Harris-Trump Election Debate Preview & Apple's iPhone 16 Launch | Daybreak: Europe 09/10/2024

Daybreak Europe >> THESE ARE THE STORIES THAT SET YOUR AGENDA. CHINESE SHARES HEAD FOR THEIR LOWEST CLOSE IN FIVE YEARS, Apple's AI promise EXPORTS FROM CHINA JUMP. APPLE REVEALS ITS NEWEST IPHONE WITH A PROMISE OF AI POWERED TOOLS AS THE COMPANY AWAITS A RULING ON WHETHER IT OWES A TAX BILL, PLUS REPUBLICAN AND DEMOCRATIC CONTENDERS PREPARE TO FACE OFF IN A LIVE DEBATE, WHAT TO EXPECT. Trump and Harris ready for showdown HAPPY TUESDAY. EUROPEAN MARKETS LOOKING FOR DIRECTION, MODEST GAINS YESTERDAY AND GAINS OVER 1% FOR THE NASDAQ AND S&P. FTSE POINTING TO LOSSES, S&P LOWER, NASDAQ OFF BY 70 POINTS. TREASURIES ARE CALLED NOW -- CALLED NOW, CPI PRINT AND INFLATION DATA WERE OUT. BRENT IS DOWN, GOLD HOLDING. DOWN 2/10 OF 1%. AVRIL IS STANDING BY. AVRIL: YEAH, MIXED PERFORMANCE IN ASIA EQUITIES, SOME LOOK RANGE BOUND INCLUDING JAPANESE AND SOUTH KOREAN WON AS INVESTORS IT IS A PAID TRUMP HARRIS DEBATE. STABILIZATION, FOCUS IN CHINESE EQUITIES, EXPORTS FOR AUGUST BEAT SO THIS IS A RARE BRIGHT SPOT BUT LOOK AT IMPORTS AND WEEK DOMESTIC DEMAND. COLD COMFORT TAKE IN WITH THE CPI AND PPI NUMBERS, CSI NEGATIVE ONE THIRD OF A PERCENT OFF. FLIP THE BOARD. GEOPOLITICAL CONCERNS IN THE MIX , THESE ARE CHINESE BIOTECH FIRMS IN THE CROSSHAIRS OF LAWMAKERS IN THE HOUSE TARGETED SOME FIRMS. FLIP THE BOARD AGAIN. PRIMARY CONCERN IS DOMESTIC DEMAND, SO IF YOU LOOK AT THESE STOCKS IT IS APPROACHING THE LOWEST CLOSE 2019. CONCERNS THAT THIS WILL ERODE CONFIDENCE CAUSING DEFLATIONARY FEEDBACK LOOP AND CORRECT JOB TO ACT. JAPANESE EXPERIENCE, THE MORE THEY HAVE TO COME UP WITH. WE ARE KEEPING OUR EYES ON THESE DYNAMICS. TOM: INDEED. LET'S GET MORE ANALYSIS. A CHECK ON ASIAN MARKETS. LET'S BRING IN MARK CRANFIELD BECAUSE THE CHINA STORY IS A TOP STORY TODAY, WHAT DOES IT TAKE TO TURN THINGS AROUND? MARK: MASSIVE CIRCUIT BREAKER, SENTIMENT IS SO BAD. TRADERS CAN SEE IF THEY SELL INTO THE RALLY, THAT HAS BEEN THE STORY. KEEP ON REPEATING. TRADERS HAVE HEARD AND SEEN LOTS OF MOVES BY CHINESE AUTHORITIES, NOT CONCLUDE THE, NOT DOING A GOOD JOB GETTING MONEY INTO ECONOMY SECTORS ESPECIALLY PROPERTY AND THEY SHOT THEMSELVES IN THE FOOT TAKING OUT PROPERTIES. THE FLOWS HAVE TAKEN OUT SOME NAMES SO PEOPLE CAN NO LONGER SEE TRANSACTIONS, NOT INSPIRING CONFIDENCE. SEEING THE SMALL THINGS MOVING TRANSPARENCY. THEY WANT TRANSPARENT MARKETS. LOOK AT THE U.S.. THEY CAN DECIDE WHETHER TO GO IN OR OUT. China deflation risks rises MORE DIFFICULT TO JUDGE CHINESE ECONOMY, NO WONDER MONEY IS ONLY FLOWING ONE WAY. FOREIGN INVESTORS WILL NOT PUT THEIR MONEY IN. TOM: ARE WE SEEING GREEN SHOOTS WHEN IT COMES TO EXPORTS? MARK: WE MAY BE BUT THE TIMING IS POOR SO GUESS WHAT? THE SURPLUS WINS AND WE HAVE A DEBATE BETWEEN HARRIS AND TRUMP, FRONT AND CENTER WILL BE CHINA OR THE SOFTNESS BETWEEN THE UNITED STATES. NO WAY CHINA WINS, SO THE TIMING IS POOR AND IMPORTS CRASHED AGAIN, NO GOOD FOR ASIA OR CHINA. THEY'RE NOT IMPORTING ENOUGH, NOT GOOD NEWS. THE NUMBERS ON THE SURFACE, THE DETAILS ARE AWFUL, NOT HELPING. TOM: INDEED. WE WILL STAY ON TRADE TENSIONS. DONALD TRUMP IN HARRIS ARE PREPARING FOR THE BIGGEST NIGHT, THE FIRST TELEVISED DEBATE. DIRECTOR ROSE MADISON JOINS ME. ROSE: THERE IS A LOT OF DEBATE ABOUT HOW MUCH DEBATES MATTER. JOE BIDEN DEBATE WAS CONSEQUENTIAL IN FOR HER IT IS A CHANCE TO REACH VOTERS BECAUSE THEY ARE NEARLY TIED AND WHAT THEY CARE ABOUT IS THE ECONOMY, THEY DON'T KNOW WHAT SHE WOULD DO AROUND TAXES. Polls show close US election EVERYBODY IS TRYING TO SHOW THEIR STUFF. HE POINTS TO HIS RECORD, SHE NEEDS TO EXPLAIN WHAT SHE WILL DO. WAYS HER OWN AGENDA? SO SHE HAS A CHANCE TO SPEAK TO SWING STATE VOTERS AND EXPLAIN WHAT SHE WOULD DO BECAUSE THAT IS WHERE THE VOTES ARE, UP FOR GRABS. TOM: THIS IS IMPORTANT, DEBATES CAN MATTER, WE SAW THAT WITH BIDEN VERSUS TRUMP. WHAT ARE THEY HOPING TO ACHIEVE? GUEST: WHAT WILL BE HIS ATTACK LINE? HE'S TRYING TO FIND THAT. HE NEEDS TO SHOW HE IS WITH IT. QUESTIONS HAVE SHIFTED ABOUT AGE TWO DONALD TRUMP. SUDDENLY THE ONUS WILL BE ON HIM. TOM: THE PREVIEW, THE LEAD UP. BETWEEN HARRIS AND TRUMP LATER TODAY, WE WILL COVER THAT FOR YOU. NOW TO APPLES BIG UNVEILING, THE TECH GIANTS ENTICING CONSUMERS WITH MODEST UPGRADES, PROMISES OF AI. NOT INCLUDED IN ADDITIONAL MODELS. ANNABELLE DROULERS, HOW DID APPLES PITCH GO? ANNABELLE: MODEST UPGRADES AND THINGS THAT HAVE NOT CHANGED, IPHONE 16 RESEMBLES 15. NEW COLORS, CUSTOMIZABLE ACTION BUTTON REPLACES THE MUTE SWITCH. A NEW CAMERA CONTROL BUT, THESE ARE SOME CHANGES BUT 15 AND 16, NO DIFFERENCE. Apple unveils iPhone 16, new watches BIG CHANGE IS THE AI SIDE AND THE COMPANY SAYS THIS WAS BUILT FOR AI ROLLED OUT IN THE U.S. AND OTHER REGIONS. THOSE ANGLES, WE DID NOT SEE MANY CHANGES. SUPPLIES LOOK WEAK, BUT ANALYSTS CONTINUE TO BE POSITIVE, SAYING AI FEATURES SET THE GROUND FOR CONSUMERS TO BUY INTO THE STORY. TOM: ANNABELLE DROULERS ON THE IPHONE 16 AND PROSPECTS AROUND AI. THINGS TO ABOUT, COUNTING DOWN TWO JOBS DATA OUT OF THE U.K. UNLIKELY TO CHANGE THINKING, BUT IMPORTANT. THEN LATER WE GET TECH EARNINGS FROM BRUSSELS WITH A FOCUS ON APPLE AND TAX MONEY SO THE BIG ONE ON THE POLITICAL AGENDA, THE PRESIDENTIAL DEBATE LIVE. YOU CAN GET A ROUND UP TO GET YOUR DAY GOING IN DAYBREAK. GO TO D.A. WHY BIGO AND THAT IS FRONT AND CENTER AS OUR CHANGES FOR U.S. BANKS. HARRIS AND TRUMP PITCHING PLANS WITH THE WTO CHIEF ECONOMIST. THIS IS BLOOMBERG. >> LOOK BACK HARRIS AND TRUMP Kamala Harris, Donald Trump set to debate tonight CALLING A 100% AND A LEVY SO WHAT KIND OF IMPACT THAT THE IN WHAT IS THE JOINING ME IS THE CHIEF ECONOMIST AT WTO WITH THE REPORT DETAILING WHERE WE STAND THIS IS A CLARION CALL CRITICS MIGHT SAY IT IS MYOPIC. WOULD YOU PUSHBACK? RALPH: WE THINK IT IS TIMELY BECAUSE TRADERS ARE A POWERFUL FORCE FOR INCLUSIVENESS AND WE NEED TRADE AND DOMESTIC POLICIES AND INTERNATIONAL COOPERATION. ,: THERE IS A LOT TO UNPACK INCLUDING EFFORTS TO RESHORE MANUFACTURING, THAT IS UNDER CRITICISM. I DON'T SEE A LOT WHEN IT COMES TO NATIONAL SECURITY, THIS IS AN ISSUE. RALPH: ABSOLUTELY. A KEY ISSUE AND WE HAVE OTHER WORK ON IT AND ECONOMIC SECURITY , RESILIENCE OF SUPPLY CHAINS. IF YOU HAVE A RISKY WORLD YOU NEED OUTSIDE OPTIONS, THAT'S US-China trade tensions remain WHAT YOU GET FROM TRADE AND I UNDERSTAND TENDENCIES FOR RESHORE. WE HAD ISSUES WITH SUPPLY CHAINS THE TRADE BECAME PART OF THE SOLUTION. TOM: WHAT LESSONS HAVE WE LEARNED FROM GERMANY? THE RUSSIAN ECONOMY IN THE IMPACT ON THE EUROZONE? ENMESHING YOURSELF TO CLOSELY COMES WITH RISKS. RALPH: BEING OVERLY DEPENDENT DOES POSE RISKS BUT THE WAY TO RESPOND IS DIVERSIFICATION MAKING EVERYTHING YOURSELF AND HAVING A BROAD SUPPLY CHAIN, THIS IS WHAT WE SAW IN THE WORK ON UKRAINE. COUNTRIES LIKE GERMANY STRUGGLED BUT THEY WERE EXPOSED BECAUSE THEY RELIED ON PARTS FROM UKRAINE, RUSSIA AND BECAUSE OF TRADE THEY FOUND SOURCES OF SUPPLY, NOT WHAT YOU WOULD GET IN CORRELATED WORLD. TOM: TRUMP THREATENED 100% TARIFFS, 10% ON ALL GOODS INTO THE U.S.. WHAT WOULD THAT MEAN? RALPH: CANNOT COMMENT ON PARTICULARS BUT WE ARE SEEING FRAGMENTATION BETWEEN CHINA AND U.S., 30% SLOWER SINCE THE FIRST WAVE OF THE TRUMP TARIFFS BUT WE DIVIDED THE WORLD INTO TWO SEPARATE BLOCKS NDC TRADE GROWING MORE QUICKLY WITHIN THEN BETWEEN. WE'VE DONE SIMULATIONS SHOWING LOSSES OF INCOME. TOM: IS BRUSSELS WRONG TO IMPOSE TARIFFS AND WHAT ARE THE ALTERNATIVES? RALPH: THIS IS FOR THEM TO DECIDE BUT WE HAVE DEFENSE INSTRUMENTS, YOU CAN SUBSIDIZE BUT IT ALL HAPPENS WITHIN THE RULES. IT'S ABOUT EXPECTATIONS AND WE NEED TO PRESERVE CREDIBILITY. TOM: WHAT YOU