>> good morning from the european headquarters in london, welcome to bloomberg markets. president biden faces mounting pressure to drop out of the u.s. presidential race. president volodymyr zelenskyy challenges donald trump to reveal his plan to end the war. and marine le pen lashes out at her rivals in the final round of the french elections. the u.s. markets are closed for

the holiday but this is the picture of european stocks. asian stocks rallied after economic data support the case for federal reserve interest rate cuts. global stocks in general are on track for the longest stretch ever weekly gains since march. soft economic data from the u.s. revives the possibility of a rate cut in september. and then the red-hot washington debate about whether biden will scrap his run for reelection is spilling into wall street. traders are shifting money and we would love to show you the futures. happy fourth of july to all of our american friends. treasuries and some of the other assets -- impacted by donald trump's returns to office -- return to office. the drumbeat of pressure on joe biden to drop out of the presidential race is getting louder. biden is rapidly losing supports of democrats in congress and dozens demanding that he withdraw although the white house denies the report that he

is considering bowing out. john joins us. so good to have you in london for all of that expertise on u.s. politics. it seems like we are talking about a velocity now because there are so many rumors and speculation. his joe biden going to find it impossible to stay on? john: i will admit there is a slight issue because i am not hearing my voice. could you repeat that question? sorry about this. francine: john, i do not know if you can hear me. john: i can now. francine: you can now? it is 50% of the job done. my question was because of all of these rumors and concerns of what we are seeing in the polls, will it be impossible for joe biden to stay on as democratic candidate? john: i suspect it will.

the some ways in which it might happen but it seems that the weight of speculation and the amount of damming evidence coming through from polls will probably be enough that he realizes that he has to relent and the risks of somebody standing down and the kind of chaotic uncertain situation if we did are going to be less than the risks of him continuing and having an election with very important issues at stake which would be dominated by arguments about one man's mental acuity. ultimately i think the odds of his standing are very strong, 70 to 90%. francine: there is a number of things that you hear, he is impossible to replace and no one has a chance of beating trump and that does not look likely because kamala harris has been doing a little bit of headway. the other question is what is

the procedure for joe biden to be replaced? john: if he stands down, first of all but his plane is that the delegates are committed to vote for him, he does need to stands down. you assume -- and he has to do that before the election. having done that and if he does not stands down altogether in which case kamala harris becomes president and it really gets difficult to choose anyone else, then those delegates do have a voting -- the phrases that he can release them to vote for who they wish. and you could have an open convention which used to happen all the time until 1968 and the horrors of the chicago convention that nominated hubert humphrey. that is basically what would happen. there are a number of reasons why kamala harris is suddenly

beginning to break through as the most likely candidate to do with the dynamics within the democratic party. if she is a woman of color and she is the obvious next person in line, it is really difficult within the democratic party to replace her with anybody else. i think the other critical thing is that she has been vetted by a national campaign and four years as vice president. if you go with gavin newsom, you do have this extraordinarily thing that his ex-wife is now engaged to donald trump's son. it is so difficult to work out. it is so difficult to work out whether he would survive. francine: are you surprised, first of all disclaimer, you are the first newsletter i read every morning at 5:00 a.m. london time.

money is shifting. so wall street is shifting money from dollar in treasuries the other assets impacted by donald trump's return to office. it feels too soon to make those bets. the election in the u.s. is november 5. john: it is fair to say that after that debate you want to be in line with the probability. i think it is fair to say that the chances of donald trump winning rose significantly after that debate because of the debate. and it is appropriate something of a reaction to happen. i do think the clearest trump trade that you can see anywhere is the 10-year yields rise fairly sharply is because of tax cutting and tarriff being seen as inflationary. but i do also think that the fact that 10-year yields are still not as high as they were

at the beginning of the year and the yield curve is inverted which does not suggest great dynamism. that is a nudging up of the probabilities that trump is winning norm -- no more than that and that seems to be reasonable. francine: thank you so much. also joining us so much -- also joining us is alex, thanks you for being here. there is biden drama and it seems to permeate through a lot. global stocks are having a good week. what is supporting them? alex: that is a good question. looking at the number of risks, it is a very good question. on positive trends that we have seen, can point to some extremely well-known trends, the ai spend going on. that is an explict -- that is a considerable amount of money going on. just from the core releases earlier this year, we are

nudging $200 million of spend. some of these trends are significant. behind that the economy despite the challenges we have seen has been very resilient, consumers continue to be resilient and even the savings rates comes down a little bit. there is a huge amount of resilience in the face of some of these challenges. francine: i know you are still long semi conductors. it looks expensive. alex: doing global you have a lot of places to look. what i draw attention to is the company tsmc is trading just over half the valuation of the stocks for example. despite being a destination you cannot avoid. it has made customers apple and nvidia, everything is driven by their capabilities. you go on a much lower valuation which is very supportive to the investment case. francine: what are markets

missing? it feels like politics is permeating everything which means that i guess that that diatribe -- the venn diagram is one way or another and it is difficult to calculate risk. alex: some of the knee-jerk reactions generate tremendous possibilities. it is one of the biggest reasons we have had for many years with about 4 billion people committed which is incredible. it can lead to unpredictable results. you look at the results of our and you have the pollsters expecting prime minister modi to come up with a super majority and he did not. the market sold off 6%. but to that .10% or so. you get the knee-jerk reaction and maybe there is a balance in the political set up and that is positive thing for long-term. francine: so you look through the political to look at value opportunities?

alex: so when you get that sharp reaction, you get some good opportunities to be potentially exposed. there might be threat reaction if the change of regime is particularly negative for the economy and markets. you can get interesting dislocations between what the pollsters expect and how reality comes in. we have seen the awful mismatch between those two things between the 10 -- in the last 10 years or so. francine: we have seen some disconnect, where we see a little bit of softening and inflation coming down a little bit. and how much does a rate cut even in september support your look on equity is. alex: if you go back to pre-christmas we went from pricing no rate cuts to six suddenly towards christmas.

it is a bit of a roller coaster. i am trying to guess that. but, we are seeing a continuation of a few trends. you mentioned a couple of them. the housing starts and market remains pretty soft. jobs have been remarkably strong and resilient and certainly they are survey based softening is not dramatic. so maybe there is a bit more room to go. also looking at pmi and consumer goods cpi data that has gone negative. francine: you like u.s. equities? you are selective? annmarie: do not -- alex: we do not buy a market but we tend to buy stocks. of course we look at them on a basis. the aggregate market however, there are lots of -- there are lots of strategies and other markets around the world. some of that is drive -- driven

by growth prospects and some of that might be -- might be inconsistent. there is a varied picture at the stock level. francine: thank you for joining us. coming up with the european commission vice president about the escalating tensions between the block and china. that is next, and this is bloomberg. 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.

francine: it is the countdown to the market open as we bring you the first trades.

francine: welcome back. now, like everyone else president zelenskyy is preparing for united states where donald trump might be president again. in an excuse -- in an exclusive interview he said he would like to understand how donald trump rings ukraine should win the world. pres. zelenskyy: so let us imagine that might be trump. in november. and he knows how to end the war, he has that plan. me, as the president of a country at war, not theoretical,

but a realized president, i would be -- i would like to be prepared. we are a big country and we really depend on the aid from the world. and we depend on the aid in the position and the stance of the west. so i would like to understand what would it mean for him to finish the war fast. tomorrow do we want the war to be over tomorrow? we did not start it, it was putin who started it. if trump knows how to end the war, he should tell us today because if there are risks to ukraine's independence and risks that we will lose the statehood, we want to be prepared for this. we want to understand whether in november we will have the powerful support of the u.s. or if we will be all alone. francine: so, will ukraine have

the u.s. support or will the country have to keep fighting without. one of the possible consequences. coming up the european commission vice president joins us on the escalating tensions between the block and china over electric vehicle tariffs. this is bloomberg. ♪

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francine: welcome back. chinese ev brands are holding onto their shares of the slumping european tv market. that is ahead of new tariffs designed to protect local carmakers from their low-cost imports. joining us to discuss this pinch points is the european commission is -- commission vice president and trade commissioner. thank you for joining us. it seems like china has already launched an anti-dumping investigation.

how concerned are you about the possibility of retaliation to the ev tariffs? valdis: good morning, and indeed. today they took the decision to impose a professional tariffs on ev vehicles. basically to ensure that it is a level playing field. the market distortion coming from subsidies with china is providing problems for economic producers. ours has been correspondence with applicable wto and e.u. rules. from that point of view we do not see any basis for -- and it is clear we need to -- we need to treat different cases separately. francine: you are not worried about retaliation. they are investigating it. if there was to be retaliation

are there specific industries that you think will be most at risk? valdis: we are not seeing as a racist -- basis for retaliation and what we have done is in line with the rules. and actually we are the largest market which is actually open to chinese battery and electric vehicles. we know that the u.s. imposed a 100% tariff on those. our aim is not to close the market to producers from china only ensure fair competition and a level playing field. therefore, once again we do not see any basis. francine: how is progress going in terms of talks with china and is their willingness to make substantial changes that lead

you to put the tariffs on? valdis: those talks with china are ongoing indeed as they should as a truly beneficial solution will emerge and we will find ways not to apply the definite tariffs. but it is very clear that solution -- that the solution needs to resolve the market dilution. and dealt with quickly. francine: are you worried that member states can actually block the tariffs in november or force the e.u. into a bad deal? valdis: obviously we are in close consultation with member states and we are also talking about a provisional new piece. and member states are also

interested to protect automotive industries from unfair competition and risk of injury and it actually means that the market share of the chinese brand and broader made in china electric vehicles are rapidly growing. so if we leave the situation unaddressed it will create more problems for the e.u. automotive industry. francine: we are days away from the second round of the french election. are you worried that a hung parliament would delay negotiation on policy or delay the workings of the european commission and the e.u.? valdis: it will definitely help to provide an institutional response because in the european commission we have clear's policies -- clear policies and we are not going with party politics in the member states.

we are working with democratically elected or appointed authorities for member states. francine: lot the out has -- latvia has nominated you for another role in the commission. is there a portfolio you want to be in charge of? valdis: indeed. there is a nomination. but portfolio distribution comes at the later stage because all countries need to dominate certain candidates and sense the president of the european commission and we have the president-elect next week as the european parliament intends to have a vote -- actually the week after next week. and only then discussions about portfolios would begin. so clearly, i would be interested to say -- to stay somewhere in the area of economy and finance. francine: there are a lot of rumors that there needs to be a

role for vice president for economic security. do you agree and is that something worthwhile? valdis: it is premature to engage in these conversations because many countries have not sat down to say yet and it is clear that the president oversees the overall picture and then oversees the portfolios. francine: always great to see with the cash to speak with you. the e.u. trade commissioner and executive vp. we speak with a vanguard economist as france readies to go to the polls. we are seeing a little bit of movement when it comes to bonds. we will bring you all the market next. -- market action next. ♪

francine: welcome back to "bloomberg markets," everyone.

the far right national rally ending ground in france ahead of the election. the centrist alliance pulling 200 candidates from runoff ballots with holes integrating that they may fall short of absolute majority. joining us now from our paris bureau is our bureau chief, alan katz. eight to have you on the program . how do you think it will all work out? alan: asking a lot for me to project the whole election. [laughter] people can be surprised by how voting turns out. as you mentioned, it does seem to be trending away from the national. they came out a strong first in the first round of voting last sunday, they had one third of the vote. it wasn't really clear at all whether or not the left and the macron centrist group would be able to come to an agreement and pull out enough candidates to make a difference on these

three-way runoffs that would have favor the national. they did, in fact, so it seems that the trend is away from the national rally getting the majority. you mentioned polls. there's been only one seat ejection poll that came out and it was late yesterday putting the national rally between 190 and 220 seats, far from what they would need for a majority. it is only one seat projection. we are waiting others from other companies to see if they confirm the harris poll that came out last night or yesterday. but it looks like the trend is in that direction. as you say, it is a couple of busy days to go, i wouldn't want to put the cart for the horse. francine: this is not together. it's not really the case in france. he would have very different factions if the center melts

away. alan: not only is there no history of it -- they have tried it for the last two years, since 2022 when micron wasn't reelected, but then his party was the biggest without outright majority. he vaguely tried to create a coalition, but there is no history of it in they are bad at it, they are not used to trying to cooperate with other political groups. they are used to having an outright majority. now if you get a hung parliament, what you will have is, according to recent projections, the biggest single group be the national rally. they have said they won't enter government, don't on to over the prime minister ship without outright majority. taken at their word, if they refuse to enter government it leaves some combination of macron and his centrist groups, possibly a party called the republicans, more like the

center-right. the socialists, the greens, a lot of people don't want to operate with the far left. it's complicated and as you say, this isn't a history. these are not countries where they are used to doing this kind of thing and it would relatively acrimonious. to be politic. francine: i love trying to brief americans on this, their heads are exploding it so complicated. this isn't something that you see in other countries. marine le pen said that with the blocking of her party, that would create more divisions. is there a kind of sentiment that if they block too much, even if the far right doesn't do well, they will just keep on growing in the years ahead? alan: so that's definitely a possibility. populism, nationalism has been rising across the west.

just because the national rally doesn't get a majority in government this time around doesn't mean that they won't necessarily win the presidential or the next elections in 2027. so, she might be right, it may not do anything to, to narrow the divisions in french society or any other society. in france they have something called the republican run, the idea that everyone should and together to bar the far right. it's come under a lot of stress in this election. it has largely been read related with centerleft groups coming together to pull out third candidates in these three-way races. the republicans did not do that generally and they gave no advice to their voters about who they should vote for in the next round. you do see that being chipped away at and it isn't clear that it would hold or be re-created

if the situation were to come up again in a few years. francine: alan:, thank you so much. france will be holding their last bond sale before the election today, which could indicate how investors are grappling with political uncertainty. for more on all of that, the vanguard chief european economist joins us now. it's complicated. a million things are going on but we are not used to seeing this kind of politics unravel in france. what's it mean for markets and good morning. x good morning. thanks for having me. as your previous speaker said, this is going to be some kind of hung parliament or coalition, which makes it quite difficult because these key decisions have to be to great -- to be agreed upon. we are looking for credit spreads in france over germany, it exploded after the snap

election announcement up to 80 basis points. it has come down of bit because le pen didn't get the majority. she did get a majority but it has edged downwards and in markets you will see that in risk premium playing out and we could see that going on for several years. francine: again, what is the main concern for markets? fiscal spending? retiring at 60 or 64, you could find money for that, or are they just worry that there will be political unrest with people taking to the streets again? >> it's the fiscal in terms of what markets are worried about. deficits in france have been 5.5%. even on the current projections they can only get them down to 3% taking into account the reform on the pensions you

mentioned, obviously unpopular. that's the key concern for markets on the fiscal side. but there are other broader issues in france that they are dealing with. for example on the pension reform. very generous pension payments, but at the same time you have to work 43 years to qualify. those are some big, deep issues. also issues that a lot of western economies are facing on immigration and immigration policy that created those tensions. those are the biggest issues. of course, some of this will spill into the broader euro as well. francine: in terms of decision-making or in terms of a blueprint of what other countries can do? >> i think it spilling over in many ways with france, first of all, being one of the largest members of the union, you see an effect on the euro, on european equities as well. so, there is some spillover obviously. greatest in france, but this

whole issue about rising credit spreads have seen in italy previously and now in france, what does it mean for the european central bank? how would they address that if it got critical levels, which it is nowhere near at the moment. francine: but they have the tools, which is different from 2014 or the middle of the crisis in recent. we had the german finance minister saying that it would be illegal if you were to step in. tightening those spreads. >> absolutely, 10 years on there is a lot more tools, they may that more explicit. as with any central bank intervening in the markets, they are not allowed to intervene in the primary markets or secondary markets. it's not ideal. you want the free market to work , you intervene only if you have to.

francine: i was just back from portugal at and it's interesting, there seems to be a wait and see from the ecb officials. after having telegraphed very well in june, now they want a lot of data points to make sure that services inflation is going down. >> no, absolutely. sticky inflation, the last mile being hard to beat, something all central banks are worried about, particularly in europe where service is openly -- is over 4%. that is why they waited to see those data points on wages, which ultimately are the biggest driver of services inflation. data dependent to be confident for they take the action. the bank for international sentiments giving a stark warning there last week, saying hey, be careful, let's not cut to quick.

let's wait to see the evidence, let's be cautious and really hit inflation on the head, get it back to two percent and then we can do more. francine: we asked the chief economist there about the fed and if they don't cut, is it difficult for the ecb to continue? >> there will definitely be overall constraints and the global world where there are spillovers, where the fed doesn't cut, interest rates are higher and we see investors going towards higher returns. that shows up in a higher dollar and a weaker euro, which feeds into higher european should -- european inflation. there are constraints. does that mean the hands are tied? our view would be three cuts this year. if it was cutting as well, potentially they could do more. francine: so interesting.

thank you for joining us there from vanguard services. nato allies agreeing on funding for ukraine, we will have plenty more on that, next. this is bloomberg. ♪ this is clem. clem's not a morning person. or a night person. or a...people person. but he is an "i can solve this in 4 different ways" person. and that person... is impossible to replace. you need clem. clem needs benefits. work with principal so we can help you help clem with a retirement and benefits plan that's right for him. let our expertise round out yours.

francine: welcome back to "bloomberg markets," everyone. we had been talking about the frack -- french auction, and it actually happened. this is the latest bond sale before the second round, the final election round, and it went smoothly, good and reassuring for the markets, taking down on the uncertainty that may have abated. the treasury raising 10.5 billion euros from the offering, the maximum amount of bids in bonds that were 2.58 times the amount sold. encouraging from france with the last bond sale before the second and on sunday. nato allies agreed on a 43 billion dollar funding target for ukraine according to alliance diplomats. members of the organization agreed on the figure with the caveat that it you'd every year and could decrease or increase depending on the situation. bloomberg spoke with the u.s.

ambassador to nato to discuss the political challenges nato is facing today. >> it's not necessarily about guarding against political change. the alliance is 75 years old and has dealt with many decades of political changes, different administrations coming in on both sides of the atlantic. we can cope with that irrespective of what happens. this is about helping the efforts being provided to support ukraine, coordinating that and bringing them all together under one roof. nato feels like it has institutional advantage in doing that, since it helped so many members in eastern europe transition into the alliance to become full-fledged members over the last 20 years. modernizing, helping a country modernize its forces is something we know how to do here

, which is why nato is moving out with these initiatives. >> ambassador, for how long? sustainability of aid, how long is ukraine expected to need that kind of aid? are we talking about years, a decade, months? what kind of timeframe? julianne: we cannot predict with certainty how long the war in ukraine will last, but let's make one think we're, one person started the war, vladimir putin. he started the war two years ago . he is the guy who can stop the war if he so desired. we will work with the ukrainians to make sure they have the assistance they could defend their territory, but we will also work with the people of ukraine towards peace and support the efforts they have undertaken in recent months to move towards some sort of negotiated settlement.

