AI Fears Roar Back, Tech Earnings on Deck

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Original language: English

Original video: AI Fears Roar Back, Tech Earnings on Deck · Channel: Bloomberg Television · 1:34:42 · Watch on YouTube

Topics: AI infrastructure and hardware, Markets and economy

Summary

European markets opened lower as renewed concerns about AI investment and a South Korean data-center IPO weighed on technology stocks, while investors awaited major U.S. tech earnings. Coverage also focused on France’s political unrest and budget risks, with analysts warning that uncertainty could keep French bonds volatile until the 2027 elections. German Chancellor Friedrich Merz warned that Europe is underestimating Russia’s efforts to destabilize its political order, while also discussing investment and trade with China. Guests weighed the long-term productivity promise of AI against financing risks, rising energy costs, and pressure on government budgets.

Key points

• A South Korean neo-cloud company’s sharp post-IPO fall renewed concerns about the financing and returns of AI data-center investment, weighing on Asian and European technology shares.
• Investors looked to upcoming U.S. tech earnings, including reports from Netflix and SpaceX, for clues about AI demand, capital spending, and the sustainability of the sector’s rebound.
• France’s protests eased after curfews and security measures, but political and budget uncertainty continued to pressure French bonds and raise concerns about wider spreads.
• Market guests said French bond-market volatility could persist until elections in 2027, while fiscal consolidation is likely to be a lengthy process.
• Friedrich Merz warned that Russia aims not only to defeat Ukraine but also to undermine democracy and destabilize Europe.
• Merz said Europe should respond to trade imbalances and subsidies but does not want a trade war with China; he also pitched Germany as a destination for private investment in AI-enabled industry.
• A market strategist argued that AI could substantially boost productivity over the long term, while cautioning that higher expected returns come with greater volatility and recession risk.
• Stronger-than-expected U.K. payroll data supported the pound and raised questions about the Bank of England’s interest-rate outlook ahead of inflation data.
• Copper supply concerns and uncertainty over possible U.S. import tariffs added to expected volatility in the metals market.
• European stocks fell, with technology and industrial shares under pressure; ABB, Schneider Electric, ASML, and Siemens were among the names discussed.

Chapters

Start	Chapter	Summary
00:05	Asian tech selloff and market setup	The hosts discuss the South Korean IPO slump, weaker Asian markets, bond yields, and concerns over AI spending and revenue.
10:54	France’s protests and investor concerns	A Paris correspondent describes curfews and police deployments as investors weigh the risks of unrest and France’s budget uncertainty.
15:40	French bond spreads and election scenarios	A market strategist discusses French bond valuations, potential political outcomes, and how long uncertainty may persist.
21:39	Global headlines and U.K. budget questions	The program covers proposed Trump-Putin-Xi talks, Alberta’s vote, and the U.K. government’s revenue-raising options.
24:23	Can earnings rebuild confidence in AI?	Manish Kabra argues that demand across the AI supply chain remains strong, while discussing capex, credit risk, and bond yields.
31:33	Merz on China and Russia	The program plays excerpts from Friedrich Merz’s interview, including his warnings about Russia’s threat to European democracy.
34:49	Germany’s investment agenda	Francine Lacqua discusses Merz’s security concerns, Germany’s effort to attract private investment, and its evolving stance toward China.
38:46	Asian markets and European stocks to watch	The market report links the Korean IPO decline to broader tech-sector caution and reviews Japanese bond demand and company news.
45:22	European market open	European shares begin trading lower as investors assess overnight Asian weakness and company-specific developments.
50:10	The long-term productivity case for technology	John Bilton discusses AI’s potential productivity gains, the risks of volatility, and how economic nationalism could reshape investment.
59:36	Industrial earnings and copper supply	The program reviews pressure on Schneider Electric and ABB, then examines BHP’s weaker copper output and uncertainty over U.S. tariffs.
1:05:43	U.K. jobs data and rate expectations	Guests assess stronger payroll figures, wage growth, and the possible implications for Bank of England policy and the coming budget.
1:11:13	France’s political and fiscal risks	A Citi economist explains how unrest could complicate budget cuts, weaken government authority, and prolong bond-market fragility.
1:21:42	Energy costs and Europe’s fiscal choices	The discussion turns to higher gas prices, possible ECB rate hikes, and the challenge of funding both social spending and defense.
1:26:36	Tech earnings and the closing market view	The program previews Netflix and SpaceX results, considers whether AI concerns are about financing or demand, and closes with inflation and rate risks.

Quotes

The market is getting to this kind of point where it is beginning to worry about this gap between expenditure and revenue. — 03:19

I think at 1.60 for Germany it is a good level to buy because it would capture a lot of bearish factors. — 15:40

My biggest concern is the underestimated Russian impact on our societies. — 33:15

When I look at the noise around things like data centers, it is irrational. — 50:41

The big takeaway is more that the concerns are around financing rather than demand. — 1:30:22

Concepts and entities

AI, data centers, capital expenditure, credit spreads, CoreWeave, NVIDIA, Meta, SpaceX, Netflix, Anthropic, Friedrich Merz, Oliver Crook, ABB, Schneider Electric, PTC

Full transcript (original language)

00:05 GUY: THE TEXT TRADERS HAD A ROUGH TIME IN ASIA AFTER AN IPO FLOP IN SOUTH KOREA. FRANCIS HAD A QUIET NIGHT AND FRIEDRICH MERZ TELLS BLOOMBERG EUROPE IS STILL UNDERESTIMATING PUTIN. ANNA: THAT IS ROOM FOR TECH TRADE IN ASIA, THE KOSPI DOWN BY 4% IN THE ASIA SESSION TODAY. AS YOU SAY ATTACHED TO ONE PARTICULAR STOCK PERHAPS, THE SENTIMENT MAY BE COMING THROUGH FROM THAT IPO. MORE BROADLY, DOES THIS INFLUENCE WHERE WE GO? IS THERE A DISCONNECT OR AN

00:36 ADJOINING LINE BETWEEN WHAT HAPPENS IN ASIA AND WHAT HAPPENS IN THE FUTURES PICTURE ON THE U.S.? WE WILL WATCH THE NASDAQ FUTURES BUT THAT IN MIND. U.S. 10 YEAR YIELDS ARE KEEPING TRACK ON THIS BECAUSE LAST WEEK WE SAW THE YIELDS GOING DOWN QUITE A LOT, BUT TODAY WE ARE AT 5.21% AS YOU WANT EUROPEAN GOVERNMENT BONDS CONTINUE TO RESPOND. FUTURES DOWN BY A TENS OF 1%. TECH STOCKS WITH THE ONLY TERRITORY POSITIVE YESTERDAY FOR EUROPE. THAT EXTENT, WE PARTICIPATED IN THE TECH POSITIVITY BUT THAT IS NOT MUCH OF EUROPE. EVERYTHING ELSE IN EUROPE IS IN THE RED AND WE LOOK TO BE CONTINUING THAT TODAY. ACCOUNT DOWN TO THE OPENING

01:08 TRADE STARTS RIGHT NOW. – THE COUNTDOWN TO THE OPENING TRADE STARTS RIGHT NOW. GUY: TUESDAY MORNING, 58 MINUTES TO GO INTO WE START TRADING HERE IN EUROPE. YESTERDAY’S SESSION IN THE U.S. FELT LIKE A BOUNCE BACK TRADE BUT FELT UNCONVINCING. THEN WE GET TO THE ACTION OVERNIGHT OUT OF ASIA, THE KOSPI IS DOWN PRETTY HARD.

01:42 AT LEAST, THIS IPO, THIS NEO-CLOUD INFRASTRUCTURE CAME OUT WITH AN IPO, DECIDED TO GO FOR IT AND GOT BATTERED IN THE PROCESS. THAT SET THE TONE AND THE TONE WAS NOT A GOOD ONE AND AS A RESULT OF WHICH, ASIA HAS HAD A BAD NIGHT. THE QUESTION NOW IS CAN THE ASIA TRADE AND THE UNITED STATES TRADE, THE U.S. TRADE DIVERGE? ANNA: NASDAQ FUTURES DEWPOINT LOWER, AND THEY DID REALLY WELL YESTERDAY. THAT IS SORT OF THE OTHER CONTEXT. THIS DIVERGENCE TAKING PLACE. THIS DATA CENTER COMPANY RIGHT

02:16 AT THE EPICENTER OF THE THINGS THAT THE MARKET IS WORRIED ABOUT RIGHT NOW. IT CERTAINLY WAS LAST WEEK, THAT IS WHERE THE WORRY WAS. IN TERMS OF THINGS THAT WERE GOING BETTER YESTERDAY, WE HAD GOLDMAN SACHS UPGRADING COREWEAVE, JP MORGAN UPGRADING INTEL. WE HAD MORGAN STANLEY PICKING AMAZON AS ONE OF ITS TOP PICKS. ENDSCALE APPARENTLY IN TALKS TO SELL COMPUTER ANTHROPIC. THERE WERE OTHER NEWS LINES AVAILABLE IN BE HELPED TO GENERATE SOME OF THE POSITIVITY YESTERDAY, CERTAINLY OVERNIGHT TAKING THE HEADLINES. GUY: SOME BIG SET PIECE EVENT COMING

02:47 UP. BERLIN, NVIDIA TOMORROW. META AS WELL LATER THIS WEEK. SPACEX TODAY, WHAT IS THAT GOING TO TELL US? ARE THEY GOING TO BE CONVINCING ENOUGH TO ACTUALLY ALLOW THE TECH TRADE IN THE UNITED STATES TO GO IN SOME WAY, OR WILL THESE PERSIST? YOU’VE ONLY GOT TO LOOK AT THE BOND MARKET AND THE CREDIT MARKETS TO BE WORRIED. TAKE A LOOK AT THEN YEA WHICH

03:19 IS META’S DEBT ASSOCIATED WITH THIS DATA CENTER DOWN IN LOUISIANA. THAT DEBT HAS SKYROCKETED IN TERMS OF THE YIELD THAT IS BEING CHARGED ON IT AT THE MOMENT. THE MARKET IS GETTING TO THIS KIND OF POINT WHERE IT IS BEGINNING TO WORRY ABOUT THIS GAP BETWEEN EXPENDITURE AND REVENUE. ANNA: ABSOLUTELY. THERE IS A PIECE OUT SUMMARIZING YES, SEAN O’NEILL WAS TALKING TO US BUT SOME OF THE OTHER SLIGHTLY MORE

03:50 LONG-TERM THINKING ABOUT THAT MISMATCH POTENTIALLY BETWEEN REVENUE AND CAPEX IN TERMS OF THE AI BUILDOUT, AND HE IS SORT OF CHRONICLING THE SHORTFALL OF REVENUE AI AGAINST. HE SAYS WE WILL GET LESS THAN $2 TRILLION IN REVENUE FROM AI AND THAT IS UP AGAINST $6 TRILLION IN CAPEX. THIS OBVIOUSLY A BIG SHORTFALL THERE. LET’S TALK ABOUT FRANCE ON DAY TWO OF THIS STORY, AT LEAST FROM A MARKET PERSPECTIVE. WE SHOULD REFLECT ON WHAT HAPPENED YESTERDAY IN THE SENSE

04:20 THAT WE GOT THE SPREAD WIDENING BY ANOTHER 10 BASIS POINTS, BUT IT WASN’T JUST FRANCE THAT WAS ON THE MOVE. WE DID SEE SUBSTANTIALLY HIGHER YIELDS COMING THROUGH, BUT ITALY, U.K., PORTUGAL, SAW A BIT OF CONTAGION OF THIS THEME. THE PROTESTS HAVE NOW DIED DOWN, WE ARE TOLD BY OUR COLLEAGUES IN PARIS. THE INSURANCE IS COUNTING THE COST. BUT MORE UNREST IS CLEARLY POSSIBLE. SEEING THE YELLOW VEST MOVEMENT CALLING FOR CONTINUED UNREST. THEY’VE ALSO TALKED ABOUT TAKING TO THE STREETS ON SATURDAY OF NEXT WEEK. SO IN THAT CONTEXT, WHAT DO

04:51 MARKETS DO? WE ARE WATCHING AND WAITING BUT PERHAPS WE DON’T GET ANY CLARITY UNTIL NEXT SUMMER. GUY: SO WHAT DO YOU DO WITH THE TENURE? DO YOU KEEP SELLING IT? DO YOU BUY IT AT THIS POINT, HAS IT BEEN BEATEN UP ENOUGH THAT IT ACTUALLY BECOMES? THERE IS SO MUCH UNCERTAINTY AROUND THIS. EARLIER ON WE THOUGHT IT WAS GOING TO BE A VOTE TODAY ON ONE OF THE TWO ELEMENTS, THE REVENUE SIDE OF THE LEDGER. THAT IS NOW POTENTIALLY IN DOUBT. WHY IS IT IN DOUBT, WHAT SIGNAL

05:26 DOES IT SEND THAT IT IS IN DOUBT PUBLIC IS THE QUESTION THAT GUEST WILL BE ASKING THEMSELVES. ANNA: THE IMF STILL CALLING ON FRANCE WILL MISS OF HIS MEETINGS LAST WEEK. THE MESSAGE THAT YOU’VE GOT TO WORK ON LONG-TERM REFORM, THINGS LIKE PENSION REFORM. BUT IN THE NEAR TERM YES, THE BUDGET IS CERTAINLY THE AREA OF FOCUS. GUY: IS NO NEWS GOOD NEWS OR BAD NEWS? ANNA: PROBABLY BAD NEWS. WHETHER THE MARKET HAS OTHER THINGS THAT ARE BADDER IN ITS MIND, I DON’T KNOW. GUY:

06:00 MASSIVE OPTION TODAY REALLY WELL RECEIVED. YOU WONDER IF THAT IS A SELL FRANCE, BUY JAPAN KIND OF NARRATIVE. LET’S TALK ABOUT GERMANY. LOTS COMING OUT OF THAT IN TERMS OF THE LINES THAT HE DELIVERED TO US. CLEARLY HE’S CONCERNED ABOUT VLADIMIR PUTIN. HIS BIGGEST FEAR, HE SAYS, IS A DESTABILIZATION OF EUROPEAN POLITICS OF WHICH THERE IS SIGNIFICANT DESTABILIZATION AT THE MOMENT. YOU’VE GOT PRESIDENT TRUMP TALKING ABOUT WHAT HE WOULD DO, IN TERMS OF WHAT HE IS SEEING IN FRANCE AND IT WAS INTERESTING THAT MERZ REFERENCED FRANCE, TALKED ABOUT

06:31 IMMIGRATION AS BEING ONE FACTOR, THE COST OF LIVING BEING ANOTHER FACTOR, TWO BIG CHALLENGES FOR EUROPE RIGHT NOW. BUT THEN YOU LOOK AT FRIEDRICH MERZ ALSO UNDER PRESSURE, A LOT OF THINGS GOING BADLY WRONG FOR HIM. WHAT IS HE GOING TO DO ABOUT IT? CAN THIS EVENT IN GERMANY DELIVER ENOUGH? IT’S THE FIRST TIME THEY’VE DONE IT. AT THE MOMENT IT FEELS LARGELY UNCONVINCING. ANNA: AND IT COMES IN THE CONTEXT OF A GOVERNMENT THAT HE IS LEADING THAT HAS DEMONSTRATED A MORE MUSCULAR RESPONSE TO CHINA ON THE TRADE AGENDA, SO WE’VE

07:03 TALKED ON THIS PROGRAM ABOUT HOW IT IS A PIVOT FROM GERMANY THAT HAS ALLOWED EUROPE TO TAKE IN MORE MUSCULAR APPROACH AND WE SAW THAT DEMONSTRATED AND HE TALKED ABOUT THAT AS WELL. HE SAID IN THIS INTERVIEW YOU NEED TO USE THE LEVERAGE THAT 450 MILLION CONSUMERS GIVE YOU. SOMETHING THAT THE WORLD IS NOW LEARNING FROM MAYBE THE TRUMP LAY BOOK. NOT TO THAT DEGREE. BUT NOT WANT TO TRADE WAR WITH CHINA, SO STOPPING FURTHER FROM THAT LINE. NOT SUGGESTING THAT, BUT CERTA

07:34 INLY WE DID SEE THAT MORE MUSCULAR APPROACH. INTERESTING THAT THEY WENT SO FAR AS TO TALK ABOUT IF WE DO SEE GERMANY, THE AFD ON THE RISE, THEY TALKED ABOUT WANTING TO LEAVE THE EURO ZONE. THESE ARE BIG PICTURE QUESTIONS THAT NOW FACE EUROPE. WE WILL GET FRANCINE ON THE PROGRAM LATER ON TO TALK ABOUT THAT. SHALL HE INTO SOME DATA? GUY: LET’S DO THAT. I THINK WE GOT LABOR MARKET DATA WHICH SITS IN SOME WAYS AT THE CORE OF THE DEBATE AT THE MOMENT. MEGAN GREENE IS GOING TO BE SPEAKING A BIT LATER ON. SECOND-ROUND EFFECTS TO HAPPEN

08:08 IN THEORY, YOU NEED TO HAVE A REASONABLY ROBUST LABOR MARKET, A LABOR MARKET THAT CAN DEMAND HIGHER WAGES. AND IS THAT THE EVIDENCE WE ARE GETTING AT THE MOMENT? ANNA: IT’S ALL SORT OF MARGINAL BUT YES, IT POINT A LITTLE IN THAT DIRECTION. JUNE TO AUGUST WAGES RISING 3.7%. THAT IS JUST A FRACTION ABOVE THE ESTIMATE. THE THING I AM ALSO DRAWN TO IS THAT UNEMPLOYMENT RATE OF 4.7% WHICH IS IN THE ESTIMATE OF 4.9. I’VE LOST TRACK, CAN WE TRUST THIS DATA ONCE AGAIN?

