Alibaba Unveils Powerful AI Chip as Meta Revives AI Optimism

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Original language: English

Original video: Alibaba Unveils Powerful AI Chip as Meta Revives AI Optimism · Channel: Bloomberg Television · 49:37 · Watch on YouTube

Topics: AI agents, AI infrastructure and hardware, Markets and economy

Summary

Bloomberg’s The Pulse examines a renewed AI-stock rally, Meta’s consumer AI agent and Alibaba’s new AI chip, while guests discuss the sector’s exposure to oil prices, interest rates and potential job losses. The program also covers pressure on German Chancellor Friedrich Merz and debates whether Europe can improve its competitiveness and digital independence. Other segments look at oil supply and diplomacy, Novo Nordisk’s strategy, Ecuador’s efforts against organized crime, US-China trade talks and the expected Trump-Zelenskyy meeting.

Key points

Meta’s AI agent, which connects with services including Facebook Marketplace, Gmail and OpenTable, helped lift optimism about consumer AI and hardware demand.
Alibaba said its new Gen Mu V900 accelerator triples the performance of its previous generation and can be used for AI training.
Market strategist Mike Bell said oil prices are a key driver of bond yields and that higher yields could pressure equity valuations.
Bell highlighted the scale of AI capital spending and the risk that AI-driven job losses could eventually reduce incomes and raise recession risks.
German Chancellor Friedrich Merz faced pressure after his party failed to clear the threshold for representation in a state parliament; Christina Spohr said his coalition was still backing him.
Economist Christina Caffarra argued that Europe’s digital dependence and slow adoption of technology hinder competitiveness, and that progress cannot simply be left to Brussels.
Oil prices moved sharply during the program as markets weighed supply developments, the Strait of Hormuz and diplomatic events around the UN General Assembly.
Novo Nordisk CEO Mike Duster said the company would pursue external assets where it sees strategic or scientific gaps, including in cardiovascular medicine.
A report suggested the US-China trade truce could be extended for three to six months, with leaders expected to discuss the relationship.
Bloomberg’s Russia correspondent expected a tense Trump-Zelenskyy meeting, with Ukraine likely to argue that Russian attacks on its energy infrastructure must also stop.

Chapters

Start	Chapter	Summary
00:03	Market update and the AI trade	The program opens with an overview of fading tech momentum, rising oil and the day’s political and economic stories.
02:13	Meta’s AI agent and Alibaba’s chip	Bloomberg’s Henry Wren discusses Meta’s consumer AI assistant, hardware sentiment and Alibaba’s new accelerator.
05:56	Oil, bond yields and AI investment risks	Mike Bell explains how oil can affect yields and valuations, and considers whether AI spending may eventually cause job losses.
13:49	German politics and international security	The show previews a discussion of pressure on Merz and broadcasts remarks about Russian sabotage risks and support for Ukraine.
16:35	Pressure on Chancellor Friedrich Merz	Christina Spohr discusses Merz’s political position, his public image, party alternatives and the challenge of holding Germany’s political center.
25:10	Oil supply and diplomatic developments	The program reviews the oil-price reversal, reported supply recovery in Saudi Arabia and diplomatic meetings expected around the UN General Assembly.
29:30	Europe’s competitiveness and digital independence	Christina Caffarra argues that Europe needs stronger technology adoption and digital autonomy, while questioning whether Brussels can deliver change.
37:43	Novo Nordisk’s strategy and market moves	Novo Nordisk’s CEO discusses the company’s plans, potential acquisitions and where it sees gaps in its portfolio as oil prices turn lower.
42:35	Ecuador’s fight against organized crime	Ecuador’s president describes the scale and international reach of cocaine trafficking and asks for support while emphasizing national control of operations.
45:15	US-China trade truce	Bloomberg’s Jill Disis discusses the possibility of a temporary extension to the US-China trade truce and issues facing the two leaders.
46:51	Trump and Zelenskyy prepare to meet	The program considers whether Trump will press Zelenskyy to halt attacks on Russian refineries and how the leaders might avoid a clash.
49:04	Expected outcome and closing	Bloomberg’s Tony Halpin expects a testy meeting, while the host notes a sharp fall in crude and previews further coverage.

Quotes

the company said its new code Gen Mu V900 accelerators is tripling the performance from the last generation. — 04:19

the big sort of multi-trillion dollar question in my mind is this ballpark trillion dollars a year that’s being spent on AI CapEx. — 09:03

We hear the same stories the whole time. We need the capital markets union. We need the single market. It will not happen in your lifetime. — 32:16

if you’re building an extension on somebody else’s house, the house will say at some point, “Nice extension you got there. I’m going to extract more rent from you.” — 36:05

I think it’ll be testy. I think they’ll try and find some way forward that they can reach a compromise so that they at least avoid a bust-up. — 49:04

Concepts and entities

AI agent, Alibaba, Gen Mu V900, Meta, AMD, NVIDIA, RBC BlueBay, Friedrich Merz, Christina Caffarra, Euro Stack, US-China trade truce, United Nations General Assembly

Full transcript (original language)

00:03 [music] >> Newsmakers and market movers. This is the pulse. >> Tuesday the 22nd, good morning. Welcome to the pulse. I’m Guy Johnson in London. What do you need to know? Okay. AI trade roaring back in America [music] yesterday. AI agent, it’s new AI agent news fueling optimism.

00:35 Baba also unveiled what it describes as China’s most powerful AI chip. That rally has now faded, by the way. Oil snaps a four-day losing streak as [music] traders weigh supply risks against hopes for an end to the US-Iran war. The ECB’s chief economist warning a new energy [music] shock will keep euro inflation higher for longer. Plus, President Trump goes to the UN where [music] he’ll speak to the UN General Assembly and meet leaders including Lebanon and Ukraine’s president. >> [music] >> Stock markets to a decent rally yesterday tech

01:07 over in the United States has definitely faded. You could see it happening kind of overnight through the Asian session. S&P futures are now flat as are as are Nasdaq futures. So, you’re not getting a continuation of that bounce. The 10-year still sub five, but only just. Euro dollar absolutely becalmed. [music] I think as somebody said, it’s sleeping at the moment. 114.45. The real story this morning is that oil back up. And that seems to again close the door on this tech rally that it opened yesterday. Big move down in oil yesterday allowed tech to rally. That [music] door has now been closed.

