news makers and market movers.
This is the pulse with Francine Lqua.
>> Good morning. Welcome to the pulse. I'm
Anna Edwards in for Francine Laqua here
in London this morning. Now, let's get
to our top geopolitical story. Chinese
President Xi Jinping says the China uh
the Shanghai Cooperation Organization is
taking on greater responsibility in
driving shared development as global
uncertainty continues to rise. She made
the remarks as he welcomed international
leaders including India's Narendra Modi
and Russia's Vladimir Putin to the
summit in Tanzhin.
We should seek common ground while
putting aside differences.
Shared aspirations are the source of
strength and advantage and the will to
seek commonality while shelving
differences reflects wisdom and vision.
>> Bloom begs Minman Lo is on the ground
for us at the meeting in Tanzin and she
joins us now. So I want to ask what's
happening today. I think a lot of the
day has already passed where you are uh
Minmmin. So we've have seen meetings
over the weekend taking place between uh
China and India and then today I think
the the big sort of headline meeting
between India and Russia. What have we
learned so far?
>> Yes, the key highlight today is
certainly the meeting between Modi and
Putin. But before that I just want to
show you what's uh top or the headline
on China daily Chinese state media. You
can see here SEO charts of course for a
shared future. This was yesterday's
paper and this one says C's SEO uh plays
a key role in safeguarding peace and
this is really a platform for President
C to show you that he really has global
leadership here especially over some of
these countries of the global south with
more than 20 leaders around the world
here in China and around heads 10 heads
of international organizations here as
well. But back to the bilateral meeting,
we have Modi and Putin meeting today. It
just concluded and Modi saying in the
opening remarks that Russia and India
have a very special privileged
relationship that has withtood the test
of difficult times. And he just said
that the meeting was excellent. They
talked about improving uh and deepening
bilateral ties on all sectors including
trade, space, cultural, security,
fertilizers. Really quite a wide ranging
talk it seems. and both leaders sat in
the same car on the way to the bilateral
venue. Uh they hug each other. It really
shows you the close ties between the two
sides perhaps even more so because of
President Trump imposing these
additional 25% tariffs on India and
really pushing India to look for other
allies and partners in the region. Today
as well the India's uh energy minister
uh defending the country's uh actions in
buying Russian oil saying it is uh
within international norms. it is within
the price cap mechanism imposed by the
G7 as well.
>> Yes, they say they've had mixed signals
from the uh from the White House as to
what uh what what what the US wants them
to do when it comes to oil. Um we've
also seen that over the weekend taking a
step back Nim and we've seen this
meeting between President Xi and the
Indian Prime Minister Narendra Modi. Now
these uh two nations there's been
friction between them on a number of
fronts of late and they seem to be
coming closer together patching up their
differences but surely not agreeing on
everything. What have we heard?
>> Yeah, certainly it seems like China is
really on this charm offensive trying to
uh get India to tilt more towards China
united by this common mission to counter
the impact of prompts tariffs. So
yesterday when Modi met with C, he
announced that both sides will be
looking to resume direct flights that
have been suspended since the co9
pandemic and certainly the rhetoric
coming out of China is very markedly
different from the time in 2020 when
both sides were engaged in deadly border
clashes along along the Himalayan
border. Uh and this time China is saying
or describing the relationship as one of
the dragon and the elephant tangoing
together. And it looks like you know the
two sides are really trying to come
closer together. Although Modi is also
balancing a a very difficult balancing
act here because he's going to be absent
from the military parade happening on
Wednesday. He's not going to be standing
alongside President Xi and Putin and Kim
Jong-un. That's not a good look for him
given India prides itself as the world's
largest democracy. So he doesn't want to
be seen alongside these autocratic
leaders. But still again it's President
Trump sort of pushing these different
countries to come together closer. And
this has been built as the largest SEO
gathering in its history so far.
>> Yeah, Mman, thank you very much. Bimbo's
Min Low at that event in Tanin as China
tries to project uh project a bigger
image on the global stage. Then let us
turn to the uh tariff agenda of the
Trump administration. America's trading
partners have been left scratching their
heads after President Trump's global
tariffs were found to be illegal by a US
appeals court on Friday. Bloomberg's
trades are Brendan Murray is here to
help us understand all of this. Brendan,
thank you very much. So, we've seen a
number of legal challenges to what
President Trump has been trying to do
over tariffs in recent months. Has this
one moved the dial? What have we
learned? Well, we've seen so many twists
and turns over the past seven months in
this trade war uh that President Trump
is is directed at a number of of trading
partners, and I'm afraid that we're in
for another several months of
uncertainty as we try to figure out what
the next steps from the Trump
administration are going to be. Will
they take it immediately to the Supreme
Court? Will they defer to this lower
court and see if the case could be
narrowed? uh or will they start rolling
out more of these sectoral tariffs that
are sort of in the pipeline. They've
already got, you know, have the the
tariffs on steel and aluminum and on
cars, those are not affected by this
court ruling. Nor will those on
pharmaceuticals, chips, uh other sectors
that they can target with tariffs. So,
uh, that that it's always been
understood inside the administration
that this quick approach, the reciprocal
tariffs, the liberation day press
conference, uh, untested in the courts
would be risky and could eventually be
struck down in the courts and sort of
and that's sort of where we're headed.
