>> good morning. this is "bloomberg daybreak: europe." these are the stories that set

your agenda. the euro and french bond futures under pressure after a leftist alliance seizes a shock victory in france's elections starting concerns about political instability. more democrats calling on joe biden to step down as a party nominated. the president is defiant. and rapport ms. -- and a reformist is elected as iran's president. checking the markets and does friends and the electroshock that has come through that will be rippling through the markets as investors tried to get clarity on what this means for the future in france. we checked in -- european futures pointing to modest gains good last week european stocks ended higher and currently european futures pointing at modest gains.

cac futures dac trying to understand the consequences for the sovereign debt of france. to what extent with a death will a risk premium be priced in -- to what extent will a risk premium be priced in. nonfarm payroll data. we checked in on oat's, the sovereign debt of france. markets pricing and the surprise game for the leftist grouping. macron coming in second. euro-dollar is the focus under pressure at 108. .1%. we look ahead to testimony from

jay powell and inflation data out of the u.s. important reports out of opec and iaea. keeping an eye on tropical storm beryl as it heads towards texas. france is set towards gridlock. pollsters had seen marine le pen's party rallying. >> the majority has made a different choice for the country. from now on the will of the people must be strictly respected. from now on no subterfuge,

arrangement or combination will be acceptable. lessons of the vote are irrefutable. the defeat of the president of the republic and his coalition is clearly confirmed. >> we will be in a position to have an absolute majority may be in a year. france will be totally deadlock with three groups of roughly equal size and the national assembly. so that is the way to go. it is an -- it is unfortunate that we will lose another year but if that is what it takes, that is what it will take. >> tonight the political factions presented in this campaign did not obtain a majority. loyal to the republic and tradition, i will hand the

president of the republic my resignation tomorrow morning. tom: ending there with the outgoing prime minister handing in his resignation. we have the details. this is unprecedented for france. how did we get here. >> since 1958 this has not happened where no one is getting an absolute majority and the national assembly. a few days ago we were thinking this would be a majority for the national rally. a huge disappointment for marine le pen. they only got 146. the left wing coming first and second, macron's party did better than i expected. this is unchartered territory. macron will have to see where he

can form a wide coalition. you have the far left leader thing he was ready to govern but that remains to be seen because even the left does not have the majority. tom: as you say, the left leader said he won't make any compromises. what are the next steps? >> there is no deadline for the president to appoint the next prime minister. however, we have a few days in front of us. we have the paris olympics in a few weeks. on july 18 we have the next national assembly with all these mp's elected last night convening for the first time. macron will probably over the

next few days look to the centerleft but that is assuming that the union of the left explodes and the far left is sidelined. there was an interesting poll last nine saying moderates left and macron together -- that is a majority. tom: and that might be market friendly. we will have caroline back. the implications of this historic outcome. let's get to the market reaction. traders digesting this election result with the euro slipping in early trade and the bond futures in the spotlight. let's bring in mary, our mliv strategist. i've read two different takes,

jp morgan send there will be additional risk premium demanded of french assets but we have others like evercore isi saying this is pretty benign. tell us about the reaction of the euro. mary: there is no question there will be time needed for traders to digest the news. the left alliance winning more than i which was not priced in. that is one factor. the second factor is no alliance has a clear majority so it will take time to form a government and how the formation of the government takes hold will take time. in the meantime, you're going to see pressure on the euro and pressure on french bonds and equities until the election uncertainty wings a little but for now, it looks like election risks are likely to prevail keeping the euro on the back

foot against the dollar and sterling. tom: euro likely on the back foot until we get more clarity in terms of what unfolds in terms of coalitions. switching focus to the u.s. -- a big week. jay powell giving testimony and inflation data on the back of a nonfarm payroll print suggesting there is further culling in the labor market. mary: even after we saw the reaction from the nonfarm payroll on friday, you saw a softer average hourly earnings. the unemployment rate has risen slightly. there will be an inclination that the fed could start cutting sooner than expected. markets are moving to price in an 80% chance of a cut as soon

as september. and if we hear jay powell citing concerns about the slow down in activity, the increase in the unemployment rate and progress on the inflation front, we could see these tailwinds coming through per bonds and the bond rally to continue. and we could potentially see another additional -- potentially see markets going further in terms of price cuts. it comes down to the testimony that powell gives on how he sees unfolding and how he sets the stage for september and after. tom: mliv strategist, mary nichola, thank you in terms of the market reaction to the french results -- french election result as well as the testimony from powell and inflation. over to asia.

