tom: good morning, this is "bloomberg daybreak europe." i'm tom mackenzie in london. french president emmanuel macron gambles on a snap parliamentary vote in a bid to stop the rise of marine le pen, after crushing defeat in european elections with far right parties surging across the bloc. in germany, chancellor olaf scholz's spd suffers a record rout falling behind the far right afd, the euro weakens the most in a month. benny gantz equates israel's emergency government criticizing netanyahu over his handling of the war against hamas and calls for fresh elections. let's check on markets, when the risks around politics are firmly back in focus. we have keynote it has later

this week in terms of the macro with central banks and the focus on the fed, but the here and now , is the focus around the risks emanating from france and the eurozone, the rolling of the political dice by president macron. european futures pointing lower 0.4%. in the u.k. come the ftse 100 not immune to the pressure coming through. many asian markets closed for holidays. ftse 100 futures lower 0.7%. s&p futures flat, nasdaq futures in similar territory. blowout jobs report on friday, above all of the estimates, 272,000 for the most recent month. we look ahead on that front when it comes to the cpi on wednesday and the fed's decision with the forecasts in focus. let's look cross assets, zeroing in on the current weakness around the euro, the reaction function of the single currency to the surprise coming through from france.

not a surprise, the far right parties came out with a strong showing in european parliamentary elections, but the rout suffered by the germans, of olaf scholz, the chancellor, but also, the french president and the challenge coming from or in le pen pronounced, as he calls that parliamentary vote. two point 54 under terms of the bund futures. we look for the reaction to these events. euro-dollar weaker, versus the pound down 0.4%, the single currency. the focus on the benchmark 10 year as we look ahead to inflation data out of the u.s., and the fed decision, 4.44 on the 10-year, brent just shy of $80 a barrel. let's get to france. french president emmanuel macron culling a snap election following his party's crushing defeat in sunday's european parliament elections.

his renaissance party came a distant second to marine le pen's far right national rally. >> this is a serious and weighty decision. above all, it is an active trust. i am confident in you the french people to make the rose choice for future generations. tom: micron's german counterpart olaf scholz did not fare better with his social democrats predicted to suffer their worst ever performance in an eu election. oliver crook in berlin has more, but first, let's crossover to caroline connan in paris. a momentous decision from the french president. how big a gamble is this for macron? >> some say it is a gamble. some say it is pretty audacious because if the national rally

gets a majority in this parliamentary election, you get a couple years of messy politics in france, but then you don't get marine le pen in 2027 for the next presidential election. this is the gamble for emmanuel macron. there is a high risk for him to lose the majority. he did not actually have in the first place. since 2022, it was fragile, he had to rely on the republicans to pass legislation, but perhaps this is a wake-up moment for the french, at least, that is what emmanuel macron is trying to do here. if you look at the eu election results, marine le pen's candidate jordan bardella got 2% of the votes, or than double renew europe, the party of emmanuel macron, where his candidate struggled to exist during this campaign. there is a high risk, but it was

seen as the only solution by many, including the republicans who have been supporting the fragile majority of macron the past couple of years. tom: seen as the only solution given the parliamentary results on sunday. give us a sense of the appeal of marine le pen across the french electorate. what is heading home in terms of messaging from her party? >> a few years ago, she was defending this idea of frexit, a french exit of the european union. she has abandoned that idea because she knew this was a turnoff for a big part of the electorate. jordan bardella during this election has build his campaign on frustration with migration and inflation. these are the two topix that they will focus on the next three weeks before this snap

election at the end of the month. if, of course, they manage to get a good score in this parliamentary election, something that is called in france cohabitation could potentially happen, meaning the president's or one-party and -- private -- president is from one party in prime minister is from another party. that could shift defense spending away from climate change issues. this is something that marine le pen is trying to focus on. she has tried to de-talks if i her party and she will focus again on this during her campaign the next few weeks. tom: cohabitation. it's happened before in france, so we will see, as we lead up towards that vote at the end of this month. caroline connan with the latest out of paris paris pre-let's crossover to berlin. where bloomberg's oliver crook is standing by. olaf scholz's party coming not second, but third, talk to us

