Iran President Dead In Helicopter Crash | Bloomberg Markets Today 05/20

Going from under. This is Bloomberg Markets today. I'm Guy Johnson alongside critic gupta and Lizzie burden. I've got about an hour to go until castrate here in europe. So what do you need to know this monday morning? Iran's president and foreign minister are confirmed dead after their helicopter crashed in the mountainous north west of the country. Ryanair flight numbers meet the expectations, but the carrier warns that fares may be flat this summer and that Boeing may not deliver all of the 730 sevens that it currently expects. And copper surges to a record and breaks above $11,000 a tonne. Gold also hitting a record. Stocks, though, stocks are bracing for India numbers this Wednesday. Credit. Yeah, sticking with the market story there on Friday, 14 out of the 20 markets closed higher around the world. The rally continues on. Futures trading this morning. Your stoxx 50 futures higher by 2/10 of 1%. A similar margin for the footsie 100 straight in the european currency as well. Euro dollar 108 cable at one 2709 marcus today starts right now. Monday, 20th of May. Good morning, folks. The first thing we need to say is we welcome back our Spanish correspondent. I'm sure we're going to be getting an updated reports on the latest on the Spanish economy a little later. So much to say, Thelma. You're just you you just give me the Q guy on. I'll rattle it off. The writer CFO is just saying book now. Christine doesn't need that advice. She's already 207. I've been churning the Spanish economy for months now, just checking this travel and I'll finally show up, I'm sure, in the data in the next month. We'll see it in the numbers a little bit later on. Without a shadow of a doubt. Look, there's lots going on this morning. I think we need to talk about what's happening in the metals market. We'll do that. You got copper, AMC surging. Gold's on a tear as well. I'd like to flag as well the VIX. Look at the VIX. The VIX is really dramatic in terms of its move to the downside. There's no volatility in this market when it comes to equities. We didn't see a record close on Friday, but I wonder what's going to happen this week. I there is one thing on the agenda for me this week. Maybe we'll talk about pimeyes, maybe we'll talk about sort of geopolitical risk. There's a whole ton of Fed speak as well coming through. But there is but one event and we'll put up the week ahead for you. There is but one event and that is in video. There is. I'm waiting for Nvidia to crack further. The options market is so interesting when it comes to these and be earnings because every time anybody reports the options around kind of or I should say the bearish bet on Nvidia gets cheaper. I don't know if you've noticed this and everyone's waiting for it to crack and it still hasn't despite the fact that, you know, the higher it goes, the more odds there should be that it should. And here we are, everyone's betting against it and video defying gravity. So what I think is what I'm saying is the skew is is actually much more muted this time. So no, you have a big upside skew to your point about what happens on the downside, which would affect that that skew as well. But actually the market this time around isn't maybe expecting fireworks. Yeah. Any good is just never good enough in this space. So we already had Advanced Micro Devices 10% down at the start of the month, even though it raised its sales forecast. You had super microcomputer down 14%. Even though the earnings report had forecast for revenue and profit, they went above and beyond estimates. But the good news is you've had already that TSMC report of higher sales in April could be a sign of good news to come for NVIDIA. Yeah, it's in video. ASML and TSMC are the three stocks you basically want to watch when it comes to what is happening with the A.I. trade. Couple of things I want to flag as well. Mike Wilson did. I had to double check myself. My guess is raising his target over at Morgan Stanley 5400 on the on the speech Yeah I he's talking about sunny sunny environments I had to double check that as well maybe that's maybe that's the biggest best thing going I'm going to say the uber bear turn turned turn bull for for a moment. I suppose it's interesting when we're talking about this in the context of NVIDIA earnings, though, isn't really a macro story or a micro story. If if Mike Wilson is talking about the sunny macro environment, are we then talking about kind of a risk taking environment where momentum trades are more favorable? Is that where Nvidia falls in or is in video fundamentally a a I a changing of the guard kind of story when it comes to the technology space? And that's kind of what I can't put my finger on still when we talk about this market action. But it's also just the momentum has just been intense and that's just given the market so much momentum. Yeah. And you wonder if that was to start to crack, whether or not how quickly that momentum trade would fall apart around it as well. The VIX story I think is fascinating. This is a market that basically has in some ways kind of gone to sleep. The upside story is there. It's really positive. You keep trading that Mike Wilson's talking about a sunny disposition for these markets. But but you look at the VIX below 12 is is an amazing read and just tells you that this is a market that is largely kind of discounting. Now the tails it doesn't worry about the tails. It's not worried about stagflation. It's not worried about what happens with inflation. It just seems to be believing that we're going to get this immaculate disinflation. The soft landing is back on, the Fed's going to cuts. We're going to hear a lot of Fed speak this week. We've also got a lot of UK data we need to delve into as well. I was going to say, speaking of immaculate disinflation in the UK, we get CPI numbers on Wednesday. This is potentially going to be back below target and it would be the first major economy to happen for that to happen in this cycle. So it would be significant, but there's a lot of risk the other way. It's something that's going to say, what are you hearing? What is the risk the other way? Because we're going we're coming down from kind of threes into the twos, what is it, 3.2 to 2.1 is kind of where the market is reading this right now. But what is the risk that we actually see stickier inflation? And that throws this idea that we get two rate cuts in the better off exactly what we've already had. RBC blew by saying that it's worried about this upside surprise. And if you get and then bets on a June cut would be unwound. So currently it's a coin toss for a June maybe we don't see that after this point. It also has political consequences, of course, as well, because halving inflation by the end of last year was the Prime Minister, Rishi Sunak's top target. He hasn't managed to capitalize on that politically. So even if they get back to 2%, maybe it still won't translate into votes we need. One of the things has been driving the footsie 100 has been the metals trade. Yeah. Wow. Goals, Matt. Copper as well. Absolutely amazing. We were talking to a lot of people up here last week. We'll talk about Spain later on. But but what we were hearing was that actually this is a speculative trade. And this goes back to this idea that the market is just on a tear right now, that speculative trade is so strong that it's not being seen in the physical market, but the physical market is quite weak right now, which is kind of a weird dichotomy. But this goes back to the point we're making, Nvidia, right, is that they risk taking environment where there's room for that speculative kind of trading where there is that kind of understanding. There's two points I want to make your following up on Lizzie's point about the U.K. CPI numbers. There's a great chart on LinkedIn. I thought actually if Diana research coming out saying that if you're looking at some sort of leading indicator for U.K. CPI, you look at the average selling prices for the next three months, they are ticking higher and they're ticking, hiring a very dramatic way. Those two charts track each other so closely. They're saying that's the kind of leading indicator you really want to point out to the other side of it. And this is we're going to bring Spain into the picture, at least Latin America, if we can. Hispanic America. The Madonna theory, I think, is relevant here. But he's going to talk about football. I'm going to talk about football. I'm a World Cup fan. I'm not like a regular soccer fan, but I don't call it that. But he's done it already. Yes, I know. I know. But I think we play with our feet. It's quite simple. I can't go into this conversation. The Madonna theory. So, again, a part of my Costa del Sol Beach time reading was the theory that back in 2005, Mervyn King, the former Bowie governor, made this reference about the way that central bankers should be communicating, that they should basically be following Maradona's approach to goal setting, which is go straight, stick to your kind of narrative around this is our inflation target, don't really deviate from the path, and it's a straight shot for anyone who knows that second goal in the World Cup. This makes a lot of sense. I can't go into the details right now of the football slash soccer, but the point I'm trying to make here is that this is where Chair Powell and Andrew Bailey have deviated from the path. They're not making that straight shot any more. They did for two years, for two, three years. Is that data dependent? In theory? And they have been sure for the last two or three years. But even when the data was not going in their favor, they thought it was transitory. And when you've got inflation about to be at target, how could you not? Many will ask. Cut rates already when there's a lag in monetary transmission and when you've got the political pressure? The Chancellor, Jeremy Hunt, already saying that rate cuts would be a feel good factor for voters. So let me leave the other way on the consumer story, though, and that is that you look at what Ryanair is saying. Neal, sorry, I was just on our air just a few minutes ago talking about the fact that we could see flat fares this summer. This is when you've got Wizz Air with engine issues with the Pratt Whitney engine. So it doesn't have the capacity in the air that it normally would have or would expect to have. Ryanair isn't getting the aircraft from Boeing that it would expect had expected to get. So the capacity is not there, which in theory should push fares higher, but it's not. If Ryanair, the biggest low cost carrier in Europe, is saying we don't think fares are going to be that high this summer, that tells you something about demand. Is that and I know that's a very specific kind of airline transportation story, but I'm also wondering if that expansive capacity issue you see in other place in the market as well, which I think circles back to the invidious story as well. You see weakness in the copper market, you see weakness in the metals market. Is this kind of I'm starting to feel like there's a deja vu story here where you're if you're concerned about inflation ticking up higher, the focus is kind of circling back to supply constraints as opposed to demand weakness. Wanting to run a story is a demand weakness story as opposed to supply. Yeah, so you've got to the supply. In theory, the supply should push fares higher, but there isn't the demand and the demand that we've seen post-pandemic has been in service. It's exactly this kind of trade, i.e. people wanted to go and have experiences rather than buying physical goods. Yeah. And if we're starting to see Europe's biggest carrier going, actually maybe we're not seeing the demand to drive fares higher because they do dynamic pricing that maybe that's something we should pay attention to. So is that then Andrew Bailey's and Chair Powells worst nightmare than that? You have this demand weakness coming at the same time of supply chain weakness. Wasn't that the exact story in 2021 where there was this concern that stagflation sort of right, that there was some sort of pullback and now you're seeing it on both sides? Yeah, I agree. Yeah. Yeah. But but I think you want to that's where we want to pay attention because that when we saw in the CPI data and I'll be waiting for the CPI data out of the UK this week to see whether that services side inflation is where the strength lies because there's another bunch of factors that are come into the mix there as well on the wages fronts, which is that we've seen the minimum wage going up, which is putting pushing the services side higher as well. So just this whole whole idea that services inflation is going to remain strong. Just to remind us, we're just slightly leads in what is the market trade there, though? I mean, it's fascinating because at the same time, you talk about the currency impact from the rate story you're talking about even the stock impact