01:39 European markets this morning fairly quiet, to be honest. Volumes all right. There’s a few individual stock stories that I think are worth paying attention to, but broadly we are drifting sideways. Some of the tech names are doing okay. ASML, [music] Schneider, etc. Not having a bad day. So, let’s get back to that tech story. Yesterday’s was definitely dominated by tech. Today, less so, but let’s talk about kind of what yesterday taught us. AI stocks rallying. Meta’s new AI agent, which is going to do everything for you, apparently, climbing to the top of the free mobile app ranking shortly after

02:13 its launch earlier this month. Let’s talk about the impact that this is having. Joining us now from Bloomberg Equities, the Bloomberg Equities team, is Henry Wren. So, new we spent ages talking about kind of Frontier Labs and and kind of what is happening there. This is This is a tool that is useful to all of us that we can access. It’s an agent that’s going to do so much for us. And that’s that’s a different take on the AI trade. So, what does this tell us about kind of what the next leg of the AI trade is going to look like? >> And it’s a free app by the way.

02:43 >> free for now. For now, it’s free. >> For free tier, if you use within the limit. So, can do a lot of things for you, obviously. Can connect to Facebook Marketplace, if you want to buy something. It can read your socials, if you allow it to. >> Yep. >> Can also connect to the likes of OpenTable, Gmail, etc. To read your emails, obviously. So, this is one more thing to think about, right? For consumers. It’s a new app to try out. And obviously, a lot of us have already tried out. >> assistant. Is Is that how I should think about it? >> Yes, yes, yes. So, obviously, as you as you might know that

03:16 for ChatGPT or Claude, you can also use as a personal assistant. But, this one is more connected to your socials, especially for those Facebook suite of apps. So, probably that’s the reason why many of us have been trying out over the past few days. >> In terms of what impact this had on the chip sector, um AMD, etc. had really good sessions. Is that the kind of the logical progression from this? Because also, some of this stuff is more likely to run on devices rather than in the cloud. Is that a subtle shift as well in terms of what it means for the chip sector?

03:47 >> You mentioned AMD just entered the trillion-dollar market cap club as well. 10% rally yesterday. We see many other chip stocks doing very strongly yesterday, including like ARM or Intel also gaining double digits. So >> that mean this is a CPU story rather than a GPU story? >> so it’s for the broader AI hardware, for the broader supply chain, right? So obviously AMD is very close with Meta in its supply chain, but also more broadly, better apps, more super apps means more adoption on hardware side. So definitely good for sentiment in terms of trading as we see, yeah.

04:19 >> How about that with the new chip as well? Talk me through the implications of that, because it’s quite a big step change in terms of the power it’s providing. >> Yeah, indeed. Um so it’s just came with Alibaba’s annual cloud conference in China. So the company said its new code Gen Mu V900 accelerators is tripling the performance from the last generation. Can be used in bulk for AI training as well. So um obviously a breakthrough in China AI story. So as we see market reacting very strongly today, not only with Baba, but also Tencent, the other AI stocks,

04:52 because people see a hardware as a key bottleneck for the AI ecosystem in China. So that’s why the market is reacting strongly. Maybe for the Western chip makers, including the likes of an Nvidia, it just shows you that China is still very tough market to crack, because you always have this tendency from the local vendors, the local model makers, that they want to prioritize using domestic chips like the Alibaba’s, for example. >> How significant is it that the tech rally ran out of steam overnight in the Asian session? >> Uh so just to put this move in a bit of

05:22 context, we do have five days in a row in terms of gains in Philadelphia Semiconductor Index. So momentum coming back a little bit. We have oil price uh easing back a bit in the previous four sessions, as you mentioned. So probably it’s um uh it’s okay in terms of the moves, because we already have pretty strong uh sessions for momentum stocks in the >> And a lot of people have got back to neutral in terms of their positioning, maybe putting those positions back on. Henry, nice to see you. Thank you very much indeed. Henry Wren joining us from our markets team. So, the rally in tech stocks seems to this morning be taking something of a breather. Oil prices are

05:56 once again tracking a little bit higher. Is the oil price now basically the pacing mechanism for this market? Mike Bell, head of market strategy at RBC BlueBay, joining me around the table. Good morning. Is it all about the oil price? >> I think the oil price is absolutely key. I think it’s definitely been the driver of bond yields this year. A lot of talk about fiscal sustainability and all the rest of it, but ultimately it’s been oil prices that have driven bond yields higher. So, I think it matters a lot. >> In terms of therefore, where do we go now?

06:27 What could we see in terms of the rates market if we if oil prices take another step to the upside and we’re talking a lot about kind of reserves being run down. Um you’re going into the winter period. There is the potential all of this to happen. What would that look like in terms of the rates what what would the front end do? >> Yeah, I think ultimately it’s quite hard now to actually see central banks hiking more than is priced into front ends. That said, I do think that even the front end and certainly the long end is still sensitive to the oil price. So, even though I don’t think the central

06:58 banks will hike more than is currently priced, I think that the market would still see a repricing higher in rates if you saw oil prices move higher even though eventually, you know, a year down the line it we look back and say, “Oh, they weren’t going to hike that much.” So, it makes it hard to trade because you look at the fundamentals and say, “Well, that rates probably aren’t going to go up any more than is currently priced.” But, you’re still on a day-to-day basis being >> So, you got to 120 on Brent. So, you got to 120 on Brent. So, you got to seven on diesel. I kind of would that be enough