THINK ABOUT AI? IS THERE RISK WITHIN THE TRADING BALANCE GIVEN HOW MUCH POWER IS EMBEDDED IN CORPORATIONS? RALPH: GOOD QUESTION AND DIGITALLY DELIVERED SERVICES GROW FASTER THAN SERVICES AND GOODS TRADE PER YEAR, THINGS LIKE ACCOUNTING, MARKETING AND SO ON, ANYTHING VIA THE INTERNET. WE VIEW THIS AS AN OPPORTUNITY FOR ECONOMIES BUT AS YOU SAY DIGITAL DIVIDE, IT'S IMPORTANT TO DO SOMETHING ABOUT IT. YOU NEED OPEN TRADE AND TRADE RULES. IN DOMESTIC POLICIES. YOU NEED INTERNET. TOM: CHIEF ECONOMIST AT WTO ON THE REPORT WITH A FOCUS AND CALL FOR MORE INCLUSIVE TRADE GIVEN POLITICAL DYNAMICS, THANK YOU. COMING UP, GOLDMAN SACHS AND TRADE FALLING 10%. THAT STORY AND WHAT ELSE YOU NEED TO KNOW THAT. THIS IS BLOOMBERG. TOM: WELCOME BACK. FRENCH CARMAKER, NOT A CARMAKER, SAYS IT IS POSSIBLE Le Maire: France can still hit deficit goals TO MEET DEFICIT TARGETS IF THE NEXT GOVERNMENT ACTS QUICKLY. IN A HEARING OF THE FINANCE COMMITTEE THEY SAID THE SUCCESSOR SHOULD CANCEL THE CREDITS THE OUTGOING GOVERNMENT HAS SET ASIDE. GOLDMAN SACHS EXECUTIVE DAVID SOLOMON'S WARNING THAT BUSINESS IS ON TRACK TO DROP 10% FROM PRIOR YEARS, LED BY CLIENTS IN FIXED INCOME. THEY TAKEN A PRETAX IT IN CONSUMER BUSINESS AS THEY MOVE AWAY FROM CREDIT CARDS WITH GENERAL MOTORS. GUEST: I WOULD SAY WITH EQUITY YOU HAVE A STRONG THIRD-QUARTER IN 2023, GIVEN THIS QUARTER, MORE CHALLENGING ENVIRONMENT IN THE MONTH OF AUGUST, BUSINESS IS TRENDING DOWN. TOM: AUSTRALIA'S BANKING REGULATOR HAS PROPOSED PHASING OUT THE KIND OF SECURITIES WIPED OUT AFTER THE CREDIT SUISSE COLLAPSE. THEY SAY THE MOVE WILL SUPPORT STABILITY AT TIMES OF CRISIS. NOW WE WILL TAKE YOU LIVE TO PREPARATIONS FOR THE SPACEX LAUNCH SENDING ASTRONAUTS INTO SPACE, COUNTING DOWN TO THE LAUNCH. LIFE PICTURES CAPE CANAVERAL OF COURSE IN FLORIDA AND THE AIMS AND AMBITIONS OF THIS MISSION INCLUDING BILLIONAIRE JARED WHO PAID MUCH OF THE MISSION TO ATTEMPT THE FIRST COMMERCIAL SPACEWALK. SO JARED WILL BE AMONGST TWO OF THE ASTRONAUTS ATTEMPTING THE WALK AND THEY WILL ALSO CARRY OUT SCIENTIFIC EXPERIMENTS IN THE ORBIT. COUNTING DOWN TO THE LAUNCH EXPECTED IN THE NEXT FEW HOURS. WE WILL BRING YOU THAT LIVE. A COUPLE OF DELAYS BEFORE BUT OF COURSE THEY ARE HOPING CONDITIONS WILL ALLOW THE LAUNCH INCLUDING FOR PRIVATE ASTRONAUTS AND A BILLIONAIRE. LIVE PICTURES OF CAPE CANAVERAL IN FLORIDA. FORMER ECB PRESIDENT MARIO DRAGHI CALLING FOR NEW SPENDING BY EUROPEAN UNION, HIS REPORT, NEXT. THIS IS BLOOMBERG. TOM: GOOD MORNING, THIS IS BLOOMBERG DAYBREAK EUROPE. CHINESE SHARES SLIDE HEADING FOR THEIR LOWEST CLOSE IN MORE THAN A FIVE YEAR TIME AS BEARISH SENTIMENT GRIPS THE MARKET. BUT EXPORTS FROM CHINA UNEXPECTEDLY JUMPED TO A TWO-YEAR HIGH. APPLE REVEALS THE LATEST VERSION OF ITS FLAGSHIP IPHONE ONLY TO ENTICE BUYERS WITH THE PROMISE OF AI POWERED TOOLS. THIS AS THE COMPANY AWAITS AN EU RULING AND WHETHER IT OWES A 13 BILLION EURO TAX BILL. PLUS, TRUMP VERSUS HARRIS, THE REPUBLICAN AND DEMOCRATIC PRESIDENTIAL CONTENDERS PREPARE TO FACE FOR THE FIRST TIME IN A LIVE DEBATE. WE WILL SET YOU UP ON WHAT TO EXPECT WITH THE POLITICS OF THE U.S. LET'S CHECK IN ON THESE MARKETS AND POLITICS WILL BE PART OF THE MIX, AND THE INFLATION DATA THAT DROPS OUT OF THE U.S. ON WEDNESDAY WITH EXPECTATIONS THAT THE HEADLINE CPI NUMBER WILL COME DOWN TO 2.6%. IN LINE WITH THAT MOVE TO LOWER INFLATION AT THE 2% TARGET. EUROPEAN FUTURES ARE FLAT, LOOKING FOR DIRECTION AFTER GAINS OF .08%. A DECENT SESSION ON WALL STREET BUT LOSSES IN THE PREVIOUS WEEK NOT YET MADE UP. FTSE 100 FUTURES LOWER BY .04 PERCENT. S&P DOWN BY A TENT AFTER GAINS OF ONE POINT 2% BY THE END OF THE CLOSE YESTERDAY. NASDAQ FUTURES POINTING THE LOSSES OF 52%. NEST CLOSING UP BY 1.3 PERCENT. LET'S LET THE BOARD ACROSS ASSET. NOTCH -- NOT MUCH MOVEMENT TREASURY. PRICING AROUND THE FRONT END, IT SEEMS THAT