08:40 WE HAD A PAUSE WHERE WE DIDN’T TRUST IT FOR A PERIOD AND IT C AME BACK BETTER. THE MARKET SEEMS TO BE MOVING, ANYWAY. GUY: THE POUND IS GETTING BIG. IF THE CONCERN IS THAT YOU ARE NOT GOING TO GET SECOND ROUND EFFECTS BECAUSE LABOR MARKET IS WEAK, THIS WOULD SLIGHTLY – NEXT PIECE OF DATA UNDERMINES THAT THEORY. ANNA: AND IF THE BANK OF ENGLAND IS PREOCCUPIED BY INFLATION BUT DIDN’T WANT TO MOVE BECAUSE OF

09:11 WEAKNESS ELSEWHERE, THEN YES, ABSOLUTELY IT TAKES US SLIGHTLY CLOSER TO A RATE HIKE. GUY: WHAT HAVE WE GOT COMING UP HERE? WE NEED TO TALK ABOUT U.S. TECH, ABOUT THE U.S. EQUITY MARKET. MINESH KABRA IS GOING TO BE JOINING US, AS WILL JOHN BILTON. FRENCH BOND MARKET, WE’VE GOT IT COVERED. ANNA: LET’S TALK ABOUT THE EVENTS THAT ARE ON OUR CALENDAR FOR TODAY. TODAY WE WILL BE WATCHING THAT

09:47 INVESTOR GERMANY SUMMIT THAT GUY JUST MENTIONED, FRANCINE TALKING TO FRIEDRICH MERZ. 10:00 A.M. U.K. TIME, GERMANY RELEASES ITS SURVEY. GOOD DAY FOR THAT, GIVEN THE FOCUS ON GERMANY. 5:00 P.M. U.K. TIME, EARNINGS COMING THROUGH AFTER THE BELL. WE ARE BACKING OF THINGS. AND LATER, STATESIDE FOR NETFLIX AND FROM SPACEX AND I THINK THIS IS THE SECOND QUARTER WE HAD FROM SPACEX AS A LISTED COMPANY, SO A PERFECT OPPORTUNITY TO FLIP THIS ON CAPEX AND WHAT WE LEARN FROM THAT IMPULSE. GUY: IS IT GOING TO BE ENOUGH?

10:21 THIS IS THE QUESTION. ARE THE U.S. TECH REPORTS GOING TO BE ENOUGH TO STABILIZE THE TECH SITUATION IN TERMS OF THE DOWNGRADES WE’VE BEEN SEEING RECENTLY IN TERMS OF EQUITY MARKETS? COMING UP, OUR EXCLUSIVE CONVERSATION WITH FRANCINE SPEAKING TO FRIEDRICH MERZ AS HE SAYS HE DOES NOT WANT A TRADE WAR WITH CHINA. PLUS, WATCHING SHARES OF A.B.B. AT THE SWISS INDUSTRIAL COMPANY REPORTS ESTIMATE THAT OF THE THIRD QUARTER. BUT UP NEXT, MORE ON THE ECONOMIC IMPACT OF THE LATEST UNREST IN FRANCE. IF YOU WANT TO JOIN THE DEBATE,

10:54 PLEASE JOIN US ON BBTV GO. 11 MINUTES PAST THE HOUR. IT IS STILL DARK. THIS IS BLOOMBERG. GUY: MORNING, WELCOME BACK. 45 MINUTES UNTIL WE START CASH

11:26 EQUITY TRADING HERE IN EUROPE AND WHAT WE ARE LOOKING AT IS A PICTURE THAT IS A LITTLE SOFTER HERE IN EUROPE. DOWN BY HALF OF 1%. WEST FUTURES ARE ALSO SOFT, THE NASDAQ IN PARTICULAR HAS ROLLOVER OVER THE LAST HOUR OR SO. A COUPLE OF HOURS AS WE WATCH THE SITUATION EVOLVE IN FRANCE. THE NASDAQ MAN DOWN BY 0.5% AS WELL. WE’VE GOT A SLOW START IT SEEMS, PREDICTED IN EUROPE. SLEEPY, MAYBE, THAT I’M NOT QUITE PUTTING IT THAT FAR. ANNA:

11:56 THAT’S LATER ON EQUITY MARKETS. THE POLITICAL STORY IN FRANCE, PROTESTS HAVE LARGELY DIED DOWN AFTER AUTHORITIES ROLLED OUT TOUGHER SECURITY MEASURES. WE ARE WATCHING WHAT IS HAPPENING IN FRANCE FOLLOWING WIDESPREAD VIOLENCE OVER THE WEEKEND AND 11 AT LIKE P.M. CURFEW WAS PUT IN PLACE IN AREAS OF PARIS ON MONDAY NIGHT ALONG WITH RESTRICTIONS IN OTHER CITIES. LET’S BRING IN BLOOMBERG’S CHIEF EUROPE RESPONDENT OLIVER CROOK WHO IS IN PARIS STILL AND OLLIE, THINGS DYING DOWN FOR NOW, THERE IS VERY MUCH A “FOR

12:28 NOW” FEELING TO THAT STATEMENT. TALK US THROUGH THE LATEST MEASURES TO TRY TO CRACKDOWN ON VIOLENCE. OLIVER: THESE ARE THE MEASURES THAT WERE ROLLED OUT BY THE PRIME MINISTER AFTER THOSE EMERGENCY MEETINGS THAT WERE HELD YESTERDAY WITH THE CABINET. THEY INVOLVE A NUMBER OF DIFFERENT CURFEWS INCLUDING WITHIN PARTS OF PARIS, INCLUDING WHERE WE WERE STANDING YESTERDAY WHICH WAS REALLY ONE OF THE EPICENTERS FOR THE PROTESTS OVER THE WEEKEND LAST SATURDAY, AND AS WE WERE FINISHING OUR COVERAGE

12:59 YESTERDAY, YOU COULD SEE THERE WERE CERTAIN GROUPS OF YOUNG PEOPLE DRESSED IN BLACK AMASSING, POTENTIALLY GETTING READY FOR SOME KIND OF PROTEST BUT THE POLICE WERE THERE IN SUCH FORCE THAT DOZENS OF POLICE VANS WERE ALL SORT OF WEARING THE RIOT GEAR. THERE WAS NO ACTIVE PROTEST OR ANY EXCHANGE BETWEEN PEOPLE BUT IT WAS VERY CLEAR THAT THE FRENCH STATE IS NOT GOING TO TAKE ANY CHANCES AFTER WE SAW SATURDAY. YOU HAD CURFEWS IN THAT PART OF PARIS AND ANOTHER PART. A COUPLE OTHER CITIES ACROSS FRANCE, AND YOU ALSO HAD A BAN ON ON PROTESTS IN MARSEILLES,

13:30 ONE OF THE OTHER CITIES THAT WAS HIT VERY HARD BY THIS PROTESTS. WE JUST HEARD FROM THE PRIME MINISTER OF FRANCE COMING OUT ON X OVER THE LAST 45 MINUTES SAYING THAT THESE TARGETED CURFEWS HAVE CONTRIBUTED TO THE CALM THIS NIGHT. HE NOW SAYS THAT TONIGHT, NEW CURFEWS WILL BE DECIDED WHERE THE SITUATION REQUIRES IT. THESE DECISIONS WILL BE MADE ON THE GROUND BY THE PREFECTS WHO ARE SORT OF THE GOVERNORS OF THE REGIONS OF PARIS, IN COORDINATION WITH THE MAYOR. SO THAT IS THE SITUATION NOW IN FRANCE. WE’VE SEEN AN ATTEMPT TO CIRCUIT BREAKER VIOLENCE AND THE PROTEST FROM THE FRENCH GOVERNMENT.

14:03 IT SEEMS THERE WILL BE POTENTIALLY MORE CURFEWS TONIGHT IN A NUMBER OF PARTS OF FRANCE BUT OF COURSE AS YOU MENTIONED, TODAY IS OBVIOUSLY A TEST. YESTERDAY WAS A TEST, TOMORROW IS A TEST, BUT THE REAL TEST IS SATURDAY. I THINK THE GREAT FEAR FOR THIS GOVERNMENT AND MUCH OF FRANCE IS THAT WE TURN INTO A SITUATION THAT IS VERY SIMILAR TO WHAT WE SAW YEARS AGO WITH EVERY SATURDAY BECOMING A SORT OF ROLLING PROTEST THAT POTENTIALLY TURNS INTO A RIOT AND THAT IS EXACTLY WHAT THE GOVERNMENT WOULD LIKE TO PREVENT. GUY: SO NOTHING REALLY FOR INVESTORS

14:34 AT THIS POINT TO GET POSITIVE ABOUT? THERE IS STILL A SIGNIFICANT RISK. OLIVER: ABSOLUTELY. IF YOU LOOK AT THE SPREAD, WE HAD 10 BASIS POINTS BETWEEN FRANCE AND GERMANY, THE SPREAD BETWEEN THE TWO NATIONS IS SOMETHING CLOSE TO 1.5%. THAT IS UP FROM 70 BASIS POINTS AT THE BEGINNING OF THE YEAR AND WHEN YOU ARE AN INVESTOR LOOKING AT FRANCE AND LOOKING FOR REASONS TO BE OPTIMISTIC, THERE ARE NOT A GREAT DEAL OF THEM AT THIS STAGE. OBVIOUSLY THEY ARE PRICING IN THE BUDGETARY RISK.

15:05 ADD THAT POLITICAL RISK AND THERE IS THIS FEAR FOR INVESTORS THAT EACH OF THESE TWO RISKS WILL FEED OFF ONE ANOTHER, AS IS BORROWING COSTS GO HIGHER. MORE AND MORE MONEY NEEDS TO GO TOWARD PAYING DOWN THE INTEREST AND OF COURSE YOU ARE SIX MONTHS AWAY FROM A POLITICAL ELECTION WHEN YOU INTENSELY POLARIZE PEOPLE IN FRANCE AND MET GENERALLY DOES NOT TEND TO BRING THINGS DOWN IN TERMS OF CALMNESS ON THE STREETS. GUY: OK. THANK YOU VERY MUCH, INDEED. BLOOMBERG’S CHIEF YOUR CORRESPONDENT OLIVER CROOK IN PARIS FOR US. LET’S GET ANOTHER TAKE ON WHAT IS HAPPENING IN THESE MARKETS. THE HEAD OF MARKET RATE

15:40 STRATEGY AND ECONOMICS IN EUROPE JOINING US AROUND THE TABLE, GOOD MORNING. >> GOOD MORNING. GUY: CAN I BUY YET? I EXPECT INVESTORS OUT THERE ARE ASKING THAT QUESTION. WHAT IS THE RESPONSE? >> I THINK AT 1.60 FOR GERMANY IT IS A GOOD LEVEL TO BUY BECAUSE IT WOULD CAPTURE A LOT OF BEARISH FACTORS LIKE WE’VE LOOKED INTO WHAT WOULD BE LEVELS WHERE THE MARKET IS PRICING A TRIPLE BEEP WHICH COULD BE A RISK IF YOU HAVE A

16:15 SCENARIO WHERE THEY GET THE ABSOLUTE MAJORITY IN THE PARLIAMENT, THEY DRAG DOWN THE AGE OF RETIREMENT BACK TO 62. THEY DON’T REALLY FIND ENOUGH MEASURES TO OFFSET THE BILL. IN THAT SCENARIO I THINK IT IS FAIR TO EXPECT THE MARKET TO START PRICING FRANCE LIKE A TRIPLE B ASSET. IF YOU LOOK AT WHAT IS WORSE, SPREADS OVER GERMANY OR ACROSS

16:46 DIFFERENT COUNTRIES COME ACROSS DIFFERENT RATINGS, YOU WOULD ACTUALLY SEE THAT SINCE 2014, THE TOP OF THE RANGE FOR A TRIPLE B PLUS COUNTRY HAS BEEN 160, 170 VS. GERMANY. SO FOR ME AT THAT LEVEL, THERE IS A LOT OF BEARISH FORCES ALREADY AND WE STILL DON’T KNOW WHETHER THEY WILL HAVE THE MAJORITY. WE STILL DON’T KNOW IF THEY WILL DEFER ON THEIR PROMISES. SO IT IS A LOT OF UNKNOWNS. GUY:

17:17 IS THE ISSUE THAT INVESTORS FACE THAT THEY ARE GOING TO BE HOLDING THAT POSITION FOR A LONG TIME? THERE ARE A LOT OF QUESTIONS AND WE ARE NOT GOING TO GET ANSWERS TO MANY OF THOSE QUESTIONS UNTIL WELL INTO NEXT YEAR. YES, I MIGHT BE TRYING TO BUY BECAUSE 160 IS THE SAME PRICE OF THE BULK OF THE RISK. BUT I DON’T THINK WE WILL GET CLARITY ON THAT UNTIL MID 2027. DO I HAVE TO MAKE THAT TRADE NOW, OR CAN I WAIT? CAMILLE: I THINK THAT’S A CHALLENGE BECAUSE IT MEANS THAT YOU WON’T HAVE A RESPONSE TO ALL OF THESE QUESTIONS FOR A LONG TIME.

17:51 AND SO THE MARKET WILL LIKELY REMAIN VULNERABLE AND YOU WILL PROBABLY REMAIN IN A QUITE VOLATILE ENVIRONMENT FOR A WHILE. BUT STILL, TO GO BEYOND THIS SORT OF LEVERAGE, YOU NEED A TRIGGER. ANNA: SO YES, AND FOR THAT REASON I SUPPOSE, EVERYTHING IS BEING WATCHED. THE BUDGET NARRATIVE, THE PROTESTS ON THE STREETS, AND ALL THE OTHER THINGS HAPPENING BETWEEN NOW AND APRIL. YOU TALK ABOUT TRIPLE BE IN THE CONTEXT OF THE RN. DESCRIBE A SITUATION WHERE THEY ARE IN CHARGE AND THEY DO CERTAIN THINGS TO THE BUDGET

18:24 AND THEY ARE NOT ABLE TO OFFSET THOSE BUDGET MEASURES WITH OTHER THINGS. WHAT IS THE SORT OF SCENARIO THAT YOU LOOK AT WHEN YOU THINK ABOUT THE FAR LEFT IN POLITICS? IS THIS A USEFUL FRAME FOR INVESTORS TO THINK ABOUT WHICH SIDE OF POLITICS EQUATES TO WHAT KIND OF DEBT RATING? YOU MENTIONED TRIPLE B, SO WHERE DO WE THINK ABOUT THE FAR LEFT? CAMILLE: FOR US, TRIPLE B IS REALLY THE WORST RATING THAT YOU CAN GET FOR FRANCE AFTER THE ELECTION.

