Good morning. This is Bloomberg Daybreak
Europe. I'm Tom McKenzie in London.
These are the stories that set your
agenda. Call in the lawyers. US
President Donald Trump says he is
prepared for a legal fight with Fed
Governor Lisa Cook after she rejects his
moves to remove her. Asia tech stocks
scale as investors brace for results
from the world's most valuable company.
Nvidia's earnings a key test of Wall
Street's faith in the AI boom. Plus, the
US imposes 50% tariffs on some Indian
goods as President Trump upends ties
with Prime Minister Narendra Modi.
[Music]
[Applause]
Good morning. So, further evidence of
President Trump's attempts to remold the
Federal Reserve in his own image and of
course raising concerns among some at
least around Fed independence. European
stocks fell around 0.8% yesterday. The
pain trade was in France. You look at
the banking sector of course on question
marks about the sustainability of that
government as they lead up to that vote
of no confidence on September the 8th.
So keep an eye continued on French
assets and the spread of course between
French debt and their German
counterparts with Carmenac estimating
that maybe you could get that spread to
100 basis points if the political risk
continues to mount in France. European
futures though today pointing a little
higher making up for some of the losses
yesterday at least as things standing
high by 4/10 of a percent. Footsy 100
futures looking to add around 50 points.
S&P futures states side after gains of
4/10 by the end of the close on Tuesday
looking to add a tenth of a percent. And
of course the direction of travel will
be adjusted tomorrow on the back of the
Nvidia earnings crossing later today by
the end of the day of course US time.
Nas that 100 futures looking to add 23
points. Let's flip the board and have a
look cross asset money continuing to
move in at the front end when it comes
to US treasuries. So the 2-year is bid.
The 10-year 426 largely unchanged. You
saw of course on the long end both in
terms of US treasuries, UK guilts and of
course what we've seen in France that
sell off pronounced yesterday. today.
Relative stability on the 10-year 426
right now, but continue to watch the
long end of course on those Fed
independence risks. Euro dollar at 116.
Brent just modestly high by a tenth of a
percent on oil prices and gold a little
softer, falling 510 of a percent so far
in the session. So, the Trump
administration is said to be reviewing
options for exerting more influence over
the Fed's 12 regional banks. It comes as
President Trump says he is prepared for
a legal fight with Fed Governor Lisa
Cook. That's after he moved to oust her
from her post following allegations that
she falsified mortgage documents.
Bloomberg's Anie Hordon asked the
president about the legal battle ahead.
Fed Governor Lisa Cook, her lawyer, has
said that they're going to be filing a
lawsuit challenging this legal action.
What is your response? Are you prepared
for a legal fight? She uh seems to have
had an infraction and she can't have an
infraction especially that infraction
because she's in charge of if you think
about it mortgages and we need people
that are 100% above board and it doesn't
seem like she was.
Let's bring in Bloomberg's David Finity
right now. So David, the president
telling Bloomberg then it is prepared
for a legal fight when it comes to Lisa
Cook. How is that legal fight likely to
play out?
Well, I said at the moment it looks like
Lisa Cook is quite happy to go to court
and defend herself and the Fed has said
look we'll abide by whatever decision
the court makes if it does go that far
and President Trump has also signaled
that he will abide by the court
decision. Um in the meantime Lisa Cook
she can certainly uh issue try and get
an injunction for her to stay in her
role while the court is ongoing should
it go to a court battle. So at the
moment it's sort of that's the process
that she'll try and stay in her position
at least temporarily. Um and then we'll
see how the court battle is is decided
we're saying how long that takes which
is yet still to be determined.
And all of this of course is part of a
campaign that is becoming clearer right
now from this Trump administration to
remake the Federal Reserve. And we have
Bloomberg reporting that part of that
strategy will now involve exerting more
influence over the Fed banks, over the
regional banks. What do we know about
that element of this campaign?
Yeah. So I think it's important to
remember that the board of governors
comprise only part of the Federal Open
Market Committee, basically the rate
setting committee. So there's basically
12 on that. There's the seven board
governors. Then there's obviously five
regional presidents. One of them is the
New York Fed who's basically on all the
time and then four other regional uh
bank presidents who do a one-year term
and they rotate um they're rotated every
year because there's about 11 other ones
of them. So the question becomes to
really take control of the FMC should we
say if you're President Trump the board
of governors by itself is not going to
be enough because obviously you need
seven votes of the 12 to really dominate
the policy. So that's where these
regional presence do come in. Now in
February next year there is a once in a
five once every five years uh the board
of governors does make the decision
whether to reauthorize the existing
roster shall we say um the decision is
said it's not made by the regional bank
president's uh appointment it's not made
by the senate it's not made by Trump
it's made it's made by the board of
governors and by private sector boards
of those regional banks so the board of
governors had does have a say in it and
that's why the importance of if leave is
quick is removed Then you saw if you
have potentially four we say people who
are aligned with Trump on the board of
governors. So they'll have a lot more
impact in terms of the influence they
could have on those existing regional
board presidents. And are they
reappointed back in February? And if
they're not obviously then that leaves
the door open for people who are more,
should we say, in line with President
Trump's policies to be appointed.