But in the meantime on this other track,
they have sectoral tariffs that they can
target uh to accomplish much of what
they want to in raising revenue and
reshoring reassuring manufacturing
production back in the US.
>> So perhaps that's why markets seem kind
of calm in the face of all of this, the
fact that as you say there might be
other ways that the Trump administration
can uh can can bring about the same
effect and generate some tariff revenue
even if this current method is in
question legally. Um, let me ask you
about evidence of of the the damage that
tariffs are doing to certain parts of
the global economy. We seem to have seen
some uh evidence out of Canada, for
example, over the weekend that their
economy is shrinking as a result of of
what tariffs are doing to exports.
>> Yeah, exactly. the effects are are slow,
but a as as companies profit margins uh
shrink and they look for ways to uh
raise prices where they can or ask
suppliers to take some of the hit for
them that that impact starts to sort of
uh play out. It doesn't happen right
away. Uh we talk to small businesses
fairly regularly and they say these are
these are killing us. We can't we can't
survive in the long term if if we're if
we have to pay an extra 30% or an extra
50%. We had the the end of the
dimminimus uh exemption on Friday. A lot
of small businesses around the world
used that to to uh to trade uh between
countries. And so all of this is kind of
happening at once and none of it seems
to be uh lifting the cloud of
uncertainty that businesses need to uh
to plan ahead and to and to and to run
their businesses efficiently. Uh and it
just leads to it's just it's it it just
winds up as an economic headwind in the
broader scheme of things.
>> Yes. because there's the impact directly
on exports. Canadian exports falling by
27% on an annualized basis, but then
there's the sort of chilling effect on
investment and and business investment
contracting by some 10% in Canada. So,
Brendan, thank you very much. Thanks for
bringing us the latest uh data there. Uh
Bloomberg's Brendan Murray telling us
all things trade. Now, of course, we'll
keep an eye on the latest developments
around the trade agenda, but other
things in focus for us, the jobs report
on Friday, key inflation data, that's
from the Euro zone tomorrow, and the
Fed's next rate decision, that's next
week. All of these things are going to
be hitting markets in the next 14
trading sessions. So, it's going to be a
busy start to September. It means over
the next few weeks, we should get a
clear reading on whether the stock rally
can continue. Uh, so with us to discuss,
Laura Cooper, global investment
strategist and head of macro credit at
New Laura, really nice to have you with
us. Um, so September is typically a
challenging month for stocks. Is this
year going to be any different?
>> I don't think this year is going to be
any different. Yes, we have the seasonal
tail headwinds that we typically see,
but as well to your point, there's a
number of key crucial economic data that
we'll be watching for. Most notably is
the payrolls print this week. That's
likely to be a make or break, not so
much for the September cut, but really
markets extrapolating the Fed policy
path further out of cuts. And then to
your point, we have the CPI next week as
well. Will we see signs of more material
tariff impact? Could that be kind of a
gamecher for market pricing? And then of
course all of that leads up to that se
September 17th rate decision where you
know 25 basis points is certainly
expected but what could the Fed signal
for the path forward and that's going to
be crucial for stock markets.
>> Yes, crucial for stock markets and we
have not seen very much volatility of
late Laura. So the VIX has rarely been
above 20 over the last 3 months which
suggests everyone's had a very chilled
relaxed out summer and we're not too not
too concerned about the path ahead. Is
there too much complacency out there do
you think?
>> I certainly think that is the the case.
I mean looking at hedge funds kind of
betting on the shorting the VIX at the
most that we've seen in three years
really does suggest that they expect
this comp to persist. I think we expect
greater volatility if we do see some of
this economic data materially surprised
to the upside or the downside just given
that equities have really been
predicated on the Fed easing coming
through quite materially. We have about
five rate cuts priced in by the July
meeting. And this is occurring against a
backdrop where the inflation uncertainty
still remains kind of unknown because if
we think about, you know, yes, we're
starting to see goods inflation that's
expected to grind higher over the coming
months. But last month, the super core
inflation measure is actually what
surprised to the upside. If we start to
see signs of services inflation
reacelerating or wages accelerating, I
think that could put, you know, some
some cold water on some of these
expectations for market easing bets.
>> Yes. And so let's think about where we
might be by Friday or what Friday's
payrolls report might tell us, Laura,
because do you think this is going to
have a real bearing on September rate
cut expectations or is it going to be
more about the medium-term? Because uh
after we heard from Jerome Powell at
Jackson Hall at Jackson Hall, we we we
increased expectations of a Fed rate cut
in September and the market is probably
quite attached to those expectations
because of what we heard from the
chairman. Um so is it that that's going
to be the focus for markets or is it
going to be all those other rate cuts
that that the market has priced in?
>> I think it's going to be a combination
of both. And I think to your point
around will the payroll rules really be
the determining factor for the September
17th Fed cut. I think it depends on the
magnitude of the miss or the beat that
comes through. I think last month's
payrolls told us that the labor market
is on much more precarious footing given
the significant downward revisions. So,
if we do see a meaningful upside
surprise, perhaps then that will start
to question whether the Fed will be in a
position to cut beyond that September
rate cut with markets pricing in about
88%. Because the Fed doesn't want to
necessarily cut into, you know, still
hot economy, there's certainly
implications on the back of that. But if
we do see a material miss to the
downside, perhaps then we're going to
see not just a 25 basis point uh cut
priced in for September, but perhaps
that you know 5025 debate will come back
to the focus because if we look when
they last surprised with 50 basis
points, what precluded that what
preceded that was really three
consecutive months of weak payrolls
print. So, as well as the payroll
sprint, I think it's a number of the key
labor market indicators as well this
week to watch for that could guide that
September cut and further out because
there is this greater scrutiny certainly
on that payrolls data more recently.