TRADE IS EVADING SOME OF THE BETS ON THE 50 BASIS POINT CUTS FROM THE FED ON SEPTEMBER THE 18TH. INFLATION DATA COULD CHANGE. THE 10 YEAR AT 370. THE POUND AT 130. BRENT 71.70 ONE. GOLD HOLDING ABOVE 2500, DOWN .10%. MARIO DRAGHI CALLING ON THE EU TO INVEST AS MUCH AS 800 Draghi calls on EU to invest €800B BILLION EUROS EXTRA PER YEAR TO TRANSFORM THE ECONOMY. HE ALSO CALLED FOR A COMMITMENT TO REGULAR THE COMMON BONDS TO MAKE IT COMPETITIVE. LET'S BRING IN BLOOMBERG'S OLIVER CROOK IN BERLIN STANDING BY WITH THE DETAILS. WHAT IS MARIO DRAGHI'S DIAGNOSIS OF WHAT IS WRONG WITH EUROPE? OLIVER: TOM, THIS REPORT TOOK MORE THAN A YEAR TO PUT TOGETHER AND HE FINALLY DELIVERED. I THINK THAT HE PUTS THIS IN REALLY EXISTENTIAL TERMS, WHICH MAY SOUND A BIT ABSURD TO PEOPLE LIVING IN EUROPE TODAY. IT'S SUCH A WEALTHY CONTINENT AND IS HOME TO SO MANY LARGE COMPANIES. MARIO DRAGHI IS TALKING ABOUT IT IN THE FULLNESS OF TIME IF EUROPE DOES NOT REFORM ITSELF, IT'S AT RISK OF BEING ECONOMICALLY RELEVANT. WE GET THAT SENSE A LITTLE BIT IN GERMANY AS WE WATCH THAT SLOW MOTION ECONOMIC SLOWDOWN REALLY BROUGHT HOME. I THINK LAST WEEK BY WHAT WE HEARD FROM VOLKSWAGEN. BASICALLY ONCE THE LARGEST CAR COMPANY IN THE WORLD, NOW LESS THAN 8% OF TESLA'S MARKET CAP. THIS IS BASICALLY WHAT AWAITS THE REST OF EUROPE ACCORDING TO MARIO DRAGHI. HE REALLY SEES THIS AS BASICALLY THE MAIN ISSUE BEING THE TECHNOLOGY GAP AND THE CONSEQUENCE OF THAT TECHNOLOGY GAP HAS BEEN A HUGE PRODUCTIVITY GAP THAT EXISTS BETWEEN THE UNITED STATES AND EUROPE SINCE 2000, BASICALLY PER CAPITA INCOMES HAVE GROWN TWICE AS FAST IN THE UNITED STATES AS A CONSEQUENCE. EUROPE HAS BEEN UNABLE TO HOLD ONTO ITS UNICORNS FOR MORE THAN A THIRD OF THEM LEAVING ONCE THEY ARE FOUNDED HERE IN EUROPE. THERE IS A HUGE LABOR SHORTAGE COMING IN 2040, MORE THAN 2 MILLION PEOPLE NET WOULD BE LEAVING THE WORKFORCE. THE SOLUTION TO THAT PROBLEM HE SEES IS BASICALLY TRYING TO BOOST PRODUCTIVITY. HE ALSO POINTS TO THE FACT THAT IN THE LAST 50 YEARS, THERE HAS BEEN NO COMPANY FOUNDED IN EUROPE THAT HAS A MARKET CAP OF MORE THAN 100 BILLION EUROS. BY THAT WHEREAS IN THE UNITED STATES ALL 6 TRILLION WERE FOUND IN THE LAST 50 YEARS. TOM: THE TECHNOLOGY GAP IS STARK. ONE ARE THE SOLUTIONS YOU POINTING TO? OLIVER: IT'S A BIGGER AND MORE UNIFIED UNIT. THAT WILL HAVE A LOT OF RESISTANCE, PARTICULARLY IN THE POLITICAL CLIMATE RATHER YOU SEE IT IN FRANCE OR GERMANY. EVEN BY THE SOCIALIST GOVERNMENT IN GERMANY. WHAT HE'S CALLING FOR IS MORE EURO BASE. HE SAYS THE U.S. AND CHINA ARE ABLE TO COORDINATE THEIR TRADE AND FISCAL POLICIES IN A WAY THAT EUROPE IS UNABLE TO DO, HE TALKS ABOUT THE NEED FOR COLLECTIVE SPENDING ON DEFENSE, PROCUREMENT, CAPITAL MARKETS AND USE INTERESTING EXAMPLES. YOU SEE THE REACTION FROM THE GERMAN FINANCE MINISTER SAYING JOINT DEBT IS OFF THE TABLE. IMMEDIATELY HAVING THIS CONVERSATION DOES A DISSERVICE TO THE POINT THAT MARIO DRAGHI IS TRYING TO MAKE. THE QUESTION OF JOINT DEBT IS A TOOL TO TRY TO ACHIEVE THESE THINGS. HE TALKS ABOUT THE DEFENSE AND IN EUROPE YOU HAVE 12 DIFFERENT TANKS THAT ARE MANUFACTURED. IN THE UNITED STATES YOU HAVE ONE. THESE ARE THE SORTS OF THINGS HE WANTS TO BRING INTO UNISON. HE WANTS TO SEE MORE MERGERS, HE WANTS TO SEE MORE ACCESS BETWEEN EUROPEAN MARKETS, WHETHER IT'S FINANCIAL OR WITHIN TELECOMMUNICATIONS, HITTING THE GRID IN EUROPE, ALL OF THESE THINGS NEED TO HAPPEN, BASICALLY FROM MARIO DRAGHI, OTHERWISE IT WILL BE A SLOW AGONY FOR EUROPE, SUCH REPORTS SEE 350 PAGES IS THAT THEY COULD BE EASILY IGNORED, IT WILL BE UP TO THE NEW COMMISSION TO SEE IF URSULA VON DER LEYEN CAN MAKE THESE THINGS HAPPEN. TOM: OLIVER CROOK ON THE GROUND IN BERLIN ON THE DETAILS ABOUT THE REPORT COMING THROUGH FROM A FORMER HEAD MARIO DRAGHI. ON THE TECH STORY, TSMC CROSSING MONTHLY SALES FOR AUGUST YEAR ON YEAR