>> final question on the cooperation between russia and china, how preventable is that from your perspective? can anything be done to counteract it? >> we spend a lot of time here talking about the deepening relationship between the prc and russia. china takes every effort, every chance it can get to argue that somehow it is a neutral player in the war in ukraine, but in reality, the prc is providing a long list of dual use components, things like machine tools and microelectronics that are enabling russia to pursue a war of aggression in ukraine. so, here inside of nato we are making sure that we can expose the fact that prc is no longer a

neutral player and warned china about the risks of getting behind russia in this unprovoked war of aggression. francine: that was julianne smith speaking to kriti gupta. ross matheson joins us now. i have 1.1 million questions. if all that anyone is talking about is a donald trump presidency, what does that mean for nato? is he trying to renegotiate funding? it will be interesting to see nato in europe cope with a potential second donald trump presidency. >> biden has threatened to for funding from nato. he has also threatened to not support nato countries if he thinks they are not doing enough to pull their weight.

does he defendant country collectively but not you? in the end does it destroy nato from the inside out? that's a big western for the collective defense idea of nato in europe. fundamentally, a donald trump presidency could be significant for ukraine directly but also for nato as a whole. francine: there is a big nato summit coming up in the u.s. with all the talk of joe biden needing to step down. what do you make of that timing and if you can stay on and what it tails? >> there's a lot of unknown unknowns with a lot of narratives around the future of joe biden as the democratic candidate the next election and if he can continue with all of those questions about durability in a demanding job as someone who is obviously elderly. so, by the way, is donald trump, but all the questions around it

have focused on joe biden. is it the point where there's no conversation around his record as president because the narrative has gotten so strong? it's just all about his age and so it does he decide to step aside as a candidate and is there a conversation around him needing to step down as president before the election? does he continue as president but step aside as candidate? there's a lot we don't know and as you say, what's the timing, potentially? we have drumbeats reportedly getting louder. does he have to make a decision be or the nato summit and before the deming attic convention? if he's going to step aside, does it need to be soon? francine: probably, right? it feels like it needs to be sooner rather than later to allow the process, but it isn't an easy decision to make. >> extremely difficult. you can see how the conversations are painting him

and his family. questions rent his stamina, physical health, mental health and all of that, but it is obviously something that will come to a head soon. francine: thank you very much. coming up, part of our interview with nouriel roubini. this is bloomberg. ♪ ♪ well i was raised by careful hands ♪ ♪ yeah, they made me who i am ♪ ♪ so i'm off to see... ♪ we invent them. we design them. we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

francine: welcome back to this is bloomberg. ♪ -- welcome back to "bloomberg markets," everyone. nouriel roubini says the federal reserve is doing it right and he spoke exclusively with alix steel and scarlet fu. take a listen. nouriel: i would say they are overall doing it right. on the one side, there is worry that there's a surge from the first quarter that might slightly more than temporary, even if the latest number suggests a softening of core pce. but now there is also something of a slowdown of the economy, something of a softening of the labor market. but the unemployment rate has ticked up towards 4%. so, there is a better balance

with a slowdown in the economy. based on the dual mandate, they are worried about inflation and growth as well. i think they are right in waiting before they start to cut rates. alix: do you think that the risk should be on the inflation side of the growth side? which camp would you be on? nouriel: until recently, i would have argued that the biggest risk was upside on the inflation side. now, economic oath is slightly moderated, potential is slowing down. there is a slackening in the labor market. i think that the fed that wants to achieve a soft landing and not a softish landing, 2% would be a short shallow recession, so they need to start thinking about the downside on economic growth. scarlet: are we out of the woods in terms of avoiding a recession and at most getting a soft landing? nouriel: yes, with one caveat.

one year ago everyone worried about a real hard landing. then there was a risk of a soft-ish landing. then everyone said no we will achieve a soft landing. recently there was discussion of the potential of inflation above target, so the risk was that the economy was going too fast and it would be a no landing situation. no landing would leave the fed staying high or higher for longer. that was the risk. i would say the right now the softening of the growth on the labor market side suggests maybe a risk of no landing has been reduced and we are going toward something closer to the goal of the fed, soft landing. francine: that was nouriel roubini speaking to bloomberg yesterday. a reminder, u.s. markets closed for a holiday, happy

independence day and fourth of july to our american friends. european stocks are steady. global stocks are on track for the longest stretch of weekly gains since march, driven by soft economic data in the u.s. that revived of the possibility of rate cuts in september. coming up, alberto gallo. ♪ i'm a rock star. great job putting finance and hr on one platform with workday. thank 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. there are so many tina feys i could be. so i hired body doubles. mountain climbing tina at a cabin. or tree climbing tina at a beach resort. nice! booking.com booking.yeah.

tom: good morning, welcome to "bloomberg markets." president biden facing mounting pressure to drop out of the u.s. presidential race. the ukrainian president, volodymyr zelenskyy, challenges donald trump to reveal his plan to end the war. far right leader marine le pen lashed out at rivals head of the

final round of the french election. u.s. markets closed were there independence day holiday. checking ahead on european futures across the benchmark, pretty decent gains, 5 -- .5%. looking at the second round of voting out of france on sunday, crucial in terms of the makeup of the next french parliament and what it means for deficit and spending challenges in france. s&p futures pointing to modest gains after fresh records on wednesday with the nasdaq and the s&p euro-dollar at 107 and strength coming through for the single currency. keeping and i of course on french debt yield moving three basis points with a spat -- spread over the german bund narrowing to some extent and we have watched the ramifications of that money flowing into french debt, given their politics. let's bring in the citigroup

global markets head of credit strategy. thank you for joining us this thursday. we started with a question of france and the political risk that is the overhang for the credit markets of europe. how are you thinking about positioning the politics in the evolution of the french political scene as we look at the second round coming on sunday? >> good to be back. on the credit markets, it says if the drama has died down a bit going into the second round of elections. it's almost like spreads have round trip all the way back to the early june levels and to some extent the positioning view has really not changed going into the second round in the sense that we are not seeing much upside in the terms of an aggressive stance for a positioning with a more market friendly outcome. the current markets are already pricing in a benign outcome. i don't expect a kind of massive directional move in that you get

a more gridlocked scenario, or even in a scenario where there is a kind of surprise patchwork but together in terms of the centrist coalition. the scenario where you get a more left-leaning majority coming into play, and that scenario i do expect some degree of a backup, but it does feel like some of the more extreme points on the agenda, there's a lot more debate about other that can be implemented in the near term which is why the market seems to be taking a more relaxed stance in the second round. >> not seeing complacency, then? >> you could argue that it is almost as if all the good news is being priced in, but that is almost too rational of a response. that doesn't usually drive market behavior. but it seems rational in the sense that what i mean by that

is the exposure of credit markets to france is size and a lot of that comes from, to the extent it comes from banks, it is internationally diversified businesses you are looking at. in terms of mustering a revenue exposure less than 20%, that comes from domestic markets and it's like the credit markets are looking through the dynamic and saying what is the impact if there is a fiscal situation that translates into a downgrade? that is what is not in christ in. if you think about it as a growth slowdown with policy uncertainty, by and large the credit markets can muddle through that ranged environment. short answer to your question, there is a degree of complacency, but the response is rational than what you would expect with binary market risks. tom: sounds like downgrade is

not the base case at this point but it is a risk factor for the markets. if that came to pass for you, which parts of the credit market in france would be most vulnerable in that scenario? >> i would frame this is not the base case scenario, but we are watching out for escalation triggers. the market starts to worry more about tail risks with nonlinear price action and if that is one of those laid out element that went up in the lead up to the first round, where financials significantly underperformed the nonfinancial conference segment. i feel like the risks within the banks would still be the most significant in terms of producing a downgrade scenario around the sovereign associated with france. the other piece of it is that the domestically focused pain

point, that something to watch out for to the extent that there is a significant growth slowdown in that country and that's something to watch out for. more broadly, the directional view of credit would turn much more bearish if we saw an escalation. the risks are still being framed as fiscal in that's a different price reaction then you get from credit whereas if it becomes more of a eurozone growth story and much more of a political unity issue, with risks that come in, we are not seeing that. right now the current markets are priced according. tom: to what extent does the ecb act as a pressure valve with close to two cuts by the end of the year and that coming through in september? seems to be a play for the ecb. is there a pressure valve effect for the strain credit markets?

>> our economists are still pricing in two rate cuts in the remainder of the year, but you are thinking about the ecb put, i think they are very far from that kind of thing outside and it's very early to back to act as a release valve. for context, looking at the cds indices, it's two basis points on the levels they started in june with effectively no price reaction. looking at financials versus non-financials, there is a medium that is typically a basic indicator of systemic risk premiums by two basis points or so since the beginning of june. looking at the credit signals, nothing in it would suggest that the market is pricing in or worried about systemic risk and the other piece is looking at the funding yields. yes, the costs of debt is high, but it is below 4% of the majority of the investment-grade

universe compared to last year, but funding is also easier than it had been through most of last year. all of this put together suggest that market reaction is orderly and there's no sign of unwarranted financial condition tightening, which is one of the catalysts the ecb is looking for. absent that, it's too early to price it in as a release valve, you don't meet one as of now. tom: so, what would you need to see in order to push further on the spectrum with that in europe into high yield? what would need to come through for you to take on more risk in credit? >> the short answer there is that so far the sub investment-grade complex has been supported by strong technicals. looking at the outstanding notion of the high yield on viewers, it's been shrinking for the last few years or so. it's the shrinking universe of

high-yield bonds. some of the weakest currents healthier than in the past which is why it is one of the reasons is spent better so through the year, even in the instance of one or two idiosyncratic large complexes going through repricing. but to get a broader kind of dominic polity view, what needs to change is the growth option. a lot of the lower quality companies are not just exposed to a higher for longer rate regime. even if the rate comes down kenny -- single rates require more earnings momentum. they need to grow their way out of a tight spot or tighter access to the market conditions and that is what is missing so far in europe. to the extent that earnings momentum picks up, that's when you get a more risk on environment within credit markets where it is easier to make the case that we are going down all of the. i think that double b complex is closer to investment rate when

it comes to the price action, but the true high-yield names, i think you need more earnings growth and economic growth momentum. tom: is europe investment-grade looking rich? >> if you look at it versus history, trading at at like the 40th percentile, a lot of that history has been distorted by the ecb purchase programs. if you look at it relative to the u.s., we think that europe is cheaper in the sense that european investment grade is pricing and more for a growth slowdown and to some extent i would have argued last that it had more of the political risk premium priced in. not so much now clearly, but if you look at europe, european investment grade versus the u.s., europe feels more fairly valued. election risk shifts more to the u.s. for dressing through the year and the policy path, it

feels like the ecb probably has an easier path in terms of cutting than the u.s. and to some extent are you that yes, it's kind of far. absolute spreads don't look exciting but if you look at it as his history in the u.s., it feels like european credit is still a reasonable value. tom: ok, you're always released -- smart on these global markets with france being factored into those views. we really appreciate it. austan goolsbee says there is still a lot of data but the u.s. central bank needs to see it before gaining the confidence to cut interest rates coming ahead of the u.s. payrolls report coming out tomorrow. i want to get your views on the fed, of course, but let's start with the ecb, where we just left off. your views on the ecb officials gathering in portugal, where do we stand? do we have clarity on where the fed goes next?

it feels like they were forced into this cut given the lead up from january. do we have clarity in terms of next steps? >> well, it is data dependent, right? it's a corner for data dependence dictated on how the economy is doing and we can't tell him a right? inflation, particularly that last mile, always known to be bumpy. service inflation in the euro area and higher than the ecb would like it to be. wages are sticky as well. you know what? i would argue that the wages are still sticky, it gives the consumers a bit more spending capacity to at least allow these economies to rebound or do better than we would've expected this year and we are seeing that in the largest european economies. i think that the ecb markets as you say have been pricing in just about two cuts, two more cuts from the ecb and some speakers came out to say that that was reasonable, but you

have these pockets of concerns and risks bubbling to the surface. the reaction from the markets, the bond vigilantes, they showed you that was quite tricky, right? it would be a high bar for the cb to step in, as their former economist came into say, but with spreads widening, fiscal and financial stability the mandate they have, but it would take quite a high bar. let's see what happens monday after the vote. tom: i like that you pointed out the hammering out of the wages, as we look ahead to non-foreign payrolls in the u.s., the u.s., numbers are expected to come in 100 90,000, a marked slowdown. what parts will you be scrutinizing and can we come away with more conviction? >> we

did say that it would take a lot more data for the fed to start saying we would cut soon. remember, it's an election year and the fed meets one day after the election was held in november. it's a 70% odd for them to cut in september but if the unemployment rate takes up higher, it's going to point to a weakening in the jobs market that is potentially a lot higher and faster than the fed had wanted. i would say the weakening of the labor market, it would mark a change in the neighbor -- narrative that would have them saying we could cut when the markets expect, it will allow the dovish bias the central bankers have to play in. it is again data dependent which is quite a difficult path to flow through. just as policymakers are looking at data points, markets are scrutinizing them and light of what the fed may do and coming up with their own narratives on how u.s. exceptionalism is

feeding into the market. tom: ok, we get the non-foreign payrolls on friday, important but not a decisive factor. markets pricing and 48 basis points of cuts by the end of the year. the unemployment rate of 4% is what's expected, but on the growth front does the resilience remain? >> it's tricky, you have the preferred inflation gauge that came out pointing to the easing at the front, something the fed likes to look at. we are seeing inflation easing, which is to the liking of policymakers and markets. you saw the ecb notching up another record with rotation in the sector. investors are not just piling into tech. hedge funds cut exposure because they are concerned about the overexposure to the sector. now you are seeing a lot of

other sectors and smaller stocks riding the wave higher, though they are still lower on the year, right? when it comes to the u.s. economy, it's a question of how slow, how much of a slowness would it take for the economy to get to for the fed to say -- ok, we are comfortable with cutting, inflation easing, it will take that kind of contraction and slowness, as seen in the inflation of the yield curve to get the fed to cut and cut fast. tom: that's leading up to the non-foreign payroll print from the u.s., hitting of course on friday. thank you. coming up, chinese ev sales hold up in europe, even as the block talks tariffs. we get the details on that story, next. this is bloomberg. ♪

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>> our aim is not to close the market to china, only to ensure the fair competition with a fair playing field. tom: that was the european commission vice president saying that the door remains open to chinese ev's, but not at the costs of up fair playing field. let's bring in elizabeth berman in munich. it's a top levy to shift the visa from china to the eu, it could be as high as 47%.

does it close the market off to chinese carmakers? elizabeth: hi there, it doesn't close the market off to them but it does make business less lucrative. we've been closing things off from the western carmakers that shipped them over here and the initial responses have been interesting, like ne-yo, which sells cars over here, they said they cannot elude raising prices in the european prices as a result of the tariffs and we would expect others to follow, though it has to be said that carmakers like this do enjoy a strong costs advantage of making these in china and have quite a lot of room to absorb extra tariffs. not every carmaker has the same level of tariff. for example i just talked about uid with comparatively low

tariffs, whereas some others, like those that make the popular mg cars, they will pay the top rate if tariffs come in as planned. tom: as you alluded to, there are differences there. in terms of the negotiations between beijing and brussels, how have they progressed, if at all? >> yeah, i think the interview by the vp for trade was pretty informative in that regard. they are going for a level playing field. he has made it clear that they are not budging from that position. at the same time, of course, the eu is very much tied into the economic interdependencies. so, that also definitely opens

the door for some of the tweaks to what we see down the line. and of course, china has a lot of cards most of their chest as well that they could play. one of the strategies they have deployed is making bilateral offers to the states that hold a lot of power in the eu, like germany, which of worse cells a lot of cars in china and ships a lot of cars from germany to china. maybe the s class or porsche vehicles. tom: ok, elizabeth, really important update there on the shift to the impact on tariffs. now to the politics of the u.s., the drumbeat of pressure on joe biden to drop out of the presidential race is getting louder. biden, rapidly losing support with democrats in congress, dozens demanding that he withdraw from the presidential race, though the white house denies the new york times he is

considering coming out john joins us for the latest. having spoken to a close ladle close contact, where do we stand? some reports see he is standing firm, others lining up to compel them to drop out. >> i think it's more consistent than it appears. he has to keep saying i'm definitely in this, in this to win until the point he's decided he's leaving. if he admits to any kind of nervousness about whether he is up for doing the job for another four years, he's toast, that's the end of it. so, i wouldn't read too much into how to -- how aggressively he's defending himself if you look at with the governors said after they met him yesterday. similarly, they said lots of nice things. none of them said that under no circumstances must he stand down or anything like that.

i still think that if you look at the kind of coverage in the times of lots of people saying -- off the record -- actually we've been worried about his mental state for a while, that doesn't happen unless there is a very big body of opinion, a growing body of opinion within the democratic party deciding he needs to stand down. i think that is comfortably the most likely outcome. that he stands down. you have that forensic view on the markets. are we seeing that play out this week? is that rational to you? how are we seeing the markets adjusting to this new reality if he steps down? the market adjustment to that new reality in the u.s.? >> it's very tricky. the probabilities have just shifted, obviously. his chances are lower than they were a week ago. but they haven't shifted that much and we still have some months to go.

so, it's fascinating how low the biden chances are. trump's have only risen two or three percentage points since the debate. he's now seen on real clear as averaging 54%, not something you would bet anything much on. there are possibilities that biden standing down could yet produce a democratic ticket that the republicans don't know how to deal with and could being -- end up being positive. there has been a move in the bond market suggesting nervousness that a trump administration would be inflationary. it hasn't been a great move because it is still -- the personal chances for biden have been dramatically reduced, the chances for trump and the republicans are improved, but not that much. tom: on the inflation story, are the markets underestimating the

inflation risks of a potential trump presidency? john: i think they haven't tried too hard because it hasn't been seen as more than a 50-50 chance . there is a drumbeat in the research that people send me every morning, a drumbeat of growing anxiety about this. tariffs plus tax cuts, which are unfunded, not -- it's the exact thing you would do if you wanted inflation to go up. tom: thank you very much, john. "bloomberg markets" on how the markets are adjusting to political risks in the u.s.. still ahead, marine le pen lashes out at her luck -- or rivals as we head towards second round votes on sunday. "bloomberg markets -- this is bloomberg. ♪

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tom: welcome back to "bloomberg markets," i'm tom mackenzie in london. european markets posting decent gains, up .5%. s&p futures pointing to a modest upside with a fresh record set on u.s. markets at the end of play on wednesday with a shortened trading day ahead of the independence holiday today. no trading today, but looking ahead to futures they are building modestly on the records for the s&p and the euro-dollar got a bit of a lift in the session. bitcoin is an intriguing story.

taking another leg lower, the third straight day of losses for the biggest cryptocurrency by market cap. tied to the u.s. story around politics, with the authorities putting coins that they have seized on to some of the exchanges. those factors seem to be pressuring bitcoin down. going to france now, the lens is on french politics where marine le pen lashed out at emmanuel macron and his centrist group with a left-wing alliance. the rivals are joining forces to block her national rally party from getting an absolute majority in the second and final round of the french parliamentary election. chad thomas joins us now with the update. chad, where do we stand? we know there was positioning ahead of the second round but does it close the door to the positioning for a second rally?

chad: it seems like it is headed in that direction. what we have seen over the last couple of days is the home centrist -- macron centrist group has old candidates from the second round of the election this sunday. they did that in districts where there were more than three or four candidates who qualified for the second round, concerned the they would split their vote. basically now they have one candidate going up against the national rally of marine le pen. it seems to have made a difference. we have had some projections that came out yesterday after this all happened from a polling company here in paris, who say now that they project she will fall significantly short of that majority, getting between 190 and 200 20 seats. you need 289 to reach that

majority. it seems that, of course we will have to wait and see how things play out sunday evening but it seems to be having an effect. tom: 200 89 is the magic number there. if that comes to pass, and you did put an important caveat there, but if it comes to pass that they are the biggest parliamentary group in the national assembly, what does it mean for the months and quarters ahead? for europe? chad: i think the operative word is that it will get very messy. ultimately you will either have the biggest group trying to form a minority government, although le pen and the rest of her party have said they won't do that, they said they would only join a government if it is majority, taking them at their word leaves the rest of the parties to somehow cobble together a grouping within the parliament.

but the centrist parties, clearly the micron group, very likely to get pretty wiped out on sunday. so, it's difficult to see how you form a government able to get much done. certainly, moving the macron reform agenda ahead from the pro-business reform agenda, that seems unlikely if he has to work with parties on the left that are proposing very different things as part of their election campaigning. the other thing is there is no real relation tradition building in france. normally i live in berlin. germany has that tradition. they have it in italy. france hasn't really done that parties 10 we very much at odds with one another and it is hard to see how you form some sort of coalition government.

so, we are likely to see some messy days next week to see how they are going to form a government and who macron ultimately decides to name as prime minister. by the way, he hasn't said a word in public since the sunday night election results. tom: yeah, he has been very quiet, hasn't he. you point out that you are not normally overseeing germany for us. what is the view in germany? aft have risen in the polls, they did well in the european elections over in germany. is it a reader cross with handwringing? is it a boost? how does it play out more broadly? chad: we had an interview over the weekend with the head of the afd after she was reelected, she was basically praising marine le pen for what she had

accomplished in france, saying that she sees it as a model that . what will be interesting to watch in germany is in september with the eastern states and the afd being particularly strong, at the moment they are polling in first place and that will be interesting to watch in terms of seeing the pressure it puts on schultz and his coalition. it's not a national election but nonetheless his pressure put set on him that if the afd wins those three state votes, its eastern germany. chad: chad thomas, -- tom: ok chad thomas, looking across to those votes in germany. thank you indeed for joining us there from berlin. harry, long-term market strategist, let's bring him in. there was a note coming through from morgan stanley this morning saying to purchase french

equities. would you lean into that view? chad: we are thinking french -- harry: there's a lot of fear and panic being priced in. from the positioning perspective , seems they are ready to rally and have already started to move up. it has to be a good buying opportunity here and i think you have stood back to think generally about politics by getting a lot of airtime in the media, but not normally the key driver of equity markets. equities really carry about rates, liquidity, and earnings growth. despite the airtime given. tom: would you purchase the index or do a deeper dive with bank utilities? how would you play that trade? harry: it depends in your

timeframe but it depends on the asset selloff rally. certainly, the cac has been deeply unsold. what has gone down the most goes up the most at a rally. tom: ok. more broadly, i want to get your view on european stocks, the stoxx 600 is up 8%. if you had been sitting there you might have been taking home a decent turn. is there further momentum or upside more broadly? >> great question. let's remember, before the french news broke, europe was outperforming in the u.s. looking at eurozone industrials and financials, tech, italy, spain, the indexes were outperforming the s&p and the nasdaq in mid to late may. there was already evidence the market's trying to rotate away from u.s. equities and towards

europe and i think that will be a theme looking out over the next couple of years, arguably a boom team is coming to europe, and economy with no trend growth. we are looking for the face of trend growth in europe as the ecb starts to deliver rate cuts and mortgage costs fall. housing has of course been closed to many. and then you have the wealth effect coming through. europe, savings rate around disposable income down to the level of 12%, right there you have a source for above trend growth economic earnings for the next few years. europe is a fascinating space in the global equity market. tom: interesting, could be counterintuitive for some that the economic and earnings booms of europe are what we could be seeing. how would you fund of the trade?

do you sell mega caps in the u.s.? how does that play into it? harry: yeah, that is where the momentum is, isn't it? that carries on a few months but it is an expensive part of the market, routed and long. remember, throughout history every six to eight years on average, leadership and the global equity market changes and it normally does that with extreme valuation between the lagging part and the macro themes. i think the new macro theme in europe will be the driver of rotation to european equities. yeah, fund it with lowered exposure in the u.s., that is the key theme. looking out over the next few years. tom: i wonder if you have this

view on here and now. we were talking to john about this a few minutes ago, he thought the odds were that biden would be forced to step down and a new contender for the democrats would have to take over. what would the reaction be from the market to him stepping down at this point? harry: i think it's probably expected that he will call a good chance he does, i don't see how he can carry on after that last debate performance. for markets? i think markets will carry about inflationary impact. because of that will determine the kind of fed policy that we get and ultimately that is what markets are all about. the implication for inflation, that's quite key. particularly for goods inflation. this is something clients and others have been getting more concerned about, someone like trump coming in, raising tariffs, generating inflation, creating some sort of impact on

next year. i think that is an interesting point of debate. tom: do you think the liquidity component fades in the second half? with that combination of failing liquidity with a possibility of a trump presidency towards the end taking over from january? how was that factored in? how do you position for a trump presidency and what is the liquidity involved? harry: a great question and the liquidity picture is fascinating and mixed. ongoing qt from the fed at a reduced pace over the coming months with treasury coming in in q3. that will suck a lot of the liquidity out of the markets. you've got the rop balance coming down significantly and relatively low. the liquidity picture is a bit of i think, but i think what is interesting is at the same time

we have a rates market allowing for increased price cuts at the front end and we will continue to do that as inflation softens. the reaction at the moment is softer with lower rate. that i think is the theme at the moment. the question over the next few months is the liquidity, does it start to bite? the answer comes back really to -- is there any concern about earnings growth? how worried do we need to be about the softening labor market we are seeing more evidence of? tom: ok, harry, senior market strategist, thank you, insightful views on how to position around the politics of france, the opportunities and risks there and around the u.s. as we factor in a disinflationary story and what it means for rates. thank you indeed. still ahead, more from our exclusive interview with presiden zelensky of ukraine,

talking about the prospect of a potential president trump. stay tuned for that conversation, that's next. this is bloomberg. ♪