07:28 to tip the market to price in more? >> Well, so I think there’s a couple of for the equity market interesting things to think about. >> about I’m talking about I’m talking about yields. >> Yeah, I think for yields Yeah, you you can see a move higher in oil prices yields going to go higher. I think it’s as simple as that. I think for equities where it becomes interesting is that you now at this point where the equity risk premium is very compressed. So, bond yields have moved up. The earnings yield is now very similar to the 10-year Treasury yield. And obviously for most of that period basically since 2002, that hasn’t been

08:01 the case. So, you’re now at the point I think where any moves higher in bond yields are going to push that earnings yield up and therefore valuations on stocks down. >> See, I hear I hear that. And and logically I totally agree with you. It just feels like the AI trade is impervious to this. It’s impervious to the rate story. It’s it’s on its it’s on tracks, it’s on rails, and it’s just running and will continue to do so. And and it doesn’t feel like it’s rate sensitive. It doesn’t feel like it’s as sensitive as you would think that logically it would be to things like what is happening between the relationship between bonds and equities.

08:33 >> I think there’s some truth to that and there’s two sides to it. One, if the earnings expectations keep going up, then you can get some valuation compression as in fact we’ve seen recently with stocks still going higher. I think the other thing is that if you look at say that 1998-2000 period, the equity risk premium went negative also in 1987 for a while, didn’t last, ended pretty badly, but you can have periods where the equity risk premium goes negative.

09:03 Doesn’t tend to end very well. Um so >> So, you think this doesn’t end well? Is that what you Can I >> But I think there’s for equities I think there are risks out there. Ultimately, when I think about how this all plays out, the big sort of multi-trillion dollar question in my mind is this ballpark trillion dollars a year that’s being spent on AI CapEx. Obviously, it’s boosting earnings cuz it goes straight through to the income statement and the cash flow of the chip companies. And then it gets depreciated for the hyperscalers so they don’t feel that cost up front. And so, you know, clearly it boosts earnings almost mechanically.

09:37 Um but the critical question is the money that’s going to fund all of this that’s getting spent on AI coming from non-tech companies. Think about the banks for example, the law firms. >> Yeah. >> Is AI going to lead to banks being able to lend more? >> Yeah. >> It’s not clear to me that it leads to more loan growth. So how do they fund the additional money they need to spend on AI? If the answer to that, which may well be the case, is that they can fund it because they can cut costs IE jobs. >> Yeah. >> Then that poses risk to the equity market and could actually end up proving

10:11 disinflationary and put downward pressure on bond yields eventually. >> When I talk to a lot of CEOs outside of AI, they tell me that the models currently that they’re working with are good enough to do pretty much all of the productivity gains that they anticipate to come out of it. So do we need more? And is that the danger that actually we keep pouring money into ever better frontier models that actually that they’re becoming increasingly hard to get the marginal productivity boost from. >> I think certainly, you know, you don’t need a Ferrari to go to the grocery shop

10:41 and pick it up is the same thing with >> I I personally probably would quite enjoy that but I’ll take it. >> Yeah, so you don’t need the absolute frontier model to do a lot of the kind of basic tasks that people >> Or are we at the point where we get enough? >> I think that at the moment, if you look at what most companies actually have implemented and the ability for it to talk to their systems, it’s not yet at the point where it can do a lot of those jobs. >> Okay. >> But if you take the models that are available for us to use at home and then you implement them so they can safely

11:12 speak to all the systems at most companies, I think they are at a stage now where they could do a lot of jobs. So I think that is one thing to consider. I actually think the bigger risk though there is that if it ends up leading to net job losses, which let’s be clear isn’t happening yet. >> Yep. >> But if that’s where we head over the next two to three years as these get implemented as they I speak to the different systems, Well, then that’s going to lead to a decline in aggregate incomes. With that, you know, clearly raises recession risk. >> Politics could get quite interesting at that point as well. >> I think politics gets very interesting at that point, yeah.

11:42 >> Um so, when do we reach the point where we the earning story’s been great. Where do we reach the point where all those mechanical factors start changing? Because at the moment they are very positive. And the earnings the I we are I look at the economy and then I look at the earnings numbers and they are so far apart. It’s it’s kind of bewildering. And I’m wondering at what point that gap closes. >> I think to me it comes down to normally. If you look at 2000, for example, which is the last time we saw similar kind of valuations to what you’ve got now on

12:15 stocks. The what popped that bubble was when jobs started being lost. So, at the moment jobless claims are low. If you start to see jobless claims picking up. >> Yep. >> Either because they’ve just a normal recession, but obviously the big risk is that AI contributes to those job losses eventually. I’m not saying right now, but eventually. Then I think that would be enough to put downward pressure on stocks. >> Doesn’t the Fed just cut rates aggressively at that point? Does the wealth effect just too important? The I the doesn’t the US economy and the market

12:45 need protecting at that point? Because once the market starts rolling the the American economy is a wealth effect economy. What happens when that wealth effect even even the kind of second derivative starts to slow down? >> I think you’re right that if you start to get net job losses, the AI cut very aggressive Sorry, the Fed cut very aggressively. Um the question is, you know, are you going to rehire the person that AI can now do their job because interest rates went lower? Probably not. >> Okay, so you >> it going to have

13:18 as much of a stimulative effect as it has done in the past cutting interest rates? And then what I think is the really interesting question is, let’s imagine a world where you get to net job losses, the Fed cut rates meaningfully, and then there’s a discussion around whether more needs to be done and whether they need to do QE. Is Kevin Walsh going to do QE? We know from pretty much everything he’s ever said that he does not like QE. >> Yeah. >> So, I think that’s worth thinking about, too. >> Okay. On that note, we will leave it. Mike Gracy, intriguing discussion. Thank you

13:49 very much indeed. Mike Bell, head of market strategy over at RBC BlueBay. Coming up, the German Chancellor Friedrich Merz meeting lawmakers from his party after lunch today amid mounting pressure on his leadership. We’re going to get more on German politics. [music] Christiane Sporl, professor at the London School of Economics will be joining us on that very [music] subject. 14 minutes past the hour, this is Bloomberg.

