEXT. THIS IS BLOOMBERG.

[00:16:50]♪ LIZZY: WELCOME BACK. THE LACK OF FORWARD GUIDANCE FROM THE FED HAS LEFT TRADERS GUESSING.

[00:17:04]ROUGHLY A 35% CHANCE OF A HIKE. THAT KIND OF SPLIT IS SO CLOSE TO A MEETING HAS BEEN EXCEEDINGLY RARE.

[00:17:16]MAYBE IT WILL BE A BIT MORE COMMONPLACE UNDER KEVIN WARSH.

[00:17:22]LET'S GET SOME MORE ANALYSIS FROM ACROSS ANALYST STRATEGIST.

[00:17:27]IS THIS INEVITABLE? WHAT KIND OF POSITIONING WILL BE THE RESULT OF THIS?

[00:17:37]>> ABSOLUTELY. IT IS A SIGN OF THINGS TO COME.

[00:17:41]IF KEVIN WARSH DOES NOT WANT TO GO FORWARD GUIDANCE, THIS IS THE WAY THAT MARKETS WILL PRICE. THIS IS EXTREMELY RARE.

[00:17:51]WE HAVE NOT SEEN THAT SHIFTED PRICING IN THE LAST COUPLE OF YEARS FOR THE MARKETS ARE THINKING IF YOUR POSITION, DEPENDING ON HOW YOUR POSITION IN THE PORTFOLIO YOU NEED TO BE HEDGING YOUR BETS IN THE BEST WAY TO DO THAT IS TO BUY THE SHORT DATED SWAPS. IF THERE IS A SURPRISE WHEN THE FED THROWS A CURVEBALL, YOUR PORTFOLIO IS ADEQUATELY INSULATED AGAINST ANY UNFORESEEN CHANGES.

[00:18:20]THAT CAPTURES VERY WELL WHAT IS GOING ON.

[00:18:27]THE INDEX HAS PUSHED HIGHER SINCE KEVIN WARSH TOOK OFFICE.

[00:18:30]IF YOU LOOK AT THE TWO-YEAR IN THE 10 YEAR YIELD THEY ARE TELLING WHERE THEY ARE TRADING LOWER THAN 4%.

[00:18:41]THAT IS A NEW EQUILIBRIUM.

[00:18:47]I THINK THAT WILL PREVAIL BECAUSE KEVIN WARSH IS TALKING VERY HAWKISH. I THINK THE MARKETS WILL INCREASINGLY BE POSITION FOR THE RISK THAT THE FED WILL DELIVER SOMETHING MORE HAWKISH THAN EVER IMAGINED. LIZZY: MAYBE WE SEE A BIT MORE VOLATILITY AROUND THE DATA TAKING OUT INCREASED PROMINENCE AS WELL AS THE DEVELOPMENTS ON THE GEOPOLITICAL FRONT. THANK YOU VERY MUCH.

[00:19:11]THAT IS OUR PROCESS AT STRATEGIST. COMING UP, PARAMOUNT'S TAKEOVER OF WARNER BROTHERS WINS CONDITIONAL APPROVAL FROM THE EU BUT THIS DEAL COULD STILL BE DERAILED BY A U.S. LAWSUIT. WE WILL BRING YOU THE DETAILS OF THAT NEXT. THIS IS BLOOMBERG. ♪ ♪ LIZZY: WELCOME BACK.

[00:19:43]PARAMOUNT SHARES HAVE RISEN IN THE U.S.

[00:19:47]AFTER ITS TAKEOVER OF WARNER BROS.

[00:19:54]WON IT -- CONDITIONAL APPROVAL FROM THE EUROPEAN UNION.

[00:19:55]THE MERGER STILL FACES THE U.S. LAWSUIT THAT THREATENS ITS PROGRESS. LET'S GET SOME MORE DETAIL WITH OUR DEALS REPORTER. GOOD MORNING.

[00:20:10]WHAT TO PARAMOUNT HAVE TO DO TO GET THIS APPROVAL?

[00:20:12]AND WHAT IS NEXT WHEN IT COMES TO U.S.

[00:20:15]LEGAL HURDLES AND MAYBE EVEN A POSSIBLE UNITED KINGDOM PUBLIC INTEREST INTERVENTION WHEN IT COMES TO THIS DEAL?

[00:20:24]>> WE HAVE SEEN THIS DEAL TAKING SOME THE TWISTS AND TURNS. AFTER THEY GOT IT ANNOUNCED.

[00:20:30]THEY NEED TO GET CLEARANCE FROM REGULATORS.

[00:20:33]WE KNEW FROM THE BEGINNING THAT IT WOULD BE A VERY BUMPY PATH AHEAD. TO GAIN THE CLEARANCE.

[00:20:53]THEY ARE SUING THIS DEAL FOR COMPETITION RIGHTS.

