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

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Speaker 2: This is the Blue Big dayvaq AT podcast. Good morning,

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Speaker 2: It's Monday, the twenty eighth of July. I'm Caroline Hepkut

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Speaker 2: in London.

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Speaker 3: And I'm Stephen Carroll and Brussels. Coming up today, the

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Speaker 3: United States and the European Union strike a deal setting

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Speaker 3: tariffs on the EU at fifteen percent, but many details

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Speaker 3: are left to be worked out.

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Speaker 2: Kis Starmer heads to the US President's Scottish golf course

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Speaker 2: for talks on trade and diplomacy.

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Speaker 3: Plus still holding the faith Plunging long dated UK bonds

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Speaker 3: become a cult trade for yield chasing investors.

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

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Speaker 3: The United States and the European Union have agreed a

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Speaker 3: deal that will see fifteen percent tariffs on most EU

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Speaker 3: imports into the US. The deal staves off and escalation

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Speaker 3: and hostilities and the world's biggest trading relationship, with many

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Speaker 3: details are still to be ironed out. European Commissioned President

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Speaker 3: or still Underline, announced the deal alongside President Trump during

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Speaker 3: his trip to Scotland.

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Speaker 4: We have a trade deal between the two largest economies

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Speaker 4: in the world, and it's a big deal. It's a

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Speaker 4: huge deal. It will bring stability, it will bring predictability.

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Speaker 4: That's very important for our businesses on both sides of

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Speaker 4: the Atlantic. It's fifteen percent tariffs across the board, all

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Speaker 4: in inclusive, but.

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Speaker 3: Our slav Underline and the US presidents appeared to differ

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Speaker 3: on some key details. Donald Trump said the deal did

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Speaker 3: not include pharmaceuticals, but officials on both sides later indicated

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Speaker 3: the sector was included in the fifteen percent rate, and

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Speaker 3: while the US president said there would be no change

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Speaker 3: to the fifty percent tariff on steel and aluminium products,

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Speaker 3: Vonderline said that metals duties will be cut and a

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Speaker 3: quota system will be put in place. Details were also

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Speaker 3: scant on an EU commitment to purchase seven hundred and

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Speaker 3: fifty billion dollars in American energy products and invest six

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Speaker 3: hundred billion dollars in the United States.

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Speaker 2: US and Chinese officials are meeting in Sweden today to

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Speaker 2: extend their trade truce beyond its August deadline. It will

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Speaker 2: be the third meeting in less than three months. Will

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Speaker 2: Chinese Vice Premier Hourly Fang and US Treasury Sectary Scott Bessend,

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Speaker 2: who will discuss how long the current tariff arrangement can

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Speaker 2: be prolonged. The news comes after President Trump confirmed yesterday

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Speaker 2: that dozens of other countries will hear details about their

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Speaker 2: US levees this week.

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Speaker 5: They'll probably receive a letter of clarification or a confirmation

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Speaker 5: type letter which will go out sometime during this week

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Speaker 5: prior to August first, and the tariffs will start being

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Speaker 5: paid by those countries prior to August. On August first

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Speaker 5: and beyond.

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Speaker 2: US President Donald Trump speaking, their American levies on China

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Speaker 2: are well above those for other nations, making bilateral trade

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Speaker 2: more expensive. Any breakthrough indiscussions could set the stage for

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Speaker 2: the US President to meet Sijinping inper after the Chinese

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Speaker 2: leader invited him to visit last month.

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Speaker 3: The British Prime Minister Kir Starmer will join President Trump

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Speaker 3: today in Scotland to finalize their trade deal and press

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Speaker 3: for a ceasefire in Gaza. The two are set to

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Speaker 3: meet in Turnbury on the west coast of Scotland, where

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Speaker 3: the President is visiting one of his golf courses. Or

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Speaker 3: some elements of the UK US trade agreement reached and

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Speaker 3: may have taken effect. The President's pledged to remove tariffs

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Speaker 3: on a quota of steel imports currently at twenty five percent,

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Speaker 3: remains problematic. The Prime Minister is also hoping to secure

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Speaker 3: a carve out from potential pharmaceutical tariffs.