Yeah. Yeah. And the president talking
pretty openly at the cabinet meeting
yesterday about what that could mean and
about his enthusiasm for having more
control and influence over the Federal
Reserve and talking about how that could
lead to lower mortgage rates of course
in the US though as we see in terms of
the long end selloff when it comes to US
treasuries that may not play out uh in
terms of how he envisages it. Let's see
uh how the story evolves. Blueos David
Finy thank you very much indeed with the
update in terms of what we're hearing
around the Fed. Meanwhile, to French
assets falling for a second day
yesterday, of course, as the latest bout
of political instability in that country
endangers the nation's nent economic
recovery. This after Prime Minister
Franu of course called a confidence vote
that could topple the government. Let's
bring in Bloomber's Caroline Corner
who's standing by for us in Paris.
Caroline, any progress then since we
last spoke to you this time yesterday
morning for the French prime minister?
Not much really Tom because Franis Beu
the prime minister spent his first day
after announcing this vote of no
confidence trying to reach out to the
moderate left the socialist. He did a
big speech yesterday afternoon in front
of the CFDT union, one of the biggest
unions in France, which is actually a
moderate union. And he really tried to
said that all his proposals on the
budget can be amended. And he also said
that perhaps he could also target the
highest earners. Perhaps the highest
earners could give a bigger contribution
to this 44 billion euros of savings. uh
planned in this next budget. Uh but at
the moment uh the charm offensive
doesn't seem to have uh paid uh paid off
or bear fruit quite yet. The socialists
have repeatedly said in the press that
they will vote against the confidence of
Franu and technically mathematically at
the moment in the national assembly they
are the only chance of survival. uh the
socialis will present an alternative
budget over the weekend for their summer
university. So we'll see how exactly
Franceu responds to that uh next week.
Uh but mathematically again u really um
even reaching out to the socialist um at
the moment if if this is not bearing
fruit uh the government will collapse on
September 8 because they can't really
reach out to the national rally. The
national rally president Jordan
Barardela was on the 8:00 news last
night and he actually called for new
snap legislative elections and even uh
President Mron to resign. So clearly
there is no hope there. The chances of a
government collapse on September 8 are
still very very high.
Okay. The parliamentary arithmetic is
not lining up in the prime minister's
favor at this point. What are you
watching for next then Carolene and how
much of this risk is currently baked
into the French markets?
Well, obviously we're still watching the
markets. You saw the reaction on the CAC
40 yesterday, down 1.7% after losing one
and a half% on Monday after the
announcement. And of course, the
continued pressure on the French bonds.
We've seen uh the spread with the German
10ear reaching nearly 80 basis points uh
yesterday. And as you mentioned earlier,
Carmen said that we could actually see
even a 100 basis points on this spread
uh if the political situation in France
deteriorates even further. Remember
before the snap elections of 2024. We
were at around 40 for this press. So
quite a far way out. The bonds haven't
really recovered really since my call
snap elections last year. And in fact,
the French finance minister Lombar was
saying yesterday on the radio that if
there is another political chaos in
France, the French boring cost will
likely reach uh the level of Italy
within the next two weeks. So we'll see
how this pans out. The next thing is
that Beiru is going to speak to the
maidf the business community. Mv being
the biggest business lobby in France
that is tomorrow. Of course, the
business community doesn't seem the
hardest to convince, but they will also
contribute to this budget. So, they are
also worried about uh for example lower
subsidies for some of these businesses.
And of course, some opposition parties
have also called for this exceptional
tax for big companies that was put in
place for this budget for this year to
continue into next year. So, we also
will see also the reaction from the
business community. Many companies are
are in a wait and see mode already
because of the tariffs, because of the
trade situation we've seen over the past
few months. Uh and this wait and see
attitude could continue. Uh companies
could be reluctant uh to do a big hiring
plans or investments over the next few
weeks.
Okay, Bloomberg's Caroline Connor in
Paris on what that political uncertainty
means for the markets, but also business
sentiment as well. Caroline, thank you.
Talking of business sentiment, we're
going to get a check on that in terms of
the AI impulse, of course, later today.
