[Music]
news makers and market movers.
This is the pulse with Francine Laqua.
Good morning and welcome to the pulse.
I'm Joanna Bersuchi in Dubai in for
Francine at Laqua this week.
Now, Nvidia has signaled that the 2-year
AI spending boom is decelerating with a
sales forecast that fell short of the
highest Wall Street estimates. It's
expecting revenue of around 54 billion
in the third quarter and has removed
China from its forecast altogether as
tensions remain over sales of its H20
chip. So, the latest afterhour trading
activity suggests that the stock is
poised to open down 2%. It was 3%
earlier on the session. So, pairing some
of those losses uh as you can see, but
the chief executive Jensen Huang says he
still hopes to sell Nvidia's most
powerful chips into China.
So, I think the, you know, the the
opportunity for us to bring Blackwell uh
to uh the China market uh is a real
possibility. And so we just have to keep
advocating uh the the u uh sensibility
of uh and the importance of uh American
tech companies to be able to to uh lead
uh and win the AI race.
Let's bring in Robert Lee, senior
analyst at Bloomberg Intelligence.
Robert, there are not that many
companies in the world that are seeing
their quarterly revenue sales growth
expand by 56%. These are still very high
numbers and yet perhaps not enough to
satisfy what investors were looking for.
No, absolutely. So, I guess let's
briefly go back to the ABC of stock
markets and broking short-term stock
movements particularly on results are
driven by incremental surprise or lack
of. And that's what we didn't see last
night. There were solid numbers largely
in line with expectations maybe slightly
ahead in terms of what was reported and
what was guidance but I guess investors
have got this got used to this sort of
diet of so-called beaten raise uh where
the company's been you know
substantially beating numbers that just
didn't happen last night so I think the
setup was pretty textbook the reaction
again uh was straight out of the um as I
said the ABC of broking it's
unsurprising we saw profit taking on the
back of uh what were solid set of
numbers, but with no massive incremental
surprise.
Rob, all of this week when we've been
previewing Nvidia, you've been using the
hoke kokei analogy of one leg in, one
leg out, and it really appears to still
be the case for Nvidia. Uh, one uh
development that really stood out to me
from the earnings yesterday, they didn't
sell any H20 chips into China in the
last quarter, obviously due to some of
the geopolitical tensions. How do we see
this panning out in the coming quarters?
And that could that pose some upside uh
surprise or a tailwind to Nvidia in the
coming quarters if they do start selling
that chip into China?
Okay. Sure. Well, you don't want the
Robert Lee hoke koke. So, I'll give you
a clear answer. I would say on balance
it's highly unlikely the company's going
to sell H20s in China. Um it's just
clouded by a lot of geopolitical driven
uncertainty. Obviously, America, the US
are major economic rivals, geopolitical
rivals. Uh, China's pushing strongly to
achieve technology self-sufficiency. As
I've said previously, from a Chinese
perspective, America is an unreliable
partner. Um, so there were unconfirmed
reports that the Chinese authorities are
encouraging companies in this part of
the world to buy locally. Um, so I think
it's highly unlikely the H20 will go
ahead. But I think the major takeaway
from my point of view on the results was
uh the uh clip you gave from Jensen. And
I I think they've maybe uh changed their
strategy a little bit on China. It's
evolving. They're potentially looking
and I assume they're lobbying President
Trump and his administration to get
permission to sell the more advanced
Blackwell chip into China. So I would
say from a corporate point of view, I'm
sure in theory the Chinese companies
might welcome that. What the Chinese
authorities and regulators would think
of that remains to be seen. So I think
that's the way the strategy is evolving.
But I would say based on what we do
know, it's highly unlikely at this point
that H20 will be sold into China by
Nvidia.
Yeah, and let's see what upside that
actually does bring in terms of revenue.
Robert Lee from Bloomberg Intelligence.
As ever, thank you so much. Well,
joining us now is John Bilton, a head of
global multiasset strategy at JP Morgan
Asset Management. At the top of the
show, John, I was saying that Nvidia
itself, a single stock, represents 8% of
the S&P. So you can see why it is so
important for market momentum uh in the
next few days. Is there anything that
you took away from the earnings report
yesterday that should or could slow down
the recent positive momentum we've seen
in US stock markets as of late?
Well, I think with the market we have to
take a bit of a step back because you
know there is concentration in the US
market and of course the US is
concentrated within global markets but
if we actually look at where the market
capitalization of the top 10 stocks in
the in the US is it's sort of in the
middle 30s but the earnings contribution
there is in the upper 20s. So this is
not an unjustified position for these
block of sort of mega cap uh names
within the US index. they are, you know,
to to use an expression, very much
washing their face in earnings and in
cash flow terms. Add on to that that
they are that many of them have dominant
buybacks going on and you can see why it
is that they are so important to the
index.