from the kind of demand story as well. Then you've got to factor in the geopolitics. And that's why I think the commodity story matters a little bit more. Are we seeing more reactions in oil prices? No, we talk about. Correct. Right. But is that kind of a hidden risk that we're waiting for to show up in the data eventually? Maybe the biggest thing previously, I think the biggest danger for the market was that you would see a no landing at. A hard landing. Yeah, but I think there's another risk as well, which is the stagflation rate kind of story. Yeah. Which is going to be really interesting to see how the markets navigate as well. You bring up geopolitics. We should really talk about what's happening in Iran and the the fact that we have seen Raisi and the foreign minister in the same helicopter in this crash in into in the northwest of the country. I think it's going to be really interesting to see how the region navigates this now and and ultimately who replaces him. Jomana BERSET, she's waiting for us to talk about this. So let's go straight to her to get the latest on this story. Jomana, what do we know about how the helicopter crashed and what do we know now about where this leaves Iran? Yeah. Hi, Guy. Good morning to you guys. Well, it took a while for us to get full details. The weather conditions in Iran didn't help, and it took the course of the evening for us to finally get confirmation that the rescue mission had reached the site of the crash. The helicopter crash earlier this morning around 6 a.m. local time. Iranian state TV saying that all people on board there were nine people on board. That helicopter had indeed died in that accident, of which, of course, Iranian President Raisi and the Iranian foreign minister were also on board. So that has happened. Now, just in terms of what happens just in the near term at per the constitution, the vice president, that is Mohamed Mukhtar, who's going to step into the role of president. But per the constitution, there are 50 days for another presidential election to be held. And it is coming at a time of a lot of turmoil for the Iranian regime. You don't have to go so far. This is a regime that is set back by a huge number of sanctions. The economy is in decline. In addition, President Raisi was seen as a main conduit for the ayatollah to pursue some of these more hardline, strict approaches just internally towards the domestic domestic social economy, but also vis a vis international relations as well. Don't forget that President Raisi also spearheaded that direct confrontation with Israel about a month ago, too. So it does raise a lot of questions as to who is going to take over and not just as president when the president presidential elections take place within this 50 day time window, but also who will succeed the ayatollah himself? President Raisi was seen as a prodigy to him. The other person in the mix is his own son. But if that does happen and if the power goes from the supreme leader to his son, then again, we're getting towards a moving towards a hereditary power sharing situation, which is exactly what the Iranian regime overthrew in 1979. So, again, very interesting questions about the future regime and what it means for their policy going forwards. Ana, thanks very much indeed for updating us. Horizons. And could you want to essentially joining us out of Dubai, but also got the situation evolving in Saudi? We've got the situation evolving in Israel as well. Yeah, significant power shifts taking place in the Middle East. How to map out kind of what happens next. We'll do we'll do a little bit more on that a little bit later in the program. You want to talk about this story in the Journal? I do. This is, I think, a really important story. And I think as we're kind of waiting for the geopolitics kind of weigh on perhaps how the Federal Reserve thinks, even how U.S. politics shape out as well. There's a story that I think everyone needs to know here, and that is this capital markets kind of shift that is coming out of the Federal Reserve. The Wall Street Journal reporting over the weekend simply that this plan, this capital rules plan about how much capacity, how much reserves that a lot of these banks need to hold on could actually be substantially cut down. This was a policy that Elizabeth Warren, among many, many others, had really been pushing for, creating a bigger cushion for some of these banks. Jamie Dimon and his peers saying you cannot pull back on the lending. It makes the economy not run as well. It's a very hawkish stance and in the way of kind of pulling back on the lending capacity of the banks. And it looks like the lobbying one now bypassing Michael Barr is reporting out there that even the likes of Jerome Powell may be pulling back a little bit by about as much as 20% on some of those lending rules, which speaks to the change in the balance of power between the banks and the regulators, maybe even capitalizing on the splits at the Fed. It's been amazing to see the influence Jamie Dimon is having that he's had quite the lobby. It's a boss talking about the fact that he has been inundated. Yeah, inundated. In terms of the lobbying that he has seen. But it's interesting, too, to Lizzie's point about kind of the the regulatory balance, this is something they really came out fighting all. Yeah, well, the timing is everything here, right? We're talking about a time when the Federal Reserve, as well as trying to not have as much of a hawkish stance, it makes just as much sense that the banks are going to be in on that as well. Something we're going to dive into throughout the show as well. But keep an eye on that reporting on what the developments around that plan look like. Coming up on the program, however, we go back to the corporate space. Ryanair forecast fares could be flat this summer. The Irish carrier looks to ramp up bookings. We'll discuss the company's earnings later on in the show. Plus, UK house prices eased slightly this month. We discussed that and the outlook for inflation. Those numbers coming up later this week. But up next, hard commodity prices are soaring. Gold especially moving on those rate cut hopes out of the Federal Reserve. I'm going to check the market and economic outlook next. As always, if you have any questions of your own for our guests, please send them to us on eBay. Plus, BBC TV. Go. This is Bloomberg. 20 past. Welcome back. In some ways, it's a very quiet we're not going to get the big data deluge that we've been having over the last few weeks that really has dominated the agenda this week. Tomorrow and in video Focus, there's a few things you really want to pay attention to. One of which is the PMI data set we're going to get later on in the week. But Wednesday, we are also going to get UK CPI data. Now there's an expectation that we're going to come down quite sharply. Is the risk to the upside or the downside on that move? Jennifer we hear in chief global economist, the Capital Economics joins us now. Jennifer, the UK story is quite interesting in as much as if you were to see sticky inflation kind of remaining sticky, the UK is probably the place that you might look and I'm wondering if elsewhere we will take our cues from what happens here in the UK this week. What are you expecting on the data? Does this trend lower continue? Yes, I really think that it does. I mean, you're absolutely right. It would be reasonable to be looking to the UK for evidence of sticky inflation, but a lot of that, of course, has been related to the way the energy prices are regulated in the UK, which has meant this significant delay before lower oil prices could feed through to the prices that households are paying. What we're expecting to see today is that that's that that changes again is that inflation comes back down to we're actually forecasting below the Bank of England's target set at 1.9% in April. Now the risk to that skewed a little to the upside, but I think it's pretty clear that you're going to see quite, quite a sharp decline today, which would be really encouraging to the Bank of England this week. Sorry, on Wednesday at Wednesday. If if that does if that comes through, can we confirm two rate cuts this year? Is that or is the risk that if they how how much how important will this data be in determining whether we do get those two? How important is this set in particular? And I think it's very important, given that it's the month when the when of GM changed its cap. So we will be looking to see the energy effects. Also, core inflation, I think, is likely to come down pretty sharply. And this month in the U.K., maybe to something like three and a half percent, which is still a bit high and for the Bank of England, but much better than it was. So, yeah, I think this is going to be a pretty crucial release combined with labour market data that are upcoming. I think that these are going to be pivotal. I think we'll see more than two rate cuts from the UK this year, partly because I think there's quite a little spare capacity in the UK economy, unlike in the US, which should mean that core inflation keeps on coming down as the year goes on. So, Jennifer, just to be clear, do you think they'll come in June and then in August so they can explain themselves at the press conference? Because surely that upset expectation at markets of back to back curbs? And yes, I think I mean, it may be August, it may be a little later. But yeah, I think that that is pretty likely. And I think back to back cuts are not really out of the question. It depends a lot on how the UK economy progresses. We know that in Q1 the economy was relatively strong and and if that kind of pace continue to was sustained, then the bank might hold off. There will be concerns of that at that point that the economy was starting to run a bit hot. But as I said, I think there's quite a lot of spare capacity there, assuming as we anticipate that activity starts to soften again in the months ahead, and that a key 1.6% gain wasn't a sign of things to come, then I think we'll get significant cuts from the Bank of England this year. We actually have interest rates ending the year at 4% in our forecast. Well, Jennifer, let's stick with that theme of back to back cuts and go from the Bank of England to the ECB. We have Isabelle Schnabel over at the ECB saying that back to back cuts aren't warranted there. What difference does it make in terms of the actual effect on the real economy between going June and July, the ECB or June? Wait a little bit and then go again? What's the difference? And there's not a massive difference in terms of the impact on the economy. Of course, 25 basis points here and there when rates have risen quite so far and that they're clearly really restrictive in the euro zone. I don't think 25 basis points July or August makes us all that much difference. And but the perception that would come from that back to back cuts is obviously quite different and would need to be couched in quite careful language around what might happen were inflation to pick up again, what might happen if the economy were to to accelerate sharply. But I think in the eurozone there's relatively limited risk of that. We know already that inflation is doing better than elsewhere. The core rates already at just 2.7%, which isn't that far off the the ECB target. Wage growth is still a bit sticky, but we've got some negotiated wage data coming out of the eurozone later this week and we're anticipating that they'll show a further cooling to so. So I think everything's really going in the right direction. And so, so far as the eurozone is concerned and activity still looks, it's rising now, which is an encouraging sign, but clearly not overheating, accelerating very rapidly, nothing really. And to to worry the ECB, the price pressures are going to pick up again. So in our last minute here, nothing, it seems like to worry for the ECB. But what what art would you put of that reacceleration? You're starting to see that a little bit in the periphery. You saw in the Italian data. You saw it in the Spanish data as well in the last couple of prints. Some are kind of pushing that away and saying, well, that's a different economic story. Spain is outperforming, for example, Italy driven by a lot of fiscal spending. At what point does the ECB start to worry about those kind of numbers? Yeah. Well, I think it's when they they're feeding through to the eurozone aggregate, the ECB can't do an awful lot about what's happening in individual economies. It needs to obviously look at the averages. And if we look at Germany, for example, clearly the economy is an awful lot weaker. It's a very large part of the eurozone. And so I think that's going to be equally important, more important than what's happening in Spain and in Italy. Something the ECB has been looking at is the survey measures of services and price pressures. Those are quite important and those have been those had been edging up a bit. So the PMIs and this week are going to be important for judging whether that trend is continued or whether they're starting to to come off profits to really important. The ECB has made clear that it wants to see some signs that profit margins are starting to be squeezed in response to previous economic weakness. We think that is going to happen and but it's another one to watch. All right. Jennifer McEwan, chief global economist over at Capital Economics, we thank you so much for coming at some of the details of not only the European economy but the UK economy as well, coming up on the program. We continue that conversation. Inflation data on Wednesday in Focus, the next key test for the UK economy bouncing back strongly from a shallow recession. We ask if the country's recovery is on track. This conversation you don't want to miss. This is Bloomberg. We all talk about wanting to go back to 2%. Every single quote we had this morning. Yeah. Assumes that 2% is the right inflection point. 