[00:20:55]THAT IS THE MAJOR HURDLE THAT THEY WILL HAVE TO CLEAR.

[00:21:02]OBVIOUSLY AS WE SAW WITH THE EUROPEAN UNION AND THE EUROPEAN COALITION NOW GETTING A NOD AND CLEARING THE DEAL.

[00:21:07]THAT IS A MAJOR STEP.

[00:21:14]IT IS DEFINITELY A GOOD WAY TO GO FORWARD. WITH THE COMPANY.

[00:21:18]AT THE SAME TIME IT IS NOT ENOUGH. WE HAVE SEEN THESE DEALS GETTING STUCK FOR A LENGTHY TIME IN EUROPE.

[00:21:26]THAT IS DEFINITELY POSITIVE. NOT YET NOT ENOUGH.

[00:21:30]WE ARE SEEING THAT TRANSLATE TO THE STOCK.

[00:21:37]ON THE TABLE BETWEEN THE COMPANIES.

[00:21:40]THAT IS WIDENING AS WELL. IN REGARDS TO REFLECTING THOSE GROWING CONCERNS.

[00:21:48]I THINK WE WILL SEE A LENGTHY TIME ESPECIALLY OUT OF THE U.S.

[00:21:52]WHETHER OR NOT THE UNITED KINGDOM AWAY AND REMAINS TO BE SEEN. OBVIOUSLY THAT WILL POTENTIALLY BE ANOTHER THING TO OVERCOME.

[00:22:04]LIZZY: THE SAGA CONTINUES. THANK YOU VERY MUCH.

[00:22:07]NOW TO SOME OTHER TOP STORIES WE ARE FOLLOWING FOR YOU THIS MORNING. BLOOMBERG HAS LEARNED THAT OPENAI IS AN ADVANCED MODEL COMPLETED AN ATTACK AND HOURS THAT WOULD NORMALLY TAKE A SKILLED HACKER SEVERAL WEEKS.

[00:22:21]BREACH THE INTERNAL SYSTEMS OF AID AI START UP.

[00:22:24]THEY NOTIFY LAW ENFORCEMENT AND OTHER AUTHORITIES AND SET THEY HAVE BEEN TRANSPARENT ABOUT THEIR FINDINGS.

[00:22:30]EUROPEAN CAR SALES HAVE HIT THEIR HIGHEST SINCE OCTOBER OF 2023 AS MORE DRIVERS SHIFT TO ELECTRIC VEHICLES.

[00:22:39]THE EUROPEAN AUTOMOBILE MANUFACTURERS ASSOCIATION SET SALES ROSE 31% IN JUNE. USHERING POWERED VEHICLE SALES RAISING 51% WITH FRANCE AND GERMANY MAKING THE BULK OF THE RISE AFTERNOON INCENTIVES HELP DRIVE SALES.

[00:22:56]ASTON MARTIN HAS SECURED 550 MILLION POUNDS OF FRESH FUNDING FROM INVESTMENT PARTNERS TO STRENGTHEN ITS FINANCES.

[00:23:06]THE LECTURE CARMAKER SAID THE FUNDING WILL HELP REPAY EXISTING DEBT AND LIFTED ITS LIQUIDITY TO 340 MILLION POUNDS BY THE END OF JUNE IS A GRAPPLES WITH CHALLENGES INCLUDING QUALITY PROBLEMS, WEEKS CHINESE DEMAND, AND U.S.

[00:23:16]TARIFFS.

[00:23:22]COMING UP, THE ECB IS EXPECTED TO STAY ON HOLD TODAY.

[00:23:25]BUT HOW ARE ESCALATING TENSIONS IN THE MIDDLE EAST AFFECTING THE OUTLOOK? THAT IS OUR CONVERSATION NEXT.

[00:23:32]STAY WITH US. THIS IS BLOOMBERG. ♪ LIZZY: LIVE FROM LONDON THIS IS BLOOMBERG DAYBREAK: EUROPE.

[00:24:04]BUMPER BANK EARNINGS AS TRADERS TRY AND FOR BNP PARIBAS.

[00:24:09]TO TAKES CENTER STAGE AS NOKIA POSTS AND EARNINGS BEAT AS WELL.

[00:24:18]ST MICRO GUIDES TO REVENUE BELOW EXPECTATIONS THIS QUARTER. ALPHABET SHARES SLIDE OVERNIGHT AS IT SAYS CAPEX WILL LIKELY TOP AN UNPRECEDENTED $200 BILLION THIS YEAR.

[00:24:29]OIL GAINS AFTER HOUTHI ATTACKS ON TWO TANKERS IN THE RED SEA THREATEN A NEW FRONT IN THE IRAN WAR.

[00:24:35]GOOD MORNING IF YOU ARE JUST JOINING US. 6:30 A.M. IN LONDON.