Nvidia set to deliver a highly
anticipated earnings report today,
giving an update on the artificial
intelligence spending boom. Analysts
that the biggest buyers of AI hardware
are still investing heavily in new gear
and kit. However, dimming the excitement
is confusion over just how much business
and video will be able to do in China
given the geopolitics. Bloomberg's
Annabelle Drul is in Hong Kong and can
give us a preview. Annabelle, how
significant are these earnings not just
for the NASDAQ 100, the S&P 500, but for
global stocks?
Yeah, I think if there's really one one
company or one set of earnings that you
could pull out, I mean, this is arguably
the single most important quarterly
release for the broader market. uh why
it's so important. Of course, it's that
sort of recurrent trend that you see
every time we have Nvidia earnings just
sort of preceding that. You start to
have these questions again. Is this AI
hype overdone? Is this spending that
we've seen so far on AI related
hardware, is that going to be
continuing? And so that's the big
question going into the numbers today.
The expectations are high. I mean
revenue estimated at $46 billion but
that's still a around a 50% jump on the
year earlier and adjusted EPS of a $11
per share. So yes I mean so far as you
mentioned there in the introduction we
are seeing some signals that the the big
buyers are keeping to buy and we had
TSMC earnings for instance just a few
weeks ago and again they signaled that
demand was strong but the options still
we're seeing pricing for around a 6%
swing in either direction. So there is
room for the market to be disappointed.
And I think what's interesting to point
out as well with with Nvidia is that it
really takes a lot to impress the
investors because the expectations are
already so high. Even when Nvidia meets
expectations, that's really not
sometimes enough. A slight beat also not
sometimes enough. It needs to beat by a
wide margin to see that that exuberance
extending.
And of course, Annabelle, the China part
of this story is going to be crucial as
well. You're sitting there in Hong Kong.
You're close to this story. you're
speaking to people in the ecosystem.
What is your sense as to the lack of
transparency, the lack of certainty that
Nvidia right now has when it comes to
the world's second largest economy and
the demand there?
Yeah, I think that's really the big sort
of question mark. Anything muddies these
numbers? I mean, it's going to be the
China it's going to be the China
equation or part of the equation. I
think from the perspective of analysts,
for instance, this is really the big
unknown. They actually don't know how to
price the China risk. Yes, China is
accounting for less and less revenue in
in for Nvidia. I mean, I think last
checked around 13% of revenue. That was
down from around 20% just a few quarters
earlier. So, it's continuing to make up
less of the bottom line. But, it is
still a very important metric. And I
think of course we had the reporting
last week that China was asking its
companies to not uh to not be buying
H20. That's the chip specifically
designed for the mainland market. And as
a result, Nvidia was putting a halt on
that production. So anything we get on
H20 is going to be extremely closely
tracked. And I think also what's
interesting to note is an earnings
release that we had overnight actually
yesterday after the bell in Hong Kong.
But Cabracon which is an AI chip
designer in China. So its competitor
there is Huawei. But of course Nvidia I
mean the world's biggest and and uh and
and most advanced chip designer. But
still Camracon had these blowout numbers
for the quarter. record profit that we
saw $144 million for the period, but it
was still a reversible loss from the
year prior. But how much is that
strength that we're seeing in the
Chinese chip companies coming at the
expense of Nvidia?
Yeah, really important to tie in some of
the gains coming through for the
domestic players in China as that
competition of course heats up. A great
setup in terms of what to expect from
Nvidia's earnings and the broader
implications of course. Bloomberg's
Annabelle Drus, thank you with that.
Here's what else to think about today
then 7 a.m. UK time. So, counting down
to this, it's the German GFK consumer
confidence. We've seen some of the
gauges in terms of the German economy
looking a little bit more positive. How
is the consumer there, though feeling?
At 12:00 p.m. UK time, we'll get US MBA
mortgage applications. We know President
Trump is concerned about mortgage rates
in the US. And after market, of course,
it is Nvidia earnings, as we have been
discussing. It's the big one for the
markets today and certainly uh arguably
for this week as well. Coming up,
President Trump's crushing 50% tariff on
some Indian goods takes effect. We will
have the details from New Delhi next.
Plus, of course, a big day for tech
earnings with Nvidia reporting. We're
going to discuss as well the launch of
Thorbreds 100, move over unicorns. This
is all about the thoroughbreds. This is
profiling the AMIA tech firms with over
$und00 million in revenue. Phoenix Court
co-founder and executive chair Saul
Klene, a big player in the VC world in
Europe, will be joining us later. Stay
with us. This is Bloomberg.
Welcome back to Bloomberg Daybreak
Europe. The US has slapped a crushing
50% tariff on some Indian goods. The
higher tariffs doubling the existing 25%
duty that was implemented on August the
7th. Doubling that duty. For more, let's
bring in our India trade and economy
reporter Shri Shvastava in New Delhi for
the latest. So these tariffs are now in
place. What impact is this likely to
have on India's economy?
