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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg daybreak Up podcast, available every morning

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Speaker 2: on Apple, Spotify or wherever you listen. It's Wednesday, the

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Speaker 2: sixteenth of October here in London. I'm Caroline Hepka.

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Speaker 3: And I'm Lizzie Burden. Coming up today. UK inflation falls

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Speaker 3: significantly below two percent, raising the prospect for more Bank

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Speaker 3: of England rate cuts.

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Speaker 2: Shares an asml extend their plunge, as global chip stalks

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Speaker 2: shared more than four hundred and twenty billion dollars in

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Speaker 2: market value.

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Speaker 3: Plus Donald Trump makes the case for huge increases in

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Speaker 3: tariffs in an exclusive interview with Bloomberg.

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Speaker 2: Let's start with a round up of our top stories.

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Speaker 3: UK inflation has slipped below the Bank of England's two

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Speaker 3: percent target for the first time in three and a

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Speaker 3: half years. Consumer prices raise one point seven percent in

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Speaker 3: September compared to a year earlier, below expectations and down

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Speaker 3: from two point two percent in August. Rabbi Bank's head

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Speaker 3: of FX Strategy, Jane Foley, says the data sets the

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Speaker 3: stage for the next month's BOE meeting.

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Speaker 1: You know, I think that number does give the green

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Speaker 1: light for a bank of England interstrate cut in November,

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Speaker 1: but ofcause a lot of people were anticipating that anyway.

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Speaker 1: And the most interesting thing perhaps from this data is

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Speaker 1: that what does it signal for December? Is there a

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Speaker 1: green light for December. I don't think we can be

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Speaker 1: sure of that yet, and I think the market price

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Speaker 1: scene in terms of anticipated inter straight cuts sort of reflects.

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Speaker 3: That Jane Foley's analysis is backed by the wider markets,

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Speaker 3: with the pound having extended its drop below one thirty

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Speaker 3: for the first time since late August, as traders raised

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Speaker 3: their BOE cut wages.

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Speaker 2: Now Shares in Europe's most valuable tech company ASML have

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Speaker 2: extended their plunge today after the firm booked orders worth

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Speaker 2: around half what analysts expected. The maker of the world's

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Speaker 2: most advanced chip making machines, lowered its guidance for next

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Speaker 2: year and reporting reported bookings of two point six billion euros.

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Speaker 2: Bloomberg's Amsterdam bureau chief Kagan Koch says the sector is

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Speaker 2: experiencing mixed fortunes.

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Speaker 4: The chip industree is experiencing some uneven times in areas

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Speaker 4: such as artificial intelligence accelerators. Companies like Nvidia can't keep

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Speaker 4: up with demand but in other sectors like automotive and

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Speaker 4: the industrial it's it's kind of a prolonged slump.

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Speaker 2: Bloomberg's Cake and Coke speaking there, he and analysts across

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Speaker 2: the industry found themselves unexpectedly scouring through the ASML numbers

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Speaker 2: yesterday after the company mistakenly released its financial results a

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Speaker 2: day earlier than scheduled.

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Speaker 3: Now, that fall in ASML's stock price has helped to

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Speaker 3: fuel a wider sell off in the sector that's seeing

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Speaker 3: global chip stocks shed more than four hundred and twenty

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Speaker 3: billion dollars in market value. The route continued in Asia overnight,

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Speaker 3: with Tokyo Electron sliding by as much as ten percent

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Speaker 3: and shares into SMNC also dropping. The negative sentiment around

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Speaker 3: the sector comes after and Vidia's stock price hit a

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Speaker 3: fresh high on Monday on optimism around their latest Blackwell

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Speaker 3: AI chip. Since then, the company's share price has fallen

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Speaker 3: by four point seven percent, wiping close to one hundred

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Speaker 3: and fifty nine billion dollars off in Video's market cap.

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Speaker 2: And there's more bad news for the European stock market.

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Speaker 2: Shares in LVMH have plunged in early trading after a

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Speaker 2: massive slump in demand from one of its most important markets.