about the scale of this setback for the german chancellor. >> once again, the french stealing the thunder with that snap election vote, but we remind everybody of the importance of germany with the biggest number of seats in the eu parliament. for scholz, it was a very unfortunate night, and for his entire coalition. the real winner, despite the fact that the afd did well, was the cdu, merkel's traditional center-right in germany, 30% of the vote. that was anticipated but is it is what helped brave afd doing 16%, there was a lot of question about how the afd would do after a number of different scandals where a couple aides were under investigation for passing information to china and russia. it was one of the senior leaders who had made comments about how certain members of the ss weren't all criminals. that got them booted from the id group within the european parliament. now you have seen them search

back up, they did 15%, second party now in germany follow by the spd. when you look at the coalition of all of the ultimate with use the spd, the greens and the fpd versus how they did in the election, they only got 35% in the european election. they did 50% less time around when they have the national election they get elected, so as far as a referendum on national politics, this is scathing for scholz and his party members. tom: you have been talking to lawmakers and officials in the lead up to this election, the european parliamentary vote. what is your sense, as we see the results of the wider implications across this bloc? >> there were questions about how far the swing right was going to go. what you saw last night was that the center really did hold, the center-right in terms of seats, the epp did the greatest number net of seats, ursula von der

leyen's party got 14 additional seats, that makes them the biggest group within parliament. it puts earthly von der leyen and the epp in strong position. the socialists lost a couple of seats but the center-right and centerleft overall really held. the greens had a terrible night. so, too, the liberals. as we have been talking in the lead up does the far right look like? you look at the groups on the screen, and the ecr, they have done fairly well, but they don't command that much of the vote. in that far right column, the other, that now contains the afd, those were 15 seats that could have gone into the id, that they were expelled from, the question is whether they lead? there is this question about coherence, it is one thing to vote outside of the mainstream, but when it comes to actually governing, how can these far right parties get together and that is what we will find out over the next couple of weeks. tom: oliver crook with

their context of the results from european elections. we continue to monitor those. the euro under pressure, as a result of all of this, weakening to its lowest level in a month versus the dollar following french president emmanuel macron's shock announcement trade was bring in strategist mark cranfield for the take. the market reaction, we will start with the euro, the pressure the single currency is under. is this a short-term, knee-jerk reaction or a reawakening to the political risks of the euro zone? >> is probably the latter. is it a big event week? traders would've had a plan for the u.s. cpi report, the fomc and bank of japan. they would've thought those were the major risks this week,

than the french early election is called and completely changes the landscape. people can see this is a high risk strategy, in which case, they will trade defensively. we are seeing the french futures getting hit hard in asia. the euro is under pressure and all of that could get significantly worse when the cash markets open in europe, in a few hours' time. it would have been more significant if half of asia was not on holiday. the volumes have not been that high, but the message is very clear, investors do not like this new round of uncertainty which has been thrown in by calling a snap election. initially, they are bound to take the reaction that well, we don't want to be part of this. equities have had a good run, bonds have done reasonably well, and the euro until friday with the u.s. jobs report was also doing well, so traders certainly have some positions to reduce,

and that is the likely response we will see. the next couple of weeks, people will be very concerned, has macron done the right thing or is it too big a able? tom: -- gamble? pressure could become more pronounced in the hours ahead. when it comes to that dot plot, this was at the center of attention last week. we had the jobs data come in well above the estimates. how does that tie into your view around where that forecast around the dot plot is expected to adjust from the fed? >> it certainly increases the risk of a slightly more hawkish outcome from the fomc. before the jobs report came out, traders were probably expecting the dot plots to be reduced to two cuts for this year, from three. three would've been a gift to markets, that would've been a

bullish in area but is probably unrealistic considering we are halfway through the year, and there are not that many more fed meetings to come. most likely, the fed will incrementally move, and people will expect two right because this year. but the employment situation is so strong and the inflation data is not cooperating, there is certainly a risk that the fed go to only one rate cut this year, and that will be seen as good for the u.s. dollar and probably a slight negative urban the equity market. bond markets would not like it very much either. the risks are skewed towards the fed coming up with a slightly hawkish outcome and that is not fully priced into the market. tom: so that dot plot of one if we get that, as we look to cpi and inflation data, a few hours before that fed decision and their forecast of number of cuts , with the analysis across the european market, and the asset