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Speaker 2: Iswell increased aid distribution to Gaza over the weekend in

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Speaker 2: an effort to diffuse a growing international outcry over hunger

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Speaker 2: in the Palestinian enclave. The UN World Food Program has

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Speaker 2: warned four weeks that two point one million people in

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Speaker 2: the Gaza strip face crisis levels of food insecurity. Dozens

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Speaker 2: of organizations have warned of mass starvation in the territory.

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Speaker 2: Israel's Prime Minister Benjamin Netting, who has disputed their account of.

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Speaker 6: The UNS making excuses and laws about the state of Israel,

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Speaker 6: it says, we're not allowed to end it with humanitarian supplies.

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Speaker 6: We are allowing them. There are secured roads, they have

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Speaker 6: been all along. But it is official. There will be

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Speaker 6: no more excuses.

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Speaker 2: Benjamin Letniel, who's speaking there, vire a translator. On Sunday,

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Speaker 2: as the Israeli Army suspended some military operations against her

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Speaker 2: Mass to facilitate UN relief convoys arriving from Gaza and Egypt.

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Speaker 2: The IDF also restored electricity to a desalination plant in

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Speaker 2: Gaza for the first time since March.

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Speaker 3: In Corporate new Samsung will produce semiconductors for Tesla and

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Speaker 3: a sixteen and a half billion dollar deal lasting until

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Speaker 3: twenty thirty three. The contract is a win for South

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Speaker 3: Korea's largest company, which has been steadily losing ground in

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Speaker 3: chip manufacturing. According to Bloomberg Intelligence, the agreement couldoo Samsung's

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Speaker 3: foundry sales by up to ten percent annually. In a

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Speaker 3: social media post, Tesla CEO Elon Musk said the strategic

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Speaker 3: importance of the deal was hard to overstate.

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Speaker 2: The England women's football team have retained their European Cup title,

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Speaker 2: beating Spain and a penalty shootout. Chloe Kelly converted the

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Speaker 2: spot kick to seal victory for the Lionesses in Basel

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Speaker 2: after Spain missed three in a row. It is the

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Speaker 2: first time an England team has won a major trophy

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Speaker 2: on foreign soil. Let's have a listen to the historic

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Speaker 2: winning moment Chloe Kelly. To retain England's title, Kelly steps up,

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Speaker 2: It's a hopskin of a job and she swamps it

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Speaker 2: into the back of the nut.

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Speaker 3: England oh Lorban champions once again.

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Speaker 2: The Prime Minister, kirst Armer praised the victory, saying the

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Speaker 2: Lionesses have once again captured the hearts of the nation.

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Speaker 2: A special reception for the team will take place at

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Speaker 2: ten Downing Street this afternoon, with a victory parade through

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Speaker 2: central London on Tuesday.

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Speaker 3: And those these top stories on those are your top

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Speaker 3: stories on the markets this morning. We are looking at

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Speaker 3: European stock futures pointing higher after the news of that

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Speaker 3: US EU deal. Eurostocks fifty features up by one percent.

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Speaker 3: ADS features are one percent higher as well. On Wall Street,

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Speaker 3: smpm ands are up by half of one percent. Not

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Speaker 3: much movement in currency markets, the euro just a touch

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Speaker 3: stronger against the dollar at one seventeen forty seven. The

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Speaker 3: Bloomberg Dollar Spot Index is flat that ten. Your Treasury

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Speaker 3: helds up a basis point just four point four percent,

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Speaker 3: and just one companies earnings that we've had out this

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Speaker 3: morning from Heineken seeing a decline in beer volumes, unexpectedly,

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Speaker 3: according to an analyst, had been expecting from the brewer.

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Speaker 3: Retailer disputes across Europe dragging on sales and limiting the

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Speaker 3: company's ability to take advantage of the summer heat wave,

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Speaker 3: the Dutch beer reporting a zero point four percent full

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Speaker 3: in volumes during the second quarter.