So the tariffs are as you said are
already they kicked in 9:31 a.m. India
time today and of they are already in
place and this is going to have a huge
impact on uh Indian exports which are
bound for the US. Now let's keep in mind
that the US is the largest trading
partner for India and some 87 billion
dollar worth exports were made in 2024
uh which is almost 2% of India's GDP. So
definitely Indian exports are going to
be hit. uh you know we are already
seeing that playing out export orders
have started drying up uh the orders
which are already in buyers are seeking
deep discounts on that so Indian
exporters are awaiting some sort of
rescue package from the government uh
how it'll also play out is the fact that
you know it'll also hit India's
manufacturing ambition Modi has been
trying to lure investors who are looking
to diversify and with such a high tariff
punishingly high tariffs uh that that
ambition seems to you know be taking a
dent of sorts for now.
One more thing I would like for labor
intensive sectors.
Yeah.
Sorry.
No, I was going to ask what this means
for broader India US relations going
forward. The relationship then
between these two nations and how this
decision by the Trump administration to
put these 50% tariffs on, how that
impacts that relationship in in the
weeks and months and possibly years
ahead.
Yeah, definitely it's going to have a
huge impact on the bilateral
relationship between India and the US.
Let's keep in mind that you know Modi
was one of the first leaders to meet
Trump when he joined White House. Uh the
Modi visited White House in February and
the both the leaders they pledged to
have a trade deal by fall of this year.
Months of negotiations later we have
seen that there is no trade deal that
India has and there is no sign of a
trade deal in the near future. uh this
and plus Trump has been blasting India
continuously for its purchases of
Russian oil. Uh it has also blasted
India for some of the red lines in the
trade in the trade negotiations on you
know giving more market access to
American farm goods and daily products.
Now these things have definitely saw
relationship between the two. New Delhi
has stuck a defiant note saying that
it'll continue buying Russian oil
because it it's financially viable and
it has also helped to keep the global
economy stable. Now uh we have seen
because of the saring relationship India
is edging away from the US and is trying
to forge deeper ties with its fellow
members of the bricks block after 7
years and you know a violent border uh
clash in 2020. Uh Modi is likely to meet
uh Xi Jinping next week uh on the
sidelines of a security summit. That's
the first visit of Modi in 7 years.
India is also trying to uh increase its
trade with Russia and they plan to boost
the trade to 100 billion dollars in the
next 5 years. So these are some of the
developments which have already played
out uh which clearly show uh the the
direction in the in which the US and
India relationship are moving forward.
Okay, Bloomberg Shri Vastava with that
update. Thank you very much indeed.
Coming up, talking of China, President
Xi Jinping unleashing China's biggest
purge of military leaders since Mao
Zadong. Now story is next. This is
Bloomberg.
Bloomberg analysis has found that
Chinese President Xi Jinping has ousted
almost 1if of the generals who he
personally appointed since taking power
in 2012. For today's Bloomberg Bigtake,
our China economy and government editor
Alan Wong joins me from Hong Kong. You
and the team, Alan, have been going
through the numbers in terms of the
military leadership in China and the
changes. What's what's behind this
purge? Is it is it corruption? Is it
power? Is it a combination of the two?
Yeah, Tom, it's never easy to completely
and cleanly separate the two in China
really. Uh what we know is that when
Xiining came to power, he made fighting
corruption one of his biggest platforms.
Uh something that uh unites the people
of China and also uh you know to help
solve a problem that was very real at
the time and probably still is. So the
purge in the Chinese military
specifically uh started uh to take off
really in his third term in the last two
or three years and uh it was just about
uh 2023 when uh one of the most
important departments in the Chinese
military, the equipment development
department uh which is in charge of
procuring weapons for the Chinese
military said that it found deep
problems within the department uh such
as clicks and also leaks of information.
So it was an very unusual disclosure
from a very secretive body. Uh and then
we started hearing about the senior
generals leading China's rocket force
being investigated for alleged
corruption. So the rocket force is in
charge of some really important uh
weaponry in the Chinese military
including uh the nuclear uh arsenal and
as well as missiles. So the top generals
from that department has been purged and
uh uh it just shows that the highest
echelons of the Chinese military is in
turmoil.
Yeah. So Alan, what happens next?
Uh we will have a Chinese military
parade next week. I'm sure the photos
and image images of that will be blasted
on many screens all over the world. Uh
what's happening next also is that uh in
a couple weeks after the parade, China's
top leaders they will gather for the
fourth plenum which is typically when
they will uh write up their next 5-year
plan for the economy but also when
they'll make uh senior uh personnel
decisions. So, we're watching out very
closely for uh any additions to the
Central Military Commission, which is
the most powerful body overseeing the
Chinese military, for any signs of she
appointing a successor. Now, this is
highly unlikely, but I mean, it's
something that analysts have flagged as
a possibility because all Chinese
leaders, well, most Chinese leaders in
uh in recent memory have to have spent
some time with that commission before
they uh take the the big job. Xiinping
himself uh was a vice chair chairman of
that commission two years before he
became the general secretary of the
ruling communist party. So we should be
watching out okay for who's going to
take up the vacancies on that body.