>> Yes. And so, are you expecting given the
uh the way that payrolls reports have
gone recently, are you expecting this
one to be another one that that
disappoints? We we've seen over the past
couple of months it was the the
revisions and the fact that we thought
we had jobs that then turned out not to
be there. That was the thing that that
sort of disappointed and spooked
markets.
>> Well, our expectation is that we're
fairly in line with consensus that we
could see a 100,000 job gains in August,
but we'll be watching for the more
stable metric around the unemployment
rate. Right now, 4.2% if it were to go
to 4.4%.
I think in this backdrop where there's
supply constraints coming through from
immigration restrictions, the Fed is
really closely monitoring this key
gauge. And I think that could really be
what to watch for to guide markets. But
as well look to, you know, the ADP print
this week. You know, that's probably
going to have disproportionate
importance given the scrutiny on the BLS
data. And if we look at given the res
revisions, the ADP print has actually
been a more accurate gauge than
historically it has been. So maybe
market attention will turn there.
>> Okay. Yes. That's interesting because
often some people say, you know, the ADP
is not a not a great indicator, but as
you're suggesting, maybe the the the
lacking data elsewhere means that we'll
we'll turn to it more. And what does all
that mean for risk appetite then, Laura?
Where where does that take us?
>> I think overall the economic
fundamentals still remain supportive
enough to support the US equity markets
in particular. I think there were some
key themes that we drew out of the
earnings season. Most notably, the
number of companies who reported
positive guidance s certainly surpassed
historical averages and was about double
what we saw last quarter. And unusually,
what we're seeing is that earnings are
actually being revised higher, whereas
historically at this time of the year,
they're they're being revised lower. So,
a lot of that lowhanging fruit perhaps
has already kind of been embedded in
market prices. But unless there's a
material shock that derails some of the
Fed pricing, I think we're still going
to see equities grind higher. We still
have our S&P 500 target around 6,600 so
far this year. It's really just being
about very selective across sectors in
particular in equities and maybe now is
still a great time for that regional
diversification still in Europe and and
pockets elsewhere.
>> Okay. So yeah, we're at 6460 on the S&P
right now. Of course, no trade today,
Labor Day. Um so but so you obviously
see some upside there. Are the are the
gains going to be good in the US versus
the rest of the world? I mean I was
looking at China, the CSI 300 had a
really good run in August. Are we
looking more broadly globally for for
for gains given how far US tech in
particular has run?
>> Yeah, I think it's about a combination
of factors. I mean certainly the China
tech upswing has been quite surprising
in July and August and there's a number
of factors behind that. We can see the
PBOC did inject fresh liquidity. we see
valuations are still relatively cheap
and as well the government is extending
this campaign to try to kind of reduce
pricing uh reductions and competition
within the space. So all of those
factors suggest that China tech can
continue on this upward advance. But
then US tech it's stumbled more
recently. But if we look at earnings
expectations, if we look at the free
cash flows that are emerging from let's
say six of the seven magnificent seven
are quite strong. We think that's going
to be supportive backdrop to continue to
have tech in the US as that key market
leadership. And then in Europe, we are
seeing some signs of improvement on the
growth front. We're still quite
constructive, but really Europe is more
of a bifurcated market. Lots of
dispersion. So, we think it's really a
stock selector's time.
>> Okay, Laura, thank you very much. Laura
Cooper, global investment strategist and
head of macro credit at New. We started
this hour talking about what's been
going on in Tanzhin at the uh that
Shanghai dialogue Shanghai uh
cooperation organization being run by
the Chinese of course and President Xi
is speaking at um a a grouping at that
meeting. It's called the SEO plus
meeting. He's saying that global
governance comes uh has come to new
crossroads. He's also proposing a new
global governance initiative. So he
continues to monitor uh the outreach
from China uh to other regional powers
at these meetings. Coming up on the
program, we'll turn to French politics.
France Beiru strikes a combative tone as
he battles to survive as French prime
minister. We'll have details next. This
is Bloomingbeck.
Welcome back. This is the pulse. Let's
get more on the political turmoil in
France. Prime Minister Franis Beeru has
told reporters he isn't sure that a
compromise is possible in talks with
opposition parties this week. Those
remarks came a week before legislators
hold a confidence vote in his
government. Let's bring in Alan Catz,
Bloomberg's Paris bureau chief. So,
we've had more days over the weekend,
Alan, of the prime minister saying there
is a path forward. I can do this. I can
win this confidence vote. And all the
opposition saying, well, we're not going
to vote for you. So, where does this
look as if it's heading?
