>> good morning. this is "bloomberg daybreak: europe. i am dani burger in london and these are the stories that set your agenda. chinese stocks lead asia shares lower. investors are cautious ahead of powell's report to congress. u.k. inflation data from may is expected to ease the will it be enough for the boe eco we will look at what to expect. plus mr. son plays offense. he is ready to invest again as the race to master ai heats up. the ai traded taking a breather. it is not unusual asked her we have gone 20% from the lows on american equities. we are down on the futures market after negative close in the u.s. yesterday. it is a shortened week for the u.s., a holiday week. there is mr. son getting back in the game. here's s&p 500 futures today

move. we are slumping again this morning. we are near the end of the month. there is likely portfolio rebalancing going on which will mean you will sell equities and buy bonds. this is what we are getting in the summer markets. we had bond buying yesterday that changed into selling today. let me show you the front end of the curve and what it has done. remove lower in terms of yields yesterday. we had slept the picked up in this morning's session but the level we are at now below 4.7 is about where we stood free fomc. the fed has revised up the dot plots consent. you would imagine yields would be higher to reflect that. his chair jerome powell and his testimony today going to need to get more hawkish in order to reinforce that? finally, i want to show you a move that happened after the close yesterday. it is fedex. the economic but whether reporting -- the economic bellwether reporting that the 2024 would be lower median than

analysts had expected. they said demand will have issues well into the next first half of their fiscal year for 2024. after hours, fedex falls 3% but sydney's sleepy summer markets, it is easy to overreact -- but in these sleepy summer markets it is easy to overreact. this is perhaps the unwind of the pandemic trade. let's get to other top stories from around the world. charlie yang is tracking asia market moves. jill disis is on jerome powell heading to capitol hill today. crucial u.k. inflation figures are due in an hour. we will discuss that with the burden. the yuan past the 7.2 per dollar level as they settled on lack of aggressive stimulus to boost the recovery. let's go over to charlotte in hong kong on this. we are past 7.2. what is the focus in? charlotte: we are seeing investors and traders here getting very cautious today ahead of the federal reserve chief jerome powell's

congressional hearing. off shoring is weakened to 0.3% to bridge a key hurdle of their 7.2 per dollar level. that puts the currency at a weaker level since november. also, this shows investors are getting increasingly impatient with china's lack of follow-through. even though we are seeing some sector stimulus and rate cuts, that is not enough for investors to see a real boost to the economic recovery. also, the signals we are getting from the chinese central bank which has sadly been at a level that is weaker than expected is also suggesting to traders that they are comfortable with currency weakness. the market participants could be treading the water at the $7.2 level -- per dollar level to see if we get currency defenses. also, the chinese equities which we are seeing investor sentiment being weak. the hang seng index and hong kong has entered the third day

of declines following -- falling as much as 2% ahead of the holiday here in hong kong. the next thing for china, people are watching the economic confidence in july and investors will keep an eye to see if there big fiscal announcements coming to that's. elsewhere in asia, we are seeing chinese equities declining. japan has retraced earlier losses and u.s. futures have retreated. dani: thank you for the round up your that is bloomberg's charlie yang it's in yesterday we got data that perhaps we are moving past a recessionary outlook. the u.s. housing starts especially surged in may by the most since 2016. applications to build increased. bloomberg's jill disis joins us for more on this. what does the data suggest to you? jill: first of all,, jay powell

just said that last week there were signs of the harvesting market -- housing market stabilizing. this is corroborating that. you are seeing homebuilders being more upbeat and supply-chain pressures easing here. demand is coming back and i think this is all really positive for economic growth in the u.s.. at this point, we have seen some analysis that suggests that homebuilding might actually contribute positively to economic growth in the second quarter for the first time since 2021. yeah, very good signs for the economy here. i think there is a limit to the upside and mortgage rates are still quite elevated. demand has only so much room to pick up here but ultimately, yes, this is good. certainly a surprise upside here and should give us good news once we get more robust economic figures for the second quarter in the coming weeks.