19:00 A SCENARIO WHERE THE FAR LEFT GOVERNS THE COUNTRY, WE ACTUALLY HAVE NOT REALLY ANALYZED IT BECAUSE THE CHANCE FOR IT TO HAPPEN IS VERY NEGLIGIBLE. EVEN MORE SO I THINK AFTER THE PROTESTS IN THE STREETS. ANNA: SO THAT IF THE BIG PICTURE AS WE HEAD TOWARD THE ELECTION. WHEN DO WE LOOK TO GET SOME – WE SPOKE TO A GUEST YESTERDAY WHO SAID IT WILL BE THE MAKEUP OF PARLIAMENT, THE NEXT PARLIAMENT THAT REALLY MATTERS BECAUSE THAT IS WHAT TELLS YOU WHETHER SENSIBLE BUDGETS CAN BE PASSED, WHETHER BUDGET REFORMS CAN TAKE PLACE. WHAT IS THE TIME SCAN ON ALL OF

19:33 THAT? CAMILLE: THE NEXT PARLIAMENT, THE ELECTION WILL MOST LIKELY BE HAPPENING JUNE, SO YOU WILL HAVE A PRETTY GOOD RESPONSE. I STILL HEAR A LOT OF PEOPLE THINKING THAT WE WILL REMAIN IN A POLITICAL DEADLOCK WITH NO MAJORITY. ANNA: SO EVEN AFTER THAT. CAMILLE: WE TEND TO DISAGREE WITH THAT BECAUSE ACTUALLY, IN FRANCE WHEN THERE IS A PARLIAMENTARY ELECTION AFTER A PRESIDENTIAL ELECTION, THE NEW PRESIDENT HAS A VERY STRONG MEMENTO.

20:04 – MOMENTUM. THEY ALWAYS GET THE MAJORITY. IT HAS ACTUALLY NEVER HAPPENED THAT A NEW PRESIDENT WOULD NOT GET THE MAJORITY. ONLY MACRON DURING HIS SECOND MANDATE LOST THAT MAJORITY, BUT IT WAS ONLY BY TEN SEATS AND HE DID NOT EVEN CAMPAIGN DURING THAT TIME WHICH WAS A BIG MISTAKE FROM HIS SIDE. SO I THINK IT SHOWS YOU THAT IF MARINE LE PEN WERE TO BE THE NEW PRESIDENT, I THINK IT IS FAIR TO EXPECT THAT SHE HAS A

20:36 VERY STRONG THE MENTOR HIM AND SO EVEN IN THAT SCENARIO I THINK WE EXPECT A UNIFIED FRONT AROUND HER. GUY: REALLY STRONG JGB OPTIONS TODAY. IS THAT MONEY COMING BACK? WHAT IS HAPPENING IN TERMS OF THE JAPANESE ARE BIG OWNERS OF YOUR EASY BEATS. IS THERE EVIDENCE – OF YOUR EGBS. IS THERE EVIDENCE THAT THERE IS MORE TO COME? CAMILLE:

21:07 SO DATA IS LAGGING, BUT FOR EXAMPLE, WHAT WE’VE SEEN IN JULY AND AUGUST WERE SOME FLOW FROM JAPANESE INVESTORS INTO EGBS, FRANCE INCLUDED. WE ARE STARTING TO SEE MORE OF A SHIFT IN THAT DATA. GUY: THAT’S INTERESTING, SO WE ARE NOT SEEING THAT BY FRANCE. CAMILLE: WE HAVE NOT SEEN THAT YET. GUY: THANK YOU INDEED. NICE TO SEE YOU. WHAT ELSE DO YOU NEED TO KNOW THIS TUESDAY MORNING?

21:39 PRESIDENT TRUMP SAYS HE’S GOING TO MEET VLADIMIR PUTIN AND PRESIDENT XI AFTER THE WALL STREET JOURNAL REPORTS THAT MOSCOW IS PUSHING FOR A SUMMIT BETWEEN THE THREE LEADERS. TRUMP SAID HE WOULD LOOK TO FOCUS ON DENUCLEARIZATION EFFORTS WHILE PUTIN INDICATED HE WANTS TO TALK ABOUT UKRAINE. >> I WOULD DO IT. NOT SO MUCH FOR UKRAINE, I THINK RUSSIA FRANKLY HAS BEEN FINE WITH UKRAINE. THE SAME THING WITH CHINA. BUT WE WOULD HAVE TO TALK ABOUT NUCLEAR WEAPONS. DENUCLEARIZATION.

22:10 GUY: VOTERS IN ALBERTA, CANADA HAVE VOTED TO REJECT SEPARATION FROM CANADA ACCORDING TO A PROJECTION FROM THE CANADIAN BROADCASTING CORPORATION. WITH AROUND ONE MILLION VOTES COUNTED, ROUGHLY 76% WERE IN FAVOR OF REMAINING AS PART OF THE COUNTRY. AND THE U.K. CHANCELLOR JOHN HEALEY HAS ROLLED OUT INCREASE IN CAPITAL GAINS IN THE BUDGET. IT COMES AFTER THE CHANCELLOR WAS PREVIOUSLY REPORTED TO HAVE RULED OUT EQUALIZING THE CAPITAL GAINS AND INCOME TAX RATES.

22:42 I THINK WE CAN NOW EXCLUDE THAT, SO WHERE IS THE REVENUE RAISING EXERCISE GOING TO BE, ANGST? – BANKS? ANNA: WE DON’T KNOW, BUT WE HAD HAD FEWER BLOOMS, – TRIAL BALLOONS, BUT WE ARE STARTING TO GET INTO THE PERIOD WHERE WE GET MORE TRIAL BALLOONS. THERE ARE LIMITED PARALLELS BETWEEN VARIOUS PARTS OF EUROPE BUT THERE ARE SOME PARALLELS AND YOU GET GOVERNMENTS ALL OVER THE PLACE TRYING TO WRESTLE WITH BUDGETS. I WAS JUST WONDERING, WE GOT THE U.S.

23:13 10 YEAR THAT HAS COME BACK DOWN FROM WHERE EVERY DATU IN THE LAST COUPLE OF WEEKS, TO 5.11 AND I’M WONDERING WHETHER THAT YIELD STORY IS HELPFUL TO ALL OF EUROPE, IF IT CAN COME BACK DOWN TOWARD FIVE OR AT LEAST NOT GO BACK TO THOSE ELEVATED LEVELS. WHETHER THAT MAKES LIFE EASIER IN EUROPE ON MANY FRONTS. GUY: THERE’S DEFINITELY A TRANSLATION EFFECT ACROSS THE ATLANTIC. I JUST WONDER IF GILTS COULD DO BETTER AS WELL. IF HEALY DOES VERY LITTLE, WILL THE GILTS BENEFIT? ANNA: I THINK BEIGE WAS THE WORD THAT ONE ANALYST USED. WE WILL SEE.

23:50 COMING UP, WE WILL DISCUSS THE OUTLOOK FOR THE SECTOR. SOCGEN’S MANISH KABRA WILL BE HERE TO TALK ABOUT U.S. EQUITIES. THIS IS BLOOMBERG. GUY: TUESDAY MORNING, GOOD MORNING. HALF AN HOUR TO GO INTO RESTART EQUITY TRADING IN EUROPE. THE PICTURE IN EUROPE, DOWN BY HALF OF 1%. SOME OF THE MARKETS ARE LOOKING A LITTLE BIT BETTER.

24:23 FTSE HAS GONE DOWN 0.5%. THAT IS THE PICTURE THAT WE ARE LOOKING AT. ACTUALLY, IT IS HALF OF 1% PRE-MUCH ACROSS THE BOARD. U.S. FUTURES ARE INTERESTING. YOU’VE CERTAINLY SEEN THE NASDAQ EVEN IF YOU’RE JUST COMING SOFTER, LAST I CHECKED WE WERE DOWN FOR TENS OF 1%. THE TECH TRADE STARTING TO STABILIZE A BIT. ANNA: MAYBE STABILIZATION IS GOOD IN THE CURRENT CONTEXT. SEE SOME STABILIZATION THERE PERHAPS, CERTAINLY AFTER YESTERDAY WHEN WE SAW THAT SPREAD OF FRANCE OVER GERMANY.

24:55 TODAY WE ARE A LITTLE MORE STABLE. IN FACT, WE’VE SEEN THE FRENCH BOND YIELD COMING BACK IN A LITTLE BIT, DOWN BY THREE BASIS POINTS WHILE GERMANY IS DOWN BY JUST 1.5%. THAT MEANS THE SPREAD IS A LITTLE NARROWER. LET’S TALK ABOUT TECH BECAUSE THIS IS ANOTHER AREA OF FOCUS FOR US THIS WEEK OF COURSE. TECH SHARES FACE RENEWED PRESSURE TODAY AS INVESTORS WAY KEY U.S. EARNINGS THAT WILL TEST THE UNDERLYING STRENGTH OF YESTERDAY’S REBOUND IN CHIP STOCKS. WE’RE JOINED NOW BY MANISH KABRA OF SOCGEN. I SUPPOSE THAT

25:30 IS THE QUESTION GOING INTO THIS WEEK, WHERE WE DO START TO GET SOME HEADWAY TECH NAMES REPORTING. CAN WE REBUILD CONFIDENCE IN THE TECH TRADE BOTTOM UP RATHER THAN THE TOP DOWN WORRIES THAT WE’VE BEEN EXPERIENCING OF LATE? MANISH: I THINK SO. I THINK THE WHOLE AI FOODCHAIN THAT WE CALL IT FROM HYPERSCALER CAPEX FEEDING INTO SHIPS, FEEDING INTO FOUNDRIES, FEEDING INTO SEMI ACUMEN, THE WHOLE VALUE CHAIN STILL HAS TREMENDOUS TAILWIND. WE HAVE SEEN HYPERSCALERS KEEP

26:05 GIVING THE MESSAGE THAT WE HAVE NOT SATURATED THE DEMAND SIDE OF THE EQUATION AND GIVEN WE HAVE NOT SATURATED DEMAND SIDE OF THE EQUATION, WE ARE STILL ACCELERATING. AND GIVEN THAT IS THE CASE, I THINK THERE WOULD BE ENOUGH MICRO SIGNALS TO SUGGEST WE SHOULD BE BOTTOMING OUT ON THE U.S. ANNA: SO DOES THAT MEAN THAT THE CAPEX IS ALL WELL SPENT? FOR BECAUSE THERE ARE ONGOING CONCERNS THAT THOSE THINGS MIGHT BE TRUE THAT YOU DESCRIBED, BUT MAYBE THE COMMITMENT ARE JUST TOO BIG OR

26:36 AT LEAST, TO QUICK. THERE ISN’T THE REVENUE TO JUSTIFY THEM. MANISH: A LOT OF THE CAPEX HAPPENS ON FUTURE EXPECTATIONS, FUTURE ORDERS. ESPECIALLY FROM HYPERSCALERS THAT ARE GOING TO REPORT THIS WEEK, YOU WANT TO MAKE SURE CLOUD REVENUE FROM THEM IS ON THE ACCELERATION PATH, WHICH CLOUD REVENUE GROWTH FROM THE BIGGEST HYPERSCALERS HAS STILL BEEN AN UPTREND, EVEN LAST QUARTER.

27:07 THE SECOND THING I THINK WHICH IS VERY CRUCIAL, APS IS NOT THE MOST IMPORTANT FACTOR. CDS SPREADS, ONE OF THE BIGGEST HYPERSCALERS LAST QUARTER SAID THEY WILL STAY CASH POSITIVE NEXT YEAR. MARKET WILL STABILIZE. I THINK THAT IS THE MESSAGE IF WE GET FROM ONE OTHER HYPERSCALER, ACTUALLY GETS CONVICTION ON THE AI ECOSYSTEM AND AI TRADE. GUY: FOR HOW LONG? MANISH: USUALLY WE SAY ON THESE BIG

27:45 CYCLE BIG BOOMS, USUALLY WHAT GETS BREAKING ALL OF THESE THINGS IS THE BIG BOND MARKET. AND USUALLY, WHENEVER THE FED IS HIKING FOR THE FIRST FEW MONTHS, THE MARKET IS FULLY TACTICAL, IS VERY SHORT-TERM FOCUSED. I THINK FOR HOW LONG IT DEPENDS OF K-SHAPED CONSUMER, K-SHAPED COMPANIES, WE DON’T HAVE A K-SHAPED FED POLICY. I THINK OUR TAKE IS IN Q1 NEXT YEAR, INFLATION DATA STARTS

28:20 COMING BACK. PEAK INFLATION SIGNALS HAPPEN AND WE WILL SEE THE LAST FED HIKE LATEST BY MARCH NEXT YEAR. THAT IS OUR MAIN CONDITION FOR THE MARKETS, TO MAKE SURE THIS AI TRADE HAS LONGEVITY WHICH THE FED WILL NOT GET AHEAD OF THE CURVE IN THIS CYCLE. GUY: DO WE GET 6%? MANISH: IT IS A MASSIVE RISK. GUY: WHY MASSIVE? MANISH: WHENEVER BOND YIELDS HAVE GONE UP TO 100 BASIS IN SHORT-TERM, WE HAVE ALWAYS SEEN A CREDIT EVENT.

28:51 WHEN I SAY CREDIT EVENT, IT CAN BE MAJOR DEFAULT CYCLE. WHEN THE MAJOR DEFAULT CYCLE HAPPENS, MAY BE AT THAT POINT WHAT IS NEEDED FOR THE FED TO REVERSE. WHENEVER A DEFAULT CYCLE HAPPENS, MARKETS START THINKING IS A MICRO EVENT OR MACRO EVENT? SO FAR, COREWEAVE IS A MICRO EVENT RATHER THAN MACRO. THIS IS WHAT WE ARE SEEING IN HIGH-YIELD SPREADS AND THEY HAVE GONE UP. THE LONGER TERM PICTURE CHART IS BARELY EVEN ABOVE AVERAGE LEVEL, ACTUALLY BELOW AVERAGE FOR THE LAST FIVE YEARS, 10 YEARS, 20 YEARS. ANNA: IT DOESN’T SEEM LIKE WE NEED TO

29:26 GO TO 6% TO CAUSE DAMAGE TO THE TECH TRADE, DO WE? IF I’M JOINING THE RIGHT DOTS, AND MAYBE I’M NOT. BUT IN THE LAST COUPLE OF WEEKS, BEGINNING OF OCTOBER WE SAW 5.1 3 – SORRY, 5.3% ON THE U.S. 10 YEAR AND THEN AFTER THAT WE HAD ALL THIS DRAMA AROUND SOME OF THE MORE LEVERAGED AREAS OF THE AI TRADE. HAVE WE FOUND THE PAIN POINT OR DO YOU THINK THE PAIN POINT, IF WE GET BACK TO THIS KIND OF LEVELS, THE PAIN JUST STAYS WHERE WE’VE SEEN IT ALREADY IN THOSE VERY LEVERAGED WAYS? MANISH: THIS IS WHAT MARKET DOES WHENEVER BOND YIELDS GO BEYOND

29:57 CERTAIN PRESSURE POINTS. THE FIRST LEVEL OF THE RISE IS WHERE WE GOT THE 5%. MARKET TAKES THE WEAKEST BALANCE SHEETS, WEAKEST ENTITIES. THIS IS WHAT WE’VE SEEN AT THIS POINT. IT IS STILL WAY MORE VISIBLE ACROSS AMERICA, ESPECIALLY CORPORATE AMERICAN COMPANIES. THEY STILL HAVE THE HIGHEST INTEREST COVERAGE RATIO, THE BEST BALANCE SHEETS, HIGHEST

30:28 INTEREST COVERAGE RATIO. STILL LOWER COST OF BORROWING ACROSS GOVERNMENT POLICIES. ANNA: ADMITTEDLY THEY ARE INCREASING, BUT IF A SECTOR HAS LOW LEVELS, WHY DOES CBS MATTER AS MUCH AS YOU SAY? MANISH: CBS MATTERS AS THERE HAS BEEN INVERSE RELATIONSHIP OF VALUATIONS OF HYPERSCALERS AND THE CDS SPREADS. CBS SPREAD FOR HYPERSCALERS HAVE DOUBLED IN THE LAST ONE YEAR AND VALUATIONS HAVE GONE DOWN 14% DURING THIS PERIOD.