UP 33% FOR THE COMPANY BEHIND THE SIGNIFICANT FOUNDRIES BASED IN TAIWAN ELSEWHERE, TURNING OUT SHIPS WITH NVIDIA AND APPLE. AUGUST MONTHLY SALES YEAR ON YEAR UP 33%, WE BRING YOU MORE DETAILS IF AND WHEN WE GET THEM. ONE AREA MARIO DRAGHI'S URGING EUROPE TO BE MORE COMPETITIVE IS TECHNOLOGIES. CLEARLY LAGGING BEHIND THE U.S. AND CHINA. IT COMES AS COMMERCIAL USES OF GENERATIVE AI IS TRANSFORMING A WIDE RANGE OF INDUSTRIES. MY NEXT GUEST, WHICH IS ALL OF THIS VERY CLOSELY WITH THE EYE TO THE FUTURE. HEAD OF THE GLOBAL THEMATIC RESEARCH TEAM AT BANK OF AMERICA GLOBAL RESEARCH. I'M GREAT TO HAVE YOU IN THE STUDIO. LET'S GET TO THAT QUESTION TO KICK THINGS OFF ON THE GAP THAT EXISTS BETWEEN EUROPE, THE U.S. AND ARGUABLY CHINA, WHEN IT COMES TO TECHNOLOGY, PARTICULARLY GENERATIVE AI, HOW WIDE IS THAT GAP, HOW MUCH OF A CHALLENGE IS IT? >> THIS IS A REVOLUTION, 18 MONTHS AGO THE WORLD HAS CHANGED AGAIN, AND WE ARE BIG BELIEVERS THAT GENERATIVE AI WILL BE AS BIG AS A SMART PHONE, AND THIS IS AMERICAN TECHNOLOGY. THE COMPANIES THAT ARE INVOLVED, THE INFRASTRUCTURE, THE IP IS ALL AMERICAN, AND EU'S BEHIND. THEY HAVE TO PUT IN THE GAP VERY FAST. MORE THAN THAT, WHAT WE HAVE SEEN WHERE THE AMERICANS HAVE UNDERSTOOD THAT THIS IS THE REVOLUTION AND WE SAW MORE SILOS AND WE SAW MORE REASSURING AND MORE RESTRICTIONS ABOUT THE PROJECT AND IF THE EU IS NOT GOING TO COMPLETE THE GAP RIGHT NOW, THEY WILL BE BEHIND. THEY WILL DEFINITELY ENJOY THE FRUITS OF AI, BUT THEY WILL HAVE TO GO TO THE UNITED STATES AND GET ACCESS AND BE IN THE MERCY OF THE UNITED STATES. IT IS NOW BEEN CONCENTRATED, WE ARE TALKING ABOUT MASSIVE GAINS, EVERYTHING THAT'S ABOUT TO CHANGE, JUST IN THE BEGINNING, AND IF THE EU IS NOT GOING TO TRY TO START INVESTING TODAY, IT'S JUST GOING TO BE WAY TOO LATE, THINGS ARE ACCELERATING SO FAST AND DEVELOPMENTS ARE HAPPENING SO FAST. IT'S JUST GOING TO BE WAY TOO LATE. TOM: WHEN IT COMES TO THE DEBATE AND THERE IS A HEATED DEBATE RIGHT NOW WITHIN THE GENAI SPACE, AMONGST INVESTORS, THOSE WITH EXPOSURE, THE CAPEX FROM THE HYPER SCALARS, THE AMOUNT BEING SPENT IN THE GAP BETWEEN THE CAPEX L.A. R.O.I., THE RETURN ON INVESTMENT, SHOULD INVESTORS BE CONCERNED, WHAT DO YOU SEE WHEN YOU SEE THAT GAP? >> I THINK INVESTORS SHOULD BE EXCITED BECAUSE WE ARE IN AN EVOLUTION, WE AND WE ARE AT THE RIGHT STAGE OF THE EVOLUTION. 18 MONTHS AGO WE WILL WAKE UP IN THE WORLD WILL HAVE CHANGED. I THINK THERE'S A GENERAL UNDERSTANDING THAT THIS IS ABOUT TO CHANGE EVERYTHING WHEN THE RIGHT INVESTMENT HAS TO BE HAPPENING HERE AND NOW. THERE'S A LOT OF INVESTMENT THAT NEEDS TO BE DONE. IT DOESN'T MATTER IN THE INDUSTRY, FINANCIAL SERVICES, HEALTH CARE, INDUSTRIALS, WHATEVER, THEY NEED TO INVEST -- INVEST TODAY, IMPLEMENTING TECHNOLOGIES, REGULATIONS, THERE'S SO MUCH WORK THAT NEEDS TO BE DONE AND COMPANIES ARE NOT DOING IT TODAY WILL NOT SURVIVE IN COMING YEARS. TOM: IT'S A FACT THEY ARE NOT ABLE TO MONETIZE IMMEDIATELY OR IN THE NEAR TERM TO SHORT-TERM MEDIUM-TERM, THAT SHOULD NOT HOLD BACK COMPANIES FROM INVESTING IN THE SPACE, THAT'S NOT A CONCERN FOR YOU? >> I'M VERY CONCERNED ABOUT THEM DOING THE WORK RIGHT NOW, HE WILL BE TOO LATE. THINGS ARE HAPPENING FASTER AND FASTER. IF THE INVESTORS ARE NOT BEING DONE TODAY, IT JUST GOING TO BE WAY TOO LATE. WE HAVE SEEN THAT IN HISTORY TEACHES US AGAIN AND AGAIN THAT THESE INVESTORS ARE NOT DONE. IF WE HAD THE DISCUSSION BACK IN 19 60, THE AVERAGE LIFE EXPECTANCY ON THE COMPANY OF THE S&P 500 WAS 62 YEARS. IT'S DOWN TO 17, COMPANIES ARE LEFT AND RIGHT BECAUSE THERE NO LONG-TERM AND SHORT-TERM ANY NEED THE INVESTMENT TODAY. I'M VERY EXCITED ABOUT COMPANIES MAKING THE INVESTMENT. I THINK THEY ARE DOING THE RIGHT WORK. IT'S THE RIGHT MANAGEMENT WILLING TO SACRIFICE THE SHORT TERM TO THE LONG TERM WHILE THE MANAGEMENT WILL WAKE UP IN 2, 3 YEARS