>> good morning. this is bloomberg daybreak: europe. i am in dubai and these are the stories that set your agenda. the german chancellor and tells

us he's open to negotiating with the u.s. on tariffs but insists the e.u. is strong enough to hit back. germany's political debate heats up ahead of this week's election. germany's chancellor tells us he's open to negotiating with the u.s. on tariffs but insists the e.u. will hit back. plus asian stocks gain as ai optimism drives a tec powered rally. it 1.3 trillion dollars in value over the past month. all right. good morning again, everybody. we are going to get you a check on how markets are faring after a strong weekend of headlines. so much news coming from the munich security conference with

investors focusing on what this means, the geopolitical landscape and what this means for europe's defense capabilities and the knock on effects of the europeans having to go it alone for defense going forward. this was the picture for futures. euro stoxx 50 is leaning towards the red light is so. we are down -- up 3% for the week. a strong start to the year for european markets. ftse 100 future is leaning slightly towards the green as well and important data coming up this week in the u.k. with labor market data. those will be big drivers for this markets. mastec futures leaning towards the green but bear in mind, today is a bank holiday so thinner trading than usual later on in the session and asked for cross-asset, this is what we are looking at. take a look at the open for futures and this is a reflection of the fact that you will likely have to see a lot more bond

issuance out of these european nations in order to fund some of these defense spending commitments. that is the picture for 10 year bond futures, down .4%. euro trading sideways what we are basically around the 105 level again so a bit of a rebound coming through on back of the weakness in the u.s. d and also a relief trade with those reciprocal tariffs still hanging over europe but the decision to implement them has been postponed back a couple of months. -- by a couple of months. brent in focus, up .2% despite the fact that we are nearing a potential resolution to the ukraine war and what that could mean for russian oil supply is again a big driver for energy markets looking ahead and gold close to but not at the all-time highs. we are just sitting below 2900, up half a percent on the day but gold continues to go from strength to strength. senior u.s. and russian officials are meeting in saudi arabia this week to discuss a

potential trump and putin summit to end the war in ukraine. president trump says volodymyr zelenskyy will be involved in peace talks with russia. >> we are trying to get a piece with russia and ukraine and working very hard on it. it is a war that should have never started. >> do you expect zelenskyy to be involved in these conversations? >> i do. i do. he will be involved, yes. >> the chairman of the munich security conference spoke to bloomberg about the future of ukraine's peace negotiations and his experience of dealing with president putin. >> trump does not want to be seen as a loser in a deal. and knowing who to and from many meetings, having been diplomatic advisor to chancellor merkel, he knows how to flatter people. but he is like children.

he smells weakness. i think what he is smelling right now is something he likes but then when trump finds out that he is being taken for a ride, he may react and say not with me. crimes all right. for more, let's bring in bloomberg's greg sullivan. we know u.s. and russian officials are going to meeting -- to be meeting. what do we know about the possibility of the summit happening and what will be discussed? >> well, one thing we do know is that the trump team does appear to be moving very fast. he has been in office less than a month and already, there are senior advisers flying to meet russian senior advisers. it seems like these preparations are made. we know they would like to have a meeting potentially by the end of the month. so these officials are meeting in saudi arabia to try to hash that out and we know that

europeans expressed worry about this with the initial phone call where they agreed to begin meeting. a lot of europeans were taken aback and they worry that ukraine and europe might not be at the table in the way they feel they need to to hash out any sort of resolution or cease-fire. >> yes. well, stay with us because i just want to bring you some comments from the german chancellor, olaf scholz. he spoke to bloomberg exclusively at the munich security conference ahead of the european leaders meeting today. listen to what he said. >> i spoke to president trump very early about how to support ukraine. my plea is that there should be first the message to putin that europe and the united states will continue with their support to ukraine because he has to understand that he cannot hope that we stop our support. >> u.s. officials have made clear that europe is not going to be at the table in any of the

important conversations. >> i'm sure that there will be no solution possible over the heads of the ukrainians and obviously if someone wants europe to be involved in peace in the future, it is necessary to discuss with europe and to implement the european leaders into these decision-making processes. >> we know that some of the european leaders are convening in paris today to discuss a potential response. is there anything they can come up with to ensure that they do get included in these discussions around the future of ukraine? >> well, that is right. there are certainly alarm bells going off in many european capitals after the weekend comments from trump administration officials and with this meeting progressing quite fast. european leaders are scrambling to get their response to the u.s. to make sure that they are included in any kind of negotiations. there is a real fear that