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Speaker 2: Here's Boomberg's Teama added Bayer with the story.

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Speaker 5: Luxury Bellwether LVMH is seeing sales tumble in China. According

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Speaker 5: to the group's CFO, consumer confidence in the region is

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Speaker 5: at an all time low, sinking to levels not seen

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Speaker 5: since the pandemic and hammering high end revenue. Analysts had

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Speaker 5: expected a small third quarter gain for the fashion giant,

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Speaker 5: but instead were met with the worst performance over the

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Speaker 5: period since twenty twenty.

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Speaker 6: Second quarter.

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Speaker 5: LVMH's American deposit receipts plunged by as much as ten

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Speaker 5: percent after the announcement, as did the likes of Gucci

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Speaker 5: owner Caerrings. US rivals Ralph Lauren and St. Lauder saw

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Speaker 5: shares full in New York trading two in London were

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Speaker 5: added by Bloomberg Radio.

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Speaker 3: To one of our top interviews. Former President Donald Trump

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Speaker 3: has defended his plan to dramatically increase tariffs on foreign goods,

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Speaker 3: saying the proposals would help to protect companies in the US.

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Speaker 3: Speaking exclusively to Bloomberg's editor in chief John Micklethwaite at

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Speaker 3: the Economic Club of Chicago, the Republican nominee for president

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Speaker 3: and former president proclaimed his belief in the policy. To me,

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Speaker 3: the most beautiful word in the dictionary is tariff, and it's.

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Speaker 5: My favorite word.

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Speaker 3: It needs a public relations firm. The former president shrugged

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Speaker 3: off the possibility that is proposed tariffs might disrupt supply

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Speaker 3: chains or squeeze small businesses, saying that companies would rapidly

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Speaker 3: return manufacturing to the US in order to avoid the levies.

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Speaker 3: Economists argued that tariffs are unlikely to create the revenue

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Speaker 3: Trump would need to pay for his proposed tax cuts

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Speaker 3: for businesses and individuals. But the former president was also

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Speaker 3: asked for his thoughts on the relationship between the Federal

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Speaker 3: Reserve and here's the US president.

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Speaker 6: I think it's the greatest job in government.

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Speaker 3: You show up to the office once a month and

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Speaker 3: you say, let's see Flip Oka, and everybody talks about

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Speaker 3: you like your god.

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Speaker 1: Oh what will he do?

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Speaker 3: I think that if you are a very good president

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Speaker 3: with good sense, you should be able to at least

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Speaker 3: talk to him. I don't say make the decision at all.

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Speaker 3: So Trump on the Fed executive relationship there, but he

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Speaker 3: also moved the market when he was asked about breaking

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Speaker 3: up Google, saying that he is not a fan and

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Speaker 3: the company needs to the company treats him quote very badly.

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Speaker 3: Shares of Alphabet paired gains as Trump was asked about

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Speaker 3: the company.

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Speaker 1: Well.

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Speaker 2: Those comments from Trump come as the European Union has

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Speaker 2: prepared a list of US goods that it could target

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Speaker 2: with tariffs if Trump were elected US president. Bloomberg has

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Speaker 2: learned that the Block has drawn up private plans on

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Speaker 2: how to retaliate against Donald Trump if he makes good

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Speaker 2: on his trade threats. The Republican nominee has proposed a

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Speaker 2: ten percent tariff on all imports and a crackdown on

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Speaker 2: EU regulators taking on US tech chants. The latest data

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Speaker 2: shows that the EU imports three hundred and fifty billion

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Speaker 2: euros worth of US goods per year and exports five

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Speaker 2: hundred billion.

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Speaker 3: Well, those are you top stories this morning? On the markets,

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Speaker 3: the stock six hundred is lower a third of eight

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Speaker 3: percent on Wall Street smp E, many futures are flat,

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Speaker 3: and in the US the US tenure treasury yield is

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Speaker 3: currently lower two basis points at four point zero one percent.

