tom: u.k. inflation falls to the boe's target for the first time in almost three years. in north korea, the russian president arriving for his first visit in 24 years. we are seeing a grand welcome from kim jong-un. reprimanded over deficits, the eu slams france and five other countries from breaking the blocks deficits and debt rules. let's check in on the markets as a reminder the fiscal challenges.

we continue to scrutinize the equity space but the sovereign debt space and we are slightly higher. from the french government in the next few minutes, s&p futures are pointing to modest gains of 0.1%. european stocks are down zero point 1% and the european equity's best is looking for capitalist euro-dollar is in focus today but the pound is the fx of the moment. one dollar 27 senso a little bit of strength coming as markets dig in through the headlines on the inflation story. that came in higher than many

expected with markets phasing out and how many expects they expect from the bank of england and that decision will be thursday. 408 currently on the guilt. got more commentary in terms of fomc. we continue to pass the data story with the fed urging patients and they say they need more evidence of calling inflation before lowering interest rates. >> we have to let -- we have to let the data tell us and it's not one door to indicators, is looking more holistically at the information. >> are you looking at one or two rate cuts at this point given where things are? >> i can imagine scenarios that would be consistent with both. >> i would need to observe a per favorableiod expanding supply before coming confident that reduction in the target range is appropriate. these conditions could take

months and more likely quarters to play out. >> it was an excellent inflation number after a few months of less excellent numbers. hopefully, we will see more. i think there is still a little bit of the juice left that's working its way through. >> the economic conditions aren't moving in the right direction. as the economy evolves as i expect, it will become appropriate to begin easing policy sometime later this year. tom: fed speakers giving their response on rates. let's start on the fed and we will move on to the bank of england and get the inflation story here. is the data in the u.s. confirming the fed now has space to move this year and if so, where are you on timing? >> i think there is a little bit

of wiggle room but i think it will come later in the fourth quarter. what we've got so far is one inflation print for may showing the price pressures are cooling but obviously as the fed speakers showed, they want to continue evidence. it takes one bad inflation print direct the confidence but several quarters of confidence is what they are looking for. the fed speaker mentioned that the fed takes a hollis take account the full range of data and what is that range they are looking at. one of them is growth. the fed projects growth will be 2.1% this year which is well above trend. inflation despite the cooling in may is still above 3%. that's not where the fed wanted to be. the third piece of information

and this is crucial, is the financial conditions index with stocks on a rampage in the fed will find it hard to hone in on late cuts yet. is this an economy that warrants it above trend growth with inflation above where it needs to be and you've got financial conditions the loosest in more than three years. the case for a rate cut is kinda of premature. i think the fourth quarter maybe when the conditions are right for a cut. tom: making the case for patients with this federal reserve and may be looking at the fourth quarter when the first cut can come through. does the bank of england need to be patient. inflation is on the headline level back to 2%. >> my fear is that the premature calling of the rate cuts, one print showed 2% inflation. if they did that, that may be a policy mistake.

if you look at core inflation, it's halfway between three and 4%. services inflation is closer to 6%. if you look at services inflation alone and compare that with the benchmark boe, you got a negative real policy rate. it would be premature for the boe to cut rates and if they did that, they may perpetuate a cycle where inflation stays elevated for longer. the boe's own projections show that inflation, you have to see an uptick in inflation be on the second quarter. so far so good. we need to see the progress continue. tom: do you have a view that if they do less at the bank of england as to whether they have to come through with more cuts next year, where do you see rates ending next year? do you have a projection pushing out to next year for the boe? >> by the end of 2025, i'm looking at a rate of four-4.05.

if you take into account their own projections come i think inflation hesitate -- has to stay elevated for longer. if services inflation is on the boil, it's hard to argue that we will get sustainable 2% inflation on the headline gauge. i think it's more conservative so i think about for-four .25%, four rate cuts by the end of next year looks possible to me. tom: thank you for the analysis on the fed but also the boe and the reaction to the cpi inflation print coming through. back to 2% in the u.k. and services remains sticky. let's get more analysis on this with france. the news has come through as expected that the european

commission has reprimanded france and other countries within the euro zone over there deficits not meeting targets set by the eu. there are challenges in terms of fiscal constraints of france right now. thanks for joining us today, let's start with the question of france. where in terms of the credit risk are you seeing the most challenge right now within the french credit space? >> thanks for having me. in terms of the credit market exposure, france is -- the french issuers are one of the largest contributors to the overall credit market in europe. to put some numbers around it, roughly 20% of the overall ig index is contributed to by the french issuers. there is a significant skewed toward banks and financials where the competition -- where

is the largest coming from those issuers. for the nonfinancial space, is closer to 16% so more manageable. the key focus within the credit markets has been around exposure that's coming through from the financials on the bank credit side and that's also the part where investors find large have had a consensus thus far. that's been the key focus on the credit markets perspective that price action has been fairly orderly. it's also last friday and there was a bit more of asymmetric price action. the markets are in a wait and watch mode even on the credit side. tom: so the markets remain largely overweight in terms of financials credit in france. what do you think derails that overweight view? what would happen politically for that to adjust to the next level? >> i'm pretty sure there is clearly more debate happening on

the investor side and also on the street side with respect to whether that is still justified or not. some of the factors we are watching out for -- how much of this remains a french centric story and how quickly or if it does escalate to more of the european union story. there is no signal that is happening yet so that's one aspect to watch out for. the other piece of it is the gap between what the politician talk is versus what the government policy is. that will be a key determinant of how much of the rhetoric we are seeing going into the elections actually translates into a concern for the market and that's the part where investors are probably holding off and there is more hedging that's happened over there in the past week or so. the other catalyst which would force a more significant re-thank of this overall positioning with respect to financials will probably be the

two points i mentioned earlier, escalation from the french to something that has a more you -- european union flavor. the second piece of it is between actual talk versus reality on policy action. tom: so you flagged two key points whether we get a prime minister who looks like liz truss and what the risks are there and the translation of that political rhetoric into reality. when it comes to spreads, the spreads suggest there is a relatively benign picture now. what do you see in terms of the adjustment on spreads and credit? >> if you look at the price action, it's been fairly intuitive and orderly in the sense that you're looking at the overall index on the european side being 10-12 basis points wider over the last week with financials underperforming and the french names within the

financial index underperforming. you are looking at around 15 paces points on the bank credit side and french banks specifically looking around 25 basis points wider in terms of the week on week moves. what's been counterintuitive is the under performance of the investment grade because when you think about it, systemic risk being a concern, you would expect that the bank complex would be the driver of this widening. in theory, it's translated to a more meaningful underperformance of investment grade versus high yield. high-yield ends up being idiosyncratic while the investment grade market is more of a macro story. it's almost as if the one signal which is counterintuitive is we are looking at the lower all the credits underperforming. tom: across european investment grades, where is the sweet spot? where do you want to sit on that curve bit? >> the curve has been more

complicated because of the spread view which has been a bit of a conflict or much of this year. we think we are at the beginning of having more rates duration. on the spread side, we been advocating at the index level, the sweet spot with respect to credit with spread duration. what we also bring out in the recent notes is that there is a fair degree of dispersion at the single level. the index curve shape looks flat in terms of yields and spreads but once you look at the single curves, there are opportunities to take on more spread duration in specific names. it's far more appealing further out on the spread curve. tom: that speaks to the need to

look at the single names rather than just the index in terms of credit. is there a particular sector that stands out to you? is there a sector within european credit that's rewarding you right now for the risks? >> it's still early days. financials were the pocket we were advocating to investors and preaching to the converted. it's been the sweet spot of the sector level but that's what's been shaken a little bit over the past week or so. to the extent you're getting more meaningful repricing, that the financial complex outside france, i would say that's a pocket we would be comfortable reinforce sizing our preference with that sector. we've been a little more vocal in terms of espousing cyclical sectors within the european complex. not banking on the domestic outlook to be more rosy but in terms of the more exposed

sectors to benefit through the course of the year. that feels like it's still out of consensus in terms of that sector preference. it's more defensive and leaning toward it getting shaken by what we are seeing coming out of france. right now, it's difficult to have a high conviction on individual sectors. i think you would want to look for opportunities to the extent there is a broader repricing coming out of any risk events and higher-quality non-french names are reacting to it. tom: really smart takes there on the european credit markets and how it's adjusting to political risk. thank you very much indeed. we will get more from france facing a blowback from the eu for breaking the deficit and debt rules. we will see how that maps onto the ever evolving political landscape of france.

that is next, this is bloomberg. ♪

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with godaddy airo tom: welcome to bloomberg markets. asia got a lift from that story but european stocks are flat. s&p futures pointing to modest gains at one -- a 0.1%. the pound is in focus with the bank of england inflation that came in in terms of the headline at 2% for the first time in three years. the gilts are also on the tenure

at 4.08. france and italy were both reprimanded by the eu for running big deficits in a confrontation that will test the resolve and code in theory of euros. it comes at a time when uncertainty in french politics is ahead of those parliamentary elections. what do we know at this stage? >> it's not exactly a surprise because we knew that the french deficit at 5% of gdp last year was above the 3% eu target and debt is at 110% also. this is the worst timing for emmanuel macron for 10 days

before these snap elections. clearly maria le pen and the opposition will seize this opportunity to attack emmanuel macron and his government again and how they've managed french finances over the past seven years. last month when france was downgraded by the s&p 500, maria le pen quickly said emmanuel has ruined france. we will see what the reaction is today. her ally who will become prime minister if that party gets a majority in these snap elections is trying to reassure the markets at the moment. he said last night that the first thing he will do if he comes to power is an audit of french public finances. clearly, very bad timing for emmanuel macron and bed timing

with -- and bad timing with these snap elections and the national electorate will clearly seize the opportunity. tom: bardella who would be the prime minister is also been saying he needs to see a majority, strong majority for le pen's party if he takes that post of prime minister and he wouldn't take it if he didn't. why is he putting that out there at this point? >> it's clearly a strategy in order to get those swing voters who are hesitating to put their vote to vote for him in the first round on june 30. at the moment, we are seeing that they would come first with the 33% of the vote but they would be shy of a majority. in fact, there will be another

very powerful international assembly if we take those polls which would be the union of the left, the so-called new popular front, who would get about 26% in the first round and would become the second bloc in parliament even though the alliance of the left at the moment is very fragile and could implode in between the two rounds or even before the first round. this is a strategy trying to reassure the markets and show that maria le pen could become the next maloney. that could be reasonable. tom: scary at first but ultimately reasonable, there is the maloney-liz truss comparison. how are you watching the politics and how the campaign goes in france? >> clearly, the french government is still focusing on the national valley or the new

popular front programs adding extra spending on the public finances. maria le pen still has not detailed the program that they will put in place if they get the majority. bloomberg economics is writing a piece about how much it would represent. it would be a net deficit of about 8 billion euros so not that much if you compare the 2022 presidential platform of maria le pen. at the time, it was estimated it would cost 100 billion euros. a union of the left victory would be more costly for france and cost about 78 billion euros. we will have to see how this evolves but clearly, emmanuel macron's defense is on the economic front. tom: an update there in terms of

the politics, thank you very much. russian president vladimir putin arrived for his first visit to north korea in 24 years, meeting with leader kim jong-un. the two leaders signed a treaty to elevate their relationship to an alliance. we have the details. how significant is this in terms of the deepening of this partnership? >> this is a long relationship. russia and north korea have worked together for many years. it's in conjunction with china. they been key supporters of north korea against the west and that's important for north korea particular because of its economy because it made sources of hard cash and a needs allies in its corner. that's a long-running relationship of what we are seeing is the mutual nature for russia as well. that shows why vladimir pugin thought it would be important to visit north korea for the first time in many years. we are seeing the welcoming he's

gotten. kim jong-un went to the airport to meet him and hug him and got in a car together with him and we are seeing crowds cheering and flowers and balloons everywhere in north korea. if anything could show how important this relationship is, you are getting it visually. the significance is for russia in this minute because it needs, vladimir putin needs more weapons for his war against ukraine. he needs sources of weapons that operate with soviet your weapons and that's what he's getting from kim jong-un at the moment. tom: no doubt the u.s. and the allies will be watching the transfer if it happens of those munitions. there is evidence that happened after his last visit or his last meeting with kim and russia. thank you very much indeed. the imagery is quite something. it's the first time in 24 years.

still ahead, we will get the taken terms of how to position in these markets was -- with max kentn ande whyr multi-sfu and how to position coming up in the next few minutes. this is bloomberg. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund

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tom: welcome back to bloomberg markets. european stocks going down 0.1%. in the asian story, the asia-pacific with ended up with gains of a little over 1%. tech is in focus in the u.s. with nvidia the most valuable company. the u.s. is on holiday today. european stocks are down 0.1%. copper and iron or prices are picking up in the session. inflation came down to 2% with services remaining relatively sticky. the pound getting a bit of a boost as the markets start to fade.

the bank of england will make a decision on thursday. the guilt is feeling some selling pressure as well. let's get it take on all of this market action and bring in mark kettner -- max kettner. let's go to the french story. it's not surprising the eu has come through an rep. britt: to -- and reprimanded them over failing to meet the eu targets in terms of deficits and debt to gdp. when it comes to the selling of the french assets, does that signal a rational response from these markets or have things been over done? >> i think it's a bit overdone because part of it i think is also crowded positioning. the last two or three months, all the economist and strategist

were saying europe looks like it's in a good place and we are starting to see your perhaps picking up and you look at the new orders on the leading indicators or whatever, all the leading indicators are picking up so i think it was a bit of a credit space not only fundamentally that anything's changed, i don't think it has. tom: does that narrative hold up? >> i think it does, the leading indicators are polling higher. the last few weeks of not change the narrative. i would look at eurozone small caps, the ones that would be benefiting from better domestic recovery coming through. i would look at french but eurozone banks on aggregate. we are seeing the recovery coming through which is not spectacular but the expectations are super depressed. when we started the new year, we had u.s. and eurozone and u.k. growth expectations roughly at the same level in november of

last year. we were a touch 1%. look at germany and france, we have close to zero and now it's the upgrades starting and you're not just seeing optimism but realism coming through that things are not as catastrophic. they might not be as rosy in the u.s. but they are not as catastrophic area i think it's pretty good. tom: how do you square the call on small caps and banks? banks are challenged if you get to a rate cutting cycle but we are not there yet. they did cut once but we don't know when they will come through with another one and small caps are benefiting. how do you square those when it comes to your view on small caps and european banks? >> it's good for small caps because they really are not in a fitting at all from tightening financial conditions from lending standards.