adjustment. bloomberg mliv strategist mark cranfield. here is what else we are thinking about this week when it comes to the stoxx story of the moment. still it is nvidia. their stock split coming through today. you will get pricing on that. 10 for 1 is the split as the company says they want to make shares more accessible to employees and investors after that eye-watering run-up in terms of nvidia's value. the stock price currently at $1200 per share, that 10 for one split coming later today. wednesday, we get the fed decision. the inflation data comes in a few hours before that decision. and we get the commentary, not expected to change in terms of rates, but it is the guidance and as mark cranfield was saying, the adjustments, if they come, for the forecast and it terms of number of cuts expected from the members of the fomc. on friday, and the next central bank to be in focus will be the

boj, the rate not expected to change, maybe adjustments in terms of bond buying and the economy weakening, but not as much as initial data prince had suggested. you can get a run-up of the stories you need to know to get your day going in today's edition of daybreak. terminal subscribers can go to dayb for the latest. benny gantz quits israel's emergency government, criticizing benjamin netanyahu, and calling for fresh elections. we bring you the details next. this is bloomberg. ♪

tom: i'll come back to "bloomberg daybreak europe." israeli prime minister benjamin netanyahu's major domestic rivalries in from the nation emergency government. benny gantz said netanyahu was preventing israel from achieving quote true victory in the war. saying politics was getting in the way of strategic decisions previous bring in joumanna bercetche, our middle east anchor, what does this mean then for netanyahu? >> benny gantz made that announcement yesterday in a televised address, seeing he was

quitting the coalition government. this did not come as a big surprise. in may he issued an ultimatum saying he wanted to see a long-term plan for gaza. unless he committed to that plan, he would run the risk of leaving the government, so that announcement came over the weekend. the symbolism is he is one of the more moderate members of the netanyahu government. while it does not mean the government itself will fall apart, because netanyahu will still have 64 seats in the knesset alongside coalition partners, it means he will be more reliant on right-wing members of government. one of them, then national security minister, is pushing for a position on the war cabinet. one of the more hawkish members of the government. it has been adamant that netanyahu should not be signing on to this biden ceasefire proposal. this comes on the heels of this successful hostage operation

over the weekend. they managed to retrieve four hostages from within gaza. which was initially met with a lot of jubilation within israel. but then it emerged that the civilian cost was very high. the hamas run palestinian health ministry saying it had killed 270 palestinians in the process of that operation, over 700 wounded. it underscores how heavy a cost these hostage operations have on palestinian lives. many within israel are saying they are not fully supportive of these types of operations, as it could imperil the lives of other hostages still on the ground. at this point, netanyahu is still fighting for his political career. tom: no doubt all of this ties into the visit by antony blinken, the u.s. secretary of state, back in the region. another furious round of diplomacy and so far it has come

to very little. benny gantz supports this peace plan from biden. what can we expect in terms of blinken's ability to move the dial on this issue in the region? >> remember, only a week ago that biden put out this three-point ceasefire proposal. it became apparent in the next 24 to 48 hours that israeli officials had not signed on to that deal. irrespective of this weekend, this is the u.s.'s once more, another attempt to get israel on board with the deal. given the turmoil over the weekend, given the fact that benny gantz has left the government, and that netanyahu will have to rely more on his coalition partners, it seems increasingly unlikely that this ceasefire can actually get across the line. the secretary of state will be meeting with the egyptian president sisi today and will be traveling to meet with the

israel defense minister. the sticking point, that is consistently the theme, hamas saying they will not sign onto the deal unless israel agrees to full withdrawal from gaza. israel saying they will not sign onto the deal, stacy full destruction -- unless they see a full destruction of hamas. still a lot of daylight between the two sides. tom: our horizons middle east & africa anchor with the latest out of that region. stay with us for the reaction to the french president's snap poll . parliamentary elections and the firmer ramifications of the votes across the eurozone. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak europe." other stories making the news this monday. indian prime minister narendra modi has been sworn in for his third straight term. his swearing in ceremony was held at the president's residence in new delhi before around 8000 guests. he extends his leadership another five years after an electoral setback that forced him to share power for the first time. the prime minister's inauguration cap stays of intense power jockeying in the capital after the ruling bjp lost its outright majority, following a marathon six-week election. in singapore, several banks including citigroup and dbs were caught up in the country's biggest money laundering scandal, are ramping up scrutiny of rich clients. private bankers at several