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Speaker 2: Okay, So in a moment, we're going to get onto

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Speaker 2: the markets. More broadly, the tech route. The impact of

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Speaker 2: those comments from Trump in terms of the tariff concerns.

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Speaker 2: But let's also get into the UK inflation story now,

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Speaker 2: because inflation is slipped below the Bank of England's two

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Speaker 2: percent target, which was expected, but it's fallen more than

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Speaker 2: eva was anticipated. CPI fell to one point seven percent

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Speaker 2: in September, the slowest pay since Eightpril twenty twenty one.

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Speaker 2: Our chief UK economist Dan Hansen joins us Now, good morning, Dan.

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Speaker 2: So November cut then from the Bank of England now

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Speaker 2: looks surely to be baked in and then December? What next?

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Speaker 2: What's the path for rate cuts in the UK?

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Speaker 6: Yeah, I mean, I definitely it's definitely the right sort

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Speaker 6: of conclusion to say. Because of this data, the chance

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Speaker 6: of a December cut or back to back cuts from

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Speaker 6: the Bank of England has risen. I mean you've heard

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Speaker 6: from Andrew Bailey a few weeks ago saying that he,

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Speaker 6: you know, if inflation continues to moderate, he thinks they

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Speaker 6: can be a little bit more aggressive. I think you

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Speaker 6: just have to be a bit careful when you look

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Speaker 6: at the data that there is good, definitely good news

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Speaker 6: in there. As you say, it fell at a headline

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Speaker 6: on a headline basis by more than expected if you

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Speaker 6: look at services inflation, and that's what the Bank of

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Speaker 6: England is sort of obsessed with. There was good news

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Speaker 6: there as well, though a few of the categories that

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Speaker 6: push down on services inflation are those that the bank

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Speaker 6: sort of looks through, so airfares, hotel prices, they're volatile.

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Speaker 6: So it is definitely a good news report. Let's not

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Speaker 6: I don't want to sort of dampen it. It's just

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Speaker 6: that there are signs in there that things probably aren't

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Speaker 6: quite as good as the headline metrics suggests. So I

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Speaker 6: think for us still, particularly with the budget on the horizon,

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Speaker 6: I think quarterly is probably more likely than meeting by meeting,

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Speaker 6: But no doubt the chance of meeting by meeting at

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Speaker 6: least for a period of time sort of December going

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Speaker 6: into the new year, the chance of them doing something

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Speaker 6: like that has definitely risen.

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Speaker 3: Dan guilt yields have taken a significant tumble off the

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Speaker 3: back of these greater rate cut prospects. You're looking at

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Speaker 3: the ten year yield lower seven basis points at four

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Speaker 3: point zero nine percent, the two year lower nine basis

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Speaker 3: points at four point zero three percent. An interesting X

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Speaker 3: post from Vander's Viraj Patel saying that actually it opens

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Speaker 3: the door to a fifty basis point BOEE cut in November.

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Speaker 3: What do you make of that?

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Speaker 6: I don't think that's likely at all.

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Speaker 3: Tell us what you really think, Dan, I just think.

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Speaker 6: That that would just be such a departure from their

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Speaker 6: their thought process, you know, servi as inflation or it's

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Speaker 6: four point It fell from five point six to four

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Speaker 6: point nine percent. The long run average is three three

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Speaker 6: in a bit, so you've still got miles to go.

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Speaker 3: And where do you see it ending the year?

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Speaker 6: Bank rate?

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Speaker 1: Oh?

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Speaker 3: Sorry, the inflation rate, because there were expectations that it

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Speaker 3: would be about two point five percent. But then given

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Speaker 3: we've had such better than expected numbers across the board

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Speaker 3: for headline, core and services on CPI today, where does

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Speaker 3: UK inflation end now?

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Speaker 7: Yeah?