>> it is interesting how we saw a bit of risk off early in the session. perhaps the election noise from europe causing jitters in this part of the world. the market focus seems to be shifting to what jay powell is going to say in congress. if we see the reinforcement of the deflationary narrative, that could support asian currencies including the yen. but also for risky assets such as stocks. we are seeing the taiex get a boost. i want to highlight the performance of chinese equities. what might be driving this along with the weakness of the chinese economy is the idea that chinese authorities could tap in increasingly -- could step in

increasingly. this seems to add to the signal that the risk premium has to come from somewhere. that seems to be why the equities are bearing the brunt today. we also have inflation numbers do out of china later this week. if we see a low number, we could see the bond selling easily reversed. tom: a check on the asian markets. let's see what else is on the docket. tuesday, jay powell from the fed testimony -- testifying and that will continue into wednesday as mary nichola was pointing out. markets pricing in an 80% chance of a cut.

thursday you get inflation data. consequential in terms how -- of how the markets are starting to price in a september cut. and on friday, wall street bank earnings taking off starting the earnings season. jp morgan, citigroup and wells all kicking off in terms of earnings coming through on friday. you can get a roundup of all the stories you need to know in in today's edition of daybreak. go to da why be go. joe biden doubles down after morehouse democrats want him to step aside. we have the details on that story next. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak: europe." boeing is to plead guilty to a criminal fraud charge tied to the 747 max crashes. for more let's go to our reporter, danny lee. what do we know in terms of the rationale for boeing pleading guilty? >> boeing is pleading guilty to criminal conspiracy to do fraud the united states after the justice department came to a view that boeing had not adhered to an earlier settlement related to the max crashes which killed 346 pupil. this leaves boeing open to a criminal crime -- fine.

it means that it has to invest more than $55 million into safety compliance programs and it has to install a monitor. boeing could take this to a criminal trial and the specter would be unpalatable. the finances of boeing are in disarray. with this being settled, it is a good thing for boeing to clear this off its dax. the question will be what will the fine be. for the families of the fatal crashes, they wanted a fine of $25 billion. it is a big gulf as to whether the judge will listen to the families of the victims to cure their case will be another matter. -- to hear their case will be another matter. tom: danny lee, the latest on

the decision of boeing to take the fine rather than go through the travails of a prolonged court case. we will see about unfolds as they expect. house democrats -- morehouse democrats say they want joe biden to step aside as the party nominee but he valves tuesday. -- vows to stay. >> i am the guy that shot p utin down. who can hold nato together like me? tom: let's bring in our reporter for the latest. how is biden polling at this point? >> the bar for success for this interview on abc was that he had to close the gap between he and

president trump that followed his poor debate performance and he did that. by that measure it was a success but he is still polling behind donald trump. only higher than donald trump in blue states. the polls are looking good but this is where his campaign is going to be putting a lot of emphasis for the neck couple of days and months going to the november 5 election day. they are talking about an aggressive traveling schedule to prove that the president is capable of executing that but he also has a lot of work to do especially in pennsylvania where he has the largest gap with donald trump, seven points of a laggard. tom: seven points in pennsylvania. in terms of the democrats and the noise you hear about members of the house and senate as well trying to form some kind of coalition divorced him out, what

is the process there and how challenging will that effort be? >> pretty challenging and it starts with the way the process works. he is the incumbent. it is a rarity in history that the incumbent does not run for a second term. there is a way to do it but the incumbent has to step down first. a candidate has to win support from the majority of delegates at the democratic national committee. there is a story in the rules that if you are the incumbent, the delegates are already pledged to support you. in the last year a biden has won 99% of nearly 4000 delegates. any succumbing to pressure has to come from president biden. it does not look like that is happening anytime soon. tom: thank you very much.

we will continue to monitor how biden addresses to the pressure in the hours and days ahead. coming up, switching focus to iran, that country electing a reformist. we outlined the challenges he will face. that is next. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak: europe." some of the stories making news this monday. protesters rallying in israel yesterday marking nine months since the war with gaza started and they are calling on netanyahu to step down and for a cease-fire do bring back hostages still held by hamas.