[00:24:42]ASIAN SHARES RISING ON EXPECTATIONS THEY WILL BENEFIT FROM THE AI SPENDING WE HAVE BEEN DISCUSSING.

[00:24:47]MAG 7 EARNINGS COMING THROUGH LAST NIGHT.

[00:24:50]TODAY, WE HAVE EUROPEAN AND U.S. FUTURES POINTING LOWER.

[00:24:55]ALPHABET, TESLA DROPPING LOWER AND THE S&P SLUMPING FOR THE FIRST TIME IN FIVE DAYS ON THE OIL PRICE JUMPED.

[00:25:03]FLIP THE BOARD, YOU HAVE BRENT UP AGAIN, 1.6% HIGHER AT $95.55 A BARREL, FUELING CONCERNS ABOUT STICKY INFLATION.

[00:25:16]THAT'S OFF THE BACK OF HOUTHIS ATTACKING TWO SAUDI TANKERS IN THE RED SEA. THE 30-YEAR YIELD STILL ABOUT 5%, AND IT HAS HELD ABOVE THAT LEVEL FOR THE LONGEST STREAK SINCE THE DAWN OF THE FINANCIAL CRISIS, ALSO PUSHED HIGHER BY CONCERNS ABOUT AMERICA'S GROWING DEBT PILE.

[00:25:31]AND YOU HAVE THE DOLLAR TOUCH WEAKER, DOWN.2% ON THE BLOOMBERG DOLLAR SPOT INDEX, DESPITE, YOU MIGHT SAY, HIGHER PRICES FOR OIL. NOW LET'S TURN TO THE FRONT PAGES THIS MORNING. DO WE HAVE FROM "THE FINANCIAL TIMES?

[00:25:48]IT IS REPORTING ON GOOGLE'S GARGANTUAN SPENDING AS FREE CASH FLOW TURNED NEGATIVE FOR THE FIRST TIME.

[00:25:54]THE PAPER SAYS IT ADDS TO INVESTOR ANXIETY ABOUT THE SCALE OF ITS BET ON A I. MEANWHILE, "WALL STREET JOURNAL" REPORT ON A SURGE IN U.S. FORCES TO THE POLICE.

[00:26:04]SPECIAL OPERATIONS FORCES HAVE BEEN DEPLOYED TO THE REGION AND AIRCRAFT BASES IN THE U.K. ARE ON HIGH ALERT.

[00:26:22]FINALLY, ANOTHER STORY SAYS THERE WERE RISK SPIRALING OUT OF CONTROL. YOU CAN GET A ROUNDUP OF ALL THE STORIES YOU NEED TO KNOW TO GET YOUR DAY GOING IN TODAY'S EDITION OF DAYBREAK NEWS WHICH TERMINAL SUBSCRIBERS CAN FIND BY GOING TO D.A. WHY BIGO. THE EUROPEAN CENTRAL BANK MEETS TODAY AND IS WIDELY EXPECTED TO KEEP INTEREST RATES UNCHANGED, AND MARKET DECELERATION OF EURO AREA INFLATION ELIMINATING THE NEED FOR URGENT ACTION. THE ECB IS LIKELY TO LEAVE THE DOOR OPEN FOR A MOVE IN SEPTEMBER.

[00:26:53]LET'S GO LIVE OUTSIDE THE ECB IN FRANKFURT.

[00:26:58]A HOLD EXPECTED, BUT HOW DIVIDED IS THE GOVERNING COUNCIL? YOU SPEAK TO ALL OF THEM.

[00:27:06]WHAT HAVE YOU BEEN HEARING FROM DIFFERENT MEMBERS?

[00:27:09]>> GOOD MORNING. IT IS GOOD TO BE HERE.

[00:27:15]THERE WAS A BIT OF DIVISION EARLIER THIS MONTH WHEN THE ECB HAD ITS FORUM. WE HEARD THAT SOME WERE ARGUING WE DEFINITELY NEED TO RAISE INTEREST RATES ONE MORE TIME IN SEPTEMBER JUST TO MAKE SURE THAT INFLATION IS COMING BACK TO THE 2% TARGET. OTHERS WERE SAYING MAYBE WITH THE CEASE-FIRE IN PLACE, MAYBE ONE IN JUNE IS ENOUGH BECAUSE IN GROWTH, WE WILL REACT IN GROWTH SLOWING DOWN.

[00:27:47]THERE WAS A BIT OF DIVISION THERE. THAT HAS CHANGED NOW.