2% strictly arbitrary. We should all realize that if we are pursuing the wrong inflation target, the risk of a mistake and that mistake would mean sacrificing growth unnecessarily. The risk of that mistake is high, especially when the low income people are most at risk. All right. Bloomberg Opinion columnist Mohamed El-Erian talking about 2% inflation target being completely arbitrary. Haven't we seen this movie before? I will make my Madonna theory quote again. But haven't we seen this movie before? One of the 2% isn't the right target. It requires congressional approval over in the United States. I'm not really sure what the process is here in the U.K.. I'm having a lot of deja vu this morning in terms of commentary. Theoretically, it is an arbitrary number I give you. Think about this sort of theoretically. Yes. The problem is, though, it would require quite a significant change in mindset to go to a different inflation target. And in some ways it is just an arbitrary number. But it does require the implications of admitting that we are in a 3% world rather than a 2% world are quite significant. And then you just change the goalposts and then you hit that target. Yeah, then you change it again and then change it to nominal GDP and you can't measure it properly and you don't hit that either. This is what governments are for. Fiscal policy is there for a reason. But isn't this where the commentary comes in? If there were a long term inflation target, what is long term are we talking about since 1999? Are we talking about since post-COVID? What is long term or are we going back to, you know, 1950s? I don't know, whatever average you hit it over? Yeah, Basically, I don't know whether we are an inflation 3% inflation world or in a 2% inflation gilt I guess in the UK we're going to find out this week we're probably in a 2% inflation world but there's and there's the risk that we actually go below that. So in the States maybe it feels like a 3% world, but elsewhere. And maybe to your point about fiscal, that's where that's where the difference lies. Yeah. And we have point we have got that UK inflation data coming out this week. We've also had a raft of other data. We've had the right move numbers coming out this morning. This is, of course, for house prices, asking prices, I should note, rising month on month, 0.8% in May to a record high. We could discuss that now with Yolanda Barnes, chair of the Bartlett Real Estate Institute at University College London. Lovely to have you with us on set, Yolanda. What ever happened to this double digit drop in house prices that economists were warning of? Well, I think economists didn't factor in the way that inflation would strip out value in the housing market. Inflation, as it were, has done the job of devaluing housing. And I think this year we're going to end up 35% higher. And do you think that with the UK election on the horizon, there's a sense that people might be holding back on selling their properties in the way that they might have done before the Boris Johnson versus Jeremy Corbyn election? Or is this just a different scenario? It's very difficult to establish whether elections affect housing markets, especially as the timing is so completely uncertain. Could be next January. But the the big casualty, if you like, of uncertainty that that's more to do with uncertainty about where mortgage rates are going, for example, means that turnover is actually the casualty of the housing market at the moment. The market is very sluggish. So I think Rightmove said things are selling, but taking a long time to to do so. How to find it is the housing market in the UK because at the top end it feels like people without mortgages, that's where we are seeing a lot of the movement happening. But down further it's sort of into the lower price levels where mortgages have a much bigger impact. You're seeing a very different market. That's absolutely key. I think it's very, very difficult to talk about the UK housing market. For a start, we're talking about 63% owner occupation. Yeah, so, you know, it's still a majority, but not as as as high as it used to be. And of those 63%, more than half own outright cash, it has become really important in the marketplace. And I think purchasing power now just isn't just about mortgage affordability. It's about much more than that. So you've got different sections of the market behaving quite differently because the purchasing power is there with some people and just not with others. And renting is such an important feature now of the market. So we've got, I think, a polarising market but an increasingly polarising, increasingly segment segment. We get very excited about rate cuts. We spend a lot of talking about whether or not we're going to get rate cuts we get in this month or next month or many months in the future. But the market responds in real time in housing of what happens with swaps. And you take a look at what the swaps price charts look like, two year three or five year. The volatility we've seen in swaps makes pricing in mortgage really, really difficult right now. Is that is it the level that's causing problems or just the volatility of the number that's causing problems because of the uncertainty around those numbers? Oh, gosh. How long have you got? Yeah. I think the thing about the housing market, of course, is that it's it's actually a long term market. People are making long term decisions. So these are temporary changes in swap rates will have an impact maybe on transaction levels, which I think is exactly what we're seeing. But in terms of people's decision making to buy or not, it depends really on not what mortgage rates are now, but what they expect them to be over five, ten, even 25 years. So that there's there's a kind of long term short term mismatch in the way that markets work. And I think actually the signs are that buyers have been pretty savvy about the timing of their purchases in the past, taking advantage when interest interest rates were low. But I don't think that I mean, I suspect we're going to see much lower rates by the end of this year anyway. And that means I think transactions would start picking up next year and the year after. Where does international demand fall in all this as we see that kind of rise in Asian economies in particular? You've seen even a wave come out of the Middle East, for example. How does that skew it one way or the other? Look, these these overseas markets are very, very focused on particular locations. I mean, London being the obvious one. Edinburgh, Cambridge, Oxford have seen have seen some inward investment from overseas. So it's it's a very localized effect. Particular sectors of the market, the particular types of property, I mean, the Asian demand has been for flats and apartments. Well rather than houses. So it, it can have a local localized effect and it's very closely linked then to the strength of Sterling. Well, and speaking of that kind of central London story in particular, talk to us about the policy changes potentially in taxes, for example, and the non domicile tax. How does that change the demand story? Well, the the non-dom effect really is related to the broader effect it has on the appetite for UK investment generally and London, London in particular. What we find is is that demand for from overseas buyers for real estate is very closely linked to demand for all sorts of other investments as well. So the future of London's financial centre, the future of London as an international store of wealth, if you like, it's very much a place where people go to to park their capital of a safe haven, if you like. And I think that is much more significant than particular tax issues, right? Yeah. Helena BEARDSLEY, thanks for stopping by to see us. Really appreciate it. Yolanda Barnes, chair of the Bartlett Real Estate Institute at University College London. Thank you very much indeed. What are we going to do next? We going to take a look at the stocks you need to be watching this morning, including Ryanair. The Irish airline says some effects may be flat despite the low capacity. We'll sing. We'll talk more about that. Remember, it is with Monday as well. Many markets around Europe are closed, including Switzerland this morning. The market open is coming up. This is Bloomberg. When he folks. Welcome back. Monday, the 20th of May, Mike Wilson over at Morgan Stanley has raised yes, race. You heard me correctly. His S&P target for the year is 5440 500. That's quite a big step up, isn't it, in terms of those numbers. But he's basically playing catch up with the markets. So the the bearish view at Morgan Stanley is starting to be eroded. The other thing I want to flag, as well as the VIX is below 12, which I'm really scratching my head about as well. The market seems really relaxed with the risks that are out there right now. Let's get more of a take on what is happening here. Mark up more joins us Markets live executive editor Mark, we've come out of a great week we've seen stocks are on a rally we fed sort of failed a little bit Friday to keep that going coming into this week. What do you think keeps the momentum with us and do you think it's going to be in video? I think a vedere is the big catalyst out there that might do well. Clearly, we still have upside momentum that does seem extremely stretched. There are signs of froth out there and therefore that makes me a little bit worried. But the overall backdrop, as we've talked all year, remains extremely bullish. The fact is companies are still making good money. Earnings season has been fine, growth is doing fine. And yet the world's policymakers are saying they're desperate to provide support whenever is needed. So we should be in a massive bull market. Has it become a little bit stretched in the short term? Yeah, probably. But until in video at least I just don't see it derails it. And I'm not convinced that invidious should be what derails it right now so they can go a bit further. Okay. So you're not convinced that anybody derails it. But but I'm trying to think of if you do have a stretched market and you have a large piece of the puzzle potentially undermining it, how does that change the narrative? This has been a market that has been driven by narrative. Strong narratives, has been one of those. How big a piece of the puzzle? How big a piece? What would it be if we if we were to take that away? What effect could that have in terms just the way the market is set up and just casting a little bit of doubt on the rally, how quickly could things turn, I guess, is the question I'm really asking. I think they could turn very quickly if in video really disappoints. You're right, guy, that this has been a key pillar of this run, a key pillar of the narrative. And therefore, I do think that the it could be a major narrative change. But for that to happen in video earnings would have to massively disappoint. I think there's volatility expected around the earnings. I think a mild miss wouldn't do it. I think we'd have to have a just a complete shocker. And I think we're too early in this cycle, even if so many thinks that the hype is maybe a little bit overdone in the short term, the structural story is valid. We've got a little bit ahead on some of the earnings and some of the the revenue plans at the moment. I think we're a little bit early in the cycle for the shocker to come this week, and that's why I don't think it's gonna come. All right, Mark, don't go anywhere. We want to get your take on a few more macro topics and video we were talking about earlier in the show. It is a lot of the earnings story. It's a little bit of a macro story as well. Is this a risk taking environment that you're starting to see have a little bit momentum in other places as well? Margaret, come back to you in a moment. But before we do, I want to break a chart that caught my eye. We've talked about copper a lot lately, of course, in the show with these massive moves that you were seeing in the copper market. Now, some of this is bets on simply