tom: this is bloomberg daybreak: europe. i am tom mackenzie in london. the u.s. and its allies prepare for a significant set of attacks against israel from iran that could come as soon as this week. western leaders urging

restraint. oil slips after a five-day advance with the threat of an escalation in the middle east offset by signs of weakening global demand growth. japanese stocks surge, recovering from last week's rout. confidence in china continues to crumble, with transactions sinking to their lowest level in over four years. u.s. inflation data in focus later. let's check in on these markets, then, after essentially a flag day across europe and u.s. yesterday. .3% up. ppi out of the u.s., the inflation print to watch today as we lead up to the cpi wednesday out of the states along with inflation data out of the u.k.. the ftse 100 up one before

points -- nasdaq futures pointing up by 51 points. let's lacrosse asset. weakness continues. the markets are back. you are seeing gains come through from japan. the japanese yen down .4%. the benchmark u.s. 10 year at 390. brent at 8180. five straight days of gains. gold down by .4%. the u.s. says it believes an iranian attack on israel could come as soon as this week as the pentagon deploys more forces to the region. iran indicated it may retaliate after the assassination of hamas's leader. roz matheson joints me now with the latest. the warnings from the u.s. and its allies and particularly

spokespeople out of the white house and biden administration are becoming ever more concerning when it comes to the risk of further conflict. roz: it's interesting because we are now two weeks since the killing that iran blames on israel of the hamas leader in tehran and there has still not yet been any retaliation even only have said they will. nothing has come. we are hearing the u.s. saying they believe it's getting close and could happen at any time. they could be in many different forms. they are saying it could be a direct attack by iran on israel or the use of its proxies in the region, hamas, hezbollah, the houthis. they could be a multipronged retaliation. it seems calibrated to avoid setting off that further war and that's perhaps why iran has been taking time to work out what to do that sends a message back to israel but does not trigger that broader war, but certainly the

u.s. is getting concerned that we are close. tom: what is the u.s. doing along with its allies to prepare for this potential iranian retaliation? christine: sending ever military assets to the region. it already has quite a lot there already. it is also sending -- a carrier group. abraham lincoln, the uss. it was ordered to speed up. that will be in the region soon. they announced they are sending a submarine that can carry missiles. normally they don't publicize where the submarines are. the fact that they are saying that is also to send a message to cool your jets. we don't want this to move into something bigger. >> revealing that will be in the region. roz matheson with the details in terms of how the u.s. and allies are preparing around risks in

the region. roz matheson, thank you. mary nicola joins me for the market reaction. we have the data out of the u.s. later but we will start on the oil story. we are seeing softness in the session but still around $81 a barrel. to what extent is about -- is this about the pricing around oil versus the details around softer demand when it comes to rent -- took brent? >> there is still that premium we are getting on oil prices as a result of geopolitical risk that is likely to linger especially when you have these tensions escalating between israel and iran and the fact that there is this lack of confidence of how this can evolve so you are going to see oil prices remain elevated without overhang still around and add onto that from the other side softening demand,

weakness out of china or a slowdown in growth from the u.s.. there is a pull for demand for demand to go lower but as long as we have these geopolitical risks lingering, that risk premium for remain. click spoil remaining one of the catalysts. we look ahead to the data. before that, producer prices out of the u.s.. one of the markets bracing for, mary? >> bloomberg economics says they are saying the high side for ppi . if we get a pc that's not in the fed's liking, that delays rate cuts even more. the key thing here is that the market needs a lukewarm number.

what i mean by that is more -- if it's too hot then it is going to rattle concerns about stagflation and if it's too cold it will bring up concerns about a recession so it needs to be in that sweet spot to get the markets comfortable and we have seen such a stark rally in u.s. treasuries over the last three months and especially as the markets are repricing where the fed is going and looking for almost 100 basis points of cuts until the end of the year. so that being said, if we get any setback, it could have an impact on treasuries over the next few days. >> ok. markets looking for a goldilocks number. mary nicola with the analysis and preview. standing by for us in singapore, avril hong. japan back.