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cease fire russia and russia has always been killing our people. so, only if it is an international forum in the presence of other countries and leaders who are trusted. they might have different ideas and views on the stages of how the war will be over, but we all have to be on the same side, we have to trust each other. trust is very important. the piece side, by the way, has shown that we can follow this plan, over 100 countries. then today we are talking about nuclear security and energy and there will be a clear plan. so, the cease fire needs a clear plan. russia would not be using cease fire to simply accumulate equipment on the territory, our territory, that they occupied,

because we will not be striking them. they can use that to create something strong and then accuse us of breaking the cease fire and starting another invasion. so, it's really complicated for us. to take this significant loss for us if they invade again, as they did in 2022, when they almost reached the capital city, accumulating a lot of from belarus. belarus kept saying it was just an exercise, there's no occupation in mind. just a training. just military games. it's very important. i really don't want to have this big trouble for my country. we are at war already. giving the advantage to russia now is impossible. we need to be smart and it's

important. also, who will be responsible for this besides the ukrainians who pay with their lives? which country will be responsible? it's easy to talk about cease fire, but it is difficult to enforce and keep it. it's very difficult to find those who will respond. >> we will see more calls for a cease fire as the world moves to the right in the united states. you had said the more is dependent on usaid. did you watch the debate between joe biden and donald trump? tom: first -- >> first and foremost, cease fire is an element to any plan to finish the war. cease fire is not finishing the war. we have been there, it would be a frozen conflict, frozen for --

frozen on our territory and our people would be under occupation and it gives a clear advantage to one side. it's easy to offer different proposals of cease fire's, but what is important? what would come after? it's a matter of not just victory. many people are talking about cease fire and that's fine the people talking. what would happen next? that's the question. what's the next step, what's the third step. what would be the step when putin breaks the cease fire? after the cease fire, a month after the cease fire, guarantees he will pull the troops out of

those occupied territories? and it's silence. nobody has the answer. i'm not accusing, i just want to explain that we are at war and we understand this. so, the debate. >> the answer on how this might all unravel will depend on who is at the table for the united states. >> amongst other things, it might depend on who is the president of the u.s., yes, that is a fact, because the u.s., the united sates of america today are probably the powerful, the most powerful player. so, whether the united states would be the major international player, if they want that or they want to focus more on internal politics, i cannot say. it doesn't depend on me. >> did you watch the debate? >> yes, i watched the debates.

first and foremost, i would say -- maybe this is out of tune from what we see in the u.s. media, but we are not electing the president. i didn't look at the incumbent president and former president. i look at them in terms of ukraine. >> president trump said that he would end the war before you he was elected. -- end of the war if he was elected. would you make of that? >> let me be frank, for example the decision is on the u.s. public, but let me just have some reasoning. >> yes, let us imagine that the winter might be trump. and he knows how to end the war? has a.

me as the president of the country at war, not theoretical, but a real-life person, i would like to be prepared. we are 40 million, a big country . it depends on the aide from the world. plus the stance of the u.s.. i would like to understand what it would mean to finish the war fast. tomorrow, do we want it to be over tomorrow? it was putin who started it. if trump knows how to end the war, he should tell us today. if there are risks to ukrainian independence, if there are risks that we will lose statehood, we want to be prepared. we want to understand if in

november we will have the powerful support of the u.s. or if we will be all alone. tom: that of course was let amir zelinski speaking with our -- volodymyr zelenskyy speaking with our annmarie hordern. his final what, if trump is a plan, tell us what it is, the implications for the people of rain are significant. this is clearly weighing on his mind. >> he's around the world and seeing the shifting sands of politics and a bunch of places, particularly the u.s., thinking about what it might for ukraine is the war goes on through the rest of the year. so, what happens in france, for example, where does china lie on all of this? what is the u.s. going to look like politically after the next election and doesn't mean for the continuation of u.s.

military and financials work? getting his head around the possibility that he will have to deal with trump. they have a history that isn't particularly great. trump accused him of corruption and zelinski denied that. trump was critical and said we didn't want to keep sending weapons and money to ukraine, i will end the war immediately. you've got the back of many years of unpleasantness but it is clear that saloons key realizes that is a possibility. tom: on that package we talked about the funding coming from nato. what kind of funny do they need and how much runway do they need? >> the biden administration has been trying to front of the aide and that agreement that you can use the proceeds from seized assets in russia to loan money to ukraine,

there's a lot of trying to get the money forward while recognizing that a republican administration is probably going to cut off the aide or taper it down and equally in europe questions about how much more they are continuing to fund ukraine and it's crucial. you can see that from zelinski. it's not just the weapons coming into russia, but it's the money to keep the lights on and the economy afloat. industry is still going, there are two tracks there and it's big questions about future aid. tom: in france, they done a pivot in the marine le pen party saying they support ukraine. >> it's campaigning, politician stay stuff, what do they mean in reality? micron has been a fierce supporter of ukraine and le pen has been questioning the war, but in terms of support it's how much she's willing to support them financially and militarily. tom: thank you indeed for giving

us context on the interview and the implications for ukraine. coming up, and capital management. say with us, this is bloomberg. ♪

>> welcome to bloomberg markets. markets on alert for president biden to scrap his campaign as the trump trade gains steam. all eyes on the economic data as investors look ahead to friday's crucial u.s. payroll support.

more election risk in focus as france prepares to head to the polls again. french markets taking some relief in the session so far today. posting gains of 6/10 of a percent. strength coming through for the french index with gains of around 8/10 of a percent on the sector basis is banks leading the gains this thursday. s&p futures pointing to modest gains building on the records just another record coming through on the session yesterday. no trading in terms of the live pricing for the stock market in the u.s. and we look ahead to the futures. up 1/10 of 1%, largely to dollar softness in the session. bitcoin taking a hit for the third straight day. we haven't seen this since february. on the back of it seems politics of the u.s. and readjustments there. and german authorities putting

tokens on exchanges. bitcoin down 2.7%. but get the view in terms of the politics and the market impact. bringing in the cio and cofounder of andromeda capital management. thank you for joining us. a note tag from morgan stanley on the politics of france saying by the dip, there is an opportunity to add french equities. would you lean into that and agree with that view? >> happy fourth of july. generally the fear we had in europe has been overdone. it's been a by opportunity. we discussed it over the past few weeks and it's been a typical reaction to binary events that investors shy away from. the probability of a far right majority in france is near zero especially after we know about all the switches that have happened, all the tactical voting candidates have

encouraged. so it's going to be a hung parliament and that in france is a fiscal non-event. so we have already seen investors running for cover on their shorts, there was a massive large short in credit in the credit markets. the largest one-week swing in history on the european investment grade index and on the european high-yield index and it's been covered. we have not seen the covering on the equity market so i would say there's more tactical upside in equities. tom: that's interesting because see there's almost a 0% chance of a majority for the national rally post that second round of voting. so some tactical opportunities still in the equity markets. where does that take you? alberto: in the medium-term what

we are seeing in europe and other parts of the world is governments continue to spend, so obviously government bonds spreads have widened but they're not really what we like here. where's government spending going, the real economy to the private sector, to consumers and subsidies so the private sector when you think about credit spreads the probability of the fault of investment greater high-yield firms that's not going to -- that's now going to increase because governments are spending more. it's going to go down. we like credit spreads when there's fear. part of that rally has happened in the index level but there are still sectors where spreads are attractive like banks of the european brief. the same can be said for european equities which have been coming down because of these fears. medium-term the real event is donald trump where we estimated in june 80% probability of a win. that's based on state and national polls and based on the

swing states where the democrats are still weak. so what does that mean? it means more spending, more inflation, higher government bond yields and stable credit spreads. it's a short-term risk positive. it clashes with central bankers are trying to do. the fed wants to cut rates, we saw jerome powell at sintra the other day. they won't cut rates but they are having a hard time because they need more evidence on inflation data so right now we have a bit of weakness. there's a bit of concerns about recession or slowdown in the economy but we might have a big spender coming in at the end of the year. tom: what you're suggesting is the french politics is just the intro. -- the entree course to the politics of the u.s.. an 80% chance of a trump victory is your assessment at this stage. as the inflation risk as the potential use excessive

derailing the fed cycle but the market seem to be position for a september start to that. how then do you position to that, are you setting off the long end in terms of treasuries. what you buying in terms of equities. how are you positioning around potential trump presidency. >> right now there's a lot of concerns about weakening in the u.s. economy and we are seeing it across consumers and housing especially the weakest part of the consumer. those are our -- those are affected by fed funds rate above 5%. households that use credit cards and auto loans. with some fed cuts, one or two cuts and then potentially a deficit above 7% which is what we would see in trumpian 2025, we are set up for a re-acceleration of the economy, or definitely not a deep cutting cycle. the market is not position for

this. see higher treasury yields, higher inflation and also real assets going up. whether it's gold or oil or obviously defensive monopoly stocks like the growth stocks in the u.s.. i think that's the trade, that's the positioning investors are thinking about or worried about. it's not so much about recession but it's the idea that central banks might accept a higher inflation target different actos , that might accept an inflation target above 2% for a prolonged period of time. that's the real risk for capital preservation in our view and that's how we are positioning. we want good yields, in fixed income at least 10% yield spread we want alpha but we also think about real assets and we don't see value in government debt here is governments spend across-the-board both in the u.s. and europe. tom: you don't like duration

preyed what are you adding? what is an op -- is looking opportunistic and attractive at this point? alberto: there's still value and very short positioning in european credit. particularly across banks. not just in france but also other countries in the periphery so that something investors will have to cover. european banks are still giving you a yield spread over government bonds that's roughly twice the spread of the equivalent u.s. bank spring so credit is attractive in europe. europe is not -- france is not a higher deficit trajectory. in my get there in the future but it's not an exit the euro on monday. so the fears of tail events in europe are overdone. we also like upside in equities in europe and the u.s. and there are some sectors where it is very inexpensive right now.

especially cyclical sectors that might benefit from trump related trump administration spending, on shoring and -- in sectors that can pass on inflation to others. -- two customers. tom: thank you very much indeed for the views there on the politics in the market implications for france, europe and the u.s.. in the most chance expected for the majority marine le pen. alberto thank you paid as markets await a potential biden exit then, the president's party and mega-donors say they will continue to support his campaign. more on that next, this is bloomberg. ♪

tom: welcome back to bloomberg

markets. pressure is growing on president biden to drop his reelection bid after a poor performance in last week's debate, buying plans to do a sit-down interview with abc news tomorrow. before more campaign stops during the weekend. bloomberg surveillance spoke to charles myers of sigman global advisors. who says biden can still recover. >> i think he needs to be unscripted and show people that he is fully there and can make decisions, interact with people. i was with him friday night in new york one on one big event with a three to four minute interaction with them one-on-one, he was very together and alert. he needs to show that to the american people instead of this perception it's been lingering of him post debate of someone who is someone -- who is really

out of it. >> isn't the damage done given people are questioning whether they're being told the truth especially from some of his advisors. you have a number of democratic congressman including one from texas verbally saying they hope he steps down. does that mean there already has been too much to shake his reelection chances? >> i would say a couple of things. the campaign expected polling to take ahead, stuff that was leaked was pretty damaging. again you need to see more than just one pole. you need to see a set of poles over a week or so and see if they can turn around. i think a lot of damage was done. so far only one member of congress, one sitting member of congress is called for him to step down grade that could be the next shoe to fall. meaning there's reporting this morning this potentially 40 additional elected democrats that will come out and call for him to step down. that's probably the most serious issue.

that in addition to further deterioration in polling because once you've got elected members of your own party asking you to step aside it's hard to recover from that. >> there's a question of who would take his place and this has been one of the arguments from some people who are saying he's the best shot. to your point because the other potential candidates whether it's, let harris, gavin newsom, kind of pole similarly in a head-to-head matchup with donald trump. do you feel like they're sufficient polling to make that decision given the fact some of it isn't that extensive? charles: to make a decision on who should replace him or if anyone should replace them? >> both. charles: on plan b, it's absolutely the vice president. that -- you may not be the favorite of every donor. a lot of donors, from financial services and tend to be a center-right industry, but any

notion that the white house, the dnc or the democratic congressional leadership is just can overlook the vice president and go to some other candidate or have an open contested convention i think is a mr. reed of the situation. the whole point of the vice president is to step in and the case of death, incapacitation, resignation or the president stepping aside. they argan a try to do everything they can to avoid a contested convention given what happened in 1960 eight. lbj's vp did ultimately win that nomination. he was so weak and he lost the white house to richard nixon. as a gift biden steps aside they will try to engineer it so that the vice president ultimately locks up the nomination. jonathan: you are wearing two hats in this conversation as a donor and individual running a global advisory firm. i hope you take this in the spirit in which its intended grade when you said you had a five-minute exchange with him. when it's behind closed doors

and you tell people he sharp, cogent. these are things we heard a million times and then we see him in public and we see something else. i wonder how much tension there is between you as a donor and on a program like this in the kind of advice you give to clients right now. >> i'm giving the same advice paid we had a base case biden would win. he is still in the race and thursday was less than a week ago. so as a firm we don't whip our calls around. we look at data and make a good assessment. he had already beaten him once in 2020, he's got the power of the incumbency. we think is a firm we will see higher than average turnout by both women and the democratic base. women because of abortion rights and democrats because trump is on the ballot. i think the race has changed fundamentally since thursday night. we want to see if he is good to stay in the race before we make any additional call from here.

i'm sitting here is a donor watching this very closely but also is the head of a firm that advises clients on what to do. it's hard to make a decision until we have more clarity on what the president intends to do and we were telling clients yesterday on a call that we thought there was three weeks for the white house or the biden harris campaign. i think there five or six days to make a decision. jonathan: can we lean on that position as an advisor. to dig -- traditionally the incumbent would have advantages. i wonder if it's a disadvantage for biden if you think about how 2020 played out. he got to make this a referendum on the former president. this feels like a referendum on him and not what he's delivered in 3.5 years, but whether he can last four. whether he can keep this job for that long. how do they change that? >> that's good to be the hardest part of the narrative to change because up until thursday this in fact had still been partly a

referendum on the former president, on trump as opposed to the sitting president. now i think it's a referendum on can the sitting president not only campaign for the next four months but can he serve for four more years and relatedly what you think of -- what do people think of the vice president. in politics everything is fair. the race changed fundamentally on thursday night and as i said we will find out in the next four to five days whether the president is still in this race. mark: the damp -- lisa: the dam is breaking when it comes to different, go to congress members and advisors, people starting to leak their feelings to a number of different outlets. is it breaking in the inner circle of joe biden that we keep hearing about the keep saying keep going? >> i'm not part of the inner circle but from everything i'm seeing and picking up is the inner circle which is his family and closest advisers in the

campaign team who have been with him a very long time still absolutely believe he should keep fighting. this is a man who's dedicated his life to public service and reach the pinnacle of real power but to drop out after a terrible stumble on the campaign trail would be highly unlikely. i wouldn't advise any politician to drop out after that. there's always a chance to turn things around in a campaign and they are trying very hard. the pressure is building faster on him to drop out of the race and i think that's been a bit of a surprise to the campaign and i think we will see more elected's coming out saying he needs to. the biggest risk is his liability down ballot with elected democrats in vulnerable seats in the house and senate and really tough races. that's what i'm hearing the most pressure and much more panic than amongst the donors. jonathan: do you think people

are underestimating, harris -- kamala harris. >> she has three advantages. she will be totally underestimated. in politics having low expectations is one of the greatest you have. she also gets the biden harris money which is not able to be transferred to any other candidate so she gets the warchest. look at her approval rating with democrats. 84%. much more popular with young voters, very popular with black voters and will help drive women turnout. i think people totally underestimate the vice president. tom: let's bring in the opening trade anchor crew to gupta for the analysis on the politics -- kriti gupta. not ruling out the likelihood to keep the door open from what he's hearing around the potential further pressure on the president even assist

support remains there for biden. where do things stand? time has moved on since that interview. a lot has happened between then and now. where do we stand in terms of that pressure on biden. kriti: a lot in the last one he four hours. near time sink biden is weighing the options. of course it is something that has been discussed by him. even though you're seeing fragmentation to some extent in this party. others throwing their weight behind, harris. the one goal that unites the party is they do not want a trump win. they are trying to figure out how to do that. it feels at the interview tomorrow with george stephanopoulos is serving as a litmus test to see ken this interview if he really performs brings that charisma and energy that so many people really loved about him the first time around if he can bring that can he turn those polls around. anything can still happen but if

you see the polls going in the direction or the gap widening from the seven to eight point lead the trump has right now on biden that's when things get really serious. tom: seven to eight points, depending on which poll you look at. the abc interview and then some campaign events over the weekend, is there a precedence in u.s. history for what's unfolding right now? kriti: there is from 40 years ago. it goes back to lyndon b. johnson in the 60's. he inherited the oval office as vice president after the assassination of john f. kennedy. the parallels are simply the vice president had to step in, but he wasn't polling very well with the demographic and a lot of that came because of the war in vietnam. we have two wars in the region both of which the united states is made clear bifurcation on which side they stand on. that was back in the 60's when the civil rights movement was important. you heard the donor talking

about, let harris big advantage is she can mobilize not only people of color but women as well. it's worth noting before president biden even stumbled in this debate he was already facing the threat of lower voter turnout simply because of his foreign policy stance. we talked about that in michigan and some of the protests in support of palestinians. things like that can actually sway the vote in trump's favor simply as a function of the numbers. tom: kriti: the other -- tom: the other component is the access to financing and the mechanics of how your place joe biden on the ticket. it becomes that much easier if you're sitting in, harris's position. what to the poll suggest about that prospect. if she becomes the ticket for this party what her standing is. kriti: that's one of the arguments for keeping biden in the race that even though kamala harris may be polling better

than biden, could she keep up that advantage against president trump. this was one of the reason she was brought on the ticket to begin with. the first time around when she ran in 2020 she was not polling as well. the independent voters, of the ones they are trying to sway did not think she could manage it and she didn't have a foreign policy record to back it up. that's one of the arguments to say even though she may be able to take on the reins president biden can she then take on president trump in the general election and that's the question they are trying to answer. tom: the trump campaign has been oddly quiet over this. is that by design? what's going on in terms of the trump campaign's position. kriti: the argument that can be made for against president biden have also been made against president trump. age, president trump is only three years behind president biden. we're talking a mental fitness, plenty of that for president trump as well. as well as foreign policy and economic policy record.

president trump is also not appealing to the independence. he's also not getting the edge. these is very popular with the base. president biden is kind of losing parts of his base so that's the difference here. when it comes to swaying of votes and swing states to independent votes neither one has the advantage. tom: what would the trump presidency mean for ukraine? kriti: the best way to answer was what volodymyr zelenskyy told annmarie hordern. he said this is -- if president trump has a plan he should share it with us. i think it's important the nato summit next week is coming up as well where you're seeing an active move from nato to centralize their operations means things like modernization, deploying troops even having a station chief in kyiv is something that's expected to be deliberated and decided upon in the nato summit. so much of that is not just

trump proofing it it's also protecting it from the far right in europe. tom: we are watching france with second-round round elections on sunday. pretty gupta with the late -- kriti gupta -- keeping a close eye on the importance of that story. still had, eric nelson of wells fargo. how to position in these markets around france and the u.s.. we get views on where the central banks go next. the key data point of payrolls dropping in the u.s. on friday. stay with us, this is bloomberg. ♪

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tom: welcome to bloomberg markets. a quick check of the european session shaping up. happy independence day for those of you in the u.s.. posting a decent day so far in terms of the equity moves. here in the u.k. the ftse 100. ahead of the second round vote on sunday gaining 8/10 of a percent. the dax over in germany a little bit more up 3/10 of a percent. s&p minis looking to the real but of the u.s. trade after

today's holiday looking to add to the records that came through on wednesday. looking to add around four points up 1/10 of 1%. essentially flat for that. the s&p moving again of 1/10 of 1%. euro-dollar moving higher in the session today. the sessions moderate the risk premium round assets linked to how the story is evolving. expectations that the national rally, the party of marine le pen of the far right will not get that majority in the national assembly. we will get confirmation of that or not if that story unfolds to a different degree, of arithmetic politically in france on sunday. bitcoin a drop for the cryptocurrency. the third straight session where we've seen pressure coming

through in cryptocurrency. part of that linking to put politics and maybe expectations if you get a new democratic contender they could be taking a test at the lowest levels it's been since around february. into harms of a broader look, a euro gaining. dollar index is softer so far in the session. the nonfarm payrolls will be crucial on friday. the expected number this is the survey coming through. 100 90,000 is the survey expectation in terms of payroll. that would be a markdown. the unemployment rate is seen as 4%, holding at 4% but wages and the strength of the growth in wages is going to be really important as well so many in the markets will be scrutinizing the wage input across those nonfarm payrolls. market still pricing inches shy

of two full cuts from the federal reserve by the end of this year. let's get to a story around the auto's market and how the relationship is shaping up. holding onto their share of the slump in european ev market according to new data from may as tariffs look to protect automakers from the cheap imports from china. francine lacqua spoke with e.u. trade commission about this. take a listen. >> today we took the decision to impose provisional tariffs on chinese battery electric vehicles. ensuring a level playing field in the market distortion coming from subsidies which china is providing to its producers. our investigation has been done in strict correspondence with

applicable wto fact-based so from that point of view we do not see any -- it's clear we need to keep this case a separate. francine: you're not even worried about retaliation and if there was to be retaliation are there specific industries you think would be most at risk? >> as i said we are not seeing a basis as what we are conducting is indeed in line with the wto rules. eventually we are currently the largest market which is actually open to chinese battery electrical vehicles. a reason involves a 100% tariff so our aim is not to close the

market to battery producers from china but only to ensure fair competition in the level playing field. so once again we do not seek -- >> how's the progress in terms of talks with china. is their willingness from china to make some substantial changes that lead you to then put the tariffs on? >> those talks with china are ongoing. as a mutually beneficial we can also find ways to multiply, but it's clear this needs to resolve market distortion which we are currently having in battery electric vehicles. and it needs to be wto compliant. francine: are you worried member states can actually block this

in november or force the eu into a bad deal? >> obviously we are in close consultation with member states and those provisional unities. and it's clear that member states are also interested to protect their automotive industries from unfair competition and from risk of injury with market share of both chinese brand and those made in china. its rapidly growing so if we leave the situation it's going to create more for the automotive industry. francine: we are also days away from the second round of the french legislative election. are you worried a hung parliament would actually delay any negotiation on policy or

would delay the workings of the european commission and the eu? >> to provide some institutional response. they have clear policies or party politics in member states. we are working with democratically elected from member states. >> latvia has nominated you. is there anything you would like to be in charge of. >> indeed so there is the nomination or portfolio distribution at the later stage because now all countries need to nominate candidates in the president of the european commission next week as european parliament and both houses vote.