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Speaker 2: Well, in a moment, we're going to bring you more

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Speaker 2: on what we know and what we don't know about

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Speaker 2: that EU US tariff deal, plus the much hyped London

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Speaker 2: bond trade that is testing investors' patients. Before we get

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Speaker 2: to those big stories, something else is caught our eye.

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Speaker 2: Have you been to Rome lately, Stephen, Have you seen

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Speaker 2: the enormous building site that is the Aquarium of Rome.

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Speaker 3: No, but I'm fascinated by this idea because I mean,

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Speaker 3: as if there wasn't enough to see in Rome already,

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Speaker 3: this is supposed to be the kind of next generation

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Speaker 3: of attraction to bring people to somewhere as we know

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Speaker 3: already attracts huge numbers of tourists. The aquarium has been

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Speaker 3: under construction for more than two decades. It's meant to

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Speaker 3: house more than one hundred marine species. It's already cost

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Speaker 3: more than one hundred million euros, but according to the

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Speaker 3: latest corporate filings, it needs at least another twenty million

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Speaker 3: euro to emerge from the financial distress that it's found

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Speaker 3: itself in. So it's sort of become symbolic of how

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Speaker 3: it's really difficult to build landmark or to deliver rather

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Speaker 3: landmark building projects in modern times. Even with the great

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Speaker 3: ambitions there was.

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Speaker 2: Yes, I mean I can understand you saying, you know,

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Speaker 2: it's an indoor attraction versus all of the amazing outdoor

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Speaker 2: architectural attractions that there are in Rome. But yes, I

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Speaker 2: mean it is so difficult to actually deliver massive building projects.

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Speaker 2: I mean the Italian banks who were sort of behind this,

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Speaker 2: have actually written off ninety five percent of their loan exposure.

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Speaker 2: There's been so much restructure. Any Bloomberg's been looking at

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Speaker 2: the company filings that we've seen. There's a legal dispute

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Speaker 2: with the local authorities, which also, you know, is a

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Speaker 2: perennial issue when it comes to building. If you kind

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Speaker 2: of lose the relationship with the local leadership, then it

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Speaker 2: also becomes very hard to deliver something.

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Speaker 3: Yeah, doing some great pictures as well of this particular

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Speaker 3: area in Rome as well, which their aquarium is located,

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Speaker 3: meant to be part of a renewal effort going on

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Speaker 3: there too. It's a great piece. You'll find a link

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Speaker 3: to it in our podcast show notes. Well, let's bring

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Speaker 3: you more on The top story this morning, the deal

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Speaker 3: agree between the European Union and the United States on

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Speaker 3: trade lower tariffs generally, but key questions remaining over certain

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Speaker 3: sectors and other commitments are Brussels Bureau Chief Suzan Lynch

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Speaker 3: was in Scotland. She joined us this morning for more. Suzan,

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Speaker 3: Good morning. The headline that a fifteen percent tariff, but

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Speaker 3: there are several areas which appear quite unclear. What do

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Speaker 3: we and don't we know this Monday morning.

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Speaker 1: Good morning, Stephen, Yes, I mean, look, a lot of

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Speaker 1: people from the EU side are saying this is a breakthrough.

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Speaker 1: They've managed to lock in that fifteen percent. Obviously, Donald

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Speaker 1: Trump had threatened a hire thirty percent, and we had

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Speaker 1: Scott signaled from last week that they were closing in

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Speaker 1: on a fifteen percent tariff rate. But as you say,

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Speaker 1: there there are a lot of unknowns. I think it's

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Speaker 1: crucial to say we haven't seen a document yet, we

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Speaker 1: haven't seen a text with any of the details. Now

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Speaker 1: officials are saying that that is forthcoming in the next

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Speaker 1: few days, and that is going to we will be

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Speaker 1: pouring over that to see some of the details on that.

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Speaker 1: I think one of the key questions remained around pharmaceuticals.

