tom: good morning. this is "bloomberg daybreak: europe."

these are the stories that set your agenda. stocks gain looking for their best week and where than a year. a strong u.s. retail and jobs data ease recession worries. ukraine says it has accepted the surrender of the largest group of russian soldiers since the start of the war and -- as gav continues its cross-border incursion. and sweden reports the first case of the new mpox variant outside of africa a day after the who declared a global health emergency. tom: good morning unhappy friday. it is a risk on across the markets. bonds begin sold off.

the data scenario in the u.s. pointing back to the goldilocks prospect of a soft landing for the u.s. economy. on retail strength. the futures led. pointing higher by .2%. looking to close out the week in positive territory for european stocks. the ftse 100 down .1%. the softness coming through in the commodities market. s&p futures pointing to modest gains, about .1% after rallying yesterday more than 1% on the s&p 2.4% for the nasdaq and the russell 2000. the nasdaq futures pointing to future gains building on the upside of yesterday higher by .2%. let's look asset. the japanese yen is a focus of weakness of recent days. right now little strength coming through and up .3% versus the u.s. dollar at 148.

the u.s. 2 year back above 4%. now expecting fewer than 100 basis points of cuts by the end of the year and the selloff in treasuries is there at 4.0 sacks. -- 4.06. gold a little softer by .1%. crossing over to avril hong in singapore for a check on the asian markets and what a strong few days it has been. avril: it is what we are seeing in japan. the equity is there are outperforming. overall asian stocks are doing pretty well except for what we see on the mainland. asian stock benchmark heading for its best we can more than a year. this is that the tailwind we are getting from wall street and the u.s. data but also in japan look how we are heading for gains on

-- of 8% on the nikkei which is follow-through from last week as though boj smooth concerns. next week might not be so straightforward especially how at the end of the week we are due for data out of japan on an asian and that the boj's governor will speak before parliament. we are seeing the strong gains. this follows on from managing gains from a day ago despite poor july activity indicating a lackluster economy. hang seng following through what we see in the rest of the region. but also given the week data out of china or a mixed bag, we had a pboc rapport and an interview and he talked about how they are pledging support for boosting of growth but these measures will not be drastic. take a look at where we are on dollar-yen here we are seeing

some traders dipping their toes back into the carry trade. the weakness returning. i want to flag what we saw and the date overnight. a reminder of how the dollar-yen and the fed moves are important. take a look at this chart which will show you how the nikkei is looking at its best week since the early days of the pandemic. putting this into context, this is after a four week selloff, it is about flows and momentum. to give you some perspective despite the rebound we are seeing today and this week. tom: avril hong with the context and the check on the asian markets. the strong u.s. retail and jobs data bolstering hopes of a continued soft landing in the u.s. economic resilience prompting traders to shed -- who is only a

week and a half ago that there was talk of a u.s. recession and concerns about a u.s. recession and talk of an emergency cut. wow, has that changed. the narrative is built on the data that seems to be aligning for a goldilocks scenario for the u.s. talk to us about the market response and if this is a rational response. mary: as you put it, what a response it has been and reaction. it comes down to the fact that a lot of the concerns especially about the u.s. and a recession has faded. it is in large part to do with the most important part of the economy and that is the consumers showing continued signs of resilience. if that continues there is no reason for the fed to panic or have a jumbo rate cut.

it was unlikely to come unless we saw a rapid deterioration in the job market. it comes down to the job market at the wing. when you are seeing that consumers are confident and are in a strong place then it is hard to gauge a big bet from the fed. i think you still get to see easing in september in line with what we have seen from global central banks where they start using but then they take a more cautious approach thereafter. tom: that is on the u.s. recession risks fading. another part of the script being rewritten is the carry trade which was unwound about the week and a half ago. now it seems back in play on softer yen. they carry trade it seems as back at least to some extent. what do you make of this and what are the drivers for the return of this carry trade? mary: i conducted an analysis of

all of the carry trades, the rallies and selloffs over the last 15 years and what has consistently been the case is when you see stronger equity markets and you see a rebound of the carry trade and e.m. carry comes back into play. i think you are seeing a repeat your today where you see -- here today where you see fueling of sentiment we have seen the vic's x and equity quality. it comes down to better risk sentiment overall. and from the study we conducted we also saw that the stability of the chinese yuan is important -- is an important precursor for carry trades over the last 15 years. those are the two most consistent things that work in favor of the carry and that is coming through today.