reports that hamas last week had broadly agreed to a u.s. proposed cease-fire plan. iran elected a leader key to restart nuclear talks with the u.s. how much of a surprise was this, that the political mechanics of iran allowed -- of iran allowed a reformist to be elected. >> every single candidate had to be vetted by the guardian council. he was the only reformist candidate to make it through. and he went on to win by a margin of 3 million votes with -- is quite indicative of a public looking for a change. i want to point out that turnout

has been historically low. the second round was close to 50%, the lowest number in history for iranian presidential elections. it underscores how much distrust there is in the election cycle and it will be a key challenge that the new leader will be facing at the beginning of his term because distrust in the system is running at high levels. he has been painted as a reformist candidate in his acceptance speech he thanked the supreme leader for his support and says he is looking forward to implementing policies put forward by the supreme leader and a continuation of his predecessor who was killed in a helicopter crash. a key element he has talked about is looking to engage once more with the west. iran's economy has been crippled by heavy sanctions imposed by

the west and the u.s. and the fact that president trump pulled out of the nuclear deal in 2018. on the back of that you have seen a steady degradation of the iranian economy. the new president says we need a fresh pair of eyes and we perhaps look forward to opening a new wave of discussions with the west. but how far he will go and how reformist the ayatollah will allow him to be is the big question. tom: you bring important context around that reformist leader. what has been the reaction? >> i don't think it will be a surprise to anyone that one of the first congratulatory message is to come through is from vladimir putin in russia saying he looks forward to closer cooperation between the countries. they have always enjoyed good relations he said. saudi arabia, one of the first

countries to congratulate both from the king and the crown prince sending a congratulatory message which is key because they only recently restored diplomatic relations a few years ago. the eu said we are ready to engage with the new market -- with the new government. no efficient comment from president biden but we did get a remark out of a spokesperson saying the elections won't have a significant impact on our approach. our concerns about iran's behavior remains unchanged. they are close to a bomb grade level of enrichment which is a signal to the rest of the world which is also why many less hawkish parts of the administration are looking to reengage in talks with iran but

it could all change with the u.s. elections if donald trump comes back in november. tom: thank you for the latest out of iran and the implications on the national -- international stage. that ties in with what is happening in the market. there is also an eye on tropical storm beryl as it bears down on texas. the oil industry is bracing for that. and opec and the iaea will be releasing reports about demand and the surplus story later this week. keep an eye on the price. we return are you ready to lose weight and get healthier? join over 5 million people who have chosen golo as a better way to lose weight. here are just a few golo customers who reached their goal and have kept it off for over two years. (jason) i don't ever want to go back

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tom: good morning. this is "bloomberg daybreak: europe." tom mackenzie in paris. the euro and print bond futures under pressure after a leftist alliance seizes a victory in french elections stoking concerns about political instability. or democrats called on joe biden to step down as the party nominee but the president's defiant hosting nato leaders in washington. and a reformist is elected iran 's president. we look at the potential impact of iran's nuclear deal with the west card the markets are focused on the national assembly of france and the shock result coming through. it was not the national rally of marine le pen's party coming in

first. they came in third. it was the group of leftist parties scoring the biggest number of seats. the horse trading begins for a coalition. we have been monitoring this. the markets are on edge obviously given the surprise that has come through in terms of the national popular front. futures currently flat. the boe speakers will be speaking later this week. s&p futures are down .1% and the nasdaq futures pointing lower by 30 points. let's look cross asset. euro-dollar at 108.

looking at selling pressure coming through for french sovereign debt. taping morgan saying investors will be demanding a wider spread. we are keeping an eye on o.a.t.'s. the testimony for jay powell and the inflation data out of the u.s. and tropical storm beryl is barreling down on texas. french markets on edge. the new popular front secured the most seats in sunday's parliamentary elections. macron's party came second. the far right national party had been forecast win but in a shock reversal came in third. let's get more on what fed in to the results. it is unprecedented for france and the moves last week played

in the favor of meg ryan to the detriment of the national rally. you could hear how angry some of their leaders were. how do we get there and where do we go from here? >> some were skeptical that the national front would have a rally. in the end you had more than 200 candidates -- a lot of left and macron supporters voted for the candidate facing the national rally and in the end the national rally did pretty poorly. first came the new popular front. what is interesting to look at exactly how many members of the far left are within the new popular front. about 75 out of 180.