this underlying shortage. Some of this is this kind of contango effect we've seen in the metals and other piece of it as well. It's some kind of really wonky contract things that are going on. I'm not going to get into the wonkiness, but I do want to show you just how big the moves are for the LME contract, a two sigma moving to standard deviation move, and that's what you're really seeing on a one year basis. You go into the right side of this chart, it is highlighted with a circle. A lot of lines here. Don't let them confuse you. But basically the fact that you were seeing this massive move you looked at the contracts over in Asia is a three standard deviation move. It's interesting that we're talking a lot about the metals because not just copper, it's gold as well. At the meantime, we're seeing very little volatility in oil. Mark, I want to bring you back into the conversation here because when I think metals, I also think about the translation to the space. And I think this is really your area of expertise, the emerging market right there that you're seeing for a lot of this metals story. And that's what I want to come to you next. When you look at the likes of the Mexican peso, the Chilean peso, for example, even the Brazilian real in this idea of a risk taking environment that may have more legs. What's your take on the story? Yeah, it's a great question critic because so first of all, go back. I think that this Cooper story is in line with the kind of euphoria that we're seeing elsewhere that we're just talking about that with guy there, that there's a fundamentally just very, very strongly bullish picture out there has a color of the kind of the short term maybe so. So I guess kind of go to your question, be what are the asset classes that aren't yet priced in this euphoria haven't got carried away. And I think you're right to draw attention to the MF space. I mean, Mexican peso is maybe less clear because that has appreciated a long way recently. I think the the guts of that rally has been behind us. But there are other currencies that the things that the Brazilian rally which offer incredible carry, you know that the political fears have proved to be over kind of rot as usual. And therefore I think that the Brazilian real Chilean peso currencies this are undervalued and perhaps have more sustainable gains going forward. And I think that's the case for other emerging market currencies as well, not just in the long term space. I think Rand as well can get this kind of tailwind from that metal story. There is election risk there as well. So I think you're obviously right. If you want to know if we are in this everything rally, which copper commodities across the board crypto meme stocks or global stocks would all say it's in there, Why haven't emerging markets fully caught the bug? Even Hong Kong and China is going to so surely the rest of the space to catch up? And I would think so, yes. Oh, my gosh. And Marc, just talk about meme stocks. How exciting. Mark, we're talking about in the break when the last time the VIX was below a 12 was I did some funny little kind of handy dandy terminal science. It was December 2019, right before that big crash that was really COVID driven. The story in December 2019. I think it was back on the day when I was on the Markets Live team with you was this idea of momentum tack was trading at these extreme valuations. It was seen as a momentum trade. I'm having a little bit of deja vu. Mark, when does it flip? What do we need to see for this kind of euphoria that we're seeing across assets to flip? Well, back then to your example, it was a true black swan situation. It was a pandemic that like we hadn't seen for 90 years. And therefore I think that that that's it is probably going to have to be something massive. If it's not a black swan, it has to be at least a grey swan like guy's idea of an end video shocker. Yes, that would do it, but I don't expect that it would have, you know, none of the obvious things either a major change in the growth story or a major change in the rate side can happen that suddenly they need a number of data points to change that narrative. And therefore I don't. I think the options are here that maybe if it's stretched, we might consolidate a bit to bounce around for a few weeks just to kind of burn off some of that as those excess moves make the charts look a little bit healthier before we go again. But I don't see us suddenly swiveling to a bearish bearish narrative without some kind of black swan like we saw last time around. Pretty. Well, do you think we're now in a situation where we are seeing markets pricing out all the risks? You talk about this kind of really strong momentum. We talk about the kind of black swan events. You can't predict a black swan event, but the markets seem to be in a position that where investors are looking at the tail risk and saying, we don't think those are going to happen and therefore we get this huge concentration in the middle of the distribution of outcomes. And I'm wondering whether or not you worry about that this this sort of this comfort level the market seems to have with the level of with the outcomes that it's seeing. The VIX is below 12. Everybody seems to be comfortable with what they see in front of them. Isn't that quite a concerning environment? Is is complacency maybe the wrong word, but isn't this an environment where the market should be thinking more about the risks and isn't? The risks are not aggressively priced. I don't think they should be aggressively priced yet. But when they're priced so low and perhaps the asset class where this is most obvious is credit, that means that when something bad happens, it can be really, really painful. So from that point of view, you're right guy like this is it's you know, it's when it's cheap to put on the hedges, that's when you should kind of put on those insurance hedges. I just say just because the market is priced very little risks, doesn't that doesn't kind of manifest risks into existence. It says that if something bad happens, if a black swan happens, it'll be very, very nasty. And therefore, if it's cheap to put on insurance by insurance. But it's not a reason in isolation to turn bullish. That will come at some point. But at the moment we have stretch pricing, but not to stretch. Well, Mark, thank you very much indeed. Great stuff. Michael Moore, markets life executive editor. You want to get Mark thoughts when he addresses the team's thoughts? There's very easy way to do it. All you got to do is go to your Bloomberg terminal. MLive Go. You got to find what they think it's worth reading. It's going to be interesting week, I think. So It's probably worth digging into this Monday. Let's figure out what stocks we're watching. Joe Eastern has all the details of that. Morning, guys, of Ryanair is in focus today as the company reports a jump in net income but also does warn of a decline in some fares as having to do more discounts than expected in order to fill that aircraft over the summer. Now, they have also done a €700 million share buyback, so that could be a positive on that one. In terms of the stock over one year, it's up around 16%. But just a couple of weeks ago, we did see Michael O'Leary warning of a potential softening in prices and we did see the stock come down to some of that might already be priced into the market. Given those comments a couple of weeks ago. In terms of the old rivalry against easyJet, Ryanair is the big outperformer. Since the pandemic, Easyjet's had more issues with debt and also strikes over Gatwick. So Ryanair is the clear winner. But those cautious comments on pricing could be an issue today. There's the analyst ratings. 22 buys not a single sell rating on Ryanair ever really positive. They may be caught blindsided by this one today. Then in terms of your video games, we've got a big takeover in the UK keyword studios getting an offer. This is from Accutane. It's a massive premium. It's a premium of around 70%. There it is on the screen. It's worth £2 billion, 74% premium against Friday's closing price. Now, keywords designs video games. Some of their clients include the big names like Ten Cent and also Electronic Arts and Nintendo as well. Now if we look at the longer term price, however, we can say that the stock was actually trading around that level less than a year ago. So some investors might not think even with that premium, it's not even that good a deal in terms of what they're getting for their money. If we look at some peers worth keeping an eye across the sector today, there could be a bit of a raid across Frontier Developments and Bryce Sealy project, which is the maker of the Witcher game over in Poland, Ubisoft, all of those could be in focus. We've had a few profit warnings out of that sector over the past year or so, so it could potentially be a bit of a relief. We might get a bit of a read across and that one that we're moving over to cars. We've got the German automakers in focus. Morgan Stanley much more bearish on the sector today. They are predicting underperformance due to prices, declining adverse foreign exchange movements as well. CapEx to high tariff issues between the China, US and the EU. All of those are an issue. So they downgrade a couple of them. They do downgrade their ratings on the Volkswagen and they upgrade Mercedes. That one comes up to buy. They also cut pork. So the two, the downgrading is Porsche and Volkswagen recommending selling those two, but buying Mercedes because they have got a better buy back and also some of their margins potentially priced in on that one. But look at Mercedes 20 buys now on that one. That could be an outperformer. But keep an eye on Volkswagen. That could be an underperformer this morning. That 30% one year decline on Porsches is really eye watering. Our equities reporter Joey from there walking us through some of the stocks to watch in just about 5 minutes. Time to come to you with the market open. Remember, we do still have a couple of markets closed, right? Switzerland may want to switzerland. The demo. Please be watching out for us. So it's wet Monday as a result of which you've got a few markets that are closed, but there's a lot of dividend as well in the market. We should already talking as well about this BHP bid. We'll talk about that a little bit later on in the program as well. Futures I it's going to be an interesting week. We'll talk about that in just a moment. This is Bloomberg. Monday, the 20th of May. We have the post Pentecost Monday affecting some markets here in Europe today. So in terms of what's closed, you've got Denmark closed. So think about the impact on Novo Nordisk. That's going to be a fairly big effect. Hungary, Iceland, Norway and Switzerland. Switzerland obviously is going to take out some big heavyweight stocks from the market today. So just be aware of that. When you look at the trading screens in front of you and what's going to be happening, you've also got a lot of ex dividend stocks in the market as well this Monday. That needs to be factored in as well. But we come off a week in which we've seen really strong performances from stocks with we've got a fading a little bit Friday couple sounds very positive for the markets. Obviously looking forward to a video. I'm curious to see what the catalysts look like. Maybe interesting. We just heard Gerry saying that talk about the stocks to watch and you mentioned gaming. Yeah. To me, this could be one of the headwinds comes from video. Yes, Datacentres are the main course in video, but one of the headwinds could be gaming that demand, not keeping up with supply. In terms of video, the data is not there this week to provide the catalyst either. So does that mean we're kind of leaning more on Fed speak, central bank speak, Bank of England speak, ECB speak this week as well? And is that going to with the absence of the data, does that create much volatility? We are definitely going to be moving on the Fed speak, I think every single word this the sheer volume of it. I think what it has going to highlight, though, and Lizzie made this point earlier, is this kind of division that you're seeing within the Federal Reserve. And I think the more mixed messages we get, the more volatility that naturally breeds. But the problem is, do we end up kind of in the way that we've ended up in the last couple of I won't say weeks, arguably months, where on Monday you have all this Fed speak, all the things they anticipate on Friday, you say, well, net net, we're back right back to where we started. At least that's the bond market story. The equity market story will be fairly interesting as well. So the Stoxx 600, it finished last week at five 2294, a little bit of a fade as we say. Friday was the story for equities but it was a really solid week in terms of the overall performance. So we start this Monday with a few absentees but nevertheless, let's see how we get going. This at the start of this week, there are a few earnings