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Speaker 1: That's a huge export for the European Union to the

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Speaker 1: United States. And there was some mixed messaging on this

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Speaker 1: from the President first, but then later on we did

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Speaker 1: get confirmation from both Arsla Vonderlion and senior US Administration

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Speaker 1: officials that pharmaceuticals were covered by the fifteen percent rate. However,

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Speaker 1: vonderlin had said that perhaps there will be further action

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Speaker 1: by Donald Trump at some point later she said, whatever

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Speaker 1: the discussions later by the President of the US, that's

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Speaker 1: on a different sheet of paper, she said, So we

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Speaker 1: do know that this section two three to two investigation

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Speaker 1: is ongoing into pharmaceuticals, so we're still trying to get

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Speaker 1: clarity on exactly what the implication of that will be

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Speaker 1: on this fifteen percent rate that they agreed.

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Speaker 2: It's a small point, but I think it's illustrative. There

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Speaker 2: was a table between Donald Trump and Ursula of underline

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Speaker 2: with some flowers on it. To me, this read as

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Speaker 2: the coolness and the distance with which the EUS try

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Speaker 2: to handle this in some ways. Is it a good deal?

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Speaker 2: Is it going to go down well with Member States?

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Speaker 1: Yeah, it's funny. The body language ways is so interesting

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Speaker 1: to watch here between. I mean, you could not get

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Speaker 1: two more different people in terms of personality, and Earthly

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Speaker 1: Underline was very poised, very quiet spoken in that meeting

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Speaker 1: and said very little, and I think that's the way

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Speaker 1: the EU wanted it. Now there is a debate about

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Speaker 1: whether the EU it's quite late coming to the table

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Speaker 1: with this deal with the United States, and perhaps it

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Speaker 1: could have, you know, plaid a stronger hand earlier in

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Speaker 1: the process. Obviously, the EU is a very big trading block.

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Speaker 1: This is a hugely important trading relationship and I could

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Speaker 1: have and would have. We are told hit back, but

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Speaker 1: you are right in that this is a question now

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Speaker 1: will EU members state to go for this now? The

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Speaker 1: way the choreography worked yesterday was that before the meeting

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Speaker 1: took place, European Commissioned President earth of underlyon her team

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Speaker 1: briefed EU ambassadors who happened to be on a trip

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Speaker 1: to denmarkt Greenland. In fact, they were briefed on what

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Speaker 1: they believed was going to be the content of the deal.

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Speaker 1: Usually this morning at eight thirty am, there is another

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Speaker 1: meeting of those ambassadors, a hybrid meeting, and that's going

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Speaker 1: to be key to what we're going to be watching

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Speaker 1: this closely what kind of reception the deal gets. Now, obviously,

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Speaker 1: the way this works, the EU knew it. It had

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Speaker 1: sign off effectively to go ahead and make this. But now,

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Speaker 1: of course, as we've been discussing, the devil will be

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Speaker 1: in the detail. So let's see what happens with that

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Speaker 1: meeting this morning. We're also expecting a lot of messaging

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Speaker 1: from the European Commissions morning. We're expecting some kind of

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Speaker 1: press conference by the EU Trade Commissioner Mario Zeeskevich. He

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Speaker 1: was also in the room in those negotiations yesterday that

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Speaker 1: that's just over an hour between Vanderlin and Trump. They

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Speaker 1: weren't on their own the other team, five on each

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Speaker 1: side in total. So we'll be looking forward and waiting

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Speaker 1: to hear what he says and whether he can shed

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Speaker 1: more light on exactly what was agreed and what remains

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Speaker 1: to be ironed out.

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Speaker 3: Okay, Suzanne, thank you very much for our RUSSA spirit

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Speaker 3: Chief Suzanne Lynch, and just looking at their latest reaction

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Speaker 3: we've had from answers. You're a minister this morning talking

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Speaker 3: about this being an agreement that's not an equilibrium for

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Speaker 3: the two sides, saying that it has the advantage of

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Speaker 3: bringing temporary stability, but that it is an unbalanced agreement.

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Speaker 3: That's what Banjermaine had Dad has been posting on social

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Speaker 3: media this morning, but indicating there as the zand pointed

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Speaker 3: to where things have to go next within the internal

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Speaker 3: e U processes on this deal as well.