as i promised you, bonus chart where we talk about the yen stock correlation.

in this case, it tells us risk appetite is emerging. tom: avril hong, thank you. remarkable news. here is what else we are thinking about. we are counting down to this and will bring you a preview in terms of what to expect from this u.k. employment data. wages, claims and the jobless number, really important at a time when expectations are inflation will go up in the u.k. we have had the first cut that has come through from the bank of england. the next steps in terms of the

u.k. and the boe will crucial be crucial. we get the iea monthly oil report. we will see whether they diverge or not from what we have heard from opec, who put out the report yesterday. they have trimmed their forecast. opec lower their -- lowered their projections by 135,000 barrels a day. we will see if the iea follow suit. we get the producer prices out of the u.s.. mary nicola telling us the markets are looking for a goldilocks number, not too hot or cool. that leads up to the cpi that drops out of the u.s. wednesday. you can get around up -- get a round up of this stuff. daybgo. coming up, oil snapping a rally.

opec trimming its demand forecast for this year and next. we will do a look on the outlook for crude, the geopolitical tensions but the softer demand and how that's playing into the world's energy markets. shares in a german defense contractor have soared benefiting from increased spending. we are speaking to the firm's chief executive at 6:40 a.m., just under 30 minutes. stay with us for that interview. this is bloomberg. ♪

tom: welcome back. happy tuesday. oil is slipping after a five-day advance with a possible escalation in the middle east can't like offset -- middle east conflict offset by weakening demand. $81.72 after rising by almost a percent -- almost 8%. let's bring in day in -- in dan . we have been hearing about the warnings that retaliation for

moran could come -- from iran could come soon. how is that playing into the pricing around oil? >> we have seen a roller coaster in terms of speculative interest when it comes to oil. a week or two ago, speculators were selling out contracts in the lowest net longs going back for years because they were concerned about demand, the economy, and what these tensions have done is bring those speculators back in, betting that if something happens it could escalate that could disrupt physical flows and raise prices. fiscal demand has been consistent. it has been whether your money managers are in or out. >> we have an update. we are looking at iea. opec have come out with their expectations and outlook for the oil market what have they been saying? >> opec has been more bullish than iea all year on crude

demand, but just yesterday, they came out and pared back their expectations. they are seeing softness coming out of china. they are worried about the possibility of the u.s. economy weakening. and so they are pulling back their forecast for demand. and, you know, even with all of this roller coaster ride, this is something traders will be keeping an eye on, because demand has been, you know, especially in china, which is the world's biggest oil importer, it has been very hard to stay bullish on the economy, which has been struggling. the shift to electric vehicles has pulled wind out of the sails of the gasoline market. we will see the numbers today and people watch to see if there's any sign china might rebound. tom: yeah. absolutely. you are right to point out there has been divergence in terms of the outlook coming through from

the iea and opec. dan, what are the implications for opec? they came through with a cut in terms of output. is that likely to be extended? what do we know about how opec is thinking about the relative softness in the oil market at this point? dan: opec is still withholding about more than 2 million barrels a day of production and that's a revenue loss for all these countries that need this oil revenue. so they would like to get those oils back out on the market. if you look at opec's forecasts, there are strong assumptions on-demand showing there is enough demand to pick up for them to start putting girls back. they are looking at increasing by maybe 500,000 barrels a day by the end of the. if you think the lower forecasts are right and opec will have to trim down in the next couple months, did makes it harder for them to bring back those barrels without bottoming out prices, which they don't want to do. so they will be in a pickle because there's a lot of opec members that want to sell more