31:02 THE MESSAGE THAT WE GOT FROM ONE OF THE LARGEST HYPERSCALERS, IF YOU GET THAT METHOD FROM UNDER HYPERSCALER, I THINK WE ESTABLISH A RE-RATING PHASE OF THE AI TRADE. GUY: WE WILL WATCH IT VERY CAREFULLY. NICE TO SEE YOU, THANK YOU FOR COMING TO SEE US. WHAT WE ARE GOING TO DO NEXT, WE ARE GOING TO TALK GERMANY. FRIEDRICH MERZ SAYS EUROPE WILL TACKLE ITS IMBALANCES.

31:33 >> WE DON’T WANT A TRADE WAR WITH CHINA. A VERY CLEAR POSITION FROM ALL 27 HEADS OF GOVERNMENT IN THIS GROUP THAT WE HAVE TO GIVE AN ANSWER TO IMBALANCES, TO OVERCAPACITY, TO SUBSIDIES, TO UNDERVALUED CURRENCIES. AND THAT WE ARE FEELING STRONG ENOUGH TO COME INTO A DISCUSSION. GUY: MORE ON THAT CONVERSATION AFTER THIS BREAK. 38 MINUTES PAST THE HOUR.

32:08 THIS IS BLOOMBERG. ANNA: WELCOME BACK, THIS IS “THE OPENING TRADE.” 18 MINUTES OR SO TO GO INTO THE START OF CASH EQUITY TRADING. FUTURES PICTURE LOOKS PRETTY NEGATIVE. IT LOOKS AS IF WE WILL HAVE ANOTHER DAY OF NEGATIVITY AHEAD

32:39 OF US. AS THIS TARGETING INTO EARNINGS SEASON. GUY: A KEY COUPLE OF DAYS COMING UP FOR THE GERMAN CHANCELLOR. HE HAS WARNED AGAINST COMPLACENCY OVER THE DANGER POSED BY RUSSIA AND IN AN EXCLUSIVE INTERVIEW WITH BLOOMBERG, THE GERMAN LEADERS AS PRESIDENT PUTIN IS SEEKING NOT ONLY TO DEFEAT UKRAINE, BUT TO UNDERMINE DEMOCRACY IN EUROPE. CHANC. MERZ: MY BIGGEST CONCERN IS THE UNDERESTIMATED RUSSIAN IMPACT

33:15 ON OUR SOCIETIES, WHICH HAS TO DO WITH THE WAR IN UKRAINE, THIS IS ONLY A PART OF THE PICTURE. THE BIG PICTURE IS THAT RUSSIA IS ON THE WAY TO DESTABILIZE THE ENTIRE POLITICAL ORDER OF OUR EUROPEAN CONTINENT. AND THIS IS OBVIOUSLY UNDERESTIMATED BY MANY PEOPLE IN MY COUNTRY AS WELL. FRANCINE: IN WHICH WAY? CHANC. MERZ: THEY DON’T SEE WHAT THE GOAL OF RUSSIA REALLY IS.

33:46 THIS IS NOT ONLY TERRITORIAL GAIN IN UKRAINE. THIS GOES FAR BEYOND, AND THEY ARE FEARING DEMOCRACY, THEY ARE FEARING OPEN SOCIETIES, THEY ARE FEARING THE SUCCESS OF EUROPEAN INTEGRATION, AND THEY WANT TO UNDERMINE THIS SUCCESS. AND THEY ARE ON THE WAY TO DO SO. AS I SAID, MANY PEOPLE INCLUDING MY OWN COUNTRY ARE UNDERESTIMATING THE THREAT, WHICH IS REALLY THERE EVERY DAY. FRANCINE: AND HIS THAT ENABLED BY THE U.S.? CHANC. MERZ:

34:18 WELL, THE U.S. IS TERRITORIAL FAR APART FROM RUSSIA. THIS IS OUR CONTINENT, RUSSIA IS A EUROPEAN COUNTRY AND THIS IS THE EUROPEAN COUNTRY WHICH IS UNDER THREAT AND THAT IS MY CONCERN. GUY: THAT WAS OF COURSE THE GERMAN CHANCELLOR FRIEDRICH MERZ SPEAKING EXCLUSIVELY TO FRANCINE LACQUA IN BERLIN. THAT WAS YESTERDAY EVENING. FRAN IS UP BRIGHT AND EARLY THIS MORNING TO JOIN US ONCE AGAIN. GOOD MORNING.

34:49 DOES FREDERICK MERTZ CE EUROPE GETTING BETTER PREPARED FOR THIS RUSSIAN THREAT? WHAT IS THE STATE OF PLAY? ARE WE PREPARED OR NOT PREPARED? FRANCINE: HE SAYS WE NEED TO STICK TOGETHER IF WE ARE GOING TO BE MORE PREPARED. FIRST OF ALL, WE SPOKE FOR JUST OVER 22 MINUTES AND TALKED ABOUT CHINA, TALKED ABOUT TRADE, TALKED ABOUT THE U.S., TALKED ABOUT IRAN, AND IT WAS INTERESTING FOR ME WHEN I ASKED HIM BUT OUT OF ALL OF THIS, WE TALKED ABOUT UKRAINE, OUT OF ALL OF THIS, WHAT REALLY WORRIES YOU THE MOST?

35:26 WE ARE UNDERESTIMATING RUSSIA, UNDERESTIMATING NOT BECAUSE WE DON’T KNOW THAT THEY WANT TO TAKE OVER UKRAINE, IT’S BECAUSE HE THINKS RUSSIA IS TRYING TO UNDERMINE WESTERN DEMOCRACY. WE KNOW ALSO THAT RUSSIA HAS TAKEN GERMANY AND ITS SITES, THERE WAS THAT EVENT IN AUGUST AT THE AIRPORT WHERE THERE WAS AN ATTACK THAT THEY THINK RUSSIA WAS BEHIND IT. BUT HE BASICALLY SAYS THAT WE NEED TO REMIND OURSELVES OF THAT. AGAIN, IF YOU LOOK AT GERMAN CONTRIBUTION TO DEFENDING UKRAINE AGAINST RUSSIA, THEY ARE DEFINITELY THE BIGGEST CONTRIBUTORS. HE SAID THE U.S.

36:00 FOR A VERY LONG TIME HASN’T CONTRIBUTED FINANCIALLY TO IT, AND SO HE DIDN’T HAVE TO DO A, B OR C. HE SAID WE NEED TO STICK TOGETHER AND MAKE SURE THAT THIS DOESN’T GET OUT OF HAND. ANNA: AND I KNOW YOU TALKED ABOUT THE GERMAN INVESTMENT LANDSCAPE AS WELL, WHETHER THAT IS TECH GIANTS COMING IN OR INVESTMENT FIRM ELSEWHERE. WHAT STOOD OUT TO YOU IN THAT CONVERSATION? FRANCINE: THIS IS THE FIRST INVESTMENT SUMMIT THAT GERMANY IS ORGANIZING. IT’S BEEN TWO OR THREE YEARS AND THE U.K. PUT SOMETHING TOGETHER.

36:34 WE KNOW THAT FRANCE EVERY SUMMER HAS AN EVENT WITH THEY BASICALLY INVITE INVESTORS FROM AROUND THE WORLD BE IT AI INVESTORS, BE AT SOME OF THE PRIVATE EQUITY FIRMS OR WALL STREET FIRMS TO REALLY SHOWCASE OUR COUNTRY SO THAT THEY COME IN WITH PRIVATE INVESTMENT AND HELP THE COUNTRY GROW. GERMANY HAS A BIG GROWTH PROBLEM OR AT LEAST FOR ATTRACTING PRIVATE INVESTMENT. THE CHANCELLORSHIP IS ALSO UNDER QUITE A LOT OF PRESSURE BECAUSE HE HAS THE RISE OF THE LEFT REALLY UNDERMINING HIS ADMINISTRATION, HIS POLLS AREN’T GREAT. I THINK THIS IS ALMOST A

37:08 LAST-DITCH ATTEMPT TO GET PRIVATE INVESTMENT MOVING. IT WAS INTERESTING THAT HE REALLY POSITIONED GERMANY AS BEING A KIND OF FACTORY FLOOR AI MASSIVE INVESTMENT IN THE SENSE THAT LOOK, EUROPE DOESN’T HAVE LLMS. YOU COULD ARGUE EUROPE IS REALLY BEHIND IN EVERYTHING TO DO WITH AI. WHAT HE IS TRYING TO POSITIONED GERMANY AS IS WE HAVE A LOT OF THE CARMAKERS IN MANUFACTURING AND AI CAN FULLY HELP THAT SUPPLY CHAIN. IT DOES BECOME MUCH MORE EFFICIENT. WE ALSO SPOKE A LITTLE ABOUT

37:41 CHINA. IN FEBRUARY HE DID A TRIP TO CHINA WHERE HE WAS ACTUALLY PRO- CHINA SAYING WE NEED THIS BIG COUNTRY TO DO A LOT OF BUSINESS WITH OUR TRADING BLOCK AND AFTER LAST WEEK AND THE FACT THAT THE E.U. VOTED TO HAVE THIS BIG TOOL TO TRY TO COUNTER CHINA, THERE WERE SUBSIDIES OR THINGS THAT THEY THOUGHT WAS UNFAIR, HE HAS COOLED OFF ON CHINA A LITTLE BIT. WE ARE ALREADY IN A TRADE WAR AND HE STILL HOPE THAT CHINA CAN COME BACK TO THE TABLE. GUY: FRANCINE, FANTASTIC INTERVIEW, THANK YOU INDEED. WE WILL BE BACK TOMORROW FROM

38:15 THE BERLIN GLOBAL DIALOGUE. SHE’S GOING TO BRING THIS CONVERSATION WITH THE BLACKROCK CHAIR. THAT CONVERSATION JUST AFTER 7:00 A.M. ANNA: CAN WE LINGER ON GERMANY FOR A MOMENT BECAUSE FRANCINE WAS SAYING THERE IS A LOT TO THINK ABOUT WHEN IT COMES TO THE INVESTMENT LANDSCAPE AND AS YOU POINTED OUT, THIS FOCUS ON THIS EVENT TAKING PLACE OVER IN GERMANY. BUT STOPPING SHORT OF SAYING THEY WANT A TRADE WAR WITH CHINA. MAYBE YOU WOULDN’T EXPECT ANYTHING ELSE FROM A EUROPEAN. THE EUROPEANS ARE STILL KEEN TO TRY TO DO THINGS BY SOME KIND

38:46 OF BOOK. BY SOME KIND OF RULES. GUY: THE EUROPEANS ARE GOING TO CONTINUE TO DO THAT. ANNA: WE SAW THAT EVIDENCED WITH CHINA RECENTLY. LET’S TURN OUT TO THE MARKETS IN THREE MINUTES ON THE OPENING TRADE. PAUL, TECH DID OK IN THE U.S. SESSION YESTERDAY. WHAT HAPPENED IN ASIA? PAUL: GOOD MORNING. WELL, IN TERMS OF BAD NEWS REALLY IN ASIA, WE WERE HIT IN

39:21 THE OPEN BY A BIG SLIDE IN THIS COMPANY CALLED ELLIS WHICH HAD JUST DONE AN IPO. IT’S A DATA CENTER-RELATED COMPANY, A NEO-CLOUD OPERATOR AND IT FELL 33%, THE MOST EXTREME FROM ITS DEBUT PRICE ON ITS FIRST DAY OF TRADING. A SOUTH KOREAN COMPANY, THERE’S BEEN VERY STRONG RETAIL BIDDING INTO IT SO THEY WERE LEFT PROBABLY CARRYING THE CAN FOR THIS, BUT THIS NEGATIVE

39:52 SENTIMENT THAT WE’VE SEEN AROUND FUNDRAISING EFFORTS FROM THIS KIND OF COMPANY RECENTLY, THINKING ABOUT AUSTRALIA, THINKING ABOUT SOME OF THE PUSHBACK, THE DELAY TO THE IPO FOR AIR TRUNK. SO THAT CREATES A LITTLE BIT MORE OF A CLOUD HANGING OVER THE TECH SECTOR AND INDEED, WE SAW MARKETS IN ASIA FALLING AS A RESULT AFTER THE GAINS IN THE PREVIOUS SESSION. GUY: PAUL, SUPERSTRONG 20 YEAR JGB OPTION TODAY.

40:29 PAUL: THAT IS A HARD ONE. THERE IS SOME VERY INTERESTING STUFF HERE. THE RATIO IS THE HIGHEST THAT WE’VE SEEN. I THINK THAT TELLS YOU THAT THERE IS A STRONG BID FOR JAPANESE GOVERNMENT BONDS EMERGING AS WE MOVE INTO THE SECOND HALF OF THE FINANCIAL YEAR. WHAT WE ALSO NOTICED WAS THAT A CATEGORY OF BIDDERS CLASSIFIED AS UNKNOWN IN THE AUCTION, WHICH EXCLUDES BANKS, POINTS TO THE PRESENCE OF SOME KIND OF

41:03 INVESTMENT FUNDS, EITHER INSURERS OR PENSION FUNDS SNAPPING THESE UP. THAT IS DEMAND BEYOND WHAT IS NORMAL. SO WE’VE BEEN HEARING THE DISCUSSIONS IN SOME OF THE CONFERENCES THAT THE MONEY MANAGERS HAVE BEEN HOLDING RECENTLY, THE INSURERS, SUGGESTING THEY ARE GOING TO MOVE MORE MONEY BACK INTO JAPANESE GOVERNMENT DEBT. SO MAYBE THIS IS A SIGN THAT IS FINALLY STARTING TO HAPPEN. ANNA: WE’VE BEEN TALKING ABOUT THAT IS SOMETHING THAT COULD RESULT IN LESS DEMAND FOR TREASURIES, HIGHER YEN MAYBE.

41:36 ARE WE SEEING THAT HAPPEN, WHAT IS THE STORY MORE BROADLY? PAUL: I THINK EUROPEAN GOVERNMENT BONDS IN THE EURO IS WHERE WE MIGHT BE SEEING THAT EXPRESSED A LITTLE BIT MORE. OBVIOUSLY YOU KNOW BETTER THAN I DO THAT THE FRENCH MARKET IN PARTICULAR HAS BEEN UNDER A GOOD DEAL OF PRESSURE, THAT IS HAPPILY OWNED BY JAPANESE INVESTMENT FIRMS. WHAT WE’VE SEEN IS THAT THE EURO IS DOWN AGAINST ALL ASIAN CURRENCIES OVER THE PAST MONTH, SO THERE IS SOME KIND OF UNDERPERFORMANCE GOING ON IN THE EURO AREA RELATIVE TO ASIA.

42:07 COULD IT BE SOME OF THESE FLOWS MOVING BACK HOME AGAIN? THAT IS WHAT EVIDENCE SUGGESTS. GUY: PAUL, THANKS, REALLY APPRECIATE THE UPDATE ON WHAT IS GOING ON OUT THERE. TIME FOR THE FEW STOCKS THAT WE NEED TO BE PAYING ATTENTION TO THIS MORNING. >> LET’S KICK OFF WITH SNYDER ELECTRIC. THIS IS THE STORY OF A $6 BILLION SHARE ISSUANCE

42:39 OVERNIGHT. THEY OF COURSE ARE LOOKING TO COMPLETE A $22 BILLION ACQUISITION OF THE U.S. SOFTWARE FIRM PTC. WE ARE SEEING THEM DOWN PREMARKET AS YOU WOULD EXPECT FROM AN ISSUANCE LIKE THAT, BUT THE BROADER PLAY HERE IS SCHNIDER WORKING TO BRING IN PTC TO HELP THEM WITH THE SOFTWARE SIDE OF THE AUTOMATION. THE REMIT IS HELPING COMPANIES WORK OF THOSE GOALS. YOU CAN SEE THE BROADER PLAY HERE. THE REAL MARKET REACTION ONCE THOSE SHARES HAVE BEEN ABSORBED.