[00:27:51]EVERYBODY IS ON THE SAME PAGE WHEN IT COMES TO THIS MONTH, SO NO CHANGE EXPECTED, AND AS FOR SEPTEMBER, AS THE GREEK GOVERNOR PUT IT IN A FEW DAYS AGO, IT IS BACK TO SQUARE ONE, AND THAT IS BECAUSE OF THE ESCALATION IN THE MIDDLE EAST OF NEW FIGHTING, NEW ATTACKS, OF OIL PRICES GOING UP, ENERGY PRICES IN GENERAL GOING UP, AND THAT MEANS NEW INFLATION RISKS FOR THE EURO ZONE, THAT SLOWDOWN IN INFLATION WE SAW THAT WAS BIGGER THAN EXPECTED, THAT IS NOW CERTAINLY GOING TO BE REVERSED. SO, YEAH, BACK TO SQUARE ONE LOOKING AT DATA, LOOKING AFRESH FORECAST IN SEPTEMBER.

[00:28:33]THAT IS WHAT THE ECB IS WAITING FOR, AND THEN WE WILL SEE.

[00:28:37]LIZZY: GIVE US MORE OF A FLAVOR OF THE DATA, THE ECONOMIC BACKDROP HEADING INTO THIS MEETING.

[00:28:48]>> INFLATION A BIT WEAKER, GROWTH SURPRISINGLY RESILIENT.

[00:28:53]WE SAW PMI'S THAT WERE ESSENTIALLY OUT OF CONTRACTION -- NOT QUITE GROWTH, BUT RIGHT ON THE BORDER BETWEEN GROWTH AND CONTRACTION. THAT IS GOOD NEWS.

[00:29:02]SENTIMENT INDICATORS GOING UP RECENTLY, BUT THE BIG QUESTION, OF COURSE, IS -- WILL THAT HOLD? WHAT'S INTERESTING TODAY IS NOT SO MUCH THE DECISION ITSELF, BUT HOW LAGARDE DESCRIBES THE ECONOMIC OUTLOOK, HOW SHE DESCRIBES THE RISK ASSESSMENT BECAUSE WHAT THEY ARE WONDERING IS SECOND-ROUND EFFECTS, INFLATION EXPECTATIONS. INFLATION EXPECTATIONS WE HAVE SEEN GOING UP IN THE SHORT TERM, WHICH IS NORMAL IF YOU THINK PRICES ARE HIGHER TODAY, BUT THE MEDIUM TERM IS IMPORTANT. THEY HAVE TRENDED HIGHER, NOT SO MUCH CONCERN FROM THE ECB SO FAR, BUT THAT CAN, OF COURSE, CHANGE AND SECOND-ROUND EFFECTS IS THE ENEMY, IF YOU WANT, FOR ANY CENTRAL BANKER, AND THAT IS WAGE GROWTH, AND LAGGING INDICATOR. IF THERE IS SOMETHING TO SEE THEY ARE, THAT WILL PROBABLY HAPPEN LATER THIS YEAR.

[00:29:52]SO THEY ARE ON ALERT. THEY ARE WATCHING OUT.

[00:29:57]THE DATA SO FAR WE HAVE SEEN LOOKS PRETTY GOOD, BUT AGAIN, IF THAT HOLDS, IF THAT REMAINS TO BE TRUE VERY MUCH DEPENDS ON THE SITUATION IN THE MIDDLE EAST. IT IS VERY FLUID, AS WE ALL KNOW. NOT MUCH OF A COMMITMENT THAT WE EXPECT FROM THE ECB TODAY.

[00:30:18]LIZZY: REALLY LOOKING FORWARD TO YOUR COVERAGE THROUGHOUT THE DAY. I'M SURE YOU WILL BE ABLE TO TEASE SOME CLUES OUT OF CHRISTINE LAGARDE OVER WHAT MIGHT BE HAPPENING IN SEPTEMBER. LET'S GET SOME ANALYSIS NOW.

[00:30:34]WE CAN SPEAK TO THE EUROPEAN ECONOMIST AT NOMURA.

[00:30:36]SHE JOINS ME IN STUDIO. I WANT TO START WITH A QUOTE FROM CHRISTINE LAGARDE BACK IN MARCH IN YOUR NOTES.

[00:30:42]THE PUBLIC MAY FIND IT DIFFICULT TO UNDERSTAND EVERY ACTION FUNCTION THAT DOES NOT REACT.

[00:30:51]YOU HAVE RE-ESCALATING TENSIONS IN THE MIDDLE EAST, OIL $95 TO THE BARREL. DOES IT MAKE SENSE TO YOU THAT IF THE ECB HOLDS TODAY?

[00:31:01]>> I THINK THE ECB SEES WHAT IS LIKELY TO BE A HOLD PROBABLY AS A REVIEW PERIOD. THEY ARE NOT SAYING WE DID ONE HIKE AND THEN ONE AND DONE. THEY ARE SAYING, WE ARE WATCHING HOW THE DATA DEVELOPS. THERE IS SO MUCH UNCERTAINTY.

[00:31:21]IT WAS ALMOST THAT EVENING, THE NEXT DAY, WE HAD NEWS OF DE-ESCALATION IN IRAN AFTER THE LAST MEETING.