oil and boost their numbers, and if they are not able to, it will create more political strains, which we have seen it does not always get along as much as you want. tom: dan murtaugh, appreciate it. great analysis and insights. the pushes and pulls in terms of geopolitics and the demand picture. thank you for the update. we will stay on the china story because it's tying into what's happening around copper, taking a hit, currently down .7%. here's the story crossing the bloomberg on what's happening. china exporting copper. it is usually a net importer of copper, but given the weakness in that economy and industrial base of china, you are seeing details coming through from the london metal exchange where you have seen a flood of copper and nickel from china into overseas warehouses. china is the largest metals market, but the flows are going

in the opposite direction. chinese origin copper making up 72% of the increase in exchange monitored inventories in july according to data from the lme, so these exports from china pressuring the copper price, and that is a story worth keeping on. you can see copper in the session today down .7%, the year-to-date, you have seen gains close to 5%. bhp group is ramping up efforts to avoid a strike at the world's biggest copper mine. the company presented a new wage offered to union leaders in chile, which includes a nearly $30,000 signing bonus and improved benefits. failure to get the union's approval would set up a stoppage of bh -- of bhp's mine, which accounts for about 5% of all the world's mind copper. the war in gaza ways on public financing in israel, downgraded

by fitch from a plus to a. fitch sees the conflict in gaza lasting into 2025 with a chance of a chance of it broadening on other fronts. moody's gave israel its first-ever sovereign downgrade in february, cutting it one notch to a2 with a negative outlook. greek authorities say a large wildfire on the outskirts of athens is showing signs of improving. the biggest blaze of the summer started northeast of the capitol sunday, fueled by strong winds, high temperatures and a lengthy drought. more than a dozen towns and villages have been evacuated with police rescuing more than 250 people. switching focus now. elon musk has pitched himself for a role cutting u.s. federal spending in a second donald trump administration. the billionaire tesla's spoke to the republican nominee in a two-hour conversation on x.

>> they would be great to have a government efficiency commission that takes a look at these things and shows that the taxpayer money -- the taxpayer's hard earned money is spent in a good way. and i would be happy to help out on such a commission if it were formed. >> i would love it. you are the greatest cutter. tom: ok. coming up, wall street's big money managers are being forced into new ways of doing business in the middle east. we will get the details on that story coming up. this is bloomberg. ♪

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tom: welcome back to bloomberg daybreak: europe. wall street's big money managers

are facing a shift in the way business is being done with sovereign wealth funds in the middle east. today's big take explores how state-controlled funds in the region are increasingly asking private equity firms and hedge funds what they are willing to do in return for investments rather than handing out checks with no strings attached. let's get more details and bring in bloomberg's managing editor who joins us from dubai. explain what is changing for the likes of apollo, blackstone, blackrock in the middle east in your region. >> good morning. thanks for having me. executives from the biggest hedge funds being able to fly into abu dhabi, riyadh, and return with checks. that has changed. they control close to $4 trillion in assets and are aware of their growing importance in the global financial

ecosystem. they have more negotiating have to and have gotten more demanding. they are asking western firms for breaks on fees, to hold more events in the region, to set up local offices and bring more people to live and work in the region. tom: what are some of the concessions, the biggest concessions, these firms have been compelled to make as a result of this shift? >> the biggest would be on fees. increasingly we hearing middle eastern wealth funds pressing wall street firms for lower fees, for a greater share of profits. firms in the past have had a two and 20 model, a 2% fee and a 20% share on profits. that is fading away. the middle eastern funds also have the ability now to work with asset managers they have relationships with, which helps winnow the field a little bit, and like we discussed, this idea

of asking firms with they would do for the region, how many allocation would help the middle east, be it in terms of jobs or technology transfer. tom: ok. interesting, some of the concessions around this. you have touched on this, but kind of the reasons why these sovereign wealth funds feel they are empowered to make these demands, like he reasons have come out from your reporting on this? >> that's an excellent question. the biggest reason boils down to money. we come as i mentioned the biggest middle eastern wealth funds are sitting on assets close to $4 trillion. that number according to one estimate is expected to go up to $7.6 billion. that's a lot of financial firepower. what's happening in north america, the largest institutional investors are mostly fully allocated. when asset managers have to

raise funds they look to the region. that gives these middle eastern wealth funds a greater degree of heft. tom: fascinating reporting, well worth checking out on the terminal and on bloomberg.com. thank you very much. coming up, the uk's labor market in focus ahead of a week of important data. it will be key for the bank of england's next move. we will bring you a preview of the wage and labor data later today and inflation, which crosses on wednesday. this is bloomberg. ♪ with so much entertainment out there wouldn't it be great... ...if you could find what you want, all in one place? show me paris. xfinity internet customers can enjoy the ultimate entertainment experience and save on some