AND START MAKING THE INVESTMENT. TOM: HOW DO YOU THINK ABOUT THE CONSTRAINTS ON THE DEVELOPMENT OF GENERATIVE AI WEATHER ON THE ENERGY FRONT OR SOME HAVE TALKED ABOUT A DATA SHORTAGE? SOME SAID WE HAVE STARTED TO READ OUT OF DATA, WE ARE STARTING TO LOOK AT DATA. HOW MUCH CONSTRAINT IS ENERGY ON DATA? >> A MASSIVE CONSTRAINT ACROSS THE BOARD, WE NEED MORE ENERGY, WE ARE MOVING FROM THE WORLD OF ENERGY TRANSITION TO ENERGY ADDITION BECAUSE THE I.T. SECTOR IS CONSUMING SO MUCH ENERGY AND IT'S NOT IN THE NUMBERS YET, OR WATER SHORTAGE BECAUSE OF ALL THOSE DATA CENTERS ARE REQUIRED THE LACK OF COOLING SYSTEMS, OTHER RESOURCES LIKE LITHIUM AND BATTERIES AND SO ON THAT ARE ALL REQUIRED, COPPER AND SO ON, AND DATA IS SO IMPORTANT. EVERY DAY WE ARE GENERATING 329 QUINTILLION BYTES OF DATA EVERY DAY. WE ARE NOT USING ALL OF IT, WE ARE REACHING TO THE POINT THAT WE NEED QUALITY DATA IN REAL DATA. AND AS A RESULT, THERE'S A NEW APPROACH WITH SYNTHETIC DATA TRYING TO CREATE NEW DATA, THAT COULD START TRADING THE MODELS, AND THERE'S A COMPETITION ON DATA, DATA IS THE NEW OIL, AND DATA IS THE NEW RESOURCES, IF YOU HAVE DATA, THIS IS PROBABLY BIG GOING FORWARD, AND WE ARE RUNNING OUT OF RESOURCES IN ORDER TO START TRADING ALL THOSE. THEY THINK THAT IT WILL BE THE SOLUTION WITH MUCH BETTER ENERGY CONSUMPTION, NEW RESOURCES, NEW MATERIALS THAT AI WILL HELP US TO PROVIDE AND EVENTUALLY EVEN QUALITY OF DATA AROUND AI. TOM: THANK YOU VERY MUCH, THE DEVELOPMENT OF THE EVOLUTION WE ARE SEEING IN GENERATIVE AI REPORTING FOR US IN A REALLY SMART WAY AHEAD OF GLOBAL THEMATIC RESEARCH AT BANK OF AMERICA. COMING UP, DON'T RISK OUR EXCLUSIVE INTERVIEW. THAT'S LIVE FROM THE E PEN CONFERENCE IN PARIS, THAT'S NEXT. THIS IS BLOOMBERG. TOM: WELCOME BACK TO BLOOMBERG DAYBREAK: EUROPE, RECORD RETURNS AND NOW AT A RECORD GLUT, BOTH FIRMS ARE NOW SEEING GREEN SHOOTS IN THE M&A MARKET AFTER DEALS WERE CRUSHED BY HIGHER INTEREST RATES, OPENING TRADE ANCHOR KRITI GUPTA IS AT THE CONFERENCE IN PARIS WITH THE KEY INDUSTRY PLAYER. QUICK THANK YOU SO MUCH, WE ARE HERE, THE BIG CONVERSATION HAS BEEN, WHAT DOES A DEAL ACTUALLY LOOK LIKE, ARE WE IN ONE, DOES IT GET IMPACTED BY A RATES REGIME AND ARE WE STARTING TO SEE THE OUTPERFORMANCE OF THE LAST COUPLE OF YEARS FADE A LITTLE BIT? WHAT IS THAT LOOK LIKE, I AM JOINED THIS MORNING BY APOLLO'S HEAD OF EUROPE REPRESENTATIVE WHO JOINS ME RIGHT HERE IN PARIS. PLEASURE TO HAVE YOU ON THE PROGRAM. THANK YOU FOR JOINING US. I'M STRUCK BY SOME, SET YOUR COLLEAGUE MADE, I HAVE TO QUOTE IT BECAUSE IT'S A JUICY ONE. HE SAID HE'S HERE TO TELL YOU EVERYTHING WILL BE OK TO EXPECT LOW RETURNS UNTIL IT REMOVED THROUGH THE PYTHON. AS THE PINK MOVE THROUGH THE PYTHON? >> THAT YOU FOR HAVING ME, PLEASURE TO BE HERE, WE ARE AT AN INTERESTING INFLECTION POINT, I DO AGREE WITH SCOTT, FOR MANY YEARS RATES WERE VIRTUALLY AT ZERO, AND THAT CAPITAL ENABLED PEOPLE TO PAY INCREASING PRICES WHEN RATES GO THE OTHER WAY, SUDDENLY THAT PRICE ENVIRONMENT IS NO LONGER THERE. AND THERE WAS A BIG GAP BETWEEN EXPECTATIONS AND WHAT BUYERS WERE NOW ABLE TO BATHE -- PAY WITH THE COST OF CAPITAL. THERE WAS TRANSACTIONS FOR A YEAR AND A HALF, MAYBE TWO YEARS NOW, BUT WHAT WE SEE IS A REALIZATION THAT RATES ARE NOT GOING BACK DOWN TO ZERO, COST OF CAPITAL IS WHAT IT IS, AND SPONSORS ARE NEEDING TO ULTIMATELY SELL THESE COMPANIES, SO WHAT WE SEE IS A CONVERGENCE BETWEEN BUYER AND SELLER EXPECTATIONS AND YOU SEE THE PICKUP IN TRANSACTIONS. WE HAVE BEEN INCREDIBLY ACTIVE RECENTLY WITH OVER $2 BILLION HERE IN EUROPE ALONE. SO WE ARE SEEING THAT EXPECTATION. WHAT YOU'RE SEEING IS VERY HIGH QUALITY COMPANIES BEING SOLD AT PRICES WE THINK ARE ATTRACTIVE, AND WE THINK THAT TREND WILL CONTINUE. >> DOES THAT CREATE INPATIENTS WITH INVESTORS? WE'VE HAD THIS BROADER CONVERSATION ABOUT THE FACT THAT THERE'S SO