tom: this is bloomberg a break europe.

donald trump promises to follow through with any 5% tariffs on canada and mexico tomorrow the loonie and mexican peso steady after falling on the president's remarks. limited learns the u.s. is investigating whether deepseek bought nvidia chips through third parties in singapore to avoid export restrictions. investigators recover the black boxes from the american airlines regional jet that crashed midair with a military helicopter, killing everyone on board. tom: earnings lines are crossing from swiss pharmaceutical company novartis. fourth-quarter quarter earnings per share eps at a beat, above the estimates $1.98 versus the estimates of $1.82.

the company expects sales to grow mid to high single digit. we know that on the call, the scrutiny will be what they say around their blockbuster drug for the u.s. market, and the impact of generics taking market share. novartis topline is a beach in terms of core eps for that swiss drugmaker. let's get to the market impact. tariffs again in focus. trump saying they will be coming for both mexico and canada. potentially as much as 25% within the next 24 hours. we watch the impact of that. we saw the drop in the cad and mexican peso. some of those losses are being impaired. the read-across of what this means for global trade will be assessed. european futures pointing softer, but after another record yesterday, another record high for european stocks part of that was the earnings story and we get more earnings this hour. was he 100 futures pointing to modest gains. s&p futures stateside after

gains yesterday, currently down zero point 2% rate nasdaq futures looking to add 109 points. the earnings coming through from apple particularly the guidance on the current quarter reassuring markets, and apple gaining on the back of that, as are some of their asian suppliers. let's look cross assets and see how the yields story reacts to these tariff threats. 4.54, yields are up close to three basis points, and we will see how that readjusts. the ecb as expected cutting rates yesterday to 2.75. will be european central bank of further? we have more data across the euro zone today. 1.03 on euro-dollar, the stories dollar strength. brent currently up 0.5%, lifted again i the tariff threat, canada and mexico supply oil into the u.s. markets. gold trading flat and close to record highs, lifted by those

tariff threats. 2795 per troy ounce. let's get the details on what could be imposed on mexico and canada. u.s. president donald trump says he will follow through on 25% levees on canada and mexico started tomorrow. it is part of the president's efforts to reshape supply chains and shrink trade deficits. trump also has his sights on china. but is considering an exemption. pres. trump: mexico and canada have never been good to us on trade. they treated us very unfairly. we will make that up very quickly. we don't need the products that they have. we have all the oil you need. all the trees you need, meaning the lumber. tom: i mentioned oil is rising as president trump reiterated his tariff plans, up on brent,

although crude flows may be exempted from the levies. we don't have certainty yet. mliv strategist mark cranfield joins us for the market reaction to this story. not a huge surprise that tariffs are coming in some form. the determination from president trump to enact tariffs after a lot of back-and-forth, talk us through the market impact we have seen so far. mark: traders are taking no chances in asia. one of the main moves today has been the dollar against you on. even though most of the focus is one what may happen to mexico and canada, the yuan weekend substantially in asian trade today. chinese onshore markets are closed but there is plenty of liquidity going through. the korean won is weaker as well. clearly people are concerned if tariffs do get going, it won't just be one or two countries, it will be quite a few and

eventually will come around to china's turn as well. you see quite a favorite of -- bit of defensive action. the dollar is firm anyway. also dollar-yen's higher this afternoon as well. traders are certainly going into the weekend with expectations that something will happen. exactly how the tariffs might be will be debated to the last moment. wall street journal have a story saying that negotiations are likely to go on to the 11th hour and people will try to find a way out of it. that's also in play. however mr. trump said he expects to say something at 3:00 p.m. eastern standard time on friday, which is tricky for u.s. traders because by that time of day on a friday, most u.s. foreign-exchange traders especially are heading for the door because by then european markets are closed, liquidity is drying up quickly, and equity markets are coming towards the end of their week. should he deliver something that should affect foreign exchange markets, at that time, it could