dani: in the meantime, we have had the pre-released text of fed governors jefferson and cook were planning to tell congress that tackling inflation is are priority but powell is also due to testified what does he need to do after what has been called this awkward press conference last week. jill: certainly, i think that what we saw coming out of that press conference is that there is a bit of confusion over how exactly does powell move forward here? markets sternly seem to think that while there is probably another just rate hike coming in next month, they're not really sure about the dot plot from the fed that suggests there is yet another one coming after that sometime in 2023. what powell is really going to have to do with lawmakers today is stress this idea of the hawkish policy that is forthcoming. he is going to have to figure out how to justify why it is that the fed raised interest rates in june if they're going

to return to that policy in july and going forward. what this really comes down to is powell finding a successful way to articulate the idea that has been developing over the past months, which is preserving the flexibility that the fed has an the room that the fed has to adjust policy as they see fit to kind of moderate the pace of these rate hikes as they see fit. ultimately, the bottom line here is that this all channels into the idea that yes, powell is going to be more hawkish today on what policy looks like for the rest of the year. dani: jill desis there on powell's testimony. elsewhere in the bond market, it was whiplash again in gilts after surging to their highest level since 2008 on monday. the 2-year yields nearly erased the entire move yesterday, dropping 13 basis points. even so, markets are so pricing in the 6% level for the boe's terminal rate as we wait for cpi data in an hour.

we are joined by lizzy burden our u.k. correspondent. what are we expecting for cpi today? >> has been pretty awkward here to after the u.k.. we had month after month of upside inflation surprises. the eyes will be on the cpi print today any comments are spending it to fall from 8.7% in april to a .4% in may because there is a rise in food prices they are expecting a fault in fuel prices to offset it. really it is feeding into the bank being the bets. -- bank of england bets. the gilts are pricing in 6% for the peak rate and our economists say that will tip the economy into a recession per they see a peak rate of 5%, one hike tomorrow and another is in august. it matters politically of course because the premise rishi sunak has made it his number one priority to half inflation by the end of the air and as we have an election on the horizon

at some stage before january 2020 five, the cost of borrowing is mattering even more. dani: is the boe going to be able to sacrifice growth for inflation? thank you so much. lizzy burden will be back later and the show for a deeper dive. let's get you set up for your trading day. first, the u.k. cpi data lizzie was talking about at 7:00 a.m. u.k. time. crucial to the rate decision. at 3:00 p.m., jerome powell begins his today semiannual testimony to congress. at 10:30 p.m., brazil central bank rate decision. the ukraine recovery conference is taking place in london and lastly, watch out for volkswagens capital markets day. a lot to look forward to peer coming up, markets await testimony by fed chair jerome powell. we will discuss what to expect in this economy, in this bond market with gordon shannon from twentyfour asset management.

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dani: a hot u.s. housing in building data suggests residential construction is on track to boost economic growth. something jerome powell alluded to in the last rate meeting when he said the housing market is showing signs of stabilization. now joining us is gordon shannon , portfolio manager at twentyfour asset management. i know you trust the wisdom of the inverted yield curve and bond market in general at this point but we have this piece of data that may suggest the pandemic bullwhip is over. is it possible we don't get a recession or do you say the yield curve is inverted and it is just a matter of time? gordon: you have to keep an open mind to all eventualities.

have portfolios that are new bull and can change. i would say trust the yield curve and the question of when not if. dani: i know it proceeds every recession in history, but again, i met this moment do we need to trust the wisdom of the bond market? that is sacrilegious to say to you, a bond trader, but we have gotten it wrong before. we are strangely in a goldilocks impairment in a couple months ago we are talking about stagflation. gordon: one of the things that is confounding everybody is perhaps a transmission mechanism from monetary policy into the real economy is even more lagged than usual. it is very interesting and there was an analysis by deutsche bank on the u.k. mortgage market in the proportion of homes that are owned outright, 35% in the portion around available and mortgages which is 15 versus 85.