14:25 >> [music] >> This week, leaders from the world’s two largest economies will come together in Washington, D.C. with geopolitical stability and the future [music] of global trade on the line. >> We’ve talked to his presidency about a lot of different things. More than anything else, we’ll be trade. >> Trust Bloomberg to go beyond [music] the headlines with on-the-ground reporting, expert analysis, and real-time market reaction leading up to the summit [music] on September 24th. Special coverage all week right here on

14:58 Bloomberg. >> [music] >> We have been member of the EU and NATO uh for more than 20 years, and we have made sure that we are safe and secure. Uh of course, uh the fact that the DOJ indicted a number of people here also in the US on terrorism financing charges for murder for hire to commit crimes on European soil, to commit sabotage, to

15:32 commit all types of actions on behalf of Russian state is a serious worry because we have noticed that this activity, which is sub-conventional activity, uh to try to implement Russia’s goals in Ukraine but on European soil uh is continuing and that’s where our security services, intelligence agencies, together with the US, Europeans, and others are paying a lot of attention and making sure that uh those actions don’t succeed. But uh as

16:04 we have seen in Leipzig Airport, where Russian agents tried to attack with an armed drone and where they didn’t succeed this time, but it can lead to casualties also in Europe or in the US for that matter, as we saw from the DOJ’s indictment. So, we take it seriously, but militarily we support Ukraine. We do what is necessary for Russia do not succeed in its blatant aggression against Ukraine. >> Latvia’s Minister for Foreign Affairs warning Russia will increase acts of

16:35 sabotage against European NATO members in a bid to deter support for Ukraine. Switch gears. German Chancellor Friedrich Merz is set to meet his own lawmakers, his parliamentarians, from his own party today. There is mounting pressure on his leadership. Yesterday, Merz survived a CDU leadership meeting. This, of course, after his party was knocked out of a state parliament. That’s the first time that it happened in post-war German history. Speaking after the meeting, Merz acknowledged the impact that that

17:07 vote had. >> This election is a deep turning point. It is a dramatic, unprecedented result for the CDU in Germany that we could not overcome the 5% threshold and that an entire state parliamentary group is falling out state parliament. This is a heavy blow and it will resonate with us for a long time. We’ll have to discuss these consequences for a long time. >> Friedrich Merz, the German Chancellor speaking yesterday. Christina Sport, Professor in the Department of International

17:38 History at the London School of Economics, joins us now to discuss. Christina, good morning. What do you think Merz needs to say to lawmakers today to keep everybody onside and to keep his job? >> Yes, to remind and communicate very well that this is about stability in Germany, the United Germany. We must not forget these have been elections now recently in two formerly East German states as well as in Berlin. But we must also remember that not only did he get the support from the land

18:10 ministers of the which are socially democratically and conservatively led, but also from his party and the coalition federal coalition per se has decided that they will stand behind Friedrich Merz. After all, we have to remember elections reflect the populace and you know, this is actually also a reflection of what they think about Friedrich Merz as a person and what they sense. This is also very emotive, what sentiments people are

18:42 expressing. But as I said, you know, we have to think these elections in two or rather three states and out of 16. And Germany is a country of 85 million people and 5 million people have voted. So we have to also remember that, you know, this this has to be seen in in in relative terms. Key is he has the support of his coalition partner, of the other leaders of the states which are conservative led. And in some ways these two parties still stand for center right and center left, both of them, the SPD and and the CDU. And now we have to see

19:16 how the coalition formation will work in those East German formerly East German territories that had their elections. >> I I hear what you’re saying, but it is Merz the right person to deliver that? His personal popularity rating appears to be something of a drag on his party, the CDU. >> Absolutely. I mean, we have a similar problem in Germany now in terms of popularity as we had with Keir Starmer in the United Kingdom before, where, you

19:47 know, when you look at the facts, what is being delivered, it’s actually not all that bad, but the way the person is perceived and, you know, the way the person comes across and how people feel about the person, the leader of the state, um you know, it’s not it’s not giving people that sort of sentiment they’ve had uh with some of the previous chancellors. That is definitely a problem. But at the same time, you know, in Germany we can have votes of no confidence. In some ways the chancellor himself put himself on the line and his party and with uh his coalition partner and with the leaders

20:19 uh of the um different states. And so, the way the German system works is that for now he has the trust. And so, you know, they have to now dig deep and see into what extent they can deliver. >> In terms of who could replace him therefore, are there names that stand out? Is there anybody that could step forward? What are you reading in terms of kind of what is going on behind the the scenes at the moment? Are people positioning maybe for some sort of a challenge?

20:51 >> Well, there have been always uh questions about, you know, where does the leader of Bavaria, this the Christian Socialist Union leader uh Söder stand, or where for example stands there the much younger leader uh in North Rhine-Westphalia, the most populous uh state uh in in Federal Republic of Germany. Um Wust, but Wust actually declared that he rather wants to stay the leader of North Rhine-Westphalia. So, everybody at the moment is standing behind the Chancellor. So, I think we have to take their word for that now. >> The the

21:24 Does Merkel Does Germany Does the CDU need to become more radical? The the policy at the moment seems to be don’t rock the boat. Let’s not make any changes. Let’s carry on what we’re doing. Is that the right policy do you think to pursue for this party? >> At the moment the two big parties that used to be the people’s parties. In other words, the Social Democrats, you know, who stood for the left, for the employees, the former working class. Either people have drifted even further to the left or if they have taken an anti-immigration, anti-Europe

21:55 perspective, there’s tendencies. We see this also in the Ruhr, in the western part of Germany. At local level, they’re drifting towards the AfD because immigration has become such a big topic. Although, immigration in in the western part of Germany and former eastern part looks slightly different when you look at the demographics. And actually, I should also remind the audience that if you think, for example, Sachsen-Anhalt, you know, there are 6.7% migrants. It’s Topic is turned into a big thing, but actually in the local locality where the

22:26 elections took place, it’s actually in in terms of numbers quite a small problem. And so, if we if we consider sort of on on a on a national level, it is all also about communication. The two big parties need to remind, you know, why you did they used to be the big parties? What How does a state function at especially in times of uncertainty? It’s not about going more to the fringes left and right. We have had this in German history. That is actually the lesson of history, how important the center is.