be volatile at the end of a friday with nobody around to traded. -- trade it read monday morning in asia is likely to be very lively indeed. tom: traders may not be heading for the bar as quickly as they might otherwise on a friday as they stick to their desks. the fed talked about trump policy in terms of how they are weighing this up. if he comes through, on monday the tariffs are there, does it change the calculus in how we expect the fed to react? you market start pricing a less dovish fed? mark: that will be part of the case. to some extent, the markets have backed up quite a way as far as the fed dynamics are concerned. if you look at the pricing in the market, we are looking in less than two interest-rate cuts the rest of this year from the federal reserve which is quite a way down from where we were. i don't think the conviction is

particularly high after jerome powell was neutral this week and said the inflation target will not shift from 2%. gitmo take much for people to dial that back further. the fed is not just looking at one side of the occasion -- the equation. they want to see what extent of tariffs there are and if there will be tax cuts within the u.s. they will also want to see the response from foreign countries. because if there is a hard response from certain people, if tariffs are put in one place and there is a hard response, that will affect the fed's response for global trade which could filter back into the domestic side. there are many moving parts to the equation. the fed has a lot of moving parts to digest. in those situations, central banks like to take their time, and it gives more incentive for not changing policy. if anything all these things going on make the fed more reason to stay on hold for longer. tom: bloomberg's mliv strategist

mark cranfield on the central bank and market reaction to the prospect of 25% tariffs. gilts up 2% on the benchmark 10-year, and the bloomberg dollar index up 0.2%. hold onto your hats monday particularly for asian traders. u.s. officials are investigating whether chinese ai startup seat got around american export controls to buy advanced nvidia chips, possibly through third parties in singapore. let's get more with matt bloxham from our bloomberg intelligence team. >> not that much. we do know that singapore accounts for 20% of nvidia sales. it is essentially a hub. tom: it accounts for 20%? >> yes, nvidia has a ship to location, so you have a lot of holding companies that buy through singapore then sell them to other countries. where they go nobody knows. it is not a massive surprise

that china has potentially been getting access to the most advanced chips. most sanctions are completely watertight. it raises concerns about how do you continue to a brake on china getting access to this advanced technology. there have been stories about whole data centers being built in the art countries and being dismantled and shipped to china. within the technology industry, it is common knowledge almost that these things happen. the u.s. has been monitoring the situation but there is concerned given the significance of what deepseek has done, that they have enough safeguards in place. nvidia must be a little worried how much of the probe will focus on whether they were doing everything they should've been doing. if you look, ericsson went through a number of years of difficulty with the u.s. about bribery, and corruption, including iraq. they suffered fines and are

still under a doj investigation, so there could be implications for nvidia. tom: nvidia it with a statements adjusting their assessment was the chips used by deepseek were compliant. but we will see with this investigation leads to pray staying on ai, there is a big question mark about apple making use of that. apple giving a reassuring forecast for the current quarter, bruising shares after holiday results showed jarring declines for china and the iphone. here is apple ceo tim cook. >> if you look at our greater china revenue for the quarter, we were down 11% year-over-year. and over half of the decline that we experienced was driven by change in channel inventory. tom: that's apples ceo tim cook talking about that drop in the chinese market.

was that the flagship #number for apple? >> people expecting china to be weak but it was 14% below consensus expectations so it was a big mess, but luckily for apple, both the mac and the ipad really strong so in aggregate the results were in line with expectations. for me the concern is china will not get better for them because they don't have the capability to sell ai products. they are struggling to find a partner. maybe china will continue to block them. given all the technology evolution including deepseek, is the apple iphone offering in china going to become weaker and weaker? on the optimistic side there is a two days iphone fresh coming up, the cheap as the phone being refreshed, that could be important for the indian market. and a more premium refreshed

later perhaps in autumn with a much thinner iphone. expectations are a more substantial iphone refresh this year and they will continue to rollout better ai futures through this year. a huge company. they know what they need to do. people are still confident that they will be playing the slow game, as the right strategy for them, because they have such brand strength and loyalty. tom: they want to get that ai proposition right for their users. matt bloxham from bloomberg intelligence breaking down those apple earnings with that ai component, but also a look at the probe around deepseek and the chips and has been using. we will check in on both samsung and sk hynix because this is a reminder that samsung is still playing catch-up when it comes to the high-bandwidth memory that accompanies these nvidia accelerators breathing managed to get the signoff in december we understand for their latest