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tom mackenzie. u.s. and allies prepared for attacks against israel this week. leaders urge restraint. threat of escalation and japanese stocks search while confidence in china crumbles. u.s. inflation data is in focus. flat session, futures point brighter as we count down to wage data. ftse 100 adding 23 points.

rafael bostic will be speaking and producer prices this week ahead of consumer prices. nasdaq futures are up. equities have soared back in japan, 147 versus the dollar. brent is down at 8165 and gold is down 5/10 of 1%. dater and a half an hour will show unemployment rising to its highest level in three years ahead of data that could

determine the next decision. lizzy burden joins me now. what will you be looking out for? lizzie: you mentioned jobs dater and inflation and retail sales but the highlight could be inflation. that would fuel caution if you remember, it was a knife edge decision, a split vote and a warning from the hawk catherine man saying you cannot be seduced by inflation falling as he can see with the white line. she is concerned so we will get those numbers and if we see a

sharp uptick that would pose risk to recovery adding to the dove argument. economists reckon you will have a cut in november but let's see how the data plays out. tom: markets pricing in cuts in november. just fewer than two cuts. where does it leave markets? lizzie: the pound is the best-performing currency but struggling so if we get soft growth data sterling could be vulnerable. traders are expecting less easing from bank of england and

the odds of a fed cut r 5050. a chart shows the tightest policy rate and the rba has the loosest. there is the bank of england translating through to the pound. >>. market positioning ahead of the dater and what it did mean for the boe. thank you, indeed. 10:00 a.m. u.k. time euro area zew survey will give a gauge of the economy as markets price in

67 basis points of cuts and september is the next cut. option of german two-year debt and the big data point, ppi for july out of the u.s. and that could inform views. home depot earnings crossing stateside. vulnerability of four may be, rafael bostic speaking at an event. will he push back on the narrative? his comments could be consequential. european defense contractor

comments amid the conflict in ukraine. i will speak to ceo suzanne. stay with us, this is bloomberg. ♪

♪ tom: welcome back. zelensky confirmed forces seized russian territory. the fighting pushed prices high, although both sides will himkeep the fuel going.

put it in the historical context. tony: that tells you the significance and how embarrassing it is to confront. ukrainian officials met with zelenskyy and said they had control of russian territory and russia met regional officials and the governor of the region said 180,000 people have been evacuated. tom: what is the situation when

it comes to those gas supplies? what is happening and what are the risks? tony: a town where russia's last pipeline through ukraine is rooted. ukrainian troops have taken control, we have reporting saying ukrainian troops have control but the gas is flowing. ukraine earns money and they want to supply customers so no sign of flows being interrupted but accidental damage to infrastructure, gas prices jump.

tom: tony with that important update. implications around gas supply. the possibility of more isolationist trump presidency prompted many politicians to boost spending, struggling to keep up with demand. german manufacturer who specializes in drive technology has reported earnings. let's bring in suzanne from germany. looking at a second quarter in terms of results reaching an all-time high and you've raised targets.

what is driving the demand, is driving the demand, visit about ukraine? suzanne: demand is driving the situation, ukraine and middle east and indo pacific around taiwan, so it is the global situation and not just ukraine. it is as i said. tom: we spoke in may and you said the order backlog was billions of euros. where does that stand now? >> 4.7.