institutions are receiving extra training to spot red flags. the moves are part of a voluntary program, as lenders try to close loopholes which allowed a group of criminals to launder more than $2.2 billion in online gambling proceeds through 16 banks. germany's chancellor's warning the eu against putting tariffs on electric cars from china. he told an industry event on saturday that the restrictions will make quote everyone poorer, saying german carmakers will only compete with china if trade remains fair and free. the eu is expected to unveil tariffs this month, after a probe into china's ev subsidies. beijing said it is ready to respond with duties on eu-made cars. foreign investors allocated around 60% of the shares in saudi aramco's stock sale, the deal generated strong demand from the u.s. and europe, funds

from the u.k., hong kong and japan reportedly backed the share sale pray this marks a turnaround from the oil giant's 2019 listing that ended up as a largely local affair. spain's carlos alcaraz won his first french open tennis title some by defeating germany's alexander zverev in five sets. the 21-year-old became the youngest man to collect major titles on all three services, clay, grass and hardcourt. alcaraz goes into wimbledon next month as the defending champion and world number two. we will take a closer look at the u.k. tech industry. and will be joined by carolyn dawson, ceo of funders forum and technician, for an exclusive conversation. this is bloomberg. ♪

tom: good morning. this is "bloomberg daybreak europe," i'm tom mackenzie in london. french president emmanuel macron gambles on a snap parliamentary vote to stop the rise of marine le pen after crushing defeat in european elections, with far right parties surging across the bloc. in germany, chancellor olaf scholz's spd suffers a record rout falling behind the far right afd. the euro weakens the most in a month pre-german and french bond futures dip. benny gantz quits israel's emergency government, criticizing prime minister benjamin netanyahu over his handling of the war against hamas, and calls for fresh

elections. let's check on markets when political risk is back in focus. the euro under pressure, european assets under pressure on the back of that surprise vote and call for a parliamentary election by the french president. we talked about the pressure that his party have faced in european elections. a similar story in germany. olaf scholz's party slipping to third place. european futures down 0.4%, the ftse 100 in the u.k. down 0.6%. stateside, looking ahead to inflation did on wednesday and the decision from the federal reserve, with expectations where rate cuts come from, will they adjust from three to two, or possibly even one given the strong jobs data on friday? s&p futures left, nasdaq futures in summer to -- in similar territory. wait and hold approach by investors until you get more color from the federal reserve.

let's look cross assets with the pressure on the euro, whether that is euro-pound or euro-dollar, the single currency taking ahead. we will look at the bond reaction, particular german bunds when they start trading later in the morning. 2.54 in terms of euro-bund futures paid euro-dollar under pressure. the 10-year stateside at four point 44, a move of one basis point as we lead up to that fed decision wednesday. brent at $79 a barrel, just shy of that $80 a barrel level. let's switch focus to technology. it is a big week for tech in the u.k., particularly in london, with tech week kicking off today and founders forum on thursday. let's look at the investment and funding trends shaping the future of the sector in britain with carolyn dawson. she's the ceo of founders forum and text nation. -- tech nation. there is a report that you are putting out around the state of

u.k. tech, particularly when it comes to ai, so give us the broad picture, in terms of what the healthways of the u.k. tech sector, particularly around ai investment. carolyn: this is a moment to celebrate for the u.k. our report is released today, the focus as you would expect is around ai, but we are holding the number one position in europe for ai investment and growth. we have 1800 ai companies in the u.k. back by vc's, over 20 ai unicorns, a second that is worth over $90 billion. we saw 4 billion going to ai last year. it is capturing 16% of all vc investment. it is fantastic for the u.k. we need to continue to focus on it. but a strong position for the u.k. as we open london tech week this week. tom: what measures would you look at to attain that position, globally, when it comes to the