high-bandwidth memory chips and are able to sell those into the chinese market, along with nvidia's chinese-compliant accelerators. both stocks trading after korea opened up after the lunar new year, this is the first trading brain, big drop from sk hynix which is on the innovation side. but both reacting well for the first time to that deepseek story. samsung currently down roughly down 2.2%. switching focus and u.s. investigators have found the black box flight recorders from the american airlines regional jet that crashed in washington after a midair collision with a u.s. army black hawk helicopter. we want to warn the audience that some of you may find this video graphic. it captures the moment the jetliner and helicopter collided . 67 people were killed in one of the deadliest u.s. air disasters

in decades brave is bring in our aviation reporter daily. gas up to speed on what investigators have found. >> the crucial piece of evidence is the black box is a flight data recorder and the cockpit voice recorder coming from american airlines regional jet. they have already been sent to the labs for an examination by the national transportation safety board. data analysis can begin quickly once they extract the data. this will be crucial because they can potentially find out in the minutes before, the lead up and seconds before, what were the conversations in the cockpit with air traffic control which is under scrutiny, and were there any warnings, as this plane would've been traveling down in the dark through the potomac river, a very busy piece of airspace. these will be important things to analyze in the days and weeks, potentially, months to come.

that kind of evidence recovered but many recriminations. one of the worst air disasters to happen in the u.s. in decades. given it is such a safe aviation system. tom: and danny, you talk about the recriminations. we hear from president trump. he gave a press conference and caused controversies. what was he saying that was controversial? does anything about what he has been saying around d.e.i. and air traffic controllers hold up? >> just to recap for the audience, president trump was talking to reporters and pointed out that d.e.i., diversity equality and inclusion may have been a factor in this accident. we don't have any evidence. it is far too early in this midair collision investigation for any blame to be apportioned. this is something that those on the right, the republican party,

have been pushing over many months increasingly. we have seen corporates being under pressure to dismantle their d.e.i. policies. the inference from trump is that a d.e.i. higher is not as good as a standard hire. we know nothing about the causes and trump does not have evidence and he admitted that. but there is a lot of finger-pointing at the moment for a collision that maybe could've been avoided frankly, given how busy the airspace is, but we will try to get more answers in the weeks to come on this. tom: an update from our aviation reporter daintily who has been following this for us. coming up, show down the german parliament as the favorite to become the next chancellor is accused of breaching a firewall by turning to support from the far right. details from berlin next. this is bloomberg. ♪

tom: the german parliament is set to vote on a hard line immigration bill which caused a stir not just because of its tough stance but because friedrich merz, the favorite to become the next german chancellor, is relying on support from the far right to get it through. he faced fierce backlash including accusations he breached a firewall aimed at keeping the far right afd from power. oliver crook joins us from berlin. explain the controversy. >> this is a really significant development in the political race, since basically the government fell earlier in the winter, in the fall. frankly, this is the most significant thing that happened in the race. how it plays out will be interesting. this is significant not just because of the content of the bill, because the bill itself,

particularly given the context of immigration how important it is in germany, across europe, how important it has been across the united states, is not that radical. he is calling for more permanent border checks. the cdu is bringing this to vote at 10:30, we should get the result by noon, accelerated deportation for illegal immigration and heightened security measures, empowering law enforcement to pursue those goals. the spd and greens will not vote with it. they say it is unconstitutional against european law. that is a sort of debate. what it will mean is for the first time in's the second world war, that the cdu and then mainstream parties will be voting with the afd for a piece of legislation. this is causing the fundamental controversy. there is all this stuff across different european nations. in germany, it is very different because for many, this is a reminder how the third reich came into power, the nazis came

into power by little concessions. this is a different time but this is getting people on the streets and protesting. tom: to that point, it is a huge gamble for merz and the cdu. how do we expect this to play out in the days ahead? >> i have to be honest, i have no idea which way this will go. there are a couple different arguments how this could play out. it is really interesting debate. fundamentally, even if you disagree with what mertz is doing, there is a fundamental problem in german politics. there is fragmentation where you have these parties with 20% of the vote and not able to get anything done. frederick mertz is trying to say there is a party that takes immigration seriously and can do something about it. he has gotten criticism not just from other parties. with angela merkel the former chancellor of germany, the former head of the cdu, going out against this grade we had two church groups, two of the