22:56 And you see this erosion of the political center, also of course, uh when you look at why at the liberals have completely disappeared. The greens are losing ground. Uh not just the two big parties. And the point of the big people’s parties was that they unite. They unite men and women, employees and employers, uh old people and young people. What we see, for example, now also a lot is that the young people uh vote for the AfD, whereas the older people vote for whole spectrum of parties. That’s also a very interesting phenomenon. I actually think that the fissiparousness in a in a state where we

23:30 have coalition governments is particularly dangerous. Uh if you, for example, think of the um Weimar Republic. Um we have at the moment a 5% hurdle, so certain parties uh every now and then fall out. Um it’s meant to stabilize, but yet we are looking at um uh quite often uh Länder coalitions of three parties. And that is very difficult to hold together when the they’re moving more and more to the fringes. I think actually populism, which is very much driven, by the way, of course, by social media, by algorithms, by exog- exogenous forces, even. We have to see this in the context

24:04 also of hybrid warfare, absolutely. Um and then, of course, how this plays to people’s emotions, because you have to remember, everything that’s done on Twitter, on social is assertion, assertive policies. But actually, when you think of policy making and decision making, it is, frankly, a bit more boring. It is also a bit more complex. And Friedrich Merz’s biggest problem is that while his coalition wants to drive, for example, pension reform in a similar way as Gerhard Schröder did 25 years ago, uh it’s not on the cards.

24:37 >> Kristina, on that note, we will leave it. Thank you very much indeed. Kristina Spohr, professor at the London School of Economics. Uh you can deep [music] dive into what is happening in Germany. Uh we’ve got a Q&A, which is going to run a little bit later, including our chief Europe correspondent, Oliver Crooke. He will be on that. Uh up next, how does Europe become more competitive? We’re going to talk about that, believe you me. That’s [music] next. This is Bloomberg. >> [music]

25:10 >> Good morning. How you doing? Tuesday the 22nd, we are 8:30 past the hour. This is the pulse. There’s a lot going on. >> [music] >> I’m Guy Johnson in London. Let’s give you an update as to what you need to know. So, the AI trade came roaring back [music] yesterday. Meta’s AI agent fueling optimism on that subject. We’ve also seen Alibaba out overnight unveiling what it describes as China’s most powerful AI chip. Tech rally though, overnight through the Asian session effectively has lost a lot of steam. Nasdaq futures are are negative now. [music] Europe’s basically just trading sideways. The reason for that, oil snapping a four-day losing streak as

25:44 traders weigh supply risks against [music] hopes for an end to the US-Iran war. It’s interesting, the ECB’s chief economist out warning a new energy shock this new energy shock will keep euro area inflation higher for longer. And the big event today, President Trump goes to the UN where he will speak to the UN General Assembly. He’s [music] going to meet a bunch of leaders. Andy Burnham is on the list. You’ve also got Volodymyr Zelenskyy very much on that list as well. So, let’s get back to the kind of the thing that has changed today. Oil is back front and center. Brent crude has been down really sharply

26:19 over the last few sessions. 8% over the last four sessions, down sharply yesterday. Today though, it comes back. So, why is it coming back? Is it just the fact that we’ve been down, we move lower, and now we start to stabilize, or is there something acting as a catalyst? Let’s find out. Let’s go to the Middle East. Let’s go to Dubai. Abba joining us from there with the latest. What is the latest? What is driving prices back up again today? >> Good morning, guys. So much is happening, whether it’s the diplomatic front, whether it’s the supply front. Let’s just start with what is happening

26:51 when it comes to the supply front. The latest we know a Bloomberg report about an hour ago or so guys suggesting that Saudi Arabia is selling Asian refineries that output from Yanbu, of course, that site that was affected about 12 days or so ago is coming back to production. Now, this is not full capacity. Saudi Arabia did say that the East-West pipeline that had been damaged as a result of Iraqi militia attacking it will come back to full capacity within 6 weeks time, but half capacity is set to come back within days. And these are the

27:24 first signs that we’re seeing that the capacity is indeed coming back. Now, we don’t have a timeline as I have mentioned guy, but the first signs of optimism there. The second signs of optimism you perhaps have alluded to President Trump speaking at the UNGA later today and meeting some world leaders. Some of the world leaders that he’s also meeting include GCC leaders. We’re expecting that meeting between the six countries here in the Gulf and President Trump to happen after he speaks at the UN General Assembly in New York. And so, that is creating some positive bush when it comes to the

27:57 diplomatic front. We had some earlier signs to suggest that the President might be meeting with his Iranian counterpart Rouhani, but we don’t see that meeting happening. It’s it’s unlikely for the time being. Anything could happen of course in the Trump era guy, but we don’t know for sure. But when it comes to the oil supply you did mention the oil is snapping a four-day loss. It was in it was making losses over the past four days. Now, it is starting to pick up. And as you have mentioned that could be because of the

28:27 days in losses that we have seen. But on the ground we’re not really seeing anything much that is changing. Supply in the Strait of Hormuz continues at a trickle. The US maintains that we’re still seeing supply at a six-month high. So, that is happening on the ground. We continue to monitor of course what happens in New York City later today when it comes to the diplomacy. That’s going to be key. >> Yep. Trading at 128 on Brent right now. Abir, thank you very much indeed. Abir Abu Omar joining us out of Dubai with the latest on the oil price. Let’s talk about some of the other top stories we’re paying attention to. The United