Mhm. You know, and it's not just that
driving it, but perhaps also interest
rate cut expectations. And and in that
regard, the Fed Chair General Pal's
speech at Jackson Hall was quite notable
last Friday for its doubishness. Do you
expect the Fed to embark on a series of
sequential rate cuts or do you think it
will be maybe one in September then sort
of reassess the outlook before
committing to further interest rates?
How do you see this all panning out?
Well, I I mean I think that the Fed are
you know we we talk about data
dependency a lot and I think that that
comes in and out of fashion but the Fed
more than any any other central bank
probably are data dependent. Um we've
heard some sort of mixed signals. I
think it's pretty clear now to us and we
expect a rate cut in September of 25
basis points, another one in December
and then a couple more next year in the
first half. We would stick with the idea
that it could be quarterly. But John
Williams of course the uh uh governor of
the New York Fed has has said that um
every meeting's live. What he also said
uh recently was that um the uh policy at
the moment is modestly restrictive. So
that means they can cut and still keep
in balance both their employment mandate
and their inflation mandate. And you
know at the moment I think some of the
dovish comments that we saw out of
Jackson Hole really point to the fact
that they are perhaps slightly more
focused on labor markets just now but
make no mistake they are still aware of
the elephant um in the room which is
inflation risk.
Yeah. And a lot of that is just so
uncertain at this point in time. It's
very difficult to see
uh the actual real economic impact so
many of these policies are going to
have. But let me just ask from from your
standpoint, your perspective.
We have seen a big steepening of the US
yield curve as of late. Do you have a
view of where tens should end up? What
approximate fair value is and again you
know we are possibly enter entering into
uncharted waters. Uh also on back of
some of the recent jabs that the
president has has made towards the Fed
as well and the Fed's independence.
Yeah. Well, look, we do expect that
curves can steepen from here, but it's
much more along the lines of the very
long end where we're pricing in some of
that inflation uncertainty into the
30-year bond. And we saw a little bit of
that during this week as we've had some
of the rhetoric back and forth between
the Fed and the White House. And of
course, even as we saw the 10-year note
rally, we saw the back end of the curve,
the 30-year point, selling off a little
bit. So, that steepening between the
front end, the twos, and the back end,
the 30s, is something we're keeping a
watch on. terms of where the 10-year
note sits, you know, we we've seen it
behaving extremely well. Actually,
despite some of this rhetoric going back
and forth, we think the fair trading
range at the moment is somewhere between
3 and 3/4 and 4 and a half. So, at 420
in the 10-year note, it feels like it's
pretty much in the middle of the range.
Now, if we do get those cuts at the
front of the curve as we expect, that's
going to have a gravitational pull on
the 10ens. But as we price in a bit of
inflation risk, then that's going to
lead to that bullish steepening of the
curve that we'd expect to see. And
that's something which we would expect
to weigh on the US dollar over the
course of the fourth quarter as well.
Yeah. And uh you know, let's talk about
a central bank that President Trump has
been paying a lot of close attention to
and that is the ECB. Uh we're getting
some commentary now from Alan, one of
the ECB policy makers. Let me just bring
you a couple of those lines. He's saying
there's no reason for complacency. We
must be alert. Uh inflation for now is
in a good place. They he does not think
that an insurance cut is needed with
inflation at 2%. Uh but they do maintain
full freedom for maneuver. Obviously, I
should mention here he's one of the more
dovish members of the committee. And on
independence, uh he's just saying that
the principle of Fed independence is
being undermined. Let me ask you a
question about the ECB. I think the the
assumption out there is that they're
pretty much done with their easing
cycle. If you look at what's priced in,
I mean, you have to go all the way out
to Q3 of next year to get a full
interest rate cut priced in.
Is that valid in your mind given some of
the perhaps disinflationary pressures
that are going to come through to the
Euro zone on back of these tariffs?
I think it's reasonable for the moment
because we haven't really seen the full
impact of the tariffs coming through
yet, whether it's in the states in terms
of how much they've collected at the
border or whether it be the impact on um
earnings and um you know data such as
inflation over here in Europe. So I
think that still has time to play out
here. But I would draw the distinction
that policy in the Euro zone compared to
policy whether it be here in the UK,
whether it be in the US is definitely on
the more accommodative side. They're
pretty much in line with where the uh
you know balance of the um of the ECB
board want to see interest rates. And
remember next year we've got significant
fiscal thrust beginning to come through
across the Euro zone beginning to
reverberate out from Germany. And make
no mistake, the outlook for the Euro
zone has topside risk because of
relatively easy and stable policy, but
also the room to be able to do this
fiscal push, which together we think can
really push um European growth to uh
surprise possibly to the top side over
full year 26 and full year 27. So
against that backdrop, I think the ECB
being a little bit more of a wait and
see mode is probably appropriate. Yes,
there's a disinflationary impact of
tariffs because frankly it just leaves a
goods overhang in countries outside the
US, but of course there's all this good
stuff from fiscal to come and I don't
think the ECB want to be caught napping
cutting rates and then suddenly having
to push them back up again.