-- actually the week after next week. only then discussions about portfolios would stay so to your question i would be interested to stay ahead of the economy. >> i know there's a lot of talk of rumors that there needs to be a role for vice president for economic security and the next commission do you agree. would that be something that's worthwhile? >> it's premature to engage in these conversations. it's very clear they see the overall picture on the division of portfolios. tom: speaking to francine lacqua about the story around tariffs and how that story or at least how those tariffs are adjusting and the impact that could have on the market but also trading

more broadly between china and the european union. on the story of the auto market let's bring in elizabeth bourbon who stands by and joins us from munich for the details on this. where do we stand in terms of brussels and their determination to impose tariffs on chinese ev's. there have been some adjustments. is that around different automakers or as a result of pressure from germany. where are we into what extent are these locked in. elizabeth: i would look to the interview with francine lacqua just now where i think clearly the eu's position came across as being one that would want to create a level playing field and abide by the wto. and very clearly stating china is not meeting these rules. that's one thing. the other point you were making just then there's been a slight adjustment in the provisional tariffs that we've seen today. those adjustments, it could

signal there's a willingness to listen and to make some adjustments if necessary and the two sides have also been seeing the link that they are ready to continue talking and indeed as we know there's time to do so for some months until november. at the same time the e.u. has made clear their position is that china is not meeting wto rules and that it's hurting the car making sector in the eu and they want to protect it which also puts them in line with other such moves protecting from subsidies in china and mainly the u.s. which has imposed a 100% tariff on chinese ev's whereas canada has also weighed similar steps. >> it was interesting to hear the vice president of the european commission talking and making a distinction between the tariffs being imposed by the eu versus those from the u.s..

how important is it for brussels that they try to make that distinction clear to their chinese counterparts. >> i think with the eu's position is here, they need to walk a much farther line. of the dependence of a number of their carmakers on chinese sales mainly mercedes, bmw and -- these carmakers don't just ship a lot of cars such as the s class to china but also china represents their biggest markets. and also vice versa with china is said to want to maintain access to the european markets is very lucrative for the car making sector which is suffering from overcapacity. >> what is the ability, what is your understanding in terms of the ability of chinese automakers to absorb these tariffs and maintain a

competitive position in the european market. >> if you look at china's biggest carmaker they sell a couple of quite popular models over here one is -- they are priced at around 35,000 euros. if you look at the same models in china they retail there at a much lower price point. that would suggest there is quite a lot of ability to absorb these higher prices. that said, byd is going to pay a comparatively small extra tariff of another 17% on top of the 10% that's already in existence. where is the maker of the also popular mg brand, they are set to pay a top rate of 48%. and their cars are sitting around a similar price point so that would quite heavily impact the margins they get for these

costs. tom: what is the status of germany's automakers and that chinese market. we know the real estate market we know consumers are under pressure. know the price point of some of these german cars is sometimes and often higher than their rivals. what is the standing with the likes of vw, bmw, mercedes right now and that market? >> what you're talking about is a hugely interesting dynamic that is keeping us quite busy. for some decade german car makers been extremely successful in china they have led sales there and mainly vw after going early in the late 80's and establishing a presence in that market. now increasingly the domestic carmakers are catching up particularly so in the battery segment. byd has become china's most popular carmaker, the biggest carmaker in terms of sale and

leapfrogging vw and while bmw and also mercedes maintain really good presence in the luxury segment of course chinese carmakers are going to try and break into those segments as well because of the significant profit they can generate in that area. >> bloomberg's liz berman with a comprehensive view in terms of tariff impact but also broadly as well how german automakers and european automakers are faring in the more challenged chinese market now. thank you very much indeed. ed nelson of wells fargo and how to position in these markets and factor in the central banks inflation dynamics as well. all of that coming up in the next couple of minutes. this is bloomberg. ♪

tom: welcome back to bloomberg markets happy thursday. a deep dive into the position in the markets given the politics and the views we've been getting in terms of the central bank voices. and looking ahead to nonfarm payrolls. let's bring in eric nelson, macro strategist at wells fargo. you can see the session so far upper the positive day for european equities. let's start with france, morgan stanley and others suggesting there is a buy the dip opportunity. i wonder if it's closed up. is there an opportunity to air out french assets at this point. how relaxed are you feeling or not to the second of final-round trade >> the dip may have already been bought in the sense were looking at euros swiss as retraced most of the move from

the initial shock from the deal with the snap election. more room to catch up with other asset classes. it does seem as though the parties can is cheryl -- fall short. the scenario everyone is worried about. are we actually going to end up better often we were up for the snap election. yes there is a narrow path here for a centrist coalition to emerge with macron, some on the left and maybe some republicans. there's still a lot of pieces figured out here and it could end up with a minority government which i don't think is necessarily supermarket positive. >> the growth dynamics are looking more positive. there is that fiscal support in terms of defense spending and the renewables shift. that continues in the prospects of further cuts as to when those lands. that still part of the debate. to what extent of those fundamental still supportive for european markets or does the

politics -- politics risk throwing that off course. >> growth is running around trend for europe and inflation is coming down. the ecb could cut more this year. we have two more cuts penciled in. the thing people aren't focused enough on his german political risk. a budget trying to go through here and there is very narrow path, there's already a shortfall on the tax side and it does look like they're some real political risk in germany over this budget negotiation that i think is a risk in terms of overall fiscal spending and growth support. >> already looking ahead to germany. >> we certainly have the likelihood of an election next year, that could even be brought forward depending on how these budget negotiations go. you look at the polls in germany there is sort of a path for a centrist candidate to emerge and that could be if there is a more fiscally open kind of fiscally

open to shifting some of the debt break rules or relaxing them that's a very positive scenario but there's a lot of steps in between here and there. in the short-term there's more downside risk for europe. tom: potential downside risk to euro on the back of the politics of germany. arguably past france to the longer term. if we focus on the data story and we had a number of voices this week from sintra. you are baking in pricing into further cuts from the ecb this year. our previous test saying for the fed it will be one and done because this is a different cycle and you have to think about a potential trump presidency and the inflation story that that could play or in to the central-bank action. do you have clarity on where the central banks go? they start to align with a rate cutting scenario we've seen the past or will this look different? >> the september meeting this is

the pre-election before we have a real sense. that's what near-term markets are focused on for pricing september and the next few meetings. the comments from powell the past few days and other fed central bankers has suggested they are worried about labor market weakness or at least softness so they want to cut in september. we had one good variant -- inflation report. the most interesting thing about powell's comments was he said stop looking at super core inflation, top looking at services inflation. were focuses on -- we are focused on wages. i think september is still very much in play. beyond that if we get a republican sweep this challenge is cutting through 2025 here now are focused on the labor market. >> do you expect to get some clarity, your focus on the wager pole component, topline or suspected to come in at 190,000 terms of additional jobs.

for you it's the wages component. what's your expectation of how that evolves. >> last month we had this relatively strong headline but also part of that we saw the dollar strength and a little bit was wages were strong. we had .4 month over month gain an average hourly earnings. it's not the fed's favorite. this could stay relatively elevated here even as we see some of the slack out of the labor market especially if organ is the immigration started tail off. this is a risk here may beyond september especially if you of death may be the fed doesn't continue cutting through 2025. >> how comfortable are you with the view the u.s. market can continue powering through. 15% or so up year-to-date. 33 record so far for the s&p year-to-date. is this a momentum trade, is this bets on cutting, and earnings story. do you think this has legs?

>> i think you have to look at the growth rates picture it's very narrow path to the soft landing. >> do you think that path is quite narrow? >> i think so. for markets to price it in for several months now. you already have two cuts price to this year and rates markets. earnings expectations are pretty bold -- even if you get more soft landing like outcomes in the real economy there's kind of a narrow path here for this continue to be reflected in markets i think. >> our markets underestimate the potential inflationary risks. the potential risks of a trump presidency? >> it certainly the talk of the town and everyone's aware of bringing back the trump trade as they call it. tom: do you think it's premature to position around trump as potential president? do you want to be changing her portfolio paid do you make these adjustments?

put in place some hedges, make some tweaks to your portfolio or is it premature. >> i think were at a point where you look at the polls and it's difficult for the democrats let's be honest. look at the polls in 2020, biden was comfortably ahead by several percentage points at this point in the race. he's now at least behind if not maybe he's pulling even. the same goes we don't have a lot of polls for the senate and the house, but a general sense would be that sort of leaning towards republican at this point. it's looking like the republicans are in a pretty good place right now. >> whether or not you see a broadening out of this market. as a cut from the fed in september. this is where jay powell wants to go. if we get that cut does that lead to more brats in this market. is that the catalyst and how important is that for upside. >> you look at the general kind

of corporate margin backdrop. it's still ok. there's always the pockets of weakness, rates are still high you're seeing coverage ratios deteriorate but across the economy margins are good. nominal gdp growth is 5% so i think that continues to be relatively supportive for the u.s. market. >> blackrock came on and said the ai theme still has legs. it has room to run, do not dial back from your exposure to ai. are you starting to get a little anxious about just the upside this come through. >> i think there's certainly been this exuberance and i think it sort of makes sense again to see some catch up for the bread-and-butter more cyclically sensitive and the old school kind of market as it were. >> when it comes -- let's switch focus. the japanese yen and know you have a view it's currently 161 so bit of relief in the session

today for the japanese yen. 161 is past the levels of which it hit when they last intervened in april with an intervention from japanese authorities. they are stuck between a rock and a hard place. where's the downside for japanese yen. where's the redline for the authority sitting there. >> it's a mix of levels and volatility so historically when you preach a key level and see a two or 3% acceleration in a few days that's when you see the finance of the boj coming so 165 is a level we are focused on. we need to see that be reached if not breached and then again seeing that further fall through volatility. seeing some underperformance. that's another key ingredient. we are probably still a few big figures away. >> 165 the line in the sand. eric nelson, macro strategist at wells fargo. coming up we will get a view from patrick armstrong and he

has a view as well in terms of ain tech. this is bloomberg. ♪

>> welcome to bloomberg markets on tom mackenzie in london. patrick armstrong with markets on alert amid ongoing uncertainty around inflation and of course global elections. ukraine's president volodymyr zelenskyy calls on donald trump to reveal his plan for ending the war ahead of a possible second term. and more election risk in focus as france compares -- prepares to head to the polls again. let's check in on the markets and french equities are performing well in the european session as part of a risk on move across european equities. european markets in the benchmark stoxx 600 posting gains so far this thursday of 7/10 of a percent. happy independence day to those in the u.s.. s&p minis pointing to further gains.

euro-dollar currently up in the session and looking at bitcoin given the softness that's come through. as the equity market moves and there's a position around the political risk that's really fascinating right now. let's bring in patrick armstrong. for a view on this. as you look across your portfolio how confident are you there's resilience within that makeup. >> the market is how you've got a vic's that's 12 despite not knowing who the democratic of candidate will be you've got issues for the u.k. election, there is a lot of moderation from the extremes and i think that's what really upsets markets is a lip pen victory in france at the extreme could be very protectionist or add issues to the euro but they are monitoring the views and there

is a direction where it doesn't look like they will get that majority so there is risk with politics but i think the tail events are less likely than they were a few weeks ago. >> you have an eagle eye for opportunities looking at individual names, i know you have that approach. are you looking at opportunities that have opened up in france. do you look at names you might want to be adding given the selloff we've seen since macron's decision to pull this vote. >> i think it's reasonable to do and we haven't made any changes because we have a one year holding period so short-term blips, across the group we been providing some opportunities that have just sold down below what fair value would be passed this point risk on the weekend. >> how are you thinking about u.s. politics until the ruptures happening in this democratic

party we will see if biden remains the candidate. how that plays into positioning longer-term with the u.s. story at the forefront? >> with politics there's very different outcomes. there's a lot of outcomes that may not be necessarily good news depending on your political backdrop but our view is a trump presidency focuses on the market. i think overwhelmingly his policies will be designed to grow equity markets. i think there'll be some company specific events with a view accompanies the enemy of the trump team there may be vindictive policies. if trump and woody have an issue with meta going forward. whoever the democratic candidate is i think that's a status quo and the status quo isn't so bad if you look at the u.s. economy. you of wage growth getting close to 4% and that's fueling consumer spending so the status

quo isn't so bad and if you're worried about equities. tom: do you still align with a soft landing scenario? is that where it sat given the data that's come through? >> we connected this year with a soft landing and march we moved up to a no landing scenario and that's where we are at. inflation is not at the fed's target it's coming down but it's not to hit the fed's target especially if we get trump elected because his policies are unequivocally inflationary. economic growth long-termers 2%. we call that no landing. hire potential inflation about the fed's targets and that's creating a backdrop for risk assets and equity markets. >> how comfortable are you with the earnings forecast for u.s. corporate? do they hold up in that

relatively positive outlook in terms of the u.s. economy? >> that's key. if you have a broadening of the rally will see other sectors that aren't just this big mega cap trade really exist here and we will see earnings and you see -- should see a broadening in the economic rally because you have more economics cyclic al he with the s&p 500. and we do think those kind of companies will be rewarded as our base case does continue to play out. >> at what point do you want to be adding to those question mark what are the catalyst skirt. you see a data point move from the fed. a set of earnings and say let's pick some of these names up. >> in my global equity portfolio of got 26% allocated to the mega cap tech stocks and that's a lot. it's the same as well and the markets caught up to my view so we have been -- these about a

tremendous rally and they are getting more and more expensive but i do not want to sell them because i think powell will be cutting in september. the sensational six stocks trading at one times earnings right now. in the long-term average they are lipid more expensive than they have been over the last decade but if you get some monetary stimulus from powell in september that could set off the stages of what -- a bubble. continuing to hold these companies with profit margins and profitability and secular growth is still there. there some cyclical opponents which i'm not afraid of anyway. i'm comfortable to own them. tom: really interesting. you've touched on meta there and maybe that would be a company you put on alert if we get a trump presidency with the caveats around that. nvidia you tell us in your notes you sold down 20% of those

holding spread you have a sizable exposure to that company. what was the trigger for that reduction? >> it became a very large weight on my portfolio because the growth came up so much this year. it was adding to a position at the start of the year at 3.5% and was going toward 6% so we trimmed it down to 5%. at the start of this year nvidia was trading at 29 times forecast . it's up to 40 times so earnings have grown it about 75, 80% for nvidia. the stock is up 160% so there's a bit if the purest play on ai. profit margins incredible. so we thought it was brilliant to top slice nvidia. tom: what's the key to that race? >> nvidia is going to beat

expectations because its customers are these big tech -- big cap tech companies with hundreds of billions of dollars in cash to keep spending on at the markets are working at it. but eventually it will be competition and nvidia will lose some pricing power and these big cap tech are not just in a have to talk about what they are doing in ai they will have to show concrete results in terms of how they're generating profit from it and that will be more difficult so in the near term this tailwind continues. 12 months from now i think you will start to see some moderation in this. tom: that's the horizon around some of the challenges or more question marks for this rally. and in terms of embedding and monetizing this technology. other parts of the world in which you are seeing opportunity whether it's in the equity space or beyond?

anything in emerging markets out looking attractive, anything else in europe besides the story that's drawing your i? >> very much europe, u.k., all of those regions look cheap to me. it looks expensive because of the u.s. component 70% but the rest of the world is cheap not only versus the u.s. but their own measures as well. there trading at about the 50th percentile and most measures are ebida earnings. these, these companies -- these companies where you allocate to the u.s. and want to be in the best companies in the world. and have more cyclical exposure elsewhere but you're getting a discount. >> really interesting, patrick armstrong always fascinating on the broader macro -- broader macro. also to the barbell approach by adding some cyclical names as well.

coming up annmarie hordern's exclusive interview with ukraine's president volodymyr zelenskyy coming up in the next couple of minutes. stay with us for that interview. this is bloomberg. ♪

tom: welcome to bloomberg markets. china's president reaffirming ties with russian president vladimir putin on the sidelines of a summit in because asked on. the relationship adding to ukraine's worries as it in the country fends off russia. plans ahead of a potential second trump administration in the united states. annmarie hordern spoke with ukraine's president in kyiv.

pres. zelenskyy: we have had agreements of cease-fire between ukraine and russia and russia has always been killing our people so only if it's an international forum in the presence of countries leaders who are trusted they might have different ideas and different point of views on the stages of how the war will be over but we all have to be on the same side. we have to trust each other, trust is very important. a peace summit by the way has shown that we can follow this plan over 100 countries and today were talking about nuclear security and energy security and there will be a clear plan so the cease-fire also needs a clean plan. they will not be using that to

simply accumulate equipment on the territory that they've occupied because we will not be striking them. they can use that to create a strong fist here and then accuse us of breaking the cease-fire and start another invasion so it's really complicated for us. it would take significant loss for us if in the beginning when they had almost reached the capital city, accumulated a lot of equipment on the territory of belarus and belarus kept saying it is just an exercise. no occupation in mind. it's just the training, it's just military games. it's very important. i really don't want to have this big trouble for my country because we are at war already,

giving the advantage to russia now is impossible. we need to be smart and it's important also who will be responsible for this. which country will be responsible. it's easy to talk about cease-fire but it's difficult to keep it. it's very difficult to find those who will respond by the cease-fire. annmarie: we are to see more calls as the world politically is moving to the right and potentially moving to the right in the united states. you have said this war is dependent on u.s. aid. did you watch the presidential debate between joe biden and former president trump? pres. zelenskyy: first and foremost, a cease-fire is an important element in any plan to finish the war. so a cease fire is not finishing the war.

we have been there. it would be just a frozen conflict and it could be frozen for the -- on our territory under the occupation, this gives a clear advantage to one side. 80's easy to offer different proposals of cease-fires, but what's important, it's important to find an answer what would come after. it's a matter of not just the victim. there are many people talking about cease-fire and it's fine that people are talking about it , what would happen next, that is the question. what is the next step. what is the third step. what would be the step when putin breaks the cease-fire. after the cease-fire, a month after will he pull out the troops of ukraine.

who guarantees he will pull the troops out of the occupied territories. and there is silence. nobody has an answer. i'm not accusing, i just want to explain we are at war and we understand this. so the debate sprayed -- debates. annmarie: the answer of how this unravels will depend on who is at the table with the united states. pres. zelenskyy: amongst other things it might depend on who is president in the u.s. yes. that is a fact because the u.s. today are probably the most powerful player, so the matter of where the united states would be a major international player, whether they want that or want to focus more on the internal politician internal politics. it does not depend on me.

yes i watched the debates. first and foremost, i would say may be out of tune to what we see in the u.s. media but i watched and we are not electing the president so i did not look at the incumbent president of the former president, i looked at them in terms of ukraine. >> president trump city would end the war before he selected. >> let me be frank. for example. the decision is on the u.s. public. but let me just test some reasoning. let us imagine that the winner might be trump in november.

and he knows how to end the war pretty has a plan. me as the president of a country at war, not theoretical. i would like to be prepared. we are a big country and we depend on the aide in the world and we depend on the aide and position and the stance of the u.s. so i would like to understand what would it mean to finish the war fast. tomorrow, it was putin who started it. if trump knows how to end this war he should tell us today because if there are risks to ukraine's independence, if there are risks that we will lose the

statehood we want to be prepared for this. we want to understand whether in november we will have the powerful support or we will be all alone. >> in an exclusive interview with bloomberg's annmarie hordern. at this point let's bring in rose matheson for the context on this but what stood out from you -- what stood out to you. rosalind: a keen sense of being attuned to the global environment in which this war is happening. obviously focused on what's happening in the -- on the ground with russia militarily it is also aware of the shifting pieces which are important to ukraine in terms of continued military and financial support. watching what was happening in a bunch of places in europe with the first and second round election coming up and possible changes in the parliamentary mix. you've got the u.s. election and that's a big one for ukraine in

terms of continued financial military support with a change of administration in the u.s. if donald trump comes in as president he's putting much said he will cut off aid to ukraine and also says he has a plan to end the war immediately. it's very clear ukraine could face quite a few -- a different g applicable environment. >> could ukraine survive without that military aid coming from the u.s. if trump wins in november. how precarious with the situation be for zelenskyy and his country. rosalind: it would make them very fragile. they started to ramp up their own domestic military industry, there were vestiges of that from the soviet era and a lot of expertise in ukraine. shipbuilding and submarines and so on. that's still pretty small and europe, can they step up to the extent the u.s. was supplying and fill that void. difficult to see that happening.

also doubts in europe about that level of support and that leaves ukraine fragile and vulnerable in a military sense and of russia feels like it's got the upper hand at that point vladimir putin has the upper hand will he want to negotiate an end to the war. you can see the concern for ukraine that they need to have some kind of sense of certainty the on the end of this year. tom: how has nato been adjusting to support and backup for ukraine? rosalind: they've been a strong support throughout but the element of donald trump potentially winning in the u.s.. donald trump has made it clear he's got concerns about nato and some member states in nato, he's even suggested he won't militarily support some nato members if he feels they are not contributing enough to the broader good of nato. just fraying the edges of nato unity and that collective defense spirit. you can chip away on that in nato but it makes it harder for them to remain united.