when we look at the ecb lending survey, we've seen those lending standards tighten and that starting to reverse and with rate cuts coming through, that's good for the small caps. for banks, i think what will be crucial is how many rate cuts we get and where do we end up. it's not just the next one in september or december, it matters where we will be in two years time. will would be down at 1% again or will it be very gradual recalibration like with the fed? it's not like we will get the next cut -- the first cut in the u.s. in july or september, that doesn't matter not for the banks. what matters is if we end up at 2.75 or are we ending up at 4% may or 4.5 in two years time? that's pretty good for the banks because we start to see rate cuts coming through that would help volume and help growth and

it would help the weakest pockets of the economy recover. that's good for volume. it's helping margins because the yield curve has inverted. tom: that could hold up in that environment. we still have 4% in terms of rates and the ecb. if you can get rates hovering between two and 3%, these banks could still be printing money. the primary driver for risk asset valuations remain rate volatility. is it rates volatility or nvidia and ai? >> probably a bit of both. on the overall market, not just equities but also for credit and risk premium, its interest rate volatility. when we look at the level of yields for the level of rates, that's not really that crucial to me. when we look at real gdp in the u.s., we are tracking 3% in q2. we are talking 5.5 or 6% nominal

gdp growth which is fantastic. i think it's more crucial -- if you square that growth and save we have 4.5 percent treasury yield, who cares? that's really good growth but what matters is if we get from 4.25-4.50 quickly? that will push valuations again. we've seen that in april where we are having longer dated rates volatility which was picking up strongly. all of a sudden, credit spreads sold off and equities sold off and you had this reverse goldilocks. you can't hide anywhere other than cash. there is nowhere to hide. the crucial thing is not about where the level of yields is. the crucial thing is what kind of speed does it take or what kind of pace does it go higher? if we are going gradually 40

basis points higher over a few months, who cares? it's a reflection of better growth. if that happens in today's that's a problem. tom: if you see the volatility ebbing into the second half, what about corporate balance and the competing pressures in the relief coming through. from that growth picture you outlined in the u.s. which is benign and resilient growth, how is that offsetting the pressure for rates at 5.25%, higher for longer? >> in the u.s. one thing people still slightly misunderstand is how much less interest rate sensitive the economy is. when we look at the proportion of private household debt. look at that in 1990. it was 40% of the private household debt and now it's 10. look at mortgages, almost 90% of nord just -- of mortgages are 30

years. you say higher for longer and imagine if they still hike rates which looks incredibly unlikely but imagine that, so what? you got private households that are most -- much less interest rate sensitive. you've got the same thing incorporate balance sheets. the s&p 500 has almost 60% of the deadwood bonds and notes that expire after 2030. if i said we have 4.5% on the 10 year and now the next six months, there is this massive refinancing wave coming through, that's where the interest rate sensitive -- sensitivity would be coming for but that's not what we are seeing. almost six a percent is expiring after 2030 which is way out. tom: is that a mega caps story rather than small caps? >> 100%. it is really an s&p 500 story in a mega caps story and in terms of cash holdings. cash holdings are high on the

compared to a year earlier, while revenue from its market business will be flat. bloomberg's sonali basak caught up this week with cfo mark mason at the company's services investor day. take a listen. we want to be the preeminent bank for institutions with global needs as well as a leader in global wealth and a winner in the us market for our personal banking business. that's what we are today, right? and a lot of what we talked about today, again, was really highlighting the crown jewel of our firm, the gateway to the rest of our offering for large institutional clients. but also for middle market clients as well as for investors and asset managers in both that treasury and trade solutions business and our security services business. it's interesting because to your point, even though security services has been a crown jewel,

accounting for roughly half the profit recently of citigroup's own entire businesses, it's been hard to explain to investors exactly what it is, what it does. do you think citigroup's stock would be trading higher if people understood the business prospects for it? i think the services businesses, which are comprised of that treasury and trade solutions and the security services business contribute a significant amount of value to this franchise. and i hope that after today, investors will realize exactly how much value that is and how much upside there is to that franchise. and we start to see it in the stock price today. you are seeing it in the stock price. if you think about some of the things that have been holding citigroup behind, mike mayo of wells fargo, big proponent of citigroup stock. but even he has been kind of critical here of the wealth business, calling the returns pitifully low. so the question is, do you have a timeline for when investors can expect returns in that business, and how soon and how robust those returns can be? you know, one of the things we

talked about today is timeline. we talked about the medium term 2026. we talked about top line growth of 4 to 5%. and we talked about the services businesses being a significant contributor to that. both in the top line and our services business is a 20% return on tangible common equity. in the wealth space. we brought in new management there, and we're keenly focused on how we grow the top line and how we improve margins and how we improve returns there. that's going to involve everything from rightsizing the cost structure to increasing the banker productivity, to driving new net investment assets across that business. and we do believe that inside of this window, between now and 2026, you'll start to see that value play through our financials. okay. that was citigroup cfo mark mason with bloomberg's sonali basak. now ether within the crypto space climbing amid speculation that the sec probe on the

digital asset may may be easing. in a posting on x consensus, a developer of ethereum said, quote, the enforcement division of the sec has notified us that it is closing its investigation into ethereum 2.0. this comes amid a possible approval of an ether etf in the us. joining us now is bloomberg's emily nicole emily. walk us through what's been happening because ether is up in the session a little over 2%. the rest of the crypto space getting a bit of a lift as well. how consequential do you think this is? well, if it is the case that the sec is dropping that probe, then it would be pretty big news for ether. and so you'd expect the token to have a little bit of a boost. it did go up as much as 3.6% in the asia session overnight for us. you know, in the early mornings it's come a little bit off that. now. and we're not seeing everything else kind of bump up to the same extent. but, you know, good news for one is good news for all in some senses. ether has been a target of the sec for some time in terms of whether or not it is a security

or a commodity, whether or not the sec should be its regulator or it should be another one like the cftc in the us. and a decision on that front is going to be expected whenever the sec kind of makes a decision on if we should have ether etfs following the bitcoin etf launch in january. talk to us about the significance of that of that definition. then if they as they as they toy with that and wrestle with that definition for ether, if they come down on the line that this is a this is a security and it falls under the sec, what does that mean for that approval process? and what is going into that debate right now? so if they decide that the ether is a security, it will mean that quite a lot of the crypto industry activities likely will also come under sec purview. and that will mean a lot of regulation, a lot of compliance overhaul from a lot of the industry. we've already seen a lot of action from the sec, and when it's been suing companies like coinbase or kraken in saying this is because we believe these 19 tokens or so they've identified so far, we think they're unregistered securities. they haven't been as explicit as to whether ether itself is is a security or not.

they've said bitcoin. they're fairly certain as a commodity that paved the way for the etfs in january. but it will mean a very big overhaul if the sec did actually decide that ether was a security. okay, emily, nicole, thank you very much indeed. in terms of the consequences, the impact, of course, and the context around this purported news that the sec is easing up in terms of its scrutiny of ether and the blockchain. and, of course, listen out for any lines from the sec. if indeed they do confirm that coming up, golden goose delaying its listing. we discuss that ipo or the ipo. that wasn't what derailed, at least temporarily, that public listing. stay with us. this is bloomberg. i can't believe you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oh, come on, data driven insights. i'm a rock star. i'm a rock star. greatthank you! guys, can you keep it down. i'm working. you people are (guitar noises).

hand over the air guitar. i've got another one.

tom: welcome back to bloomberg markets. 11:47 a.m. in the u.k. and there

was a decent session in asia in the u.s. session posting records on the s&p 500. futures are pointing to gains of a little under 0.1% and the nasdaq is looking at 0.2% when the u.s. markets return to trade thursday and currently closed for the holiday. the fx focuses on the pound with the strength there on the back of inflation that came down to 2% but only services remains sticky. it's fading some of the expected cuts coming through from the bank of england. expecting to cuts by the end of this year. that decision will come through tomorrow from the bank of england. the u.k. yelled space is currently 4.07 with selling pressure coming through across the curve. the front and is saying more pressure than the 10 year. it's about a five basis point move higher.

let's get back to what's happening in terms of the corporate stories in focus today. in the land of the giants, nvidia is the new king. it fell almost -- it felt inevitable. they are -- they have become the world's most valuable company for now. the move reiterates the importance of the ai boom to many investors. it's valued a little at 3.3 trillion u.s. dollars with the stock up around 200% over the last 12 months. up 170% in the last year to date for nvidia. two golden goose which has postponed its ipo. the sneaker maker backed by private equity firm primaera and they are shelving the listing for now. let's delve into what's behind this. what led to this thinking?

>> it was definitely a surprise because we got price guidance yesterday morning and they said they would price it toward the bottom of the range. it is surprising to see them come out and cancel the ipo. they blame the political uncertainty in europe and the snap election in france but it's also to do with the selloff loosing and luxury stocks across europe and sentiment for the luxury sector has been dented for a while and there close competitor montclair has come off in the last couple of weeks. tom: it tells us a story about politics in france and the risks there but also the broader drag on the luxury space but it doesn't apply to all in the luxury business within that sector. his signals the challenges there. what is your take in terms of where that story starts to turn around? when will it be comfortable to come to the market for the first time? >> it will be quite difficult

for them to come back in the near term. they have set a price now so it's not like they can come back and get a higher valuation. the investors willing to participate know how much that they've set a price. not like they can come back in a higher level. they will be have to comfortable with his valuation and they will have decent post-ipo performance and that is the big question here. they could have gotten away with an ipo ahead of demand but what would it have looked like? tom: we've been waiting on the sidelines for the story when it turns around ipo's not just in europe but globally. does is suggest they are our headwinds before we get back to pre-covid levels of ipo's? >> absolutely, it seems we are

quite a ways away from that and shows how fragile the ipo market is. this year so far, the european ipo market has been pretty positive with a couple of large listings. these stocks performed really well so there was some exuberance that the european ipo market came back but it faded away just as quickly. tom: thank you very much. that's the golden goose delay for now on that ipo. turning to financials, ubs is a bunch of swiss -- as part of swiss banks postponing global capital rules for their trading business. this comes after the european union decided on a similar delay. for more on this, but ring in miriam. why the lobbying? there is a difference how regulators are approaching this, the eu versus switzerland so what's driving this? >> the driver behind the

lobbying is to make sure that switzerland and swiss banks are not put at a disadvantage with an early implementation of the new rules. also nominally, all of the regulators tend to synchronize around the implementation dates. it would be to ensure more of a level playing field with european banks. swiss tanks and in particular ubs is the largest in the only globally systemically relevant bank. it has the biggest international presence. they don't want to be put at a disadvantage and they want to catch up with european banks as well. tom: you can understand the rationale coming through from ubs. we continued to watch how the swiss government reacts to this and the regulators. in terms of these delays on the regulatory front, and the

capital rules, what are the risk around pushing this further into the home grass? >> there is no major risk per se, the rules will be implemented anyway, just a matter of time. these discussions around the new rules on basel three have been banks and regulators having these discussions since 2017. this is going to happen, it was just a matter of fine-tuning the implementation. in particular for ubs, this delay or deferral of the implementation would benefit the bank. they have the acquisition of credit suisse, a lot of the assets are booked under their legacy unit that the bank is now slowly winding down. the illegal merger of the parent company took place a few days ago.

they can no push forward with the wind down of these assets. the longer time they get, the better it is for them because they would've gotten rid of these assets in the meantime and it would not affect them as much. tom: before we let you go of how that integration is progressing, what are they watching for and how much progress is being made on that front? >> just today, the regulators cleared the merger. there is no competition of any sort of hurdles as being attached to it. that's one milestone that was ticked. one of the key things is just to wind down of the non-core unit and how they will also grow the business in the u.s. we've seen a team reshuffle at

top levels of will be interesting to see how they get on with the u.s. business and how they integrate credit suisse investment bank to benefit and fully profit the ubs wealth management business. that's something to watch. tom: fantastic stuff, thank you so much. coming up, we will speak to aviva investors in terms of how the politics continues to inform the economics and the eurozone. european stocks are currently flat and u.s. stocks part two a modest gain. stay with us, this is bloomberg. ♪

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♪ ♪ tom: good morning from our european headquarters in london, i'm tom mackenzie. u.k. inflation is falling to the boe target for the first time in nearly three years. the eu slams france and italy and five other countries for running big deficits. the first electric ferrari car will cost more than $500,000 according to a reuters report.

markets in the u.s. are close for a holiday and they will be back thursday. let's check in on the markets. it was a deeper session in asia. the benchmark in asia posted gains of a little over 1%. we've dropped the ball in the euros ain't with the u.k. holding up with modest gains but across the stoxx 600, losses of 0.1%. basic resources as a sector is lifting the ftse 100. that's up 0.1% with koppen -- with copper and iron or up. the s&p 500 in the u.s. is up 15% year to date. strength coming through from the pound and the services part of the inflation story is holding up higher than many had expected and suggesting maybe the boe will not quit -- cut quite as

much is expected. $1.27 on pound versus dollar and a little bit of selling on gilts with the two years selling off more than the 10 year. u.k. inflation falling back to the 2% target for the first time in a most three years in the u.k. is ahead of the central banks meeting tomorrow. the bank of england will make that decision tomorrow. the consensus view is the boe will not go tomorrow and part of that will be down to politics but you argue a lot of that is down to the economics data in the u.k.. what is your take on how this informs the central bank of britain in terms of the inflation direction? 2% is a very market number. >> that's a good number from the bank of england perspective but if you look at this morning, they been ticking higher

particular at the front and which is more sensitive to rate expectations. it's been a sharp move higher so the markets are thinking that they're reading a pretty negative print even though that is ironic. the headline inflation has conversed to 2% but the markets are looking through that number and looking at the services inflation and core inflation rate the picture you get by looking at those numbers is one of less optimism and more creative optimism. for the bank of england, it means this will take longer than they expected to take italy the hawks on the council will look at service inflation numbers and they will say this will take even longer than they expected. that means the bank of england would probably be able to cut rates in months maybe once this year but to is possible if inflationary prints go their way. from the looks of it, this was

supposed to be one of the better months. the spring was supposed to be the season when inflation converged to the target and we don't mean just headline inflation, also services and core inflation which are not behaving. that puts the boe in a kind of a dilemma as to when they should go with rate cuts. tom: what are the constraints around the services inflation? what will be needed to get that back on trajectory that will allow the boe to go more aggressively on cuts? the economic data across the u.k.'s looking constrained. >> services is a tricky number to focus on. it's very hard to get that done because it reflects the second round of inflation expectations keeping to the economy priced in. they are deeply embedded in the economy and wage formation and

price setting of the entrepreneurial level at supermarkets and everywhere else and wage expectations have gone on court and those are hard once the inflation genie has been uncorked, it's difficult to put it back into the bottle. that is what we are seeing. it will take a lot of patience. if you look at money says broad money supply growth, it's gotten tired in the last couple of months was argues for inflation staying higher for longer. i think services inflation has to be resilient and not go down neatly without a battle. i think the bank of england has got to be in this mode where they have to fight inflation for longer than they would like. tom: thank you on the embedded nature of the services inflation in the u.k. as the headline comes in at 2% on cpi. fantastic to get your analysis. let's get more takes on this

this is from aviva investors. let's start in the u.k. because you have a different view on the boe or do you? has the inflation story adjusted your view that the boe twice this year? >> no, although it has raise some additional caution. we have had two back-to-back to back bad services inflation prints. let's not forget the boe had services inflation at 5.3 and it came out at 5.7. that's a considerable miss. i think it raises some question about domestic inflation. also the path toward convergence. it's good news that headline inflation is at 2% and we've seen further deceleration on core inflation but services inflation remains a concern and

we know the boe has definitely referenced this multiple times. my main point about the u.k. is that so far, and the post-pandemic years, what i see missing in the u.k. is consumption -- household consumption growth. it's basically flatlined since the end of 2019. i wonder that even that slow approach to target can be sustained and accelerate on the back of a lackluster consumption growth. the other thing which worries me a bit more broadly is the fact that effective mortgage rates on the outstanding scope of mortgages which is roughly 90% of all mortgages, they keep on rising. in the euro zone, they peaked in

november of last year but in the u.k., they are still rising. as more mortgages reset, this means more pain. tom: there is a clear link between household indebtedness and the services and the paying off of that mortgage debt and the consumption story you are talking about. >> absolutely. tom: then you've got services sticking is so they are two stories there. there are two competing narratives. within that caveat and that nuance, you still expect the boe maybe to go more aggressively next year? you start to think the narrative around the consumer and the indebtedness of households come to the for next year? >> i think so. i expect they will go two times this year but more broadly, i think they will deliver more easing the markets expect in 2025. tom: what does that mean for u.k. assets and the pound? >> that's a good question. a lot of what happens on cable

more specifically will depend on the dollar narrative. the question is whether it outperforms or underperforms fears. there is a lot of moving parts. over the course of the next year or so, i would expect there to be a slight underperformance because i'm not bullish on the dollar. i think cable could appreciate from here. tom: given the politics of the euro zone, this is just on politics and we will happens on july 5 we get the results from the u.k. election but polls are right, we are potentially looking at a fairly stable political environment for the u.k. which is in contrast to what we are seeing in france and germany. does the u.k. benefit from a political stability dividend for the first time in a long time? >> i think that's right. the existence of a stable and strong government will instill

some sense of stability and certainty or reduce uncertainty, if you like. i don't expect any big changes on the fiscal front. at least over the next year or so but nonetheless, in case we get a stable and small government, i think at the margin, these will help sentiment toward the u.k.. tom: in france, you see a hung parliament as the most likely scenario so talk is true that area >> just to clarify come in terms of bass cases, we don't really have more information than other people do which is interpreting the opinion polls. likely with a relative maturity for the opposition party, this is what a hung parliament means. you don't have an absolute majority government with