Okay, interesting. You're pretty
bullish. Uh what about the elephants or
I should say elephant in the room which
is which is France right now. Uh again,
you know, the politics are front and
center. Are you not worried about the
perhaps more broader systemic impact
some of the political generations in
France could have on the rest of the
Euro zone?
I'm I'm always worried about politics,
but at the end of the day, that's just a
a matter of, you know, life when it
comes to markets. You know, a lot of the
what we try to do is separate out the
signal from the noise here. Remember, in
the Euro zone, there are 19 countries.
All of them with a four to five year
election cycle. On average, you're
getting an election once a quarter. So
if we get hung up too much on one of
them, then I think we miss the general
move which has been towards some, you
know, the the fiscal improvement in
Europe, relatively low rates
environment, the beginning that we're
seeing in terms of the turns in economic
data in places like Germany, the ongoing
strength in places like Spain. Sure,
there are issues. I'm encouraged by some
of the commentary to try and repair and
avoid a snap election that's coming out
today. But generally I think we have to
accept that this is just going to be
background noise across the Euro zone
you know as as a just a a a matter of
life. So I would look through at the
economic data and the opportunity for
growth to expand across the block as a
whole.
John really lovely to talk to you. Thank
you so much for coming on the show. John
Bilton head of global multiasset
strategy at JP Morgan asset management.
Well it's not just Nvidia everybody.
There are other corporate earnings that
we're keeping an eye on. Perau Perno
Recar shares have gained as much as 8%
after reporting sales that topped
analyst expectations. The company
expects overall sales to improve towards
the second half with average growth
between 3% and 6% from 2027. For more,
I'm joined now by Bloomberg's global
business reporter Jennifer Kre. Uh it's
interesting because Perno is one of
those stocks where people perhaps had
such low expectations. The bar was
pretty low for a beat here. What did we
learn from uh what what they released on
the earnings this morning, especially as
it pertains to sales in both China and
in the US?
Yeah, exactly. It's definitely surprised
the market. So, uh for Q4 sales, there
was a a beat. Uh it was it was fairly
flat. Uh it was better than the8%
decline that analysts were expecting.
And for fullear profit, there was uh
also a beat. Um unsurprisingly, there's
still a bit of weakness in China uh and
the US. In China, organic sales were
down 21% and that's due to softer
demand, the impact of tariffs, but also
the removal of duty-free cognac sales.
Uh in the US, some of that weakness of
course is due to tariffs as well. Uh one
interesting line from management today
is uh some uh bullish statements on the
uh on the outlook for global travel
retail with the resumption of duty sales
and that in China and that's expected to
come into effect in Q2. So, so looking
ahead um in Q1 of uh this fiscal year,
uh the company is expecting there to
still be some weakness, but a lot of
that recovery will be uh weighted
towards the back end of of this year.
So, things are looking up for the
company and you can see that reflected
in the share price today.
Yeah, most definitely up almost 16%.
Thank you, Jennifer Kiri. Uh speaking of
stocks, I just want to bring you some uh
lines that we got through on selling
that's taking place in Hong Kong stocks.
But this is interesting. Investors in
the mainland in mainland China have sold
a record 20.4 Hong Kong dollar uh 20.4
20.4 billion Hong Kong dollar, that's
$2.6 billion worth of Hong Kong listed
stocks uh on Thursday uh today. Uh but
the read is that perhaps this means some
of those investors are actually
returning to the local market, investing
back on shore again in Chinese equities.
And as we've been talking about uh the
last couple of weeks, Chinese equities
are in the middle of a $1 trillion
rally. So uh that there you have it. So
some of those liquidity metrics coming
through this morning sale selling coming
through from mainland China on the Hong
Kong stock exchange. But then also bear
in mind there was a bit of a negative
impact this morning from Mettoan which
pulled down the overall index. That
stock was down about 10% today in
trading.
All right, coming up after 5 years of
tensions, China and India draw closer in
the face of Donald Trump's trade war.
But who was it that made the first move
towards repairing their damaged
relationship? All the details next. This
is Bloomberg.
The Indian Prime Minister Narendra Modi
will meet the Chinese President Xiinping
next week as the two countries put aside
tensions that had been simmering for
years. Now Bloomberg now understands
that it was President Xi who made the
first move towards repairing their
damaged relationship by writing a letter
to the Indian president back in March.
It coincided with the US president
ratcheting up the trade war with
Beijing. Joining me now is our chief
Asia correspondent Rosa Mat. This is
such an interesting story and perhaps
speaks to one of the byproducts of uh
Trump's trade war essentially bringing
these partners who had been uh somewhat
economic rivals closer together.
Well, that's right. So, there's a long
history of tension between India and
China and trade is part of it, but also
there have been long-running border
disputes between the countries that
flare up quite regularly. Uh, China
supporting Pakistan, which India has not
looked very long, as you can imagine.