Okay. Excellent. Alan Wong on what to
watch out for when it comes to China's
military leadership and the changes.
Thank you. Coming up, French assets
still in focus. We'll get more details.
This is Bloomberg.
Happy Wednesday. These are the stories
that set your agenda. Call in the
lawyers. US President Donald Trump says
he is prepared for a legal fight with
Fed Governor Lisa Cook after she rejects
his moves to remove her. Asian stocks in
terms of tech gain as investors brace
for results from the world's most
valuable company. In Nvidia's earnings,
a key test of course of Wall Street's
faith in the AI boom. Plus, the US
imposing 50% tariffs on some Indian
goods as President Trump up size with
Prime Minister Narendra Modi. Let's
check in on the markets then. A modest
turnaround in sentiment. You did see
some gains by the end of the close state
side yesterday with outside of around
4/10 of a percent on the S&P 500. It was
a brutal day of course for European
stocks. Most notably what was happening
in France with the catar falling has
fallen now a little over 3% just in the
last couple of days. Futures though
pointing to modest gains across the
benchmark for the stocks 50 futures
today up 3/10en of 8%. The Footsie 100
here in the UK looking to add 41 points.
S&P futures very modestly looking to
build on the gains of yesterday and
NASDAQ 100 futures looking to add just
seven points. Let's flip the board and
have a look cross asset. A lot of
selling pressure of course particularly
on the long end when it comes to
government debt of the US, the UK and
France yesterday. Today the benchmark US
tenure is largely unchanged at 427.
Though there is money moving into the
2-year part of the curve, the front end
is bid again. Yields down. It's the long
end in terms of the yields up story.
That yield curve steepening continues
116 on euro dollar single currency down
2 cents on dollar strength. Brent larger
changed at $67 a barrel and gold taking
a bit of a knock in the session. The
element metal softer by 510 of 8%. So,
French stocks, as I mentioned, falling
yesterday as political uncertainty
ratcheted up following Prime Minister
France's plan to call a confidence vote,
which could topple the government. The
Kakar tumbling 1.7% at the close, twice
the move of the panuropean stock 600.
For more, let's bring in Bloomberg's
French equities reporter, Jun Ponus.
Julia, talk us through the French market
reaction to the political risk that
seems unabated at this point.
It's a very clear-cut reaction really.
Um stocks have fallen. the the spread uh
with Germany uh for the French bonds uh
has widened and so you had a big
reaction on financial stocks on BNP, so
credit card insurance like AXA uh very
focused companies um domestic focused
companies like VI you know
um you know operators on domestic
operator of highways. Um we look at
baskets that you know uh investment
banks do on the most exposed stocks.
They they they fell twice the the rate
at the international stocks. It's um
it's a very clear-cut reaction. I mean
the vote the market itself voted a no
confidence uh vote to to be really
okay. Yeah. So so the the vote came
through from the markets. How much is is
there further sell when you speak to
analysts and and those in the trade when
it comes when it comes to French
equities? Is there an expectation that
that that political risk is now priced
in? Is there further selling? And what
are the implications if indeed you do
get the 10-year yield in France
above Italy's? And we're just what five
or six basis points away from that?
Exactly. Um the finance minister Lomba
had said you know we never know maybe in
two weeks we could get to the parity
between Italy and France. It seems we're
getting there very very fast and no um
all the investors or traders or
strategists I'm speaking to they expect
uh the uncertainty to continue and the
pressure on French finan financial
assets to to grow. there's no reason
there's nothing on the horizon that lets
you think that the budget crisis will be
resolved. uh you can do we spend a lot
of times with my colleagues looking at
you know simulations of the vote in
parliament you know vote by vote party
by party but there's just no way at this
point there's no way uh be can pull it
off and what happens afterwards is
anyone's guess we could have a new prime
minister we could have um general
elections uh it's not really clear like
and when for a lot of uh we have a story
that just went out on that and just like
for the French economy itself like all
the corporations and a lot of people are
putting their recruitment plans on hold
uh their investment plans on hold so
this will also bite into the economy
making the the budget equation harder
and um I guess it's true in in life in
general you know as they say death death
and taxes but I mean in France taxes are
even more certain than than the rest of
the world at the moment
okay Julian fantastic take in terms of
how the markets are reacting and maybe
more selling pressure uh to go in terms
of European stocks, French stocks I
should say. And of course, we continue
to watch the yield when that trading
resumes. Jul Ponus, thank you. Joining
us out of Paris on the political risk
across French assets, switching focus to
the political risk here in the UK
because former UK Prime Minister Liz
Truss says the country's economy is in a
doom loop cycle of higher taxes, lower
growth, and higher debt. Speaking on
Bloomberg's OddLots podcast, Truss also
weighed in on the Bank of England and
backed Donald Trump's approach to the
Fed.