bringing a lot of that talk of e.m. carry back. tom: fascinating in terms of the details in terms of the fundamental supports of the carry trade. mliv strategist, mary no cola with the reaction. as far as markets repositioning and adjusting around the day that. equities bid in the session. sweden has reported a case of the new mpox variant. the first recorded outside of africa. bloomberg health care reporter has been following this in detail and joints me now for the latest. what more do we know about the case from sweden? janice: i don't have a lot of information. we know it is someone that came from the region. they do not seem severely ill. the swedish authorities called a conference and will be taking it seriously because this strain is

more berland. -- is more virulent. an experienced scientist put out a post saying that there have been mpox cases every month in europe and it is a different play but it is a problem. if we continue to neglect this problem in the areas where it is endemic, we do risk you tatian's and we don't know what we are working with when viruses are mutating. tom: still a number of unknowns

and the risks of those mutations. what do we know about the containment efforts at this point? to what extent are officials looking back at the playbook of the covid-19 pandemic for solutions to this? janice: i do think that in some circles there is an acknowledgment that the way we did things with covid was not ideal. but i do think equally people learned a lot from covid. one on the ground examples, a problem in africa that is a global risk is that effectively you have a problem with getting vaccinations on the ground. covid certainly helped with ensuring those systems are

somewhat in place so it should be easier this time around. the world health organization -- in the early days of covid for example, when asked if this was able they said no. this week when i asked that question at their press conference, they did not say it was able but they also did not write it off completely. unfortunately, we are seeing news this morning out of china that they are considering closing borders and they are surveilling and more carefully if it is an inbound from africa. tom: our bloomberg health care

reporter janice kew about how the response to the mpox virus is evolving. ukrainian troops continue to advance in russian territory with kyiv said to have captured more than 100 russian soldiers in a single day. details on that are next. and later we speak of the ceo and cofounder of swedish fintech giant klarna holding as the buy now pay later company moves into retail banking. that conversation at 6:30 a.m. u.k. time. ♪

tom: welcome back. you can say they have accepted the surrender of the largest group of russian soldiers since the start of the

war or than two years ago. ukrainian forces continue to push into russian territory. we are entering the 11th day of this extraordinary operation. how do ukraine and russia view the situation on the ground right now? this event has kept many on the tenterhooks and has taken the russians by surprise. what is the latest? >> the ukrainian top military chief told the ukrainian president that they are setting up a headquarters and that is an indication that ukraine is planning on a longer-term presence in the russian territory. it is not a single rate. they contain deal -- they continue to expand their hold on the territory. russian officials, the defense minister held a meeting with top military officers yesterday, saying he wanted defense strengthened in the neighboring

melgorod region -- belgorod region. the challenge for russia the longer this goes on is to demonstrate to its population that it can restore order at its border. tom: that challenge from moscow continues. what about ukraine's allies? are they supportive of this? is there anxiety in western capitals? tony: this has triggered a renewal of the debate about whether ukraine can use long-range weapons against targets in russia. they have been under some u.s. and european restrictions with the use of those weapons but that debate has intensified because ukraine has demonstrated it can enter russia and gain territory and russia has not responded in the way that some of the european and u.s. allies

would respond as many feared they would. russia will have -- russia while territory in eastern ukraine and ukraine will have russian territory. that is the logic. bloomberg's tony help in on what remains to be an extraordinary push into russia by ukrainian forces in the broader implications. switching focus and staying on geopolitics but to the middle east where a gaza cease-fire talks are underway in doha among israel, egypt and the u.s. let's bring in wells madison who has been following this with the team in terms of the details. the rock -- the talks continue. any updates on possible progress? >> we are hearing there was

maybe some small signs of progress. we also have reports that qatar which has a conduit to hamas may be providing hamas with updates through the day rather than waiting for the talks to end hamas is not represented in person at the talks which makes it more complicated. it is unclear what the progress might have been and it is unclear, talks are going on today, but are they pushing through or do they see some glimmers of light? there were a significant sick -- there are significant points. we know there are fundamental sticking points. there are reports of small signs of progress. the talks will go on today and

qatar will go back to hamas with an update. even if they say they have reached a framework for a deal, they cannot sign off on it. they need hamas to agree and then israel to agree and israel has to go back to present this to benjamin netanyahu who does not really seem inclined to get a truce. there are a lot of steps to take bo for a cease-fire can be enacted. tom: when it comes to the bloomberg team quantifying the potential impact across gaza and the rebuild if and when the conditions allow for that, how extensive with that project be and how much of a challenge would it be? >> god is our biggest story for the day. it seems odd to talk about construction when the war is going on but the talks are happening because a challenge is real. there is 42 million tons of rubble in gaza.