we will see at the new popular front stays together. the leaders said we are ready to stay together and ready to implement the full program. we will see if that is the case or whether it splits and macron reaches out to the more moderate part of the left-wing. tom: what is important is the makeup of the new popular front. it is an unwieldy coalition. we will see if it holds. in terms of the business community of france, you have been speaking to them in the run-up to this crucial vote. what are we hearing from business leaders in france? >> generally for the last severing -- seven years, president macron has been holding a tight grip on france.

there was a lot of uncertainty that this was the end of the era. we were looking at a new beginning, whatever it is. if you look at the new popular front, they are saying there measures could cost as much as 179 billion euros on top of the current deficit we have. there was a wait and see attitude. there was some anxiety. clearly this is going to be a new beginning. and possibly some more physical -- fiscal slippage. whoever becomes prime minister will have to deal with the budget and possibly face a vote of no confidence in the fall. tom: one thing that stood out to me watching the french commentary yesterday was that

both the left and the right seem to be aligned on one thing and that is the reversal of the reforms on the pension which was key to macron. >> just last year macron raised the retirement age from 60 to to 64. we will see if these measures are implemented. tom: thank you for the granular take on how the politics of france has unfolded. and we will watch to see what combinations could be put together in the national assembly of france. we will get plenty more on the market reaction through the morning. we get insights from our guests. to the politics of the u.s., joe biden vowing to stay and the race after more congressional democrats call for the president to step aside as the party nominee. we have also had our own poll put together by bloomberg and that demonstrates that in some

areas, biden is holding together quite well. tie it all together for us. >> he is holding up quite well in michigan and wisconsin. these are democrat heavy states regardless. but he has narrowed the gap in several swing states. right after the debate performance, you saw a lag between biden and donald trump your if you look over all, -- between biden and donald trump. what is the crucial question is if he can continue to repair some of the damage. the gap is narrowing but can it take over president trump's polling numbers? that is the concern. tom: ok, thank you for the

latest in terms of the polling and implications for president joe biden. in the u.k. rachel reeves will give her first speech as the exchequer. >> the u.k. has a labor prime minister for the first time in 14 years. and a female chancellor for the first time ever. but who are starmer and reeves? starmer has only been an mp since 2015. he joined a former labor leader, jeremy corbyn's shadow cabinet. he took over the leadership in 2020 following labor is crushing defeat at the hands of --. he is a -- rachel reeves has been on a charm offensive to win over business and the city both

seen as friendly to britain's conservatives. she is seeking to reduce trade barriers. plans include a new publicly owned energy companies and ending exemptions for private schools. britain is struggling to grow. that is the and her attendance they will be facing which could tie their hands in the next parliament. tom: alex morgan joins us now with more details in terms of what to expect from the chancellor today. what are the top line that we should be looking for from rachel reeves? >> good morning. rachel reeves -- the first female chancellor to occupy the post in the u.k. they want to be seen hitting the ground running. rachel reeves, the national mission is boosting growth.

making clear that the way this government will seek to avoid tax hikes is to get the economy growing. boosting growth is a good slogan. we expect more details later today. another part of this, another central pillar of labor's plan is they want to unlock the planning system. the labour party under rachel reeves as chancellor planning to reimpose house targets on local councils. development has been snarled out. labor making clear that it wants to break through the logjam. and attracting investment. seeking to bring private capital on board and to direct the funding toward some of labor's

policy agenda. tom: there has been a policy blitz from starmer and his team since friday. >> i was with you on friday. we did not get much sleep. the king's first words to cure starmer were, you must be exhausted. keir starmer is on a four nation tour of the u.k. to me policymakers. the new foreign secretary went on a whistle stop tour of germany taking a quick break to watch england's penalty shootout. he went to: ann sween. and that -- poland and sweden. you are seeing a mission of

labor wanting to communicate that they will get on with change as fast as possible. starmer showing that his party is in a hurry and there is no time to be lost. tom: alex morgan, an excellent update in terms of the u.k. and the government. some of the stories making news. i will get you up to speed. savc that he and starmer have already spoken to tata. and the parent of cbs and mtv has agreed to take over

skydance. the deal ends one of the messiest demos dramatic mergers in recent history. orban is set to meet china's leader in beijing fresh from his controversial sit down with vladimir putin. orban called it a piece mission. leaders said he had no mandate to represent the bloc on matters like the war in ukraine. the indian prime minister will visit russia on monday for the first time in five years and he is said to be with vladimir putin the visit. russia is india's biggest supplier of weapons and oil but has been drawing closer to china. coming up, french bond futures slip, a surprise victory for the leftist alliance in