I I think the Bank of England needs to
be accountable to politicians. I think
the current system doesn't work. This is
why I'm very sympathetic to what Donald
Trump is saying about the Fed. Monetary
policy is incredibly important. It
determines the allocation of assets
within within society. You know what
we've seen in Britain is we've seen
people who have
property who have capital have done very
well out of the low interest rates that
the Bank of England and the easy money
the Bank of England has created over the
past 15 years.
And you can listen to the full interview
with the former UK Prime Minister Liz
Truss on Bloomberg's OddLots podcast
with Joe Weisen and Tracy Aloway. Now,
former New York Fed President Bill
Dudley says President Trump's latest
move to oust Governor Lisa Cook.
Sticking with central banks is a serious
attack on the Fed's autonomy. The
Bloomberg opinion columnist believes the
courts will eventually set precedent for
the Fed's independence through the case
because this is a real assault on the
Federal Reserve's independence and as we
know central banks independence is
really important for good uh economic
outcomes. There's been a reason why
we've been moving in the direction of
greater central bank independence over
the last four decades across the world
because central banks that have
independence in terms of how they
conduct monetary policy to achieve the
objectives set for them by Congress and
the administration do a better job in
controlling inflation and keeping the
economy on a stable path. So this is
assault on that and I'm sort of
surprised that the markets are so
relaxed about this. Now maybe that's
because we don't know where this is
going to go. We don't know whether Lisa
Cook is going to be able to stay in
office. Uh it certainly looks like the
bar to getting her out is quite high uh
because doesn't seem that the uh for
cause would would extend to to to to the
allegations against her, but she
certainly at very minimum deserves her
her day in court.
Well, Bill, it it seems like that is the
system that is emerging that we're
understanding the contours of Fed
independence from the courts. Be it the
most recent ruling that said other
independent agencies could have their
heads fired by Trump but not necessarily
the Fed without cause. This may be
defining having the courts define what
cause is. If you have a system where
it's not encoded in law but instead is
being interpreted by the courts. What
does that say about the fragility or the
stability of Fed independence?
Well, it sort of has to be interpreted
by the courts because this is but
there's what there's no precedence for
this. So, we don't really know what the
law is until the courts actually rule on
it. So, so it so the courts have to
decide, you know, what the what what
what's the law intended to do. Um, I
think most people think that uh, you
know, what Lisa Cook did does not
represent for cause dismissal from her
governorship, but it's up for the courts
to adjudicate that. So, Bill, if we're
in a scenario where it seems like we
might be, that this is a Fed that wants
to start to ease policy, that it wants
to cut, but because of all these
proceedings in the background, you get
some real tension on the long end of the
curve. What would the Fed do in that
case? That it wants to cut, it wants to
ease, but the markets do something
different.
Well, I think the Fed will do what it
thinks is appropriate to achieve its
objectives on employment and inflation.
and polic certainly signaled at his
Jackson Hole remarks that he's worried
about the downside risk to the labor
market more than he's worried about the
upside risk to inflation and so his view
that monetary policy is currently
restrictive he basically sent a signal
that it's highly likely the Fed's going
to cut rates in September and I don't
think this changes any of that what it
does change is down the road when the
Federal Reserve acts when the Federal
Reserve if they cut rates at subsequent
times is that because they think that's
an appropriate thing to do for the
economy or because it's because they're
under pressure from the Trump
administration.
Bill Dudley, former New York Fed
president and Bloomberg opinion
columnist speaking with our colleague
Danny Burgerer. Coming up, move over
unicorns. Today sees the launch of
thoroughbreds 100, a new list of the
AMIA tech firms with over $100 million
in revenue. Phoenix Core co-founding
executive chair Saul Klein will be with
us to discuss that next. And we'll
discuss and tie in the AI theme as well
with Nvidia earnings up later today. S
Klein a key player in terms of the tech
startup ecosystem here in Europe. Stay
with us for that conversation. That's
coming up. This is Boombo.