largest churches in germany against this. this is the christian democratic union. these are not people that tend to weigh into german politics. this is significant. for many, they would say the cdu is trying to imitate afd policies. people prefer the original and this could torch merz. on the other hand this is embracing a more pragmatic approach. the criticism from the afd is there is no conservative vote left in germany because if you vote for the cdu they will end up in coalition with spd and left, and he will not get progress. he is trying to undermine support from the afd and attract those voters. the other side is the spd and greens could've voted for this piece of legislation. this is something that could harm them in the polls break when you look at the latest polls, i wanted to bring one up from two days ago because this is significant. the cdu has lost a little support the last couple days. the final consensus will have to wait until monday. look at the scores. cdu at 29% in this yougov poll,

the afd at 23%, that is a six-point spread. the spd to win reelection in 2021 closed a 12 point spread within a month or two of the election. no one thinks this will be the outcome but looking at this race and how much a torpedo has been fired into it, anything could come out of this weekend. tom: bloomberg's oliver crook on some important political developments on the ground in germany. the consequences and how that can ripple through to the election in february. thank you very much indeed. a lot more coming up. this is bloomberg. ♪ ♪ three little birds ♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪

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tom: happy friday. the president of the world's largest commercial property owner says he is preparing for higher tariffs under president trump trade blackstone's john

drake spoke to sonali basak after the firm reported a surge in profit despite a slump in its real estate business. >> there is definitely going to be higher tariffs. but i think it's going to be fluid given some of these negotiations. i do think our businesses need to be aware of this. our investors do, but we have to wait and watch a bit to see where it settles. >> do you have concerns that some of the immigration policies under the trump administration could cause labor market distortions that could impact your businesses? >> i think it is still early to see what's going to happen. there is a shift in immigration policy. the focus now is on deporting criminals. i think we will have to wait and see the extent of what will happen to understand it. on the inflation question more broadly, i was encouraged to see the new treasury secretary his testimony in washington, d.c.

he talked about the fact that inflation is a killer for working families. he talked about being committed to fighting the affordability crisis. there is clearly a recognition that inflation is an issue. tom: blackstone president and coo jon gray speaking to sonali basak. as february the first looms, the day donald trump threatened to impose tariffs on canada and mexico, we discuss the implications for global trade. that's coming up. this is bloomberg. ♪

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tom: good morning, happy friday, this is "bloomberg daybreak europe." i'm tom mackenzie in london. donald trump promises to follow through with 25% tariffs on canada and mexico tomorrow. the loonie and mexican peso steady after falling on the president's remarks. bloomberg learns that the u.s. is investigating whether deepseek bought nvidia chips through third parties in singapore to avoid export restrictions. plus, investigators recovered the black boxes from the american airlines jet that crashed midair with a military helicopter killing everyone on board. let's check in on markets. european stocks posted fresh record highs yesterday. the earnings story supportive, the ecb cutting rates. and the focus shifting now to the pce data stateside. the preferred gate for the fed.

to what extent will that change the narrative? today is about tariffs, the bloomer dollar index is stronger, the tariff threat is real. 25% for canada and mexico, negotiations are underway. european futures pointing to modest gains, looking to build on the records yesterday. ftse 100 futures up 0.2%. as futures after gains yesterday looking to add 18.3 nasdaq 100 futures lifted by the prospects of apple. pointing to gains of 0.6%. let's have a look at the u.s. treasury curve, the two year and that 10-year seeing yields up two basis points, 4.54 on the benchmark. euro-dollar at 1.03 but that is not reflecting the strength on the bloomer dollar index, currently up 0.2%. brent gaining 0.5 percent, also weighing up the impact of tariffs. canada ships about 4 million