providing too many concessions to russia could embolden putin but also that any kind of negotiated cease-fire could not represent ukrainian or european security interests and in the longer run, officials are starting to frack. what does this mean for the transatlantic alliance question mike what does that ally partnership look like going forward if it looks like the u.s. is really stepping back? it is setting off some alarm and with this meeting coming today, it looks like european officials are scrambling to come up with that response. >> yes. bloomberg's greg sullivan, let's see what the response out of europe is going to be. a critical time for europe. it is 7:45 london time and we will be speaking with the defense minister of lithuania, a country that is closely watching the debate on ukraine so do not miss that interview. the week is starting on a down note for european bond futures so here to explain is valerie. i have got to say that one of the assets i was looking at this morning was the reaction across

europe to all of the different headlines that came through from the weekend but one of the ones that caught my eye was the reaction in bond futures. we are selling off today. what is going on? >> it is all around the expectation of more coordinated fiscal response from europe. how are they going to finance this to defense spending? it is likely to come through with more debt issuance. german and french bonds traded lower ahead of their open just over one hour from now. it is notable that these bonds have been trading, quite weak in the last few days with yields rising with that expectation of more debt issuance to come but even though it is seen as a negative for european bond assets, it is seen broadly as a positive for european stocks and it has been one of the main drivers of european stocks year to date. they have outperformed global peers when you compare it to u.s. and asia. a mere 12% gain. nearly four times the amount

that s&p futures have returned. now, this specific driver of this has been a lot of the defense stocks rising from the lows in one of those has been rheinmetall hit a new all-time high up some 32% year to date and we will have an eye on how those defense stocks trade when they open later this morning but one sector in europe that is yet to shine as brightly as european autos, we have another threat from president donald trump on friday, threatening more auto tariffs as soon as april and being those german the automakers, a key input into the u.s. market. let's see how those trade as well at the open. >> sector specific but at a macro level, people are counting for the potential for more fiscal issuance out of europe. thank you so much. let's check in on how asian markets are faring. multiple drivers over there also of note is that president xi had a talk with some of the key business leaders so how has that gone down?

>> multiple drivers. even the japanese auto stocks are down today following on from what they said but as you say, it's about the chinese presidents meeting with top business leaders that has gotten confirmation by state media among the top business leaders. we had the execs from huawei, pyd, xiaomi. what markets were latching onto was that he met alibaba as jack ma and this was a company that was once china's e-commerce darling and then got squarely hit by the regulatory crackdown. executives recently have been trying to turn around the company, restructure it. so the meeting was seen as potentially the government endorsement perhaps of the tech sector as a whole as well but it was interesting how despite the confirmation, alibaba stocks actually turned negative and on the hang seng, tech is not doing so well now so interesting to see a bit of profit underway as well. let's flip the board because i

wanted to highlight japan data today. it was a big beat for the fourth quarter and i think it's getting the yen bulls excited. they have cpi to look forward to. the point mark cranfield was making that if you look at the full basis point, 25 basis point hike that is being priced in, you are going to have to look all the way to september. the march and april pricing, very low for that. there still seems to be time for this repricing to get underway especially if you consider the boj's approach to the january rate hike. the flooring that we saw in the two weeks before the boj actually hiked and signaled its intent to the markets. flip the board again. for context, if you look at the price of alibaba's stock and how it has come 60% since the january trough that was in the middle of january, it is still really far away from just before the aunt ipo got scuppered. keep that in mind as we look ahead to alibaba earnings later

in the week. >> that is important context. thank you so much for the overview there. in terms of other drivers to watch out for, we have got a bunch of a series of significant data coming through in the u.k. that we want to watch out for pa labor market data. that comes through on tuesday but then we also have u.k. inflation data on wednesday as well. we expected to see a little bit of an uptick for the headline year on year so that is always a big driver for u.k. guilt so something to bear in mind. wednesday, we have the fomc minutes coming off from a week when we had upside surprises in both cpi, ppi, and retail sales numbers did disappoint on friday so any clues about the direction of the u.s. economy will be parsed very closely and friday, we have global flash pmi's to get a sense for how some of these key economies are actually faring in the last month and as ever, you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak.

terminal subscribers can go to d.a. -- dayb . some of the top stories today are about trump open to europe buying arms for kyiv. and mosques ai launching a new ai chatbot today. coming up, the latest on how the markets are responding to donald trump's tariff threats,. ♪ you think those phone guys will ever figure out how to keep 5g home internet from slowing down during peak hours? their customers have to share a wireless signal with everyone in their area. oooh. you know, it's kinda like when you bring a really big cake for your birthday, and then there's only a little, tiny sliver left for the birthday girl. aw. well, wish her a happy birthday. happy birthday... -it's... ...to her. -no, it's me. have your cake and eat it, too. don't settle for t-mobile or verizon 5g home internet. get super fast xfinity internet you don't have to share. forty's going to be my year.