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Speaker 2: Absolutely so that on the EU US tariff agreement.

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Speaker 4: Right.

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Speaker 2: Let's pivot though to a story here in the UK,

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Speaker 2: a big bet from the pandemic era that is turning

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Speaker 2: out actually to be a losing one. A UK bond

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Speaker 2: maturing in twenty sixty one, a Niche Ultra long bond

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Speaker 2: has the potential to deliver big returns in the event

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Speaker 2: of the recession, but of a recession, but that's not

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Speaker 2: really how it's turned out, and our Bloemberg reporter Greg

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Speaker 2: Richie has been writing about this. Greg, good morning. So

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Speaker 2: at Firstie, why do people invest in this long bond

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Speaker 2: in the first place? Why was it so popular?

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Speaker 7: Good morning? Two main reasons for why it attracted so

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Speaker 7: many private investors. The first is that it's fallen so

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Speaker 7: far on price. So it's issued back in May twenty

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Speaker 7: twenty at around one hundred pounds and it's fallen all

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Speaker 7: the way down to twenty five, so the player is

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Speaker 7: pretty simple. If it can return back to its pandemic levels,

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Speaker 7: we're talking about a rally of three hundred percent and

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Speaker 7: that's very alluring to many people. The other reason is

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Speaker 7: a tax benefits. So because of a quirk in UK

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Speaker 7: tax policy, guilt so exempt from capital gains tax. So

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Speaker 7: rather than betting on meme stock or a crypto currency

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Speaker 7: for example, whether it be a lot of tax, if

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Speaker 7: there is any capital games, this guilt is exempt from that.

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Speaker 7: And because of the bulk of the games will come

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Speaker 7: from the capital games rather than any kind of interest income.

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Speaker 7: Because the coupon on the bond is very low, it's

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Speaker 7: something that became very fashionable for people to bet on.

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Speaker 3: The notes have plunged, So how does it compare now.

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Speaker 7: Well, I think what's happened over the last year. So

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Speaker 7: it's people that are realizing that long bond globally are

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Speaker 7: doing very badly and that while there might be a

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Speaker 7: recession in the coming years, it might not be similar

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Speaker 7: to a recession from previous decades. It might be a

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Speaker 7: stagflationary recession for example, where it's a lot of concerns

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Speaker 7: around inflation and therefore long bond deals don't drop in

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Speaker 7: the same way that we've seen in previous recessions. There's

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Speaker 7: also concerns that biscal jitters that we've seen globally but

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Speaker 7: particularly concentrated in the UK will persist, and therefore, again,

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Speaker 7: if there is an economic slow down, the long end

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Speaker 7: of the curve won't recover in the same way it has.

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Speaker 7: For that reason, we're not people are becoming concerned about

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Speaker 7: their bets and I'm not sort of sure that it

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Speaker 7: will perform the way that they hope.

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Speaker 2: And you spoke to obviously a number of investors on this,

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Speaker 2: some do still think that it could deliver. I suppose

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Speaker 2: why are they holding out hope?

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Speaker 7: Yeah, I've s talking to a few dozen investors, a

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Speaker 7: lot of them bankers, an invested in the city, looking

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Speaker 7: to put down their tax bill, and how betterness. The

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Speaker 7: sentiment I'm getting is that they don't want to sell

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Speaker 7: at these rates, they don't want to realize a large

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Speaker 7: capital loss. At the same time, they're not so positive

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Speaker 7: on this. So in previous guilt set offs, what they'd

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Speaker 7: be telling me that they'd be buying the dip, and

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Speaker 7: they're often be boasting about buying the dip think you'd

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Speaker 7: be great trades now that we're seen as bonds fall

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Speaker 7: further in the last few weeks, I'm not getting that

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Speaker 7: same sentiment. They're not looking to add to their exposure

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Speaker 7: at the same time, they're not looking to reverse in

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Speaker 7: their exposure. It's something they're just going to hold on

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Speaker 7: to and hope it comes off one day, but they're

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Speaker 7: becoming increasingly pessimistic about that.

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