MUCH MONEY WRAPPED UP IN THE PRIVATE EQUITY SPACE, 3 TRILLION IS WHERE I READ IS THE FIGURE, DOES THAT END UP MEETING HASTY RETURNS AND INVESTORS WANT TO GET THEIR CASH FASTER, GET RETURNS FASTER OR DOES THAT MEAN YOU HOLD ONTO IT FOR A LITTLE BIT AND THEN MAYBE GET A JUICY ARE RETURNED THE ROAD? >> IT'S DEFINITELY PRESSURE FROM THE LP COMMUNITY RETURN CAPITAL, THEY HAVEN'T SEEN SALES FOR TWO YEARS SO YOU GET THE PRESSURE TO SELL AND THERE'S ALSO A REALIZATION THAT IF YOU'RE SELLING AND YOU PAY TOO MUCH, YOU WILL GET THE KIND OF RETURNS THAT PEOPLE EXPECT. AND SO THERE'S THE ATTENTION THAT'S HAPPENING, SO THE BALANCING ACT IS THE HIGHEST QUALITY COMPANIES BEING SOLD FIRST WHERE INVESTORS CAN GET GOOD RETURNS AND THOSE ARE THE ONES MOST LIKELY TO RESULT IN TRANSACTION AND NOT A FAILED PROCESS. THE ELEMENT THAT'S EXTRA TO THIS IS I'M NOT SURE THE DEBT THAT WAS ISSUE THAT WAS CHEAP WAS ISSUED A FEW YEARS AGO, SO IT MATURES IN THE NEXT 1-3 YEARS. WHAT YOU ARE GOING TO SEE IS AS THOSE CAPITAL STRUCTURES MATURE, YOU CAN'T REFINANCE. THEY SAY I HAVE TO PUT MORE EQUITY IN, REFINANCE AND KEEP THAT COMPANY FOR FOUR TO FIVE YEARS OR I HAVE TO SELL. YOU ARE SEEING PRESSURE THAT WILL SELL AS THESE CAPITAL STRUCTURES MATURE. QUICK SATA INTEREST RATES PLAY INTO THIS GIVEN WE SEE THE GLOBAL EASING CYCLE COMING AS QUICKLY AS THE GLOBAL TIGHTENING CYCLE DID? THERE IS A THOUGHT HERE THAT THAT OPENS THE DEALS AND SPEEDS EVERYTHING UP AND SETTLING CAPITAL MARKETS JUST OPEN WIDE. WHAT GETS IN THE WAY OF THAT? >> AT THE DEBATE, HOW LOW WILL RATES GO. WE DON'T BELIEVE THEY GO BACK TO ZERO, WE THINK THEY GO TO A Apollo ramps up private credit targets NORMAL ENVIRONMENT, I THINK THERE WILL BE A TAILWIND OF RATES COMING DOWN BUT THERE'S A LIMIT TO HOW LOW THEY GO. THE SECOND I WOULD ADD IS THAT WHILE YOU HAVE RATES COMING DOWN, IT SHOULD BE A VERY GOOD TIME FOR PRIVATE EQUITY, I THINK THE VINTAGES SCOTT WAS MENTIONING IT IS, IF YOU BOUGHT COMPANIES FOR FIVE YEARS AGO, THOSE WILL BE TOUGH RETURNS. BUT I THINK INVESTORS RIGHT NOW WILL BE VERY HAPPY WITH THE PRIVATE EQUITY RETURNS THEY GET FOR THE NEXT 3-5 YEARS. INHERENTLY, PRICES WILL BE LOWER BECAUSE THE COST OF CAPITAL AND YOU SELL AT A LOWER RATE ENVIRONMENT. PRIVATE EQUITY TREND IS GOING FORWARD AND WILL BE VERY ATTRACTIVE. >> IS THAT A U.S. OR EUROPEAN DYNAMIC? >> IT'S A GLOBAL DYNAMIC. WE SEE OPPORTUNITIES IN THE U.S., EUROPE. WE HAVE ONE GLOBAL FUND, BUT WE USUALLY INVEST IN 20%-20 5% IN EUROPE. VAST MAJORITY OF THE U.S., AND WE ARE BUYING GLOBAL COMPANY SO IT'S AN ARTIFICIAL DIVIDE. IF YOU LOOK AT THE RETURNS OF OUR EUROPEAN PORTFOLIO VERSUS THE U.S. PORTFOLIO, THEY BEEN VIRTUALLY ON TOP OF EACH OTHER. EVEN THOUGH TYPICALLY THE U.S. ECONOMY HAS BEEN SLIGHTLY MORE ROBUST, WE THINK IT WILL BE MORE ROBUST IN THE EUROPEAN ECONOMY, PURCHASE PRICE CAN OFFSET THAT. WE ARE BUYING GOOD QUALITY COMPANIES, WE ARE WORKING WITH THOSE MANAGEMENT TEAMS TO IMPROVE THE COMPANIES WE GET THE SAME RETURNS. KRITI: WE ARE IN THE BEAUTIFUL CITY OF PARIS WHERE IN THE LAST WEEK OR SO WE HAVE SEEN A LOT OF DEVELOPMENTS IN THE POLITICAL FRONT, THE LAST 24 HOURS WE'VE SEEN MARIO DRAGHI ISSUE A CALL FOR INVESTMENT IN EUROPE ECHOING THE SENTIMENT THAT WE'VE HAD GLOBALLY AND CERTAINLY FROM LEADERS IN EUROPE. HE'S CALLING FOR $1 BILLION OF INVESTMENT, GOVERNMENTS IN FRANCE AND GERMANY, OTHER PARTS OF EUROPE ARE SAYING WE DON'T HAVE THE MONEY TO DO THAT, WHERE DOES PRIVATE CAPITAL STEP IN? >> IT'S A GOLDEN OPPORTUNITY. WE'VE BEEN TALKING ABOUT OUR PRIVATE EQUITY BUSINESS, BUT IF YOU LOOK AT OUR PRIVATE CAPITAL AND PRIVATE BUSINESS, IT'S WHAT WE WANT TO INVEST IN THE NATURE OF OUR CAPITAL OF FUNDS AND REGULATED BALANCE SHEETS AND THAT MAKES THIS A GREAT PARTNER FOR CORPORATION NOT WANT TO INVEST LONG TERM. WE COULD DO A HYBRID CAPITAL, IF YOU LOOK AT THE DEAL