barrels per day into the u.s. market. we do not know yet if oil will be targeted. gold at around record highs. there were yellow metal close to 2800 per troy ounce. that is according to people familiar with the governing council's debate. for more on the scoop lizzy burden joins us from frankfurt. she was outside the ecb yesterday of course. why would this be significant the changing of the language? lizzy: it e-cig get because it signals maybe we are closer to the end of the right cutting cycle although soon it will be time to take a pause in the cuts. if we look at yesterday's quarter-point cut, it is similar to the march meeting, the expectation is there for it to happen. we can talk about that item of a moment but a march cut would take the deposit rate to two point 5%. the currently ecb describes its

policy rate as restrictive and yesterday they do not drop that language. it would have sent a hawkish signal that we are closer to neutral. this is the level at which rates are neither restrictive constraining the economy or stimulative drawing it, but they did not drop that word, therefore there is barely any market move off the back of the decision. but our team in frankfurt have the scoop that they are discussing in march whether to change the language. you saw the euro rising a little because it is a hawkish hint. there is a debate around where neutralize pre-lagarde said yesterday on every seventh there will be a report on this very matter, but generally it is agreed to be about 2%. hawks think it is higher but the caveat is there is a difference between the neutral and terminal rate. given the weakness in the euro economy which we saw in the gdp numbers yesterday, it is not necessarily where they will stop cutting. tom: markets still see rates

below 2% possibly as early as september this year. what did lagarde have to say about the path ahead? lizzy: she said it was a unanimous decision. she said there was not even discussion of a jumbo move. it was much more consensual than previous meetings but as we expected, tom, she was very tightlipped about the path ahead. take a listen. >> we will follow a data dependent and meeting by meeting approach to determining the appropriate monetary policy stance. in particular, our interest-rate decisions will be based on our assessment of the inflation outlook in light of the incoming economic and financial data. the dynamics of underlying inflation and the strength of monetary policy transmission. we are not pre-committing to a particular rate path. lizzy: in the press conference, she went on to say discussing

where to stop cuts is premature. even debating how to behave as they approach neutral is premature. but it does seem pretty obvious that there will be a cut in march. because she noted that by then they will have two more inflation reports, updated forecasts, and they will have the result of the german election and perhaps more idea on the shape of trump's tariffs on europe. and it does seem the focus of ecb policy has somewhat switched from too high inflation to too low growth. because lagarde also said economic activity is set to stay weak in the near term. but she was more optimistic about inflation. she said that uptick to 2.4 percent in december was expected. they came down to energy price volatility. she said even if services inflation is high, wage pressures are abating. and she said they are confident inflation will reach 2% target in the course of 2025.

this is why you saw traders adding to bets of easing off the back of that decision. tom: lizzy burden breaking down what we have been hearing from christine lagarde of the ecb, what it portends as to rates and moves lower in the coming quarters. thank you. and it is last day of january. already the 31st, which means tariffs earmarked, one thing it means is that tariffs earmarked by the u.s. president are set to come into force tomorrow. first in the firing line, canada and mexico, although donald trump is yet to spell out what he intends to do. it's bring in tatjana greil castro, cohead of public markets at muzinich & co. i want to start on tariffs and we can move to central banks, the ecb and boe, but from a corporate credit perspective where is the vulnerability if we get into a regime of tariffs from tomorrow out of the u.s.? tatjana: thank you, tom, and

good morning. first of all with those announcements on tariffs, as we have seen in colombia last week he may announce tariffs on saturday then come off again on monday. it is difficult to predict what they look like, how long they will stay, how high they will be, on which products they are. all this means there is uncertainty and uncertainty that it doesn't matter how long you try to work on analyzing it. how many reports you read or how closely you even hang onto the president's lips. it is difficult or next to impossible to know. we tell our clients, luckily, there is a space within the credit market where you don't need to know those things in detail. you don't need to try to know the unknowable. and why do we say that? that is, for instance, european investment grade of which we

have really strong companies. despite the weak economic outlook and recessionary environments, shallow recessionary environments, those companies have such good liquidity, very strong balance sheets. you don't need to take a lot of risk. this is where the base value now is because those were the best spreads are to be found. so you can go into the credit market with very little credit risk, and with very little interest because it is their short end where the credit spreads are. in terms of risk/reward, the market would have to move significantly against you. if you are looking in the dollar market, the market would have to move against you by over 2.5%, meaning the fed will have to raise interest rates, spreads in