tom: what's the situation on the ground in ukraine? speaking about the offensive russia has been pushing through and making gains. are we back to a stalemate. are the weapons getting military aid and hardware getting to the front lines? rosalind: we are hearing today another town that's quite strategic is at risk of falling and that's the ukrainian retreat from the town. russia is not making massive gains but they are holding the territory they've got to ukraine is struggling to take that territory back. when you look back, russia has occupied a significant part of the east and the south of ukraine. the more time goes on where they hold that land it becomes more of a fact. it's hard to dislodge them and if you get to a point of negotiating you can see where lines get drawn on a map. for russia it's not necessarily about pushing further afield,

but for ukraine the challenge is to take that land back. >> what are the changes. the base case seems to be right now after sunday the base case seems to be possibly they become the biggest party but don't have the majority, the national rally. they used to be closely aligned or fairly favorable to russia and vladimir putin. they've adjusted that view. how concrete is the support for france in that scenario for ukraine? >> it could get trickier. marine le pen has softened her language. she does support ukraine and the cause but that's a bit of an open-ended question. does it mean willingness to keep sending money to ukraine. do these decisions become harder if you've got a parliament dominated by these right wing parties including marine le pen's outlet -- outfit. you've got them dictating

government there. that makes it more complicated for france to take the lead. we seen emmanuel macron be forceful on behalf of europe taking some of the leader and pushing support for ukraine alongside germany. a lot of quite difficult questions for ukraine going ahead. tom: news director on the implication on the politics of france and the u.s. on the back of that exclusive interview. annmarie hordern with volodymyr zelenskyy of ukraine. we will get the views in terms of how the eurozone economy adjusts to the politics. that's coming up in the next couple of minutes. stay with us, this is bloomberg. ♪

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>> welcome to bloomberg markets, happy july 4 for the u.s. in particular. a percentage risk on french stocks performing well as we lead up to the second round of voting. the ftse 100 and the u.k. up just shy of a full percentage point. markets looking ahead to the u.s. reopening on friday. payrolls will become sub -- substantial. they are looking to build on

another record plunged through by the s&p on wednesday. the euro-dollar, the single currency gaining. a little bit of dollar weakness is aiding that. bitcoin under pressure for the third straight day. this is the worst we have seen since february. 57,000 on the largest currency, down 3.5%. let us get to france where the country is hosting its second round vote. it is the final push by the centrist alliance and the left ring new popular pond -- front to push marine le pen's far right in terms of the gains made. let us get the details from a reporter based in paris who has been following us for us. where are we, where do we stand in terms of how these parties have been aligning to close the door on the national rally. in the response from marine le pen? phil: i think the big surprise has been the unity that the

other parties have shown in the face of the national rally's performance. the left-wing alliance, the new popular front and the centrist group have gotten together and agreed to pull candidates in three-way or four-way braces to increase the chances to be national rally candidates. that has undermined marine le pen's party's chances of getting an absolute majority. there is a pullout showing that she might get 190 220 seats. you need to hundred 89 for an absolute majority. she was very critical of the other parties for doing this saying it is thwarting the will of voters. but, this is setting up a situation which we have not seen in france in a long time where the election might happen on sunday and there might not be

any party with a majority and then who does emmanuel macron to learn to -- turn to form a government. >> the political arithmetic will be key. how does this play out in the days and hours ahead as we lead on the back of that boat. when do we start to get a clear picture onto how things are lining up and then the potential back room horsetrading between the different political parties? phil: the polls close 8:00 p.m. sunday night and you will have exit polls almost immediately. official results sometime thereafter. you can imagine that the horsetrading began sunday night. monday will be crucial where people can take a breath and take a step back and see what i government might look like. it will be interesting to see how the markets react to this. the markets have come to terms with the fact that micron is not -- macron's party will not be

leaving the government. that much seems clear. monday is the key day where people take stock and begin to do that horsetrading. >> how damaged is emmanuel macron even where the national front does not have an majority but they could be the largest group. what does it mean for the standing of macron domestically and internationally? phil: domestically, it is clear that he will not be setting the agenda for legislation. he has been very pro-european and pro-business. the markets have liked what he has done over his time in office in seven years. the domestic agenda clearly will be set by whatever government they can cobble out of the election results. in the friend system the president is on the international stage.

it will be a diminished presidency if he is not in control of the domestic part of the agenda. going forward it is a different look. >> does any policy get pushed through? or does the policy just reads up in france? is it case-by-case and do they still take laws to the national assembly and work through and push through some policy on a case-by-case basis, or does that freeze up? phil: that is the great unknown. the current prime minister says that we can do policy on a case-by-case basis. we will cobble together a majority that supports it. and those might change. that sounds good in theory but it has not been done in practice. there is a lot of bad blood on the left, center, right, and far right.

it will be quite a feat to get them to work together on a case-by-case basis. they have not managed to do it in the past couple of years. >> really important update out of france as we lead up to the second and final round of voting on sunday. thank you very much for joining us from our paris bureau. for more on france in the euro zone in terms of how it impacts the economy, let us bring in the chief economist at berenberg. we will hold onto our hats as we look to sunday, how are we looking at the impact. is the economy immune to the politics? >> it is not. we are almost certainly facing the end of macron's reform drive which has done the french economy a lot of good. even in the best case scenario. namely a hung parliament in which neither the united left or

far right has a majority to press their agendas, but even in such a hung parliament we would be in a situation where in france if anything changes it would be a modest reform here and there. there are unresolved physical issues and the french reputation as a good place to do business has been impaired. micron can no longer -- macron can no longer push growth reforms. it is not gearing up to be an immediate financial crisis but a drag on the long-term performance of the french economy. >> a drag on the long-term performance of the french economy? what does that look like and how are you adjusting your outlook? holger: a week ago we changed our growth forecast taking them by -- taking them down by 0.2 percentage points. it does not sound like much, but that is an assessment of trend

growth. in the future each year you have 0.2% growth less then you would have had. that adds up, especially as financing costs for france will remain elevated related to what they were before. this combination of less trend growth and high financing costs and a president no longer able to push progrowth reforms, that would have saved money and given incentives to work. all of that adds up to mounting physical challenges over the long term. >> i want to go back to what you said in your first answer about the success of macron's reform agenda and put to you the case from thomas piketty who was writing "the guardian" a couple of days ago and said that left alliance would not be that harmful and it would be positive for the economy of france and

the reforms have clearly not filtered down to the people. the wealthy have benefited and wall street has benefited, but the people of france have not felt it. they are saying that the left agenda of funneling money to renewables and getting workers and having them have more say in terms of the running of con -- of corporations would push through real and concrete sustainable growth for france. holger: first of all that is nonsense. what the agenda would have meant was a significant rise in borrowing costs which is bad for the ability of the government to support people. it might benefit those who actually owe or are able to lend money to the government in the future which would have benefited more the rich than the poor. looking at macron's reforms, the key result has been a significant rise in employment.

a drop in youth unemployment, which is an improvement exactly where you need to see it for those people. of course, macron has had bad luck, namely that the surge in energy and food prices caused largely by putin has hit lower income people more than those with higher income so they spend less of their income on food. so many people at the low end do feel like they are worse off. it is something that has nothing to do with macron's reforms but it is a consequence of what we see in energy and food prices. >> the long-term drag on the french economy as a result, what are the implications for the ecb? does it pull forward her ramp up the rate cutting cycle when they do go again? holger: it should not. what i am afraid of is not the

immediate demand outlook changes, which would be an issue for the ecb. i am afraid that the long-term outlook for french supply actually changes. sorry. and what that could mean is actually that we get a bit less growth, that the balance of supply and demand shifts towards a little less growth and slightly higher inflation. because what supply-side reforms do is they improve the balance between growth and inflation and further supply-side reforms and a small reversal is less strength growth. and inflation pressures for the future. for the eight -- for the ecb this is no reason to accelerate its rate cutting cycle. >> i am conscious of the fact that we are quizzing you and maybe your voice is being challenged. but if you have more -- if you

have more, go for it. i want to get your views on the euro. we are seeing a little bit of strength right now. .10% -- up .1%. what are the challenges for the single currency given everything you have said about the topside in terms of french growth coming off and the reaction function from the ecb. you said they should not adjust in terms of what we are seeing. is there a vulnerability at this point? holger: i do not think there is a huge vulnerability unless the result is different from what now the opinion polls project. the risk of an immediate financial crisis in france, if say the far left what have been able to implement its full agenda or if the far right had taken control and dropped all moderation. that risk seems to be much reduced. so, near term, i do not think that should put negative

pressure on the euro. of course, longer-term france is no longer the fast-growing country in relative terms that it often was under macron. that is not a positive. once again relative to the challenges that the u.s. is facing in its own fiscal and political arena, europe as well, not all that bad. >> on the u.s., nonfarm payrolls on friday. are we seeing that labor market looking more fragile. the balance of risks between inflation and jobs, what are you scrutinizing between the data and the u.s. on friday? holger: we will be looking at payrolls as to whether they finally show what other indicators show, namely a softening of the market. so far what we see in drop offers and other aspects is a softening towards could call it more and more or less normal

state from a state that used to be hot half a year ago. what we are not yet seeing is a significant drop of dynamics into a very cool kind of have hard landing period. the labor market is likely normalizing with some probability that it will be a bit low normal temperature in the second half of the year. but the economy remains well supported by fiscal spending and well supported by parts of consumer spending especially those on the middle or higher income spectrum. all in all, i do not expect the labor market to soften too much but a little bit is on the cards including the data we will see tomorrow. >> the markets pricing in two cuts. they have not cut yet as such of course. in september and then again in december. does that seem rational? we were speaking to someone's

earlier on in the show and he said it will be one and done because the dynamics have changed. holger: our forecast is one cut not two but i admit a significant probability that there might be two cuts. the economy is softening and inflation is coming off a bit. the underlying dynamics remain somewhat resilient especially as wage growth soften modestly and we have and core inflation a few factors that will likely keep inflation on a track that goes down but only so slowly that it would make more sense for the fed to be labor -- to delay the first cut until after the election. if they cut on not clear evidence that they should cut, they might be accused of interfering in the u.s. election campaign. so unless the data is clear you

need to cut in july or september. they will probably wait before they start the cycle. >> ok. the case for waiting until november given the politics and that will be a philip -- that will be helpful to whoever wins. thank you very much on the view around the adjustments to the french economy and longer-term drag given the changes around the national assembly expected after the second roundabout. thank you. coming up, bnp is looking at a possible joint venture which could create on of the largest firms in europe. the details next. this is bloomberg. ♪

>> welcome to bloomberg markets,

the handoff from the fraction -- from the french records that came through european equities or risk on and the stocks hundred .6%. hosting gains of 80 points up by 40%. .8% ahead of the second-round vote of the parliamentary elections closing out on sunday evening. the dax is more modest posting games -- gains in germany. happy july 4. u.s. session is closed but we look ahead to friday. modest gains at 10th of a percent building on the record that came through on wednesday. 108 on the single currency and bitcoin under pressure for the third straight day at 57,300 down, almost 4%. bloomberg reporting that bnp paribas switching to deal and annulling a joint venture worth 1.4 trillion euros each could

create one of the largest european firms by assets under management. alexander joins me from paris with the details. what do we know about this potential tie up? alex: well so the talks are quite early-stage and not particularly in advance. axa and bnp are looking to tie up their asset -- asset management units into a joint venture. it remains to be seen whether the talks will actually go through and lead to a deal. the question of control is key because in the past asset managers have been walking away with deals and he will -- anytime they could lose control so it is interesting to see how that plays out. >> what are we watching for in terms of how the deal formulates. $1.4 trillion in terms of a u.n. if we do get this joint venture. and more broadly what it means for the sector. alex: so, asset managers have

been racing to gain scale because it allows them to be more competitive in an environment with margins under pressure. europe is no exception. there is one player that has been growing to become the biggest in the strings of acquisitions. people now and other asset managers are trying to catch up with them. if this deal was to go through they would have 1.4 trillion in euro assets. it is quite joy just quite good. there is quite a lot. there is room to grow for them. >> you touched on this but in terms of consolidation is this a step change or gear change towards further consolidation. how do we read into the story? alex: consolidation talk has

been quite present for the past years. it has been heating up leave for several reasons. when you look at bnp, they have been looking to deploy the billions of cash that they pocketed after the sale of their retail urine it. they have been the hot topic for bankers. and it is kind of obvious that they were underexposed and asset management where they could grow. that is driving the talk. however, for a long time many teams and asset managers were for sale. but when you talk to bankers the teams know their worth and they are willing to sell for quite an expensive price. so it was deterring further moves the past years. >> how are regulators in europe and brussels likely to look at this kind of tie up? does it get the green light or

is are going to be scrutiny. while this draw the attention of europe's regulators? alex: i would say it is way too early to know about this deal in particular. you can actually do some consolidation, other by buying similar firms like with the -- like with pioneer but buying significant chunks of other firms or firms that are more specialized the latest deal with alpha associates when they went into private markets which is a hot topic. also elsewhere, and i am saying that they would merge the u.s. unit. they are looking at opportunities in asia. this deal is domestic and there will be some consideration in terms of consideration. it will not be clear whether it will be frowned upon in

brussels. >> still a long way from that talk about the private markets because there is a lot of activity. what is it about the private markets that will drive in the focus and generate a lot of the activity? alex: well, when you look like -- when you look at what he was said when he bought the boutique it kind of draws diversification for them. there was a push for passive investment strategies in the past. that is where yields are right now. and apart from monday you saw blackrock buying infrastructure recently, everyone is kind of looking at this area. it yields more and is very profitable and is attractive for investor errors. >> the profitability and the yield story within the private markets. thank you very much. the details around that

potential proposed tie up between bnp paribas around $1.4 trillion. we will look at if that gets firmed up. we will look at annmarie hordern's exclusive interview with volodymyr zelenskyy and the possibility of a second donald trump administration. let us take a listen. pres. zelenskyy: so, let us imagine that the winner might be trump in november. and he knows how to end the war. he has a plan. me, as the president of a country at war, not a theoretical person, but a real-life perfect -- person i would like to be prepared. we are a big country and we really depend on aid from the world, we depend on aid, position and stance of the u.s.

so i would like to understand what would it mean to finish the war fast and tomorrow, do we want the war to even start. it was putin who started it. if trump knows how to end the war, he should tell us today because if there are risks to ukraine's independence and risks that we will lose the statehood we want to be prepared for this, we want to understand whether in november we will have the powerful support of the u.s. or we will be all alone. >> volodymyr zelenskyy. coming up, so martin back again on how to think about the political risk inflation and central banks coming up. there is a lot more market analysis. stay with us, this is bloomberg.

>> welcome to bloomberg markets, i am caroline hyde and here are the top stories we are folk -- following on fourth of july. pressure joe's on -- grows on joe biden. democratic governors emerge from a crisis meeting saying they back him. investors grapple with the political uncertainty as a u.k. votes and france heads to the critical -- to the polls for the critical election. french firms unite. access saying to the weighing

age joint venture with bnp paribas which could create a large player. first, let us check on the markets. the s&p fee -- s&p 500 futures are as what we are focus on. we have have been record high after record high and there has been a key focus on what is happening ross the markets more broadly and the economy slow down in ism services waiting for a weaker dollar once again down for a second straight day. we are seeing european stocks up the most since june 24 despite the political risk in france as a u.k. heads for the polls. we will keep a close eye on what is happening. even with a weaker dollar which seems to be more issues about the german government selling crypto that has been constant -- confiscated. supply-side issues as well as what it would mean if we do see a different leader for the democratic party and who could win as trump is seen as a pro

crypto leader. i am looking at what is happening in the futures market the nasdaq. keeping a close eye on tech stocks which have been the bread-and-butter of the market rally. and keep a close eye of what is happening with the euro as we head towards the polls and france comes -- come sunday. maybe we have seen some price ability and look, asia had a strong trading day and the msci benchmark is up again. i am looking at individual movers and we will get to these stories later in the show. acts the doubling down on perhaps focusing on its investment -- investment management part in forming a joint venture which could create one of the biggest players in the market. keep a keen eye on continental looking like some good growth in china. ev sales have been on fire. and lastly we want to keep on a spanish company that is poaching a member of bank of america

merrill lynch to be, cfo. all of that corporate news needs to be baked into what is happening in the economy. we are trying to pass through what is a resilient but weakening u.s. economy. political risk in europe. and more broadly how is asia continuing to ramp higher and what does the boj do in the face of the yen. let us take into it. dz bank and head of monetary policy. when you are looking, let us start with the u.s. dollar. it is down for a second day is on the back of some weakening data. i am interested in what -- in if you think the u.s. economy will have a calm or slow down or if we will get a jolt due to political risks? >> as you said, the data currently is pointing to a

slowdown. i like to look at the bloomberg surprise index which is a great indicator of where the data is coming in relative to expectations. that index is falling and that is clear evidence of a slowdown. as to the future of the u.s. economy. all will really depend on who will become president in the autumn or winter because that will have a massive impact on growth. in a biden scenario you're looking at a solid not massive growth evenly spread into next year and with trump it would be a lot more volatile. a massive boost at the beginning and then a slowdown. it really depends now. the outlook is solid but it is not exactly goldilocks either. caroline: can you spell out how you are trying to price in what a different leadership in the white house will mean for markets. many have started to feel that if we get a trump presidency that means you are going to be

seeing some pressure on fiscal spending, i.e. more of a. and then pressure on bonds at the long end. is that something you are factoring in? sonja: yes. the thing is the last time trump was elected president we were expecting horrible market reactions and we have learned our reaction. if trump does when i think that the dollar -- does win, i think the dollar will benefit because we are looking at stronger growth in the beginning. he will cut taxes which means more investment and consumption and proof sentiment. and the fallout from that, the fiscal fallout will come a bit later. i think at first we are looking at a stronger dollar and we have a parity call for the trump scenario, for -- certainly in the first three to six months. in a biden scenario we know it is moderate. that makes a big difference.

absolutely, it is a fiscal problem. to be honest, i am not sure if it is that different whether we have trump or biden. we are looking at more deficit spending. caroline: let us pivot to the euro-dollar call. we have been speaking with the ecb amid the political risk happening in france. the ecp has been leaning upon as to how they might cater to political fallout and the feeling is that they would not, they have moderate -- they have monetary policy and let us look at what peter pratt had to say a little bit earlier. peter: markets are satisfied by parliament and the government not taking a lot of decisions up to the presidential elections. people would love to have 70 basis points to compare it to the bond with the expectation that if things go wrong central

banks will intervene. the hazard is unacceptable. and i personally think that americans are being too pessimistic. caroline: how do you feel about moral hazard and the ecb moving from its trajectory of cutting rates? sonja: well, moral hazard is a massive problem for the ecb. the market has become very used to the sort of intervention by the central bank and the ecb coming into mop up the mess when it happens. it will be difficult if not impossible and there are people in this market do not know anything else. all their reality has been a be having a massive residence. and it is sitting on a huge pile of paper. it is difficult and while the ecb has been trying to impress upon governments that they need

to be fiscally responsible the reality of the matter i believe is that if push comes to shove, italy or france, they are probably more the driving seat and the ecb will not drop them. there is a moral hazard and it has already happened. it will be difficult to change. caroline: what we might see change is intervention from the boj or a push towards a different style of monetary policy. what are you making of a day of japanese yen strength? sonja: the boj is in a difficult position that they have maneuvered themselves into. they did change monetary policy and they started to signal that they will continue to higher grade. they have talked about changing the asset purchase program and they have made adjustments. the problem is they do all these things and then talk it down. they have taken action but the words are so debited -- dovish

that all the market takes is that they are expansionary. you might have to intervene again and it is pushing in that direction but that will only achieve temporary wrist bite. what they need to do is to be more aggressive in their actions at the upcoming meeting at the end of july. i fear, given the track record that they will not do this. and then fundamentally the yen remains vulnerable. it is only treating the symptom but not the underlying problem. caroline: that is tougher the japanese consumer. it has been so great speaking with you. stay well and have a wonderful rest of your week. coming up, president biden getting a vote of confidence from summoning his party. we take a look at the presidential election and who, if anyone might replace him. this is bloomberg. ♪ sweat isn't sweet.