>> So, I mean, by who definitely seems more
optimistic than most. I mean, pretty
much everybody else gives him very
little chance of surviving this. Um, as
you said, even he last night said, you
know, oh, confidence or compromise is a
is a beautiful term, but I'm not sure
that it's reachable uh in this instance.
uh that those comments came after uh
both the head of the socialist party
earlier on Sunday and then and the
president of the national rally the
farright national rally on Saturday had
said they absolutely weren't going to
support his confidence motion. We're
definitely going to vote against him and
and if he doesn't get at least one of
those two to flip that or at least be
willing to abstain, then he seems almost
certain to be to be forced to resign uh
a week from today. So, it's hard to see
how he makes it through this. Uh, and
it's hard to see too whether his
optimism is, you know, deeply felt or if
he feels he just needs to sort of put on
a front uh between now and and next
week. It's it's it seems o really overly
optimistic to put it that way,
>> right? Yes. So maybe that's his own
Yeah. overly optimistic reading, Alan,
of his own prospects. So if he does not
last, if he's not prime minister just
over a week from now, then we just look
ahead to a new prime minister, do we?
and and and will we be still faced with
exactly the same uh political maths
within within the assembly and the same
problems for a new prime minister?
>> So largely yes we will be faced with
exactly the same problems. Now if he's
forced to resign M then it's up to to
French President Emanuel M to decide
what to do and he has a few choices. One
of which is to name a new prime minister
and that person could even be France
again though that is doesn't appear to
be likely but he can name a new prime
minister. uh that new prime minister as
you say would have exactly the same
issues with a completely divided
parliament. It would be very difficult
to think of anyone who might be able to
assemble a coalition large enough um to
really get anything through including a
budget. Uh and that's the one sort of
mustpass bill that you have in France.
Um but that is what most observers think
is the most likely outcome. The other
thing that Mong could do or one other
thing he could do is dissolve parliament
and call parliamentary elections again.
He did that last June. Um that didn't
turn out very well for for his party. Uh
they lost a lot of ground uh really to
to the uh both both to the socialists
and to the farright national rally which
the national rally became the biggest
single party in in in the national
assembly. Um so that seems to be
something that he's not that M is not
inclined to do. But again, as you point
out, like how does he find someone who
in just naming a new prime minister who
could actually sort of muddle through
for the next year and a half? because
don't forget MO's term runs until early
2027. So we have quite some time until
there'd be sort of a a big presidential
election to really change the political
dynamic in France.
Alan, thank you very much. B's Alan Katz
with the latest on French politics. Uh
from France to Germany, the German
Chancellor Friedri M has warned that he
sees the war in Ukraine dragging on with
no clear end in sight. Speaking on
German TV, Merz said he hasn't given up
hope that a ceasefire can be secured,
but he says he's quote, "Not under any
illusions either." Greg Sullivan, our
Russia economy and government editor, is
here with his assessments of of where
this takes us. Pretty negative
assessment then from the German
chancellor. Uh Greg, I mean, is this a
surprise? This would be the the the
assumption, I suppose, amongst many
European leaders.
>> Yes, negative, but potentially
cleareyed. Um, we've seen that both
sides have held successive rounds of
talks, but those haven't produced a
ceasefire. Instead, they've largely just
resulted in prisoner exchanges between
the two sides. Uh, Putin has stuck to
maximalist demands that Ukraine is
unlikely to accept to reach an end to
the conflict. And the Kremlin has really
shown no sign of wanting to end the
fighting uh, short of a Ukrainian
surrender. And Ukraine is at this point
not likely to do that because they see
this as a existential conflict. Um and
they've been very clear that they do not
want to seed sovereignty to the
aggressor. So uh at this point it does
not look like a ceasefire is on the
horizon despite the push towards one. Uh
things could always change but for now
it seems like a rather cleareyed
assessment from Merz.
>> Yeah. So we don't see much progress then
on the Ukraine agenda. Meanwhile, Mets
and President Mron of France have
renewed their calls then for secondary
sanctions against Russia. How likely are
they at this stage?
Well, it's interesting because
historically they've resisted this idea
of secondary sanctions, but in some
regards this could be read as an
admission that the current direct
sanctions on Russia just don't have the
same sort of leverage that they feel
they need to force President Putin to
the table to negotiate a ceasefire. So
here they are calling for secondary
sanctions to both make those more
effective and ramp up the pressure on
Putin. It's also a move to try to prod
the US to step up to the table. Uh Trump
has warned that there would be an
economic war and bad consequences for
Russia if the fighting continued, but so
far he's been reluctant to impose
sanctions on Russia or impose new
penalties. And so maybe this is a prod
from the Europeans in that regard to try
to ramp up the pressure on Russia amid
these negotiations.
>> Greg, thank you very much. Greg
Sullivan, our Russia economy and
government editor. Thank you for
bringing us the latest on Ukraine. A
quick look at what we have on European
equity markets right now. Then it is the
1st of September. No trading in the
United States. Uh we are up by 4 cents
of 1% on the stock 600 right now. We see
some positivity coming through on the
healthc care space for example. Coming
up on the program we'll get back to some
of that geopolitics, hellos and
handshakes as Chinese President Xi meets
India's Narendra Modi and Russia's
Vladimir Putin at a summit in China.
We'll discuss what it means for global
trade and security next. This is bling
back.
Welcome back. Good morning. Uh, welcome
to the pulse. I'm Anna Edwards in London
and these are your top stories. The
leaders of China, India, and Russia meet
in China as they seek to strengthen ties
amid trade tensions with the United
States. Tariff uncertainty. Washington
considers its next move after an appeals
court declares President Trump's global
tariffs illegal. Plus, OpenAI aims to
build a massive new data center in India
that could mark a major step forward for
its AI infrastructure push.