whatever the plans are on whatever is included in the manifesto. potentially, we will have back between the relative majority in the minor majority government and the president. in france, the role of the president is very important. tom: does this derail the economic growth story? they are continuing to look at the data and some think things are improving. >> on a fundamental basis, the euro going through a mini pause now with disposable incomes having risen considerably. all surveys we are looking at have turned higher away from low levels. it is quite unfortunate we have that pricing of a risk premium now that could potentially derail sentiment. base case scenario is that this year potentially we are looking at 0.1%-1% growth for the euro

zone. that means every rate is higher than consensus expectations. tom: it shows a mini boom? >> it depends where you are coming from. if you are coming from complete stagnation for three or four quarters, if there wasn't the political uncertainty, i would consider the risk to the upside. tom: 0.1% growth in the u.s. will look ready purse -- pretty pathetic. why is the labor market central for this fed right now? >> we have to remember that the fed has a dual mandate. this looking both at inflation and the labor market. right now inflation takes a lot of precedent and takes a lot of priority and what they think. unemployment has risen and the

reason -- and the bias in general with central banks to ease policies because they believe monetary policy is quite restrictive. i think they would grasp at any opportunity to do so as long as inflation seems to be cooperating and the labor market shows further signs of loosening. core pce is projected to 2.8%. if we are going there,, we are going there, unemployment is rising 4.2% or higher between the third and fourth quarter, i think that fed would opt to cut interest rates. tom: thank you very much indeed. we have traveled the globe with you this morning. implications here in the u.k. for the central bank policy for the boe up tomorrow with inflation data and ending on the view that maybe things could

align for a cut for the bed as late as this year. the other part of that component, part of our exclusive interview with jim ratcliffe, the second richest person and you want to stay tuned for that interview. this is bloomberg. ♪

tom: welcome back to bloomberg markets, i'm tom mackenzie in london. the prime minister of england is on track to lose 2/3 of the seats they want the last general election according to the latest analysis. we are just two weeks away from britain heading to the polls. billionaire jim ratcliffe says the u.k. is ready for a change. take a listen. >> you got immigration which is

one issue and the other issue is the economic issue. if you look at the economic issue for the u.k., it's quite simple. the gdp is 2 trillion pounds on the government takes half of it, at least half of it. the government spend as 2 trillion pounds. in my view, if you look at any of us, we spend 60 or $70 billion per year. the government spends $1 trillion which is more. you need to spend money well because you are not spending your own money, you are spending the population of the u.k.'s money. there are good reasons why people pay taxes. you got health care coming got police come yougov roads, all those things. i don't think the government manages those things very well and i don't think it's got the

right quality people running it. they are spending one trillion pounds. the whole service is a mess. we don't have security anymore, education is a bit of a mess. we can't run sewage systems in the u.k.. we have sewage systems running in the victorian era. we allow -- we allow the water utilities to be sold off. they were mainly bought by french companies which pay 50 billion pounds in dividends but don't reinvest in the equipment to ensure we've got top class equipment to do the job. all of a sudden, it's a crisis. if you want to buy a water utility, they set the minimum price. they would lock them up like they do in america if you misbehave. you got the whole issue of the economy and the you got immigration and they haven't

dealt with immigration. they've sort of danced around, i think we have 500,000 people coming into the u.k. last year. that's two times the self -- the size of southampton. two southampton's in a year and you think about the infrastructure. it's one of the basic problems because we've allowed so many people into the country and that can't go on forever. all the planet speaks english now and there will be 10 billion people and there will always be people coming to the u.k. so we need to deal with it. we probably have got an infrastructure for 55 million people and we've got 68 million people so the roads don't work on the hospitals don't work area somebody has to say no at the end of the day. we can't take anymore people. how many schools you have to build, how many roads do you have to build and what about

sewage systems. we are not doing that. >> how do you think we will deal with that? do you think we will have a better prime minister? >> i think he's a sensible man. he's an intelligent man so i don't know, i think you probably have to do some popular things to be able to get those types of issues dealt with. they have to do some things that are unpopular but i'm happy with the political environment in a way. doing difficult things and the degree of unpopularity, this might make you more popular. someone will say you're making difficult decisions. i can't predict how that will come out.

tom: jim ratcliffe speaking to francine lacqua. let's switch focus to north korea where leader kim jong-un vowed to unconditionally support russia in the war in ukraine. he and president putin signed a deal to come to the others eight if attacked, treaty that kim called the most powerful treaty in the history of north korea -russia relations. let's talk about the details on the context about what that could mean for the conflict in ukraine. what is your take on this -- on these close ties? how significant are they? the pomposity and imagery was there but is this material >> >> for vladimir putin? it's a big deal and it's a huge deal for north korea which has been isolated. for a long time, they had a

relationship with russia and china more than the u.s.. they are under pretty tight control on the russians had signed off on all kinds of sanctions at the u.n. that is now all in question. from the north koreans come in they now have access to all kinds of things they haven't had before, technologically and so on, russia is a developed nation. it's massive for north korea and you can see that in the way vladimir putin was received. for russia it's a big deal. we are reminding ourselves that there is technology but they are also about mass and the way x soviet forces both fight is via artillery, far more than we do as americans. what we do is that the north koreans have vast stocks of

compatible artillery shells, rocket shells, multiple rocket launchers coming munitions the russians can use. equally important is that they share a border. all of that can just be shipped over land and there is nothing the u.s. or anybody else can do to intervene. tom: the allies are probably looking at this with significant anxiety. when it comes of the time frame, u.s. and european equipment is being delivered to the ukrainians as we speak. do the russians get that additional munition ability coming through before that equipment is on the ground? how does it play out in the rush for munitions for both sides? >> there is a race on and i don't know the details of everything that will be delivered and what the time frames would be on that.

in terms of artillery stocks and shells and these kinds of weapons, they can be delivered very quickly and they have been. we are talking millions of shells. the north koreans can deliver this stuff faster than the europeans and americans can make it. we get a much murkier area were we short -- where we talk about short range ballistic meet dismissals. we don't know for sure but we think more of those will be on the way and that would be important to increase attacks but i don't know what the timeframe on that would be. tom: some have suggested this is a sign that vladimir putin is increasingly isolated and the fact that they have to go to the north koreans for this kind of support, what do you read into that analysis? is it a week and cut off putin? >> i think that's slightly delusional.

what we are seeing is vladimir putin finding a very useful ally. it is an ally that we have very little time for and it's a strange state and rather poor but it's highly militarized and it is useful. i think you need to not think about that this is a sign of weakness. it is in the sense that he's cut of his relations with his biggest market in europe and it's an economic disaster in the medium and long term and terrible for russia but in the short term, these are very important security moves. tom: does north korea become more of a risk to south korea? you said russia was the signatory to the u.s. -- to the yuan sanctions. what are the consequences of south korea and japan? >> >> i think it's very significant and and maybe speculation that the chinese are nervous about this.

they don't really want anything to persuade the north koreans and the japanese that it's time for them to acquire nuclear weapons. it's complicated but i would say it's significant there as well. tom: thank you for taking us through the complexities of this relationship. coming up, france faces blowback from the eu and we will get the latest on france and the implications on the fiscal constraints on the politics coming up. this is bloomberg. ♪

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>> welcome back to bloomberg markets. of markets closed for a public holiday. a bit of a record high coming through once again this week. nasdaq futures in more positive territory. now currently the most valuable company in the world. european stocks a little lackluster. a result of the trade. in the focus and in the linens for us and sense of the u.k. story, it is inflation data. the services remaining sticky.

127 on the pound, adjusting around potential bank of england cuts. again, european futures are currently flat. delivering a warning to france over raking deficit and debt rules that could lead to fines. elections less than two weeks ago. for more, let's bring carolyn in . not a big surprise, but it adds another fly in the ointment for president macron. >> not a surprise, but it will be an opportunity for the opposition for them to criticize once again the pub -- handling of public finances. the sanctions will take time.

there is a long process. they have until september 20. they are planning to reduce the deficit after they have pledged to cut spending 20 billion euros , even before president macron called the snap elections. september will be when the next government will have to present the next budget. the leader of the national rally will become prime minister, if th get a majority on july 7. we will obviously face a lot of scrutiny on what kind of budget he could present. we have seen the markets over the past 10 days and even though he has been trying to reassure, they are very costly. >> he has been trying to

reassure the markets and on the geopolitical front, in terms of the rally's position. he has come out and said that their party would continue to support arming ukraine. >> that is right. in the past hour, he was talking to french media at the defense forum and he said that he his redline would be to send french trip -- french troops to ukraine. he does not want to send any french troops to ukraine. the president said a few months ago that the possibility as a last resort, if france faces some risk from this conflict in ukraine. the position of the national rally regarding the war in

ukraine is a difficult one. marine le pen, when she man took a loan from a russian bank that she says she has since paid back and has obviously distanced herself sense, but she will face some questions on this, on the financing of the party. possibly tomorrow, there will be a hearing of all the leaders of the parties running. it will be interesting to hear about the different proposals when it comes to budget and defense spending, and how they are planning to finance all of this. >> how the politics of france continued to reshape. let's stay on this topic and bring in lizzie at aberdeen.

there is a debate. this is a few weeks away, but if we do get a national rally, whether that prime minister evolves into a baloney like image or character in terms of the relationship with the eu and aspects of ukraine. it remains a fear factor for those in brussels and the market. how do you think the story could evolve? >> they do have credibility with the market reaction. it is pointing towards skepticism about ability to moderate in particular because we have the presidential election in two years time.

i think some moderation is likely. we do not necessarily think it will be able to move credibly. there is still pressure on the right from other parties as well. they would be living -- willing to take that ground. >> that is fascinating. there is only fire that they can moderate in terms of that base. in terms of delivering, we got a reminder with the eu slap down of france about missing those target. what a prime minister even be able to deliver? >> it is unlikely that they will be able to deliver us incredible, meaningful

consolidation in france. we are looking at the parliament situation at the head of the next government. you're probably looking at a parliament where the largest party actually struggles to bring consolidation. we continue to see parliament react to the consolidation plans and the eu's expectations. we are not necessarily expecting a clear outlook to emerge from these elections and certainly not one that will result in meaningful consolidation. >> are they underestimating gains? somewhat described it as left-wing.

are they overlooking that risk? >> they have announced it. they are still trailing the party. i do not think it is necessarily a misplaced expectation, that they will not be the largest party. if we continue to see them making gains, it is something that they should continue to monitor. it is worth noting that the system does mean that they do not necessarily translate well. in is fairly high. higher than what we saw where we had a much clearer idea. >> how are you adjusting the

outlook? >> if we get it, very little legislation will get through. you're not going to see these groups likely to enact their policy platforms, unless we can see a majority government formed. it is more medium-term. it is set up in the budget plan. the real issue has damaged potential growth. >> we have been talking the last

couple hours about the relative strength in the economic data coming through for the euro. it is holding pretty firmly. it is putting too much focus on the moves to the far right. west mayor going to see a relative policy continuity. there are some interesting levels across the main european economies. germany is another interesting

case where they make significant gains. it is performed quite poorly in the elections as well. we are seeing politics shifting to the right. from a european perspective, we are not going to see that necessarily reflected in the outlook going forward. >> before we let you go, you and the team at aberdeen. on some of this political risk. we have seen the blowout. but beyond that, it seems there is an interpretation that the market is a little more nuance on the story.

what is your assessment? >> it is probably a fair situation. i think the market is responding to this uncertainty as much as anything else. do we think there is a significant crisis brewing? as we said, the issue is that it moves to a position where it is the status quo. we think it is fair that we have seen some market movements in response to this uncertainty that it throws up. there is no major crisis we are expecting, particularly if there is a hung parliament, as we expect.

>> we are looking at how they are adjusting and what it could mean for the spending ability. coming up, we will bring you our interview. that is next as we look at the auto sector. this is bloomberg. ♪

at morgan stanley, old school hard work meets bold new thinking. to help you see untapped possibilities and relentlessly work with you to make them real. >> welcome back to bloomberg markets. a slowdown in demand and new tariffs on imports. announcing a new electric scv that is the least expensive scv made in europe for now. we sat down with -- he sat down

with francine lacqua and shared what he sees. >> it is progressing, year-over-year. we are very confident that they will be favorable in the months to come. it is a question of what they need. we need to be able to afford electric cars. >> talk to me about how the slowdown has been more pronounced for eeev cars. how do you see demand for tv's -- the ev market in general?

>> we shall not forget that. we have to share. in 2025, we could double the share of electric cars. at the end of the day, we have to sell electric cars profitably. that is what customers want. when we revealed it a few months ago, today, electric -- we are coming with very attractive affairs. >> are you worried about pricing

? are you sensitive to that? >> you see pricing for electric cars and it is a big challenge. that is what we have today. we are introducing that. it is a question of price. but it is also a question of cost. people probably save up to 1000 euro per year. the selling price may be higher. but in terms of usage costs, the customers will enjoy a much more favorable use cost.

that is important to take into account. >> it can be quite tricky. i you expecting not to give a big boost to the ev market? >> the chinese companies are coming. they are coming with they competitive offers. we need to be able to produce cars at a competitive cost. we think we have very competitive base. to participate in the growth of the market in europe. >> derek speaking to francine

lacqua earlier. moving from affordable ev's to supercars. the electric ferrari has a price tag. it will cost at least half a million euros and that is without any of the special features. confident that the car will sell just as well as its combustion engine models. joining us now is oliver. talk to us about the significance of this pricing point and more broadly in terms of the ev market. >> it is a starting price for this car. the first ev that they had put out.

it compares with the average price. close to 150,000 euros is quite expensive. it is not a super liquid market. they are developing a secondary model. it is still in the early stages of planning. of course, the inevitable market with a lot of unknowns. >> you have done a lot of reporting between the eu and china. how would that potentially impact ferrari? >> what i think is really interesting is all the unknowns

about where the unknowns about whether trade barriers will be. they are looking at the manufacturing and where they will produce these cars. it does not make sense to build those cars all over the place. it makes sense to do it all over the place. it will have a huge impact. there will be a factory -- all the ones that go around the world, those are built in stuttgart. >> thank you very much. coming through for ferrari without the accessories. let's focus on wall street where sonali basak spoke with mark mason. take a listen.

>> the preeminent bank for institutions with global leads. a winner in the u.s. market for the personal banking business. a lot of what we talked about today was really highlighting the crown jewel of our firm, the gateway to the rest of our offering but also for middle-market clients in both the treasury and trade solutions business and security services business. >> even though security services has been a crown jewel, accounting for half the profit, it has been hard to explain to investors exactly what it is and what it does. do you think they would be trading higher if they understood the aspects?