So, there's a lot of underlying tension
there, but there have been equally
efforts over the years to patch things
up, you know, in 2023, and 2024, but
they didn't really go anywhere. And what
seems to have been the catalyst you as
you were saying is is their mutual
interest in the US and that's Donald
Trump's uh trade wars, trade tensions
with countries but also particularly of
like zeroing in on India really
criticizing India for purchasing Russian
energy you know giving China a pass at
the same time on it but really the
relationship between the US and India
has deteriorated and so there's a mutual
interest for China and the US to draw
closer and to paper over their
differences. at least for now and so
what we're seeing is some tangible signs
of that on the trade front on the
business front and most of all you know
with Narendra Modi going to China in a
matter of days to to sit down with
Cinping the question is in all of this
can that you know can that last
and not just Prime Minister Modi uh
China's also courting North Korea with
Kim Jong-un also set to attend a
military parade in Beijing on Wednesday
uh how significant is
Well, that's also significant when you
look at the way that the chessboard is
moving here because you're going to have
the leader, you know, of the Russian
president, Vladimir Putin, also in China
at the same time. Now, you've got the
North Korean leader saying, "I'm coming
along as well, you know, and China has
been a little bit on the sidelines with
North Korea of late because the
relationship has really been deepening
between uh North Korea and Russia. So,
China maybe this is a chance to get back
there with North Korea. But it's also
for them collectively to show some unity
of sorts against the US because Donald
Trump has been floating the idea in the
last few days of at some point could he
have another meeting uh with the North
Korean leader. Of course, he had two
summits with Kim Jong-un. The first one
was fairly successful arguably. The
second one didn't go particularly well,
but suddenly he's saying maybe he wants
to have a conversation with the North
Korean leaders. So, it's actually quite
good from the China perspective for them
and and Russia to be hosting him at the
same time uh next week, but it'll be
interesting to see what conversations
emerge tangibly once they're all there
at the table together.
Yeah, no doubt President Trump will be
watching very closely. Uh Bloomberg's
chief Asia correspondent Rosley Matens,
thank you so much. Okay, let's get more
on a Bloomberg scoop. We've learned the
Mexican government plans to increase
tariffs on China as part of its budget
proposal next month. The move would
protect the nation's businesses from
cheap imports and satisfy a
long-standing demand of US President
Donald Trump. Uh we are talking to
Bloomberg's trade char uh Brenda Mari
right now. Uh Brendan, you know, for
once it's not the US that's the source
of these tariffs. Now uh you know
according to our own reporting, it's
Mexico looking to apply tariffs on
Chinese imports. What's the rationale
behind it?
Well, if this goes through, uh, this
really would play well in Washington.
Mexico is trying to walk a very fine
line between, uh, its protectionism
against Chinese imports and maintaining
some sort of ties with Beijing, uh,
economically. So, uh, there's a there
are a lot of concerns in Washington that
ch Mexico has been a backdoor for for
Chinese products and inputs into things
like automobiles and machinery. Uh and
so Mexico is uh apparently taking steps
to uh to address those concerns ahead of
time uh before these talks that are
going to get underway between Ottawa,
Washington, and Mexico about
renegotiating the US uh M uh Mexico
Canada trade agreement. So, this is all
part of a longer term strategy to to
appeal to the Trump administration in a
way that sets it up uh to do to
renegotiate a good deal on USMCA.
Yeah. Okay. So, that's North America. Uh
just give us get us up to speed on where
things actually stand right now with the
EU US trade deal.
Yeah. So, the European Union is trying
to uh take some legislative steps to uh
to put into effect the the tariff uh
decreases that it it pledged uh on US
industrial goods a as a way to uh
appease America so that it will lower uh
auto tariffs on on on European exports.
Uh they're trying to rush this through
uh to get it done. This is part of the
framework deal. But of course, President
Trump recently threw the digital taxes
issue into the mix and and potentially
uh you know threatens a new kind of uh
assault on on the on the European
Union's digital regulations which the
European Union has drawn a red line
around and said we we have sovereignty
over this issue and you can't force us
to do anything with it. So, uh, they're
they're close to, uh, getting the
framework deal, uh, uh, into into force.
Uh, but there but there are factors that
have cropped up that thrown have thrown
that into question at this stage.
Yeah, at Bloomberg's trades are Brandon
Murray, thank you so much for the
overview on all things trade and tariff
related. Well, coming up, uh, as markets
digest Nvidia's earnings, we will
explore the AI ambitions of the US as
China looks to erode American dominance.
So, some big picture themes we're going
to be discussing on back of these Nvidia
earnings in addition to what we actually
got away from these earnings as the
stock slips a little bit in after hours,
trading down about 2% is the latest.
That's all coming next. This is
Bloomberg.