28:59 States, Denmark, and Greenland are reportedly set to sign an agreement at the United Nations General Assembly later today. President Trump says it gives the United States, quote, “permanent control over security for Greenland,” ending for now a saga that fractured the transatlantic alliance. It appears to be a significant pullback from Trump’s previous attempts, of course, to take over the semi-autonomous Danish territory. China’s foreign minister, Wang Yi, says China and the European Union should find a way to avoid confrontation over trade. EU leaders are set to meet next month to

29:30 discuss the trade deficit with China and possible new instruments they can use to strike back against the trade practices that Beijing pursues. Beijing and Brussels earlier agreed on a set on to set an October deadline to make progress on trade disagreements. Okay, let’s turn to the bigger picture for Europe, undergoing pressure to become more competitive as it struggles to keep pace with the United States and China. In her State of the Union address last week, remember, Commission President Ursula von der Leyen warned that fragmented markets, red tape,

30:04 slowing permitting, are all holding back investments and growth. She says Europe needs to move faster. >> We have to be faster on institutions. Yes, we know this. We now have the political agreement on one Europe, one market roadmap. And together by the end of next year, we can and we must complete this historic overhaul of the single market. In today’s economy, speed is of the essence.

30:38 >> Kristina Caffarra, an economist and also founder and chair of Euro Stack, the Eurostack initiative, which is aimed at building an independent European digital infrastructure. Joins me around the table. Good morning. >> Good morning, guys. >> I can sense your frustration listening to her. >> I was agitating. >> Yeah, why? She says we need to move faster, isn’t that a good thing? >> Well, she said that for 10 years and nothing has really fundamentally changed. Um the competitiveness word, which is all the rage for the last 2 years in Brussels, which comes out of this report

31:09 that Mario Draghi, the former president of the ECB and the former prime minister of Italy produced for the commission, again lists a number of steps, a number of measures that Europe needs to urgently take >> Yeah. >> to reduce the the productivity gap with the US, to try try and limit our decline. But this is the same kind of story that we heard former Italian prime ministers telling reports for the commission for the past 15 years. We had Letta. We had Mario Monti. So, these kind of episodes

31:43 continue. Um and nothing really changes at a time when of course China is increasing the pressure. We have the tires. So, the the geopolitical environment of course is getting worse. So, it’s all very well for the president to say this, but the reality is that Brussels is not going to be capable capable of really changing the picture. Brussels isn’t the US federal government. They don’t have the prodigious spending powers. They don’t have the executive order capabilities. They are collection of 27 member states

32:16 that need to find a consensus. They will maybe find a political consensus to do something, then bureaucratize it for 5 years. So, we hear the same stories the whole time. We need the capital markets union. We need the single market. It will not happen in your lifetime. >> Is Brussels the problem? >> Brussels is a major misdirection for us Europeans we are becoming infantilized into believing that somehow Brussels can do it for us. >> Yes. >> And instead of developing and preserving our own agency, doing things, there is a tendency to look to Brussels in the hope

32:51 that someone centrally would do something. This has been the major rot of the last 15 years. A world in which we have essentially deferred in Europe to Brussels much of the agency and the capabilities that we we ought to be preserving. >> levels. >> Absolutely. Because while Brussels is what it is, the notion that Europe is in decline and is hopeless is very much attached to that that bureaucracy. It does not >> [clears throat] >> it does not really extend to the reality on the ground. If you go around Europe,

33:25 we are rich, we are capable, we are talented, we have enormous tech >> Yeah. >> innovation. >> We don’t talk to each other, that is true. But it isn’t going to happen because someone in Brussels design a road map or designs a compass. This isn’t the way. They even haven’t got the budget to put behind things. So, I I I think >> How do we get away from that? Okay. So, kind of Do we need to get more high tech? Do we need I government needs to get out of the way and and let the market do things. But

33:56 that’s exactly what we don’t do in Europe. We don’t let the market do what it needs to do. The price signal is not there. There’s so many other factors that that we don’t get the information we need to make the correct decision. >> this mindset in which somehow we need to defer to Brussels to orientate us. >> Yeah. >> And this is something we need to break. Just as an example, you mentioned Euro stock. Euro stock is an initiative to increase European autonomy in digital because the very major reason why in Europe we’re behind is technology. We have been slower than the US in adopting

34:27 and diffusing technology. So, Mario Draghi and everyone else says, well, Europe is behind because our adoption and capabilities in technology, IT, AI are behind. Why are we behind in technology? Because we spent 20 years regulating what we don’t own. We thought the answer was regulating Meta, Google, Microsoft, and so on. And no one asked the question, but where’s our stuff? If I regulate Google search or Apple App Store, where’s my cloud? Where’s my connectivity? And this is now waking up to We’re all waking up

34:58 to this fact that we are a digital colony. So, is the commission going to do it for us? Forget it. It’s not. It is going to be grassroots. We are realizing that being a digital colony means we are not appropriating the value. >> to accept that cuz one of the things that also came out of that era was that we didn’t want things to get too big. We didn’t want things And what we are now learning is that scale matters. The United States produces things at scale, China produces things at scale. We That is not what we have done. >> We haven’t got a hyperscaler. We will not get a hyperscaler. People ask me,

35:31 where are the European hyperscalers? We haven’t got them. That said, I don’t think that the answer is got to be we either create a hyperscaler or nothing. It’s not binary. I think Europe it’s a feature, not a bug. We are different. Different culture, different capabilities. Germans and French are not going to buy each other’s tech. Reality. But there is good tech in France, there is good tech in in Germany, and it can be essentially connected and federated. But the point is we’re not going to create giants. We don’t. But you You don’t necessarily need giants in cloud. We have three in Europe that are American, but you can

36:05 exist in Europe with cloud that is more fragmented as long as it’s ours. Because if you’re building an extension on somebody else’s house, the house will say at some point, “Nice extension you got there. I’m going to extract more rent from you.” Which is what we’re doing. >> The The danger is that that China and the United States see us as a mid a series of mid powers. If we become nation states again, aren’t we aren’t we at risk of being bullied by the big guys? >> Collectively we have enormous power and this is why I resent and resist the this description of Europe as a middle power. >> Europe isn’t but it’s individual