Welcome back to the program. Let's
return to our top story this morning and
that is the events taking place at the
Shanghai Cooperation Organization
meeting in Tanzhin. Uh Chinese President
Xi has welcomed world leaders including
Vladimir Putin as they discuss trade and
security with us to discuss the impact
of this uh this meeting this grouping.
Franchesca Guereti who's Europe China
Initiative director at Rand. Very nice
to have you with us Franchesca. Thanks
for being with us. So what do you think
China is trying to get out of this
meeting? What are the aims of this?
>> There are a couple of things that I
think China and Russia together are
trying to get out of this which is and
they've explicitly said so is a new
world view is a new world system
organization view. Now I would however
be very cautious about the fact this is
not the first time China tries to put
out there a new world system. Right?
They had the global security initiative,
the global development initiative. They
had the belt road initiative before
that. So this is definitely not the
first time that this happens. However,
the fact that the United States has
taken the position has taken the fact
that is somewhat alienating the allies
does feel like it is creating a
situation where China and Russia
potentially they can propose something
more um assertively to partners because
there's a need for multilateralism which
is not being filled by other countries.
>> Yes. And you make this point in your
notes ahead of our conversation that it
is important in itself that these
countries, some of them run by very
authoritarian leaders, they still want
to operate in a multilateral
environment. I mean, is that the case,
Franchesco, or is it just that's that's
the image that they want to create? I
think it's a piece of both, right? It is
indeed the case that a lot of countries,
not necessarily Russia and China, want
environment, but is also the case that
these two want to have a multilateral
backing. they do want to be part of of a
system that can support their um aims
and their goals and they want to have
backing in the image that they're
actually much more supported than the
so-called west. So what so if we dive
into some of the relationships that are
on display here and we've got China and
India coming closer together as a result
of of these events and in the run-up to
them in fact uh what do you make of the
the the warmth of the relationship there
or is warmth too strong a word? Is this
something more tactical? I think warmth
is too strong of a word. Uh the two of
them keep having some very deep security
issue there. Trust is not necessarily
there. Um Modi has complained about the
trade deficit that India has with China
and considering how China's economy is
doing and the structural issue that it
has especially the exportdriven uh the
need to export more. I'm not sure that
trade deficit issue will be solved. Um
however you know India does want to have
a successful economy and at the moment
because of the potential 50% tariffs
from the United States. China looks like
a a potential positive partner
economically. However, I would
definitely not see this as the beginning
of an alliance or a partnership but
nothing like that.
>> Yes. I mean India is a democracy.
What do you think the India is that the
thinking is in New Delhi about how close
to get to this kind of grouping? Well,
they did want to they did apply for
membership. So, they're interested in a
grouping that brings together Eurasia
countries, right? So, India is part of
Asia. So, rightfully so. Rather than
leaving everything to China and Russia
for the decision around the SEO, they
applied for membership. So, they're
interested in steering the direction of
the group in a certain way and that in
itself I think is important.
>> Yeah. And you mentioned the tariffs that
the Trump administration has imposed on
India. to to what extent do we see the
influence of America in this room in
this grouping even though America is
clearly not there but but the the fact
that they all have something in common
they have Trump and his tariff agenda to
contend with I mean let's put it very
bluntly if it weren't for the vision
view towards the United States probably
China and Russia wouldn't even be
partnered to begin with right is this
idea that they have to fight and against
the so-called west that creates the the
relationship between the two of them. On
top of that, if you layer the fact that
now Trump, the Trump administration is
imposing tariffs on partners, allies,
and so on and so forth. As I said
before, this creates a window of
opportunity for a country like China and
Russia to propose to propose themselves,
especially China, as responsible global
actors to a lot of middle income, lower
income countries that just want to have
a good and solid economy.
>> Yes. Um and and what about the oil
relationship the energy relationship
rather between India and Russia? So
India buys a lot of its energy from
Russia and the current US administration
Peter Navaro in particular with the
trade brief has been very critical of
this almost laying the blame for the war
in Ukraine at India's door because
they're saying that India is bankrolling
uh Russia in its in its war in Ukraine.
Um but India pushes back and says we've
had mixed signals from the Trump regime
and actually we're buying in accordance
with the the G7 uh minimum price and and
all of the complex rules that were put
in place there. I mean does India have a
point? What what what's the future of
this conversation do you think? So we
talked about India China right and I
told you that I don't think that the
relationship is particularly warm and
that there are a lot of issues there.
India Russia however we've seen their
relationship being relatively close not
really a partnership but definitely
there's an ongoing relationship between
the two of them in terms of oil but
there's also there's also an history of
weapons weapons from Russia being sold
to India so I suppose that there's a bit
of narrative coming out from New Delhi
in terms to be able to maintain this
relationship and a bit of truth the
reality is however at the SEO if I were
to you know identify one bilateral
relationship that seemed particularly
warm that is definitely the one between
India and Russia.
>> That's interesting because I was reading
that Narendra Modi did speak to Vladimir
Zalinski before attending this event and
that makes you wonder if any progress
can be made any pressure applied to
Russia when it comes to its actions in
Ukraine. I suppose that would be a lot
to hope for from this event. Absolutely.