I'm Janna Versace in Dubai and these are
your top stories. Nvidia slips in
pre-market trading as the world's
biggest company signals a slowdown after
a two-year surge in AI demand. Bloomberg
learns Mexico plans to raise tariffs on
China after months of pressure from
President Trump. Plus, India and China
move to restore relations after Trump's
tariff barrage with sources revealing
details of a secret letter from
President Xi to his Indian counterpart.
And let's go to our top story. Nvidia
reported a 56% rise in quarterly
revenue. But a tepid forecast for the
third quarter as investors worried that
the AI boom is slowing. The self
proclaimed engine of AI is more than
just another tech giant. It is key to
President Donald Trump's $500 billion
Stargate project aimed at leading the
world in artificial intelligence.
Nvidia's earnings outlook is also a
window to the prospects of other tech
company's bets on a AI computing. So to
discuss the US race to dominate
artificial intelligence, some of the big
trends in the space. Really happy to say
that Adrien Cox, the MATIC strategist at
Deutsche Bank Research joins us. Good
morning to you Adrian. Good to have you
with us.
Um good Well, as I was just uh saying in
the intro out to you, Nvidia has been
the poster child for AI AI ambitions
even, you know, alone single-handedly
constitutes 8% of the S&P, right? So,
you can't overstate its importance. Do
you think what we got yesterday out of
these earnings is broadly still positive
for the AI sector as a whole?
Yes. So I think as you say AI really has
become a poster child but also uh to mix
the metaphors slightly I think it's also
the canary in the coal mine that
everyone is looking at. So there is a
almost a cottage industry of people
trying to seek whether there is going to
be a slowdown or even a bursting of this
boom that we've seen in AI in uh recent
uh months and Nvidia obviously is at the
heart of that because not only is it
producing 90% of the key chips which are
essential for uh the most sophisticated
AI but it's also found itself now at the
fulcrum of a geopolitical contest which
is going on between the US and China.
And Nvidia has on its side the fact that
number one obviously there are the chips
themselves but it also has uh the
software which uh pumps it up uh and
also um the whole network of
infrastructure of clients and of
suppliers which makes it very hard to
challenge but at the same time if you
look at the US the US has a number of
advantages in terms of its ecosystem but
it's not yet there so China is a very
strong competitor in areas that we
sometimes forget
like for example patents. I'm going to
ask you
building its own chips.
Yeah. So I'm going to get there in a
second but I just want to bring it back
to something that I I picked up on from
Jensen Huang Huang's comments yesterday.
Um he talked about three to4 trillion
dollar in infrastructure spend over the
next decade. How much of that is
speculative versus actual investments
that will yield a positive return on
investments and be positive from a
operational standpoint when it comes to
the underlying businesses? I mean how
much of that really is going to be able
to be monetized is my question.
Yeah, it's a very difficult question. So
uh if you have a look at the amount that
the hyperscalers so the big four
companies are going to spend it's around
300 or even more billion dollars this
year. Uh at the moment they say that the
demand is outpacing the supply and that
is forecast to go on for years to come
and it's not just the demand which is
coming from these hyperscalers but also
Nvidia is now broadening that out to
other areas. But the more important
question really is whether there is life
in AI beyond just this sort of focus on
uh on data center buildout at the
moment. Yeah. And I would say that yes
there is.
Um so it's it's a technology which I
think is fairly misunderstood at the
moment and because people focus on the
idea of it being intelligent then
sometimes expectations run away with
reality but actually for the companies
which are at the center of it i.e.
Nvidia and the hyperscalers, they are
actually generating revenue at the
moment which is justifying a lot of that
expenditure in a software which is
likely to be transformative even if it
were just to stay the way it is at the
moment and carry on for several years
with us learning how to implement it,
how to put it into systems, how to use
it more effectively.
Yeah. So interesting. Okay, let's come
back to what you were saying about
China. Uh and one of the other
interesting uh uh things that stood out
to me from the earnings call was the
fact that Nvidia didn't sell any H20
chips into China in the last quarter.
But what that has meant is China have
had to work on their own ecosystem and
build up their own shipmaking abilities
and achieve some level of autonomy. How
do you see that race between China and
US playing out in the coming quarters?
Yeah. So there are a number of factors
with China and chips. Um, one of which
is that they've been able to make use of
the chips which they have which are sort
of um dumbed down versions of the most
sophisticated chips and were able then
to develop deepsek which is the uh the
large language model which really set
off concerns back uh earlier this year
about whether it was sustainable you
know whether the AI spend was
sustainable. But on top of that, there
have been accusations from US officials
that China is able to get uh chips
through the back door. And most
importantly, they're also developing
their own chips. So, there was a report
um just in the last few hours about
China looking to triple its production
of AI accelerator chips over the next
year. Now, that is an extremely
difficult thing to do and it comes down
not just to the chips themselves, but
also to the equipment that you use to
build the chips. you know these are 400
mill billion dollar uh machines which
are being used to create chips. So it's
not something that you can just switch
on at the uh the flick of a switch.