that are going to continue to creep through. We're going to continue to watch what's happens there. I'm intrigued to see how the market takes Ryanair today. I think there's a macro read not only from video, but also off Ryanair. So we'll see how that trades in terms of the the early action on the upside, some of the miners look like they're front and center. Unsurprising given what we're seeing in terms of the metals trade that we're watching copper through $11,000 on something of a tear as well. Yeah, some of so you got your shell's your rio's your Anglo American as well. Glencore I think pretty heavy volume as well. Also highlight that you're seeing some of the banks higher as well. Lloyds, for example, is up. You see Barclays is one of your biggest upside movers to the downside, though, HSBC is going to be one of your biggest weights, at least on the Footsie. AstraZeneca as well, seeing a lot of pain. You can't necessarily compare that to what the sector is doing simply because of closed markets in in Denmark and in Switzerland as well. So keep an eye on kind of volume when it comes to the health care sector there. But Standard Chartered as well, there's interesting banking story, some divergences here between some of those companies. AstraZeneca, that was the news a little bit earlier on, talking about building a £1.5 billion plants in Singapore that'll do it, which could be a factor behind all of this. But I think it's interesting that what you are also seeing with with Astra is kind of where they're positioning themselves in terms of where that manufacturing is going. The UK is making a really big push at the moment to attract more of it. Interested to see that it's going to Singapore. I think we've got a Capital Markets Day coming up over the next few days. I think in fact I think it might be this week. In fact, I think we're going to be joined by Pascal Soriot this week to talk about what is happening with the business. So that's a story we want to watch out for as well. It does look as if some of the banks are a little light around Europe this morning. So Intesa Sanpaolo is soft, as you say, Kristie. I also add a smile is one of your biggest weights on the Stoxx 600 as well. So perhaps that early tech trade showing up as well. But as we head it, some of the kind of main mining stocks, Rio Tinto, Glencore, all your biggest ones, it looks like we're still waiting for some of the data to perhaps kind of seep in through again. ASML is the one that I have my eye on here. Is that just simply a sell tech ahead of Nvidia story? There are two completely different companies, do two completely different things, but I've kind of the heavyweight du jour. Is there a trade there? But they're part of the same ecosystem. You think about the three stocks that dominates that, that trade ASML is definitely one of them. Nvidia's Kind of one of the other ones. And then TSMC, which kind of does all the manufacturing is the third one, and it's increasingly they're seen as being this kind of group that travels on their own. Yeah, and you already had those terms AMC sales 60% boost in April. So that gives you the positive headwinds going into the NVIDIA earnings. Well, I think one of the issues as well with the chip sector is you don't actually know what is the leading indicator because remember what ASML came out with those really poor earnings for lack of a better term, I think it's simply coming out with this massive profit growth as well. What is kind of the is it the dog wagging its tail, the tail wagging the dog? Something something with a puppy is happening in the chip sector. It's important, though, to talk about kind of what is actually moving the market and what what that actually says about sentiment is not the big conversation we've had. How much of NVIDIA is at the end? A macro story is a euphoria story. It's been such interesting combination of kind of how the macro has interacted with the micro and in. It kind of falls between those two stools, I think, in terms of the impact that it has. But the macro signals certainly have been quite positive. The earnings earnings story has been reasonably positive as well. There are a couple of things I would flag out of that. Last week, a thought day was really interesting in terms of what it told us about what's happening in the manufacturing space. Started to see maybe some weakness creeping in there. We kind of talked a lot about this on Friday to get this kind of sense of what was going on. And in terms of the guests we spoke to, Nancy Curtain had this to say about how she sees this market sets up. It's been our view that the Fed could remain cautious here, may not raise a sorry, may not cut rates at all this year, but so far, economic growth and earnings growth we think will trump what's going on in terms of the Fed policy. Remember, liquidity is pretty generous. Look at corporate issuance. Look at corporate spreads. We've reduced cu t, we've got bond yields coming down. These are all kind of positive signals. Our international operations CEO, Nancy Curtin. It's fine, Tag. All good. I think what's important to hear about this is kind of this idea of some of these positive signals, something the guy highlighted at the top of the show when it comes to the likes of Mike Wilson, for example, is Uber Bear also saying it's perhaps a sunny macroeconomic environment. Let's bring in one more voice in that conversation. Ian Cunningham, head of Multiasset growth at 91 UK, joins us right here on set. Good morning. Good morning. Are you as positive as everyone else seems to be? I mean, on a broad basis, there's a lot of different things going on. I mean, there's a lot of elements of increasing stimulus coming out of Asia. So they're trying to clear prices of property. I think across Europe, we are seeing some dynamics in Europe where things are picking up a little bit in the short term. And then within the US, the economy remains pretty pretty solid and robust for the time being. So it sounds like you are quite positive then. Is this simply positivity? Is this optimism or is this euphoria? How are you thinking about it? So I think we I guess when we look at market dynamics, there's a couple of signs with the markets that there might be a bit of excess liquidity and some some like forex action taking place. And obviously we've seen some of the meme stocks starting to come back. We've seen some pretty impressive price action in some of the tech space. But on a broad basis, I think we're sort of nowhere in the realms of where we were in 2021 when there was obviously huge excess liquidity and and lots of speculation taking place across all sorts of different markets. And in last I checked, you raise your net long US dollar position quite significantly. And then the dollar headed for its first monthly decline this year. So I wonder what your thinking was behind that and whether you're not convinced that the Fed's actually going to cut rates at all this year. Sure. So I think too early on this year, we were starting to rebuild those those dollar longs on the basis that we were seeing increasing prospects of divergence. So so for us, I guess the probability of the US actually holding up better here has increased. And ultimately we've expected policy to continue to feed through in Europe, i.e. sort of leading to a continued soft outcome. We expect more disinflationary pressures coming through in Europe and the UK in particular, given that a lot of the prior excess inflation was driven by energy shocks. So sort of cost push inflation, whereas in the US it was more sort of excess stimulus and significant amounts of of liquidity that was driving those inflationary dynamics. So you might have divergence between the Fed and European Central banks, but what about within the European Central banks between the Bank of England and the ECB, maybe not just at the start, but how much divergence do you see throughout the easing cycle? So we would say, I think when we look at both the ECB and the Bank of England, there's a pretty good chance they're going to go in June and then continue to ease. And we'd expect more pronounced easing cycles in Europe than we would in the in the US. What's your level of conviction at the moment? How certain of you are you of of outcomes? Because it strikes me that that protection is really cheap fixes below 12. You can go out and you can buy upside downside protection, certainly on the downside very cheaply right now. Why should I be buying it? So on your point of conviction, I think we'd openly admit that the spectrum of potential outcomes fuels wide at the moment. And I say that because we still exited out of this era of exceptionally easy monetary policy. And there are risks associated with that as we continue to try and go forward. And that policy feeds through into particularly into corporations and into household refinancing relevant in Europe. But then when we look at the other side of the spectrum, we've got a world changing technology that's with us, and we've got central banks who who want to ease. And the Fed seem to be setting a relatively high bond not to to ease later on this year. So you've got potentially increasing liquidity conditions and the latter just rules out just kind of dominates the former. There are risks. We don't know about them. But if you've got those two trends in place, don't worry about that. Just keep going. So there's those trends and then some other really big key trends are everything relating to what we're seeing that feeds through into decarbonization, spend defense spending and the broader infrastructure programs that particularly sit within the US. So there's a there's a CapEx cycle underway in the under the surface as well. And this is the calm before the storm, before everyone starts to price in the election risk, the geopolitical risk. Is this kind of why everyone's maybe coasting maybe while the VIX is below a 12 right now? So as you say, that there are event risks on the horizon. And as we move into the US election and in some of the policies that may come out of that, there are there are risks associated with certain parts of the world. So I think ultimately when you look at various different dynamics, credit spreads are exceptionally tight at the moment. So so hedges that could be could be relevant. Obviously, with an equity markets, there's there's potentially hedges as well in terms of just generic options. But obviously markets can be quite dynamic and we can end up with our puts pretty far out the money pretty pretty quickly. And then within currencies, there's some interesting dynamics. Obviously volatility in currencies is exceptionally low as well, particularly in some of the Asian crosses. And if we start to see increased protectionism and the like tariffs, then then there's some interesting things to play there. Just on that geopolitical news. Of course, we have had various developments today from Iran and Saudi Arabia, Israel as well. I wonder if you share some analysts skepticism about government rhetoric on defense spending actually translating into benefits for defense equity stocks. Yes, I think I think for us, I mean, the the key, I guess, when we're looking for positions are ultimately looking for positions that can benefit from a broad spread of different dynamics. So we would say the material space has pretty strong underpinnings from from multiple different different angles. So it's more those areas that we'd be would be keen to get involved in. What are what are investors objectives at this point? When you talk to investors, when you think about kind of what they are, what they want to see. What are they telling you about how they how they see. Their story developing over the next next sort of 6 to 12 months. I'm not talking about sort of years out. But but if you think about kind of what investors are doing right now, are they are they in capital preservation mode? Are they in capital allocation mode? They want to make sure that they're part of this rally. What are their biggest fears right now? Is it missing out? Is FOMO still part of the narrative? Is is capital restoration after a decent run part of the narrative? And how are those two kind of shifting right now? I think I think you probably say 2021. There was a lot of FOMO. Yep, 2022 there was a lot of capital preservation going on and we're probably somewhere halfway in between now. Two FOMO, FOMO still part of the narrative. So we would say ultimately people want to clients want to participate in these moves in markets. What is are you worried a lot about a short squeeze? I mean, if you have this much momentum here, are you speaking to clients and saying, why aren't we more invested? For example, why are you even more bullish on this? And I think I mean, it's is different across different parts of the world. I mean, you could you could say this is going on in in China and Hong Kong now. Yeah. There's a lot of people very underweight that market. And there are policies coming through that all are