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Speaker 6: So I think the rise to two and a half

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Speaker 6: issue is still baked it. It's only is baked in

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Speaker 6: on on headline inflation because of what's going to happen

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Speaker 6: with energy bills. We know they're going to write off

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Speaker 6: GM have told us they're going to rise by ten percent.

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Speaker 6: So sorry, they did rise on the first of October

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Speaker 6: by ten percent. Obviously, we'll get the data next month.

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Speaker 6: So that is an energy price story. It's not a

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Speaker 6: it's not an underlying inflation story, if you like. I

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Speaker 6: think services inflation could end the year instead of close

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Speaker 6: to five close to four and a half four four

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Speaker 6: and a half. So that's the sort of bigger news really.

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Speaker 6: But I think the pickback up in headline inflation is

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Speaker 6: going to happen. It's not going to change how the

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Speaker 6: bank acts. I think you know the services what happens

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Speaker 6: with services inflation, and that picture will be the driving

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Speaker 6: force and they will look through what's going on with

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Speaker 6: energy prices. It's been well telegraphed for a long time

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Speaker 6: now just loasted.

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Speaker 2: What does this mean that in terms of Rachel Reeves

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Speaker 2: and the budget. I mean she is facing pressure on

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Speaker 2: all sides, the warning from the IMF around a debt

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Speaker 2: in the UK one hundred percent of GDP. But then

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Speaker 2: you've got people not wanting tax increases, and she's being

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Speaker 2: lobbied from all sides and has to come up with

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Speaker 2: an answer. How does the economic picture in the UK

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Speaker 2: now play into that budget that's on the thirtieth October.

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Speaker 6: Yeah, I mean the first sort of obvious thing to

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Speaker 6: ask is whether this will affect the obr's forecast for

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Speaker 6: debt interest payments. It won't because just because we've had

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Speaker 6: a rally today, so yields falling, the OBR locks its

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Speaker 6: forecast down quite early, So we won't get that sort

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Speaker 6: of good news, won't sort of give any form of windfall.

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Speaker 6: I think that the broader, the broader question, and the

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Speaker 6: interesting thing here is the interaction between fiscal and monetary

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Speaker 6: because you know all this talk of black holes or

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Speaker 6: a growth enhancing budget, which is it. You know, if

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Speaker 6: you think of black holes, you think of austerity, you

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Speaker 6: think of tax rises. If you think of growth enhancing,

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Speaker 6: you think of more borrowing and investment. I think, on net,

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Speaker 6: you're going to get a fiscal loosening. So if you

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Speaker 6: think about what that means for the bank, that means

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Speaker 6: probably a bit more caution in terms of how quickly

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Speaker 6: they can cut interest rates. But I think bigger picture.

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Speaker 6: I mean, if you look if you look at sort

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Speaker 6: of the if you like the inheritance, you know, the

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Speaker 6: near term picture I think remains for labor pretty good.

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Speaker 6: I think the question, and given what we've seen in

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Speaker 6: all the confidence indicators and the like, is to ensure

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Speaker 6: that the narrative around the budget is positive. Yes, we

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Speaker 6: know we need we know we need tax rises. There

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Speaker 6: is a spending hole there that needs to be dealt with.

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Speaker 6: But the point is is that spending is going to

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Speaker 6: rise and taxes are going to rise. It's not that

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Speaker 6: taxes are going to is to fill a fiscal hole

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Speaker 6: because the economy has done a lot worse. It's because

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Speaker 6: spending is going to be higher as well.

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Speaker 3: So they're really conscious that they need to be responsible sounding.

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Speaker 3: But what really surprises me is that even though they're

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Speaker 3: talking well, they're hinting that they're going to change the

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Speaker 3: fiscal rules. Guessed after Guest sits in that seat and

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Speaker 3: says that it would kind of be not worrisome for

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Speaker 3: the market, unlike what we saw in the trust era.

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Speaker 6: Why in terms of changing the fiscal rules, Yeah, because

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Speaker 6: a lot.

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Speaker 3: Why can they even get away with it?