70% of housing has been damaged. most of it destroyed. a lot of people displaced. and the task of clearing the rubble which is enough dump trucks to run from new york to singapore, an extraordinary amount, and that is complicated about what is in the rubble with chemicals, unexploded ordnance perhaps. it is a big task to rebuild gaza but it is important to think about that now so our story looks at the challenge but what are the conversations going on about how to start that while the war continues. tom: thank you for that update rn the middle east on the potential reconstruction challenge as well area coming up , we look at some of the intense headwinds forcing winter -- wind turbines. there have been convulsions in that sector. that is next. this is bloomberg. ♪

>> it does not make a sustainable business if you are selling with moss on the wind turbine. some will have other means. we are listed as a private company and we have to make money. tom: the vestas chief executive on the challenge of competing with the cheaper energy from china. here for a deep dive is leo wang.

they have he's consistent margin pressure. we hear this every time we speak to a wind turbine ceo. are there signs of a turnaround on the horizon when it comes to margins? leo: i think we can see some light at the end of the tunnel. this year turbine make sure yours are -- turbine makers are expected to deliver their legacy orders. they have done this -- it is significant indiscernible --[ indiscernible]. we do have key ingredients for a certain level of margin recovery. tom: that is interesting and consequential for those players

in the sector. talk to us about how that feeds into the competitive landscape globally certainly with your touch on the chinese market. leo: the global landscape is going through an interesting shift. european and u.s. manufacturers for a long time are known for their diverse footprints. two of the largest manufacturers are shifting forecasts out their onshore wind business to more as tablets markets like europe and the u.s. are they have a high demand and lower risks. they may end up having highly overlapped focus which eventually can bring fierce competition that really impacts prices and profitability. tom: you mentioned the western manufacturers are refocusing their footprints. how much of this is around

concern about chinese competition and how real is that threat? leo: the fact is that chinese manufacturers historically focus on their home markets but since 2020, the fierce competition has created a lot of margin pressures for them and is pushing them to enter the international markets. with the western competitors cutting their footprints, this can open doors for chinese companies. brazil is a good example where we have seen several western manufacturers scale back activities. and in europe, chinese manufacturers have been able to build a factory in italy.

leo, how are chinese turbine producers keeping the product so cheap leo: there are subsidies to drive down prices. there is intense competition. and massive demand. and the low cost of the supply chains and rapidly rising turbine capacity which helps to reduce the turbine cost. tom: brilliant, you packed it all in there, leo. thank you for the deep dive research with what is transpiring in the wind turbine field. stay with us. this is bloomberg. ♪

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tom: good morning. this is "bloomberg daybreak: europe." these are the stories that set your agenda. asian stocks gain heading for their best we can more than a year as strong u.s. retail and jobs data ease recession worries. ukraine says it has accepted the surrender of the largest group of russian soldiers since the start of the war as he have continues its cross-border incursion. and swedish klarna pushes into retail banking as it gets ready for its ipo and we speak of the companies ceo in a few minutes. let's check in on the markets. risk on after six straight days of gains for the s&p. european future is higher by .2%. the ftse 100 is flat.

s&p futures gaining 10 points. let's flip the board and lacrosse asset. the japanese yen and the selloff in u.s. treasuries. the japanese yen is slightly stronger in the session today after a few days of weakness. up .2%. gold is down .1%. that's get to the corporate story around the fintech space and the swedish buy now pay later firm klarna pushing into retail banking by rolling out digital accounts in the u.s. and much of europe. it is happening as a firm prepares for an ipo in the u.s. the ceo and cofounder sebastian siemiatkowski joints me now from stockholm for the latest. thank you for taking the time. tell us about what this push says about your ambitions and klarna's ambitions to push further into this space and what it could mean for the top line

in terms of revenues. sebastian: this is one of the least competitive areas. ever since 2015 we said the future would be a digital ai powered system that analyzes your spending. ever since that has been the direction of the company. this for us is one of those huge steps where we are offering deposits across europe and the u.s. it is unheard of. we are launching in over 10 markets at the same time. this is important as klarna focuses on credit and debit payments. that is 30% of our annual. tom: it is ambitious.

you are taking on the likes of j.p. morgan and sadie. do you -- and citi. do you have an idea of how much of the market you can carve out? sebastian: we are going to see a disruption in the retail banking industry. out of that will emerge three or four large global retail bankers. it could be klarna and others that have already proven that we have 80 million users worldwide. we are not serving a full offering but as we do that. the incumbents are poorer from the technology perspective.