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>> i am here to tell you today, president joe biden is in it to win it and all of us have pledged our support to him because the stakes could not be higher. >> none of us are denying that there is a night was a bad performance and a bad hit, but it does not impact what i believe. >> the president is clear that he is in this win this and the president is our nominee and the president is our party leader and he has told us and was very clear that he is in this to win this. caroline: democratic governors offering support for president joe biden despite the calls for him to step down. he has faced criticism coming

off of his performance coming up against donald last week. joining us john authers who can beautifully weave together what on earth the markets are making of some of those topsy-turvy happening on capitol hill and ultimately. john: all of our american viewers need the british working on the fourth of july to take us through it. caroline: the irony is not lost. we are the ones working on july 4, take us through it. take us back to all the infighting, the show of force from certain governors and the noise is relentless. and is the market factoring in the noise? john: i think it is. i have had a lot of fun looking at the betting markets this morning, which shows that kamala harris has for the first time overtaken joe biden in terms of her odds of getting the presidency. that is pretty drastic. if you can buying all the four

democrats for whom you can get contracts, avenue should and shall obama, it looks bad but nothing like as bad as it does when you look at biden. trump's chances of winning is still regarded as 53 or 54%. i think the market is assuming that biden cannot survive this. but that is not necessarily terminal for the campaign. i think that might be broadly right. so what you see is a slight calibration and things like the bond market to take in the increase chance that donald trump is going to win. they thought he was going to before and they think that more clearly now and it is far from a done deal. so i think that is where the market had reached before everybody went off to enjoy the fourth. caroline: let us talk about what

the bond market thanks and prices and what donald trump being more anti-trade and tariff prone and more fiscally expansive. how does that factor into a purchase or salad? john: that factors in largely ugly phrase is a bear steepener. the long end of the curve the 10 or 30 year yield rise sharply while the shore up -- the short end which is affected by monetary policy does not move much. i think that can be overstated but we saw a higher move in 10-year yields in the last few days after the debate. and that reflects exactly as you were saying, trump is tariff man. he said he will raise tariffs which would be inflationary on the face of it. he says he was going to touch -- to cut taxes and made plenty of

arguments that that would be a good idea and in the short-term term it will be inflationary and bad for the bond market. so, there is a bet on an interestingly, you saw this in 2016. immediately after he was elected, obviously very surprising you saw the bond yields really scoot higher. but stocks also did well. there is a belief that trump is good for stocks and bad for bonds. caroline: i sit -- i feel that inverse relationship keeps breaking down on us now matter which way we go. john: i can imagine that. caroline: it is a joy, happy fourth in the u.k.. meanwhile, the exclusive interview with the ukrainian president. he is -- and his outlook for a potential cease-fire and what he makes on the call that trump could expedite any sort of cease-fire. this is bloomberg. ♪

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caroline: this is bloomberg markets. nato allies have agreed on a funding target for ukraine according to alliance diplomats. bloomberg sat down with the ukrainian president volodymyr zelenskyy and asked about a possible cease-fire. pres. zelenskyy: we have had agreements about a cease-fire between ukraine and russia and russia has always been breaking and killing our people. so, only if it is in some international forum in the presence of countries and leaders who are trusted. they might have different ideas and views on the stages of how the war will be over but we all have to be on the same side.

we have to trust each other. trust is very important. the pieces of it, by the way have shown that we can follow this plan, over 100 countries and today we are talking about nuclear security -- nuclear security and energy security. the cease-fire needs a clear plan. we must understand that russia will not be using a cease-fire to simply accumulate equipment on the territory, our territory that they have occupied because we will not be striking them. i mean, they can use that to create a strong base and then accuse us of breaking the cease-fire and start another invasion. it is really complicated and it would take significant loss for us as i invade again as they did

in the beginning of 2022 when they almost reach the capital city and they accumulated a lot of equipment in the territory of belarus and belarus can say it is not just an exercise and no occupation is going on. it is just training and will attend games. it is very important. i really do not want to have this big trouble for my country because we are at war already, giving the advantage to russia now is impossible. we need to be smart and it is important and also, who will be responsible for this beside the ukrainians paying with their lives? which country will be responsible. it is easy to talk about cease-fire but it is very difficult to enforce it and keep it. it is very difficult to find those who will respond why the

cease-fire was wrong. annmarie: we will see more calls as the world is politically moving to the right and potentially to the right the united states. you said this is dependent on u.s. aid. did you watch the presidential debate between joe biden and former president donald trump? pres. zelenskyy: so, first in forest -- foremost, the cease-fire is an important element in any plan to finish the war. so a cease-fire is not finishing the war. we have been there. it would just be a frozen conflict and it will be frozen for the our territory and our people would be under occupation. so it would give advantage to one side. it is easy to offer different proposals of cease-fires but what is important? it is important to find the answer what would come after?

it is a matter of not just the victory. there are many people talking about cease-fire, it is fine if people are talking, but that is the question. for example, what is the next step? what is the third step? what would be the step when putin breaks the cease-fire? a month after the cease-fire? will he pull the troops out of ukraine and who guarantees that he will pull the troops out of the occupied territories? and there is silence. nobody has answers. i am not accusing, i just want to explain that we are at war and we understand. so, the debates. annmarie: so because the answer of how this might all unravel will depend that he was at the table for the united states. pres. zelenskyy: amongst other

things, it might depend on who is the president of the u.s., yes, that is a fact. because the u.s. and the united states of america today is the most powerful player. so the meta-on whether the united states would be a major international player whether they want that or they want to focus more on their internal politics. i cannot say it does not depend on me. annmarie: did you watch the debate? pres. zelenskyy: i did. first and foremost i want to say may be to be out of tune to what we have seen, but i watched and we are not electing the president of the u.s.. so i didn't look at the incumbent president and the former president, i looked at them in terms of ukraine. annmarie: president trump says

he will end the war before he is elected. what do you think of that? pres. zelenskyy: yes, i heard that. let me be frank. for example, the decision is on the u.s. public. but let me just have some reasoning. yes, let us imagine that the winner might be trump in november. and he knows how to end the war. he has a plan. me, as the president of a country at war, not theoretical person, but a real-life person, i would like to be prepared. we are a big country and we really depend on the aid from the world. we depend on the aid and the stance of the u.s. so i would like to understand what would it

mean to finish the war fast. tomorrow, they want the war to be over tomorrow? it was putin who started it. but it would agree if it would be fair if trump knows how to end the war he should tell us today. because if there are risks to ukraine's independence and risks that we will lose the statehood, we want to be prepared for this. we want to understand whether in november we will have the powerful support of the u.s. or if we will be all alone. caroline: ukrainian president volodymyr zelenskyy speaking with annmarie hordern. coming up we will dig into equities and where to place your bets amid what our steer -- still near or record highs across united states. we had the -- we have the head of equities at fulcrum asset

management. why he remains bullish on the u.s. economy and housing. this is bloomberg. ♪ with so many choices on booking.com there are so many tina feys i could be. so i hired body doubles. mountain climbing tina at a cabin. or tree climbing tina at a beach resort. nice! booking.com booking.yeah. want to save on some of the biggest names in streaming on

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caroline: welcome back to bloomberg markets. a quick check on the markets. we are only focusing on futures because it is a fourth of july and people are celebrating. we can get a signal. we are up record highs and up five points on the futures. the stoxx 600 up even as france had to the polls and the u.k. is at the polls. we are seeing some risk appetite with most industry groups on the higher side. the dollar index is falling as service data came in weaker which means that the fed could cut as soon as september.

bitcoin is falling some 4.4% even well below some of those key trendlines. the 183 meet -- 183 day moving average things below it does not mean support is gone? the -- big tech just slightly down. the 10-year yield do not keep an eye on that for the moment. futures is where we see borrowing costs trying to digest whether we see a trump win and if we see selling off in the end of the curve. the cac 40 up as france sunday the second round of voting and it does not the majority for marine le pen is on the table. asia is getting a bit more than a percentage point. we want to focus on what the nasdaq as been doing and the fact that stockmarkets have had an extraordinary year largely

due to artificial intelligence. and the one who can talk about that is ahead of the -- of -- does the ai run-up still have legs? fawaz: thank you for having me. it is a seminal technology and it will be here the rest of the decade. at the moment the highest remains in the second and third derivatives. a long way to go and i do not think valuations are stretched. caroline: picks and shovels being chips and everyone has been so focused on nvidia and the $2 trillion that they have added. there are other players that have caught a bid and i am wondering where you identify places that are undervalued at the moment. fawaz: memory is what we like the most and a company in korea

makes high bank memory, a specially -- a specialized form of memory. and there are only older two memory producers. his high-bandwidth memory has low yield and it takes up more of the supply. so as global ai spending grows towards 5% of memory market it will have a 15% impact on supply side. micron will win and so will other memory tool producers. caroline: micron has been suddenly a high land with memory play. but there have been issues that it sold it to china. how much has geopolitics been a factor in the upside for the company is? fawaz: micron and samsung, only three companies in the world can make memory at this stage and ai

is very memory intensive. so china does not have domestic memory producers. one way or another, either an older generation's memory will go to china and that will not stop. and if it is not micron it will be the korean company. it does not matter if micron serves in china, it will serve to some other customers. caroline: if you have not been able to play eai and tech magnificent five, you might have been able to play health care and that is the other extraordinary performer into 2024. there have been headline risks to the maker of ozempic and levi lily and orval nordisk. are you still thinking that these drugs are remaining key players for the next iteration of health care play? fawaz: i have even more

confidence in them and the ai team will at some point transition from the bits and shovels to the software or value add. the products do not exist yet which will generate. for obesity on the other hand, we will see nutrition keep going. currently 3.5% of the u.s. population is on weight loss and obesity treat drugs and by the end of the decade they will be 10% and then 3%. there is an extraordinary growth. eli lilly and novo nordisk, the latter larger in europe. we feel that these companies are still two years out and are not expensive. and there is a long way to go. caroline: does that call -- does that become the be all end all play? i sat down with the ceo and he

was trying to articulate that they feel like they have these miracle drugs to be able to help the way in which we look and are obesity and internals, but is the brain health that needs to be focused on and that is something that they are gaining improvement with in particular when it comes to generation of the brain. a drug just yesterday getting a sign off in the u.s.. how far do you think the companies run with r&d. fawaz: it is only a diabetes and obesity company. eli lilly has alzheimer's. at these market caps, they are all defined by weight loss and obesity management drugs. and those are miracle drugs in the sense that 70% of the u.s. population is either obese or overweight. and that these drugs help with cardiovascular disease, kidney disease, sleep apnea and mental health and well-being. and we will add average

lifestyle to the u.s. population. so, miracle drugs is the right word. they work, and everyone wants to lose weight. caroline: are you long-short as well? is there an area you bet against when it comes to health and people feeling that you will not be eating so much or at least bad food? fawaz: some of our best returns have come from identifying the losers. but from obesity, basically some of the cohort that goes on these drugs, their alcohol consumption drops 40%. their sugary snap -- that consumption drops 40% and cigarette consumption drops 45%. as a percentage of population goes on these drugs wrote -- rose, consumption naturally for these categories will drop.

so i spoke to her she management, 40% of their project is consumed by 5% of users who eat 10 to 12 candy bars a day. this is a problem and it is a been a market that has been attacked for these businesses that will shrink. so we are short businesses and we think they will continue to underperform. caroline: maybe a more healthy consumption of the odd treat now and then. talking of treats. fawaz: fruits and vegetables. caroline: everything in moderation including moderation. i am interested in what has been a moderation in the housing market and with mortgage rates as high as they are we can see rates falling more of a focus on housing. i introduced you previously when we talked about having you on you have a more against the grain view of the housing market in the u.s.. fawaz: that is fair to say that

ai and obesity is well-established. and everyone is waiting for the housing market to crack. on the flipside 35% of all mortgages were refinanced in 2020 to 2022. the average effective mortgage rate was 3.8. while the incremental mortgage rate is up 7%. they are sitting on paper with mortgages at 26 or 28 years of remaining and mobility has collapsed. and that housing disappeared from the market. this is a shortage of housing as people are sitting on mortgages that are locked in. and that shortage is leading to house prices rising. so you said going back and housing, but to look at house prizing they are on the rise and still rising on the shortage that we talked about and rent is

very strong. homebuilders continue to find demand for their product even with effective rate rates on a new and effective mortgage. construction is going but they will clear their backlogs and house prices continue to rise. caroline: we like contrarian views. thank you for joining us. happy july 4 in the u.k.. coming up, political uncertainty pretty prevalent in france. how the markets are digesting the run-up to the final round of elections on sunday. this is bloomberg. ♪ all-day energy starts with clean hydration. lmnt. more electrolytes. zero sugar. you feel the difference when you get it right. stay salty.

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>> in terms of health care, unilever is an incredibly important company and our first priority is to ensure that whoever governs provides a predictable and stable environment. we just started a 10 to 15 year process and we need to think long term. we hope whoever leaves the country will think long-term. we know the current government has been supportive of innovation and ecosystem. that will continue -- we hope that will continue. we have people hoping to understand what that means for the economy especially for the changing government in the u.k. and people want the predictability in the markets. we are a long-term player trying to do the right things for patients and we hope to partner with whoever is in power because we have to be ready to do our part for society. and so far we believe that that will continue. caroline: that is paul hudson

talking to be yesterday, the ceo of the french pharma giant talking about french election. the rivals of marine le pen gaining momentum as they work against a majority for the right party. that is ahead of the second round voting for the french legislative vote that will take place on sunday. who better to ask, it -- that are reporter who is currently in paris. it feels like domestic policy is in play but for the markets a worst-case scenario might be avoided. >> that is right and the worst play scenario for the markets would have been a nectarine and outright majority of the far left. that seems to be a scenario that will take place on sunday in this runoff. it is also going to be much harder for the national party and marine le pen to get a majority of the far right given

the number of candidates who have pulled out of the race is for this runoff. so more than 200 candidates have pulled out meaning that you have a so-called republican fraud. with one candidate only in most of the constituencies facing the national rally candidate. that makes the chances of getting an outright majority of the far right actually much lower. in fact marine le pen was on television last night and this morning saying that micron -- macron has allied with the far left and that was his big dream from the beginning. but president micron has responded by -- president macron responded by saying he will rule out any sort of coalition with the far left so that he will moderate to try and form that kind of coalition. at the moment the president macron is leaving the last of

the campaigning to his prime minister. we will have another primetime television political debate on tv with gabrielle and jordan and two representatives from the far left and the socialist, right philip -- rafael, who was saying that france is on the edge of a cliff and we do not know if we will jump or not. caroline: let us talk about the potential cliff when it comes to policymaking. we had sanofi saying that under macron, it has been business and innovation friendly. coalition is not the usual state of play. how much more difficult does it make policymaking? caroline c.: the main concern for the markets was an outright majority for the far right which meant clashes with the e.u. when it comes to fiscal rules and

this would have made the budget very difficult. now, the hang parliament seems to be the likeliest scenario and some have been talking about a technocratic government even though we have the former president on this week saying that he does not believe in a technocratic style -- italian style government. this shows a wide coalition with moderates from the left and right wings is the most likely scenario. we will see what this means for pension reform because you know that macron spent many months trying to get approval for this pension reform. you have months of protest in the streets. is that going to reverse the pension reform? at the moment we know that macron has suspended the implementation of the unemployment benefits reform trying to extend a hand to the moderate from the left wing. we will see how that pans out but it will be difficult for

france to do any kind of significant reforms over the next three years. caroline: you will be having significant conversations going into this election come tomorrow with key policymakers and macro lot ledgers -- leaders. thank you for being with us. staying in france there is corporate news, two of the largest companies are considering a joint venture. it would create $1.5 trillion giant, potentially. we are talking about axa for a joint venture with bnp paribas. i am pleased to say that we are joined by alex over in paris. and, what is really pushing axa's ceo to want to merge is part of the business that tries to offset risk? alex: hello. there are several things at play. axa has been mulling over options for its asset management

unit recently but there were rumors in the past over seven years ago, almost. this is something that has been floated. here, bnp paribas has said -- has been trying to deploy the billions of cash that they have when they sold the bank of the west a couple of years ago. it is kind of a perfect storm. they are our -- they are two companies that are large and france but the asset management units are subscale. in the asset management sector globally, players are trying to gain scale and remain competitive and there is a huge pressure on margins and fee's. and gaining scale having more power and assets under management is the way to go. creating 1.4 trillion euros in asset management is going to be significant for france. it is quite far behind the first

one which has more than 2 trillion euros in asset management. caroline: what about regulatory risk? would there be any? alex: the talks are not really advanced so far. and the banks have not commented on them or the story. it is quite early to tell whether there will be concerns. i mean, this is something that will come into play because these are two french units and the merge is going to be quite a big change for domestic players, however it is not clear whether brussels will be looking at this very thoroughly. it depends on really the assets and classes and the funds offering for clients in france. caroline: that is a great scoop. thank you so much for talking us through what could be quite the combination.

meanwhile we want to be talking about their policy and about the united states coming from chicago. austan goolsbee is who we will be speaking with. policymakers should start preparing for rate cuts. we will hear from him next, 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 investment objectives, risks, charges, expenses and more in prospectus at invesco.com

caroline: this is bloomberg markets. austan goolsbee is saying that policymakers should cut interest rates if united states inflation continues to fall to the 2% target. francine lacqua sat down in portugal. take a listen. austan: there is a danger for waiting and making wrong new -- wrong moves. the basic function is that we moved to a quiet restrictive posture -- quite restrictive

posture and we raise the rates and we have been holding their. we have gotten to this when inflation was over 4% and inflation is down close to 2.5%. if you sit with the rate while inflation goes down you are tightening. the reason you want to tighten is if you think you are not on path 2%. if you are on path you have to take seriously that the u.s. central bank has a dual mandate. so if employment starts falling apart or the economy weakens, you have to balance that off with how much progress you are making on the price front. francine: how worried about you about the unemployment rate and job slowing down? austan: the unemployment rate is low and rising. but if you look at quit rates

and the ratio of vacancies to the number of unemployed workers and various conventional measures, they are cooling, but at a level that is still pretty strong. that is kind of what we have been trying to fully sort out. now i think if you look at the second half of last year, in the u.s. we had seven straight months of excellent inflation. we hit a bump in the road in january of this year. and now we have gotten a string of improved inflation readings, and if we get more like what we have just seen, to me that feels like the path to 2%. caroline: the chicago fed president speaking with francine lacqua. coming up more insight on macro policy and single -- central-bank policy. daniel morris joining us. why he thinks fundamentals are

more importance to market and then there are political risks. from new york it is july 4. this is bloomberg. ♪ want to save on some of the biggest names in streaming on

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caroline: welcome to bloomberg markets, i am caroline hyde in new york. the top stories on the fourth of july, pressure mounting on joe biden to drop out of the race. while investors grapple in the political uncertainty in the u.s. to the u.k., france heads to the polls for a critical election on sunday. deals are still brewing as french firms potentially unite.

a joint venture with bnp paribas that would create one of europe's largest players. we turn our attention to the futures market in the united states because the pain that -- main benchmarks are closed. we are currently flat on the futures market. the stoxx 600 managed to push up .6% as we see some risk on attitude heading into some of the elections. the bloomberg dollar index on the downside after some significant weakness, the most significant and for years, and a slight cooling in the jobs market. all eyes are on fp come friday. even with a weaker dollar we are seeing money coming out of bitcoin. that is a supply-side issue. will we see sales? will we see the german government sell bitcoin? a look at what is happening on other key benchmarks, the futures market these are individual movers we are currently seeing at play in europe.

no, i down to .1%. a little coming off the table would have been another record high for tech stocks. up 8/10 of a percent on sunday. let's see how asia-pacific is up a percentage point. asia stocks are doing well at the moment. we look at some individual movers that have been key players in france. access/bnp paribas, will we see a joint venture that could have one and half trillion dollars under management? up 8% as chinese sales do well. we look at the spanish company that is trying to settle itself with the new cfo. we will turn our attention to geopolitics. some of the impacts that the ongoing war in ukraine is continuing to have. president zelenskyy is potentially preparing for the united states when donald trump may be president once again.

in an exclusive interview with bloomberg and kyiv he said he would like to understand how donald trump thinks that ukraine should end the war if you were to win november's election. >> let us imagine that the winner might be trump in november. since he knows how to end the war, he has a plan. me, as the president of the country at war, not feel radical, i would like to be prepared. well, we are a big country, and we depend on the aid from the world. we depend on the aid and position and stance of the u.s. i would like to understand, what would it mean to finish war last? if tomorrow we want the war to be over tomorrow? if we didn't want the war to

start because putin started it, but if trump knows how to end this war he should tell us today. because if there are risks to ukraine's independence, risks that we will lose the state hood, we want to be prepared for this. we want to understand if and november we will have the powerful support of the u.s. or will be all alone. caroline: will ukraine have the u.s.'s support, or will the country have to fight without? that is one possible consequence of this year's election. joining us for if trump could expedite any sort of cease-fire is the bloomberg impending colonist for international affairs. it ultimately speaks to the hubris and perhaps the arrogance of us in the west to think that

ultimately russia invaded ukraine because of us, because of nato. you say, trump and many others have this wrong. >> absolutely. we always tend to think that everything happens because of us . in fact, around the world a lot of people assume that if something happened it must have been the u.s. that did it. if it didn't happen, either the u.s. was too weak or made it happen. the fact is, great powers do have an impact, but countries have their own agency. especially a country like russia. putin makes the same mistake. he assumed that ukrainians had no agency. that if they went out to the streets in 2013-2014 and were protesting and must have been the cia. one million people in the streets must have been the cia.

that is how he made the mistake initially going into the war, invading thinking that they wouldn't fight. they did fight and here we are. the point that i was trying to make was, if you want to make peace you have to have a really strong grip on what the russians want, what their goals are. that will determine. they will try to achieve their goals also through peace negotiations. understanding what they want will let you know what they will be willing to accept and also if they accept something is this just part of a wider plan to go further? to restart the war at a later date? or does this have a chance of actually working? that is the point that i wanted to make. there has been a transformation within russia that really needs attention. caroline: can you talk through the transformation? what ultimately russia wants if indeed we are in any way to

consume and understand this ahead of any change in the white house? marc: it is a big subject. in essence, you had the collapse of the soviet union in 1991. our tendency was to think, well, that's that. in fact, it was the beginning of a process of disintegration. we are in it. it wasn't over 30 years ago. we are in that process at the moment. the russians are very much contesting exactly where their borders should be. they were never a nationstate in the traditional sense you have in europe. the borders that exist, internationally recognized borders of russia now are not borders that russia necessarily recognized, even back in the 1990's when i lived in russia. very few russians thought that ukraine was a country, or that

belarus was a country, or kazakhstan was a country because they were used to the idea of the soviet empire, the russian empire being what russia was. that is know what is being taught, very aggressively, and russian universities and schools. they are being taught that there is this civilizational state somehow bigger than the state that includes indistinct borders that are not necessarily the borders that russia has now. caroline: i will ask a controversial question. do you think either current candidate for the white house, or indeed candidates for leadership in the u.k. or france, get this? marc: in general, no i don't. as i say, we tend to be very solar for stick. in europe they understand it because they lived it.

it is very poorly grasped in the u.s. where there is a debate about whether nato is at fault or not. it is a debate about u.s. foreign policy. what does russia want. what is their history? they have been fighting for centuries, including the for periods of genocide. this is a long story. we -- it is not very well understood. caroline: the man covering international relations within europe, russia, and of the middle east. you are a busy man. marc champion, we appreciate you spending time with us today. coming up daniel morris on why he thinks fundamentals are more important to markets than politics. this is bloomberg.