>> the security services business contributes a tremendous amount of value to the franchise. i think they will realize how much upside there is to the franchise. >> today you are seeing it in the stock price. they have been critical of the wealth business calling the returns pitifully low. do you know how robust those returns can be? >> we talked about the medium-term. we talked about 4% to 5% and we talked about the services business being a significant contributor to that.

in the wealth space, we brought in new management and we are focused on how we improve margins and return. increasing the productivity to driving investment assets for that business. we believe that between now and 2026, people see that play in the financial. >> staying on wall street, j.p. morgan joining goldman sachs. goldman sachs went ahead of it. joining goldman. now the ratio is moving from two to one. a potential bonus that j.p.

morgan's staff could be taking home later this year. the benchmark is currently flat. a little bit more interest when you left the hood. a little more on what is happening on the commodity front. the french taking a knockdown at six points. top of the list is the workshop after an upgrade. some of the chipmakers are losing some of the peace. u.s. futures .2 gains. ben is coming up next. stay with us. this is bloomberg. ♪

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>> from our european headquarters in london. the markets are closed, however there are things happening in the rest of the world that are worth paying attention to. we will figure out how politics is impacting what we are seeing on the screens and also, what is

going on with nvidia and the impact it is having right now? this is what the story looks like in europe, stocks going nowhere in a hurry. there is no volume. top of the screen there. fairly flat. yesterday, the story was driven by nvidia. does that carry on tomorrow? surprisingly catch a little bit of a bid today. coming back to the bank of england's target. the british election is getting in the way. and then you have friends. we will talk a lot about france over the next hour. let me assure you of that. we will talk more about them in just a moment.

a couple of things really dominating right now and one of which is politics in europe. we are talking about what is happening with france and we should not ignore what is happening in the u.k. a build up to the november election over in the u.s. it is one subject that is nice to have because we do not have to spend so much time talking about the fed. nvidia, that stock keeps doing what it is doing, climbing higher and higher and becoming the largest market cap in the world. i want to talk a little bit about politics. we are going to start with john. let's start with you. has the tax finally been given to our cousins across the english channel in france? quest that is fairly fair to

say. one thing i will say, to be fair, i think that u.k. was already getting to the point where markets were given more leeway over the last three to four months. one of the better performers in global markets. but i think this will be the coup de grace. only political turmoil is part of it. >> we will take boring, but not boring over in france. is the political -- if the political story continues to create turbulence do we see a long period of underperformance? question will see a slightly different set up.

the difference when we came into those announcements surprised. investors were heavily positioned on france and europe, but france was the big overweight everywhere. >> we suffered because of that. people did not understand the politics and stability. >> obviously, people are starting to reduce their exposure, but they still need to keep their exposure, generally speaking. we have seen the switch. there is a switch from what is risky and what is less risky. at the moment, the u.k. looks pretty dull but also, if you take the ftse 100, lots of

exposure. it is kind of a bit defensive compared to the rest. it is being operated at the moment. >> what is the contrarian trade? >> we are starting to see that. the dislocation in europe versus the u.s. or france versus the rest of europe is kind of exceptional. we are having a very unusual data. hedge funds have started to buy into french equities this week. j.p. morgan was saying that they were starting to buy that. they are still hedging their exposure but they are stepping in. hedge funds were actually not really well exposed to france

and european equities. it is kind of like the entry point moments. >> in terms of what happens with the u.k. next, inflation is coming down, the bank of england will probably cut rates a couple of times. does the trade -- extra fun flows from the continent as well. >> retail outflows, three consecutive years, just relentless outflows. is there anyone left from domestic capital base that is not sold? that is already happening. but we are coming from a very low base.

relatively cheap. we have not yet seen the outflows. i do not know if you pay much attention but that is a really good one. you can see that the u.k. is coming off of the bottom. that is a good sign. they are saying, -- might be thinking about getting out again, but yeah. >> let's do some contrast. is that the ultimate portfolio now? >> i think you have deep value. while stanley is still relatively inexpensive. obviously, you go post-brexit from that. relatively cheap market.

but what happens if all economic reality has been suspended forever and it keeps going on for good? that is a good trade. >> he was saying, you look at nvidia and think about what else is going on. we were told that the real estate trade was going to come back and that is not happening. it is not happening because of what is happening in france and elsewhere. look at what is happening with small caps. look at the s&p and most of it is down but nvidia is right at the top of that. you buy because you love the ai trade or you hate everything else. is that the narrative around

nvidia? which do you think is the dominant force? >> there is a bit of that. this is the short play. there is not another pure play. we are talking about the market share. he won exposure? this is the only way. many people are talking about enablers that will benefit from the growth in the ai market, but it will take a bit of time. some people do not want to waste time. since the split, there is a huge appetite from the retail market as well. definitely. i was looking at the options volumes just this morning. actually, the volume has been going down compared to the past

quarter. there is less of a push from the gamma trade that has powered the stock earlier this year. the latest push is looking like retail. >> you think that the retail chain has legs? usually get the effects and then it fades. quest at the moment, it looks strong and you are saying, we were discussing it earlier, the exposure. if you want exposure to peer ai play, this is what is out. >> thank you very much. setting us up beautifully for what is going on in the markets. carrying on a conversation. let's start with nvidia. what is the logic? do you think the logic persists?

some of it could be hedging and some of it could be the pure story. what do you think the logic is right now? >> it has moved decisively. i have never seen a company of this size grow topline revenues. that sort of run rate more than justifies this 40 times price earnings ratio that you are having. i do not find it difficult at all to justify nvidia today. that does not mean that you should be chasing it or looking to diversify elsewhere, but this is a fundamentally driven rally. >> when country builds the world's largest building, it usually preludes disaster.

can i make that case for nvidia, the world's tallest company? >> long-term, you're absolutely right. there have only been 12 largest market cap stocks in the last century, so this is verified air. there are some names in there that you would like to forget if you held them in your portfolio all the way through. phillip morris, a lot of those have seen better days, so yes, time is not on nvidia's side. as an investor, the key question is, is this happening in five weeks or five months? >> what happens on the day that expectations are so high and nvidia is cracking on and doing great business, but it does not meet growth margin expectations?

we just talked about what happens with the option story. there is, despite -- the rv enforcing trade where it keeps going up. the stock keeps going higher and higher. it is huge. as we get more concentrated, what happens on the day when the margin miss through. does it all go to reverse? >> it will be horrible. we have had consecutive beaten raises. the bigger nvidia is and the more passive flows, the more painful that will be. the biggest trade in markets right now, it has been the juggernauts and you need to diversify. as far as your markets.

>> i hear that a lot and i understand the logic. but you are paying nvidia tax when you do that. they are not just underperforming nvidia and big tech. am i am prepared to take a lower rate of return in order to protect myself? the diversified portfolio is not going to outperform. do i accept a 6% to 7% return rather than what i am seeing on big tech? >> i do not think it is repeatable. nvidia is already the biggest stock in the world. is it going to double again? i doubt it. whether you want to do the diversification quickly or slowly, you should be doing it because the rest of the world has catalyst, and they are here

and now. the cycle is picking up. as he referenced in your previous piece, the markets are very cheap. the u.s. is 65%. it has been a giant outperformance that does not need to reverse by much. you do not need a little bit of that money going into other parts of the world which have become very small and cheap, little bit of good news, little bit of inflows goes a very long way in other parts of the world. that is why you should be looking. flexing seated the tap on the shoulder about the portfolio. i'm wondering, cameron has written about this as well. do we need to see more people sucked into the tech bubble before it bursts? is there enough money in that

trade already to justify some of it coming out again or is there potential to go into it before that happens? >> i do not think it is a bubble. i think it is supported. you make the comparison with.com. the nvidia of its day peaked. nvidia is less than half of that and revenues grew. i think it is quite fundamental, but i think the rest of the world has catalysts that are happening now. you cable cut interest rates over the summer. so, how quickly do you do that? i do not know, but there is a story in the rest of the world. a little bit of good news, you do not need good news when you're this depressed, you just need bad news. it makes sense.

>> we do not do glass half-full well over here. joining us. we will talk about some of those catalysts. facing blowback for breaking debt rules. we will have more on that story, next. this is bloomberg. ♪

>> the u.s. is on holiday and european markets are called due to the lack of volume. the eu is set to one friends over breaking deficit and debt rules. campaigning to the country as we had the first round of elections two weeks away. joining us from paris.

i want to talk about the lessons that the french may have taken away from the k when liz truss came into power and cut taxes and tried to put the k on a growth agenda. we're already seeing significant turbulence around french market as a result of what we are seeing. to what extent are french politicians afraid of the market? to what extent is she afraid? >> they warned about this moment for friends, if -- already, he has warned about a potential debt crisis, but what we have seen today with the debt

procedures, clearly it is great for marine le pen in a sense that she will seize the opportunity to attack emmanuel macron on the fact that he has been handling the public finances for the past seven years and look where we are. we have the french deficit above the target. must hire lynn the eu target. remember last month when france was downgraded, marine le pen was very quick at attacking emmanuel macron, making him responsible, saying that you have ruined friends. we are seeing the reaction from the leaders of the national rally, but clearly, she is also worried about the reaction of

the market. >> what is the focus on right now? what else are they focusing on? what are the stories on the agenda today? >> a couple of things. a couple hours ago, they were at the military for him and he said, we are not going to send french troops to ukraine. kind of echoing what emmanuel macron had said about the possibility of sending troops as a last resort, if france was under threat. trying to reassure on the defense front. a difficult position for them because remember in 2017, he

received a loan from the russian bank. people in france do remember that. with them both on the international front and on the spending front, but they are trying to do is to reassure to appear reasonable and appear mainstream to get what they are trying to achieve. >> thank you for keeping us up to speed. joining us from paris. let's take one of the angles and develop it a little further. those facing an eu infringement procedure. the timing is inauspicious. crank sterling joins us now to discuss. what does this actually mean?

>> initially, it does not mean very much in the sense that this will be a long and drawn out procedure. september, the countries have to come back with a plan and november they will come up with its own views on that. romania has already been in the process of are quite a period of time. but obviously, this will be an escalation. this is a recalibration and they are supposed to be stronger than last time. it is feasible that we could end up in a full-blown showdown, especially if there is a confrontational government in friends between france and the commission with officials telling them 10 at their

finances in order. the government may not be wanting to do so. >> other countries are on the list as well. i'm curious as to the selection process. >> there are eight countries, essentially. i think it is interesting to look at who they are. france and italy over 100% of the debt is one reason why he would be that she would be on there. i think that kind of tells you where we are going. the comment nominator is high deficit. and deficits that are not going in the right direction. at least not in a timely manner.

that is what worries brussels. staying well above 3%. >> still ahead, but we need to talk about. just in time. we will debate that issue, next. this is bloomberg. ♪

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>> welcome back. june 19, juneteenth in the u.s. markets are closed today in u.s. fairly light volume on this side of the atlantic. absolutely nothing right now. the pound, you could argue it is catching a bit of a bid today. throughout much of the fx classes. we continue to see french bonds on offer this morning. turning back to the case story. they have fallen back for the

first time in almost three years. cpi rose to 2%. critically, services inflation is fairly sticky. andre is standing next to me to discuss. the headline comes down and services are still sticky. >> it is a bit awkward. that is for the first time in three years. it is proving to be very sticky. it is also in april when we had a lot of prices being updated. you already saw some of that stickiness. we are in an environment where they are a big comfortable passing on the higher cost that they are facing. while headline inflation came,

there is a gap. it is more tolerant of surprises. but it is a little bit too hard to ignore. >> we are waiting to see what happens in august and september. tell us what you think is going to happen. >> there is just some underlying stickiness. we think there is a case in august. august is the next likely timing that rates can start to be brought down. the headline is at 2%. it will bring down services, in time. the labor market is cooling, so there is a case for rates to be brought down.

we were seeing every meeting that only two cuts are likely because it will take its time. it can have fiscal implications. if you compare it to the spring budget, i think that the rate curve that they incorporated had 100 basis points of cuts. it can reduce but there are a lot of moving parts. it would have a clearer picture. it did point out, so that suggests mid september to late september. >> in terms of how we think the bank of england is going, what

do you think the vote split is going to look like? what is happening in terms of how the various groupings and hawks are going to be thinking? >> that is an interesting question. at tomorrow's meeting, it will be interesting. it is the last meeting of the deputy governor and she has been a driver of the thinking and he is leaning a little bit more dovish. that injects a little bit of risk into it. we would fresher have in august rate cut. but then, there will be a bid of uncertain t. proving a little bit more

hawkish. >> we are getting more pushback against active sales. do you think the bank of england will be listening to that? >> i do not think so. one thing i would say is that we have more active sales this year because they have decided and there is a passive runoff in bonds maturing. he would actually have 80 billion. you only need 10 billion of active sales if they are going to keep the 100 billion envelope. there can be a reduction in active sales, just not as a reaction to political pressure but mechanically. >> thank you for stopping by to update us.

not expecting a great deal of action. it is impacted by politics but also great coverage coming up. joining us now to continue the conversation, the global head at fidelity international. any views on the bank of england? should we be looking at september? do we think the change of pace will be a little slower? quest we have to look at the fed to start cutting. but it is an important factor for the bank of england as well. it is quite sticky. if you start cutting without the fed and start cutting more, you expose yourself. you saw the narratives that came

out. we do not know what we will do next. what did they do to change the shape of the economy? we just started to boil up. it is also control, but you can see the problem with the one-off. >> that is what is priced into the fed as well. is the timing actually going to lineup for the bank of england? quest it will be tough to deliver those two parts without the fed going for those cuts. i think it is important. you can see that in market reactions. we had impact across the curbs and in the u.k. because the market knows that there are spillover effects. quest we are going to put the

steepener on and at some point, it will work. at what point does it work if the bed is as cautious as it sounds? >> not -- let's not forget that the profiles are not yet that comfortable. you have some of the risk coming into europe. fiscal policy will be front and center of those developments and at the same time, you have to start thinking about the balance sheet runoff and how to contribute to the pressure in the market. i think the trade is starting to get interesting. quest we will wait to see when that actually happens. how serious is the situation for

france right now? >> the rhetoric is much different now. i think it is very decent. you see how the effects can come through with cascading effects of political developments leading to the policy statements and the market reacting to that. that is much different now, but the school will be in focus. we are not expecting anything like a full-grown crisis to come in. it took years. quest you really think they're going to take conditionality? >> what causes that to take place? obviously, there are scenarios

where discussions take place, but they are there. >> could not blowout further? how far -- what would be a spread that would be concerning, do you think? quest the rule of thumb was 200 basis points. you are a bit away from that. this can become. >> i'm trying to see what the long-term average is. let's call the average 50 is the

average. do you think france, as a result of what is happening right now, that average goes up? the premium that they have to suffer over germany is something that is materially higher? >> you are looking at more political manufacturing. there is pressure. i think generally, he would see vulnerable countries starting to pay a little bit more attention to the market. they want to protect themselves. trade in europe right now, we are expecting a spillover. you are not seeing the debt crisis move. we like sterling because there

is a bit more stability. exactly. we think it can be harvested against a flare of the same issue. i think europe is looking more underweight. quest out of curiosity, how would the market react if the government took a more positive view? >> we have seen that the cycle is probably the most important macro impact of brexit. if there is any policy development, it gives it back to long-term investors for

long-term portfolio flows. we speak to our clients and are able to sense that this is an underweight market. if they come back with a more stable relationship with europe, -- quest you buy front end or back end with that? maybe not quite as far? in theory, a move back towards europe would take some friction out of the market. do you buy a basket? quest you focus on the curve. we want to lock in some of the rates. ultimately, it is a late cycle and policy is restrictive. it could happen later in the year. we want to lock in some of those rates. it will benefit us all from some

of those structural things we were talking about. quest joining us from fidelity international. we will hear from the ceo in france. we will be talking about the new for re:. for re: is coming out with a new ev and list price is about 500,000 euros. look at what is happening with the porsche dvds and for re: might be different. anyways, this is bloomberg. ♪

>> welcome back. you are watching bloomberg markets. let's talk about what is happening with the car markets. new tariffs and imports from china has them focus on affordability today. for now, the latest -- the most expensive ev made in europe. sitting down with francine lacqua, sharing what he sees in story for the market in the coming months. >> i think that the market remains fairly strong. it is progressing year over year. we are confident that market conditions will be favorable in the months to come. and as a question of being able to offer.

we are selling more and more electric cars and we need to be able to afford. that is what we are doing. >> talk to me. the slowdown has been more pronounced for ev cars. it may be because some of the incentives have been removed. how do you see it? >> understand that there is a slowdown in some countries. anyways, we have to grow to share. to give you a example, in 2025, we will have to double the share of electric cars. this is what we have to face. we had to sell electric cars

profitably. we need to be able to afford products, which is what the customers want. we revealed it a few months ago. now, today, across electric suv, we are coming with very attractive offers. we are able to grow. >> are you sensitive to pricing, depending on the market or the country you are in? >> pricing for electric cars is a big challenge. we have to look at that with competitive offers. today, you do not find an electric suv below 2000 euros. we are introducing that in the

market, but it is a question of price. it is going down, but it is also a question of usage costs. compared, he will probably save up to 1000 euro per year. it is absolutely significant. the selling price may be higher. but in terms of usage costs, customers could enjoy much more. >> if it is not translating, then it is very tricky. i you expecting that to give a big boost to the ev market? >> the chinese companies are

coming and they are challenging us because they are coming with competitive offers. what we need to do is to fight with the same waypoints and to be able at a competitive cost. this is what we are doing. we think that we have competitive cost base made in europe that would enable us to participate in the growth of the market in europe. >> joining francine a little earlier on. the first ever electric for re:, we now think it has a price tag. that is without the necessary add-ons, 15 to 20%.

it is neither here nor there. it is expected to be unveiled in the course of next year. able to talk about ferraris and whether they should be able to do this. is this something that ferrari is assured of being able to make it work? >> asked -- listening to the ceo recently, i do not think it is a cut and dry answer. he pointed to the notion that some younger consumers, for them, absolutely, it is something that they want. but there are diehard consumers who want nothing to do with it.

this is not what a for re: is. they made comments. you can make an suv over my dead body. it was similarly downbeat on the notion of making an electric for re:. these brands do have a gap to bridge here, what their heritage is based on to make this transition. >> that is not what you are seeing in other makers that have gone down the route. i am on the porsche website. two years old and on the clock. let's call it 40% to 50%. some of these vehicles have not held their value particularly

well. it is for re: running the same risk? >> when you are talking about a price that is high, even for ferrari, i think that is a valid question to ask. it was somewhat surprising in the sense that they do have a threshold in mind, according to the reporting. but it is not necessarily as you alluded to. the starting price is -- what these customers have to pay have no object -- no object for the clientele buying the for re:. the amount of volume that this company does, it has a better

handle on resale prices. they do not necessarily change hands a lot. maybe it is not necessarily as big of an issue, but it is the case that this would be a first model that is very historic. do they historically try to keep production more limited than they would otherwise to protect against? >> the acceleration has to be unbelievable. >> much as there are trade-offs, the company has talked about inauthentic noises. there is massive opportunities here. the customer will not be losing out, even if there are some other trade-offs. >> is there going to be some

kind of effect? is this the new market or does it hit into the existing market? >> a younger consumer is very attracted to this. this is a market that is only so big and some consumers absolutely -- it will always be aspirational for them. >> thank you for stopping by. on the new ferrari, we look forward to seeing what it can do. the u.s. is close. a distinct lack of volume. stocks and futures are going nowhere in a hurry. the investment adviser will be joining us in the next hour. stick with us. this is bloomberg.