ai front foot we have in the u.k.? carolyn: we see certain aspects such as the major u.s. players opening headquarters for europe in the u.k. openai and cohere just to name a few. the amount of investment coming into our companies, the amount of growth we are seeing is critical. we need to ensure those companies stay in the u.k. that means weekend grow the talent base and employees those companies foster. it is important time for that. critically, the growth capital needs to come in and the amount of capital these companies need to truly grow along that global stage. tom: that is potentially the weak spot, is the late stage funding in the u.k., which is been a challenge for years, and how you exit. whether they stay, that is a key question, you have broken to many an executive behind closed doors and they say there is frankly no competition, despite the changes put in place by regulators, what measures can

improve the late stage funding and that desire, or the ability to hold these companies here, financially list in the u.k.? carolyn: the u.k. has incredible ingredients, good access to capital, we have an absolute powerhouse in the sense of talent and skills here, education. so we have a lot of the brilliant ingredients and you will see that across tech week this week. and if terms of growth capital, yes, the pension reforms will be significant, but we need to look at other options such as venture debt and unlocking more alternative sources of finance for those companies. but we do have all of that potential. we need to stay focused. tom: is the labour party listening to that message? carolyn: i think no matter which government is in power, those are key aspects to consider, as well as the skills. we need to do a lot around homegrown skills, but also, ensuring we still encourage foreign international skills and

talent to come into the u.k.. tom: you have a significant role in terms of working through those applications. this is a bugbear of manually -- many a tech executive that ability to get foreign talent. what needs to be done to change that dynamic and is the appetite there to put forward on that front? carolyn: that talent visa, where you had over 5000, 1 in four go on to be founders. those are measures to continue with incentives for capital raises, but also, for talent. london tech week is a major platform where we focus on talent and skills. we have so many international companies. 146 companies globally coming into the week, so it is an absolute moment for the u.k. on that global stage, with 30,000 people coming to experience the u.k. tech sector. tom: is it all about ai, to what extent does that dominate

discussions, to what extent does that crowd out other areas in tech that are equally consequential, whether it is biofarma tech, is that a potential risk with the focus on ai? carolyn: it is not groaning it out, actually, we have moved into olympia this year, that has enabled us to cover a whole breadth. we have a ton around climate, fintech, quantum, so it is not just about ai. naturally that is where headlines are going and it is a great success story, so why not, but there are other aspects to a. tom: when you think ai, you think about the regulatory debate, it takes many shapes and sizes, within your report, one of the lines that stood out was that many within the u.k. have found that smaller tech companies are saying we need more regulation. carolyn: people do recognize that we need to develop this in a safe and responsible way. the sentiment is shifting. people understand more about the opportunity and enhancements for productivity for business and

efficiency. which is, i think, a very important aspect. what we are hearing is regulation is important for big companies and small, so that lends should be considered. tom: carolyn dawson, founders forum ceo and tech nation ceo is welcome a big week for u.k. tech. we will stay on the tech story and get the view on ai and how to integrate it across enterprise with nicola hodson, chief executive of ibm u.k. and ireland. thank you for joining us this monday morning bright and early. when it comes to integrating ai solutions, you have a background in siemens, you are currently with ibm. you have insight into the reality of putting systems in place at an enterprise level. what is the gap between aspiration and reality as you look across or businesses? nicola: we are moving from

genuine application for elections of ai, so natwest and wpp will join me on stage later at london tech week. there will be talking about how they are using ai in production. we are seeing applications in the banks, for example, natwest, their chatbot enabling us to have a better customer experience. we have seen applications in health care. we just did some work with on trust in the u.k., and they have with a simple ai use case, doctors can save 700 more patients a week and they can scan in 18 hours the number of patient letters it would've taken four years to do before. you start to see productivity gains already in the enterprise world. the challenge is when you think you can put all of the world's data into a single ai model for

consumer use. when you look at business, only 1% of enterprise data is in trustworthy foundation models right now. there is still a long wait to go for business to get that next wave of productivity. tom: with all the privacy implications of that. we are moving from the heigh to the -- hype to the gains coming through. in terms of the biggest challenges for integrating, is the biggest challenge integrating with legacy systems within corporations, was it getting the existing workforce up to speed, is it around data security, or the challenges of integrating these systems into legacy businesses? you mentioned wpp and natwest, who have been around decades, if not hundreds of years, that presumably is not an easy task. trang: firstly, there is integration, secondly, the skills and thirdly in no particular order, is it