i think this is just the beginning. tom: in terms of projections around topline numbers and revenue streams, do you have some estimates or ballpark figures that you are looking at in terms of the potential value of this push? sebastian: one of the biggest things for us is that so far the money has been pushed back to the bank and customers and other networks. with us -- more of the money will stay within our network. more the balances will build up in our network which will have an impact. we have already offered attractive deposits historically but what is cool about this in europe is that we will offer up to 3.5% interest on the balance

account which i think most european consumers have not had. tom: you have the interest offering in europe and a banking license in europe but not in the u.s. yet. are you making progress on that front? what is the timeframe? do you need the banking license before the ipo? sebastian: i don't think it is a prerequisite. in 2019 our u.s. business was nonexistent and today it is the largest part of our business in terms of revenue and number of customers. that has made sure that we are doubling down our efforts to accelerate rolling out new services in the u.s. especially when you talk about licensing, it does take a few years.

tom: what are you seeing in terms of consumer behavior in the u.s.? is there any softness or is it holding up in terms of resilience? sebastian: i'm a little confused around the reports. considering we have over the top 100 u.s. retailers that we work with, we have interesting numbers. my impression was that christmas would have been softer than what we saw about things to a lot of discounting, the volumes were pushed out. as i hear some of these retailers reporting softer numbers, we are seeing strong sales and the u.s. -- in the u.s. tom: on the ipo, how much enthusiasm have you seen for the ipo so far? sebastian: well, we are

flattered by the media attention to it. something seems to be written about it quite a lot. obviously, 1-2 weeks ago we had a dramatic event in the stock market. before that there was more of an acceptance. we were going into a period of time where ipos were happening and there was more interested in that. what people appreciate about klarna is two years ago this business was attractive but in two years we have increased revenue by 50% and we have reduced cost by 30% which means we are profitable. that financial performance raises eyebrows with investors. and we are committed to continue

on their shrinking path through natural attrition rates. tom: you have been an early mover on genai. what has been one of the most surprising things that stood out to you as you have embedded some of this genai across the business? sebastian: in a way i would say i was pulled into the hype about a year ago. we used to read about self driving cars in the press and then you would look out the window and wonder where they were but now it is actually happening. now you have almost the opposite. at klarna though it is working. it will take more time before it

will have the full impact. tom: before we let you go, you are going to list in the u.s. which is the expectation. what does europe and the u.k. need to do to win this listing? sebastian: one thing i have said to regulators in europe, i have suggested that europe will not agree on where to list so the only way to get this to work is if you would mandate that any stock listed in one is automatically traded in another. i think that would create a critical mass.

that is one of the biggest challenges when you make those comparisons. tom: sebastian, we appreciate your time, the klarna ceo and cofounder, sebastian siemiatkowski, on the latest as that company prepares for an ipo. staying in the tech ecosystem, looking at europe's entrepreneur seen. i'm joined by suranga chandratillake from balderton capital. what does this capital raise tell us about the appetite of investors to put capital in play

within europe's tech space after a funding for use in the last few years? suranga: it has been an interesting front raise process, the fastest we have done and no long time and we have raised two different funds. an early stage front and a larger stage front. we have found that the majority of the capital came from existing investors. 80% of it. existing investors that have been investing in bench capital and still feel good about what they are doing. the remaining 20% that came from new investors, a big chunk came from the u.s. we saw multiple large u.s. investors including a state public pension fund. what they were telling us was that they felt that the european system is at the point where they can see it as part and parcel of the global technology

ecosystem they have to have exposure to it. tom: that is really interesting in terms of the u.s. capitol coming into play and the fact that they are taking notice of the activity in europe. what are you looking at in terms of deploying the capital? what kinds of companies would fit the bill in terms of how you pull the trigger on this funding? suranga: we are a general list investors. we invest broadly in fintech companies including klarna, we were the list and still the largest investor. businesses like that have been strong. we have also invested in wave, europe's best performing autonomous vehicle companies but also things like gaming businesses. software through to consumer businesses, we look at all of

those things. what is interesting about europe is, being made up of multiple cities, you find different specialties in different areas all the time. tom: in terms of generative ai, where within the stack are you drawing your at -- is drawing your attention? are you concerned about some of this investment being monetized? suranga: if you look at generative ai and the fundamental foundation models themselves, the majority of those have been built in the u.s. we have a couple of exceptions in europe. but it feels as though the volume of capital required to build those large building blocks is in the u.s. primarily in the hands of the big tech companies generating huge amounts of profit. as you move up the stack towards application, the different types of software that use this