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♪ >> welcome back, folks. you're watching "bloomberg markets." i'm guy johnson in london. it is juneteenth the united states. it is a holiday as a result of which we don't have cash trades in the bond market or in the equity market. we don't have u.s. volume. so we trade it sideways. the pan is big this morning. cpi back to 2%. and we continue to keep an eye

on what is happening with the french story. french bonds are an offer once again today. and we have fresh warnings now coming from brussels in terms of its deficits. but the story so far this week has been two stories. one of which is french politics which has been dominating. the other one is this continued and relentless rise of u.s. tech. inmean nvidia. let me show you a chart. this gives you a scale the rally that we've seen in the company and the cap additions that it has added. and you can see that quite clearly the yellow line and how upward sloping it is. it has caused the rest of big tech and overtaken it. it is in the $3 trillion crop. 35% of the increase in the s&p's market cap since the beginning of the year. this was a few days ago, has come from one stock. that of course, is nvidia. so what do you do with this? why are you buying it?

what is the reason for holding it? and carry on delivering these kinds of gains? what does it mean for your portfolio and how you construct it? let's try and answer some of those questions. anna rathbun, cio joins us now. great to join us on a holiday. what is the case for continuing to own nvidia? it does seem like everything has fallen by the wayside. is it just like a black hole? is it just going to suck money in day after day, month after month? >> well, it certainly has been. so, it's been very difficult for diversified portfolios to outperform because of this one stock. i mean, we had the magnificent seven talk at the beginning of the year which turned into fab four and now it is just nvidia. i think some of this has to do with the fact that there are headwinds in the u.s. economy that's being reflected in the price of other stocks. let's talk about regional banks,

for example. last week, we saw them fall. these are realities that are being priced in. nvidia is about the future, not necessarily today. and so i think people are piling into it because there aren't too many interesting things and there are risks that -- discount in other stocks. the other component is, look, they have a crazy amount of market share in tips. and everybody is experiencing a.i. not only do we have mag-7s. and the other thing is on the venture side. capital is getting pretty dried up and has been for almost two years on the venture side unless you have a.i. hanging from your shingles. as long as there's a good pipeline on the application of a.i., i think nvidia is still

going to be doing well. guy: given the gains that were being made, is this the right place to maybe hide from the kind of gathering storm? seems to be this argument that this is the stock you want to own. everything elses is -- there are lots of reasons to not throw everything else the u.s. economy is looking more fragile. you want a high asset in nvidia because it's got all the momentum. does that argument hang true? i hear what you're saying about the strength the a.i. story. but is that enough to continue to propel this story, and is it enough, do you think, to make this stock the place that you want to hide out? is it a safe haven or is it something else? >> well nvidia stock is not u.s. treasury. so i wouldn't consider that -- if there's a huge correction in the market, a technical correction or whatever it might be or a recession driven, nvidia is not going to be immune from us. so i wouldn't call that a safe haven. the a.i. thing is more of a long-term play, right?

so if we look the short term, what are we looking at? there is a technical danger because it is priced so high. it does have robust market share but looking out, we have to ask ourselves what is priced into these highs? it's really the future revenue, future demand. and i know nvidia has been outperforming expectations, but the -- if the date comes, i don't know if or when, but when the date comes, when nay underperform that expectation, i think the shock would be pretty high. and that is the argument for diversification because nobody has a crystal ball and these expectations are actually -- there's a little bit of a crowd sentiment no these expectations. so it's priced for perfection and perfection that we can't even forecast. guy: yeah, some of the positive forces like the options trade that are getting it propelled higher and higher maybe getting to reverse and you could see a

negative on the stock. that would be something that would ripple in the wider markets. do i have to therefore, accept that my portfolio is going to underperform the wider market just to kind of get myself some risk protection? there are lots of things happening right now. do i just have to accept that my diversified portfolio is going to underperform so that i can sleep at night? [laughter] anna: it's a hard pill to swallow for diversified portfolios out there. but when you have a very their -- narrow market leadership, it's better. i'm not saying don't have nvidia because the largest company in the world. you do need exposure it to because, again, this is infrastructure tech, infrastructure, not even really, you know, software that we don't know if there's going to be demand. so it's a little bit of a different story.

but narrow leadership is what would actually cause me to exempt the underperformance, not necessarily nvidia itself. it's just that the market isn't very healthy right now. guy: what do i diversify into? anna: well, there's rest of the market outside of nvidia in the s&p 500. there are 499. i guess that is -- and then -- of course, also small caps. it has underperformed. and a lot of that is tied to interest rates, right? so the fed is saying higher for longer, etc. it gave us some direction as to the first rate cut coming to the end of the year, potentially. one rate cut, right? so if the fed starts to cut rates, there's room for murrays i can and more rates sensitive areas of the market to run. we just don't know when. and if you're a long-term diversified portfolio, we're not market timing. so it does pay off to hold it --

hold things that are not nvidia, 499 stocks of the index because we don't know where policy will go. we have elections. the last several weeks have taught us. it remains a prudent to be diversified and not necessarily chase the winners. guy: so do i just -- is it as simple as buying the buying the s&p equal wave? does that give me enough diversification? anna: so equal weight has been underperforming the market cap weight. and i think that's the market telling us something, right? i think the market is telling us that where capital is going is where the opportunities are. so i'm not a huge fan of equal weight because that is us basically deciding where capital should go. so i think s&p 500 -- you know what? if nvidia is going up, ride it but the way to deal with the

diversified portfolio is to rebalance and have a rebalancing discipline. if you have growth versus value and growth is running really hot because of nvidia, ride it, but then you need to rebalance that back into value. i think that is a more prudent way of doing it. guy: anna rathbun, great to catch up. really appreciate it. cbiz investment advisory service, cio. thank you very much indeed. talking of risks. we got to get the latest from the french election and remember the e.u. scolding france and italy on their budget deficits. we'll talk about that as well. this is bloomberg the future is not just going to happen. you have to make it. and if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. the all new godaddy airo. put your business online in minutes with the power of ai.

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>> both are being reprimanded by brussels. it is the first stage in a confrontation that will test the resolve and could in theory end the euros in fines from brussels. it could get quite feisty, i think, is probably me underestimating the situation. you got meloni in italy and you'll get le pen in france. you will see how she will react. uncertainty in french politics, the dominant theme over the last few days. let's wrap this up in one nice neat bow. we will joined by carolyn. are people paying attention to what brussels are saying? are the politicians paying

attention to what brussels is saying? >> i think they are and it's quite interesting that you put le pen in france and meloni in italy together. because le pen is clearly to show that she is like the meloni type but in france. kind of scary at first for the markets but trying to reassure and not that scary at all. at least that's what she's been trying to tell the markets over the past couple of days, since this weekend, and even her ally who would become prime minister if they get the majority on july 7 has been repeatedly saying that the first thing he will do if he becomes prime minister would be an audit of french public finances and his ambition is to show historical seriousness.

clearly, they're going to seize this opportunity to attack macron again on the way he's left france in terms of deficit and debt. guy: i wonder how they will react with brussels to escalate. you have meloni in the mix as well. how do you think that nature would interact with potentially a threat from brussels? caroline: i mean, they want europe of nations to put a double border and another border within europe between the various countries even though they have not exactly explained how he would technically do that. so that is a potential fight here.

but what they're trying to do is reassure in terms of deficit. i would ask him who is speaking tomorrow is going to be asked about the program and i would try and put that question to him, whether he will respect the 3% deficit target if does become prime minister. we'll see the details of their programs. hopefully over the next few days. but to put this into perspective, back in 2022, when le pen was to become president, her program was estimated to cost 100 billion euros for france. and now, bloomberg economics is saying that the current measures would only cost about 8 billion euro. and that's an attempt to appeal

to mainstream voters. guy: caroline, what are they saying on defense? caroline: so today, he was at the euro set to lead paris, which is a military farm and he was saying that his intention is to not send any french troops to ukraine. so trying to echo here a response to what the president macron was saying a few months ago about sending troops as a last resort if france was in danger. so jordan is saying they will send ammunition to ukraine but not any troops but they're against the idea of sending french army instructors to ukraine. they say that their red line is to become belligerent. guy: i wonder whether the 2025 will go as well. we'll see whether that story

evolves as well. carolyn, thank you so much. let's turn to the u.k. next. we'll come back and talk about u.k. cpi. back to 2%. however, inflation still remains. this is bloomberg. ♪

guy: the prime minister, current prime minister on track to lose two thirds of the seat they won the last general election. this is according to the analysis from the polling group. they are two weeks away from going to the polls. let's talk about how jim ratcliffe, the u.k. billionaire now relocated to the out of

monaco, how he is seeing things evolves. he says this country is ready for a change. he said this in a conversation with francine. >> if you just look at the economic issue for the u.k., in my view, it's quite simple. the u.k. is 2 trillion pounds. the g.d.p. is two trillion pounds. and the government take at least half of it. so the government spend is one trillion pound. so, we spend 60 or 70 ball year. the government spends one trillion. that's an awful lot more. so, you need to spend the money well because you're not spending your own money. you're spend the population of the u.k.'s money. and, you know, there are good reasons why people pay taxes.

you've got health care, you've got police. you've got roads. all those types of things. and i don't think the government manages those things very well. and i don't think it focuses on it very well. and i don't think it's got the right quality of people running them. but they're spending a trillion pounds. the health service is a mess. we don't have security anymore. education's a bit of a mess. you know, we can't run sewage systems in the u.k. we have sewage systems running in the victorian era. you know, we allow all the utility -- you take that for the for example we allow all the water utilities to be settled off. they were maybe bought by the french companies. they don't reinvest in the equipment to manage our sewage and drinking water facilities. and then all of a sudden, it's a crisis. i mean, what does the government say not to buy the water utility? and if the people don't behave,

then do what they do in america. they lock them up. there's some consequence if you misbehave. so, you've got that whole issue of the economy. and then you've got immigration. they haven't dealt with immigration. they've sort of danced around. so i think we have 500,000 people coming to the u.k. last year. well, 500,000 people is two southams a year. -- southhamptons a year. and that will go on forever because we speak english because we're in england. they're are going to be 10 billion people while 2050. there's always going to be people getting into the u.k. but we probably have got, you know, an infrastructure for 50 million people and we've got 68 million people. so the hospitals don't work. the roads don't work. nothing works.

and, you know, at the end of the day, somebody has to say no. we can't take anymore people in. because if you bring 500,000 people in a year, how many schools do you have to build? how many roads do you have build? and we're not doing that. we're just sort of cramming them all in on the existing infrastructure. >> how do you think labor will deal with that? do you think, you know, sergio will be a good prime minister? >> well i think -- i mean, i think he's a very sensible man and he's an intelligent man. i don't know -- i think you probably have to do some unpopular things to be able to get those types of issues dealt with. it's like on having to do some things which are unpopular. but i'm happy in a little environment in a -- political environment in a way. at the end of the day, doing difficult things and a degree of unpopularity in a funny sort of way might make you more popular.

i don't know. i mean, time will tell. i can't prick how that will all go. -- predict that will all go. guy: jim ratcliffe speaking to francine la across. i feel much better after listening to him. let's turn our attention to some good news that we do have going out of the u.k. a little bit of a good news but not completely good news. u.k. inflation is back. the first time we've been there in almost three years. supported the case for interest rate cut from the bank of england. last time, it was 2.3. we've come down quite significantly. the problem is that service for inflation remains very elevated and quite sticky. anna rathbun joins us now. presumably the bank of england

is going to focus on that service story. less so on the headline number. >> the wage has been volatile and the committee has expressed the preference more on inflation rather than wage so the surprise that we got today, this morning and on the april cpi on services inflation, it's a bit too high. guy: why is it so sticky? what are the factors that are contributing to this stickiness? and are any of those going to abate any time soon? >> yeah, in april, april is just sort of an awkward month for inflation because you have a lot of prices being updated at once and a 10% increase in the national minimum wage. and you can have sort of an increase in costs like wage costs and this needs to pose a

threat to inflation if the firms don't -- those prices. and the bill belichick, it did -- pmi suggests that would happen a bit. and the cpi, that's a little bit of a different story. the economy's cooling and the labor market is cooling but you're still in an environment where firms feel confident to pass on a little bit of those higher costs. guy: you have -- you expect now slower rates of cuts. >> yes. because of that. because. that persistence. because the boe, a lot of progress has been made. it is important for them. they are likely to start its policy in the summer but the persistence will hold it back. guy: thank you very much. coming up, we're going to turn to the fed and what we're hearing in terms of the latest guidance. that's where the cuts finally start over there. that's next.