36:37 components are. >> Individual components are. I’m not suggesting we should go to sort of extreme fragmentation. There needs to be some coordination but the driver cannot be entirely deferred to Brussels because for a variety of reasons Brussels is impeded in actually acting fast and effectively. So it won’t happen over there. What are we doing? Sitting on hands and waiting. So no, the middle power description of Europe is inapt and and and we should resist it because Europe is extremely rich. We save twice as much as the American. We sit on 14 trillion

37:11 in assets from institutional funders that can be effectively fluidified and invested in Europe. We don’t but we are not behind. We’re not behind in technological capabilities. The issue is really employment and this is not going to come at the death at the speed we need from Brussels. Either either the private sector does it or forget it. >> Not Brussels. >> Not Brussels. >> Definitely getting that message, Christina. Nice to see you. >> Thank you so much for having me. Thank you for coming to see us. Christina Kufour. >> Christina Kufour, uh economist and founder and chair of the Euro Stack

37:43 initiative. Uh to some European corporate news now. Novo shares, Novo Nordisk shares a little weaker today a day after the Danish drug maker laid out its 2030 strategy. The strategy largely just pointed investors hoping for more concrete turnaround plans. The CEO of Novo, Mike Duster, spoke to Anna and myself a little earlier on the opening trade. >> Yesterday we laid down a clear path forward and how we’re going to get there. The reaction of the market, I think, tells us that they still have

38:17 some work to do to build confidence and confidence is built with good results and we intend to of course deliver those good results quarter by quarter as we go forward around the plan that we laid out yesterday. >> Yeah, I I delivering good results can help. Also, there seems to be a lot of obsession around M&A and your business. Reading some of the analyst comment this morning, a lot of people talking about maybe have you been ambitious enough on the M&A front. What do you say to that sort of allegation? >> I would say that we have to start by seeing what we can do on our own. We have done that all the time, but we should also have a mindset that we don’t

38:51 have a patent or a monopoly on all the good ideas and and make sure that when there is a gap strategically or scientifically, we’re looking outside to see how we can fill the gap. So, I’ve made it very clear yesterday that we are actually searching and looking to see what else is being done outside of our own shop within diabetes, obesity and the other areas we are operating in and and when we find a good asset that we really see fit, we’ll bolt that on to what we’re doing internally. >> Lilly’s done a lot more deals than you

39:24 have over the last few years. Why is that? What are they seeing that you’re not? And how will that influence your thinking now? I Are you playing catch-up on the deal front? >> I would say I’m not going to comment of course on other companies deal making. What what we have done in the past has been meaningful deals where we are actually now using in the strategy that we laid out yesterday. We are being praised quite a bit for our Wegovy pill launch. Wegovy pill is on a back of a

39:54 technology we bought in from a company called Hemisphere. We yesterday spoke about a fantastic sickle cell drug that comes from a company called Forma. We spoke about a fantastic upcoming obesity drug, a triple agonist. That’s a Chinese company United Lab that has made that one. So, so there are a number of deals we have made that we’re very proud of. >> Is it easier to Do you need to get bigger in obesity? And do you need to really get bigger in obesity? I Do you need to do a massive deal and is that deal potentially out

40:25 there? Or or are the are the big deals outside of obesity? >> We are one of the biggest and the first company that came into the obesity field and intend to expand from that front. Having said that, the obesity market, looking at it from a patient’s point of view, is enormous. So, we do need many more assets to be able to segment this large populations. >> So, you see the deals coming in obesity. You don’t see them coming outside of obesity. >> No, actually to the contrary, I think that we are doing a lot on our own within obesity and there are very little

40:58 out there that I see that are substantially could be better to bolt on to what we have. But, I do see gaps in some of the other areas where we are newer to. Think about cardiovascular area. We just had a setback in one of our own assets. So, we are more active to look and see can we close that gap by looking externally. >> Mike D’Souza, the CEO of Novartis talking to Anna and myself a little bit earlier on today. Things are starting to move in this market. I just want to update you on what is happening. Oil just went negative. The Brent contract

41:31 is now down on the day. We’re almost exactly at 100 bucks a barrel. Um earlier on today, we were up circa kind of 2%. So, there’s been quite a big reversal. Now, this may again open the door to equity markets maybe to shift into a different gear, potentially higher gear. We certainly saw that yesterday, but you have definitely got crude rolling over in a fairly substantial fashion. Look at it on the charts on your Bloomberg. That’s the narrative that I think may define the session. I wonder whether it’s connected to the Unger story and what Trump is going to be doing later or whether it’s just the Saudis are saying, “Actually, maybe we’ve cleared the pipeline and we

42:03 can actually put more oil out into the Red Sea.” Don’t know which factor it is, but it’s having a market impact. 47 minutes past the hour, this is Bloomberg. >> [music] >> There’s about 1,200 tons of cocaine coming out of Ecuador every year, and

42:35 all of the cocaine comes from Colombia, comes from Peru or Bolivia. That’s over 30 billion dollars in cocaine, aside from another 10 or 12 billion dollars in illegal gold and other criminal activities like human trafficking. So, these organizations are very large, they’re transnational organizations. And we’re going to need the help from the US and from Europe. 40% of the cocaine that comes out of Ecuadorian ports goes to the US, another 40% ends up in Europe and 20% in Middle East and

43:07 and Russia. So, this needs to be treated as an international problem. Ecuador is not a cocaine producer, is not uh traditionally, it’s been a peaceful country for the last few decades. And it has you know, the the the curse of being a very well organized country logistically with good roads, with good ports and a dollarized economy, which makes it easier for transnational crime to operate. >> So, so would you, for example, ask you

43:40 know, President Trump to give more military or police aid like they have given to Colombia? >> Yes. Always respecting our sovereignty and making sure that Ecuadorian armed forces are going to be the ones that lead the operations. Uh we would never give a blank check to any country or just uh like some people try to to, you know, go to extreme descriptions by saying like a license to kill. No.