[00:31:29]THE ECB WILL ACTUALLY PROBABLY BE FEELING THE EFFECTS OF THAT WHERE IT PRODUCED FORECAST THAT WE THOUGHT WERE QUITE HAWKISH LAST TIME BUT THEN ALMOST IMMEDIATELY AFTER THAT, EVERYTHING WAS LOOKING A BIT MORE BENIGN, AND NOW THEY ARE IN A MORE CONCERNING SITUATION. THAT QUOTE ABOUT REACTING TO IT'S OWN REACTION FUNCTION, SHE ALSO NOTED THAT ITS OWN FORECASTS INCLUDED THE ASSUMPTION OF TWO RATE HIKES, SO AT THAT POINT, WE MADE IT PRETTY CLEAR THE BASELINE WAS TWO HIKES, BUT NOT NECESSARILY IN QUICK SUCCESSION OVER WHAT WE THOUGHT WAS LIKELY TO BE A QUARTERLY PERIOD, BUT AT THE LAST MEETING, SHE LEFT THINGS A LOT MORE OPEN BECAUSE OF HIGH UNCERTAINTY, AND WE IMAGINE SHE WILL WANT TO DO THE SAME TODAY.

[00:32:14]>> ON THE COMMS TODAY, YOU HAVE TWO HIKES ALREADY PRICED IN BY YEAR END. IT WILL BE DIFFICULT TO SOUND MORE HAWKISH THAN THAT. WHAT WE COME OUT OF THIS MEETING THINKING, NOT A DOVISH HOLDER?

[00:32:31]>> WE DO THINK THAT. THE DECEMBER QUESTION, LAGARDE, I THINK, WILL JUST BE THINKING THAT IT ALL DEPENDS ON WHAT HAPPENS IN IRAN, SO SHE WILL NOT WANT TO COMMIT IN ANY WAY TO A DECEMBER HIKE, EVEN IF SHE HINTS AT SEPTEMBER, SO WE THINK THERE IS POTENTIAL TO DISAPPOINT MARKETS.

[00:32:54]>> DO YOU SAY ECB MARKET PRICING IS LARGELY IN OIL TRADE?

[00:32:59]IF THAT IS THE CASE, AS I SAY AGAIN, OIL AT $95 A BARREL TODAY ON BRENT. WHY NOT GO FOR 50 BASIS POINTS IN SEPTEMBER?

[00:33:08]>> THAT IS A GOOD QUESTION AND ONE WE HAVE LOOKED AT, BUT WE THINK IT UNLIKELY. THE LAST TIME WE SAW SOME 50-BASIS-POINT HIKES, THAT WAS IN A MUCH BIGGER ENERGY CRISIS IN 2022 WHEN WE SAW INFLATION RAPIDLY ACCELERATE.

[00:33:23]WE ARE NOT YET IN THAT SCENARIO, AND WE DO NOT THINK THE ECB WILL WANT TO SIGNAL THAT IT IS IN A SCENARIO WHERE IT NEEDS TO TAKE AN AGGRESSIVE STANCE TO GET AN ASIAN -- TO GET INFLATION BACK TO TARGET. LAGARDE HAS SET OUT THREE DIFFERENT SCENARIOS, THE SCENARIO THAT IS NOT REQUIRE AN TRANSITORY INFLATION AND A SCENARIO THAT WOULD REQUIRE A SMALL ADJUSTMENT. WE THINK SHE STILL LIKELY VIEWS WE ARE IN THAT SCENARIO, THE RISING OIL PRICES DO RISK THAT WE ARE IN A THIRD SCENARIO A BIT MORE LIKE WHAT HAPPENED IN 2020 TWO THAT REQUIRES A MORE AGGRESSIVE HIKING CYCLE.

[00:34:00]WE THINK A 50 BASIS POINT HIKE MIGHT SIGNAL THE THIRD SCENARIO THAT SHE IS NOT QUITE READY TO SAY WE ARE IN.

[00:34:05]>> LET'S PUT OUR OPTIMISTIC HATS ON AND TURN TO THE FLIPSIDE. LET'S SAY WE HAVE THIS MEETING AND THEN DIPLOMACY RESUMES, OIL FALLS.

[00:34:14]HOW LOW WOULD IT HAVE TO FALL FOR HOW LONG TO WRITE A SEPTEMBER HIKE OFF?

[00:34:23]>> WE THINK SEPTEMBER WAS ALWAYS LIKELY, EVEN IF THAT FALL IN OIL PRICES WE SAW AFTER THE LAST MEETING HAD CONTINUED AND OIL HAD STAYED ROUGHLY SIMILAR TO PRIOR TO THE START OF THE WAR THIS YEAR BECAUSE, OF COURSE, WE HAD THAT FAIRLY LENGTHY DURATION OF MUCH HIGHER OIL PRICES BETWEEN EARLY MARCH AND JUNE, AND THAT WILL HAVE ALREADY DONE SOME DAMAGE IN TERMS OF HIGHER INFLATION EXPECTATIONS.