43:09 SCHNIDER UP AROUND 8%. LET’S FLIP THE BOARD AND GO TO THE REAL ESTATE SECTOR. THE POLISH-GERMAN HOMEBUILDER. THIS IS AN INTERESTING ONE. THIS MORNING WE ARE GETTING GOLDMAN HAVING INITIATED A BUY, SAYING THERE IS A SENSE THAT THE STRONG BALANCE SHEET PUSHED INTO POLAND COULD SEE AN UPSIDE FROM HERE ON.

43:41 WHILE YEAR-TO-DATE DOWN THE RENT 22%, GOLDMAN SEEING A GOOD ENTRY POINT HERE. FINALLY, WE’VE HAD TWO CUTS THIS MORNING, THE BROADER STORY HERE IS THE LEGACY IN EUROPE, THOSE DELAYS OVER CONSOLIDATION SEEN AS THE HOLY GRAIL FOR THE LEGACY PLAYERS. THE PRESSURES HERE UP AROUND 22%, BUT THIS CUT TODAY LEAVES

44:18 THEM AROUND SEVEN BUY, SIX HOLD, SIX CELL. MUSK STARLINK, THAT CUT THIS MORNING REFLECTING SOME OF THE CHALLENGES THAT THE LEGACY NAMES ARE FACING IN EUROPE. ANNA: I’LL ADD ANOTHER TO THE LIST AND THAT IS ABB, THE ENGINEERING BUSINESS REPORTING THIRD-QUARTER ORDERS THAT CAME IN BETTER THAN EXPECTED. DEMAND FOR ELECTRIC COMPONENTS USED IN DATA CENTERS AND

44:52 UTILITIES. I SPOKE TO THE CHAIRMAN JUST AT THE END OF SEPTEMBER AND 10% THE BUSINESS ROUGHLY AS DATA CENTERS AND THE REST IS AUTOMATION, ELECTRIFICATION, WHICH ARE STILL THEMES THAT HAVE BEEN RUNNING ON REALLY STRONGLY THAT EUROPE HAS A STRENGTH IN. GUY: IT’S PROBABLY A BIGGER CIRCLE AROUND THAT WHICH IS UTILITIES PROVIDING. ANYWAY, FUTURES FAIRLY MIXED THIS MORNING. A LITTLE NEGATIVE. WE WILL BE THERE IN A MOMENT.

45:22 WE ARE FIVE MINUTES AWAY. THAT’S NEXT. THIS IS BLOOMBERG. GUY: TUESDAY, 20TH OF OCTOBER. TWO MINUTES TO GO UNTIL WE START TRADING IN EUROPE. CASH EQUITY TRADING EXPECTED TO

45:54 BE NEGATIVE. ONE OF THE REASONS FOR THAT COULD BE THIS, A LITTLE BIT OF A GAP THAT STILL NEEDS TO BE PRICED OUT OF THE U.S. SESSION YESTERDAY WHICH WAS LARGELY PRETTY POSITIVE. THERE IS A BIT OF PUSH AND PULL. FUTURES ARE NEGATIVE AND IS ALSO THE OVERNIGHT SESSION OUT OF ASIA WHICH WAS CERTAINLY QUITE NEGATIVE FOR TECH AND MAY BE LOOKING AT THE JGB OPTION, A KIND OF FEAR CREEPING INTO THE NARRATIVE WHICH IS WORTH PAYING ATTENTION TO. THIS MORNING WE HAVE A LITTLE BIT OF DOWNSIDE AND SOME

46:27 INDIVIDUAL SINGLE STOCKS. ANNA: LET’S DELVE INTO SOME OF THOSE INDIVIDUAL STOCKS AND START WITH SCHNEIDER ELECTRIC. ALL OF THAT ADDS UP TO 6 BILLION EUROS, AND THAT IS BECAUSE THEY ARE TRYING TO FUND THEIR DEAL FOR PTC. WE WILL LOOK FOR SOME MOVEMENT IN THE SHARE PRICE CONNECTED TO

46:58 THAT. ABB WE TALKED ABOUT, SOME OF THOSE NUMBERS LOOKING BETTER-THAN-EXPECTED. DATA CENTERS HELPING TO FUEL THE JUMP IN ORDER THAT WE ARE SEEING AND THOSE ORDERS CAME IN BETTER-THAN-EXPECTED OVER AT PARTICULAR ENGINEERING BUSINESS. AND ALSO WATCHING THE MINING SPACE, ANGLO AMERICAN BOOSTING ITS DIAMOND PRODUCTION FORECAST, JUST ONE OF THE LINES COMING THROUGH FROM THEM. ALSO GETTING MORE DETAIL AROUND COPPER PRODUCTION, 760,000 TONS.

47:29 GUY: LET’S PUT THAT ALL LONDON’S GOING TO BE INTERESTING. THAT WILL BE ONE OF THE MORE INTERESTING MARKETS TO LOOK AT. MINERS, THE OIL STOCKS AND BANKS OF INTEREST THERE. THE FTSE 100 FLAT AT THE GET-GO EXPECTING HALF A PERCENT OR

48:00 MAYBE LOWER FOR SOME OF THE OTHER EUROPEAN MARKETS. CAC, DARK ABE EX. – DAX,IBEX.HOW ARE THEY GOING TRADE? THEIBEX DOWN BY .3%. ANNA, WHAT DOES THE SECTOR STORY LOOK LIKE? ANNA: MUCH MORE EVENLY SPLIT TODAY. YESTERDAY THE ONLY SECTOR

48:31 HIGHER WAS TECHNOLOGY. EVERYTHING ELSE WENT LOWER. THE ONCE HIGHER ARE LED BY HEALTHCARE. DOES THAT TELL US SOMETHING ABOUT RISKE APPETITE. THE EQUITY MARKET DOWN .2%. HEALTHCARE IS THE BEST PERFO PERFORMER. PERSONAL CONSUMER DISCRETIONARY GROCERY STORES ONE OF THE SECTORS THAT IS MOVING HIGHER. THAT DOESN’T SPEAK THE A HUGE AMOUNT OF RISK APPETITE MORNING. BASIC RESOURCES, WE WERE WATCHING SOME OF THESE AS A RESULT TO HAVE UPDATE. ANGLO AMERICAN, YES, THERE IS

49:06 SOME MOVEMENT THERE ON THE BACK OF THOSE NUMBERS UP 2.2. %. TECHNOLOGY, THAT SECTOR IS ONE OF THE WORST TODAY. DROPPING TO THE BOTTOM OF THAT BASKET. ASML DOWN. GUY: IT IS A DATA CENTER IT LOOKS LIKE. LOOKING FAIRLY POSITIVE. ABB DOWN BY 4% THIS MORNING ON THE BACK OF ITS NUMBERS. THE OVERLAY OF DATA CENTER CONCERNS. SCHNEIDER DOWN.

49:38 WE KNOW THE ISSUANCE IS COMING. MARK IS THE BIGGEST DROP THERE. SIEMENS IS DOWN AGAIN. AIRBUS DOWN AGAIN. SOME OF THE OTHER TECH NAMES. ANNA: ABSOLUTELY. IT IS INTERESTING WE ARE SEEING THIS WEAKNESS IN ABB. WE GET A SENSE ON PLACES, IT WASN’T A ESG SUGGESTION THAT IT WOULD BE DOWN HEAVILY AT THE START OF TRADE. MAYBE THERE IS A BIT OF A DATA CENTER THEME COMING THROUGH

50:10 HERE. LET’S TALK ABOUT THE BROADER ENVIRONMENT. JOHN BUILTON JOINS US. JOHN, VERY NICE TO HAVE YOU. TAKING STOCK OVER THE TECH TRADE. THE AI TRADE. LAST WEEK, WAS QUITE TORTURED. PEOPLE LOOKING FOR THE TECH STOCK, THOUGHT THEY FOUND THEM AROUND THE DATA CENTER BUILDING BUSINESSES AND YESTERDAY LOOKED BRIGHTER ON WALL STREET AND

50:41 TODAY IN ASIA LOOKS GLOOMY AGAIN. HOW ARE YOU FEELING ON THE BRIGHTNESS TO GLOOMINESS. >> MOTHER TOLD ME THERE WOULD BE DAYS LIKE THIS. WHEN YOU STEP BACK, THAT’S WHEN HE WHAT WE HAVE BEEN DOING FOR THE PAST FEW WEEKS. WE’RE TAKING A – LET’S TAKE A STEP BACK. LET’S TAKE A 10-YEAR VIEW. WITH WHERE IS TECHNOLOGY GOING? GROWING 6% TO 40%. ADDRESSING THROUGH THE

51:13 TECHNOLOGY WAY SIGNIFICANT UNDERNIGHT PRODUCTIVITY. AND OF COURSE THIS BIG THING WHICH ALL OF US PHOENIX, POPULATION AGING WHICH TAKES A CHUNK OUT OF GROWTH. WHEN I LOOK AT THE NOISE AROUND THINGS LIKE DATA CENTERS, IT IS IRRATIONAL. WE’RE BUILDING TOMORROW. WHAT PEOPLE ARE WORRIED ABOUT IS WE’RE GOING TO BE PUTTING FIRMS IN COMPETITION WITH ONE ANOTHER. WE DON’T SEE INVEGAS DISCIPLINE. THAT WILL COME THROUGH. THERE WILL BE VOLATILITY LIKE THERE IS TODAY.

51:47 WHAT WE SHOULDEN TAKE AWAY FROM THE FACT, A SUBSTANTIAL BOOST TO PRODUCTIVITY COMING FROM THE TECH TRADE OVER THE HORIZON THIAZIDE AS MUCH AS 50%. ANNA: SO MANY CHEMICAL WEAPONS THEN JOHN. YOU TALKED ABOUT 40% TASK AUTOMATION. VERY NICE TO TAKE 10-YEAR VIEW. SOMETIMES GET LOST IN THE DAY-TO-DAY. IS THIS TECHNOLOGY GOING TO BE AS GOOD AS THAT? >> WE THINK IT IS. THERE ARE EARLY SIGNS WHERE IT

52:18 DESCRIBE DEPLOYED. THINGS LIKE SOFTWARE AND DOCUMENT AUTOMATION. THAT TYPE OF STUFF. WE’RE BEGINNING TO SEE REVENUES COME THROUGH PARTICULARLY THE SOFTWARE BUILDOUT. WHAT WE’RE ULTIMATELY SEEING, WHEN WE TAKE A GRANULAR BUILDING UP LEVEL, WE’RE LOOKING AT THE GRANULAR TASK AUTOMATION LEVEL AND BUILDING IT BACK UP ALSO LOOKING AT A REALLY, REALLY IMPORTANT FEATURE. WHEN WE START TO RETURN OF WORKERS, THAT’S WHAT WHEN PRODUCTIVITY HAPPENS.

52:51 WE NEED TO MAINTAIN THAT TASK AUTOMATION. THAT IS NOT A SIGNIFICANT JUMP YEAR-ON-YEAR IN TERMS OF ANY SECTOR. WHAT IS INTERESTING IS IT IS NOT JUST SERVICES SECTORS. IT IS COMING THROUGH IN SUPPLY CHAIN AUTOMATION. IT IS AN AWFUL LOT TO BE CONFIDENT ABOUT. ULTIMATELY, OUR NUMBERS ALTHOUGH THEY ARE BULLISH, THE BEST OUTLOOK WE HAD FOR TREND GROWTH IN 15 YEARS, WE’RE SITTING A LITTLE BIT BELOW THE OECD BASE CASE. BEING A LITTLE CONSERVATIVE AS WELL. GUY: RIGHT FOR ASSETS?

53:26 >> WE WOULD BE OUT OF A JOB IF IT WERE. GUY: YOU SOUND LIKE YOU’RE BASICALLY SAYING BUY TECH. THERE IS AN ARGUMENT THAT SAYS THE MOST HISTORICAL BIG ASSETS, FIBER IN THE GROUND. RAILWAYS. WHATEVER YOU CALL IT. THEN YOU GET THE EFFECT OF IT AND THE BENEFIT OF THE PRODUCTIVITY IMPACT COMING THROUGH. >> THAT IS NOT AN UNREASONABLE CASE. THERE ARE A FEW THINGS WE HAVE TO BEAR IN MIND. NOW PEOPLE TALK TO ME ABOUT WOW, YOU’RE JUST RERUNNING

53:59 DOT.COM. WE HAVE COMPANIES THAT ARE REALLY WELL RUN. THERE IS A BASELINE OF BUSINESS OF CONSERVATISM THERE WHICH GENERATES CASH FLOW AND PROFIT. I FEEL LESS CONCERN THAT WE’RE GOING TO SEE THAT SUDDEN COLLAPSE WE SAW IN THE DOT.COM ERA. WILL THERE BE WINNERS AND LOSERS? ALMOST CERTAINLY. WHAT WE HAVE DONE IS RATHER THAN DOUBLE COUNT AND BE CONSERVATIVE, WE PUSHED UP SOME

54:32 ESTIMATES. THE SAPP 500 TRADING AT 7.5%. THAT’S UP 80 BASIS POINTS. WE ALSO PUSHED UP THE VOLATILITY ASSUMPTION. A 10% JUMP IN PROJECTED VOLATILITY. IF WE TAKE HIGHER RETURNS, THE TRADEOFF AS IT SO OFTEN IS IN FINANCES, MEANS MORE RISK. GUY: I’M GOING TO GET QUITE –

55:07 YOU’RE BASICALLY SAYING EVERY YEAR YOU CAN BANK ON THIS. HOW BIG A SWING COULD THERE BE IN THIS? THAT SOUND LIKE, YES, YOU COULD GET 10%. WHAT ARE THE CHANCES OF A 30% DOWN OR A 30% UP? HOW WIDE CAN THE VOLATILITY STORY BE? >> WE ARE LOOKING AT A 10-YEAR HORIZON. IT IS ALMOST CERTAIN WE WILL GET A RECESSION. WHEN WE GET A RECESSION, THE AVERAGE DRAW DOWN ABOUT 30%.