this is bloomberg ♪

guy: welcome back. wednesday 19 of june. it is juneteenth over the united states. markets are closed. you still have futures trading but cash trading is short for the day. volume has been taken out with the u.s. on holiday. and we're waiting for tomorrow. similar story on futures as you can see. .1 higher. no real action there on the pound. this is a very exciting board, i have to admit. and then you've got a little bit of move into french bonds. so french bonds on offer this morning and we talked about the story with france and the e.u.,

the bank of england. and the s&p could be a surprise. keep an eye on the swiss national bank. could be providing a little bit of a catalyst for markets. and the one that we're watching for is the fed. and we've had a chorus of fed officials speaking urging patients when it come -- patients when it come -- patience when it comes to rate cuts. >> it's looking more holistically at the information. >> are you looking at one or two rate cuts at this point given where things are? >> both. >> i would need moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate. these conditions could take months and more likely quarters to play out. >> i believe economic conditions. i believe we are in the right

direction. as i expect, it would become -- to begin a policy some time later this year. guy: brian jacobsen is with us, from annex wealth management, chief economist. the market pricing in two rate cuts from the fed. we've had a bit more aggressive and over the last few days, given what we've seen in the data. but the fed is still saying that we should be cautious. who's right, do you think, right now? the market or the fed? brian: i think the market is right for a while. they are underestimating in terms of the rate hike path. but if we take a step back and just think about what the fed has done with their communications over the last couple of years, it reminds me of in the movie "top gun" where the commanding officer told maverick that his ego was writing checks that his body

couldn't cash. the fed had been saying things that their policy couldn't deliver on. and that we saw that with chair powell initially saying he we would welcome higher inflation and we know how to fix that. well, so much for that. and then you said there will be pain. well, so much for that. so they're trying to demonstrate a lot of humility. and they're just going to basically spring a rate cut on the markets probably in september even though right now, they're really saying it's too soon to tell. guy: do you think the data will support such a move? brian: it should. this past week with the data we had on retail sales, showing a very weak bounce from the negative growth in retail sales in april. that is quite telling that consumers are beginning to feel the pinch. we did see an increase in manufacturing output, but that was after two consecutive months

of a decline in manufacturing output. cpi has been moving lower. and i think that really by the time we get to the september meeting, it will be appropriate for the fed to start cutting rates. now the big question is is they actually willing to do it? are they going to believe the data? or are they going to wait for a few more months of data to support the idea that they should start cut something that's where i think that it could be rather treacherous for the markets if they wait beyond september. guy: i want to come back to the surprise factor in just a moment. but let's just stick with the consumer if we can for just one more question. if i look the university of michigan data, i see the consumer becoming more pessimistic, but the reason i see the consumer becoming more pessimistic is because inflation has reaccelerated for the consumer and that's starting to impact their behavior. that reacceleration that the consumer is feeling of inflation should be presumably something that the fed should worry about. brian: yeah, the fed is very

aware that monetary policy, it's incredibly powerful, but they don't necessarily have a lot of control over how it actually influences the economy. one of the channels is through people's expectations of what inflation will be. it almost becomes a self-fulfilling prophesy. the fed is incentivized to maintain this hawkish rhetoric. but i think it's important to recognize that those surveys don't necessarily income wait the respondents. if you look at consumer spending, it is driven about 40% of consumer spending is by the top 20% of households by income. and so if they were to do a waiting, i wonder if we would get more of a harmony between that the sentiments are saying and what the sales numbers are saying. guy: maybe we could do that. brian, let's talk about the surprise you talked about. the fact that maybe the fed is

going to spring a surprise on the market. how do you think the market would react a surprise after so many years that the fed is trying to do the opposite? brian: i think that would be an opposite during the temper tantrum. so every time around this time of year, i remember back i think it was 2013 when chamber niang talked about how the fresh was going to start tapering their assets and that caused threw the market into a tizzy. right now, we have very tight credit spreads but that's mostly not because corporate yields are too low but because treasury yields are too high. and that's what the difference is what defines the spread. so i expect that we will

probably see yields across the board move a little bit lower and it could be more of that risk on rally more favoring small cap value stocks almost as though it's kind of the typical playbook for when an economy is coming out of recession. i think it would be a sigh of relief that we are continuing to revert a recession. guy: brian, last time we saw this happen and it was back in december, the fed loosened reactions significantly, asset markets took off and the fed has had to deal with the consequences of that because that has had an impact on the economy, spending and on inflation. why do you think this time will be different? brian: yeah, the financial conditions measures, i question how well they measure actual financial conditions or the relevant conditions. most of them look at the stock market, credit spreads in the public markets, things like that. but really, the financial conditions that matter for monetary policy are more like financial conditions of

households and small businesses. so even though these financial conditions measures to make them daily or you know the high frequency, they tend to focus on the bigger companies that are out there. but when you look at the actually bifurcation or the difference between how it is that bigger companies are doing versus smaller companies, i think that lends, leads me to believe that financial conditions aren't quite as loose as what the data might suggest. it's not just the availability of the credit, it's the cost of credit as well. guy: is there a danger to the risk assets looking at rate cut and say the good times are over? the fed clearly sees something that we don't and we should be worried about and risk assets react negatively to that? brian: certainly. i think that is the playbook that a lot of people are looking at. the perforate cuts, it was oftentimes because the federal reserve was too late to recognize because they held rates too high for too long. so they had to start cutting rates.

now, it's different though in the sense that they're able to cut rates because inflation is falling and growth has gone from great to good. i don't think growth is going to go from great to good to grisly. it's more that it's going from great to good to sustainable. so it's really the key thing is the conditions are a little bit different for the setup. the market might price it in looking at the past playbook about the fed is cutting, therefore we must be at a recession and you get the market draw downes. but if that does happen, i would view that as a tremendous opportunity to reallocate into risky assets. guy: ok. desires i can assets include big tech? brian: it's become more of a defensive tech companies are

cash flow generators where they were just sucking up all the cash. and it was a great way to put it down the garbage disposal. but now, they're actually generating the cash and nvidia, according to our models, we still hold it across a number of our individual equity strategies and recently, it has gotten up to fair value. so it was undervalued based upon things like, you know, current earnings and then properspective growth of their earnings. key things will be how well they defend their moat. very similar to what happened with intel and amd. they should maintain the sort of their characteristic as being somewhat more defensive. but that can change on a dime unfortunately. so it does require vigilant monitoring. guy: yeah, that day will be an

interesting day when that dime is flipped. brian, thank you very much indeed. brian jacobsen of annex wealth management. thanks for joining us on a holiday. coming up, we're going to talk cars. we're going to hear from the c.e.o. this is bloomberg. ♪ dangerous ladders. gutter muck. yuck. no wonder you hate cleaning your gutters. good thing there's leaffilter. our patented filter technology keeps leaves and debris out of your gutters forever. guaranteed. call 833- leaffilter to get started. and get the permanent gutter solution that ends clogs for good. they took the time to answer all of our questions. they really put us at ease. end clogged gutters for good. call 833.leaf.filter, or visit leaffilter.com sweat isn't sweet.

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♪ guy: talk about what's happening in u.s. bank. citi expects banking fees to surge, compared a year earlier. while revenue from its market business will be flat. mark mason is the cfo of citi.

he was the occasion for the conversation. take a listen. >> we want to be the preeminent bank for institutions with global needs as well as a leader in global wealth and a winner in the u.s. market for our personal banking business. that's what we are today, all right? and a lot of what we talked about today, again, was really highlighting the crown jewel of our firm, the gateway to the rest to our offering for large institutional clients but also for middle market clients as well as for investors and asset msg in both that treasury and trade solutions business and our security services business. >> it's interesting because to your point, even though security services has been a crown jewel accounting for half the profit recently of citigroups owned entire businesses, it's been hard to explain to investors what it is, what it does. do you think citigroup stock would be trading higher if people understood the business prospects for it?

>> i think the security services business contribute a significant amount of value to this franchise. and i hope that after today, investors will realize exactly how much value that is and how much up-side there is to that franchise and we start to see fit the stock price. mike mayo, wells fargo, being probability but he has been critical here of the wealth business calling the returns low. and how soon and how robust those returns can be? >> you know one of the things that we talked about today is timeline. we talked about the medium term, 2026. we talked about top line growth of four to five percent. and we talked about the services business being a significant contributor to that both in the top line and our services

businesses a 20% in equity. and we brought in new management there. and we're keenly focused on how we drove the top line and how we improve marlins and how we improve returns there. that's going to involve everything from right sizing the cost structure to increasing the bank for productivity to driving new net investment assets for across that business. and we do believe that inside of this window between now and 2026, you'll start to see that value play through our financial. guy: citi cfo mark mason in conversation there with us. meanwhile, let's turn to what is happening in the e.v. space and new tariffs from china has put the focus on pricing for automakers. today, they are announcing a new electric s.u.v. that for now is the least expensive e.v. made in

europe. citroen c.e.o. sat down thierry koskas to share his views on what he sees in store for the e.v. markets in the coming months. thierry: i think the market remains fairly strong. it is progressing year-on-year. so we are very confident that the market conditions would be favorable in the months to come. a question of being able to offer the cars that the customer needs particularly, electric vehicle you know that we are seeing more and more electric cars we need to be able to make affordable electric cars and that's what we are going the new citroen, of course. >> talk to me. the slowdown has been more pronounced for e.v. cars. and this varies from countries to countries or some of the incentives have been removed. how do you see demands for e.v. in general and the demand for

c-3? thierry: i understand that there is a slowdown in some countries but we shall not forget that. anyway, we have to grow the share of electrics just to give you a very concrete example, in 2025, we have like any other manufacturer to double the share of electric cars. this is the objective that we have to face. so at the end of the day, we have to sell electric cars and we have to sell electric cars profitably. which means we need to be able to afford products. that's the customer. and when we look the new car, we revealed first, european electric car is 25,000 euro. now the new ec-3 electric s.u.v. 30,000 euro. we are coming with very attractive and we will be able

to grow the electric car sales for the future. >> do you worry about price something are you very sensitive to that, depending on the kind of market or the cub you're in? thierry: well, obviously, pricing for electric cars, it's a big challenge. so, we have to welcome that. we first of all very competitive. today, you do not find an electric s.u.v. below that amount. we are introducing that in the market but what i would like to highlight is it's certainly a question of price. ok. it's going down. it's great. but it's also a question of usage cost. if you use, for example, applicant compare to petrol, you will probably save up to 1,000 euro per year. so it's absolutely significant, which means yes, the setting price may be higher. you can find it, but in terms of

usage cost, the customers will enjoy a much more favorable usage cost. that's very important taken into account. >> yeah, but if it's not translating into consumer demand, then it's quite tricky. the other big thing is the incoming e.u. tariffs on chinese e.v. imports. are you expecting that to give a big boost to the e.v. market in europe? thierry: well, obviously, the chinese offensive is there. the chinese company tariffs are coming and they are challenging us because they are coming with ways with very competitive offers. so what we need to do is to fight with the same way and to produce cars at a competitive cost versus the chinese. this is what we are doing. we think we have very competitive cost base for a car made in europe.

that will enable us to face the chinese competition and participate to the growth of the electric market in europe. ♪

guy: let's wrap things up about shoes. golden goose backed by premiere has take on the decision to shelf the listing for now. bloomberg's analyst joins us to discuss. this was the private equity shot that took dr. martins to market and it hasn't been great. >> that was probably a convenient excuse that it just can't have -- it was price that's bottom of the range. it clearly wasn't going to pop on day one. they just couldn't have another dr. martens on the hands. guy: what do they do it for now? >> i expect it to come back. the question is does it come

back at the valuation they were looking at? it was priced closer to monclair. guy: wow, ok. that's quite a big discrepancy. what does this tell us about the i.p.o. market more broadly? can i read from what we're seeing with golden goose to the i.p.o. is there a connection? >> it's different sector, but you could call golden goose accessible luxury. and again, they're going through a really punchy valuation. i never thought it would come before the election but there were rumors a couple of weeks ago that it was coming very soon. it's now looking at the autumn. this has been mapping for ages. it still hasn't happened.

is it going to come later this year? or, you know, are they going to hold off because of some of the feedback that had investors over those risks? guy: accessible fashion. is there a read across into the wider fashion market the fact that they pulled this? >> this was a very specific product. 90% sneakers. it's a bit like dr. martens which is well chunky. with those things, you do have a lot of fashion risks. and it's difficult to put your finger on, you know? some things's in one minute and out one minute. you've got all these super fast tiktok trends. so investors need to be just aware that things can go in and out of fashion. guy: i tend to think that. andrea, very much in fashion. thank you very much indeed. we're going to carry on to the next hour. lindsay burr tan is going to take you through that next hour.

thank you for watching. this is bloomberg. ♪ we invent them, we design them, we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

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lyndsey: live from london, i'm lyndsey burton. welcome to "bloomberg markets." here are the top stories we're following you today. full market and get a preview of the bank of england's rate conclusion. the latest that could prompt billions of euros in fines. and kim jong-un plans to unconditionally support russia as he meets with vladimir putin. and we will discuss that and so much more here on the coming hour. let's check in on these markets. u.s. markets seem to be powering

ahead but here in europe, stocks struggling to add much to that two-day rally. nvidia has overtaken apple as the most valuable companies. the dak prescott's trading lower. and the ftse 100 in london actually higher, a 10th of a percent. and if you break it down bisector, you got about seven out of 20 in positive territory. basic resources lead the gains higher, .8. but the laggard is technology, lower at 1% today. if we look over to the wall street open, futures pointing to a higher opening stateside. u.s. markets closed for the juneteenth holiday today though. and cash treasuries off line. but if we look to the european bond space, you got yields edging higher, especially that two-year guilt yield off the cpi

print. i just mentioned for you, back at the 2% bank of england target. now services coming in hot. traders now seeing a 30% chance of an august rate cut compared to 45% before that data. the pound trading at $1.27. so a touch stronger there. and brent at $85 a barrel. colin graham is with us. are stocks going to work is out? colin: what we have seen a couple of episodes of that the middle of last year, for example, but we still think that for the magnificent seven or six, nvidia, they keep

delivering on those earnings. lizzy: so everyone's excited about nvidia. who is overvalued? colin: there are certain sectors that we would look at and say ok, this doesn't really fit with how we think about the world but there are some laggards. we've been underweight euro stocks. and we don't want to fight the momentum because it's very strong. we just have to go with that. but look up and find these areas of value the markets and that's where we're focusing on.

from the top down sectors, talking to online portfolio managers meteorologist do pick stocks, they were saying the sell-offs have been unprecedented. the earnings have been very good. so you can just see there's a bit of positioning changes. and those are sort of areas that we look at from that perspective. lizzy: and what about the u.k.? do you buy it why it's cheap? are the fundamentals strong and then layer on the election. does it change anything when markets are so ready for a labor government because of the poll something. colin: yeah. most elections, there was a stream going into the election. we saw that in italy we saw that two donald trump in the u.s. you're going to see a change in

government. and then after as that premium comes up and everything calms down. you haven't got that in the u.k. because everybody's so focused that the labor's going to win. so everybody's already priced that in. lizzy: when we think about central banks, we had the fed saying that we can only expect one more cook this year. how much is that going to hurt the small caps? colin: that's our biggest underweight position in terms of u.s. small caps. less so in europe. but the u.s. small caps. they've been affected by the rise in interest rates more so because they go to the bank to get their financing, whereas these large caps, they don't need the cash. because they are generating cash. but schnappsst small caps is where we see the pressure.

colin: i think that people that are focusing later in the year, i think with the fed sort of saying early one this year, it makes it very difficult for other central banks to start their significant rate cuts cycle. lizzy: traders have changed their positions does it change your view on how slowly the bank of england is going to have to cut rates this year? colin: not really. the cut rates when they need to and they're in a position where, you know, unemployment is low. inflation's coming down. it's been slower than most people thought. but inflation -- prices are still rising that's what people forget the cpi's come lower but day-to-day goods are still going up in price. so that's the thing that voters

will see. goods is more expensive now than it was last year and the year before and the year before. so from our perspective, we look at things like the misery index which puts unemployment and inflation together and if you look at euro zone the u.s., we're back to close to lows. the populous should feel reasonably happy about life at the moment. lizzy: how does that affect the consumer then? colin: in terms of change. i feel poorer. so therefore, i need a change of policy. lizzy: there is a debate over the top savings as well. but i want to bring in the ecb because you say a central bank cooks when it needs to. but there is a debate because it's been overtelegraphed.

do you think that is going to look like policy error? colin: we're discussing that and, it might be seen as precedent because with the turmoil in france, actually, a lower interest rate would help with concerns about their sustainability, the fiscal spending from that perspective, so it's ok. but, you know, we think that you're starting to see the global industrial cycle turn off. and we should have the good pmi from the u.s. yesterday. so we're starting to this see pick up which should be good for europe and china. so from that perspective, you're willing at it going well, especially, if that's happening, weaker euro, industrial perspective as opposed to europe. lizzy: can you explain why you closed and reopened your commodity open? colin: we're because a topdown team. and we just saw a difference in

pricing from the co max which is the u.s. exchange versus the london exchange in copper. and we're like ok, we don't understand that. so let's close it out and just come back. and we saw actually, that's reverted. we've also saw the opec meeting coming up. we don't know. so let's close it. and we've got through the opec meeting. you're starting to see demand for oil start to increase. the u.s. continues to pump oil into its strategic reserve. copper prices have reverted, although you can see today, it's beginning to go out again, that spread. so from that perspective, yeah, we just -- we understand the fundamentals but didn't understand the market pricing. so that's why we've gone back in because the prices came back for the fundamentals. lizzy: humility. i respect it. colin graham, giving us your market update. and we're going to have plenty more of this on the program.

we're going to go to france, facing blowback from the e.u. from breaking debt and deficit rules. more on that for you next. this is bloomberg. ♪