as each month goes on there are more variable or expensive rates and that will squeeze economy and ultimately lead to an erosion some profit versions because people have less to spend. dani: let's talk about how to price the end. -- price that in. junk bonds have contracted to regional banks price levels, some around 400. we have seen in the past something like 1000. do you start pricing that in? gordon: with spreads here, it is tough to see them rallying more because we have the risk of recession hanging over us. in comparison to the fairly attractive levels that can be had and government bonds, it is a hard value situation. when we are talking to our investors we are complete -- competing against cash as investment class again for the first time in decades. nonetheless, spreads till do or compensate for default risks -- do overcompensate for default risks. for fixed income you need both a

short and lower yields and that is what we had last year the short was inflation. we came in with very low yields. this year, the starting yields are far higher so that allows me to bit more confidence. dani: cash is attractively look at the three-month t-bill yielding more than the 12 month earnings on the s&p 500. a lot of it is credit markets. is it done though? is the cash trade -- are we looking to the top in terms of the yield you can get there? gordon: the federal reserve looks close to terminal rate here, one more hike. dani: they would tell you it is tomorrow. are your. plot outer, gordon? -- are you a dot plot doubter? this happens every time you're on. i don't know what witchcraft you are bringing to the show, gordon. the guilt market, yields on the front end go by 14 basis points on monday and fall by 13 yesterday. we are pricing around 6%

terminal rate for the boe. what is going on? gordon: yesterday it was the can't are grocery data -- chart grocery data. it indicates that food inflation will come down and that is the market discounting and the head line rate will fall. there are falls and mortar field. ignore that because gilts have already arrived so be hard for them to beat. what we want to pay attention to his core because the bank of england cares about the tightness of the labor market, which growth, and what core services are doing. it is perpetually disappointed. there's always some excuse. one more or one off. it is like someone trying to escape from the pump. just one more, one more off. this time fingers might be pointed at services transport data, but ultimately, if we have more disappointments in services, it was the been giving

lynn in a tough spot. dani: -- the bank of england being in a tough spot. dani: valerie and kevin made a wonderful full-screen and i want to show you commentary from mainstream outlets. this is not bloomberg or ft commenting on the bank of england. this is the telegraph, the times, the sun. the telegraph over the weekend writing this might be one battled the governor just cannot win. andrew bailey has run out of excuses. the sun in may, my personal favorite, monkeys could run the boe better than his current bosses. what effect does this have on bailey's decision-making? gordon: he always seems like someone that was very sensitive to criticism. so, i hope he is not reading any of that just concentrating on the data. he will be filling under increased pressure and expectation as we get a 25 basis point hike today, anyway he might feel pressured to do 50.

but then it will be viewed as you are being led by the market rather than the data. on the opinion that we will get 25 here and have to have a few more hikes. when i was on last november, you asked me what the boe is going to get to, and much to manus's consternation, i said 6% but don't worry, he does not have to come back from holiday. dani: he is not here and he knows and is living in shame. gordon: i have rolled back and i think we don't need 6% but we do need to go higher and stay there for a protracted length of time because the transmission mechanism has more of a lag to it. dani: does that mean there is a greater chance of going too far, of overdoing it? gordon: it depends how you define overdoing it. we will have to take the u.k. to a recession to push up unemployment ultimately. inflation just looks to steady but pushing it straight to 6%

will be taking it too far. the impact on mortgage rates is going to be very acute. dani: mortgage rates are already over 6%. can we not just let that simmer and see what effect it has on inflation? gordon: ultimately i with a couple more hikes, i think that's what we can do. the bank of england is trying to steer an oil taker and last thing you want to do is jerked the wheel even though it does seem to be heading for that. with mortgage rates, affordability checks are basically based on 6% as the high rate. it is one thing for us to go close to that for a couple of quarters, but hear her since her production as we will be there for a while, that will cause tight affordable issues the u.k. harvesting market. -- and the u.k. housing market. dani: some people have dubbed it the hot core summer which i love and hate. one of the effects of that, we sell the euro make a new high.