>> over the next sometime around april 2 -- on april 1, believe it or not. i am a little superstitious. we had it planned for april 1 and i said, let's make it april 2. you know how much money that costs? a lot of money, just that

one day. >> president donald trump speaking on auto tariffs on friday but wall street has been playing a guessing game as to whether president trump will follow through on his threats. equities have continued to rally as investors bet on a favorable outcome but will the new year surge continue question mark joined by the global market analyst. good to have you with us. maybe let me start off by asking you whether you think this theme of u.s. exceptionalism that was so dominant towards the end of last year can continue in 2025? >> thank you very much. we are quite busy trying to decipher what -- how the trade policies going to shape up in the next few months. i do believe that given the fact that the u.s. dollar has started across major currencies, european stocks will have more

room to advance from here. obviously, some of the sectors will come under pressure as trump has alluded to more tariffs on automakers. we think of german automakers's as particularly susceptible. so we say to investors, be very cautious about which companies you are being exposed to but overall, the u.s. dollar weakening is a good sign. >> how much of a threat do you think these tariffs actually pose to the theme that just highlighted? is that the biggest risk for macro sentiment this year? walks i do believe so. i think it is a major driver of policy uncertainty at the moment. i think that they are quite important, quite serious. the endgame for the trump administration is to be able to deliver tax cuts and for that, they need to they are helping

from spending from the federal government but tariffs is part of that. yes, some parts of trump's rhetoric is a negotiating tool such as -- which we think in practice is hard to implement but what he really wants is countries to negotiate with him directly and therefore when you look at that currency market, which is the first place where these policies are being priced in, the currency markets think that is something that resembles a universal tariff in place. >> yes. flight to quality assets have been doing quite well. we got the screen above the usd. toward the end of last year, it was a very popular trade. some of the steam has come out of the usd this year but let me ask you whether you think this is an environment where safe haven plays will continue to do well and here, i'm not just talking about the usd.

i'm talking about gold and other safe havens as well. >> share. obviously, as the u.s. dollar continues to depreciate, we think this will be overall positive for gold into your point, in an environment where, again, policy uncertainty is quite elevated and possibly inflationary pressures on the rise, we think that gold has a very good volatility to hedging in portfolios and going back to the market, we say that in those quality stocks and companies which are able to generate a stable, long-term cash flows. when he think about it, it's going to be in this environment at least. it's going to be in mid-cap stocks especially. >> yes. you are also recommending for people to be positioned in crypto and in bitcoin and i just wonder what you see as the next

catalyst for bitcoin to move higher because the market is already discounting an administration that has come in that is more pro-crypto and likely to lead to a lighter touch regulation on that front so where will the next catalyst come from? >> the most important thing is continuation of easy policy. i think the market is really eyeing the fed's forward guidance on that. we still think that the fed wants to deliver rate cuts but it is just the pace of rate cuts seems to have slowed down a bit. again, deregulation will continue to be a major driver as the trump administration is changing and going to change. regulatory bodies that are looking after crypto. so i do believe that, you know, trump's administration is putting a floor on the price of major crypto assets. when you look at crypto, it has standalone volatility, obviously, but when you look at long-term correlation of bitcoin

to major asset classes going back to 2022, you see that the correlation is actually very low and in fact negative for some asset classes and that gives us reason to put it in our portfolios which would decrease overall portfolio volatility when you include crypto. >> yes. you get a massive pullback in risky assets. bitcoin and the crypto community would also be exposed to that as well but interesting perspective. thank you so much. coming up, for investors seeking to mitigate inflation risks, carbon markets could prove to be an attractive asset. we will discuss the latest trends in the global carbon markets, next. this is bloomberg. ♪

>> come back to bloomberg daybreak: europe. protectionism and tariff wars are becoming bigger threats to global trade but the world's carbon markets are becoming more interconnected and this year will mark significant acceleration in the process. here to tell us more is m a come ahead of bloomberg's carbon markets team. good to have you with us. for companies looking to reduce emissions with carbon credits, what should they be watching out for this year? >> yes, so the carbon market has had a turbulent last few years with a number of market scandals emerging but we believe 2020 five could mark a tipping point for this market. one of the main reasons for this is the country of brazil. brazil not only is home to a wealth of their own nature based