trustworthy, safe, reliable and is it going to give me ethical and fair results? if you thing about the integration challenge, there are ways to take an individual use case and move forward without having to reimagine the entire enterprise data landscape. most organizations have what we call a hybrid cloud set up. they have public cloud, maybe their own data centers, but they are all in a hybrid scenario so you have to work within that complexity and be able to run your ai models across the top. we believe very firmly in having an open approach. because organizations, even within one use case of ai, will need to use different people's models, put them together and have them interoperate. having an open ecosystem, democratizing ai and making sure you have more hands on the code and more eyes on the problem, and are developing solutions across a wide ecosystem in the market is important.

skills, all organizations are citing skills. some of them are going end to end rebuilding the skills landscape but it is important as we think about that pipeline of talent coming up through universities. that we're building those skills in helping people who are going to be in all jobs working alongside ai. tom: when you speak to clients, do you ever get concerned from them in terms of the amount of capex versus the gap and monetization because there is that lag, is that a concern amongst cfos who are charged with putting cash side to pay for this? nicola: it's important to think about putting in place a proper framework of ethics and governance.most large companies are starting there and picking one or two use cases where you can see value quickly. that starts to give you more confidence to build out

subsequent use cases. some of these are paying back pretty quickly. every company we talked to is experimenting. 14% have genai deployments in production in the u.k. and another 40% of large companies have pilots which they are hoping to go into production the next 12 months. they are well along in the journeys. tom: are there certain sectors that jump out in terms of the real commercial value? we are talking about a relatively targeted approach but seeing a lot of clients integrating along those targeted lines, but is there a sector that jumps out, here and now, the commercial value is very prominent? trang: there is a lot going on in banking. the government is exploring heavily. it is more about use cases than sectors. there are some use cases that really jump out. when his contact centers and taking all of the easy queries, so that the people can deal with the more complex customer requirements.

second is around the back office. digitizing labor, all of your hr capability that can be done with machine learning and ai, and then extending that to back office functions like finance, i.t. operations. the third is code and automating code. you talked about legacy systems. being able to look at the code in your legacy systems, document that, then decide whether to modernize it. they are the big three. lots more following behind but a lot going on across sectors. tom: your best guess in terms of replacement of jobs when we think about those enhancements, on the jobs front, do you and the team have a best guess forecast? trang: we have been in this business 112 years and have seen over that period new technology has net positive benefits. we are very optimistic. some jobs will be replaced. the vast majority of jobs, we

believe, will be enhanced by ai, so we will be working alongside it. allowing us to focus on what we're good at, empathy, building relationships and being creative . and there will be new jobs as there always are with waves of technology, so we feel optimistic about it. tom: nicola hodson, chief executive of ibm u.k. and ireland, and deputy president of tech u.k., on how to integrate these ai solutions and the opportunities coming through as a result. let's switch focus to the emerging market space. investors are turning to local bonds and relative currency trades. that's in the aftermath of election shocks that crushed long-standing bets in the largest emerging economies. just think of south africa, india and mexico to name three of the most prominent. i am joined by trang nguyen, global head of em credit strategy at bnp paribas. good to see you again. how has it been the last few

weeks, em investors have been whipsawed? many have been taken by surprise, particularly by india and mexico. trang: indeed, i think it is a reminder that markets are heavily reliant on polls, which have been notoriously wrong. it is important to acknowledge that while polls provide a guide, heading into the election, they are never that reliable. it's important to look at consensus positioning. that was the case heading into some elections where the currency positions and rates positions were quite consensus to the long side. i cover credit, in that respect, we see more push in there because positioning was not as long and we're not seeing the same volatility. tom: where have people been re- rotating within the credit space? have a been removing risk and

reallocating? nicola: one election we were wrong about is india. this has been the bright spot in em. part of that is because there is a real story, structural reform and growth, and him but an interesting rotation out of china to india. tom: none of those change on the fact that modi has partners many would deem unreliable, that he had to sign up with to govern. trang: our base case remains that we have policy continuity. and that the growth story in india remains intact. there is a very supportive technical aspect to this. over the years, and we have talked about china extensively, and there has been a rotation out of china. there is a great deal of excess cash due to the fact that we have negative net supply in asia primarily driven by the lack of issuance out of china. so that excess cash has to be deployed somewhere.