I'm not sure New Delhi has the means to
apply pressure on Moscow to begin with.
uh but otherwise I I don't think that
India is necessarily siding with I know
I mean India is not siding with Moscow
right it just is a position where his
interests need to be served and they
served at the same time by buying oil
from Russia while at the same time also
saying we need an end to this war
talking to Zilanski and backing the
Ukrainian positions and another thread
that you flag as interesting in in in
going into this meeting is what we could
learn about Russia and Iran and the the
the the Iran nuclear program something
else that we'll be watching for
headlines on is that is that is why do
we have that expectation that that will
be addressed
>> I think because that the Iran and Russia
are going to are going or have met um at
the SEO right and then we're going we're
going to talk about the nuclear programs
especially now that European nations
have decided have you know flagged the
possibility to impose sanctions again
against Iran and that would bring these
countries who are authoritarian
countries even closer together. Okay,
Franchesca, thank you very much for your
analysis. Franchesco Guerr, Europe China
Initiative director at Rand. Now, in
other news uh from the Asian trading
day, Indonesian stocks tumbled by the
most in nearly 5 months, hit by growing
concerns over political instability in
Southeast Asia's biggest market.
President Prabo Cibanto cancelled the
trip to China following the deadly
unrest as demonstrators targeted the
homes of Indonesia's finance minister
and several lawmakers on Sunday. Prao
announced Parliament will remove hefty
lawmaker perks that had been a source of
eye for many protesters. Alibaba shares
have surged today after the Chinese
e-commerce giant reported a jump in
revenue from China's AI boom. The
company posted a tripledigit percentage
gain in first quarter AI related product
revenue, helping offset a surprise drop
in profits. And the Wall Street Journal
has also reported that Alibaba has
created a chip capable of operating AI
services as Nvidia faces hurdles in
selling its products into China. Shares
in the Chinese EV leader BYD have
slumped after it reported a 30% plunge
in quarterly profit on Friday. Despite
robust overseas sales, BYD's net income
for the period fell short of analyst
estimates for a modest increase. Heavy
discounting saw BYD's gross margin
contract as a fierce battle among
Chinese car makers hits its bottom line.
Coming up on the program, Parliament
returns from recess in the United
Kingdom. We'll discuss the challenges
facing the the government here and look
ahead to the upcoming budget. This is
Bloomberg.
Welcome back to the pulse. Here in the
UK, MPs are returning from their summer
break this week with immigration top of
the agenda as criticism grows over the
Labor government's handling of asylum
issues. Uh, that's in focus. Uh, plenty
more. A reset of communication strategy
from number 10 perhaps as well. Let's
talk to Ruth David, Bloomberg's London
Bureau Chief and John Steek, author of
Bloomberg's Money Distilled newsletter.
So, there's a lot in the mix this
morning and the bigger picture, I
suppose. Is it big picture to think two
months ahead, medium-term view? Um,
we're looking ahead to a budget of
course and that's going to keep
everybody guessing uh for weeks and
weeks. No doubt. Two months of that
ahead. So, so Ruth, just in the short
term though, we've seen quite a lot of
news lines just dropping in the last few
minutes uh surrounding a new uh chief
economic adviser in the shape of Man
Shafi at uh at number 10, new comm's
team in place at number 10. So, do we
get a sort of back to school new year
starting reset feeling coming through?
>> Yes. And one can make the case that
Nigel Farage has had a better summer
than Kestama arguably speaking. Yes. So
Minu Shafi Nin Pandit stepping down. It
does seem like the prime minister is
looking at getting a more economic
focused team in place with the view that
the budget is coming up soon. There is
this general sense of discontent in the
UK public around so many issues, right?
We're talking about immigration. We're
talking about taxes. In the last few
weeks before the summer, you know,
before we went back to school, there
were all these rumors about are they
going to tax banks more? Is there going
to be more property taxes? Is there
going to be landlords paying national
insurance taxes? Right.
>> And this general sense of discontent
over the summer, even though yesterday
Downing Street officials were apparently
swearing to us that they would not be a
big cabinet reshuffle, but they've just
gone and confirmed Shafi now. But I
guess they're thinking that's not
Maybe that's not a ministerial thing,
the advising teams. Yeah. But but a
sense of reset then coming through from
number 10 and and you know well well
they might want to reset I suppose after
they haven't necessarily been in charge
of the narrative over the summer and
John that narrative that cost of living
conversation still keeps popping up in
other media e even though some of the I
was talking to Callum Pickering uh at
Peele Hunt earlier on today and he was
telling a slightly more positive story
about the UK economy which doesn't
necessarily seem to be cutting through
uh in in the wider media story GDP
numbers and PMI okay they're They're not
going great, but they're perhaps at the
upper end of the G7. They were better
than expected in some cases, and yet
that's not being turned into any kind of
positive story and momentum for the
government.
>> I mean, yeah, and Callum's absolutely
right. I mean, this has been a
persistent issue for the UK for a a good
few years now that the the fundamentals
have actually generally been better than
expected, even though they're they're
not great. I mean, actually, that
probably is part of the problem. It's
like they're better than people think,
but they're still not amazing. Yeah.
>> Um the other issue is I guess well
there's a couple of things. The
employment market looks a bit wobbly in
various areas and that partly is down to
policy. So whenever the government uh
decided to impose employee national
insurance so they basically hiked the
cost of employing people particularly
young people um like by about 20 odd%
when you combine it with a minimum wage.