investment grade will have to double which would mean an extreme external shock. those are areas that are very easy to hide out in walls you are waiting for a little more clarity. tom: you want to be front end, investment grade european credit is the place to sit amidst all this uncertainty. what is the function of the ecb and to what extent are you building in additional cuts from this central bank when you think about how to position in european investment grade credit? tatjana: that would be on top of what we have already in spreads. that would allow additional total return if rates were to come lower than what is currently priced in. we have priced in a few of the rate cuts. the rate cuts were down to close to 1.5%, which we think is probably a bit too low, but at the moment being closer to 2%, it would indicate there is a

chance of additional rally. on top of what you already can get which is already attractive, there could be a little extra to be had, and we do expect the ecb -- we talked earlier, lizzy said 2.5% where they were no look or in the restricted area. we think that is a bit too high. we think there will only start talking about exiting the restricted area when they are in the low 2's, closer to 2.25. and then may stop at 2 or even go a bit below. if they go below 2, that is not priced in the market. tom: you think that is a possibility for the european central bank. the focus arguably switches to the boe on the calendar next week. we have been hearing from rachel

reeves and the prime minister about the determination to grow this u.k. economy. tatjana: it is difficult to see those pledges work out. she has been clearly bashing the entrepreneur sector in her budget. that has changed the mood significantly. a lot is talked about that. and the growth drivers she is suggesting are very old-fashioned. and also, those are big plans that are difficult to implement. and they will take many years to implement, if at all, so to increase taxes, to increase relation, the red tape, and at the same time, trying to unleash those powers of entrepreneurialism is a complete contradiction. we see the noises that she thinks she needs to make but in terms of her actions, it doesn't

support a big turnaround in the u.k. economy. tom: before we let you go, do you want to be out of gilts at this point? tatjana: within credit we do like sterling-denominated credit because the gilt market has sold off so much and is also quite steep. given we don't think the economic outlook will improve significantly, that allows the bank of england to lower rates. we see that to be the chance of some rally in the rates market can bump it even if we don't that is fine because we get really attractive carry. what does that mean? we may not take the total return upfront, which would be great with regards to return drivers, but if you don't want to -- if you want to rely on very

steady income, then the sterling market offers you additional income. tom: tatjana greil castro, always smart on these markets, cohead of public markets at muzinich & co.. sit in investment grade european credit but opportunities in u.k. gilts with the boe expected to move in terms of dovish moves lower on rights. at the end of what has been a huge week for tech, we will look at europe's role in the ai race. does it have one? stay with us for that conversation. this is bloomberg. ♪

tom: welcome back. bloomberg learned that openai is in talks to raise as much as $40 billion in a funding round led by softbank. the chatgpt makers in discussions to raise funds a

post-money valuation of 300 billion u.s. dollars, assuming ai -- openai raises the full amount. it was valued at 57 billion in october, so doubling that within a space of months. softbank was considering investing 15 to 25 billion into openai, a deal that would make the japanese company its biggest backer after microsoft. with me to discuss europe's role in the ai race is laura connell, a partner at atomico. she says the ai race is being redefined in ways that mark clear areas of european opportunity, which for many may sound counterintuitive. i want to start by reflecting on this week because it is a moment is weak in terms of the innovation from deepseek and what we have heard from ceos stateside. was this a pivotal moment for ai? laura: it's been such an interesting week reflecting how much what seem to be miner

announcements in model evolution can trigger markets. that is due the fact that big tech has significant investment to build capacity. be it across compute, critical info structure, data centers indeed even eco-energy. we have seen that ripple effect throughout the value chain from compute providers, be it nvidia having $600 billion of its value by profit the beginning of the week, or right back to the nuclear providers on the backend who are a critical component -- tom: do you think that spending will be reduced? laura: the main thing to remember, and satya nadella talked about devon's paradox earlier this week about how decline in cost will drive production. it is a net good from a consumer perspective to have costs decrease rapidly. against this idea that sometimes market overreacted to