♪ lizzy: welcome back to "bloomberg markets." i'm lizzy burden. and we're going to head over to wall street now where we spoke exclusively with the cfo mark mason. take a listen. >> we want to be in the preeminent bank for institutions

with global needs as well as a leader in global wealth and a winner in the u.s. market for our personal banking business. that's what we are today. and a lot of what we talked about today, again, was really highlighting the crown jewel of our firm, the gateway to the rest to our offering for large institutional clients but also for middle market clients as well as for investors and asset msg in both that treasury and trade solutions business and our security services business. >> it's interesting because to your point, even though security services has been a crown jewel accounting for half the profit recently of citigroups owned entire businesses, it's been hard to explain to investors what it is, what it does. do you think citigroup stock would be trading higher if people understood the business prospects for it? >> i think the security services business contribute a significant amount of value to this franchise. and i hope that after today,

investors will realize exactly how much value that is and how much up-side there is to that franchise and we start to see fit the stock price. mike mayo, wells fargo, being probability but he has been critical here of the wealth business calling the returns low. and how soon and how robust those returns can be? >> you know one of the things that we talked about today is timeline. we talked about the medium term, 2026. we talked about top line growth of four to five percent. and we talked about the services business being a significant contributor to that both in the top line and our services businesses a 20% in equity. and we brought in new management there. and we're keenly focused on how we drove the top line and how we

improve marlins and how we improve returns there. that's going to involve everything from right sizing the cost structure to increasing the bank for productivity to driving new net investment assets for across that business. and we do believe that inside of this window between now and 2026, you'll start to see that value play through our financial. lizzy: so, an exclusive interview with the citi c.e.o., mark mason there. i want to bring you back to europe now the e.u. has delivered a warning to france over breaking deficit and debt rules triggering a process that could lead to fines while complicating campaigns the country with elections less than two weeks away. let's bring in with more analysis with caroline connan. what does this mean?

caroline: france is a sick man of europe when it comes to debt and deficit. that's not me talking, it's the cfo and clearly that sums up the situation that we knew this procedure from the e.u. against the excessive deficit in france would come. but it comes at a very bad time for macron because we're 10 days away from the first round of the elections, he called. clearly the op suspension the national rally of le pen and bardella are going to seize this opportunity to attack the president on how he's handled the french public finances over the past seven years because french deficit has reached 5.5% of g.d.p. last year, which is clearly above the 3% target or limit for set by the e.u.

we've already heard from jordan bardella who would become the prime minister if he gets the majority. he's saying that his ambition is to reassure markets to put the public finances back in order and the first thing he would do if he gets the job as prime minister on july 8 would be an audit of french public finances. so clearly, this e.u. warning comes at the worst time for emanuel macron. lizzy: so is the budget the reason le pen's party talking the way they are? they would back ukraine but not equipment that would trigger a broader war which contrasts with macron's position? does it all come back the budget concerns?

caroline: i don't think it's necessarily linked the budget concerns. clearly, what they're trying to do here is to reassure those who think that marine le pen still have links with russia and the russian president vladimir putin. because remember back in 2017 when marine le pen ran for a president, she got some financing from russian bank. she went to moscow to meet vladimir putin. so even though she has been trying to distance herself from the russian president since the beginning of the war in ukraine, clearly, the strategy from jordan bardella today when he said france will not send any french troops to ukraine is trying to appeal to the murder rate who might be scared that this war will come to france.

so, he actually said unlike macron because a couple of months ago, the french president suggested that he could send french troops to ukraine if france was in danger, if there was a real threat from this invasion by russia and this is what he repeated again today. they will send ammunition and support but they will not send any troops there and he's also against sending french army instructors to ukraine. lyndsey: caroline connan, we thank you. after coming from france from cannes and it was stunning wet where you are. so lucky you. not so in london. let's take you to some other news. meanwhile, golden goose has pulled the plug on its milan listing as sell offin there luxury stock. they have threatened to dent the

appetite even after it attempted its valuation expectations. while demand is strong across the price range, the company sailed that the current market backdrop means it isn't the right time to list. well, coming up on the program, russia president vladimir putin makes a president to north korea and we'll have all the details of that visit even the hug between the two leaders. that's coming up next. this is bloomberg. this is bloomberg. ♪ you know what's brilliant? boring. think about it. boring is the unsung catalyst for bold. what straps bold to a rocket and hurtles it into space? boring does. boring makes vacations happen, early retirements possible, and startups start up. because it's smart, dependable, and steady. all words you want from your bank. for nearly 160 years, pnc bank has been brilliantly boring so you can be happily fulfilled... which is pretty un-boring if you think about it.

lizzy: to the geopolitics now. russian president vladimir putin arrived for his first visit to north korea in 24 years, meeting with north korean leader kim jong un. they signed treaty that kim jong un says elevates their relationship to alicense. and for more, we can bring in our analyst from warsaw.

just talk us through what the u.s. fears could come out of these talks. they've been incredibly friendly, these two leaders so far. >> indeed. it was a friendly -- very friendly visit and you saw a lot of pomp and circumstance around it. so obviously, a red carpet white horses things. it was really a show of a friendship between these two leaders. and obviously, it's the first visit in 25 years for putin in pyongyang. but obviously, it's also follows a visit by kim in russia. he was there in september. what happened after the september visit is what probably worries the u.s. the most. it was the moment when actually a lot of ammunition artillery shells started to flow into russia from korea. what we have to remember is north korea's has one of the biggest stockpiles of

artilleries that it is inoperable when it comes to soviets europe. artillery and weapons, which obviously used for russia the war against ukraine. so, there's some estimates that about like five billion shells have been shipped and it's really gave russia a lot of advantage on the battlefield. and probably the fear here is that when the kim is backing for putin, the concern is that those ties between the two economies and those two countries are going to grow even more. russia is obviously in overdrive when it comes to its war economy. it's producing a lot of weapons, but additional help from korea is going to make it even more difficult for ukraine to fight back and also for the west to sort of provide more support. lizzy: well on the ground, how does it change the situation in

ukraine? >> well at this point, obviously, ukraine is sort of having a bit of a breather, if we can say that. in the sense that there was the six-month gap when no help from the u.s. in particular which served at the most crucial weapons have been coming from. so, over those six months, we have seen how much ukraine is vulnerable in terms of -- if there's no support from the u.s. so, at this point when the weapons have started to arrive and there are artillery shells and obviously, they started to allow ukraine to use the long range weapons a bit more in fighting back russians, we've seen certain stabilization on the battlefield. so what we've seen is that that ukraine's fought back some of the advances that russia has made, especially in northeastern

kyiv where we have seen quick offensive that has been beaten back. but obviously now, if russia is going to receive any more aid, even more support and artilleries from russia, that might be a concern for everyone. lizzy: ok. thank you very much for that analysis. clearly, an interesting meeting of the two leaders after such a long time apart. very friendly coming together now. but coming up on the program, another exclusive interview. this one is with jim ratcliffe, britain's second richest person. that's coming up next. and this is bloomberg. ♪

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>> let's check in on markets. 3:30 p.m. in london. traders looking for fresh catalysts now that they've ingested nvidia taking over apple. the ftse 100 ekeing out gains. fewer than half sectors positive today. basic resources, the leader of the board. the bottom of the basket is real

estate. in the u.s., the juneteenth holiday. markets are closed. treasury also off-line. futures tomorrow point a higher opening. european yields, higher across the curve, across the continent. the two-year gilt yield, this is partly because of the u.k. cpi data today. you had a return to the target but perhaps boe will cut more slowly. the pound trading at $1.27, reflecting that narrative and

brpearrel. the inflation story. jennifer mcewan, capital economics chief global economist. lots of ecb speak to digest. give us your analysis on the inflation reading. are you worried about the hot services print? jennifer: initially more concerned by the print and the market reaction. inflation 5.7%, that's clearly high for boe. a lot of that is energy prices. we knew that would be temporary. what they are looking for is

services inflation to come down. it will need wage growth to come down for that to happen. a lot of indicators in the labor market and the higher frequency numbers are showing that is starting to happen but i don't think boe can cut at the moment. we are hoping it will do so by august. >> you are a former boe economist. they've tried to extract themselves from the political narrative. this snap election going on as well. no party members speaking during the campaign. can they pull off making tomorrow a nonevent? jennifer: probably. it's at the margin. if things were balanced between the decision to cut or not, the

fact there is an election coming up might be enough to stay their hand, to avoid accusations of political meddling. as it stands, the inflation data are still too hot. everything points in the same direction. by august, the banks have more information who will be covering and policies to help decisions. >> we've got the manifestoes. is anyone showing any real ambition policy was? -- wise? jennifer: there's a lot of similarities between the two. no one is proposing a big fiscal stimulus. we been bitten by that in the u.k. following the trust mini budget.

little to be seen in that respect. more redistributive type policies, as you would anticipate. >> i don't usually say what i am about to say. what is your take on what will happen tomorrow? jennifer: we think it's unlikely the s&p will cut rates again this year. -- the smb will cut rates again this year. there is less urgency to bring policy rates down. there has not been enough evidence in this inflation data. it is finally balanced. >> what is your sense of the relationship between the ecb and the fed? is the ecb waiting for the fed to catch up with it? jennifer: i think president

lagarde's has been clear that ecb policy is not driven by the fed and it doesn't need to be. it's not as if the eurozone is an emerging market where fluctuations are crucial. the ecb will respond to its domestic situation. that said, whereas the inflation picture had been looking better in the euro zone, now we see the economy starting to pick up. 1.3% growth. not fantastic but positive at least in the first quarter. also services inflation is looking sticky in the euro zone. i don't think ecb will be in a major hurry to cut again. we are looking for the next one in september. >> part of the reason for that

stickiness is taylor swift. are you a swiftie? can the ecb shake it off? jennifer: my daughter is a massive swiftie. i am too old. it was partly down to her concert, the impact that had on inflation in spain and italy. a temporary effect which the ecb can look through. there was a temporary effect regarding a drop in german public transport fares one year ago. couple different things. what the ecb will be interested in is the fact forward-looking wage indicators such as the indeed tracker, suggests wage growth will continue to slow even though recent data have been worrying. there is cause for hope in

eurozone and to expect rates to come down further but not immediately. >> jennifer mcewan, never too old for taylor swift. we thank you. i promised you another exclusive interview. it comes back to the u.k. general election. two weeks away from britain's heading to the polls. rishi sunak and his party on track to lose two thirds of the seats they won at the latticed -- at the latest general election. >> you got immigration. the other issue is the economic. for the u.k., it is simple. the u.k. economy is two trillion pounds.

the government take half. the government spend is one trillion pound. in my view, any of us, spend 70 billion a year or something like that -- the government spends one trillion. you need to spend well. you are not spending your own money. your spending the population's money. there are good reasons. you have health care, roads, all those things. i don't think the government manages those things well and i don't think it focuses well. i don't think it has the right quality people running it. the health service is a mess. we don't have security anymore. education is a mess. we cannot run sewage systems in the u.k..

we have sewage systems running in the victorian era. we know all the water utilities to be sold off. french companies pay 50 billion pounds in dividends. we need to invest in top class equipment. all of a sudden it's a crisis. the government says we want to buy a water utility. if the people don't behave, do what they do in america, they lock them up. you've got that issue of the economy. you got immigration. we haven't dealt with immigration. we've danced around. 500,000 people came in the u.k. last year. that's two times the size of southhampton.

you think about the infrastructure. one of the basic problems in the u.k., that will go on forever. we speak english in england. the planet speaks english. there will always be a flood of people coming into the u.k.. you've got to deal with it. we probably got infrastructure for 55 million people and we have 68 billion people. nothing works. at the end of the day, somebody has to say, we cannot take anymore people. if you bring 500,000 people in, how many schools, roads, stations do you have to build? we are not doing that. we are cramming them all in on the existing. francine: do you think he will be a good prime minister?

jim: he's a sensible man. i think he would have to do unpopular things to get those issues dealt with. like manchester united, i'm having to do things that are unpopular. at the end of the day, doing difficult things, in a funny way, might make it more popular. you have to make difficult decisions rather than just blowing with the wind. time will tell. i cannot predict how that will go. >> jim ratcliff was speaking to francine lacqua. coming up, the 2024 presidential election is approaching and we will hear from the former house

speaker paul ryan on why he believes the race is currently too close to call. this is bloomberg. ♪

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it's easier to predict here than it is in my country. it's hard to determine who will win. francine: is it not possible to know who will win? paul: it is too close to call. if this is tied going into the election in polling, which is likely, right now trump is pulling at peak, right now biden is polling below his typical performance, but it will probably be a few hundred thousand voters who will determine the outcome of this election. it's that close. francine: what makes a difference in campaigning? paul: turnout. showing up. the ground game.

it comes down to the new swing voter in america which is a suburban college-educated swing voter. in wisconsin, 53,000 wisconsinites in this suburban part didn't vote for trump but voted for every other republican on the ballot and then 23,000 of those voted for biden. it is that close. arizona, nevada, wisconsin, michigan, pennsylvania. francine: what happens if trump is in the white house? paul: on tax policy, personally i think it will be better. a lot of executives feel that way. the 2017 has expiring provisions, some of which hit

small and medium businesses. then we have some corporate provisions up for grabs. the next presidency will help determine what happens. trump will be more pro-business on taxes. biden is proposing to get rid of those things. biden has not reduced the trump tariffs but he is not per bruising -- but he is not proposing new ones. francine: you've called donald unfit for office. are you surprised by the money? paul: it is too close to call. people are trying to hedge their bets. they want to understand which direction the country is going to go. that is how we help our clients. what is trade going to look like? regulations?

m&a? antitrust? etc. right now it is too tight to see. you have to plan for both contingencies. francine: how often do you get asked about budgets? paul: that is my hobby horse. i am concerned. i'm frustrated about our choices for president. neither is proposing to do anything about a coming debt crisis. it's already as large as the economy. we have an entitlement pro blem. these programs are going bankrupt by the end of the deck to -- by the end of the decade. we have to solve that. it's not inconceivable to have a treasury auction failure in a short time. it would probably be after we

are done carving interest rates. jay powell just said he will do one cut this year. and a number of cuts, if all things work to plan, in '25. by '26, let's assume, do we have clarity in fiscal policy? have we got our sheet in a good place? both candidates are not proposing to do a single thing. the only shot we have given that is an entitlement commission with teeth that requires congress to vote on it. the last time we had one of these things, that could be ignored, and it was. it has to vote. no filibuster, no amendments. hopefully you have a president willing to accept the results,

provided they are substantial. that is in my opinion the best way we get out of this. ♪

>> milestone reached. nvidia overtaking apple as the world's most valued company. it's meteor rise to becoming the best-performing stock of the past quarter-century. when it comes down to it, what paved the way? henry: it's not a straight line. it's hard to imagine it would rise by 591%.

it generates revenue from datacenter ai business. chips, people cannot get enough for running ai algorithms not to mention chatgpt or chinese tech companies. gaming is an important part of the business. there ai business has increased revenue 15 times since '20. >> it is not just nvidia. tsmc inching toward its own milestone. $1 trillion.

how much of nvidia's success comes down to the supply chain? henry: it's benefiting from nvidia but nvidia is benefiting from the chain. tsmc is one of the three most major chipmakers, around the world based in taiwan. apple has been its biggest client for the past decade but nvidia is one of its biggest clients these days. in europe, we have asml. they supply chipmaking equipment to tsmc. romaine: >> that news digested by markets. the stoxx 600 lower .1%.