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>> the countdown to the market open as we bring you the first trades across europe. caroline: this is bloomberg

markets, i am caroline hyde in new york. currently, trading futures and the u.s., we celebrate july 4 in the united states. one american who is based elsewhere is daniel morris, who we can lure on to talk about what is occurring in the markets from a fundamental point of view. daniel, we are looking across the u.s., the u.k., europe broadly at political risk. what the markets should be dictated by is the services data we got yesterday, nonfarm payrolls we get on friday? daniel: clearly right now we have so much happening on the political front a nice change from looking at the latest pmi figure or see pmi, but those numbers are any indication of what will happen in the markets. i think that the upcoming cpi figure for the u.s. is particularly crucial because as we know last month was surprisingly weak confirmed by

the pce, personal consumptions expenditure data. that would suggest inflation has disappeared and we should look for how many cuts by the end of the year. it probably won't happen, but we need another bit of confirmation in the data and hopefully that will come from the upcoming cpi. caroline: we brace ourselves, 3.1% is where the market consensus lies. if we are likely to see what was articulated in portugal by fed chair powell, cooling and the job market that would manage the inflation come back on track to 2%, is any of that moved around in terms of the cut analysis by trump in the white house and turning on the taps of fiscal spending? daniel: i think that there are two things that will influence the fed's perspective. you mentioned fiscal spending. the other one is tariffs. if you look at the markets, you will have seen an increase in

inflation expectations in the u.s. over the next 1-3 years post the debate. the markets are pricing in the possibility. in fact, we think the markets are a bit overconfident about the inflation outlook. we think the risk of a trump presidency are higher than the markets have priced in. the two factors and the reaction from other countries. it is the fiscal question that will matter the most. as we are aware, budget deficits and the u.s. are high, debt levels are high, interest is high. then debt burden is not necessarily an attractive picture if you are u.s. treasury investor. if that happens or to the degree it happens will depend on what happens in congress. if you get full republican control, that is different than a divided congress. caroline: to that point, how do

you, with your white papers and reach -- research analysis, informed bnp paribas about hedging that risk that we could see a greater selloff in the bond market? daniel: well, that's a very good question. what we ask ourselves, what investors in general the last couple of years, is the diversification benefit between stocks and bonds. that has worked out well, but there have been moments that hasn't worked out well. when it tends not to it is in those scenarios where you had a selloff in the treasury market. when we got to 5% on 10-year yields. that is bad for bonds and stocks. you look for the alternatives. one area where we have an allocation for those reasons is gold and portfolios. that is one area where investors should think about an extra set to hopefully protect their portfolios in the event that we see a doctor outlook for

treasury yields. caroline: what has been interesting is, even with those snaps of bond market selloffs, and an interim basis it takes the wind out of the sales of high-growth names, but it hasn't knocked out the up and up of the ai trade. when it comes to the equity and bond market portfolio that you look at, does equity markets go up to the right under any leadership in the u.s.? the buildout of artificial intelligence is an unstoppable force? daniel: what you had a lot of this year is on one hand it has been the positive momentum you've gotten from earnings clearly driving prices up. there have been moments when you had a drag from the increase in policy rate expectations, particularly at the beginning of the year when we went from six cuts to seven cuts priced in for the fed to one to two. that was swamped by the enthusiasm on the earnings front. the worry that you would have for growth stocks perhaps more

next year than this year's we priced and a lot of enthusiasm because of ai and other opportunities for tech stocks.by next year you would imagine the marginal increase will be lower. if you have a scenario where interest rates are rising you may not have that offset effect from earnings or not to the same degree that you had this year. caroline: then you morris, it is great to catch up with you. the bnp paribas asset management joining us. still ahead, back to the eu. the trade chief says they see no basis for tariff retaliation from china. part of our interview next as the eu pushes back against chinese evey's. this is bloomberg. ♪

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chinese ev makers are holding on to their share of the slumping european ev market. data from may as new tariffs look to protect automakers from cheaper imports. francine lacqua spoke with the eu trade commissioner about this. >> when it comes to the decision on chinese battery electric vehicles basically to ensure a level playing field and market distortion coming from subsidies . our investigation has been done in strict correspondence with eu rules, facts-based. you don't see any basis for retaliation. we need to treat different cases separately. francine: you aren't even

worried about retaliation? they are investigating it. if there were retaliation, are there specific industries you think would be the most at risk? valdis: we are not seeing the basis for retaliation as what we are conducting is in line with rules. currently we are the largest market which is actually open the chinese battery electric vehicles. the u.s., for example, recently holds a 100% tariff on those. our aim is not close the market to battery electric vehicles from china, but to be sure of fair competition and a level playing field. we don't see any basis for retaliation for that. francine: how is the progress going in terms of talks with

china. is there a willingness from china to make substantial changes that led you to put the tariffs on? valdis: well, those talks with china are ongoing indeed. should a mutually beneficial solution emerge -- but it is very clear that the solution needs to resolve the market distortion and battery electric vehicles and to be compliant. francine: are you worried member states can block this, block the tariffs in november or force the eu into a bad deal? valdis: well, obviously we are in close cooperation with member states. it is clear member states are

interested to protect their auto industries from unfair competition and risk of injury as the market share of the chinese brand battery electric vehicles is rapidly --. if the leave the situation unaddressed it will take more programs for the eu automotive industry. francine: we are days from the second round of the french legislative election. are you worried that a hung parliament would delay any kind of negotiation on policy or the workings of the european commission and eu? valdis: we will definitely half to see to provide institutional response because the european institution has clear rules.

we are working with the democratically elected authorities from number states. francine: you have been nominated for role in the next commission. is there a portfolio that you would like to be in charge of? valdis: indeed. the portfolio distribution comes at a later stage because all countries need to nominate their candidates and the president of the european commission. european parliament intends to have this vote. actually, the week after next week. only then discussions about portfolios would take place. to answer your question, clearly i would be interested to stay somewhere in economy and finance. francine: there is a lot of talk

of rumors that there needs to be a role for the vice president of economic security in the next commission. would you agree that that is something worthwhile? valdis: it is premature to engage in negotiations because many countries haven't nominated their candidates yet. we will then decide on the distribution of portfolios. caroline: valdis dombrovskis speaking with francine lacqua on a day when the eu starts to impose their tariffs on chinese electric vehicles. meanwhile, let's check on the markets. it didn't take the wind out the the sails of asia trading. down about four points. no big moves. people are home not getting too much. they settled their risk ahead of this long weekend that many are taking. the european stoxx 600 is up on the higher side.

much political anxiety is the u.k. heads to the polls today and we see france do so on sunday. next week on the back of the ism data. bitcoin is also lower as we see supply-side push lower. this isrg. ♪ lmnt. more electrolytes. zero sugar. you feel the difference when you get it right. stay salty. get your business online in minutes with the power of ai... ...with a perfect name, a great logo, and a beautiful website. just start with a domain, a few clicks, and you're in business. make now the future at godaddy.com/airo 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.

caroline: welcome back. i'm caroline hyde in new york on july 4. we are seeing the futures market just down a smidge. looking at the nasdaq 100, currently off by .2% let's call it. we are off record highs, the nasdaq and s&p major benchmarks in the united states. the bonds future market we are seeing a tumbling in terms of the 10-year and ultimately seeing pressure poster services data that certainly signaled weaker fundamentals in the united states. does that therefore mean that

the united states can see a fed that cuts as soonest september? managing to rise ahead of the political anxiety that is sunday's election final vote and whether or not we have seen enough coming together with macron and some of the centrist left and far left to be able to see that marine le pen's party will not sweep to a majority, as many initially anticipated. looking at the asia-pacific pacific currently of more than a percentage point. we want to look across asia, across europe come across the u.s., and a broader markets. the capital markets senior economist, we love you can go global with us, jennifer. a key theme is political anxiety. no matter where you look there are elections and question arcs. does this have any bearing on fundamentals in the united states? people trying to price in if it is biden or not and if a trump presidency means more fiscal

spending. jennifer: my heart has been racing all week with these alexion centro oil. it has fundamental impact, i would say yes it does in how much businesses will potentially be holding off or not the head of the u.s. elections, in particular. i have seen with the ism surveys a couple of times over the past few months that a couple of respondents have mentioned the uncertainty over the coming alexion. we are seeing some uncertainty play out because we don't know who will take over the oval office. that could have a negative impact on growth. i think this is the uncertainty and waiting before we start seeing the actual fundamental impact playing out. caroline: it has been interesting. we had laura martin on the show yesterday regarding the paramount saga.

that is m&a. her viewpoint was to hold off on m&a until you know who the next president is in the white house and therefore if the regulatory risk is bigger or less so when it comes to m&a in the u.s. and france, we understand there to managers looking to combine their units, looking at axa and para box -- and bnp paribas. will some of the animal spirits of business be put off by these alexion anxieties? are you seeing that in the high-frequency data as much as you think could play out? jennifer: there are some time to go before the november election. that is the issue with this. it is about political and policy uncertainty. we don't know what will happen with taxation or with the climate. we don't know what will happen in terms of commentary made

about the federal reserve and their independence. a lot of this has an impact on the animal spirits, as you put it. ultimately, i think it will be about what the actual sales are that will drive economic activity going forward. we won't really know for sure how that will play out until early 2020 five. caroline: for the here and now we have the fundamentals to go on. how are you preparing yourself for nonfarm payrolls in the united states?are we getting the golding scenario with a cooling labor market and cooling economy that dials back inflationary pressure? jennifer: we have seen that over the last few months, but it seems like over the past couple of weeks we have seen some more speeding up of the slower economic growth, which we have all been participating in.it will happen over 25 basis points of hikes over the last few years, so you will get the slowing and that's what we want to see. it seems to be playing out more quickly over the last couple of

weeks. this week alone almost every single economic indicator in the u.s. came in below expectations except for job openings. overall, this is what we want. all the supports what fed chair powell said in portugal when he said we are starting to see real progress made on slower inflation. whether or not that is going to be supported and tomorrow's payrolls numbers remains to be seen. i think the overall story so far, every indicator is pointed to slower growth and that paves the way for what we believe will be the first rate cut the coming september. caroline: following from an ecb rate cut and others going further and faster, how do you look at europe in the moment and feel they are able to manage inflationary pressures? jennifer: everyone has come a long way from the record highs a couple of years ago. the ecb, just like the bank of

canada, have the comfort and confidence to cut rates in june. going forward, that is another story. it is almost near unanimous from the ecb in june, but that will not be the case. it is highly unlikely that we will see another rate cut in july. we are expecting another move cutting in september, but even that will not be unanimous from all of the governing council members this week alone. everyone has been talking about either, they are all on board for another rate cut, whether it will be september is another story. some of them are morning from austria in particular that we should never underestimate inflation. it will be more of a battle i think to get another rate cut in, but we are looking for one more rate cut from the ecb in september. we will see what happens with elections today and what the new chancellor, or who the chancellor will be, what policies they bring and if that will help or hinder the bank of england's quest to bring

inflation lower. we are looking for another bank of england rate cut in august, but we will have to see how this plays out after the elections. caroline: in asia, there is a very different situation from a macro perspective. all eyes on the japanese yen strength today versus a weaker u.s. dollar. more broadly, not strength. are you anticipating intervention? jennifer: when we say strength i will use air quotes because it is over 1.60 which is stronger but started at 1.40, still very weak. i've been waiting for the ministry of finance to intervene and so far very little intervention has been made. i am expecting the bank of japan to tweak policy when they meet this week. keeping in mind how weak the yen is. it is a very different animal

playing out over there when you have everyone cutting rates are getting ready to cut rates and the bank of japan possibly tightening policy. even the rba is on the fence. a rate hike cannot be completely dismissed and they are still discussing it. it is very different era with all of the different central banks potentially moving in different directions. caroline: what is wild to think is generally we have stocks at record highs no matter where you look. looking at japan or the united states and europe pushing higher if not it records. with rates only likely to come down do you think more broadly people will still have a risk on feel? when you try to compare what's happening in the markets to the fundamentals you dissect every day, you are such a straight shooter, what do you make of the idea that markets can only go up it seems? jennifer: i think it will all come down to the federal reserve. as long as the market expects,

starts to get a whiff of a fed rate cut, they are getting more confident and more comfortable for easing policy, i think that would help support financial markets. at the same time, we won't see a series of rate cuts. to borrow from the central bank speak, everything will be data-dependent. one thing that we've learned is that we cannot assume that everything will go in a straight line because you have had three consecutive months of better or worse inflation data. it doesn't mean that it will continue that way. central bankers will remain very cautious, including the fed. no one wants to look foolish and cut too quickly or act too quickly. they want to make sure things are going in the right direction. getting back to your original question, i think everything will boil down to what the federal reserve will do and how they see things play out. caroline: central bank to the world. jennifer lee.

stay well. coming up, we talked a little about political uncertainty. we are heading to france, how markets are anticipating the final round of elections come sunday. this is bloomberg. ♪

caroline: this is bloomberg markets. caroline hyde in new york, july 4. return to what is happening on july 7, the final push by rivals of marine le pen gaining momentum in france. ahead of the second round of voting, which will take place sunday, joining us is caroline in paris. i was reading that buy french

stocks into this election because the two most probable outcomes are better than the market is currently pricing in for the economy and stocks and risk assets. can you tell us what those probable outcomes are? >> that is exactly right. the riskiest scenario for the markets is now out of the picture, a victory of the left-wing. there are two scenarios remaining. one is an outright majority of the far right of marine le pen and another is a hung parliament scenario. both of these according to morgan stanley strategists are better than what we could have called when macron called snap elections after he lost the european elections in june. technically, what they're saying is the cac 40 stocks will rebound no matter the outcome on monday, especially if i can mention a couple of sectors.

the energy sector, the construction sector, the banking sector, they have all had a lot of pressure since macron called the snap elections. they have perhaps started to rebound after the first round last weekend. clearly, the two scenarios that are remaining are less scary for the markets. caroline: some of the concerns that would have come with a far left or with a majority of far right would be turning on the taps of fiscal spending, a more difficult relationship with europe. how do we think with the muddy, messy metal we are approaching, will domestic and international relations bear out? caroline c.: of course, if the national rally president does become prime minister next week, there is still a risk of clashes or a showdown with the eu when

it comes to fiscal rules. france was downgraded last month. france has been placed on an excessive deficit procedure by the eu already. we could expect some clashes with the eu in the fall. if we have a hung parliament scenario and end with a prime minister from the centerleft, some personalities have been named. for example, the former president who could make a comeback. the former socialist prime minister is also a possibility. or perhaps more technocratic figures have been cited. this is not reassuring for the markets. we could see the threat tighten to around 60 basis points. that is what some analysts for morgan stanley are saying. we could see the cac 40 rebound and there will be less of a clash with the eu. if there are a lot of left-wing members of parliament within the government, we will see what

that means for the pension reform. we know that the left-wing has criticized the reform that macron past last year raising the retirement age to 64. the left-wing has been calling for canceling this reform.at the moment macron is ruling, but you never know if there is a strong show for the left-wing. caroline: all eyes on sunday. all eyes on you tomorrow, key event you will be reporting from. turning now to a key french giant. i caught up with the ceo yesterday to discuss how his company is focusing on leveraging ai, managing concerns about the technology. >> our approach is to weaponize our people to do better. i don't know if you are familiar with waze, but i see it like that. start the car and drive to the

end of the street. if waze says i am statistically more likely to have an easier journey turning left rather than right, i want that advice, crowd sourced in real time. i want our people to feel like they are multiplied in that event too. the goal is not less people. the goal is putting our people to be more effective and make better decision intelligence. that in itself gives us a great opportunity to do something incredible. we have only seen huge appetite. which is why on any given day we have 80,000 people in our organization using the ai that we make available. that's pretty fantastic. caroline: let's talk about doing the amazing and incredible because we have seen a push up in your share price on the day. you have been re-orientating this business and thinking about more drug discovery. in some costly cases in the way that you have to experiment in

clinical trials, they have paid off today. when we think about a chronic lung disorder. can you tell us what that means for the business? caroline c.: we got approval for copd. it is the third biggest killer. we are ready to go in europe to be able to provide an advanced therapy that will reduce their chance of going to the hospital by one third. that is a breakthrough when there has been so little innovation. we aspire to be the leading immunology company driven by moments like that that we look for in our industry. to do things that transform or protect patients' lives or prevent disease. we are very proud, huge company but we wanted to be at the forefront of science again. we have made big bets, appropriately so, to make sure that our science is some of the most exciting and is first in class the best in class. to complement our conversation earlier, the more that we improve our decision

intelligence the more opportunity we have to do more in that space. that is catching the excitement in our organization. we believe that we are far ahead. of course, we are responsible about how we use ai, but others are still hesitating. we are taking our moment. caroline: sometimes you need good data to feed into these longley -- these large language models. what about bird flu in the u.k. and u.s.? there is a worry that the data hasn't been good enough in the united states. is that something that worries you when you need to be developing a new vaccine for that? paul: we have been through one pandemic and have learned a great deal about having the best data. we position ourselves to take advantage of those opportunities on behalf of society. we played a small part in covid but stand ready should we be asked. often the data comes in through government channels, health systems, and we work at real-time speed to make sure we have the very best data

available. in terms of large language models, the rest of the data sets, we collaborate far and wide. we are really trying to make sure at our fingertips we have huge data sets to mean that our data and predictability is far ahead of the competition. we won't get it right everywhere but data and integrity are the starting place. our relationship with openai, we are putting our own data at play to make sure that they can learn from it too. all boats rise, we are in health care to do good. caroline: as ai and pharmaceuticals interconnect. our conversation yesterday. coming up, a luxury super merger. the potential neiman marcus and saks for the luxury consumer. ♪

caroline: this is bloomberg markets, caroline hyde in new york. let's get to a luxury retail deal. if the owner of saks fifth avenue manages to close in on acquiring neiman marcus, america's two largest high-end department stores. joining us with the details that inject a little bit of spice with amazon and salesforce part of the deal. >> we know that the department store sector is in turmoil. we have a lot of deals. they raise their bid, nordstrom may go private. the interesting thing is amazon getting involved. amazon has long tried to get in luxury fashion with limited

success.this gives it another way into that sector at a time when online retail is also having a very hard time. caroline: having a hard time. it is interesting salesforce, why they are taking a stake in luxury partnerships. they may be financing a deal. is this an expensive deal? ultimately hudson bay has to bit creative in the way it is able to purchase neiman marcus? >> it all helps to finance when things are tough out there. the luxury consumer in the u.s. has called in. there was a great surge amid the pandemic. everyone bought gucci handbags and the lack of stimulus checks and crypto gains all them pull in. also spending things on travel. things have been tough for that

sector. yep, they probably have to get creative. caroline: it would say that the higher end consumer has remained relatively resilient and it is often those squeezed in the lower income brackets. how are you getting the read that the consumer is pennypinching? >> you have two tears in luxury. you have the wealthiest consumers who haven't seen any impact on their wealth. they have been spending on armies bags -- hermes bags. you have the aspirational luxury consumer who is comfortably off, not super wealthy. that cohort has been hit by inflation, rising interest rates. it was that oher that had lots of extra -- that cohort had lots of extra money airing the pandemic with stimulus checks and crypto gains. that has been reversed. there sing pressures on their incomes and they have pulled back.

caroline: it is always such a joy having you on. bloomberg opinion giving us a glimpse into the deals and how the consumer is feeling. so much more is coming up on bloomberg markets. ben laidler joining us next. this is bloomberg. ♪ more electrolytes. zero sugar. you feel the difference when you get it right. stay salty. the moment i met him i knew he was my soulmate.