Having said that though, China is very
much leading the way in a number of
areas where the US is potentially
slightly on the back foot. So while the
US has the advantage in for example
talent and private investment in AI,
China has the edge when it comes to
government investment but also actually
on research and development. So 70% of
the patents that are coming out on AI at
the moment versus 40 or sorry in 2024
versus 14% uh for the US uh coming out
of China. So there is definitely a lot
of development going on there and you
can see therefore why the US was so
concerned with its AI action plan in
making sure that it can maintain its
lead against China and not seed that uh
to its uh to its geopolitical rival.
Yeah. Really fascinating I guess. Then
my follow-up question from that is is it
ultimately a zero sum game between the
US and China? Is is China's gain the
US's loss or are they targeting
different clients, different eventual
end users?
Yeah, it's an interesting question and
in fact actually that is very much the
uh the underlying message that you got
in the AI action plan that the US does
see this as a zero sum game. Now, part
of the big debate that's happening about
Nvidia and also the other US chip
suppliers is whether you need to just
send them enough in order to be able to
or China and the rest of the world
enough chips to be able to get people
looped into that ecosystem. So, it makes
it hard for them to develop their own
competitive competitive offering. And
you see on the same side the Chinese
reacting to that by saying well we want
to restrict the use of US chips or we
want to encourage people to use
alternatives to domestic alternatives to
US chips as a way to avoid dependencies
on both sides. But then of course there
are the underlying dependencies as well
like for example the fact that you know
Nvidia is getting its major chips made
by TSMC which is in Taiwan which is
itself the center of not just a seismic
but actually a geopolitical fault uh
with uh with you know US and China as
well. So, um, it's a fascinating area
where there are so many different
competing elements and possibly unlike
any other kind of boom that we've seen
in the past.
Yeah. Well, difficult to unpack it all
in a seven, eight minute interview. Uh,
but you certainly did did your best. Uh,
thank you so much for joining us on the
show, Adrien Cox, theatic strategist at
Deutsche Bank Research.
Well, July new car sales data for Europe
has shown the biggest jump in over a
year. According to the European
Automobile Manufacturers Association,
registrations climbed 5.9% from a year
earlier, driven by sales of fully
electric and hybrid models. And Ryan
stock dropped sharply yesterday after
the lowcost carrier CEO gave an update
on summer demand. Michael Olirri also
says Boeing has accelerated 737 Max
deliveries with the airline expecting to
receive 25 737s between August and
October. He spoke to Bloomberg Sky
Johnson.
I think we're reasonably optimistic. I
mean, I'm not sure the market is right,
but we've had constrained grow capacity
growth this year. So, Boeing have left
us short of aircraft. Certainly, this
summer trading has been strong. Forward
bookies are about 1% ahead of where they
were this time last year. Last year,
fairs were down about 7%. It looks like
we'll get back most of that 7% fair
decline this year. Not all, but I'd be
reasonably hopeful we get most of it
back to
where's the market looking wrong? I
I think there's more growth available in
the marketplace.
So, the market is is fairs are
recovering this year because capacity is
constrained. Uh but people there's
certainly strong demand for air travel
certainly from the UK to Europe. Um if I
had more aircraft, I think I'd be able
to deliver more growth.
Okay. You're going to get more aircraft.
You're going to get them from from
Boeing. You're getting 737s earlier than
anticipated. 25 of them beginning in
October rather than 6 months later.
Does that mean you increase your
passenger targets?
Uh not in the UK. Uh because
anywhere?
Oh yeah. Yeah. Yeah. I mean we're
growing very strongly already. So
you're going to raise passenger numbers
because of those aircraft coming.
Exactly. I mean we will grow with this
year we'll do about 26 million
passengers in the year to March 26. Next
year to year to summer 26 we'll grow to
about 215 million passengers. So
is that brought forward? Is there any
bring forward? No
because you're getting the aircraft.
Yeah. I mean, we're taking the aircraft
early to, if you like, to kind of to
secure that growth for next summer. The
only area where we can deploy those 25
extra aircraft will be this Christmas.
So, there'll be a lot of additional
flights in most of our markets,
including even in the UK at Christmas.
But other than that, no, we'll sit them
on the ground until we get
Are you bringing them in early because
you're worried about tariffs?
We're bringing we were we're bringing
them in early because we're worried
about tariffs, but also we're worried
something else might go wrong with
Boeing. So, get them in early if Boeing
it's a good sign that Boeing are able to
deliver these aircraft early. We want to
take them early. So at least we've
guaranteed we have them for summer 20.
So your confidence in Boeing is still
not that high. You're still worried that
that things could go wrong.
We should always be worried. You know
the experience with Boeing. But I mean
the very fact that Boeing are able to
deliver these aircraft four or five
months early is a good sign that the
manufacturing process is going well. I
think Stephanie Pope did a good job in
Seattle and the quality of the aircraft
we're getting. The fuselage out of
Witchah, the aircraft out of Seattle has
immeasurably improved in the last 12 18
months. Scott Besson, US Treasury
Secretary, he's just been on television
and he's criticized Boeing for
delivering a massive buyback rather than
investing in R&D. Do you have some
sympathy for that?