[00:34:51]ENERGY PRICES SPEEDING THROUGH SLIGHTLY TO THE REST OF THE ECONOMY, SO WE THINK THE ECB WILL LIKELY HIKE IN SEPTEMBER, JUST AS A SIGNAL AND TO MANAGE ANY SECONDARY INFLATION AROUND EFFECTS. THE ECB SAID RECENTLY THAT IT REGARDS NEUTRAL POLICY RATES AS ONE THAT DOES NOT PLACE UPWARD PRESSURE OR DOWNWARD PRESSURE ON ECONOMIC GROWTH OR INFLATION, IS LIKELY BETWEEN 1.75% AND 2.5%, SO ANOTHER HIKE TO 2.5% WOULD STILL BE BROADLY NEUTRAL.

[00:35:26]>> CAN YOU SPLIT HOW MUCH THE FURTHER HIKES YOU SEE WOULD BE BECAUSE OF ON ONE HAND THE OIL PRICE AND ON THE OTHER HAND SECOND-ROUND EFFECTS?

[00:35:36]>> OBVIOUSLY, THEY ARE VERY INSULATED.

[00:35:41]THE HIGHER OIL IS FOR THE LONGER DURATION, THE MORE THAT WILL FEED INTO EXPECTATIONS AND THEREFORE WAGE NEGOTIATIONS AND SECOND-ROUND EFFECTS. THE ECB CAN WORK AGAINST THIS POLICY RATE BECAUSE IT CANNOT STOP WHOLESALE INTEREST RATES RISING AND HOUSEHOLD ENERGY BILLS.

[00:35:58]FISCAL POLICY MIGHT BE ABLE TO AFFECT THINGS LIKE PUMP PRICES WITH TAX CHANGES, BUT THE ECB CANNOT.

[00:36:06]WHAT IT CAN ACT AGAINST IS SECOND-ROUND INFLATION EFFECTS PUTTING A BREAK ON THE ECONOMY. THEY HAVE NOT SLAMMED IT DOWN, BUT THEY ARE PUTTING THE BREAK ON SLIGHTLY JUST TO SAY WE ARE SEEING THE POTENTIAL FOR SECOND-ROUND EFFECTS.

[00:36:19]WE DON'T WANT THEM. WE WILL RAISE RATES TO WORK AGAINST THE POTENTIAL FOR THAT.

[00:36:25]>> ALWAYS A PLEASURE TO HAVE YOU WITH US.

[00:36:32]COMING UP, STOCK TRADERS BLOW PAST ESTIMATE THAT FRANCE'S BIGGEST BANK. WE UNPACKED THE NUMBERS FROM BNP PARIBAS NEXT. STAY WITH US. THIS IS BLOOMBERG.

[00:36:54]LIZZY: WELCOME BACK TO BLOOMBERG DAYBREAK: EUROPE. 6:45 A.M.

[00:36:55]IN LONDON. WE HAVE A KEEN EYE ON BNP PARIBAS. THIS MORNING REPORTING BETTER THAN EXPECTED REVENUE AND PROFIT SECOND QUARTER AS ITS STOCK TRADERS BLEW PAST ANALYST ESTIMATES.

[00:37:12]ANALYSIS NOW WITH CLAUDIA COHEN WHO HAS BEEN ACROSS ALL THE DETAILS FOR US. GOOD MORNING TO YOU.

[00:37:19]WHAT STOOD OUT TO YOU FROM THESE NUMBERS?

[00:37:25]CLAUDIA: THANK YOU FOR HAVING ME.

[00:37:28]THE EQUITY TRADING PERFORMANCE IS REALLY SPECTACULAR FOR BMP.

[00:37:35]BMP IS ONE OF THE FIRST EUROPEAN BANKS PUBLISHING EARNINGS. WE CAN SEE EUROPEAN BANKS ARE FOLLOWING WALL STREET EUPHORIA WITH VOLATILITY, TECHNOLOGY.

[00:37:44]OBVIOUSLY STOCKS THAT WERE EXTREMELY HIGH.

[00:37:50]THIS IS ONE POINT. ONE OTHER POINT ON EQUITY.

[00:37:57]BESIDES BMP, EQUITY TRADING REVENUE IS AS BIG AS FICK REVENUE WHILE SICK REVENUE IS USUALLY WAY BIGGER.

[00:38:07]THIS IS ONE IMPORTANT POINT. YOU MENTIONED NET INCOME AND REVENUE ARE BEATING ESTIMATES. THIS IS ONE POINT ALSO.