55:40 WE FACTOR THAT INTO OUR NUMBERS. GUY: IF YOU BUY NOW, WHEN ARE YOU GOING TO COME BACK TO THOSE LEVELS? >> WHEN WE’RE INVESTING FOR THE LONG-TERM, THE BUSINESS WE’RE IN, YES, WE HAVE TO BE AWARE OF THESE MARKET SWINGS BUT IF WE SIT ON OUR HANDS WE’RE MISSING TECH SWINGS AS WELL. THE ADVICE, YOU TAKE THE 12 BIG SWINGS AND THE MONTH BEFORE YOU GOT THAT DRAWDOWN. YOU BOUGHT ALL OVER THE DROWN DROWN. AFTER ONE YEAR, IT HAS

56:16 OUTPERFORMED CASH BY 7% 3/4 OF THE TIME. AFTER THREE YEARS OUTPERFORMED BY 22%. THE REALITY IS WE’RE NOT IN THE BUSINESS OF TIMING THE MARKET. WE’RE IN THE BUSINESS OF LOOKING AT HOW WE BUILD TENDING RETURNS AROUND THAT. ANNA: OK. IN YOUR 10-YEAR HORIZON THEN, HOW DO YOU DEAL WITH SOME OF THE OTHER BIG THINGS SUCH AS ECONOMIC NATIONALISM AND THE INVESTMENT THAT COMES FROM THAT. DO YOU LEAN INTO THAT OR LEAN INTO DESPITE THE POLITICS THE CONTINUATION OF THE GLOBAL TRADE THINGS TO HAVE LAST 10-20

56:49 YEARS? >> PART OF WHOLE NOTION OF ECONOMIC NATIONALISM, IF WE ARE BUILDING A 10-YEAR VIEW OF THE WORLD, WE HAVE TO START WH WE HAVE WHAT THE POLITICAL ECONOMY LOOKS LIKE. IF WE DON’T, WE SAY TOMORROW LOOKS THE SAME AS YESTERDAY. WE KNOW IT DOESN’T. THE WHOLE GLOBALIZATION TENDERS ARE THAT HAS SLOWED DOWN. WE HAVE DUNS INVESTING IN THEMSELVES AGAIN. WE KNOW THAT IN GERMANY AND THERE IS A LOT TALK HERE ABOUT HOW WE WILL START TO INVEST IN

57:21 OURSELVES. AROUND THE GLOBE, SEEING FOR FISCAL SPENDING. WHAT DOES THAT MEAN? ULTIMATELY A ELECTRICITY MORE IN TERMS OF DOMESTIC SPENDING BAA LITTLE BIT LESS IN TERMS OF CAPITAL IN MOTION. CAPITAL GETS REWIRED. NUN HAD FLOWED INTO U.S. BOND MARKETS. IT MAY BE MORE DISCERNING. THERE IS MORE CHOICE. MORE COMPETITION AS WE GET TO SOME OF THAT. ANNA: THAT NATIONALISM MIGHT HAVE CREATED A LOT OF INFLATION. ARE WE BANKING ON AI TO BE THE

57:57 REASON THAT WE CAN DO THIS, INVEST DOMESTICALLY? >> WE TREAT INFLATION AS LEVEL OR IT IS VOLATILITY. THIS IS A CRUCIAL THING. IF WE WERE TO SAY INFLATION IS GOING TO MISS PERMANENTLY. WE’RE BASICALLY SAYING EVERY CENTRAL BANK HAS FAILED IN ITS MANDATE. THAT IS REALLY BIG. ANNA: MAYBE THAT IS A DIFFERENT CONVERSATION. >> I THINK IT IS FAIR TO SAY THERE HAS BEEN A LOT OF EFFORT ON CENTRAL BANKS TO TACKLE INFLATION.

58:28 WE DO HAVE THE TOOLS BUT WHEN YOU HAVE LOTS OF FORCES PUSHING IN BOTH DIRECTIONS, WE CAN EXPECT INFLATION VOLATILITY. WE ARE WORKING ON THE ASSUMPTION ON AVERAGE WE JUST ABOUT HIT THAT INFLATION TARGET. IT IS GOING TO BE A WILD RIDE AT TIMES. WE WILL SEE PERIODS WHERE WE GET CONCERN ON THE DEFICITS AND CAPITAL CHASING SCARCE ASSETS WHICH PUSHINGST INFLATION. A LOT OF THAT IS PUSHED INTO BOND MARKETS GETTING BACK TOWARDS LEVELS WE SAW

59:02 PREFINANCIAL CRISIS. WE THINK THAT IS ALREADY IN THE MARKET BUT MORE INFLATION VOLATILITY IS PROBABLY WHAT WE WOULD BE EXPECTING. GUY: JOHN, GREAT TO SEE YOU, JOHN FROM JPMORGAN ASSET MANAGEMENT. THIS IS WHAT WE’RE WATCHING IN EUROPE. TECH IS DEFINITELY UNDER PRESSURE. ASML DOWN BY 2.4%. ASSIGNMENTENINGS, SCHNEIDER, ALL DOWN PRETTY HARD. KEEPING AN EYE ON SCHNEIDER. IT IS UNDER PRESSURE THIS MORNING. WHAT’S GOING ON?

59:36 >> UNDER PRESSURE. 6 BILLION EURO ISSUANCE OVERNIGHT. THIS IS PART OF THE MOVE TO ACQUIRE PTC. IN A WAY WE WERE EXPECTING TO SEE THIS. THIS IS A BIT OF A DELUSION OF EXISTING SHARES. IF YOU WANT TO SEE HOW THIS PLAYS OUT THROUGH THE DAY, OVERTALL STRATEGIC PLAY IS TO BRING IN THE AUTOMATION SOFTWARE. UNDER PRESSURE. LET’S FLIP IT OVER THE TO ABB. THIS IS A SLIGHTLY INTERESTING ONE. STAYING IN THE TECH SPACE. DOWN THIS MORNING.

1:00:09 THIS IS QUITE EXTRAORDINARY WHEN YOU THINK ABOUT IT. RECORD BREAKING ORDERS FOR THE THIRD QUARTER. GROWTH STILL NOT QUITE LIVING UP TO WHAT THE EXPECTATION MIGHT HAVE BEEN THERE. HUGE AT THE CENTER DEMAND DOWN 5% THIS MORNING. ANGLO AMERICAN, A COUPLE OF THINGS GOING ON HERE FOR THEM. REALLY I THINK THIS IS THE BOOST TO DIAMOND PRODUCTION. THE DIAMOND MINING THERE GIVING

1:00:43 THEM A LIFT EARLY. LET’S TALK ABOUT O.V.H. DIPPING OUR TOES BOOK IS TECH A LITTLE BIT HERE. DOWN AROUND 8% HERE. FULL-YEAR RESULTS GIVING THEM THAT LIFT. LIFTING THEM UP INTO THE GLEAN MORNING. EXPANSION REALLY ACROSS ORGANIC GROWTH UP AS WELL. THIS IS GIVING THEM A LIFT. LET’S END WITH THE DELIVERY PLATFORM FOR GROCERIES. THEY ARE ALSO UP THIS MORNING AROUND 4%. WE HAVE A JPMORGAN RAISE. OVERALREADY OVERWEIGHT.

1:01:18 THEY HAVE INCREASED THAT TO NEW HIGHS. THAT IS GIVE THEM A LIFT IN THEIR SAILS THIS TUESDAY MORNING. ANNA: WE WILL TALK MORE ABOUT BHP. SLUMPING AT THE KEY MINES IN CHILLY. MORE ON THAT STORY NEXT. THIS IS BLOOMBERG.

1:01:51 ANNA: WELCOME BACK TO THE OPENING TRADE. 18 MINUTES INTO TODAY’S SESSION. NEGATIVITY COMING THROUGH FROM CENTRAL BUSINESSES. MORE AROUND THE TECH TRADE. TECHNOLOGY IS ALSO AN APPALLING PERFORMING SECTOR. GROCERY STORES, HEALTHCARE COMPANIES, FOOD AND BEVERAGE. GUY: SAFETY TRADE IS DEFINITELY ON THIS MORNING.

1:02:25 WHERE DOES THAT LEAD TO MINKE? GLOBAL MINKE GROUP B.N.P. PARIBAS, HAS SLUMPED AFTER BEING AFFECTED BY STORMS. MAJOR MINERS STRUGGLE WITH FALLING GRADES. NEW DEPUTIES BECOMING HARDER TO FIND APPARENTLY. WHAT’S THE READ WHEN IT COME OS TO THE MARKET MARKET OUT OF

1:02:59 THIS BHP UPTATE & LYLE? >> BROADER TREND FEEDING INTO THIS RESULT? 19% COPPER OUTPUT DOWN IN THE LAST QUARTER LARGELY DUE WHAT’S HAPPENING IN CHILE. THE EXTREME EXTREME WEATHER. OTHER INTERRUPTIONS. THERE HAVE BEEN THREATS OF STRIKE ACTION AT OTHER MINES OUTSIDE OF BHP, THERE HAVE BEEN STRIKES. WE HAVE SEEN THIS OVERALL IN CHILE WHICH IS A VERY IMPORTANT PART OF THE COP MARKET.

1:03:30 THE OUTPUT POSSIBLY GOING FALL FOR THE FIRST TIME SI SINCE IS 2017. A SLOW PERIOD FOR SUPPLY PARTICULARLY FROM CHILE. THAT’S WHAT YOUR SEEING WITH BHP. THEY ARE GOING TO NEED TO PICK UP NUMBERS IN THE REMAINING QUARTERS TO MEET THE LOWER END OF THEIR COPPER TARGET. NATS CONTRAST TO RAI TINTO.

1:04:06 IT ALSO HAS – RIO TINTO. IT ALSO HAS MINES IN CHILE. ANNA: YEAH. ONE OF THE QUESTIONS FOR THE SECTOR I GUESS THEN IS HOW MUCH OF THIS STUFF IS COMING OUT OF THE GROUND, COPPER I MEAN AND THESORE WHERE IT ENDS UP AND WHERE IT IS TORED. BECAUSE OF U.S. TARIFF POLICY A LOT IS FINDING ITS WAY INTO THE U.S. JUST IN CASE WE SEE A CHANGE IN POLICY. WHAT IS THE THINKING THERE? >> HAS THE BIG STORY, COPPER TO BE HONEST AT THE MOMENT.

1:04:37 WILL THE U.S., WILL PRESIDENT TRUMP GO AHEAD WITH EXPANDED TARIFFS ON IMPORT TARIFFS ON COPPER? THOSE WERE EXPECTED IN THE MIDDLE OF THIS YEAR. THERE HAS STILL BEEN NO ANNOUNCEMENT. HUNDREDS OF THOUSANDS OF TONS ARE GOING TO THE U.S. IF HE WAS TO RULE OUT TARIFFS, THE RISK IS ALL OF THAT MATERIAL FLOWS BACK OUT AND HAM TERSE PRICE. IF HE ANNOUNCES TARIFFS FOR SOMETIME IN THE FUTURE, THERE

1:05:08 COULD BE ANOTHER LAST MINUTE RUSH TO GET METAL THERE. PRICE COULD SETS ANOTHER RECORD AS THEY DID LAST MONTH. HAS THE BIGGEST SUBJECT. IT IS RIFE WITH UNCERTAINTY. NO ONE KNOWS WHAT’S GOING TO HAPPEN. THERE COULD BE A LOT VOLATILITY IN STORE FOR COPPER IN THE NEXT FEW MONTHS AS THAT GETS PLAYED OUT. ANNA: OK PURCHASING WE’LL WATCH FOR KLUSE. MARTIN, THANK YOU VERY MUCH. MARTIN RICHIE ON THE METALS

1:05:43 SECTOR. U.K. UNEMPLOYMENT FELL LAST MONTH. PAYROLL EMPLOYEES ROSE 13,000. THE DATA PROVIDES AN UNEXPECTED BOOST TO CHANCELLOR JOHN HEALY AHEAD OF THE BUDGET. LET’S TURN TO BUDGET TODAY. RECALLING THE THROUGH DETAILS OF THESE NUMBER. GOOD MORNING. AT FIRST BLUSH, WE LOOKED AT THIS. THE POUND WENT HIGHER AND IT LOOKED AS IF WE HAD REMOVED A REASON WHY THE BANK OF ENGLAND

1:06:15 WOULD BE TENTATIVE TO HIKE RATES. IS THAT THE TAKEAWAY HERE? >> ABSOLUTELY. THAT WAS MY IMPRESSION. OF COURSE THE DATA WAS MIXED. OVERALL IT WAS AN IMPRESSION OF A STRENGTHENING LABOR MARKET. PARTICULARLY THE PAYROLLS FIGURE. WE SAW THE BIGGEST INCREASE IN JOBS ADDED SINCE LAST AUGUST. IT WAS EXPECTED TO BE A DROP. THAT WAS SIGNIFICANT. I THINK A LOT OF THE BANK OF ENGLAND MONETARY POLICY COMMITTEE MEMBERS WHEN THEY HAVE BEEN RELUCTANT TO BACK

1:06:46 HIKES, ONE OF THE REASONS HAS BEEN A WEAK LABOR MARKET. THIS MAY EASE SOME OF THOSE CONCERNS AND ACTUALLY WHILE THE HEADLINE FIGURE WAS SLIGHTLY WEAKER THAN EXPECTED IN TERMS OF WAGE GROWTH, IF YOU EXCLUDE BONUSES THAT WAS LARGER THAN EXPECTED AS WELL THAT SUGGESTS WE ARE SEEING THOSE SECOND ROUND EFFECT OF INFLATION WITH GROWTH GOING UP. THAT IS SOMETHING THEY WOULD BE CONCERNED ABOUT. THEREFORE AGAIN SPUR THE NEED TO INCREASE RATES MORE THAN THE

1:07:20 ONE THAT IS ALREADY PRICED IN NEXT MONTH. GUY: IT LOOKS LIKE WE’RE NOT KNOT GOING TO GET A FLIES CAPITAL GAINS TAX. WHERE DOES THAT LEAVE US? >> THAT IS A REALLY GOOD QUESTION. WE TALKED ABOUT THE CAPITAL GAINS TAX. IT SEEMS WE ARE GOING TO HAVE A HIKE ON SOME OF THE BANK TAX AND THAT IS SOMETHING THEY WERE REPORTING LAST WEEK. ONE OF THE THINGS WE’RE GOING TO BE CLOSELY LOOKING AT IS BORG COSTS AND HOW CHANCELLOR HEALY IS GOING FUND HIS COST OF

1:07:52 LIVING PACKAGE THAT HE PROMISED PARTICULARLY IF INTEREST RATES SEEM LIKELY TO GO HIGHER BECAUSE THAT IS GOING TO MAKE IT MORE EXPENSIVE TO BORROW AND SERVICE THE GOVERNMENT’S EXISTING DEBT. ANNA: WE GET MORE DATA FROM THE U.K. DON’T WE? I THINK WE GET INFLATION DATA TOMORROW. ALWAYS A LOT AT STAKE. WHAT IS INTERESTING ACTUALLY IS THIS WEEK, LAST WEEK, WE SEEMED TO BE HIJACKED BY U.S. BOND MARKETS. THE MOVE HIGHER IN THE U.S. 10-YEAR YIELD. UNSETTLING MANY MARKETS.

1:08:25 AND THEN THE FRENCH BOND MARKET. IT SEEMS THERE WAS A PERIOD OF INTERNATIONAL FACTORS EXERTING THEMSELVES HERE. ON THE INFLATION NUMBER, ARE WE EXPECTING A DRAMATIC CHANGE THERE OR ARE WE LOOKING FOR – WE ARE STILL EXPECTING A LIKE I SUPPOSE. THAT TELLS YOU SOMETHING. >> Y.E. YES. I DON’T THINK TOMORROW’S DATA IS GOING TO CHANGE THAT PICTURE AT ALL. ACTUALLY WE’RE LOOKING FOR IT TO PICK UP AND I THINK CRUCIALLY THE CORE READING WHICH STRIPS OUT ENERGY IS

1:08:58 EXPECTED TO RISE AND ALSO THE SERVICES FIGURE. THOSE TWO ARE MORE SUGGESTIVE OF THOSE SECOND ROUND EFFECTS. OBVIOUSLY THE SERVICES SECTOR, THAT TENDS TO FEATURE CONSUMER EXPECTATIONS AND THE CORE READING IF YOU TAKE OUT ENERGY, YOU ARE LOOKING AT ACTUALLY HOW IT IS FLOWING THROUGH THE REST OF THE ECONOMY. THOSE TEPID TO BE MORE IMPORTANT IN TERMS OF WHAT THE BANK OF ENGLAND IS LOOKING THROUGH. IT IS HARDER TO SEE THROUGH WHICH IS WHAT THEY HAVE BEEN DOING SO FAR.