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caroline: welcome to "bloomberg markets." here ar the top stories on this fourth of july. democratic governors emerge from a crisis meeting and say they backbiting -- back biden. u.k. votes today. france heads to the polls on sunday. the deals are still brewing. axa quagga venture with pmb pair about -- parabas.

the u.s. is off partying. sv 500 futures down by three points. record highs yesterday. we head towards the close of trade. up .5%. a little bit of a risk on attitude as we see la pen will fall short of a french majority. the dollar index off of a quarter of 8%. that's more -- quarter of a percent. bitcoin coming off 3.6% risk off for crypto. surprise site concerns building. we get the latest breaking news. macron's group is projected to win 95 seats, not allowing marine le pen's party to have a majority.

the nasdaq futures market off. 10-year signaling a pulldown in the bond market. yields dropping 15 to 16 basis points as the data cools in the u.s. their relief that maybe the worst case scenarios for the markets will not play out in the french election. asia rose more than a percentage point. let's bring it back close to home in the united states. it's about joe biden in the eye of a storm. calls mount for him to step down as the presidential nominee. there are doubts within his party has what it takes to defeat donald trump in the november election. biden has begin support from demokan to governors. take a listen. >> i'm here to tell you today, president biden is in it to win it. we pledge our support to him because the stakes cannot be higher. >> none of us are denying. it was a bad hit but i don't

impact what i believe. >> he is in this to win this and the president is going to -- he's our nominee. he's our party leader. the president told us and was clear he's in this to win this. caroline: let's get the international perspective on what's happening in the united states. mark champion joins us. you look at the europe and middle east and russia. what's happening on capitol hill now, it's a complete mess. how are you thinking other countries are relating to what is occurring in the democratic party? mark: in a lot of parts of the world, especially the western parts of the world there's a real apprehension about a second donald trump presidency. anything that makes it look more likely is a concern. i suspect it is not a worry

about whether it is biden or biden is replaced, but whether a democrat wins and donald trump doesn't come back to the white house. this has really big implications. you saw president zelenskyy of ukraine in a bloomberg interview saying he was really concerned about what trump's plans were. nato will be very concerned. nato members will be concerned about what trump's plans will be for the alliance. you will have allies in asia and japan also concerned. in the middle east it is quite nuanced. you may well see prime minister benjamin netanyahu and israel quite keen to see a trump presidency. i think it's been interesting how quiet and general trump has

been on the israel crisis. it will be interesting to see. he has constituencies also in saudi arabia, etc. caroline: we both listened, a glutton for punishment listening to what president trump said in some way around middle east and his view was it would never have happened had he been president. is there any detail you think ultimately biden has fallen out of favor with younger voters because of his handling with the middle east. how do you think there could be any assuaging of concerns building up to the election? marc: i don't think -- that's a problem for biden, for any democratic party candidate. it is less of a problem for trump. these are not his constituency who are worrying about the rights of palestinians in gaza.

it is much less complicated for him. whoever takes over, if someone takes over, the vice president should biden step down, they will have to address this also. they might find it a bit easier to do simply because they had not been driving the policy. they have not been the president in charge of the policy. nevertheless they will have to deal with it. caroline: marc champion, thank you for giving us the international perspective on what is very much a u.s. story now. let's make it a broader global market story. ben laidler joins us from bradesco bbi. let's start on u.s. politics. how much has there been a re-rating in the bond market? how much is there been a reorientation of portfolios by trying to bet who's going to win the u.s. white house? ben: i think it's probably barely started.

i'm not sure how much more you are going to see. we saw a little bit of pressure on bond yields. we saw a little -- an attempt to dollar strength. gets all been swamped by the broader data that shows the u.s. economy is slowing and interest rate cuts are coming. we have real cross currency and it's a reminder we do upsets about politics but there's a lot of drivers for the markets here. we want to pay attention to u.s. politics. did dwarfs the u.k., dwarfs france but i think the fundamentals of this will market our about -- bull market is about earnings and interest cuts, not politics. caroline: let's dwell on the interest rate cuts. it looks as though services data is cooling quite substantially. we look to nonfarm payrolls. what are you baking in for friday at how much what a surprise affect the bond market?

ben: i'm hoping for a goldilocks number. call it 150,000 to 200,000 on payrolls. a slow down enough to reinforce that september rate cut. but nothing too dramatic ticket is to reignite the recession fears. i think of goldilocks remains alive and well, you know, that is a big pillar of the bull market. that will give us 10% earnings growth when q2 earnings kick off next week. the u.s. joining the rest of the global interest rate party, which kicked off six month ago. caroline: is there a risk to the desire to spend on artificial intelligence? that has been the driving force from earnings and from a spending perspective. what anything dislodge what seems to be just a truck that cannot be stopped? ben: yes.

the bull market has been a one they get stool so far. it's all been about the u.s. and about big tech. if that stumbles we have a problem. i think from here, especially as we get an economic soft landing and get interest rate cuts the bull market broadens out. it broadens out into smaller u.s. sectors and crucially a broadens out to the rest of the world, which are especially cheap and especially sensitive to these interest rate cuts. caroline: the u.s. has been at record highs. valuations have been topping. japan is at a record high. other benchmarks have done well. where is cheaper than? -- then? ben: europe, the u.k., emerging markets have always been cheap. they deserve to be cheap. they don't have a lot of super

profitable, super growing tech stocks. even when you adjust for that the u.s. has been this outperformance juggernaut for over a decade here. it sucked in a lot of flows and inflated valuations. the rest of the world may be outside japan which has been a recent bull market is very under owned. europe is seeing a double digit recession because of this very cyclical market. i think as the ecb rate cuts flow through and the economy firms up you will see a leveraged economic and earnings recovery here. i think you will probably see something similar in emerging markets. caroline: does that cross sector? we have seen european tech stocks do well on the semi -- semiconductor corbyn makers. what other sectors will do well in europe? ben: big banks. banks is the biggest sector.

it is more domestic focused. the domestic stocks are the ones that are most sensitive to rate cuts and most sensitive to this early firming up of the european economy that we are seeing. i think it will be less about the tech stocks and the exporters and more about the depressed european stories. people have doubted people can never grow again --europe can never grow again. caroline: let's finish up where we started. there is a french election this weekend and worry about ultimate lease suddenly moving away from europe spending fiscally. with that change any of the viewpoint that france is cheap and you should get into european stocks more broadly, french banks? ben: it has definitely thrown some grit in the wheels over the last month or so. i hope that the result of sunday's french election and maybe relief we are through the

u.k. election today will allow us to stop talking about politics and get back to the pillars of this european bull market which are rate cuts, a turnaround of the earnings recession against the backdrop of valuations very cheap. i hope being in equities strategist talking about politics that we can move on on monday morning. caroline: that would be a fine thing. i'm sure you will be dragged into talking about politics a few more times. you said the -- is there signs the productivity is getting better? are the fundamental viewpoints that the economy is setting itself and growing at the same time as just being at the behest of what interest rates do? ben: if we look at the pmi's we see a stabilization of economies

that are maybe less bad is the way to put it than we thought. remember europe is more sensitive to interest rates than the u.s. is. durations are shorter. more debt is floating rates. even relatively small interest rate cuts could have disproportionate impact on economies and therefore on these very depressed european earnings. caroline: and on the consumer with their mortgages. ben laidler, bradesco bbi, pray to heavy on. -- great to have you on. polls indicate marine le pen will fall short of a majority in france. we are live from paris with the latest. this is bloomberg. ♪

caroline: this is "bloomberg markets." breaking news. the polls are indicating that marine le pen's national rally i set the fall well short of an absolute majority in the french legislative election on sunday. joining us to break it down is paris. chief alleycat. -- alec katz. they have worked together. >> yes. it's a little surprising. france has a tradition of the republican front and the idea is that if and when the far right party gets close to power than everybody else bans together to try to keep them away from it. it was not at all clear last sunday when the national rally came in first in the first round of voting with a third of the vote whether or not macron's party and allies in the left

group which includes both centerleft socialists but far left parties including the france unbound if they could come together to strategically pull out candidates and turned what can be sometimes a four-way race in france and to two-way races. if the national rally got one third of the vote, two thirds of the people did not vote for them and they would be likely to lose those two-way races than if they had two or three opponents against them. in fact they have come together largely. not always but in most cases. it is starting to show at the polls. we've had two so far. one that came out a few minutes ago which showed the national rally probably getting somewhere between 190 to 220 seats. as many as 240, but that's far away from the 289 the national rally we need to get a majority in parliament. it looks like they are still

going to be the biggest party in parliament, the most seats probably according to the polls, but it does not look like they would have enough support to get to 289 to form a majority and a government and run the government which they said they would not even enter government if they do not have that absolute majority. caroline: let's talk about policymaking. how easy, how murky does it become if the polls are indeed right? it's a big 'if.' alan: french polling is not perfect but it has not had these massive misses that have happened in other countries. it's very murky. if it is not the national rally with an absolute majority and able to name its own -- have a prime minister and name its own government then who runs the country? that is unclear. the republican front really only

applies to candidates in the second round of this election and ordered to try to prevent national rally members from winning the election. after that it's free-for-all again. you have to have negotiations between parties. in other countries this is quite normal, italy or germany, the netherlands. coalition forming sparta government. france does not have a history of it. it's more like the u.s. in this case. it is not a two-party system but usually there is one dominant party that controls the national assembly and names the government and passes laws and that's that. we don't have a good plan or system or a culture in place to make compromise and say we will have, i don't know, this interest of mccrone's party -- macron's party. we will work together and form a government. there's no history of that. it is unclear what will come in terms of how you form a

government and how you actually write policy after the election. caroline: more questions but answers but morgan stanley says you should buy french stocks going into this vote. we stay with france but this time we talk m&a. two of the largest companies in the nation are considering a venture to create a $1.5 trillion giant. axa and pnb parable -- paribas. why with asset management bigger better? >> the two companies are not active in management itself. those units are considered to be quite subscale in the european market in general. the bigger the better. when you have good teams you are more efficient in eventually you are more competitive in an environment where there's a lot

of pressure on margins and fees, management fees in particular. it's a race for scale across the board, be it across the globe but in europe we have seen this with companies either buying some firms with strategies that are more profitable. it's a hot topic at the moment. or, just buying rivals. caroline: the key player when it comes to asset-management. it comes at a time when axa is pivoting a little bit less on life insurance and therefore the need to risk upset dwindling a little. what if any are the blockers to such a deal? is it something that's far along in terms of negotiations? alexandre: there are a few things we have to pay attention to. it seems to be really obvious that control is going to be a

key part of the negotiations. there has been instances in the past where asset managers have been working -- walking away from deals whenever the terms are not in their favor or they would lose control. in this instance we don't know exactly what's going on. talks are preliminary and not advanced yet. none of the parties -- the plaintiff to create a jv. we don't know the terms or what will happen next. we know that axa is evaluating options. there were rumors several years ago and in the past month they have been looking at options with other rivals as well. caroline: i spoke with the ceo of is an offer yesterday -- zenofi. many thought it would have to do it to another french player to avoid a pushback from the french government. these are two french companies coming together as a joint venture. would there be regulatory risk?

alexandre: well, french authorities agreed to -- it's a concern for the authorities to make sure any strategic unit remain in french hands. that will not be much of an issue for national authorities. it is way too early to know at this stage how this is going to come about. it really depends on what kind of products where you can find redundancies in the offerings of the two firms. this is a big deal for france. it is two of the largest asset managers uniting. it will deftly have some impact on the environment here in france and europe as well. caroline: we thank you so much for breaking down what could be quite joint venture. from new york, from paris, this is bloomberg. ♪

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caroline: this is "bloomberg markets." july 4. let's check in on futures. we are off partying. it is currently flat. down one point on the s&p 500 futures. we were at a record high yesterday. the stoxx 600 up .6% as we head towards the last few minutes of trading. we are anticipating what will happen in france in the course of the election on sunday. we are looking to what is currently occurring in the u.k. we see the banks and other insurers leading the charge. the bloomberg dollar index on the downside on the back of what had been weaker data, services data coming out of four year low. we are seeing all eyes on nonfarm payrolls. 190,000 jobs added. is that enough for the fed?

bitcoin off by 3.5%. we are worried about some of the selloff. maybe this germany selling off some of its bitcoin data confiscated supply-side issues. from new york. this is bloomberg. ♪ it's salty. lmnt. more electrolytes. zero sugar. you feel the difference when you get it right. stay salty. godaddy airo. creates a logo, website, even social posts... in minutes! -how? -a.i. (impressed) ay i like it! who wants to come see the future?! get your business online in minutes with godaddy airo [introspective music] recipes. recipes written by hand and lost to time. are now being analyzed and restored using the power of dell ai. ♪ want to save on some of the biggest names in streaming on

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caroline: welcome back to "bloomberg markets." a quick check on the markets. we are at the european close. the stoxx 600 had a relatively strong day. up .6% on the overall benchmark. when you look at most industry groups, utilities, little technology in the red. higher by the banks. the cac 40 up .8%. it looks so the worst case scenario for the market is off the table of a majority going to the far left or indeed the far right. it looks as though an overall outright majority has not been

won. morgan stanley saying buy french stocks into this runoff election on sunday. the ftse 100 up point percent. the brits had to vote today. the euro up .2%. the dollar is weaker and that seems to be a lack of fundamentals. we look at with the job status as on friday. the americans have the day off. looking at axa up 1.5% and 2% for p&p bnp paribas. we were talking about their asset-management units. a spanish company taking a cfo from bank of america. up 1.9% as they try to study itself. i want to focus with continental. eyeing china growth. lacey growth in china. we are up almost 10%. other news when it comes to china and europe and the ev

market in particular. the eu moved ahead with plans to impose provisional tariffs on electric vehicles imported from china. it will raise rates as high as 48%, for step likely to increase trade tensions with the eu and beijing. joining us with whether china is an investment to be made in about the emerging markets as well is sean taylor, matthews cio and portfolio manager. i ask for your chinese expertise here at the moment. demanded some funds that are x china. with the player from an economic perspective geopolitics is crucial. is it a worry that europe is dialing up at the same time the u.s. had been? sean: anything that changes the balance of geopolitics particularly at a company level is important. there has been some good news from europe this year. you have seen german fdi into china increase. also the tv tariffs are not good

news. i don't think it will make that much difference to china because a lot of the market is quite domestic. we will have to see what happens if there is retaliation. caroline: about 60% of the ev market is china. a lot of those byd's are being sold to mystically. the ratcheting up of tensions and what that means, a tit-for-tat, the eu does not think that will occur. is there risk we get to a situation with the u.s. were suddenly we are having issues with chips and technology and ai and the u.s. has been leaning on the netherlands not to be exporting equipment. how does that sit for chinese growth more broadly? sean: i think it's a challenge. if you go back to when trump came in and put the first tariffs up, the chinese share of global exports you would have thought would have gone down a

lot in that time. covid, china was one of the only economies open. the factories carried on running and the share of gdp -- exports to gdp continued to go up. in the last couple of years or you have seen mexico become the major exporter into china and am -- sorry, america and also importer. the chinese share of global exports continues to go up. what china has managed to do was export to people who are outside the u.s.. emerging markets, other parts of asia and areas like africa. probably lower margin but managing to keep the level of exports up. caroline: therefore how was the rest of asia looking? where are the best economies, the best industry groups that should be put to work ? sean: we prefer north asia. japan, south korea, taiwan.

we are seeing the earnings increase. a lot of it is driven by was happening in the u.s., in particular in ai. we are seeing the larger ai companies in the u.s. increase the revenues. they are increasing their capex. that has been good for the demand for semiconductors. it's been good for the supply chain in taiwan and south korea and also japan as well. since the election has now taken place in india we are positive there. we think it is good news that modi did not win by a massive majority. democracy is more sure there. that risk is lower. the great story will continue and widen out. we have a lot of opportunities. we are on hold at the moment until rates come down in the u.s. when rates start to come down in

the u.s. i think we will see eight or nine central banks across asia and emerging-market start to cut rates, which is good for consumption. that could provide some great opportunities. caroline: i like the way your articulating companies coming to mind like samsung. what makes me question the fact a lot of this is based ultimately on the central bank to the world, the fed. is there any risk from your point of view that we get a change in the white house from a party perspective, not just an individual perspective, and that changes the outlook for rates and the opportunity to cut rates in the u.s.? sean: obviously, there's more tax cuts, more physical spent, inflation does not come down as quickly and that could be no rate cut until early next year. the were situation would be if the fed cut rates or did one rate cut and then they got more

unfriendly and they have to cut desperate rates of again. -- they would have to put rates up again. it's about earnings and evaluations. the rate story and emerging-market is driven by parts of asian like indonesia. india will continue even if rates are high. north asia will continue even if rates are high. caroline: when you think about an asset breakdown, is it automatically equities you tend to look at, the debt markets? a lot of these are either u.s. denominated. how do you feel about the asset diversification across north asia? sean: north asia in terms of fixed income has had a very good run. it has sort of come in. they benefited from the better

balance sheets. the spreads are quite thin. in terms of spreads we are looking for india and indonesia and latin america in particular with rates being very high and at some stage inflation is not as high relative to history. at some stage when the fed starts to cut we will start to see those yields come down. that will be positive. north asia is about equities. more emerging parts is about fixed income. fx has been under pressure everywhere. the stronger dollar and also weaker growth. that is really the catalyst in terms of where we change asset allocation when we start to see the dollar weaken, which will likely come with rates. then people will start to allocate more outside to the more emerging markets. caroline: more reason for us to

be focused on the nonfarm payrolls tomorrow. sean taylor of matthews, thank you for spending time with us today. coming up, we will go to the box office. getting ready for a big weekend. the details on the must-see flicks next. this is bloomberg. ♪

caroline: this is "bloomberg markets." july 4. time for the holiday weekend at the movies. it is the summer of the sequel. this vehicle me -- despicable me 4, following the success of

inside out 2. it broke records last month. let's join daniel loria from the boxoffice company. it feels like kids are winning right now. daniel: it's a great summer for movies that are family-friendly, for kids to go back and enjoy the time off with their parents. we are seeing the box office really return some great results because of that. caroline: although if you like a movie that's totally terrifying, you can get that. that did not seem to do as well compared to despicable -- not despicable me but inside out 2. there is something for everyone. i'm curious if we are back post-covid and we still like and desire cinema experiences. daniel: i absolutely think so. if you look at the result post-pandemic since cinemas reopened, five of the top 15 movies of all time have been

released after cinema reopened for the pandemic. you have one film from each major studio. the studios know the potential for a big cultural event of the movies is back. it's a matter of having an uninterrupted year from the production pipeline to support that. we had a frankly reduced release slate because of the impacts first of covid in the because of the labor strike from last year. it's preventative regular release schedule hitting theaters. just look at the data. five of the top 15 movies of all time since 2021, 3 of the top seven. it is very much still a platform for mass audiences to get together. caroline: are we talking globally? there was much relief the new wolverine deadpool will be shown in china. how much are we seeing that replicated outside the u.s.? daniel: it depends on the

market. pete handles things a little differently. if you look at europe, there are several european markets that are either on par with their pre-pandemic performance or have already exceeded it. every market is a little different. in europe, local productions. national films from france to french audiences filling in those gaps when hollywood has not been able to produce. china is another example for a market that can rely very well on their own productions. internationally, depending on the domestic film industry, you have seen either on par or better results. it's only markets where those reduction pipelines have been a little impacted that are taking a little longer to get back to normal. united states is one of those examples. caroline: did feels as the studios are pulling punches, putting their way behind once they know will win. they tend to be sequels. i never knew we needed a

gladiator sequel. i didn't know if we need to reinvent the wheel. i watched the trailer and i could get into this. how are we seeing the movie ecosystem wanting to bet on a two or three or four? daniel: it's impossible to but it will will be a trend and what isn't. last year was the summer of the original movie with barbie and oppenheimer. movies like sound of freedom. movies not part of an already established franchise. those were some of the biggest hits last year. even established ip's like super mario brothers, that ended up doing huge business. we are seeing sequels doing great business. if you think you know what's going on in terms of trend and what is taught at the box office, the public will always surprise you by what they respond to the muscles caroline: maybe investors are less surprising. we feel a need to consolidate. we feel m&a is inevitable when

it comes to some of the studios and entertainment and streaming more broadly. the paramount saga is something i reported on for the past seven months. once again, maybe we get skydancy teaming up and taking shari redstone's holdings out. what is it mean for moviemaking more broadly? oh? i think we have a technology issue. i was excited for that answer. we will see if we can get daniel loria back. where you hearing me, daniel? daniel: i apologize. the lesson a bit i missed. we were talking about originals and sequels. caroline: what about the m&a and paramount? are they still going to be able to make movie magic when we are questioning their future? daniel: that's i think the biggest topic in hollywood right now. with the skydance acquisition on

track it on think they will be a major disruption there. obviously, having a studio be a standalone studio rather than consolidate two studios into one is the preferred solution for this industry to move forward. i think paramount is well-positioned. we saw them with a massive hit like talk on maverick a couple of years ago. they just need to stability in the boardroom to be able to continue that. as soon as an acquisition happens or a strategic direction for the company happens they will have that stability to move forward. caroline: there was anxiety about skydance. many people like the bid because he has technology equities. there's a focus on ai and the handwringing that was fueling people going on strike and wanting a new deal. how is that playing out in the movies we are seeing now? daniel: i think it played out in the first six month of the year. decreased production and release schedule impacted by production delays. the first six months we had a

very decreased output in movies that performed longer expectations but not along the expectations of memorial day weekend. i think right now since we have been able to turn a corner. we have seen titles that were able to enjoy a longer production cycle and a real marketing campaign behind them. we did not get that between september and may from last year to this one. we have been able to turn a corner. there is stability in the industry we have not had since 2019 now that covid is behind us and the strikes are behind us. i think the entire industry is looking forward to a very healthy and successful 2020 five and beyond. caroline: is ai going to be used in gladiator 2? i have a feeling it might. daniel: i have no idea what we are going to define ai as. we have computer-generated images be a big part of production and setting up the back round of scenes for years. whether that is ai or not, i

can't really say for certain. i think there's never anything wrong with technology used to help the industry, to help promote jobs, help promote films that come out. if hollywood can find a way to tap ai into creating more opportunities, the entire industry is going to get behind it. caroline: daniel loria, great to have you on. enjoy this weekend, this july for. the boxoffice coming. we are talking about more m&a but in the luxury sector. find it with the potential neiman marcus sacs deal means for the luxury space. this is bloomberg. ♪

caroline: this is "bloomberg markets." a luxury retail giant is looming on the horizon. the owner of saks fifth avenue is close to acquiring neiman marcus, bringing together america's largest high-end chains. what pressure is being put on these two giants to be forced to get bigger? charlie: a lot of pressure and it's coming from below from the consumer whose feeling squeezed by inflation. it is coming from above, from large luxury houses that the department stores decades ago introduced to the american consumer, but now the houses have become so large and powerful they have a lot of pricing power that is squeezing

nieman and saks. the idea is that they come together and are able to have more power on some prices on luxury goods. caroline: biting the hand that feeds, not nice. what makes it all the more exciting for me is the technology anchor is amazon has its way and so does salesforce and having financed the deal. what does that say about the future of luxury retail? charlie: increasingly luxury is a logistical. good logistics is luxury. a couple of decades ago we would not be saying that. you would not be thinking luxury when you think about amazon. amazon increasingly has been trying to get into the luxury space. it's a really striking in jazz as of the deal because they have a minority stake in saks global. that's the type of potential of these companies. if you're buying something expensive, putting the money behind it as a consumer, the

thinking here is that consumer is going to want that to be delivered quickly. they want returns to be easy. it seems like that is the kind of expertise amazon would be bringing to their minority stake here. caroline: what's interesting is that ultimately we've got a high-end consumer, very high and able to spend well, but there's caution about the u.s. consumer more broadly now. people are already turning on the barbecues and getting their pool parties ready. how does consumer sentiment feel when you're looking across the atlantic? charlie: it has not been great in the u.s. the consumer sentiment has been challenged. we have interesting data, a numerator. a data provider showed how expensive just that fourth of july cookout is going to be. data from the american farm bureau shows it will be up 5% from last year. meat is more expensive. i'm seeing that chicken is actually cheaper this year.

pressure but a little bit of release, a little relief in some categories. caroline: ok. how are people going to be spending today? is there any data on how they will be salivating? -- celebrating? charlie: the assumption is barbecues and it sounds about 73% of consumers surveyed by numerator, the data provider say they will be celebrating. you can break it down by different demographics. gen z says they are going to be celebrating more likely with drinks. people in the midwest indicating they will be going to more public celebrations. people in the west more likely to travel. the unifying element is at 83% of consumers in the survey said they plan to buy food, which is what i want right now looking at those images. i want a hot dog. caroline: i'm hungry. i hope you go find yourself in american hotdog and a british pub somewhere once you finish your day. what a wonder to have you on

close to 5:00 p.m. u.k. time charlie wells, we appreciate him. that is it for this bloomberg markets. go have a wonderful fourth of july if you're watching in the united states. elsewhere, hit the polls. look at what's happening in france. this is bloomberg. ♪ lmnt. more electrolytes. zero sugar. you feel the difference when you get it right. stay salty.

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