not yet game changing, but there's policies that are trying to put a put a floor on to things just in a. Because he wants to talk about dividends and buybacks. I'm sure at some point during the show. How much of that is a relevant part of the conversation right now that they believe that actually the dividends and buybacks story is just so strong that it wants to keep you invested because you just taking out stock at such a rate. Is this in China specifically? No, here in the U.K., in Europe and broadly in the States as to, yeah, I mean, ultimately, I think there's there's parts of the world where you've seen quite a lot of capital market reform. So parts of Asia in particular, there's been efforts of authorities to to force buybacks and force dividends. And then I think more broadly across the world, those dynamics remain ongoing from this cycle or the past ten years where you're seeing a lot of money chewing up those those shares. But is that just a function of excess profits circa 2020, this kind of massive capital issuance, for example, that a lot of these companies had on both sides of the Atlantic, the record numbers in the bond market? Are we is this just a carry through from from three years ago? Well, I think if you look at the if you look at various corporations, the obviously the smaller cap end of the spectrum is struggling to some degree because there's quite a lot of leverage in there. And it's sort of a bit to speed. And then on the other side of the spectrum, you've got a lot of companies sat on a lot of cash who are going to be progressively returning that to shareholders. Okay. And great stuff. Thank you very much indeed. Ian Cunningham, head of multi-asset growth at 91. Right, Joe, what's happening with the stocks? We'll see some of the single names. One place to start, and that is in video games, because we are seeing a 63% gain and Quest Studios here in London. Surprise, surprise. That is a record gain for that stock. We're also seeing a bit of a fade through and some peers like Frontier developments up 7%. Clearly a bit of a read through in that one at the moment. Key words is a designer of games, as we said in stocks Watch is actually based out in Dublin, but it is listed here in the UK. We're keeping an eye on Embrace and also Ubisoft as well. She was actually a client of Ubisoft. Ubisoft had its own broker move today, but that is the K movement. We've got another UK takeover by a foreign entity as it comes in to cheap valuations in the UK. Then speaking of UK, we'll look at a couple of mining stocks. We did have that gain in copper. Copper was up 2.7% early in the UK today and also the gold prices, the one standing out up around 25 bucks this morning and that is boosting a couple of precious metals miners today, Hochschild and Fred. Now both of them gaining more than 3% this morning. Glencore and Anglo obviously more focused on the copper iron ore, those kind of base metals getting a boost as well. So all of them moving higher today. We'll have a look at Ryan and there wasn't too much movement on that one. They have warned of a slowdown in some pricing as they discount heading into the summer, but coming down 0.7% at the moment. That was kind of priced. And given Michael O'Leary, given those shock comments a couple of weeks ago that move the whole sector, but right now slipping a bit, now down 0.7% on the Dublin exchange. Then we'll look at some real estate stocks. Couple of things to bring you, say, UK house prices at record highs. It's not what we want to hear if you're in the market to buy, but we are seeing a bit of a boost in person. And Taylor Wimpey, Berkeley, the homebuilders, it was actually up less than expected by economists, but nonetheless the house prices rising, according to RIGHTMOVE and over in Sweden. Obviously I'm never going to try and pronounce that, but it is ASB and it's down 6%. They have got a bit of a warning out from Fitch on their debt over the weekend and that is getting hit a little bit on the market over in Stockholm today, down 6% on that one. I'm sure some people will be able to pronounce that. But now in terms of German autos, we did mention that in the Morgan Stanley now and both of those ones that were downgraded to underweight are declining. That's push and Volkswagen and I recommend selling them. They do keep an eye on Mercedes. A lot of this is due to prices coming down. I would say this has a decent buy backs. They kind of like that one. But those stocks are underperforming that Morgan Stanley recommends selling over in Germany. Finally, from gamers to Aston Martin's next one, more positive. HSBC, for the first time ever recommends buying Aston Martin. They had yet more weak results. A few weeks ago, the stock fell. HSBC sees an opportunity to buy. We're getting a big move on. That was up 3%. 180 price target trades at one for five. Plenty of upside. That one's moving in London today. All right there is in from our equities team. We thank you for the update on the stocks on the move 15 minutes into the open. And Christine, you've been telling me you want to talk about video games. I did not have you down as a gamer. I know I'm not at all. But I think for our global audience, you should know the when I first started out of Bloomberg as a as a wee intern back in the glory days, my two stock beats were video games and marijuana stocks. And this was October 2018. There's a there's a reason for that combination there. I think it was just at that point, it wasn't this kind of booming industry that it is now. And they gave it to the intern because they wanted to get me out of their hair and it ended up being the best learning experience because guess what happened, you know, five, six years later. The two industries that have, I would argue, the most growth right outside of, you know, the tech sector. So can I just say, weirdly, as an intern here in the U.K. at Bloomberg, I too had to cover the marijuana industry. I brought a t shirt back from my husband very well at the airport. People look at him really weirdly. I'm sure The takeaway from my mind, though, this morning on both of these trades, apart from the fact that I think these days are the critics glory days, but we kind of put that one for the moment is the level of takeovers in the UK. It takes us you could go back to the BHP story of the Anglo story that obviously is the other end in terms of the cap scale. But there are every day it seems at the moment we are talking about deal flow out of the UK, people recognising maybe just how cheap the UK has become. In some ways it still looks cheap. So does this momentum continue? I was told months ago that there were loads of deals in the pipeline. We are now starting to see that evidence. Yeah, and we're going to get into this later on. But just on the BHP Anglo point, it really ties back into the copper story because that surely a huge step in why BHP wants Anglo American to be the biggest copper operator in the world. Are we going to be happy in the UK though, potentially to lose that stock out of the Footsie 100? I think it may be a lot of annoyance. We'll find out on Wednesday because that's the put up or shut up moment when we get to that. What is what is BHP ultimately going to do? And as owners of Anglo, it looks like Anglo is going to do all the hard work and if BHP wants to come back in six months time, would it be a much higher valued company? We'll continue the conversation around UK stocks and what's what's happening globally. Stocks are going to be affected by the next story that we're going to be covering. Wall Street bracing for t plus one. We're going to explain what t plus one means. It's basically about how stocks are settled and how quickly that happens. It's going to happen within a one day period down from two. What impact, what ramifications will that mean for global stocks? Also for global effects as well. That's a big part of this story. We'll talk about it next. This is Bloomberg. This is market today. We're 21 minutes into the European trading day flat to the upside on the Stoxx 600 energy and basic resources is leading the gains this morning as you might expect given the moves on gold and copper. But we're going to talk about the plumbing now. Wall street gearing up for a major shift to faster US stock settlement when markets open next Tuesday. The time allowed to complete every transaction is going to have to be halved to a single day. Analysts fear the change may bring a spike in the number of failed trades, operational glitches and additional costs. So let's get more on all of this with Bloomberg's Greg Ritchie. Greg, you've written a great piece about this. I wonder what it actually involves to change this behind the scenes where the pressure points. Thank you. I mean, basically lots of processes, which currently there's plenty of time to do have to be done in a matter of hours. And it's a bit of a misnomer. We're saying it's a one day settlement cycle. In reality, a lot of these processes, the process at the time that you conduct them is much shorter. So let's say you complete a US equity transaction at 4 p.m. New York. You've only got 5 hours to a firm that trade with your broker dealer in the DTCC at 10 p.m.. So it's all these sorts of things when you consider how much volume is going through U.S. securities markets. That's where people are concerned and people have made preparations. But ultimately, even if you as an institution are very well prepared is your counterparty. You've had your intermediaries prepared. You can never be entirely sure. And that's why there is anxiety. That's the stock story. And there's the story as well, requires an extra kind of component of funding as well. Where does this go wrong? Where is the biggest kind of challenge here? You're exactly right to highlight that. I think it's quite ironic that this is a U.S. regulation, but it's going to be Asia based institutions, Europe based institutions, because they have to buy the dollars before they buy the US stocks, the US securities. Now, the time to do that is going to be massively compressed and they're going to have to conduct a lot of volumes at the end of the New York session right now of your currency trader, you'd far rather be transacting when London is online because that's where a lot of the liquidity is. Yeah, doing it a 4 to 5 p.m.. New York. We're not used to volume to that time of the day. We don't know what's going to happen to bid office spreads. We don't know how much money volume is going to shift there. That's the uncertainty and it's a cost that's going to have to be carried by Europe and Asia based institutions. I think a lot more people are going to be working on Friday evenings that were working previously on Friday evenings. It's not great, let's say Friday evenings. Very pleasant anyway. Greg, thank you very much for the really nicely written piece, really enjoyable to read this morning. Gregg Ritchie on our big take today. And another fact we've been watching very carefully with the way the markets are working has been this huge pickup that we've been seeing. We references earlier on in the program in terms of buybacks here in Europe. Now Europe has traditionally been driven by dividends. If we're talking about how companies think about ways of returning money to shareholders or at least boosting their asset base in the states, buybacks have been a much bigger feature of the landscape, but that has changed. It's somehow coincided with Christie's arrival here in Europe or certainly our recognition maybe of it. We were talking about this Friday, Chris. He wasn't here, so we wanted to come back to the subject. Cole Smead, CEO of Sweet Capital Management, joins us around the the studio on Friday to discuss this. This is what he had to say about the European approach. There's a myth out there that there's this American style of capitalism that only Americans can do. It's crazy when I hear that, it's like, Oh, yeah, buybacks were created for Americans by God. No, this is capitalism. It's just that the Americans have been a lot more aggressive in that style of capitalism. But again, using Porcello as an example, he's been doing those same things. Did the Americans say, oh, this this person over here is doing and I should go on that, make a lot of money? No, they were losing money in banks that disappeared a year ago. What I like here is optimism is low. What I don't like here is there's a historical stigma around buybacks. I don't get it. It's like they treat it like the gnomes of Zurich. If they raise their dividend, the numbers of Zurich are going to come out of their woodwork in their head. They're going to pour money to the hedge funds and buy the extra income that these stocks provide. Thoughts. He doesn't get it. He doesn't get to go. I think it's as simple as that. There's there's a regulatory scrutiny around this as well, right? Yes. There's a historic stigma. 