I don't really. I mean, if Scott Besson
wants, you know, what he should be doing
is supporting Boeing. You know, one of
the reasons Boeing can't make more
aircraft is the FAA won't approve the
increase in the production rate from 38
to 42. Uh we still need to get the Max
7, Max 10 certified, you know. So Scott
Bessant should let secretary transport
secretary Duffy deal with Boeing, get
the increase, get the production rate up
and certify the Max 7, Max 10.
That was the Ryan Air CEO Michael Liry
speaking with Bloomberg's Guy Johnson.
And coming up, we speak to Chhattam's
house
about President Trump's efforts to end
the Russia Ukraine war and whether
they're actually working. That's next.
This is Bloomberg.
The French Prime Minister, Franis
Beerus, says he will negotiate directly
with lawmakers next week and has warned
against new elections as he battles to
stop France's parliament from forcing
him to resign. Beeru says serious
discussions must now begin over next
month's confidence vote.
There are 12 days left and 12 days is a
lot of talk. I'd say something simple.
We haven't opened negotiations because
there is a question to ask before
negotiations. It's whether we agree on
the seriousness and urgency of the
situation. And if we agree on the
seriousness and urgency, then we open
negotiations. We will still have a month
before the presentation of the budget.
We have plenty of time to look at
things. And I said I was ready to
examine measure by measure, as they say,
decision by decision everything we have
announced.
Let's get more with Bloomberg's Karolin
Kanan in Paris. So interesting to hear
from the prime minister, Beiru. I guess
he seems to think that he can win over
some lawmakers and convince them not to
vote against the government at this
confidence vote on September the 8th.
The question is how successful is he
going to be?
Yeah, another day, another charm. Fancy
from Franceu this time to the general
public opinion on this 8:00 news on tier
last night. He still believes he can
make it through September 8 even though
he acknowledged that mathematically it's
not looking very good. uh he says he's
going to gather all the opposition
parties next week in order to try and
convince them that the debt issue is the
most important issue of all. He said
that every single measure can be
discussed including this proposal of
scrapping two bank holidays including
taxing the highest earners including uh
of course all the measures that the
socialists have said should get out of
this budget. At the moment the
socialists have closed the door. They
said they will not support this vote of
confidence. But there's still there
seems to be also a little music going on
including in Macron's camp about the
alternative being new snap legislative
elections. The question is do the
socialists really want that because you
know they've broken their alliance with
the far left. So some of them might
actually lose their seats if there are
new snap legislative elections. And last
night clearly the prime minister Franceu
said this will not provide any more
stability to France.
Yeah. Meanwhile, the president is doing
a little bit of hosting of his own
tonight. The Franco German summit. The
chancellor Mertz heading to France. What
do we expect out of this meeting? Carol
President Mun and Chancellor Mer already
spent a couple of days together in
Muldova trying to defend the Muldovan
president against possible Russian
threats in the next parliamentary
elections. And tonight they're still
together. This time I was coming to for
the Bon the summer residence of Emanuel
M. last time President Mron invited a
German chancellor there was in 2020 for
Angela Merkel. So quite a rare occasion.
Tomorrow we're going to have another
meeting of the uh cabinet meeting of
with 10 ministers from each side. Of
course they will discuss trade but also
defense and security.
One elephant in the room, Jumanna, will
be this next generation fighter jet, the
FCAS. You know, this is supposed to be a
joint project between France, Germany,
and Spain. But DO Aviation, the French
company, has said they want to take 80%
of the work share of this next
generation fighter jet. Something
Germany is totally opposed to. They want
broadly an equal share of work. So
that's something that's going to be
discussed. Perhaps they will make some
progress on this topic during uh this
cabinet meeting in France.
Bloomberg's Kaholin Kon in Paris. Thank
you so much. Well, Bloomberg has learned
that President Donald Trump's special
envoy Steve Witkov will meet a Ukrainian
delegation to the US this week as Kev's
allies discuss possible security
guarantees for the war ravaged nation.
But overnight, Russia unleashed a wave
of drone and missile strikes on cave,
killing 14 people. Joining me now is
Arisia Lutvich, deputy director of the
Russia and Urasia program and head of
the Ukraine forum at Chatham House. Uh
good to have you with us. You know,
there was a lot of optimism and hope I
guess around the Alaska summit a couple
of weeks ago and then Zilinski's
subsequent visit to the US alongside
European leaders that we may see some
form of a breakthrough or at least
progress when it comes to a peace deal.
And yet, as we talk about this, Russia
attacks on on Keev keep going overnight.
Another massive aerial assault. What
hope is there really of of a
breakthrough at this point?