it increased by more than 10% to q2. so very pleased with the markets. tom: where does that leave inventor use? to what extent there is a surplus in the inventor restoring? >> if you reflect our growth, on the aftermarket side, it shows many, much more use and after market revenue grew in the defense side of the business.

great performance by all sectors. tom: inventor reese drawn down. this is something else you touched on, to what extent have chains adjusted? are they back or is there more more work to be done? suzanne: always work to be done, glad that in germany we have it under control and back to the old normal, some work to do on the u.s. side but no is you to be reported. reflected in the strong topline

growth which we see specifically here. very pleased as well with the development. tom: ok. improvements in europe but challenges, what are they? suzanne: shortages to be managed but all under control so we have dedicated measures and we see positive results so the u.s. activities are three or six months behind germany, but also normalizing path. tom: talk about deals and partnerships. you signed a deal with an italian company. what does that entail and are you looking for further tieups?

>> it is important to have partnerships in close relationships. completely independent with good solutions in the market and we cooperate on projects. great developments in the past and the italian programs and market and global reach of the two companies promised some good let's say prospects and development and this is where we agreed to analyze for the market. tom: ok.

and you spoke about a gap that exists between governments reacting and the reaction and putting in orders for equipment and the kind of equipment you supply. has that extended or shrunk? >> it has shrank, good development specifically in germany, coming into play with placing orders and positive discussion on -- on -- on -- on increase of the merchants. i am very pleased with the development of the last months.

tom: yeah. >> countries around us, the gap has been closed. this is reflected in the financial figures. tom: i have to ask you because you said on these tensions and fissures globally. there was an attempt against the ceo, do you fear for your safety? suzanne: this does not leave me cold and untouched and we had to increase security measures for let's say the premises and personal security and im -- im -- im -- i am not scared. but things have changed and it

is not fun. tom: i am sure, it's -- it's -- it's -- it's hard to imagine what that is like but you have increased security? >> absolutely and we follow that. tom: switching to the politics of the u.s. what would a -- what would a trump policy mean for the defense industry of europe? >> it might increase the pressure. trump is clear in -- in -- in -- in -- in his view of investments. we know that but trump made it more clear and more robust in actions so this, i expect this

will increase pressure on europeans to act faster. we have started to close the gap and this will increase the pressure more and -- and -- and europe needed that push. tom: briefly on ai how are you incorporating generative ai in -- in -- in -- into your business? suzanne: since we produce the system and not the weapon system specifically, ai plays a role in automatic driving, in -- in -- in -- in predictive maintenance solutions and also in the next

generation of suspension systems. this is increasing overall the safety and mobility of -- of the systems we are providing. tom: ceo suzanne indeed on the back of those earnings and how the industrial complex around military is adjusting. supply chains normalize, still challenges in u.s.. plenty more, stay with us, this is bloomberg. ♪

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♪ >> welcome back to bloomberg. a snapshot on the health of the u.s. economy, one snapshot -- one snapshot in time. you have gone from sub 2% seasonally adjusted on an annual basis to 2.9% second quarter, a snapshot. it suggests resilience. that resilience is putting a foundation under earnings. bloomberg intelligence pointed out that in the second quota you

are seeing smaller cap stocks coming through. you will see income earnings growth around 7.4% for those companies and magnificent seven posting 35 percent earnings growth, down from pv it -- previous quarters. there may be is some grist to the mill. different picture in china. in terms of the dater coming through and reporting what we are seeing in the turnover, demand for stocks, chinese stock trading falling to the lowest levels in more than four years. lack of demand for chinese stocks, lack of confidence. we know about the crisis and

fascinating moves to intervene in the bond market. no appetite at this point and some will see that as an opportunity to buy the dip. others will suggest further downside indeed. the trading around stocks falling by the most in four years. exclusive interview coming up with the head of the oil market division. the details coming through. the agency releases the oil report. the opening trade will walk you through all of that with interviews, dater, the market deep dive. this is bloomberg. ♪

anna: good morning, i'm anner edwards. european futures are in the green.