technology to deliver different features or functions whether it is used by a consumer or an enterprise, that is where we see europe playing strongly and we have a number of investments in that market. that is where you will see the most value get captured. it will start like we saw with klarna -- using that technology internally to make the system faster or more efficient leading to smaller workforces in certain departments. over time we think it will be used for generative applications like the creation of marketing content or images and so on. there is a company called photo room used by sme's or individual owners to use it to tweak their photos so they can sell their products more effectively on platforms like etsy and ebay. these are timely applications -- these are tiny applications but

they are growing successfully. tom: we really appreciate your time this morning in terms of the rays coming through and what it means for the european tech landscape. the general partner at balderton capital. coming up, asia stocks rally after data it uses u.s. recession concerns. markets are risk on and we will look at what to expect in markets ahead of the european open and how investors are reacting to the u.s. economy. stay with us, this is bloomberg. ♪ ways hot. sleep number does that. can i make my side softer? i like my side firmer. sleep number does that. your ideal firmness and effortless comfort, all night. can it help us sleep better and better? please? sleep number does that.

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tom: welcome back and happy friday. asian stocks are rallying after

u.s. data eased recession concerns. treasuries fell. joining me now is charlotte mueller, the chief economist at swiss re with a take on how the data this week informs our views on the world's largest economies. softer cpi, jobs claims coming in lower than expected and retail sales jumping and the consumer of the dutch and the strength of the consumer in the u.s. leads to a goldilocks view. you share that? suranga: -- charlotte: there is still some risks on the horizon so maybe digging deeper into yesterday's data, retail sales surprise to the upside both on the headline number but when you look at the control group, that was less positive but still overall positive. and the key messages that the

u.s. consumer is still spending. they might be more selective in terms of what they are willing to spend their money on but they are still going out there and spending. the risks on the horizon to watch our pandemic savings are largely gone. and wage growth is cooling. many americans are resorting to credit cards or other loans to support consumption so that might add some questions to the sustainability of consumer spending but overall we still believe the u.s. economy is on resilient putting. we have a 2.7% gdp growth for this year. tom: if this u.s. economy is less -- more resilient to higher rates than many expected, will it be less responsive to lower rates on the others as the fed moves to cut? charlotte: certainly the economic variables react to monetary policy with a lag.

however, when we look at inflation data and employment data, that also comes and reacts to monetary policy with a lag. it is important the fed does not get behind the curve when it comes to rate cuts. we still expect the fed to cut by 25 basis points in september. we think market reactions are pricing in 50 basis points cuts was over done weeks ago. but we do think there are good reasons for the fed to start easing gradually. given the employment data and inflation data we are closer to inflation risks them before so we think the balance of risks around our forecast are skewed to three rate cuts instead of two this year. tom: on the boe, the markets are expecting the bank of england to hold off its next cut until november. are the markets right to make that estimation?

we would agree. if we look at the inflation data, we had that out in the u.k. this week. headline inflation rose slightly which was expected. the big positive is that services inflation did ease. if you look under the hood, the reason for that was more due to the volatile components of the services categories namely accommodation or hotels which did ease quite a bit. if you want the boe to be more confident that inflation is coming down on a more sustained basis, you will need to see more underlying services other components easing. as a result we think the bank of england will hold off to cut again in september and will rather wait until november. what would change that view? if we got a disappointing inflation print which is out right before the boe meeting next month.

tom: charlotte mueller, thank you, a chief economist at swiss re. focusing on services as it -- the caution around the view of the federal reserve and they will cut but they will take their time. 25 basis points is the expectation coming through. there is plenty more coming out. stay with us. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak: europe." the storm data out of the u.s. yesterday, retail sales growing 1% beating expectations and jobless claims coming in lower than expected.

and inflation moderating or than expected. all of that coming together to reinforce the view that maybe we are in a goldilocks scenario and as a result what you saw yesterday was a selloff in the treasury markets. the two-year back about 4% as markets go from close to four cuts to closer to three. reducing the number of cuts that they expect to see from the federal reserve. this chart illustrates what has been going for the last few days. you have seen the restriction from 100 basis points to fewer if you combine them. september still firmly in play. the yen carry trade is back. it is the take. selling the yen to buy positions in the nasdaq. the yen is seeing strength in the session today but since august 5 it is down by about 5%. softness in the yen coming through again.

dovish comments from the bank of japan officials which is part of the factor. the yen short positions building. the correlation with the nasdaq has been there. when you saw the selloff in the nasdaq use all the strength in the yen and that correlation is back right now. selling the yen, buying the nasdaq and the tech stocks and we will see of that continues. the boj governor next week will give testimony to the parliament in japan so that becomes consequential. later today we speak to the chief executive of five guys in the u.k. and europe on the fast food chains appetite for expansion. perfect friday content. this is bloerg. ♪