parliamentary elections in france. more market reaction is next. this is bloomberg. ♪

tom: welcome back. french bond futures slips in the euro dips as people start to digest the election surprise. risks of expansionary fiscal policy remain and perhaps on the margins have picked up. let's get another take and bring in douglas yates qamar professor and member of the academic committee at the american graduate school in paris. douglas, thank you for joining

us on the rooftop in this unprecedented and moment for france as they work through the implications of the vote. what is your top take? >> surprise. all of this week people have been preparing for the victory and macron won his bet. everyone was preparing for what it would be like to have jordan as prime minister and marine le pen waiting in the background. bordello claimed that the election had cheated the french people but marine le pen said, our time will come and our victory has only bn ferred. in the meantime, macron has won a reprieve. he appears to be a clever strategist. he has played the same game three times in a row. in the first round he attacks

the two extremes and in the second round he builds a front against the --. and that strategy worked like a charm. tom: it looked like last week the republican -- there is a lot to unpack including your line that macron has turned out to be a good strategist. for they hear and now in terms of the potential because watching it unfold yesterday on french tv was fascinating as the anchors asked the leaders who they would partner with. what are the combinations that could form? >> this is the third round of a two round election. everyone voted basically against the national, they did not vote for anything. there is not any common policy. the problem is their problem of an alliance. the leader of the extreme left

party came on first on the television and declared that the prime minister should step down and macron should appoint someone from the front. and he sort of suggested it should be him but 85% of the french reject the idea that he should be the prime minister. the other partners, the socialists, the greens, the communists on the left who had been in that coalition might migrate to get the votes they need and the center. and so to what the republicans. to construct a majority they need 289 seats. tom: if you carve him out, some describe his policies as the extreme left. you can carve him out and isolate him and his group and partner with the socialists and greens and bring in some republicans with macron steam. you would then have a

significant majority. what you expect the economic implications of a formulation like that to be? >> the market will respond to the uncertainty. a government would send a message to the market that would be largely negative. if he were to try to implement his program it would involve angst like lowering the retirement age back to 60. increasing the minimum age -- wage to 1600 euros a month. the current minister of finance has indicated this would be catastrophic for french public finance and the markets lending difference would probably take advantage. tom: when do we get an answer in terms of some of these potential combinations? and where does this leave macron? >> 18th of july a nomination is supposed to be made. between now and then, the prime

minister will announce his resignation but remain in office. a pizza man joke that he could stay prime minister if there is no majority to oust him. what we are looking for is someone who is a woman. someone not threatening to macron. and someone on the winning side willing to migrate to macron so i will take a spin of the wheel and suggest the head of the green party. tom: and macron goes off to the nato summit in washington and you said this has turned out better for him than many expected. >> he has done it a third time. he has managed to win although a minority of french support his policies. tom: fascinating analysis of what has unfolded in france. thank you to our guest. you can watch bloomberg's

coverage of the french parliamentary election results throughout the morning with insights from our guests. plenty more coming up. stay with us. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak: europe." we check on the market reaction to what has unfolded in france which has taken most people by surprise. it was the new popular front, the coalition, an unwieldy coalition including the leftist groups. including the socialists. macron's party coming in number

two. the pressure -- you are starting to see it in terms of the sovereign debt of france and j.p. morgan saying investors will demand a premium to german bunds. given the coalition's on higher spending. we are still at the stage where we are trying to make out what the future government will look like in france but given the clout of the leftist coalition, there is concern about the constraints on the debt of france. let's look at inflation and that story out of the u.s. the data is dropping on thursday in terms of cpi. you expect the inflation story to continue to ease. the expected number is down from

3.3%. core expected to remain around 3.4%. this is a big week in terms of the earnings season. jp morgan, citigroup and wells kicking off the earnings story. this chart showing the value of these s&p companies coming through with the earnings kicking off this week with a focus on the banking space. jp morgan, citigroup and wells. there is plenty more coming up. we will continue to scrutinize the french story. stay with us. this is bloomberg. ♪

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>> good morning from london. we are an hour away from the opening trade. the euro and french bond futures under pressure after a leftist alliance seizes a shock victory in france's election.