[00:38:16]THE MAIN WHAT I THINK ANALYSTS WERE REALLY LOOKING FOR IS THE SEA TO ONE RATIO. BMP SAID THIS HE TO ONE RATIO WOULD BE AT A CERTAIN PERCENT IN 2020 SEVEN AND BMP SUCCEEDED TO ACTUALLY THIS QUARTER AND ANALYSTS WERE REALLY LOOKING FOR THAT.

[00:38:40]IF WE LOOK A BIT AT THE DOWNSIDE, BECAUSE THE VARIOUS CLUBS A BIT HIGHER THAN EXPECTED, THE BANK TOOK PROVISION BECAUSE OF GEOPOLITICAL CONTEXT AND OPERATING EXPENSES WERE SLIGHTLY HIGHER THAN EXPECTED.

[00:39:01]LIZZY: DO YOU WANT TO RUB IT IN AFTER THE WORLD CUP DEFENDANT -- DEFEAT.

[00:39:09]YOU HAVE A GREAT STORY ON THE TERMINAL ABOUT WHY THERE MIGHT BE AN EXODUS OF BANKERS FROM FRANCE, A REVERSAL FROM THE POST-BREXIT SITUATION. TELL US MORE.

[00:39:20]CLAUDIA: THANK YOU FOR HIGHLIGHTING THE STORY. WE ARE NOT THERE YET.

[00:39:25]THE STORY IS ABOUT BANKERS THAT CAME TO PARIS FOLLOWING THE BREXIT REFERENDUM.

[00:39:34]WE NAMED, FOR EXAMPLE, BANK OF AMERICA.

[00:39:37]THE FIRST BANKERS AT THAT CAME TO PARIS CAME 2018-2019.

[00:39:44]BASICALLY IN FRANCE, AS IN MANY COUNTRIES THERE IS A MARVELOUS TAX PROGRAM. IF YOU ARE WEALTHY BANKERS AND YOU COME TO PARIS, YOU HAVE LESS TAXES THEN YOU USUALLY HAVE.

[00:39:58]THIS DEAL WILL EXPIRE FROM THIS YEAR, NEXT YEAR, AND THE FOLLOWING YEARS.

[00:40:08]IF YOU ARE A BANKER, YOU WORK IN FRENCH BANKS OR U.S.

[00:40:10]BANKS, YOU ARE A BRITISH BANKER, YOU CAME ALL THE WAY FROM LONDON.

[00:40:17]EVEN IN PARIS IF YOU ARE GOING TO PAY 15%-20 5% MORE TAXES, THIS IS WHAT THE STORY IS ABOUT. ALL OF THESE BANKERS ASKING THEMSELVES, WHAT AM I GOING TO DO NEXT?

[00:40:30]AFTER SPENDING EIGHT YEARS IN A COUNTRY THAT IS MAYBE NOT HERE IS MAYBE NOT YOURS ORIGINALLY YOU WANT TO -- MAYBE IT IS TIME FOR A CHANGE. IT'S A PERSONAL STORY ALSO.

[00:40:40]ALL THOSE BANKERS PRETTY MUCH LOVE PARIS.

[00:40:44]SOME ARE KIDS IN SCHOOL, SO IT'S NOT THAT EASY TO MOVE.

[00:40:49]ALSO THE STORY IS ABOUT POLITICS.

[00:40:53]I DON'T KNOW IF YOU HAVE NOTICED LATELY, BUT POLITICS HAS BEEN A BIT MESSY THESE LAST FEW MONTHS IN FRANCE.

[00:41:00]NEXT YEAR WE HAVE THE PRESIDENTIAL ELECTION COMING.

[00:41:04]YOU ARE SEEING THE FAR RIGHT LEADING WITH MARINE LE PEN, NOT SEEN AS A POWER BUSINESS -- PRO-BUSINESS CANDIDATE AND THE PHARMACIST -- FAR LEFT IS HAVING MOMENTUM.

[00:41:18]TALKING WITH MANAGEMENT AT U.S. BANKS AND FRENCH BANKS, NOBODY IS WILLING -- REALLY EXPECTING AN EXODUS FIRST BECAUSE PARIS HAS BEEN VERY ATTRACTIVE FOR EMANATE FROM THE TRADING DESK.

[00:41:35]THE SECOND QUESTION IS, WE SAID PARIS HAS BEEN A BIT MESSY.

[00:41:37]BUT EVERYWHERE ELSE IS MESSY. IF YOU LEAVE PARIS, WHERE WILL YOU GO?

[00:41:49]EVEN IF YOU LOOK AT MILAN, WHICH HAS BEEN VERY ATTRACTIVE FOR HIGHER EARNERS, WE NEVER KNOW.

[00:41:59]MY STORY IS ABOUT ALL OF THE BANKERS ASKING QUESTIONS.