Europe. Now, there is a big test of
course for the US stock market later
with a read on what has been driving
gains for the past few years. Artificial
intelligence, of course. Nvidia
reporting earnings after the market
close and investors will be hoping it
can shore up some angst that we're
starting to see about AI spending and
effectively confirm the stock market's
latest rally isn't just another tech
bubble. For more on this and a broader
look at the European ecosystem and fund
flow, Saul Klein, co-founder and
executive chair of Phoenix Court, which
has topped a list by deal of VC funds
investing in the European tech space and
Phoenix has the seed part of the
business and then later stage you've
backed companies including wise, travel
perk, tide. You have personally been
involved in a number of significant
exits. You were CEO as well of of course
of love film. You were significant in
terms of the early days of Skype.
someone who has deep experience over
over a couple of decades. That's what
I'm getting at ultimately. So, you're
ancient. You have deep experience in
this space and you can speak to it with
with real with real gravitas. I want to
I want to start by by asking about the
AI theme. Are you seeing any letup at
all in terms of flows, fun flows into AI
startups? Is it is it looking frothy to
you? What are the dynamics you're seeing
right now specifically when it comes to
funding AI? Look, I think it's it's what
what uh one can think of as an
incredible wave. Uh AI really has been
building as a wave probably for the last
15 years. And actually the UK with Deep
Mind arguably kicked off this whole
phase of of this AI wave. And you know
what we've seen with the biggest waves
in technology going all the way back to
semiconductors from the ' 70s is that
the big waves in tech last decades,
multiple decades. If you think about it,
you mentioned Nvidia. 53 years on, we're
still investing in semiconductors. And
if you look at the 10 largest companies
in the world, many of them are
semiconductor companies. So we would
think of the AI wave 15 years in really
is in the early innings. Now what that
means is there are absolutely going to
be periods of that wave of that cycle
that appear frothy but there will be
absolutely landmark companies built uh
in this wave that have been founded in
the last 5 or 10 years and you know our
belief is that there are still companies
that are just getting started today that
will end up being you know superstars of
this era.
Where do you expect those superstars to
show up? Where do you see the billiond
dollar opportunities in AI in in the
years ahead?
Well, I think you know billion dollars
is sort of at at the lower end quite
frankly, you know, if you're looking at
where these massive players are in AI,
you know, the Nvidias, the Microsofts,
the Googles who are really riding the
top of the wave, never mind open AI or
Anthropic or others. You're talking
about hundreds of billions or trillions.
You're not talking about billions. So I
think you know we're in for an
absolutely massive uh opportunity. There
are going to be economic massive
economic gains and and changes. Um and
you know we see it as I said all the way
through the stack from semiconductors
to compute to the application layer uh
and everything in between. I mean AI is
not just one thing. It's sort of a
multiplicity of things. And I think
that's why you're seeing, you know, the
impact kind of cascading across the
market.
So that value acrru when it comes to AI,
you know, and and by the way, I don't
think even at the semiconductor level or
at the compute level, the game's up.
What is all of this doing to the
European tech ecosystem? We're talking
about the thorough beds. So we're moving
away from unicorns, the focus on
valuations above a billion to
thoroughbeds where you're raising or at
least you're pushing through in terms of
revenues more than hundred million US
dollars. and you've been consequential
investing in companies that have got to
that metric and me met met that
benchmark. How how significant
ultimately is it that that we're
switching focus from valuations to the
fundamentals? I
I don't know if we're switching focus,
but we're recognizing that, you know,
ultimately companies are valued on their
fundamentals. They're not just valued on
their hope and their promise. And you
know the great thing about unicorns is
that they capture this notion that
innovation and technology is about hope
and it's about promise but ultimately
unicorns are mythical beasts. So you
know about a year ago we started to
think about you know what are the sort
of the fundamentals that anyone can look
at that tell you is this more than hope
and promise is this a real business and
real businesses make revenue and so you
know the idea that if you're over 25
million in revenue we still think of
those companies as cults
uh but 100 million or more in revenue we
think of as thoroughbreads and the
incredible thing for me, you know, you
pointed out I'd been around for a while
is, you know, when we were at Skype,
maybe there were two or three companies,
tech companies in Europe that were
generating 10 million, 20 million, 30
million. Today, there are 700
thoroughbreds in EMIA, companies doing
over 100 million in revenue that are
venturebacked.
Does that mean we're solving the scaling
question? We're not solving the scaling
question in terms of funding, but we are
solving the scaling question in terms of
businesses being created that are
creating value for customers. There's a
second question is are they being
capitalized appropriately given their
scale? And you know what we've seen
particularly in the UK and Europe is
that we're brilliant at starting
companies
and you know the evidence is now there
with this thoroughbreds uh table. Uh the
the table I think dealer releasing today
is the top 100 but there's 700.
You know what we're not seeing is the
capital coming to meet the opportunity.
How do we how do we close that gap then?