assets which they could provide to the market but the nation is also set to host the 30th conference of the parties in november. we think markets are going to feature heavily on this agenda and the global carbon crediting mechanism under article six could in fact go lives there. what this would do is signal to companies and countries that they could then trade under the u.n. fact mechanism and hopefully restore some market confidence. >> recently, the u.k. prime minister signaled interest in linking the u.k. market with the e.u.'s market. what does this mean and how like is it that it will happen in reality? >> yes, so this is an interesting development. the u.k. started its own carbon market in 2021 following brexit but at the time, there was always a clause to say do

consideration should be given. this appears to be happening in reality where the u.k. prime minister signaled an interest in such a feat and what we saw was prices actually picked up in the u.k. market after having trailed their counterparts. now this is not surprising. a merge would see the u.k. market have a big boost in liquidity. it is about 1/10 the size of the market currently. however, that pickup of prices could in fact -- with a bill for you at -- u.k. businesses and could see the carbon bill annually increased by over one billion pounds. however these linkages take time and require alignment of policy settings so it is unlikely to happen overnight. >> yes. fascinating and we have a chart up of some of the u.k. and e.u. carbon pricing as we head into a critical year and the meeting taking place in brazil later this year as well.

head of bloomberg carbon markets team. we have had a very busy weekend in terms of headlines coming through from the munich security conference. coming up, europe scrambles to respond to trump's ukraine more policy while its biggest economy heads to the polls. we are going to be getting the latest with senior fellow judy dempsey, next. we will be talking to the upcoming german federal elections and what that means the future of the german economy but bigger picture questions about europe and the joint defense spending plans. so all of that to come in just a few moments. this is bloomberg. ♪

>> good morning, this is

daybreak europe and i'm joumanna. donald trump promises ukraine's president will take part in peace talks as leaders hold an emergency meeting on security. olaf scholz is open to negotiating with the u.s. terrorists. debate heats up and asian stocks again as optimism drives a tech powered rally adding a trillion dollars in value. we are building on equities, we did rally last week on some

optimism manifested in european equity markets. ftse 100 inching toward the green, key data and u.k. inflation, s&p and nasdaq starting off the week off in the green and we will get thin trading, fomc minutes in focus. flipping over a couple of market moves in europe, look at 10 year bond futures, the bond futures are down. we were talking to valerie that investors are hoping for issuance to account for defense

spending as a catalyst for bonds. the euro is back at one .05, relief from the tariff discussion, tariffs have not been applied. brent has strength coming through despite talks between russia and ukraine, they will hopefully progress. gold up 3/10 of 1% though trading sideways, bit of a drop but the trajectory has been positive. president donald trump says zelenskyy will be involved in peace talks after advisors suggests conversations might go on without zelenskyy.

europe scrambles to deal with the u.s. new policy. >> mike lee is there should be a message to -- my plea is that there should be a message, we cannot stop our support. guest: the new administration if the endgame will be a win for pruden that will week in security in america because everyone will interpreted as weakness and between europe and the united states of america. joumanna: we are joined from berlin from judy, what is it

tell you about trump's perceptions the fact that they have been sidelined from ukraine discussions? judy: trump is amplifying that europeans are weak but trump is sidelining europeans, europeans had been united financially so it's a real slap in the face for the eu and ursula von der leyen, she tried to open the accession talks so it's a slap in the face and damaging. joumanna: yeah, yeah, yeah. if there is a truce and ukraine

signs on but they make concessions does that put europe in a safer place? judy: well, it depends on concessions or details that trump will bring but what is important is maybe zelenskyy can be involved, this is what europeans insist upon but if they have to cede territory it could embolden russia and remember what they are doing in belarus. it does not make europe safer and ukraine coming out worse, we

wonder why we had three years of appalling war. joumanna: yeah. i spoke to people who see this as positive for europe integration and a coherence proceed -- policy to energy plans do you think the events of the weekend will serve as a call? judy: how many wake-up calls does europe need? euro crisis and then covid and then the energy crisis, can't can't -- so many wake-up call so this is meaningless. the call is for europe to have a strong security and intelligence

and defense policy. they don't have a common perception. so wake-up calls should be put on the back burner. joumanna: we've got elections in germany with a shift in government, how will that affect the trajectory of what we are discussing about cohesion and leadership, when the election are out of the way? judy: we don't know if that's going to happen, we assume frederick maersk will be the new chancellor and setting up a coalition but if germany is not back on its feet they will not assume european leadership. it has been lacking under the

current chancellor and it -- it -- a strong german economy is not only linked to a strong european union, it could give europe and germany the leadership is needed. joumanna: yeah. do you think germany can make this come back with the threat of tariffs hanging over the country? >> great question. germany cannot do this alone. they've got to going united. this is about europe speaking on