information but actually from a secular perspective on this long-term decreasing cost trend, which frankly, as a requirement to see broader adoption in the industry. tom: what does it mean for europe? laura: we need to ask ourselves what are the boundary conditions that have allowed the chinese and will drive the u.s. to increase overall ai capacity and leadership. and to do we have those conditions in europe? rightly, there has been a lot of reflection this week whether we have enough appropriate capital committed to drive critical infrastructure. big news with stargate. china expressed in 2017, they were desiring to become a global leader in ai by 2030. we need similar commitments to investment in critical infrastructure. we have an interesting advantage and possible edge from a more specialized industry perspective. is actually, we have taken a much more shall we say clear approach regulating those

industries where data privacy and consumer protection are critical. take health care as an example. the act from the io has made significant headway clarifying what that would mean from a data perspective for health care providers to drive adoption within the european ai act. but that is absolutely critical for and critical in the context of rescinding biden's ai act in what was going to be harmonization with the e.u. act is allowing companies that are building within this more comprehensive regulatory framework to passport that level of data privacy and regulated approach throughout the world. where we see europe have a clear advantages in being first to trust by virtue of higher and better regulation in critical industries over time. tom: there is a view in the u.s. and parts of europe as well that in fact we are getting regulation wrong. that the moves by the u.s. are the right ones to catalyze innovation. you are suggesting that those

regulatory frameworks will themselves be a catalyst? laura: we have seen that time and time again. let me be clear, a reasonable level is one thing and overwrite elation is another. free markets are a critical, but not unfettered, particularly when we talk about health care and energy. it is essential we set a standard in terms of its playability, data privacy, consumer protection and reasonable constraints for developing any new technology. not regulation at any cost but rather a sensible framework that gives clarity over the medium and long-term to people building. tom: arguably we have just one really serious foundation model company in europe, and that is mistral in france, do they get bought out? laura: i work with many founders that are building at the very early stage. that is what we do at atomico.

we seed founders that want to build category companies. surprisingly, i don't think that characterization of mistral being the only player is the right one. you are right that they are one of the leaders in european ai. more broadly we are seeing lots of grassroots innovation across the board. but now is the time to invest aggressively both in terms of direct investments, direct backing of companies but to your point earlier, around driving critical info sector in europe and increasing bandwidth across all parts of the value chain that are essential. tom: i want to ram this out because you are calling for more investment in critical infrastructure. yet deepseek is a reminder that efficiencies can be created. does it not change the spending impetus? do you not want to be investing in the companies that are building on top of that infrastructure? laura: there are two

countervailing trades. you will see the absolute cost of compute declining. we are absolutely on that trend and quite rightly. on the other hand, increased adoption. we are very early in the adoption curve from a consumer and business perspective. the innovation the last couple years is just starting to filter through into enterprise ready applications. as that adoption increases, we need to drive broader capacity to service the increased demand. on the one hand decreasing competition all costs, and decreasing costs along the value chain that are upstream of those applications, demand overtime should drive overall adoption and therefore required supplies. there is so much optionality in this market and so much we don't know yet. it is too early to make a defining statement about whether we should be decreasing investment. we know for sure we are somewhat constrained today still on a global basis in terms of

building to meet this next wave of demand for ai. tom: early stages of adoption that could be accelerated this week. really smart analysis at the end of a huge week for the technology sector with the focus for european builders and investors. thank you for coming to the studio bright and early this friday. laura connell, partner at atomico. this is bloomberg. ♪

>> i think that is a very interesting academic discussion. that i was marginally more open-minded about before the pandemic. one of the things we have learned the last two or three years is people really hate high inflation. and there is zero appetite. my judgment is there is zero appetite. even though the academic

arguments, i understand them, there is zero appetite to raise the inflation target. tom: that was minneapolis fed president neel kashkari. you can watch the full interview on wall street week. talking of inflation, let's get you up today. the fed is standing put. pce their favored gauge coming out later today. that is the white line being illustrated. still clearly above, core pce above that 2% line, the target for the federal reserve. the data expected to come in at 2.6%. bloomberg economics says longer-term, there is still scope for lower rates stateside. the cad is moving on the tariff threats. the opening trade is up next. stay with us. this is bloomberg. ♪ anks. with the caribbean sea. ♪♪

anna: i'm anna edwards, alongside kriti gupter and guy johnson. kriti click dingle but him him him him him