i know you're not a currency guy necessarily but here is an example of the risk being left behind when everyone else is going at its pretty aggressively. do any other central banks risk being left behind too? gordon: the swiss national bank is very concerned about that. switzerland has the lowest rate of inflation for any developed market economy but nonetheless, we have had five meetings, five hikes, 225 basis points worth of hikes for an economy that has inflation rate about to hit 2%. the swiss national bank has said the fight is not over. the market is split on whether we get 50 basis points tomorrow or 25. that is about offsetting with the ecb are doing. they don't want to be left behind. they are data dependent and looking at second and third order impacts in their economy, but i think the driver is not being left behind versus ecb. dani: there is a clear divide

with schnabel saying it is better to do too much than too little and lane saying we had done too much. we can't talk about september yet. you would expect them to say the same thing but what do you pray for an ecb, again, when you have policymakers so divided now? gordon: the ecb simultaneously did their forward injection of inflation coming down quickly but are managing the credibility. they knew that like many central banks they spent a lot across -- credibly last year and they don't want to get where andrew bailey is where your credibility is gone. dani: no one wants to hear monkeys can do your job better than you. you like europe corporate's over the u.s.. why is that? gordon: in general we look at the u.s. economy which is more endemic -- dynamic and there is less fear of implications of recession there. that is already pretty much priced and if you look at the differences in spread levels and

high yield investment grades. meanwhile, i view the u.s. consumer who has been remarkably robust, as having maxed out their leverage, run down their savings, and is looking very vulnerable right now. dani: gordon, always a pleasure to have you on. i can't wait to see with the gilt market is doing next time you join us. please tell them to be more calm. my heart cannot handle it. gordon shannon from twentyfour asset management. coming up, searchers race against time to find five people who went missing during a tour of the totemic shipwreck -- of that hispanic ship wreck. -- of the titanic.

dani: rescuers are descending on the north atlantic and a search for a submersible these -- vehicle that is missing with

five crew on board and less than 30 hours of oxygen remaining. the u.s. coast guard has been joined by vessels from canada and france at the scene 900 nautical miles east of cape cod massachusetts. air searchers have failed to find any signs of the missing 6.7 meter long aircraft. however, a canadian plane with sonar capabilities searching for the missing best -- a vessel has heard sounds. the coast guard has confirmed and vehicles are being relocated to the area. detail from the craft has been shared with the u.s. navy. we will give you updates. u.s. president jodi biden's son hunter just joe biden's son hunter is pleading guilty to firearms charges. the terms of the justice department are likely to spare him time behind bars for the deal ends a long-running probe into the second son but republicans have vowed to continue the investigation.

a florida federal judge has set august 14 as the initial trial date for president donald trump's classified document case. he pleaded not guilty last week to 37 charges related to mishandling secret government files. lastly, before we head to the half-hour mark, there has been a softbank agm. i went to bring you some of the lines of that because masayoshi son and softbank are back. they are going to be shifting to offensive mode in investment. basically saying they want to get back to investing in ai. of course, they have stepped back from this market, really focused on the arm ipo. there have been some blunders shall we say it from the vision fund, things like we work and troubling things. again, they stepped back and now masayoshi son said they have saved up enough firepower to get

invested again he must to get into the burgeoning field of ai and once generative ai regulations that don't impede progress. of course, ai progresses so fast now, it is hard to imagine how that might happen. the ceo also says the portfolio has at least several unicorns. being preemptive mystic there in how the portfolio stands. coming up, we will turn our attention to europe. the eu is announcing economic security plan. we will look more on what that might include. also, a view into some of italy's push to reduce the influence of chinese state-owned firms in classic italian companies. we will have more on that next. this is bloomberg. ♪ hi, i'm jason and i've lost 202 pounds on golo. so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news

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good morning and welcome back to daybreak. chinese stocks lead issue shares lower. investors cautious ahead of jerome powell's semiannual report to congress. u.k. inflation data for may is expected to ease but will it be enough for the boe? plus my seo sheets on plays offense -- plus masayoshi-san plays offense. u.s. stock futures fall for the second consecutive day but we are headed to the end of the month and the end of a quarter that j.p. morgan says could be about $150 billion worth of rebalancing. stocks have outperformed bonds so you might see stock selling for the sake of buying bonds. that is what we have seen so far to start this week.