44:12 Uh all operations have to be led by Ecuadorian armed forces and by Ecuadorian police. If we can have the help and the resources of other nations, then that would be great. >> So, will you ask more support from President >> We ask every day. >> And And will he give it? Has he given any indication that you you could enter a Columbia-style agreement? >> Uh there is an intention. We talked to Secretary Rubio. >> Yeah. >> Uh and uh there is an intention because they understand uh how difficult it is to fight these organizations and how important it it is

44:45 to block or eliminate the problem in origin, not when it it arrives to to their doorstep. >> Ecuador’s president speaking to Bloomberg’s Francine Lacqua in New York on the need for support from the United States and Europe to help fight the cocaine trade. 30 billion a year that trade is worth. Um Okay, let’s talk about what else is happening. Uh the US and China have wrapped up a second day of talks in New York with the focus on AI and investment plus a course a bit of trade. Uh the

45:15 current trade truce is, remember, due to expire in November. Will it get extended? Is that what we’re working towards? Let’s find out. Jill Disis joins us to talk about this. Jill, [snorts] it seems as if both sides that maybe actually do get an extension, maybe not for long, but China’s got issues it needs to resolve at home as has the United States. So, they just want to park this for now. >> Uh yes, that’s right, Guy. I think you know, we heard from the US trade representative Jamieson Greer when he was talking to us just yesterday was that um you know, you could be looking at something likely a 3-to-6-month

45:48 extension of this trade truce. So, really the issue here when it comes to the US and China is um at least from the US perspective is that there needs to be sort of a a regular check-in on how these terms are actually going and whether or not uh from their perspective Beijing is actually following through on some of the terms of the truce. I mean, if you’re China as well, um, you know, you’re also probably, you know, very wary about how exactly this relationship looks like going forward. So, yes, it does seem like maybe there’s a temporary truce in the works. Of course, um, you know, uh, we’ll have to see what actually happens when Donald Trump meets with the Chinese President Xi Jinping

46:21 later this week. But, of course, you know, Trump is first going to have to get through his, uh, UN General Assembly speech, uh, in just a few hours from now. Um, you know, we’re expecting him to be really kind of tied up with a lot of other issues, um, that are approaching the UN General Assembly right now, not the least of which is all of these conflicts, um, that the US is, um, you know, involved in or sort of tangential to. Um, obviously, the Iran war in particular, which when you’re talking about the US and China, uh, that continues to be sort of a key sticking point here between these two leaders. So, plenty of things to to look forward to. But, yes, I mean, at least when it

46:51 comes to that trade truce, maybe there’s something of a temporary extension. >> Let’s hope the escalators works today and the also script works today. All those kinds of things that that caused so much trouble last year. Jill, thank you very much indeed. Jill Disis, and what we can expect a little bit later. Uh, the French President Emmanuel Macron says he discussed a possible halt to energy strikes by Ukraine and Russia with President Trump in New York yesterday. President Volodymyr Zelenskyy has so far brushed off, remember, Trump’s calls for Ukraine to stop striking Russian refineries, which have triggered fuel shortages. Russia doesn’t export diesel, but it’s having a

47:24 compounding effect, uh, elsewhere around the world. Zelenskyy is meeting Trump today. Let’s bring in Tony Halpin, who leads Bloomberg’s Russia coverage. Presumably, Trump is going to ask for Zelenskyy to stop hitting refineries. Diesel prices are six and a half in in in the United States. That’s a problem for Trump. Is anything going to come out of this? >> Yeah, that’s right, Kam. There’s potential for quite a bit of friction at these talks, because as you say, Trump’s under a lot of domestic pressure. He’s got elections around the corner. There’s not a lot he can do about the situation in Iran. But, he thinks he can push Zelenskyy to roll back on striking

47:57 Russian, uh, infrastructure, Russian oil refineries, and that that may ease the situation. But I think President Zelensky will be very clear that look, we are more than willing to do this, but President Putin is not willing to do this. And so, you know, you should really be having this conversation with the Kremlin. And if Russia stops attacking our energy infrastructure, we’re ready to roll back. But as until that situation arises, we’re going to retaliate at Russia’s most vulnerable points, and that includes oil refineries. >> Presumably the US is still sharing intelligence with the Ukrainians. >> There are There are strings that that Trump could pull if he wanted to. Do we have anything like

48:31 Could this meeting go badly? We’ve seen it go badly these types of meetings in the past. I How close to the edge do you think Trump is? >> Yeah, I mean, we’ve seen it go spectacularly badly more than a year ago, and it did lead to some halt in intelligence sharing with Ukraine, and that had a pretty direct catastrophic effect on Ukraine’s ability to fight this war. So, there is an area that Trump can apply pressure if he wishes to. The question is whether President Zelensky is able to manage the situation rather better to avoid such a conflict. But as I say, I think he will stress to to Trump that the most important person

49:04 in this conversation is Putin rather than him. >> So, how do you think it goes? Just very briefly. >> I think it’ll be testy. I think they’ll try and find some way forward that they can reach a compromise so that they at least avoid a bust-up. >> Okay. We’re going to watch with interest. Thank you very much indeed for updating us and preparing us, telling us helping joining us on what we can see in that meeting. Crude is dropping like a brick right now. I just want to make everybody aware of that. And that could have something to do with the UNGA. I don’t know, but it’s down really sharply. World leaders are gathering for the UN General Assembly. We’ve got some great coverage coming up.

49:37 I don’t know what’s moving oil prices, but we’ve got some great guests [music] to talk about the impact of those oil prices. There are two of them. Plenty more still to come here on Bloomberg. 56 [music] minutes past the hour. This is Bloomberg. >> [music] [music] >> Woo!