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>> let's check in on markets. the dax lower a quarter of a percent. the ftse managing to eke out gains. traders have digested nvidia overtaking apple as the world's most valuable company and now they want inspiration. europe, half in positive territory.

basic resources leading the gains. bottom of the basket, tech and real estate. juneteenth stateside. markets are closed and cash treasuries offline. tomorrow futures point to a higher opening stateside. to the european bond space, yields higher across the continent. i would draw out the two-year. gilt higher five basis points off the back of the latest u.k. cpi print. the pound trading at $1.27. brent $85 a barrel. next, janet, we have so much data to digest.

all these numbers coming out on the u.s. economy recently. do you believe we will only have one cut from the fed before the year is out? janet: about right. u.s. data has been softer recently. the fed is leaning to cut. they need more evidence. incrementally we are getting that with slowing inflation and a nice picture on the labor market. we are moving in that direction. just not there yet. lizzy: the speculation of a bond rally? janet: that could be harder to come by. market expects two cuts by the

end of the year for the u.s. even if we get there, there would probably not be a bond rally. longer maturities, the scope is less. over the long-term, you need to worry about the budget deficit, the rising debt. there is a place for bonds. it can act as a hedge. we don't see a significant rally in bonds. lizzy: i spent the last couple weeks at london tech week. the sector and the marketing sector, really hyping ai. is it overblown? janet: there is enthusiasm.

how strong the semiconductor sector has done. there are fundamentals that support the rally. look at the books of the semiconductor related companies. very strong. visibility in '25, a lot of these companies have high barriers to entry. they are in a good position to protect margins. this is not just type but it is based on fundamentals. short-term the rally has gone very strong and it looks stretched. lizzy: how much further can we go in chip stocks? how much exponential rise can we see? janet: not talking specifics,

talking about the leaders in the sector across the supply chain, designers for chips, equipment, foundries, memory space, software, networking. there is scope for the wider sector to participate. we have our in-house indicator for the industry. it is still green which indicates there should be further gains in 6-12 months. lizzy: why not buy the u.k. while it is cheap? janet: good point. we moved overweight on u.k. our favorite region is the u.s. and semiconductor but equally we

want hedge in case there is inflationary slowdown. the u.k. market provides exposure to the energy sector, industrial, things like that. it tends to act like a hedge. it is cheap. it's starting to get attractive. we increase it a little bit last month. lizzy: thank you. lovely to have you on the program. this theme of u.k. inflation. new data showing at falling back to the 2% target finally for the first time in three years. it keeps the bank on track to cut but the hot services number, does that mean the cuts will come more slowly?

tom rees has been following the data and market reaction. seems like good news for the prime minister but is it too little too late? tom: good excuse to declare victory. he's declared it a few times. you can always say it more. first time it has been at the target since july, '21./ interest rates are not behaving the way boe would like. there is no hope of a decision tomorrow because of the campaign. the election was hours after the last inflation release. we saw the repricing of markets. markets were already moving to move back expectations to later

in the year. lizzy: interesting about this meeting tomorrow, it's the last one for ben broadbent. wondering what we're are thinking about the committee? tom: they thought ben would want to leave on a final hurrah. say, i defeated inflation before i left the bank. he's been there for 14 years. the addition of claire is interesting. we haven't heard loads. what we have heard is more hawkish. interesting to see where she fits. broadbent was the intellectual underpinnings behind the scenes driving the bank. we will see whether claire does that.

lizzy: and slows the cuts down at boe. anything tomorrow we should be looking at? a surprise? anything that could change pricing? tom: probably get the same votes but maybe guidance but one thing to look out for is how boe is acting. during this election campaign, boe hasn't been able to speak publicly. they keep quiet during these. this will be the first opportunity we've had to see whether they are being relaxed about the overshoot's in services inflation and whether that means they look at cutting in august. lizzy: some people warn you could have arise in inflation at the end of the year. not the best inheritance for

rachel reeves. tom: a bit of a pickup largely due to base effects. what concerns the bank is whether the current service inflation, wage growth, how that plays into future inflation, whether that means expectations on headline inflation are lower. lizzy: that's the bit that they can control. same story for christine lagarde. i'm sure you will be busy tomorrow. thank you for the preview. coming up, we go to crypto markets. they report the sec is winding down investigation into token status. this is bloomberg. ♪

lizzy: golden goose postponed its ipo. what's behind this? reporter: luxury stocks, in the past couple weeks, their closest competitors have come off a lot. there's broader uncertainty

about european markets right now following the elections in france. a broad selloff. there was demand for the shares being offered in ipo but backers were worried about first day performance. that was behind the decision. lizzy: wondering whether it is a european equities thing or maybe it's just a shoe thing. doc martens was kind of a flop. swetha: they were keen to avoid another ipo debacle. they didn't want another poor performance. they decided to try it at another time. lizzy: the political risk.

maybe after the elections they will reconsider? swetha: it's unclear. it will be tricky. now there is a marker. the next time they try, investors know exactly what the stock's worth. they have to be confident of that first day. we have to see how markets pan out in the coming months. lizzy: that's what makes things get busy and exciting. golden goose on the shelf for now. ether climbing amid speculation the sec probe may be easing.

this comes amid possible approval of ether etf in the u.s. emily nickel, i'm glad you can explain. what's the speculation based on that this regulation will get eased? emily: consensus say they received a letter from the sec saying they concluded the investigation and there won't be any enforcement happening as a result of that against consensus. what we have not heard is from the sec. at the moment it is not official. it's a nice boost to the market thinking perhaps we might look

forward to is theory him etf's being approved -- ethereum;s etf being approved in the near future. the sec chair has always said he didn't think bitcoin fell into the commodity bracket. they weren't sure on ether. ether is the token that runs on the blockchain but the blockchain is home to many currencies across the spectrum. if it is decided that ether is a security, that could spell trouble for other coins in the system. lizzy: what's the difference?

why would they be classed differently? emily: there is difference in how you would apply the test. security determines which regular word -- which regulator would oversee the assets. both regulators think they should be in charge of crypto. filings have come out for both. it is the basis of a lot of sec action. it is not definitive authority. if ether is found to be a commodity, that will make the crypto industry happy because it is a regulation they are more familiar with, less restrictive and better for the industry. lizzy: the blockchain is the most important for crypto based financial services. what's the outlook?

bitcoin sentiment falling, a one-month low. emily: bitcoin is operating in a vacuum. it is heavily correlated with tech stocks. last year it broke out of that to perform better. this time around, it's doing worse. that is potentially because of the etf's being launched in january. a lot of people piled in. since then demand tapered. it is operating on its own. ether dictates a lot of what happens with the smaller enterprises that people like to bet on. more chance for reward, more chance for loss. lizzy: i could listen to you all

day. thank you. coming up we bring you our interview with thierry koskas. this is bloomberg. ♪

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lizzy: a slowdown in evs and the situation in china. citroen sat down with francine lacqua. thierry: the market remains strong.

we are confident market conditions will be favorable in the months to come. it's a question of being able to offer cars the customer needs. particularly ev. we need to have affordable electric cars. francine: the slowdown have been more pronounced for ev cars. this varies from country to country. how do you see demand in general? thierry: i understand there is a slowdown in some countries. we have to grow.

'25, like any other manufacturer, we have to double the share of electric cars. these are short-term objectives. at the end of the day we have to sell ev's profitably. which means we need to afford products. when we look, first, today, the new electric suv, we are coming with attractive offers. we think it will enable the electric car sales to grow. francine: do you worry about pricing? thierry: pricing for ev's is a

challenge. we have to work on that. we are competitive. today you do not find an electric suv below 30,000 euro. we are introducing that. it's not only a question of price. it's going down. it's also a question of usage cost. if you use a c3 ev versus petrol, you probably say 1000 euro per year. it is significant. the selling price may be higher. in terms of usage cost, customers will enjoy a more favorable usage cost. francine: if it's not translating to consumer demand, it is tricky.

the incoming additional eu tariffs on chinese imports, to you expect that to give a big boost to the market in europe? thierry: the chinese cars are coming. they are challenging us. they are with competitive offers. we need to fight with the same weapons and produce cars at a competitive cost versus the chinese. this is what we're doing with the c3. we think we have competitive costs for a car made in europe that will enable us to face chinese competition and participate in the growth of the market in europe. lizzy: coming up i'm joined by zachary hill of horizon investments. this is bloomberg. ♪

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lizzy: we are getting toward the end of trading in europe. uninspiring day. the dax in frankfurt lower. the cac 40 lower. ftse 100 managing to eke out gains. the broader stoxx 600 lower. a day digesting the news nvidia overtook apple as the most valuable company. looking for something else. u.s. markets closed today for the juneteenth holiday. futures stateside pointing to a higher open tomorrow across the

pond. nasdaq higher. the fed. it's been taking things cautiously. it feels understandable given they got things so wrong on the transitory narrative? zachary: there are good reasons for concerns. they messed up on the transitory coming out of covid. that's understandable. really extreme economic environment, it's easy to make mistakes. today, rates are 5.5%. growth is humming.

nominal gdp still above pre-covid levels. ecb delivered a 25 cut. now the path is uncertain. the fed wants to make sure it is a series of cuts. they will wait until they feel confident that it puts them not in play for the summer. lizzy: the ecb june cut may be a policy or? -- error? zachary: it is too early to tell. it does cloud outlook. it's not official. there is unofficial coordination around interest rate policy.

we are to see diversions. ecb, sweden, switzerland. australia is not contemplating cutting at all. they are thinking about potentially hiking. it's a fertile backdrop for macro after everything was dictated by the fed for the last nine months. lizzy: not everyone agrees. some people take it at face value that ecb does its own thing. perhaps there are more unofficial back channels thinking going on. you have cooler readings on cpi and ppi in u.s. zachary: we are not positioning for inflation to rise but given the mood in breakeven

expectations, there's opportunity in inflation sensitive parts of the market. in the event this process, which we don't have a good handle on how it actually works three years out, slicing and dicing inflation, saying oh well, it is because of this or that, now we are talking about auto insurance, and really as you take a broader look, our view is the economy is growing rapidly. a resilient labor market. general take-home pay individuals in the u.s. have is running above pre-covid. that is spending power. balance sheets are stronger and more resilient than people understand. not very many people are paying

high interest rates we have. a lot of that has to do with the structure of the u.s. mortgage market. prices have rendered sheets in good shape. that resilience, based on what we've seen, will potentially hedge some of that. lizzy: what's the view from charlotte on european equities given the political uncertainty we see here? zachary: surprising results. we will be jittery for a few weeks. as we take a broader look, international stocks in general have not been able to get off the floor. a lot of what has been driving indices has been ai and tech. outside a few names, there isn't

a lot. broadly speaking, that's an area we have been avoiding. we think this overhang from french political uncertainty is, and potentially monetary policy, will keep foreign investors away. we've been reluctant to embrace fit. it's another reason to hide out in tech and ai in the u.s. lizzy: thanks so much. quite a pessimistic view on europe. if we break down europe, we've seen london overtaking amsterdam as the top stock trading hub in europe in may. it's the first time london

topped amsterdam since july, '21. frankfurt and paris just shy of 5 billion euro. something for the brexiters to rub their hands about. banking fees may surge 50% in the second quarter compared to one year earlier. sonali basak caught up with mark mason at services investor day. mark: we want to be the preeminent bank for institutions with global needs as well as a leader in global wealth and a winner in the u.s. market. that's what we are today. a lot of what we talked about was highlighting the crown jewel of our firm, the gateway to the large institutional clients and

middle-market clients as well as investors and asset managers in the treasury and trades solutions business and our security business. sonali: even though security services has been a crown jewel accounting for half the profit recently of citigroup's businesses, it's been hard to explain to investors. woodstock be trading higher if people understood the prospects -- would stock be trading higher if people understood the prospects? mark: i hope after today investors will realize how much value it is and how much upside there is to that franchise. sonali: today you are seeing it in the stock price. mike mayo, a big proponent of stock.

he's been critical of the wealth business calling the returns pitifully low. do you have a timeline for when investors can expect returns? mark: we talked about timeline. the medium-term. '26. topline growth. 5%. the services business being a contributor to that in the top line and our services business, a 20% return on common equity. in the wealth space, we are keenly focused on how we improve margins and returns. that will involve rightsizing the cost structure, increasing banker productivity, driving new net investment assets across the business and we believe between now and '26, you will start to see that value play through.

lizzy: coming up france getting a slap on the wrist, facing blowback from the eu for breaking deficit rules. this is bloomberg. ♪

lizzy: france and italy

reprimanded by the eu for running big deficits. this could in theory prompt billions in fines. it comes at a time of uncertainty in french politics. talk about how bad the situation must have got for the eu to start talking about fines for france. will: they would be a long way off. it's a slap on the wrist for france. politically it couldn't come at a worse moment for president macron. he's always structured his

government around sensible economic policy. this is an opportunity for those running against his party to say this guy doesn't have it. he hasn't got this wonderful record of finances that he may say he has. lizzy: will this move the dial when it comes to polling in the legislative elections? will: i don't think this will make a huge difference to the polling. another stick for macron's rivals to beat him with. looking further, it heralds a difficult summer for whoever forms the next government. they will have to negotiate with the commission to come up with a plan to get the french deficit under 3%.

depending what government we get, that could be fraught. some of the parties are polling strongly. they are very pro-european. some are saying they would go into a confrontational situation against brussels. lizzy: talk us through the polling. will: marine le pen's rally is projected to have the largest share of the vote followed by a left wing bloc made up of social democrats to communists, pulling in second, and then mac ron and his allies in third. the share of votes they might get at the initial level is unlikely to map onto who gets

the majority at the end of the day. it seems unlikely anyone would emerge from this election with a majority. part of the reason we are getting fiscal uncertain the. -- uncertainty about what comes next. lizzy: thank you for the analysis of the latest polling data out of france. coming up where joined by the ceo of zilch on the new financing deal. it's a biggie. this is bloomberg. ♪

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with watsonx code assistant. ibm. let's create. lizzy:zlch has raised $127 million in a debt financing deal organized by deutsche bank. lovely to have you back in the studio. how are you feeling? philip: we are feeling good. it's taken months to get this done. thank you for having us. this means growth. it's a securitization vehicle.

deutsche's leading that. this allows us to triple commerce which is phenomenal. we are excited. we can accelerate the rollout of our product roadmap, continue to capture market share at a time when others in the space find it difficult. lizzy: what changes for a customer? philip: everything continues to get better. our engine is called an ad subsidized payments network. this is driven through ai. the more sales we generate, the more commissions this network will pay and that means credit gets cheaper and is free or deals and discounts get bigger. everyone needs a break now.

how much more can we put in people's pockets? lizzy: you've got apple this week shutting down its own pay later program. why are you doubling down? philip: it's difficult for us to speak to other companies. hard to say what's happening on the inside. what i can speak to is what is going well for us. three things are working well. you have to have regulation. this market, you need to be regulated. second, you need diversified streams of revenue. we are making a variety of revenues. third, you have to go direct to customers.

you need to own the relationship. lizzy: why have you gone for deutsche bank? philip: we ran a process. this took a few months to complete. we had 10 top banks moving into the rfp we ran. deutsche is known for ingenuity around lending. it is their core. what we see from this is you have a bank taking a retail deposit and has gone we are willing to invest a pound from uri into this book. that's how safe this is. lizzy: you said recently that timeframe for a listing was a

year or two. what about now? philip: it's a combination of factors. this helps us move toward ipo. we have to report on this quarterly. deutsche are the first major partner. we will bring in others. that's a big step toward being public. we need to see the other things we've talked about to bring the timeline forward. interest rates. we need to see lazy capital moving back to equities. ipo markets opening back up. lizzy: would you entertain a takeover? philip: interesting question. depends which way round. lizzy: i wonder what is keeping you from the ipo? philip: it's all about timing. if we are going to go to market,

we have to be at a size where we can generate good returns for shareholders post ipo. we need to get the timing right. lizzy: there is also the location. london seems an obvious choice. why aren't you convinced? philip: we are not saying we are not convinced. we are saying we have to do what is right at the time for shareholders. you can argue. we've been saying a couple things. in the u.s. and the u.k., capital has to move back to ipo's otherwise it is not interesting anywhere. in the u.k. specifically, we know we need to change things. we need liquidity in the market. we have to have that. we need perception to change around the lse. we are encouraged. we cannot wait to see what

happens with policy. lizzy: we had the manifestoes and the other parties. has that tempted you to list in london more? philip: we are relying on conversations with partners moving forward. it's different with what people say now versus what happens after they are in the seat. the clock is counting. we are almost there. we know who will be taking ownership of this sector. it's about to happen. lizzy: you will have to come back and tell us where you will do the ipo as soon as we have the election results on july 4. always a pleasure. that does it for markets. you are looking at futures pointing higher for the wall street open tomorrow. this is bloomberg. ♪

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