So new graduates are having a tough time
finding jobs. Um, and then you've also
got the fact that with inflation coming
in a bit higher than expected, probably
going to hit 4% for September, you're
going to start seeing headlines about
real wages are no longer going to be
rising. You've also got the housing
market is kind of wobbly
>> and a lot of people in the UK, the their
mental balance sheet is based on the UK
house break.
>> It's interesting. I was reminded by Dan
Hansen just last week from Bloomberg
Economics how the real wage story is
positive in the UK. If you look at back
through 2019 over a longer time period,
you can find a a positive story to tell
about real wages, which as you say is
something that maybe doesn't doesn't
always cut through.
>> Well, I guess it's also the thing that's
been propping up consumer spending.
Yeah.
>> Um despite all of the painful bits of
governance that we've had and the
question is whether that can continue.
>> Yeah. And I suppose we're moving towards
the budget then um Ruth and you know it
might be nice that some of the numbers
come in better than expected but we're
still talking about a chancellor with a
fiscal black hole to fill and still the
speculation will be about further tax
rises then and we've got we've got eight
weeks perhaps of speculation about tax
rises. So where do we start?
>> Absolutely anywhere between 40 and 50
billion depending on who you speak to.
You know, some of the UK media have had
these polls that they've had Yugav do
for them specifically saying that both
Rachel Reeves and K Star Tama right now
their popularity is so low and reform of
course has been ahead of Labor in the
polls in the opinion polls since April.
This week I think the focus is going to
be there's a reform conference in
Birmingham where we've been reporting
and others have been reporting that
there's a record high in terms of
business lobbyists attending. So they
definitely are g garnering not just
public attention but also business
attention. Now Labour is trying to say
okay you know we've got a lot of these
child care initiatives coming through 30
more hours for nurseries. anecdotally
and so many others are saying this.
They're saying there's more free child
care. Our nursery and many others across
the country have just gone and increased
fees. So, you know, there this sense of
discontent and the sense of what is this
government doing continues and it's
going to be hard to see how they can
change that and what Rachel Reeves can
do in the budget to really give herself
that fiscal buffer.
>> Yes.
>> And carry through with it.
>> Yeah. We'll see how if the narrative can
be turned around, if they can get ahead
of the communications challenges with
the new comm communications team then
coming into place. You mentioned reform
and it seems that this was such a big
conversation over the summer that it be,
you know, um we should not neglect it.
Uh we've got a story out over the
weekend that says that Labor is going to
review changes to the European
Convention on Human Rights. And this
feeds into a big debate that now exists,
it seems, in the UK as to whether it's
that legislation that stops the UK doing
what it wants to do to stop small boat
uh crossings across the English Channel
or not. And and the the answer to that
seems to be elusive.
>> Home Secretary Cooper is speaking in the
House of Commons today and she's going
to be talking about all of these things.
You know, the BBC was reporting this
morning that maybe there'll be tighter
rules for family members of asylum
seekers. It seems like there is a debate
within the government about how to
proceed with disconnecting from the ECR
and whether really having that
disconnect is going to be as effective
in stopping immigrants. The other thing
to keep in mind and we've seen some
protests around it is these hotels for
asylum seekers, right, which the
councils are really going up in arms
again. I mean the government wants some
legal reprieve last week, but they might
the council might take it to the Supreme
Court and then we see what precedent
that sets. M okay Ruth thank you very
much Ruth David Bloomberg's London
bureau chief and John Sepeek author of
Bloomberg's money distilled newsletter
thank you to both of you uh for joining
us now sticking with the UK Norway has
picked the UK to supply frigots for its
navy in a 10 billion pound deal the
Nordic nation's biggest ever investment
uh in its defense among the NATO members
that border Russia Norway had also
considered France Germany and the United
States for the contract uh delivery of
the British type 26 frigots specifically
designed designed to detect, track down,
and combat uh submarines will start in
2030. Now, the European Commission
President Ursula Vanderelion says the
block's plan to accelerate investments
in its defense industry will benefit
Poland most. The commission will prepare
a roadmap for investing additional
defense funds in coming weeks and will
discuss that with national governments
in October. Joining us now is Suzanne
Lynch, Bloomberg's Brussels Bureau
Chief. So, a number of interesting
developments and threads that we're
following when it comes to defense
around Europe. Suzanne, how significant
are these plans on defense a and and and
foreign policy?
Yes, I mean, this is the European
Commission's flagship defense spending
program. It's 150 billion euro pot of
loans at favorable rates that countries
can apply for and use that to increase
their own defense capabilities. Now, as
you were saying there, uh Ursula
Vanderline was in Poland yesterday.
That's part of a whistle stop tour
across seven European countries that are
closest to the war in Ukraine. She's in
Lithuania today and later in Romania.
And I think this is about the messaging
here is important. It's about saying to
these kind of frontline countries,
Europe, the EU is behind you. And also
giving that message to Ukraine that
Europe support is still there.
Obviously, we've seen a lot of uh twoing
and throwing over the summer about
what's next for Ukraine. We're still
waiting to see if there will be a
meeting between Vladimir Putin and
Vladimir Zalinski. But in the meantime,
the Europeans are looking at ways at how
they're going to make sure they continue
to build up that defense industry uh
domestically that has been so lacking in
recent years.