1:09:29 IT WILL BE INTERESTING IF IT FOLLOW WHAT IS ECONOMISTS ARE FORECASTING. IT COULD SUPPORT THE CASE FOR RATE HIKES AND WE COULD SEE THEM INCREASING OR NOT PULLING BACK. THEY ARE QUITE ELEVATED AND SOME ARE SUGGESTING THAT PERHAPS THEY ARE TOO ELEVATED. GUY: OK. GREAT UPDATE. THANK YOU. WE HAVE TO WATCH THOSE. WE GET MEGAN GREEN SPEAKING LATER TODAY. THE OPENING TRADE HAS YOU

1:10:00 COVERED ON THE UPCOMING BUDGET. WE HAVE COVERAGE TO HAVE CHANCELLOR’S ANNOUNCEMENTS STARTING AT 12:00 P.M. LONDON TIME ON OCTOBER 28. THE TEAM TAKES A DEEP DIVE INTO WHAT IT ALL MEANS FOR ECONOMY HOSTING THE SHOW IN FRONT OF A LIVE STUDIO AUDIENCE. AFTER THE BUDGET BEFORE THE BELL. SIGN UP AT BLOOMBERG.COM/EVENTS. ANNA: THAT IS EXCITING. SOMETHING TO LOOK FORWARD TO. TECH UNDER PRESSURE. INTERESTING THAT ABB FALLING

1:10:32 VICTIM TO THAT, PUTTING TOGETHER THE TECHNICAL AND INDUSTRIAL THEMES. SOME ANALYST SAY WE NEED TO TO SEE AN IMPROVEMENT IN THAT MARKET BEFORE WE GET A DRIVE HIGHER IN THE ABB SHARES. GUY: THAT’S WHAT THE MARKET IS PRICING THIS MORNING. COMING UP, WHAT’S HAPPENING IN FRANCE. THE LATEST UNREST. WE’LL GET THE VIEW FROM CITI ON WHAT’S HAPPENING THERE. THIS IS BLOOMBERG.

1:11:13 ANNA: WELCOME BACK EVEN. TUESDAY MORNING. OPENING TRADE. 30 MINUTES INTO TUESDAY’S SESSION. IT IS A NEGATIVE ONE. STILL WAY DOWN BY TECHNOLOGY AND THE INDUSTRIAL BUILD GLOUT EUROPE IS UNDER PRESSURE AS WELL. WE SEE THE DAX DOWN .8%. BROADLY ACROSS THE EUROPEAN SESSION THAT WE’RE SEEING THAT WEAKNESS. SOME MAYBE COMES THROUGH FROM ASIA BECAUSE THERE WAS A CONSIDERABLE AMOUNT OF CONCERN AROUND THE DATA CENTER BUILDOUT IN THE ASIA SESSION DESPITE

1:11:45 YESTERDAY’S WALL STREET TRADING DAY WHICH LOOKED PRETTY POSITIVE. BOND MARKETS LOOK A LITTLE CALMER. WHAT HAVE YOU GOT? GUY: LET’S DIG INTO THE DETAILS. YOU PAINTED A PICTURE OF NEGATIVITY FOR THESE MARKETS. THAT IS JUSTIFIED BY WHAT WE’RE SEEING WITH THE SPREAD. 270 UP, 272 DOWN HEAVYWEIGHTS ON THE UPSIDE. MAYBE NOT THAT MUCH ROTATION IN THE MARKETS THIS MORNING.

1:12:19 LET’S TALK ABOUT WHERE WE ARE SEEING SOME OF THE WINNERS COME THROUGH. JPMORGAN OUT WITH A NEW NOTE SETTING A TARGET ON ACADO. OVH GROUP IS ON THE MOVE AS WELL. AS IS ANGLO. WE DIDN’T TALK ABOUT ANGLO VERY MUCH BUT THIS IS A BOOST TO ITS DIAMOND PRODUCTION FORECAST PRESUMABLY WELL RECEIVED IN THE MARKETS THIS MORNING.

1:12:51 AB BUNCH IS THE REAL CHALLENGE THIS MORNING. HIGH COMING INTO THEY SEE NUMBERS. TRANSFORMERS, ELECTRICITY, GENERATION. THAT’S WHAT ABB DOES. PLUS YOU HAVE TRADE COMING OUT OF ASIA FAIRLY NEGATIVE AS WELL. SCHNEIDER ISSUING NEW STOCK. THAT HAS NOT HELPED IN THIS FAVORITE IN. DOWN 3.8%. NEARLY 4%. ASML ALSO SOFTER ON THAT SAME TREND. YOU KNOW OVER 3%. ANNA:

1:13:25 AS WE HAVE BEEN MENTION, MENTION THE ASIA AROUND THE AI STORY. SHARES PLUNGED I AS MUCH AS 35% IN THEIR TRADE WITHING DEBUT. THE ABRUPT SELLOFF CAME AFTER THE COMPANY RAISED $151 MILLION. THE MOVE HAS REKINDLED CONCERNS ABOUT WHETHER THE ARTIFICIAL INTELLIGENCE BOOM CAN JUSTIFY BILLIONS OF DOLLARS POURED INTO THE INDUSTRY. FREDERIC MERZ HAS WARNED AGAINST COMPLACENCY OVER THE DANGERS FROM RUSSIA. HE SAID THAT PRESIDENT PUTIN IS

1:14:01 SEEKING TO NOT ONLY DEFEAT UKRAINE BUT LOOKING TO UNDERMINE DEMOCRACY IN EUROPE. AN 11:00 P.M. OCCUR SHEAFY IN PARTS OF PARIS AND OTHER CITIES APPEAR TO HAVE QUELLED VIOLENT PROTESTS FOR NOW. PRIME MINISTER MACRON MADE COMMENTS IN A POST ON X. GUY: LET’S SEE WHAT WE CAN EXPECT FOR THE REST OF THE DAY. HOW CALM IS FRANCE?

1:14:32 LET’S FIND OUT? OLIVER CROOK IN PARIS FOR US. OLLIE, ARE THE CURFEWS WORKING? IS THAT THE NARRATIVE WE’RE WORKING WITH HERE AND WHAT HAPPENS WHEN WE DON’T HAVE THE OCCUR FUSE? >> I THINK A GOOD PART OF NARRATIVE IS THE CURFEWS ARE WORKING AND THERE IS A GENERAL EXHAUSTION AFTER WHAT WE SAW OVER THE WEEKEND AND THE MASSIVE DESTRUCTION ACROSS THE NATION OF FRANCE AFTER THAT CRISIS MEETING WITH THE PRIME MINISTER, A FEW OCCUR FUSE HAVE BEEN ROLLED OUT IN A NUMBER OF NEIGHBORHOODS IN PARIS. TWO WHERE WE SAW SOME CROWDS

1:15:07 BEGINNING TO ANAS THE AFTERNOON BUT THE RIOT POLICE WERE THERE IN SUCH FORCE THAT DISUADED ANY ACTIVITY. WE CAN THINK ABOUT THIS STORY IN THE SHORT-TERM, MEDIUM TERM AND LONG-TERM. IN THE SHORT-TERM, PREVENTING THIS DAILY PROTEST SITUATION. THE CURFEWS HELP. THERE WERE BANS ON PROTESTS, MARSEILLE DEALING WITH THE IMMEDIATE OF THE ISSUE. DOES THIS BEING ANOTHER

1:15:38 SITUATION WHERE YOU HAVE THIS KIND OF CIRCUS OF PROTESTS SATURDAY TO SATURDAY TO SATURDAY THAT PERIODICALLY DEVOLVE INTO RIOTS AND MASSIVE DAMAGE ACROSS THE COUNTRY. THAT IS A SITUATION THE GOVERNMENT WANTS TO AVOID. LONG-TERM, AS YOU TRY PLUG IN THE POLITICAL DISCONTENT, ALL THE DISRUPTION, THE PROTESTS AND RIOTS, HOW MUCH APPETITE THAT IS FOR THAT, WITH THE BUDGET NEGOTIATION AND ELECTION THAT IS ONLY SIX MONTHS AWAY THERE IS A REAL POTENTIAL HERE IF YOU CANNOT GET THE BUDGET UNDER CONTROL AND THE PROTESTS

1:16:12 ARE ABOUT IN PART SPENDING MORE MONEY ON THE WELFARE STATE AND TRYING DULL THE EFFECT OF INFLATION AMONG OTHER THINGS YOU CAN GET INTO A SITUATION WHERE YOU GET LOCKED INTO THIS DEATH SPIRAL OF POLITICAL UPHEAVAL AND THE MARKETS PUSHING BACK AND THAT LEADS UP TO A FRENCH POLITICAL ELECTION WHERE EVEN’S RHETORIC IS ESCALATING. THOSE ARE THE SCENARIOS FRANCE IS BRACING FOR. WHAT WE SAW IN THE BOND MARKET, YESTERDAY WE ADDED AN ADDITIONAL TEN 10 SIS POINTS. INVESTORS ARE SIGNALING THEIR

1:16:44 CONCERN ABOUT THAT SCENARIO. GUY: OK. OLLIE, THANK YOU VERY MUCH INDEED. OLIVER CROOK IN PARIS. CONTINUES TO KEEP US UPDATED. SENIOR EUROPEAN ECONOMIST AT CITI JOINING US NOW TO DISCUSS. SKYLAR, DID YOU FOR YOUR TIME. LET’S THINK ABOUT WHAT HAPPENS NEXT. IF WE SEE PROLONGED PROTESTS IN FRANCE WHICH WOULD MAKE IT HARDER TO GET THE BUDGET UNDER CONTROL, ARE WE GOING TO SEE MORE TURBULENCE IN THE BOND MARKET? COULD SPREADS GO WIDER?

1:17:19 HOW BIG OF A CHALLENGE TO WHAT’S HAPPENING IN FRANCE AFFECT THE TRAJECTORY? >> GOOD MORNING, EVERYONE. LOOK, I THINK THESE EVENTS OVER THE LAST FEW DAYS HAVE TWO MAJOR IMPLICATIONS FOR THE BOND MARKET AND THE FRENCH ECONOMY. ONE A YOU SAID, IT WEAKENS THE ABILITY OF THE CURRENT GOVERNMENT TO DELIVER ON THE NECESSARY BUDGETARY CUTS THAT ARE NECESSARY FOR THE GOVERNMENT TO BRING DOWN DEFICIT TO 5%, THE TARGETED 5% OF GDP NEXT YEAR.

1:17:55 ALSO AS A SECOND POINT, ALSO MORE GENERALLY, DELEGIT MIZE THE STATE. IT WIDENS THE SOCIAL GREEN BAY PACKERSES. NOT JUST FOR THE CURRENT GOVERNMENT BUT ALSO FOR THE NEXT GOVERNMENT AFTER THE PRESIDENTIAL ELECTION, AFTER THE VERY IMPORTANT – ELECTION IN 2027. THE NEXT GOVERNMENT WILL HAVE A DIFFICULT LIFE IN TRYING TO RALLY THE COUNTRY INTO WHAT IS NEEDED TO STABILIZE PUBLIC FINANCES WHICH IS FISCAL CONSOLIDATION. SO I THINK THIS IS THE

1:18:27 TAKEAWAY, THE IMPLICATIONS THAT WE HAVE, WE DROVE FROM THE VENTS OF THE LAST FEW DAYS. IT MAKES THE LIFE TO HAVE CURRENT GOVERNMENT AND THE NEXT ONE MORE DIFFICULT IN ORDER TO DELIVER THE NECESSARY BUDGET ADJUSTMENT. GUY: IS IT POSSIBLE TO HAVE BUDGET ADJUSTMENT WITHOUT PENSION REFORM? NOBODY IS TALKING ABOUT IT AND NOBODY SEEMS TO WANT TO GO DOWN THAT ROAD, BUT UNTIL GET TO THAT POINT, CAN WE ASSUME THERE WILL CONTINUE TO BE TURBULENCE IN FRANCE? >> WELL, LOOK. THE MARKET WILL BE HAPPY WITH

1:18:59 ANY SORT OF ADJUSTMENT, I WOULD SAY. WE KNOW PENSION REFORMS ARE DIFFICULT. SOCIALLY DILL DIFFICULT, POLITICALLY DIFFICULT. NOT JUST FRANCE. WE HAD AN EXPERIENCE 15 YEARS AGO OF SIMILAR MARKET TURBULENCES ACROSS EUROPE, THE EUROZONE TARIFF I PERIPHERY AND REFORMS WERE THE EPICENTER OF THOSE POLITICAL DECISIONS. MARKETS WILL BE HAPPY EVEN WITHOUT A PENSION REFORM AS LONG AS THERE IS A STRATEGY. A STRATEGY FOR FISCAL

1:19:32 CONSOLIDATION TO REDUCE EXPENDITURE OR INCREASE TAXES OR A MIX OF THE TWO PROBABLY MOST LIKELY FROM THIS GOVERNMENT OR THE NEXT GOVERNMENT. THE PROBLEM I THINK IS THE CURRENT GOVERNMENT HAS A VERY WEAK POLITICAL CAPITAL. DOESN’T HAVE A MAJORITY. REALLY WE THINK THAT THE BOND MARKET IN FRANCE WILL REMAIN THE A VERY FRAGILE SITUATION UNTIL THE SPRING 2027 AND WE WOULD SAY NOT EVEN JUST AFTER THE PRESIDENTIAL ELECTION, WE

1:20:03 THINK THAT THE ELECTION IN JUNE 2027 ARE THE KEY EVENT TO LOOK OUT FOR BECAUSE ON THE BACK OF THOSE, WE WILL KNOW WHETHER THERE WILL BE A MAJORITY BACK THE NEXT PRESIDENT AND DELIVERING OR WISHING OR COMMITTING TO DELIVER FISCAL CONSOLIDATION. ANNA: SO ON THAT SUBJECT, WE WAIT UNTIL NOT JUST SPRING NEXT YEAR BUT MAYBE SUMMER O TO GET SOME CLARITY AND THEN WE HAVE TO MAKE UP WITH THE PARLIAMENT.

1:20:35 IS THERE A CHANCE LIKE WE’RE SEEING IN MANY PARTS OF EUROPE, WIND UP WITH FRACTURED PARLIAMENTARY CLASS. IT REMAINS DIFFICULT. FROM WHAT YOU SAID, IT SOUNDS POSSIBLE THIS UNCERTAINTY GOES ON FOR YEARS, NOT JUST MONTHS. >> INDEED. I WOULD SAY THAT IS A PLAUSIBLE SCENARIO POLITICALLY THAT WE DON’T THE SAME THERE WERE NO THE ASSEMBLY AS WELL AS IN THE PRESIDENTIAL SEAT BUT I WOULD SAY FROM AN ECONOMIC POINT OF VIEW, I THINK A VERY IMPORTANT

1:21:06 LESSON THAT WE LEARNED 15 YEARS AGO FROM THE EURO CRISIS IN THE PERIPHERY WAS THAT PHIL FISCAL CONSOLIDATION PROCESSES ARE INDEED PROCESS. ARE NOT ONE-YEAR, TWO-YEAR ADJUSTMENTS. THEY ARE LENGTHY PROCESSES. IT ACTION TO TOOK SIX TO SEVEN YEARS FOR COUNTRIES LIKE ITALY, FRANCE, SPAIN OR GREECE TO ADJUST THEIR BUDGET DEFICITS TO MANY OF MORE SOUND EQUILIBRIUM AND IT IS GOING TO TAKE A WHILE FOR FRANCE AS WELL TO REDUCE ITS BUDGET DEFICIT.

1:21:42 YES, I THINK THE SITUATION MAY BE SOLVED POLITICALLY. HOPEFULLY NEXT YEAR. BUT THE ECONOMY WILL TAKE TIME TO DIGEST THE FISCAL CONSOLIDATION AND REACH A NEW MORE SUSTAINABLE LEVEL OF BUDGET DEFICITS. ANNA: WE HAVE THE GAS PRICE ON THE RISE AGAIN. NOT MUCH TODAY. BY RECENT STANDARDS BUT STILL ON THE RISE. I WONDER HOW CONCERNED YOU ARE ABOUT THE EUROPEAN ECONOMY IN THE CONTEXT OF HIGHER GAS PRICES AS WE WORK OUR WAY TOWARDS THE WINTER.