s&p 500 futures fell yesterday, continuing to slump this morning. let me show you what the bond market is doing. we were buying bonds yesterday. during the asian session we are seeing some selling. we have had a slight pickup to the start of wednesday. we were just talking to gordon shannon who says he does not believe the fed is going to do two hikes. he thinks they are going to go at it one more time. we are not seeing as high of yields. a lot of people think we could. just 4.7% below, not far from where we were pre-fomc dot plot. after market hours yesterday we saw fedex slump. they had their earnings, they disappointed when it came to forecasting. the demand woes are likely to continue into the first half of next year. is it the unwind of the pandemic trade or does it say something more pernicious about this economy? we are looking at fedex, post-market fall about 3%.

the european union is ready to propose a financial aid package of 50 billion euros to support ukraine. the money will finance the ukrainian government's expenditures and pay -- struggling with my words. pay for urgent reconstruction. it comes at a pivotal time for the country as it aims to retake territory lost since russia's invasion. the eu has announced its economic security plan to avoid economic dependence on countries such as china. measures include increasing oversight on critical technologies and possible screening of investment coming into and out of the bloc. >> europe becomes the first major economy to set out a strategy of economic security. we want to promote three strategies -- we want to promote, protect, and partner.

dani: maria come a kicking off with you, what is in this plan from the eu? >> before we get to the details we should stress that if you believe ursula von der leyen will be able to do what she set out to do yesterday, this is the start of a new trade doctrine for the european union. one that puts economic security at the forefront. they have to, because the old playbook does not work. the idea of peace through trade, the idea that the more you trade , the better relationships you will have on the diplomatic front, has been decimated by the russian invasion of ukraine. now they need a compass. you saw those words, this is about promoting, protecting, and finding the right partners for the european union and its trade relationships. the big question is what about china? where does china fit into all of this? the head of the commission was

asked, is this about countering the chinese? she said the plan which is 14 pages long, there was no reference to china. it is not targeting anyone or anything. but behind the scenes diplomats say china is a point of tension. ursula von der leyen was one of the most senior but also one of the first european officials to use this idea of no decoupling from china, but yesterday risk. she is seen as closely aligned to the u.s. which is good news for the administration but not so much for the chinese. dani: the eu is not a monolith. this proposal, how could it go down with individual leaders? >> this is a very good question. this is the core of the brussels machine. they will set out a plan but european leaders have to debate it, agree to it, and ultimately that is how things happen in brussels.

of course as i said diplomats say this is the debate that is needed. it is a necessary one. they also say it is the sort of a long debate among european countries. if you ask me is there a consensus position around china when it comes to the different eu nations, the idea is no. a lot of that was reflected to the tone from bandar lyon yesterday. -- ursula von der leyen yesterday. she was not as assertive which goes back to the point that she's not in a position in terms of speaking in the name of the eu. i would stress that european leaders will debate china next week when they meet in china for a summit. and of course that summit comes just a few days or a few weeks i should say before the nato summit. so there you go. politics and security very intertwined. dani: it certainly is. thank you. maria tadeo in brussels. the same debate of what the government is going to do and

what companies are going to do on china influences specifically is playing out in italy. we saw the designated successor to the rally ceo step down. what exactly happened and how is this related to what the government is trying to do with chinese influences in italian companies? >> her rally -- pirelli is the iconic italian tire brand and they had a plan where the deputy ceo was going to take over under a plan devised by the italian side of the business but also the chinese side. the biggest shareholder, it is a state known chinese company, and basically though this was a broker-deal to have him take over, last week the italian government said we are going to exercise gold and power rules, imposing restrictions on access to information and influence over the business by sinochem.

the person set to take over will not. this is not necessarily because the italian side had a problem with it but because the next ceo needs to be unambiguously selected from the italian side. there's two things we read. it is delivering on from us to be more involved in italian companies, but also it is the de -risking story, which europe is going to have to grapple with. it's an early case study. dani: we are still in the early innings of derisking. what does the rest of it look like for companies? >> this is the major question. italy was one of the countries stepping back from the belt and road initiative. it tells you -- we have examples of a european company with the chinese shareholder but here in

germany a bigger issue is a huge amount of european companies with massive activity in china. vw, siemens, all the carmakers. pft reporting that astrazeneca is looking to spin off its chinese local unit. sequoia has done that. then you have this other variety. chinese companies increasingly that took german models operating in the u.s. like catl. i spoke to the catl europe ceo yesterday. >> there is no way around dialogue. dialogue is important. i lived a lot in asia and germany also. it is not always better or worse, it is just different. >> what all these companies have is the hope that these dialogues will help these conversations that you might not have to the rest as aggressively -- to de-risk as aggressively.