100%. Yeah. But the reason that buybacks, dividends happen so much in the United States, it's not just a capitalism kind of American story. It's because there's an incentive to do it. You're doing it through pension holders, through massive endowments, college institutions, for example. That kind of passive investment does not exist in Europe. It doesn't exist in the Footsie. It doesn't exist in the same way it does in the U.S. So I think the incentive one is is diminished. And two, there's also a regulatory. It was always this view that buybacks were open to manipulation. I got I've never really understood the difference between that and a dividend story, but there's always been this kind of idea that that you were incentivized as a CEO to do that. And and and the incentive was different when it came to dividends. But it does seem to be taking off now here in the UK and certainly seems to be taking off more broadly across Europe. So it's going to be interesting to see whether this is a trend that continues. It does to to a European operator feel like an American trend. Yeah, but there's also a question of excess profits, right? We're in an arena where this kind of consumer resilience out of the state has really been eye watering and unexpected. And therefore, cue the buyback. But that's precisely why it's the oil giants and the banks who are giving just five bucks here in the UK, giving the footsie some hope moving forward. Coming up, as the Iranian news agencies confirm the deaths of both the country's president and the foreign minister. We'll bring you the details and discuss the implications for the wider region. That's coming up next. This is Bloomberg. This is Marcus today, about 30 minutes into the European trading day. We're seeing some marginal gains here on stocks that wandering the footsie 100. It looks like the party continues when it comes to the global equity market. But a lot of this is led by two sectors in particular. We're looking at a commodity driven story, and that's following the kind of gains you're seeing in the copper as well. This euphoric tilt they may be seeing in the macro economic space. Banks are kind of split here, though. You are seeing a little bit of outperformance there as well. It's a really interesting market dynamic that we're seeing. But how much of this is a wait and see mode for perhaps the rest of the week? Absolutely. We're building up to a video. Those are the key numbers that are going to be watching out for whether some key the M&A story is going to be there as well. We'll talk more about this in a little while. But BHP, big deadline coming up on Wednesday. So we're going to watch very carefully to see exactly how we build up into that. Yeah, And to what extent is what we're seeing with the basic resources trade this morning, kind of kind of the M&A story, I think probably less so more about what is happening with that big move that we've seen in copper. Yeah, I'm not saying that the M&A story is what's fueling the copper rally, but the reason that BHP wants Anglo American is partly because of the reasons that are fuelling copper because of the supply problems. Right. We'll come back to that a little bit later when we turn our attention now to what is happening in Iran. Iranian news agencies have confirmed the country's President Raisi and the foreign minister have both died in a helicopter crash that happened Sunday. Search teams have now located the wreckage. This is in Iran's mountainous northwest region where they have been visited visiting. Apparently, the weather was extremely bad and there was significant amounts of fog. Jane Kinnaman, who is policy and impact director at the European Leadership Network, Ilan Airline, a pan-European think tank focusing on European foreign, foreign defence and security issues. Jake, what do you think the implications of this are going to be for Iran and the wider region? Well, it's a shock event in one of the most important countries in the region, But the immediate geopolitical implications may be quite limited. Assuming that Iran does not blame outside countries or forces for this day. The Iranian system has got a lot of its own problems and insecurities. It's already dealing with a slow motion succession crisis over who becomes the successor to the country's top cleric who's in his mid eighties and said to be not very well. But when it comes to replacing the president, there are enough other forces and people in the regime who are likely to be able to close ranks. They're unlikely to significantly change Iran's foreign policy orientation, but it is still early days and we don't know what is going to happen in terms of the blame game. Whether the government will see this as a tragic accident or whether they will try to cast blame on others. What would you expect in terms of the political narrative at the moment? Is this something, given what's happening with Israel, given what is happening in the wider region? Is there a. Would that be an advantage in blaming others? I guess it's the question that I'm going to ask when it comes to this accident. It's I think it's most likely that this has been an accident caused by very bad weather. And Iran has a really poor record in aviation safety. Some of that is partly because it is under sanctions and it finds it very difficult to keep upgrading and modernizing its helicopters and its planes. So certainly, I think you'll see some emphasis on that from the Iranian government to see sanctions really are deadly. But at the same time, you know, this is a country where they have had senior officials assassinated both by America in the case of customs to the money back in 2020 and by Israel and including just a few weeks ago, some senior commanders who were in Damascus at the time. However, it would be completely unprecedented to have interference at this level of politics and with, you know, people who are sort of in the government rather than involved in Iran's military or military operations overseas. I think Iran probably also wouldn't want to look weak. So I don't think there will be that official leaning, but there will be a lot of conspiracy theories. And of course, there will be a lot of internal conspiracy theories, as well as some thoughts that Raisi might be a candidate to become the supreme leader in the future. There is a big internal tussle over that position, which ultimately is more important than the president. So Raisi had a lot of enemies and there will be a lot of speculation and theories, especially in a country where for understandable reasons, people do not trust the official news sources. Jane. So that is the the Iranian story. And, of course, just one part of the story coming out of the Middle East over the weekend. I want to switch over to Israel as well, because we've got plenty of headlines coming out of there as well. Internal turmoil, you say, in Iran, but perhaps internal turmoil in Israel as well, where Benny Gantz, for example, has threatened that unless there's a new war plan actually presented, he could quit the government altogether. Can you walk us through the dynamics there? What do we need to pay attention to? So there really is a question about how long Netanyahu can hold on for. We know that if there were fresh elections, he would be thrown out. But one of the factors that has really been complicating the efforts to reach a ceasefire in Gaza is that Netanyahu has to think, of course, about the country's security, but he is also thinking about his own political survival. And indeed, if he leaves office, he will also be vulnerable to various corruption charges. So it's very, very high stakes for him. And essentially he will need to make the choice. Does he placate the hard right parts of his governing coalition who want to see an offensive in Rafah, or does he stick with people like Gantz in the war cabinet who he doesn't personally like their old rivals, but they are more experienced, more professional and have more international trust? Gantz is probably calculating that if he leaves the government, it could trigger elections, and opinion polls in Israel suggest that most Israelis would rather have somebody else at the helm at this time of profound crisis. So, Jane, what are we waiting for here that the June 8th deadline that Benny Gantz has presented? Are we waiting for more updates on weapons shipments coming out of the states? Biden policy? What is the kind of game changer perhaps for the region here? Well, it's it's not completely clear. There have been people trying to oust Netanyahu. You know, for months now, there's a big protest movement, including some of the families of the hostages who are still trapped in Gaza, who are calling for Netanyahu to go and for the government to refocus on hostage diplomacy. A lot of it really still is in Netanyahu's hands. You know, some people thought that he would be out weeks ago. But he is a real veteran political survivor. And so far, he has been focused on keeping that governing coalition together, even when it has cost him in terms of the public support from the US. So it remains something quite unpredictable. So you've got the cracks in the Israeli war cabinet. You've got the death of the Iranian president. You also got the Saudi king in ill health. I just wonder how you gauge the instability in the region, because we haven't seen much of an impact on the oil price this morning. Well, the Saudi king has handed over most of his powers to his son quite some time ago. And his son is really positioning himself as one of the most influential figures in the region, still negotiating hard with the US to try to get more security guarantees for Saudi Arabia. But there is an issue of leadership. There is an issue of state fragility. You know, and well before October seven, many analysts were worried that, you know, domestic politics in both Iran and in Israel would put those two countries on a collision course. I think especially in Iran, it has really kind of built up this system of non-state actors that are friendly to Iran in the region, all of which depend on a narrative of forever war or permanent confrontation with Israel. And it becomes really difficult to make peace when internal political systems are geared towards confrontation, even if it is sometimes more about internal calculations and external ones. And Jane, just coming back to Iran and the death of the Iranian president, Raisi. Does it at all open the door back to a more moderate path on nuclear policy? It's early to say because it is going to depend on who succeeds him. But certainly, you know, since Razi came in, it became much more difficult for the international attempts to bring back the nuclear deal to succeed. And that wasn't just personally about where you see also seem to be about the supreme leader losing faith in nuclear diplomacy. But it is possible that you could get someone succeeds him. That takes a different view and you could get someone who succeeds him. You could get a new foreign minister who are more all with the West and better able to work out how they might get to some mutually advantageous understanding. The problem is that since the JCPOA was so badly damaged back in 2018 by Trump leaving, Iran has gradually just built up more and more nuclear capabilities. And it's probably impossible now to get back to where we were with the JCPOA because it's gained so much technical know how the inspectors have lost so much information that, you know, Iran is really the country that has gains in a lot of ways from the nuclear deal not being enforced. So probably the international priority now is to make sure it doesn't convert the knowledge and technology it does have into a weapons program. That's a much lower ambition than they used to be. But it remains something really urgent, as we do know that in Saudi Arabia, UAE, Turkey and others are talking about how they will look at their own options for nuclear weapons if Iran did come to get one. Okay. Jane Comunemente, policy and impact director at the European Leadership Network. Lovely to see you despite the circumstances. We'll get back to the markets next. This is being. We're going to grow by traffic by 9% this year. It's almost 200 million passengers and we're guiding for hours in the peak summer months flat to modestly up. And that's on top of a 21% fare increase. We would hope to have 158 maybe if we're lucky, hundred and 6061 game changers in the fleet by the end of July. That's roughly 2023 aircraft shy of where we had hoped. Yes, sir. I'm the CFO over at Ryanair is going to talk a little bit earlier on this morning. Let's talk more about what Ryanair had to say for itself. It's a little low this morning. The stock. It met estimates, but it's the outlook that really is where I think the interest lies this morning. Joining us now to discuss it are Phillip from our aviation team said, look, the expectation going into the summer was that we were going to see strong demand that was going to drive prices. These. Ryanair is a master of dynamic pricing. We're not seeing that. Why? So at the moment, I think there's a lot of I mean, airlines