the changes. joumanna: thank you julie dempsey at carnegie europe. will bring you all the news this week including a special program when the polls close live from berlin. germany's chancellor says europe is strong enough to stand up to trump but olaf scholz said the eu is open to talks to avoid a trade war. >> i am in favor of free trade, this is a big advantage we have and many of the growth we have

is because of free trade. free trade is better than tariffs and i don't think this will work. when it comes to the eu everyone knows we are a big area with a lot of strength. tariffs are a common policy so we are strong and can react to everything harming european economy but we should act in a way that is offering the chance for agreement because it is better for all parties. >> are you considering cutting tariffs? >> we invite the united states,

there is a willingness so it's better if we agree to something that strong enough. >> talk about a common project but trump wants reciprocal tariffs, not a wto approach and even with the european onion -- european union he might want a tariff on france, germany only or italy. there's nothing to stop the u.s.. >> we act together and -- and -- and we stick together, which is important, so i'm confident a good solution is feasible and

everyone should work. joumanna: german chancellor olaf scholz speaking with stephanie flanders. irish leader michelle martin says the risk of u.s. tariffs concerns her while emphasizing the reciprocal nature, the u.s. accused ireland of running a surplus at america's expense and martin says the surplus is small. >> free-trade generally has led to the greatest living standards so we are concerned, we understand the issues if you look at services and goods together, europe's deficit is small and we need to be careful.

joumanna: coming up a meth lab says its users have generated 8000 and years of content so we will talk to their cofounder next. this is bloomberg.

joumanna: following the ai summit, one company, 11 labs, raised money to advance ai audio technology. tom mackenzie, take it away. tom: indeed. i'm joined by danny, the ceo of

11 labs. thanks for coming to the studio, give us a sense of what you guys do and what markets are targeting and then we'll get into the fund it. dave: 11 labs has a mission of making info accessible like sandwiches. there's two pillars, we know from models you can build human quality high emotion speech and the audio it in other languages while preserving emotions or allow you to build a low latency models and products, whether it is audiobooks at scale, movies

or dubbing movies or creating digital elements. you can build an agent with the voice. >> so it is -- is -- is that where the funding will be going? dave: the first one is double down on the research, we have some of the great talented researchers, were going to build and invest and scale. as we work with big companies we are building the project allowing us to scale together. one of the most exciting one is an international expansion into

any language. asia, other countries to counter those languages. tom: what are you model? dave: we are looking to build a generational company with a few different business lines and each market is already huge. entertainment where you can create content. dub it to other languages which adopt ai to tell stories to users and then working with companies that are creating use cases. aa -- aa -- a -- day -- a place

where we will see customer support and call simulator where we allow them to create an experience that's a lot more seamless. your hearing ai, that's more aggressive. time magazine where you cannot only read the article, listen to the article but you can interact. ask it questions, learn more about the background. it's new and impossible so the market is just getting started. tom: talk -- talk -- talk to us about getting cannibalized by language models, are they the main competitors? maddy: as you think about the future of the company we are

competing with the potential to build incredible models, we specialize on audio. it is really the devil down on the models that are -- double down on the models that are lowest latency and allow you to build in a way that companies cannot -- cannot yet. of course that will be putting our heads down and continue to work. tom: ceos want to replace workers with ai, is that how you look at it? maddie: there will definitely be a change in professions whether it is how the companies and -- and -- and -- and -- and

customer support will evolve. so far we are seeing most use cases in places where you don't have the capacity in place as you think about a company in the u.s. where they were alternating how to reach out in health care sector to people, there is no receivers to take appointments and people can call in, schedule the meeting. you are filling a gap where it was not possible before. hopefully in the next -- the next couple of years, still an open question, between the u.s. and u.k. something that we will figure out.

tom: indeed. joumanna, back to you. joumanna: fascinating to hear about ai. in the world of audio, quite a discussion with tom mackenzie in london. we will talk about areas that are benefiting from drive toward european defense spending. this is bloomberg.

>> working around out the show

europeans will have to invest in defense, a basket that ups tracks is up 73% compared to the stoxx 600, huge outperformance but it's not just defense, we are seeing a rally in ukrainian bonds, the rally started picking up steam and now you can see bonds trading at $.60 on the dollar versus that $.45 last summer so positivity and then another chart as we head into federal elections this is the number of asylum rejections which outpaced acceptance rates, point that down to the rise of

the right in germany and immigration is a huge topic. quite notable that the number of rejections overtakes acceptance for asylum so i will just park that thought. we will be speaking with the defense minister of lithuania watching the debate on ukrainian and ceo of banko cpm will be joining us to respond to their rival unicredit. for now the opening trade is coming up, thank you for watching the show. this is bloomberg.

anna: i am anna edwards. here's what you need to now.