And of course, I'm sure the defense
industry and Europe's intentions towards
defense. Uh that's going to be one of
the issues that you'll keep front and
center with your new uh Brussels
newsletter. So tell us a bit more about
what to expect there.
Yes, we're relaunching today our
Brussels edition newsletter and that um
comes into people's inboxes, European
readers in the afternoon and basically
this is a snapshot of what's happening
in Europe every day. You know, as we've
been discussing there, Brussels is more
and more at the center of geopolitics,
trade, economics, that whole
transatlantic relationship and Europe's
place in the world. So, it's
increasingly significant and our
Brussels edition newsletter will be
tapping into that. The idea is just to
give readers a an idea, a snapshot of
what's happening in Brussels each day. H
and also highlighting some of those
scoops, analysis um that our team here
in our Brussels bureau and across Europe
are generating each day. So make sure
you sign up for that.
I will Suzanne, thank you very much.
Suzanne Lynch, our Brussels bureau chief
and you can sign up to the new Look
Brussels Edition newsletter at
bloomberg.com/newsletters.
Now, from a scrappy startup to global
media giant, YouTube has constantly
evolved over its 20 year history,
Bloomberg Originals has taken a deep
dive into the platform's legacy and the
challenges posed by AI and its biggest
competitor, Tik Tok.
>> Okay. Hi. So, my name is Boxy and um
it's been a while since I made a new
video.
>> I first heard about YouTube when I was
in high school. Hey, it's Brad.
>> I went to a party with Daniel and he
kissed me. Just kind of wondering what
is that? I have this really vague
memory.
>> They have really long.
>> I believe it might have been the first
YouTube video ever.
>> It was and featured trunk enthusiast and
YouTube co-founder Javeed Karim. And it
ignited 20 years of liking, commenting,
and subscribing.
20 million videos are uploaded to
YouTube every day and the site's
estimated to account for about a fifth
of all internet traffic. In the US,
people spend more time watching YouTube
on TV than Netflix, Amazon, or all of
Disney's TV networks and streaming
services combined.
But the world's central repository of
video content is now taking a risky
gamble while also facing its first real
competition in years.
The biggest threat for YouTube is that
someone could come along and do what
they did 20 years ago.
>> And so with novel threats knocking at
its door, can a wealthy grown-up YouTube
still keep its kids engaged?
>> You're still here.
And you can watch the full documentary,
the full story at bloomberg.com or on
the Bloomberg terminal. Let's stick with
the technology theme for this Monday
morning. OpenAI is seeking to build a
massive new data center in India that
could mark a major step forward in Asia
for its Stargate branded AI
infrastructure push. Let's bring in
Bloomberg Tom McKenzie with details on
this story. Uh Tom, good morning. So
take us through the details of this data
center. Yeah, and I think what this
story reminds us is the ambitions of
course of OpenAI and Sam Alman in terms
of that Stargate project, but also the
growth in terms of what OpenAI has seen
in the Indian market. So they are
planning according to our reporting to
team up with a local player to build out
1 gawatt in terms of data centers which
would be on one of the largest if not
the largest in India if that's what it
comes to. Google, Microsoft have already
been building similar facilities to
support their AI ambitions and growth in
the Indian market. Now it's open AI's
chance and they again are looking at
this size and scope one one gigawatt
potentially in terms of in terms of the
size of this data center. They're
looking for those local partners.
They've seen significant growth uh in
the Indian market and of course this
builds out as I mentioned that broader
Stargate push for open AI. They're
committing about $500 billion alongside
SoftBank and Oracle in the US market to
build out potentially up to 4 a.5
gawatt. They've got agreements that are
underway in the UAE and parts of the
Middle East to build out data centers
there. Now India is in focus and it
could be announced according to the
reporting as soon as this month when Sam
Molman the CEO of course is expected to
be on the ground in India.
>> Yes. And this comes at a hugely
sensitive time doesn't it for US India
relations. We're just seeing this
weekend and into today the Indian prime
minister in China trying to further uh
links and ties there because of the
difficulty between the US India
relationship. So I wonder how this open
AI story could fit into that. Well, I
think we have to watch for any comment
of course from the White House and
President Trump himself whether or not
this will be welcomed as an example of
trying to align the world to US
standards when it comes to AI or if
there'll be some push back on that given
what you've said given the 50% tariffs
of course that the US administration has
now imposed on most of those Indian
goods as punishment for India's
purchases of Russian oil. So I think the
Trump administration's response to this
will be fascinating. There have been
supporters of open air's push to build
out that so-called sovereign AI beyond
US borders and we had that really
articulated in the UAE when of course
President Trump was himself there on the
ground and we've heard from
administration officials they do want
the US to be setting these standards
globally and so arguably the India push
would be part of that piece but a time
as you say of those tensions between New
Delhi and Washington. Tom, thank you
very much. Tom McKenzie on the Techbe
with the latest on OpenAI and its
intentions towards the Indian market. Up
next, Bloomberg Markets, that's with Guy
Johnson. He'll be taking you through all
of the the strength that we're seeing
actually on European equity markets
right now. The stock 600 up by 4/10en of
1% broad gains, most sectors in positive
territory, industrial goods and services
on the rise this morning. Guy is back
with the markets next. This is