the fear for chinese investors has been, do you actually own anything in china? could the tides turn against you? it is interesting to see the tides turn with a chinese company invested in europe and not seeing the rights they thought they would. it is a state owned enterprise, it is not one for one, but i will leave you with that thought. dani: thank you to all of her crook in berlin. this was an interesting one. we learned late yesterday that kkr agreed to purchase as much as 40 billion euros of by now, pay later loan receivables from paypal. the payments giant expects the transaction to generate 1.8 billion dollars in proceeds allowing it to repurchase an additional $1 billion worth of shares this year. from the kkr side, this is being done from their private credit funds and accounts. something they are really known to be taking on corporate debt.

but here is a foray into consumer debt. there are concerns about the by now, pay later loans. will they go sour? month so worn they were going to have to beef up credit provisions to protect against default. an interesting one to keep your eye on. coming up, pain for dealmakers. jp morgan cuts more investment bankers in asia. details next. this is bloomberg. ♪

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these ones are small but who is impacted? >> with these cuts, what we understand is that largely they are going to be affecting the junior level round of the investment bank over here in asia at jp morgan. what this tells you is just how difficult the climate is at the moment. this is not the first round of layoffs of course. jp morgan have made cuts in previous months in quite a lot of the other investment banks as we know have been making cuts across the board. it started 12 months ago now as we got into the sense that things were slowing down. we had a tick down in m&a activity. banks are positioning for global downturn. they are making cuts. this is another example of what we are seeing right now. they are still finding areas where they are overstaffed and

having to trim down at the margin at least some of the staff that are related to bringing down overall costs at the bank. ongoing cost-cutting exercise which is occurring in pretty much every investment bank across wall street. it is another sign of difficulty ahead. how do we know if there is? at jp morgan it looks like junior level bankers at this point. dani: even so it feels like they are looking at every corner of their investment bank to try to find where they can make cuts. the fact it has not abated, what does it tell us about how jp morgan and the wider industry is thinking about the outlook for the remainder of the year? >> you can see it in the data. m&a is not picking back up. they are still finding pockets where they think they are overstaffed and they are looking to trim headcount in those areas.

to your point more broadly what it says about six months, maybe as we go into 2024, we know the economy is fragile. we know these areas of not just the u.s. economy but the global economy that are struggling and what we have seen in china with disappointing data, it shows a lot of these banks are still grappling with how much of a slimmed-down version of their operations they need to go ahead into these times. investment banking is very cyclical. but we are going through now is a more prolonged -- is more prolonged then people would have predicted last year. more persistent and sluggish roast environment where they are looking for a continual process. dani: everyone is looking for the economy, not just for

dealmaking but for the economy. we are going to have an exclusive interview with deutsche bank's ceo christian sewing. do not miss that on bloomberg television. we are going to get inflation data from a in the u.k. -- data for may in the u.k. we had yields yesterday. inflation data on food suggests that may have topped out. we are joined by our u.k. correspondent lizzy burden. are we expecting easing in inflation data? >> exactly right. a fall from 8.7 percent in april to 8.4% in may. for core inflation to stay on hold at 6.8%. you mentioned food. food inflation is expected to rise but be offset. it matters because you have seen

three upside inflation surprises in recent months from the u.k. meaning that investors have ramped up their bet. some seeing a peak of 6% rates from the boe. our economists reckon that would trigger a recession in the u.k.. they see a hike tomorrow, another in august, and a peak rate of 5%. our bloomberg opinion columnist says there should be a ceiling of 5% from the bank of england. you can talk about that at the water cooler. really it matters politically because rishi sunak's number one priority of course is halving inflation by the end of the year and the closer we get to general elections, arming costs matter more. dani: marcus got mad at me because i said if they put a ceiling on at the bond market is going to push back. he said how could you say something like that? >> marcus getting mad? dani: how rare. even if the bank of england is