[00:42:05]I GUESS WE WILL SEE IN THE COMING YEARS AND FROM NEXT YEAR IF WE TAKE A DECISION TO MOVE OR NOT. LIZZY: WE HAD A JAMIE DIMON, THE J.P. MORGAN CEO WARNING THAT YOU CAME BANK TAX SURCHARGE COULD DRIVE CAPITAL AWAY.

[00:42:25]IT IS BURNHAM LESSENING?

[00:42:32]CLAUDIA, THANK YOU VERY MUCH.

[00:42:38]DON'T MISS OUR INTERVIEW WITH THE BNP PARIBAS CEO 7:15 A.M.

[00:42:44]LONDON TIME. YOU HAD PRIME MINISTER ANDY BURNHAM ANNOUNCED A 20% REDUCTION IN BUSINESS RATES FOR HOSPITALITY. THE CUT APPLIES TO PUBS, CLUBS, AND LIVE MUSIC VENUES FROM APRIL OF NEXT YEAR.

[00:42:59]THE MEASURE WILL BE FULLY FUNDED WITH RELIEF FOR WHAT IT CALLS ANTISOCIAL BUSINESSES LIKE VAPED SHOPS BEING REVIEWED.

[00:43:13]THE EQ IS PREPARING TO REVIEW AIRLINE OWNERSHIP ROLES, A MOVE THAT MIGHT REFLECT TAKEOVER BIDS FOR THE LOW-COST CARRIER.

[00:43:23]CASTLE LAKE SET TO REPORT EARNINGS.

[00:43:26]MORE COMING UP ON THE PROGRAM. DON'T GO ANYWHERE.

[00:43:30]THIS IS BLOOMBERG. GOOD MORNING FROM LONDON.

[00:43:45]CORKS WE REMAIN OPEN TO DIPLOMACY AND WORKING IT OUT IN A NEGOTIATED WAY BUT RIGHT NOW THEY DON'T SEEM TO BE SERIOUS ABOUT THAT. WE WILL PROTECT SHIPPING.

[00:43:56]AT THE SAME TIME, WE WILL, WHEN THE OPPORTUNITY PRESENTS ITSELF, DEGRADE THEIR ABILITY TO TARGET GLOBAL SHIPPING.

[00:44:02]>> THE U.S. SECRETARY OF STATE MARCO RUBIO THEY’'RE SPEAKING IN MANILA. AS YOU CAN SEE, THE WAR HAS WIDENED ON TWO FRONTS. THROUGH THE STRATA PERFORMANCE, THERE WAS A WINDOW WHEN TRAFFIC PICKED UP WITH A CEASE-FIRE WAS IMPLEMENTED. NOW THE CEASE-FIRE SEEMS SHOT TO BITS. LET'S LOOK AT THE INDICATORS.

[00:44:27]TOWARDS $100 A BARREL AGAIN, THE FRONT END OF THE U.S.

[00:44:31]YIELD CURVE BEARING THE BRUNT OF THE OIL SHOCK.

[00:44:40]CHAIRMAN KEVIN WARSH ANCHORING EXPECTATIONS, BUT THE BOND MARKET SEEMS TO BE SLOWLY STARTING TO DISAGREE.

[00:44:45]WILL CONSUMERS CATCH UP? WE HAVE SEEN PUMP PRICE RELIEF FADING BACK AT THE CRUCIAL LEVEL, ABOVE THE CRUCIAL PSYCHOLOGICAL LEVEL OF FOUR DOLLARS.

[00:44:58]EIGHT DAYS NOW GAS PRICES HAVE BEEN ON THE RISE.

[00:45:02]WILL IT PUT PRESSURE ON PRESIDENT TRUMP TO GET BACK TO THE NEGOTIATING TABLE? RUBIO SAYING THEY ARE OPEN FOR TALKS. CAN THEY ACTUALLY WORK SOMETHING OUT?

[00:45:15]AT THE MIDTERMS, THIS MATTERS HUGELY POLITICALLY.

[00:45:17]OTHER RISK EVENTS ON THE DOCKET TODAY.

[00:45:22]WE HAVE THE ECB DECISION AT 1:00 -- 1:15 P.M.

[00:45:27]LONDON TIME OUT OF FRANKFURT, FOLLOWED 15 MINUTES LATER BY U.S. JOBLESS CLAIMS DATA TAKEN MORE PROMINENCE GIVEN THE LACK OF FORWARD GUIDANCE AND YET MORE EARNINGS. S&P REPORTING EARNINGS AS WELL IN THE TECH SPACE.

[00:45:46]THE VALEO CEO WILL JOIN THE OPENING TRADE TO TALK EARNINGS AT 7:30 A.M. LONDON TIME ON THE OPENING TRADE. ANNA, GUY, AND TOM WILL TAKE YOU ALL THE WAY TO THE MARKET OPEN. THIS IS BLOOMBERG.