expected fares to continue growing this summer and that really hasn't kept up. So I think people are getting a little more circumspect about spending, especially on holidays. And while demand is strong, what airlines have said, demand is strong. That sort of rush where people are willing to pay as much as they can to go on holiday, I think that's sort of fading away a little bit. So is this a Ryanair story or is this a broader sector story? I think Ryanair is a leading indicator for the broader sector. I think that's what investors will be looking at in terms of how demand pans out going into the summer, because especially with Ryanair, you sort of it is one of the biggest low cost carriers in Europe, and that is where sort of the bulk of the market travel is. And that's really an indicator of where demand can go from here. And how much of a boost did Ryanair get from the at grounding? And then how much of a hit can we expect when we get reserves results later in the week? So so Ryanair was hoping for a massive boost from business grounding, especially because there are so many aircraft of of the a321xlr grounded because of the engine issues. And that's what they were sort of banking on, the fact that low capacity this summer would mean prices go much higher. And I think they sort of temper those expectations now, saying that the prices will be flat to a modest growth. And I think that's sort of indicative of demand out there in the market. So so this is confirmation of the French travel story is over. But the expectation was that, yeah, we would see that fading anyway, but the capacity issue would keep prices high. I think with its own capacity issues or around deliveries of the max, the 737, there was an inkling today maybe they're not going to get even as many aircraft as they had anticipated. Now they've got kind words to say for Stephanie Pope and what she's doing at Boeing in Seattle. But nevertheless, is there a sense that actually the initial the initial numbers may not even be matched? Surana said about 20 to 23 aircraft short this summer? Yeah, from what they want it to be. And I think they I mean, they are sort of struggling to get capacity. I mean, they were hoping to get as many maxs as possible because they have more seats on them verses their older engines and it gets them sort of way, way more sort of capacity and allows them to offer more services and more capacity. I mean, their entire strategy sort of offering routes and then filling them up with low fares said we have to get to my favorite topic, which is buybacks and dividends. Ryanair's new to that game, relatively speaking. How long does it continue for already talking about these flight fares? Oh, that's a really good question. I think that's what everyone's hoping to see, because 700 million was the buyback they announced today. They also announced a dividend earlier. And so essentially, investors are looking to see what sort of shareholder returns are going to come as they go along. And I think that's the companies said it's too early for an outlook, but I think that's what everyone's really hoping to see, what sort of investor returns come back. All right. We like I said, Philip, thank you for that. The latest on the Ryanair earnings. And don't miss our interview with Michael O'Leary, the CEO of Ryanair, of course, on those earnings. That's at 1:15 p.m. UK time. Now, we have been talking about what a busy week it's shaping up to be for M&A. A dramatic week. Time running out for BHP to make an improved offer to acquire rival Anglo after two bids rejected already BP. BHP is of course particularly interested in Anglo's copper mines, the metal surging to its highest ever level earlier extending a months long rally. Rio's Martin Ritchie joins us now for more. MARTIN Does the fact that Anglo's restructuring plan looks so similar to BHP is bode well for BHP? Yeah, it's a good question. As you said, BHP has until 5 p.m. London time this Wednesday to decide whether it's going to go for the full takeover of Anglo American, chiefly targeting the copper assets. As you said, Anglo has already its rival proposal, saying it will break up the company, creating something that looks like roughly like what BHP had proposed anyway. You know, there's two ways of looking at that. You know, on the one hand, BHP might want to get this done as quickly as possible before Anglo has a chance to put through its own restructuring and perhaps get a better valuation. This might be the only chance for BHP. On the other hand, I think it might make Anglo shareholders perhaps a little bit more cautious about the bid. They may say, look, we can get something similar from what Anglo management's proposing, let's just wait and see how that pans out. BHP, we understand, would prefer to have engagement with the Anglo board. Perhaps they will table a higher bid just to try and get the shareholders to pressure management to to to start talks. But as yet we haven't heard anything. Waiting for some news from BHP any time over the next two days. It does kind of feel as if BHP is betting against itself at the moment, which is an interesting place to be, and maybe its shareholders may feel something about that. MARTIN Let's just talk a little about the copper price. It feels like we've got two markets right now. You've got the speculative market which is driving the price higher, but you've got the real market, which is feeling like it's maybe a little oversupplied at the moment. Why are we getting this divergence between those two markets? Yeah, it's a very good question and it really is quite striking, especially coming speaking here from from China, where I think if you speak to people in the corporate market here in China, the biggest market in the world, people are not particularly optimistic, not particularly bullish about demand this year. But at the same time, you've got the copper prices going gangbusters in the rest of the world. And copper, copper futures are metals futures are sort of forward looking assets. So people are really anticipating supply shortages starting to get more serious over the next 12 months or so. We've seen a lot of very bullish, optimistic forecasts of that happening, and that's really what's attracted a lot of speculative money into copper into the London Metal Exchange in recent months. The idea that this is starting to happen, these shortfalls are starting to appear, but that's causing this dislocation, which you've pointed out between the price in London and what people might be seeing in the the physical markets. Well, Martin, the kind of euphoria that you're seeing in copper, the speculative pricing, as you put it, it breeds questions of when that kind of market action is going to snap. I'm curious, connected to for us, could it snap in time to affect the premium on the Anglo deal? Is there a connection to be made there? And look, I think it's partly it's partly sort of just coincidental timing. I think that BHP has launched this bid, which is very much driven by, you know, hopes for corporate prices and demand. It's sort of coincidental that it just happens to be happening At the same time, if you look at copper prices going to $11,000. I don't think BHP is going to make a decision of whether to go ahead just based on what the copper prices did. I think BHP has made very clear over the past two or three years that it wants copper assets very much for the long term for the next two or three decades. So obviously it makes colourful backdrop for the bid, but I do think that's what's at the core of motivating BHP. I want to see how high these prices actually rise. Boomers. Martin Richey, we thank you so much for that context on the copper market and of course the deal that we were seeing around BHP and Anglo American. Speaking of deal flow, this, I think where I can put my Spanish correspondent hat on properly. You already buy one of those as well, a badge of honor, I think, a sweatshirt and all the paraphernalia. Let's talk a little bit about this BBVA Sabadell deal. Yeah. You now have Mexican billionaire Daniel Martinez backing it. You have the ECB saying, we're a fan. What could possibly go wrong? Spanish politics. Shareholders. Unions, staff. There are many there are many issues that stand in the way of this deal. I still think this deal is emblematic of a problem that Europe faces, which is you can do deals within a country and even then that appears to be quite hard doing deals outside of and cross-border deals incredibly difficult. Isn't this exactly what Emmanuel Macron spoke to John Micklethwait about? Exactly. That he's actually ramping them up? I'll also add the other piece of the equation. Sorry to interrupt you. Was the idea that the Bank of Spain is actually at the same time increasing their standards around lending at the exact same time they're saying is not going to happen to October of 2026. But they're saying that reserves that those banks need, that the U.S., by the way, is pulling back on or potentially reported to be pulling back on. Yeah. Spain is wrapping it up because they're worried about the longevity of those banks. Well, the point that Emmanuel Macron is making is that you need to have this sort of take over if you want to compete internationally. So, yeah, it's interesting that you've got the ECB and the second biggest investor supporting it. You talk about the potential blowback later on from shareholders, but there surely shows that the shareholders, some of them at least do support this deal. Some of them, some of them certainly do. And you can see the attraction of doing such a deal. You take you need to take out an awful lot, though, in terms of the domestic banking network in order to make this work. There is to make this to make this deal stand up and for it to really work for shareholders. You have got to take out an enormous amount of costs. And that is going to be something that is that is politically problematic. And I think that is where the pushback may come. I'm not saying that you can't make the deal work on paper, which you almost certainly can. It's whether or not you can make it work in the real world and with the politics that go around that. There's also I'm curious, I don't think on the record Santander has said anything about this just yet, but Santander is, of course, the largest Spanish group. They don't only have massive of a presence in Spain and broader Europe, but in Latin America as well, not here in the UK and elsewhere internationally. But that's why this deal is so interesting, because BBVA in particular is more of an EU kind of exposure, whereas SABADELL has more of that domestic story. Together they actively compete with Santander. And I'm wondering if there's some sort of behind the scenes politics, behind the scenes lobby about that competition not being a positive thing, but actually almost cannibalizing some of that growth within Spain, but is precisely something else focused on lending in Spain with the counterweight of Bbva's tilt towards emerging markets that reportedly makes the ECB give this support despite it being potentially a hostile takeover. I think the bigger take away from all of this, though, is that we are six different. Yes, things are starting to happen. We've got we've got deal flow certainly happening in the UK. Deal flow has been sort of really absent for quite some time. You're certainly seeing evidence of that continuing to push on. Is that something that keeps equity markets on track as well in terms of the rally that we're seeing? I find it fascinating that this is a day where Mike Wilson, one of the biggest bears out there, has finally capitulated and raised his targets. What is there that is standing in the way of this rally continuing? Well, is deal for sign then of good times ahead isn't expansionary sort of a consolidation story ahead of poor times ahead? And I and I've never been able to figure out whether it's actually a sign up because you see it at the best of times and the worst of times. And the fact that we can't tell which we're in is a problem. And is this is it better that companies do deals or that they buy back their stock? Yeah. And kind of what what what the shareholders choice it's that these are tricky decisions that have to be made but Mike Wilson it looks as if he has finally capitulated. Is that a signal that maybe the market will take on and think about a little bit more? We're going to carry on the conversation. Wake up for this morning. The Post is up next. Francine Lacqua. I'll take you through the next hour of the rest of Monday. It is interesting as the staff will continue to see the build up to the video numbers which come Wednesday. This is Bloomberg.

Channel: Bloomberg Television

Views: 9,658

Keywords: BBVA, Boeing, ECB, Earnings, Ebrahim Raisi, Gold, Iran, Iran President, Neil Sorahan, Nvidia, Plane Crash, Real Estate, RyanAir, Sadadell, Smead, Wizz Air, boeing 737 MAX, helicopter crash

Id: rs6hrhJVHK0

Length: 96min 16sec (5776 seconds)

Published: Mon May 20 2024