WE JUST ANNOUNCED TWO MONTHS AGO, IT'S $11 MILLION INVESTMENT WE MADE ALONGSIDE ONE PLANT THEY ARE INVESTING IN IN IRELAND, SO WE CAN BE THAT GAP AND WE THINK THERE'S A HUGE OPPORTUNITY FOR INVESTMENT. KRITI: DOES THAT COME AT A HIGHER COST GIVEN THE RISK AND THE UNDERPERFORMANCE OF THE REGION? >> IT COMES AT AN APPROPRIATE RISK RETURN. WE WORK WITH COMPANIES AND SAY, HOW DO WE DE-RISK? WE WANT TO PROVIDE COMPETITIVE CAPITAL. WE NEED TO THINK ABOUT THE RETURN. THERE ARE CERTAIN SITUATIONS WHERE CORPORATIONS COULD DO THINGS IN THE STRUCTURING OF THE DEALS TO BASICALLY DO YOU RISK THEM. THE EXAMPLE, THEY NEED THESE CHIPS TO FUND THE DIGITAL FUTURE . AI DOES NOT HAVE THE CHIPS. SO WE HAVE SOME REAL ASSURANCE THEY WILL NEED THE CHIPS SOLD IN THE MARKET AND IF WE GET COMFORTABLE WITH THAT, YOU COULD DO IT AT AND ATTRACT -- ATTRACTIVE CAPITAL PRICE. WE ARE INVESTING INTO RETURNS THAT MAKE SENSE FOR CORPORATIONS. KRITI: USE THE KEYWORD ASSURANCE. DO YOU NEED GOVERNMENT INSURANCE. WE ARE TALKING ABOUT THE CAPEX INVESTMENT THAT MAY NOT EXIST IN THE REGION TO THE SAME EXTENT THAT IT DOES IN THE STATES, WHAT YOU NEED TO SEE US A LARGE PREP -- LARGE PLAYER THAT YOU ARE IN THE GOVERNMENT CONVERSATIONS YOU ARE HAVING, THESE BACKSTOPS, WHAT DOES IT LOOK LIKE? >> IT DEPENDS ON THE SITUATION. EVERY SITUATION IS DIFFERENT. WHAT WE'VE DONE AT APOLLO IS MARRIED TO CREDIT BUSINESS WITH BUSINESS THAT WAS HISTORICALLY CREDIT. WE ARE USED TO TRANSACTIONS AND WORK WITH CORPORATIONS AND IDENTIFY THE RISK. SO IT CAN COME IN DIFFERENT THINGS. THE QUALITY OF INTEL AND OTHERS WE'VE INVESTED IN, THE THREE TIMES DIFFERENT THAN PARIS. THERE ARE CERTAIN ELEMENTS OF THE BUSINESSES THAT ARE VERY RELIABLE, VERY STABLE ROCK SOLID PARTS OF THEIR COMPANY, THERE ARE A SITUATIONS WHERE THE GOVERNMENT WANTS TO ENHANCE. IT'S IMPORTANT FOR THEIR CITIZENS. ULTIMATELY THE GOVERNMENTS WANT THEM TO GROW AND PROSPER. HE DOES FOR THE EMPLOYEES AND DOES WELL FOR THE ECONOMIES. IF THERE'S TAX INCENTIVES OR INSURANCES, THAT JUST LOWERS THE COST OF CAPITAL. SO WE ARE HAPPY TO WORK WITH GOVERNMENTS AROUND THOSE STRUCTURES, IT'S MORE PURELY A FUNCTION OF EVERY SITUATION IS DIFFERENT. KRITI: GOOD TO SEE YOU. THANK YOU FOR JOINING US THIS MORNING. TOM, HE REALLY ZEROES IN ON THE CONCEPT WE ARE TALKING ABOUT. THIS IS WHERE WE SEE THE TENSION. BUDGET ISSUES ON THE GOVERNMENT LEVEL, WHERE IT IS PRIVATE CAPITAL PLAY A ROLE, APOLLO SEEMS TO HAVE THE ANSWERS. TOM: GREAT CONVERSATION. KRITI GROUPED ON THE GROUND IN PARIS. WE WILL BRING YOU GREAT INTERVIEWS THROUGH THE DAY FROM THE CONFERENCE IN PARIS. STAY TUNED FOR MORE. COMING UP, WE WILL GIVE YOU A LOOK AT THE APPLE PROPOSITION IN CHINESE EQUITIES. STAY WITH US. TOM: WELCOME BACK TO BLOOMBERG DAYBREAK: EUROPE. FRESH DATA OUT OF CHINA SUGGESTING THAT THE EXPORT ENGINE OF THAT COUNTRY IS ON A BETTER FOOTING. NONE OF THAT HAS DONE ANYTHING TO SLOW THE ROUTE IN CHINESE EQUITIES. THIS IS A LONGER TERM VIEW BECAUSE WE ARE CLOSING IN ON THE LEVEL FOR 2021 CSI 300. BENCHMARK CHINESE EQUITY INDEX AND THE DOWNSIDE FROM THAT PEAK OF 45%. THE CONCERNS ABOUT THE HEALTH OF THE CONSUMER, THE CRISIS THAT CONTINUES IN TERMS OF REAL ESTATE AND THE GEOPOLITICS, THE TENSIONS BUILDING UP TO THE ELECTION IN THE U.S. AROUND NOVEMBER. LET'S LOOK ABOUT THE OUTPERFORMANCE OF OTHER GLOBAL MARKERS COMPARED TO THE PLIGHT OF THE CSI 300, AND THAT TAKING YOU BACK TO 202021 OVER A FIVE-YEAR TIMEFRAME TO 2019 WHERE HE COULD SEE WHAT'S HAPPENING IN TERMS OF THE DIVISION. THE S&P IS UP ABOUT 80%. CSI 300 IS DOWN ABOUT 17%, SO COMPLETELY DEALING CAME FROM WHAT'S HAPPENING WITH THE S&P, JAPAN, EUROPE AND INDIA ALL PERFORMING COMPREHENSIVELY BETTER THAN CHINESE EQUITIES. YOU COULD BE SET FOR A FOURTH AND THIS IS UNPRECEDENTED, FOURTH YEAR OF DECLINES IN CHINESE STOCKS. PLENTY MORE COMING UP ON BLOOMBERG TV.