Well, I think you know particularly in
the UK and this has also been true in
France. Um in the UK you know the
chancellor uh h in the last few months
has encouraged the mansion house group
of pension funds and insurance companies
to double their commitments by 2030 to
private markets. Uh France have had the
the Tibby initiative. So I think there
is a generally a good understanding that
we need more European capital in our
innovation economies
and s you touched on the UK government
you're close to the to the government
you've advised this government other
governments as well how concerned are
you your ecosystem founders investors
about potential tax increases from this
chancellor come the autumn bud is that a
topic of conversation is there concern
about that
look I I I think tax is always somewhere
in people's minds but I go back to sort
of the fundamentals if companies
companies are are growing, if they're
performing well, you know, capital will
follow them and then the right
conditions will be created for those
companies. The bigger problem that we
have in terms of growing our innovation
economies is lack of scale up capital.
It's not tax structures in my view.
Okay. It's still about scale up capital.
S Klein, excellent. Thank you very much
indeed for coming on to the show and
talking us through what is happening in
terms of the ecosystem here. The flows
into AI and how that is changing the
opportunities as well around of course
some of those bigger players reaching
that $100 million revenue target and
above. Saul Klein, co-founder and
executive chair of Phoenix Court. Now,
some other stories making the news this
Wednesday. SpaceX's Starship rocket
launched to space and deployed
satellites for the first time before
surviving most of its journey back to
Earth, achieving new milestones after a
year of setbacks. Build as the largest
and most powerful rocket ever built,
Starship is the centerpiece of the
company's plans to send huge batches of
its Starling internet satellites into
Earth's orbit and carry humans to the
moon and eventually Mars. And finally,
congratulations are in order for pop
superstar Taylor Swift and NFL player
Travis Kelce. The pair announcing their
engagement in a fivepart post on
Instagram captioned, "Your English
teacher and your gym teacher are getting
married." The photos also feature Swift
sporting a large diamond ring. You'd
expect nothing less, of course.
Wellishes from the couple are already
pouring in online and even from the
White House. President Trump, who has
been critical of Swift for endorsing his
political rival, Kamla Harris, commented
on the engagement during a cabinet
meeting.
I wish him a lot of luck.
I think it's I think he's a a great
player. I think he's a great guy and I
think that she's a terrific person. So,
I wish them a lot of luck.
All right, plenty more coming up. Stay
This is a real assault on the Federal
Reserve's independence and as we know
central banks independence is really
important for good uh economic outcomes.
It's very very threatening to the very
independence uh of the Federal Reserve
and it should cause concerns I think
among investors and more broadly about
that fun fundamental underpinning of our
strong economy.
This is nothing more nor less than a
banana republic style power grab of the
central bank trying to diminish its
independence. What we are certain of is
that we're seeing a fairly unprecedented
attempt to influence the Fed and not
just influence the Fed, but really make
members of the board of governors
afraid.
If the president can remove a member of
the board of governors based on an
allegation that's not even been brought
forth in the courts, then that really um
sets up risk for any member of the board
of governors.
some of our guests there on the growing
standoff of course between President
Trump and Fed Governor Lisa Cook. Let's
bring you back to the French story. Of
course, our equities reporter talking
about that fact that you should brace
maybe for more selling in terms of
French stocks in the days ahead given
the political risk and uncertainty
there. Just looking back year to date,
French stocks have underperformed
anyway. They've performed, they've
gained just 4%, just a little over 4%
year to date. You compare that to what's
happening in Spain where you've get
gains of a little over 30% on the IBEX,
gains of more than 20% of course in
Germany. Different dynamics of course at
play in terms of France. The exposure to
luxury isn't helpful. The political un
instability of course is the front and
center story as well. And then there's
the tariff impact from those trade
relations with of course the US and all
of that has played into what's happening
in terms of the French equity
performance. The banks of course being
particularly badly hit in recent days.
So keep across that story for you. Of
course, that is the longerterm context
in terms of the underperformance of
French stocks versus their European
peers. There was a lot of focus in terms
of the sell off on the long end
yesterday, particularly here in the UK
where guilt yields on the 30-year
closing into the highest level in about
27 years at 5.6 or thereabouts. If you
get to 5.66
on the 30 year, you're back to levels
you have not seen since 1998. All of
this, of course, anxious and anxiety of
course building as we lead up to the
Aland budget for the Chancellor Rachel
Reeves, making that situation for her
just that much more challenging. Let's
split the board and quickly look at what
to expect in terms of Nvidia's earnings.
This is the big one for the markets
today, of course, and the focus is going
to be on the data center piece in terms
of the revenues. That's where they're
getting the bulk. Of course, you're
expecting to see a 577% around 57%
yearon-year increase. Revenues of 41
billion just in a single quarter. That
is the breakdown in terms of the
different segments of this business, the
key catalyst for these markets. The
opening trade though is up next. Stay