china is still a precarious investment thesis in the eyes of many investors, so that excess cash is now going to india. tom: there is a supply question, the fact that that supply is not coming through from china, that has been redeployed to india and you think that continues. switching jurisdictions. and we will look back to china, but for now, latin america, mexico and the carry trade story there. there is now a risk, this is the view of some, that the institutions of mexico with the new government who have that new majority, those institutions could be undermined by some of their measures. trang: the investment thesis for mexico many years have been strongly tied to the strength of its institutions. that's been challenged by the idea that a super majority could undermine checks and balances. going back to consensus trades, the peso was one of the most

well-owned currencies in em. there are structural reasons to have this bullish view in the peso. near term, we're seeing this unwinding of a consensus trade. bringing this back to credit markets. there is this idea that perhaps the undermining of checks and balances could challenge the broader thesis for mexico. but if you look at the issues that are pertinent to credit investors, it might pave a smoother path for government to provide support for state-owned pemex, which has been a perennial issue for the government. tom: you talk about china and fund flows not being pulled into the credit space. when you look at some of the policy changes, already starting to see momentum? real estate stocks are back in a bear market, but in terms of supporting the real estate market in china, is there anything that wants to pull you back into chinese credit?

trang: our timer stations -- conversations around china have gotten incrementally more positive. it is important to her knowledge that this change in policy stance, to the extent that we are directly addressing the stockpile issue, but implementation is the key and that takes time to see whether there will be progress. there are moral hazard issues around project selection, etc., so it does take time, but it is important to acknowledge that these measures by the government do support the idea that there is a floor on prices here. there is somewhat of a turnaround but the physical market does take time here. is it significant for us to see inflows back into china credit? i think it is premature to say that but there is a floor. tom: there is a floor but it will incrementally be more

positive. trang nguyen, on a deep dive around all things em, given the political shocks that have emanated the last few weeks. the focus on the political shocks out of the euro zone. trang nguyen, global head of em credit strategy at bnp paribas. let's turn back to europe. and the asset reaction to the news, not just that the far right has made significant gains across the euro zone. you look at germany for an example of that. also, of course, the snap vote being called by president micron, the surprise vote in terms of parliamentary elections for the end of this month, and european asset reaction to that. euro under pressure, euro versus dollar currently 1.07, the pound currently at 1.27, euro-bund futures 2.54, they start trading cash 7:30 u.k. time, french oats

will start trading in terms of sovereign debt in france. we can expect the sovereign debt picture of france to show reaction and maybe sovereign debt to come under pressure. we will monitor those moves for you, as we look at the single currency under pressure, on the back of that surprise decision by president macron, and the surge of the far right across the euro zone in those european elections. stay with us. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak europe." happy monday. we are in fed week. the focus right now is on the reaction to the politics of the euro zone. looking ahead to wednesday, if the inflation data and the fomc

decision, with the dot plots in focus. march we came through with three, the expectation is two or potentially one, the swaps market pricing in just 1.4 in 2024, that is the view from the swaps market. nonfarm payrolls, the jobs data on friday above all of the estimates, 272,000, well above the estimate of 180,000. the inflation data, cpi out of the u.s. expected to drop a couple of hours before that fed decision. the dot plots will be in focus and scrutinized by markets. let's have a look at the corporate story when it comes to nvidia. the stock split coming through 10 for one, fundamentally, it does not change anything for investors, still get the same dividends just split, of course. the market reaction, historically, they have done a number of these splits before, the rationale is they want to make it more accessible to employees and outside investors,

but this is the market reaction. bit of a pullback, before over a month you regain the gains, this stock triple last year and is up 150% year-to-date. let's have a look at the relatively paltry wealth of elon musk, head of that agm, the scrutiny of his pay package, poor old musket has dropped in his net worth, only has a net worth of $202 billion, the norwegian sovereign wealth fund have question marks around that 50 billion plus pay award. that will be fascinating to watch. tesla down double digits here today. plenty more coming up. this is bloomberg. ♪

welcome, i'm guy johnson.