1:22:13 >> OF COURSE. THIS IS YET ANOTHER HEADWIND ON THE EUROPEAN ECONOMY. WE HAVE TO ADMIT THE EUROPEAN ECONOMY HAS BEEN REMARKABLY RESILIENT OVER THE LAST FEW YEARS TO MANY SHOCKS. WE HAD THE ENERGY SHOCK BACK IN 2022. MUCH BIGGER THAN THE PUERTO ONE AND YET THE ECONOMY WEAKENED A LITTLE BIT BUT IT CONTINUED GROWING THOUGH AT A RELATIVELY SLOW PACE. WE HAD U.S. TARIFFS LAST YEAR. WE HAD THE ENERGY SHOCK STARTED

1:22:46 IN FEBRUARY THIS YEAR. WE DO EXPECT THIS RESILIENCE TO CONTINUE BUT IT IS DEFINITELY THE LATEST WAVE, THE SECOND WAVE OF ENERGY PRICE INCREASES INCLUDING ON GAS. IT IS YET ANOTHER HEADWIND ON THE ECONOMY. I THINK THE OTHER IMPORTANT FACTOR THE IMPLICATIONS OF HIGHER ENERGY PRICES ON THE ECB REACTION FUNCTIONS BECAUSE WE HAVE HEARD A PRETTY HAWKISH REACTION FUNCTION FROM THE ECB IN SEPTEMBER. THEY HIKED RATES TWICE ALREADY ON THE BACK OF HIGHER ENERGY PRICES AND IT IS SIGNALING THAT

1:23:19 POTENTIALLY THERE WILL BE MORE HIKES COMING. WE AT CITI, WE EXPECT TWO MORE RATE HIKES. ONE IN DECEMBER AND ONE IN MARCH. BUT OBVIOUSLY THAT WILL ALSO DEPEND NOT JUST ONHOW HIGH ENERGY PRICES WILL GO BUT WHAT THE EXTENT TO WHICH THESE HIGHER ENERGY PRICES WILL TRANSFER, WILL BE TRANSFERRING INTO THE PRICES. SECSECOND FTSE. SO FAR WE HAVEN’T SEEN ANY SECOND ROUND EFFECTS. VERY LITTLE OFFED SECOND ROUND EFFECTS. WE THINK THERE WILL REMAIN VERY

1:23:52 LITTLE EVIDENCE GOING INTO YEAR END. AT THE BEGINNING OF NEXT YEAR IF, ENERGY PRICES REMAINS ELEVATED, THERE COULD BE A RISK OF HIGHER SECOND ROUND FTSE NEXT YEAR AND HENCE MORE RATE HIKES WHICH MEANS IT IS YET ANOTHER HEADWIND AND NOT JUST THE HIGH COST OF LIVING BUT ALSO HIGHER INTEREST RATES WHICH WILL HINDER INVESTMENT AND PRIVATE CONSUMPTION. GUY: CAN EUROPE KEEP SPENDING AS

1:24:24 MUCH AS IT IS ON SOCIAL SECURITY AND BUILD UP ITS DEFENSE BASE? SIT ONE OR THE OTHER OR CAN IT DO BOTH? >> THAT IS A HARD QUESTION. IT SHOULD BE DOING BOTH. OBVIOUSLY FIND THE RIGHT BALANCE. IT IS NOT EASY. WE HAVE SEEN COUNTRY WHERE IS THERE IS FISCAL SPACE LIKE GERMANY, WHICH IS PUTTING A LOT OF EMPHASIS ON DEFENSE. THEY MAY HAVE A PACE ALSO TO OPEN UP ON SOCIAL SPENDING.

1:24:57 BUT THEY DO HAVE FISCAL SPACE. OTHER COUNTRIES, THEY DON’T. FRANCE DOESN’T. ITALY DOESN’T. OR VERY LITTLE OR LESS THAN IT USED TO HAVE ONLY A YEAR AGO. AGAIN, I’LL GO BACK TO THE POINT I WAS MAKING ON THE ECB. THE HIGHER YIELD CURVE, THE HIGHER SHORT-TERM INTEREST RATES GO, THE LESS FISCAL SPACE IS AVAILABLE FOR COUNTRIES LIKE ITALY OR FRANCE WHICH HAVE A HIGHER LEVEL OF PUBLIC DEBT IN

1:25:29 ORDER TO DEPLOY RESOURCES FOR SOCIAL SPENDING AS WELL AS FOR DEFENSE. OUR SENSE IS THAT DEFENSE WILL GREEN LIGHT MORE SPENDING. ITALY HAS DEVOTED A GOOD CHUNK OF ITS BUDGET FOR NEXT YEAR AGAINST DEFENSE AND ENERGY SECURITY. THIS IS A SHIFT COMPARED TO WHAT HAS BEEN THE CASE SO FAR. GERMANY IS ALLOCATING A LARGE SHARE OF THE BUDGET TOWARDS DEFENSE WITHIN THE DEFENSE FUND. SO SOME THINGS ARE MOVING BUT IT IS NOT A HOMOGENOUS

1:26:05 GENERALIZED INCREASE IN DEFENSE SPENDING BECAUSE MARKET DISSPLINE EATING INTO THE FISCAL SPACE OF MANY COUNTRIES. ANNA: THANK YOU VERY MUCH. EUROPEAN ECONOMIST AT CITI. COME UP ON THE PROGRAM, WE’LL GET TO TECH EARNINGS. WE’RE LOOKING AHEAD TO SOME IMPORTANT TECH EARNINGS THIS WEEK. JUST TODAY, WE ARE LOOKING AHEAD TO THE LATEST TAKEOFF OF SPACEX. WE WILL BE GETTING THEIR NUMBERS OF COURSE. NETFLIX ALSO REPORTING. WE WILL HAVE A PREVIEW NEXT.

1:26:36 THIS IS BLOOMBERG. GUY: 49 MINUTES INTO THE EQUITY MARKETS SESSION IN EUROPE. LOOKING TOUGHER THAN WE THOUGHT IT WOULD BE 59 MINUTES TO GO. WE ARE SEEING SOME WEAKNESS COMING THROUGH IN THE

1:27:08 INDUSTRIALS. ABB IS ONE OF THE REASONS FOR THAT. IT IS NOT LIMITED TO ABB. THINGS LIKE SCHNEIDER ARE ALSO UNDER PRESSURE FOR VARYING REASONS. THERE ARE TRADE COMING OUT OF ASIA THAT HAS NOT BEEN WELCOMED HERE IF EUROPE. ANNA: THE INVESTOR GERMANY SUMMIT TAKES PLACE TODAY. 10:00 A.M. U.K. TIME. 5:00 P.M. U.K., WE GET AFTER HOURS EARNINGS. ASML WILL BE OUT WITH EARNINGS.

1:27:41 A TECH TRADE THERE THESE DAYS AS WELL. LATER ON WE WILL GET FROM THE TECH SECTOR NETFLIX NUMBERS AND SPACEX REPORTING NUMBERS. GUY: LET’S FOCUS ON THE U.S. TECH EARNINGS. ARE THEY GOING TO BE FLOOD ENOUGH TO OVERCOME THE FEAR IN THE MARKETS ABOUT WHETHER DATA CENTERS ARE ULTIMATELY GOING TO DELIVER. MATT JOINS US FROM BLOOMBERG TENSION. WHAT ARE WE LOOKING FOR?

1:28:12 >> I THINK SOME COMMENTARY ON THE 2027 CONTENT STRATEGY. THERE HAS BEEN SOME CHANGE ANNOUNCED THE LAST FEW WEEKS AROUND A NEW CHIEF CONTEXT OFFICER. THAT CONSENSUS IS THAT HAS BECOME A BIT TOO UNFOCUSED IN ITS CONTENT STRATEGY AND LACKING THE BIG HIT THAT USED TO DRAW PEOPLE IN AND KEEP THEM ENGAGED. THE SENSE THERE IS GOING TO BE A SHIFT IN DIRECTION. THE QUESTION IS HOW MUCH MORE FOCUSED ARE THEY GOING TO GET AND CAN THEY DELIVER BIG HITS

1:28:45 WITHOUT INCREASING THEIR CONTENT BUDGET WHICH IS ABOUT $20 BILLION A YEAR. THAT IS WHERE THE FOCUS IS GOING TO BE. ANNA: THERE IS A SPENDING QUESTION DIFFERENT IN NATURE TO THE AI DATA CENTRES. THE FRONT AND CENTER QUESTION FOR THE REST OF THE SECTOR. LET’S THINK ABOUT SPACEX. WHAT CLUES ARE WE GOING TO GET THERE? >> PROBABLY NOT MANY. WE ARE EXPECTING A PRETTY SIGNIFICANT INCREASE IN REVENUE. ADDING ABOUT $5 BILLION IN

1:29:17 REVENUE QUARTER-ON-QUARTER. ABOUT $4 BILLION WILL COME WITH A DEAL THEY DID WITH ANTHROPIC PROVIDING COMPUTE CAPACITY TO ANTHROPIC. IT IS IN THAT – ANNA: THAT POSITIVE. >> EXACTLY. I THINK THE REST OF THEIR BUSINESSES LIKE SENDING ROCKETS UP INTO SPACE, THE BROADBRAND BUSINESS ARE GOING TO BE GROWING BUT NOT SIGNIFICANTLY. THAT ANTHROPIC ZEAL A VERY SPECIFIC ISOLATED DEAL. WE HEARD EARLIER TODAY ANTHROPIC HAS DONE A SIMILAR

1:29:49 TERM ON LONG-TERM COMPUTE DEAL. ANTHROPIC IS PUTTING THEIR CAPACITY ORDERS AROUND THE MARKET. MAYBE ON THE MARGIN, SPACEX WILL SURPRISE US WITH ANOTHER CAPACITY DEAL TO FILL UP THE DATA CAPACITY THEY HAVE BEEN INVESTING IN BUT I THINK IT IS PROBABLY UNLIKELY. ANNA: THANK YOU VERY MUCH, MATT. I WAS JUST CHECKING MY TERMINAL TO SEE WHAT ELSE WE’RE EXPECTING. THOSE ARE THE TECH ONES TODAY. WE GET MORE LATER ON IN THE WEEK. WE’LL BE BACK TO THAT THEME.

1:30:22 TECH ON THE MIND. IT IS HARD TO AVOID, SUSPECT IT, SKYLAR? TECH IS ONE THING THAT WE ARE WATCHING IN TERMS OF EQUITIES AND WHETHER WE’RE BUYING THE DIP. THAT WASN’T THE CASE IN ASIA TODAY THAT WE WERE BUYING INTO THAT DATA CENTER BUILDOUT STORY. WHAT DO YOU TAKE AWAY FROM THAT? >> THE BIG TAKEAWAY IS MORE THAT THE CONCERNS ARE AROUND FINANCING RATHER THAN DEMAND. THE EARNINGS SEASON THAT WE’RE STARTING OFF, THE RESULTS SOFT POINT TO DEMAND BEING VERY HIGH. WHAT YOU’RE SEEING IS MORE OF A

1:30:57 ROTATION AND THINKING ABOUT HEDGING BROAD BASED EQUITIES OVERALL. EQUITIES, RELATIVE EXPOSURES MORE OR LESS UNPOPULAR IN THE U.S. MORE POPULAR. IN ASIA, MORE WEAKNESS. THERE ARE MORE VOLATILE COMPANIES. THERE HAS BEEN FOR – BONDS AS A HEDGE. IF YOU HAVE GROWTH TURN ENOUGH AND IF YOU DID GET A BIG TURN IN THE AI TRADE, IT IS PART OF YOUR GROWTH AND PART OF RISK SENTIMENT, YOU EXPECT TO SEE A

1:31:30 BIG ENOUGH GROWTH TURN THAT IT WOULD WEIGH ON FETE EXPECTATIONS AND BONDS CAN COME TO YOUR RESCUE. YOU HAVE THIS INCOME CUSHION IN THE MEANTIME. YOU’RE BEING A BAG PAID TO HEDGE YOUR AI TRADE. WE’RE NOT BROADLY TURNING ON AI EQUITIES. DO WE WANT MORE QUALITY? WHAT DO WE WANT TO OWN? NOT THE RISKER STOCK. GUY: DEBATE THIS MORNING ABOUT WHAT IS THE DRIVING NARRATIVE FOR BOND MARKETS THIS MORNING? MORE BROADLY. IS IT OIL? IS IT NOT OIL?

1:32:02 IS OIL LOSING ITS GRIP ON THE BOND MARKET? >> ABSOLUTELY OIL IS LOSING ITS GRIP. WE’RE AT $110 A BARREL. THE CORRELATION BETWEEN OIL AND YIELDS IS AT THE LOWS THAT WE SAW IN JULY WHEN WE WERE AT $70 A BARREL. THERE ARE A COUPLE OF REASONS FOR THIS. THE FIRST IS THERE IS A LOT PRICESSED IN FROM AN INFLATION PERSPECTIVE AND COMMODITY PERSPECTIVE. BRENT HAS RISEN RECENTLY. DIAZING PRICES BEING HIGH, GAS PRICES HIGH AND FOOD PRICES HIGH AND THERE ARE MORE WORRIES

1:32:32 ABOUT GROWTH NOW. THAT IS MORE RELEVANT IN EUROPE. IF YOU GET THESE HIKES, THAT COMES AT A GROWTH COST. YOU ALSO HAVE FRANCE BEING AN ISSUE. AS FRENCH RISK LOSE FLARED, THAT LIMITED HOW MUCH ECB TIGHTENING YOU CAN HAVE. YOU HAVE A DIRECT LINK BETWEEN YIELDS AND THE AI TRADE AND GROWTH. THE MARKET IS GOING MAYBE WE NEED TO BE THINKING MORE ABOUT GROWTH THAN JUST OIL. ANNA: HAS THE COMPLICATE NATURE OF THE BOND MARKET TRADE NOW.

1:33:03 THAT CAN BE IN FOCUS TOMORROW IN THE U.K. WHEN GET CPIDATA. WE HAVE SOME DATA TODAY ON THE LABOR MARKETS THAT IFIF YOU WANT TO YOU COULD INTERPRETER AS OPENING THE WAY UP FOR HIKES FROM THE BANK OF LAND. >> THE LABOR MARKETS ARE VERY HARD. WAGE US FROM THERE. I THINK THE ISSUE IS THE NCAA PARTICULAR, THERE IS SUCH A LONG LAG BETWEEN COMMODITY PRICES AND THEN INFLATION AND THEN SECOND ROUND IMPACT. THE REASON FOR THAT IS THERE

1:33:36 ARE A COUPLE OF UNIQUE THINGS. YOU GET A UTILITY BILL VET. IF WE HAVE GAS BRICES WHERE WE ARE NOW, WE’RE HEADED FOR A 20% INCREASE IN ELECTRICITY OR HOUSE GAS PRICES IN JANUARY. JANUARY VERY FAR FROM NOW. YOU DON’T GET THAT RESET UNTIL A QUARTER AFTER COMMODITY PRICES COME THROUGH. THAT MEANS THEY ARE LAGGING. YOU HAVE FOOD PRICES MORE INSIDE THE U.K.. WHEN YOU GET A SHOCK, THAT CAN IMPACT U.K. INFLATION FOR 2 1/2 YEARS AND

1:34:11 IT IMPACTS EXPECTS MORE. INFLATION STILL SET TO BE HIGHER. I THINK THE PEAK THAT BLOOMBERG ECONOMICS EXPECTS IS 4.1% IN 2027. YOU CAN’T HAVE THOSE HAWKISH EXPECTATIONS COME BACK. YOU NOT SEEING THE FULL FEED THROUGH YET. IT IS GOING TO TAKE A LONG TIME. GUY: SKYLAR, THANK YOU VERY MUCH INDEED. SKYLAR MONTGOMERY JOINING. WHAT DID WE LEARN TODAY? TECH IS TAKING IT BADLY TODAY. THE NEWS OF ASIA.

1:34:42 MARK IS SIEMENS, ABB, SCHNEIDER ALL DOWN PRETTY HARD AS WE COME THROUGH THE OPEN. ANNA: ABSOLUTELY. SELLING OFF TECH STOCKS AND INDUSTRIAL GOODS AND SERVICES THAT HAVE A LOT TO DO WITH TECH THESE DAYS. THAT IS IT FOR OPENING TRADE. “THE PULSE” IS UP NEXT. THIS IS BLOOMBERG.