Well, Jim, you mentioned some optimism
or hope around the Alaska summit, but in
Ukraine, this event was described as
shameful and despicable because in a
way, it rolled the red carpet in front
of Putin. uh somebody who is as you see
nightly bombarding Ukrainian cities,
terrorizing civilians without any sign
of willingness to either agree to a
ceasefire or negotiate in earnest. So in
a way Alaska emboldened Putin to
continue his uh war unprovoked
aggression against Ukraine while
President Trump embarked on this
pleasing mission thinking that if he
looks in Putin's eye as and if he offers
him economic deals this will be enough
for Putin to stop the war. But he
forgets that Putin has achieved none of
his political objectives. Neither visav
Ukraine nor visav Eastern Europe and US
presence in Europe and war. All he wants
to use the war in Ukraine to United
States from Europe.
Let me ask you a question about land
swaps because that is one of the topics
that came up in the runup to the Alaska
summit and also out of it as well. How
realistic is it to expect President
Zalinski Ukraine to seed territory in
the Dawnbass in exchange for firmer
security guarantees out of Europe and
potentially the US as well? Is that a
realistic quidd proquo?
Well, I I think this is rather an absurd
idea for two reasons. one, you can do
land swaps between the territories of
Russia and Ukraine. But as we know,
Ukraine right now does not control any
Russian territory and it cannot swap its
own territory. Secondly, uh there is a
ironclad principle that borders should
not be changed by force and we do know
that Ukraine and Eurs European allies
disagree with this principle. And
finally, why should Ukraine withdraw
from its legal territory to give passage
to the Russian army that is torturing,
killing, and raping civilians? This
would be totally immoral on the side of
President Zilinski and is not supported
by Ukrainian people. Nearly 70% of
Ukrainians are against this idea.
Okay. So, do you think the US should be
applying more pressure on Russia? And if
if if that is the case, what does that
pressure look like?
Well, I I think this has been hope from
the first days of Trump administration,
especially in Kiev, that he would try to
pursue peace through force. So far, we
seeing pursuing of peace, but no force
imposed on Putin. So that could be diff
variety of actions. One, it's secondary
sanctions on uh countries that are
buying Russian oil and we have seen some
of it imposed on India through the
tariffs. Second, it's supply to more
advanced weapons and not limiting the
range of missiles that US provides to
Ukraine and enabling it to strike
military targets inside Russia. And the
third one is to actually continue the
pipeline of support to Ukraine together
with Europe so that Putin understands
that he cannot win this war, that the
West will not abandon Ukraine and that
Trump will not agree to the list of his
capitulation demands that he seemed to
be putting on the table in front of
Trump, including these uh land swaps
we've discussed.
Yeah. How likely is it that a trilateral
summit between Trump, Putin, and
Zalinski will actually take place? Do
you do you see that happening?
Well, we do know from President Trump
that he would only have a trilateral
summit if there is a bilateral meeting
that yields some result between
President Zilinski and President Putin.
At this stage, Russians are putting
again on the table request to Ukrainian
side that they know Ukraine cannot
accept. And this request is basically
that Ukraine should have a limited
sovereignty. It should agree for example
to Russian demands for the right of
ethnic speaking Russian minority or
Russian Orthodox Church or for the same
matter the size of Ukrainian army and
they keep bringing bringing back um uh
demands from the Eastern Bull meeting
and this is problematic. So it's
unlikely that this meeting between
Ukraine and Russia will take place at
the high level.
Can I just ask you about how you're
thinking towards the European response
to all of this and the the real move to
put together a coalition of the willing
become a bit more self-reliant on on
self-defense uh as opposed to leaning on
the US? Uh where do you see all of this
leading?
Joanna, we see that um uh United States
wants to refocus, recalibrate its
military assets from Europe to
Indo-Pacific to uh deter and possibly
face China in a future war. That means
that Europe has to uh build its own
military capabilities to be able to
deter Russia and to defend Ukraine.
That's why that meeting in Washington
last week was so significant that
Ukraine was uh standing
shoulderto-shoulder with Europeans
because Ukrainian uh military
capabilities especially in a new uh uh
type of warfare, drones, electronic
warfare are very significant and could
actually be an asset for Europe rather
than a liability. So we see Europe in
expanding industrial uh square
production
artillery shells. The Ryan Metal just
opened the large factory to produced
more artillery missiles. Europe is
rearming but it will take time and it
needs a phased out um plan for US
presence in Europe and I think Putin
knows it. That's why he's escalating
right now in order to achieve his
objective before Europe rearms.
Yeah. Arisia Lutvich, deputy director of
the Russia and Eurasia program and head
of the Ukraine forum at Chhattam House.
Thank you so much. And as she was
speaking with, we're showing some live
pictures from Kev on the back of yet
another Russian aerial assault on the
city which has killed 14 people
overnight. These are live images from
the Ukrainian capital.
Up next, Bloomberg Brief. This is