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Speaker 6: A big reason why when you change or when you

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Speaker 6: loosen fiscal policy, it's the narrative that matters. And when

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Speaker 6: if it's all about investment spending, there is a rate

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Speaker 6: of return on that that delivers potentially economic growth in

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Speaker 6: the long term, and markets are much more relaxed about

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Speaker 6: investment spending than short term tax cuts that deliver a

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Speaker 6: sugar rush to the economy or big increases in spending.

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Speaker 6: There't match by by tax rises. So being increase in borrowing,

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Speaker 6: that's to do with sort of term a near term

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Speaker 6: boost the economy. If you borrow to invest, investors are

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Speaker 6: a lot more relaxed about that. So a lot of

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Speaker 6: it is about the lever that you pull when you

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Speaker 6: when you borrow more. And there is also, of course

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Speaker 6: the narrative that you you sort of you spin with it.

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Speaker 6: I think the narrative that was a company what happened

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Speaker 6: in late twenty twenty two was just just a difficult

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Speaker 6: one for the for the market to swallow, and we

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Speaker 6: saw the reaction to that. This has been very choreographed

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Speaker 6: and it is very clear that labor are extremely keen,

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Speaker 6: probably too keen in some if you might, you could argue,

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Speaker 6: if you want to be controversial, the bit too keen

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Speaker 6: to keep markets completely on side. I think they've probably

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Speaker 6: got more wiggle room than they think.

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Speaker 2: Yes, yeah, you're right. I mean it is a very

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Speaker 2: different situation. I mean it was talking, you know, the

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Speaker 2: liszt choss here was talking about abolishing the top right

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Speaker 2: forty five percent, you know, income tax rate and things

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Speaker 2: like that. So yeah, it seems like a different moment.

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Speaker 2: But thank you so much for being with us this morning,

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Speaker 2: Bluemberg's chief UK economist Dan Hanson.

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Speaker 3: Now let's also take a look at the most market

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Speaker 3: moving stories this morning. Our markets reports to vale Retitele

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Speaker 3: is with us. Here, looks like the ASML hit Valerie

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Speaker 3: is continuing into today's session, a further drop of four

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Speaker 3: point four percent for that stock, and it's impacting more

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Speaker 3: widely as well.

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Speaker 8: Yeah, it's really interesting to see how it's impact with

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Speaker 8: global overnight, not only on chip stocks in the US,

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Speaker 8: but those in Asia. If we do look at pre

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Speaker 8: market trade though in New York, Navidia shares are up

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Speaker 8: half of percent, so maybe a bit of hope that

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Speaker 8: this slide in tech shares could come to an end

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Speaker 8: in the US session. But note we also get TSMC's

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Speaker 8: results out overnight tonight and possibly tomorrow late tomorrow morning,

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Speaker 8: so maybe another shift and narrative if we get something

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Speaker 8: different coming from TSMC.

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Speaker 2: Yeah, absolutely. And China also a big part of the

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Speaker 2: chips conversation given Toomp's comments speaking to putting By defending

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Speaker 2: the proposals to increased tariffs.

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Speaker 8: Yeah, those comments on tariffs are really keeping the market

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Speaker 8: on edge. Just to note what happened, you know, last

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Speaker 8: time during the election twenty sixteen, we saw the dollar

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Speaker 8: strengthen five percent in the days after that election. So

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Speaker 8: this possible currency volatility very much on investor's mind. We've

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Speaker 8: seen a spike in options traded in FX. Just goes

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Speaker 8: to show, you know, there is a lot for investors

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Speaker 8: to deal with as we get closer to the election,

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Speaker 8: because you have to take into account we also get

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Speaker 8: that payroll report on October fourth, just four days before

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Speaker 8: election night, So a lot of volatility out there for

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Speaker 8: those to deal with. A lot of it's focused on

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Speaker 8: the dollar, just because of how strong his language was

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Speaker 8: on those tariffs last night.

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Speaker 7: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 7: stories making news from London to Wall Street and beyond.

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