not as aggressive with rate hikes, where are you facing 6% mortgages in the u.k.? is the government going to do something? >> eye watering numbers and you have the labor party trying to pin it on the government. jeremy hunt has said he's going to meet banks to talk about what they can do to prevent repossessions. he has said explicitly he's not going to go against the bank of england in its inflation fight mission. we saw what happened when liz truss a lot of step with the central bank last autumn. there was a report from the resolution foundation think tank saying -- for today's data, before tomorrow's decision, that the cost for the average mortgage borrower to remortgage in the next year is going to be 3000 pounds a year. the cost of living crisis ongoing, it is painful and real. dani: that was a good report. thank you so much. you have a lot of work to do in 10 minutes time so we will let you go. lizzy burden our u.k.

correspondent gearing up for the data release. the softbank founder has said the world's largest tech investment firm will go on the offensive soon. we will tell you what that means next.

dani: far-fetched founder and ceo jose neves says consumers are spending more money on sustainable brands. he spoke to francine lacqua about how ai is being deployed in luxury fashion and how that is decreasing online order returns. >> we have not seen returns go up actually. it has been consistent and stable over the years. it is actually for us, returns, we don't break it out but it is

a number for e-commerce standards. it is a percentage of sales, let's be clear, and it is an environmental problem. it is not just a customer experience problem and the financial impact. but the environmental cause concern. everything we can do to improve feeding information -- fitting information, use virtual try on, we have acquired a virtual try on company where we are being very successful with things like sneakers and shoes for example. with try on across a number of categories. but things like virtual try on, like using artificial intelligence to figure out what your size is based on past consumer behavior and past purchases and returns, this is very powerful. we have seen they consistently

have an impact on the positive impact on a lower level of returns. dani: you can catch that interview with the farfetch founder and ceo on leaders with lacqua on bloomberg tv and online. the softbank group founder says he's ready to invest again as ai heats up. >> ai is about to grow explosively and we are prepared for such an error. dani: that even sounded like an ai voice. joining us now -- why now? why is masayoshi son ready to get back into the game? >> it has a lot to do with this increased excitement over generative ai thanks to the popular chatgpt and as we have seen it has led to huge share price gains for chip stocks like

nvidia and the idea is this will help softbank pull off a successful ipo of its army unit which means more cash. as masayoshi son said today softbank has or than ¥5 trillion of cash to spend, so it sounds like they are ready to get back in the game and spend a lot of money on startups. but we will see what happens. dani: this is off the back of what, five straight quarters of billions of dollars of losses for softbank? does this suggest a change in fortune? that things are improving? >> you raise a good point. they are still mired in losses. we do not know when their earnings are going to improve. it is good that the market sentiment has kind of turned around sharply and shares are rising. softbank shares also are rising. but we will have to see when these investments actually bear fruit.

he did say today they are expected to bear fruit soon and with markets rising it is possible they could turn around. but we will see how the earnings actually do when they do announce results next quarter. dani: you mentioned the share reaction and we are looking at it, over 40.5%. is it fair to say that shareholders are happy with this announcement? >> yes, i spoke to shareholders on the spot and they did sound pretty happy about what masa son had to say. it is a sign that son sounded confident in the future of ai where softbank has investments and they were saying they are happy to see him kind of delivering this message that he's kind of ready to get back to the scene and invest again. but we will see how much they spend going forward. data does not back up that right now. so we will see if they start

spending again. dani: you make a great point. we are in the proof is in the pudding moment for softbank. thank you for that. that is bloomberg's min jeong lee. still ahead we are going to be speaking with louis mosley on palantir's ai ambitions and why they are choosing the u.k. as their european headquarters. that's going to be at 8:40 a.m. london time. tomorrow we are going to have an exclusive interview with deutsche bank's ceo christian sewing. do not miss that conversation on bloomberg tv as banks grapple with slower pace of dealmaking and advisory in their investment banks. that is it for daybreak. bloomberg markets europe is next.

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