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Speaker 1: This is the Bloomberg Daybreak Europe podcast, available every morning

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Speaker 1: on Apple, Spotify or wherever you listen. It's Tuesday, the

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Speaker 1: twenty seventh of February in London. I'm Stephen Carroll. Coming

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Speaker 1: up today. Sweden joins NATO as questions grow over what

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Speaker 1: a Trump presidency would mean for the Alliance. Fast fashion

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Speaker 1: retailer she In considers a London IPO amid growing US resistance,

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Speaker 1: and why the price of chocolate and cosmetics could be

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Speaker 1: about to rise as the result of a new European law.

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Speaker 1: Let's start with a round up of our top stories.

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Speaker 1: Sweden has cleared the final obstacle to joining NATO after

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Speaker 1: a vote in Hungary's parliament. The move helps bolster Europeans

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Speaker 1: security amid rising provocation from Russia, just as US support

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Speaker 1: for Ukraine appears to be faltering. While Sweden was welcomed

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Speaker 1: by most allies, securing the backing of Turkey and Hungary

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Speaker 1: proved to be more challenging. Bloomberg's Nicholas Rollander is in Stockholm.

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Speaker 2: Hungary has been heavily criticized by many European countries for

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Speaker 2: its backsliding on democracy and for undermining the rule of

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Speaker 2: law in the country, and Sweden has also criticized Hungary

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Speaker 2: on those points, and that does not sit well with

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Speaker 2: the victor orban and the Hungarian government. So they wanted

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Speaker 2: to make a stand show that they are not happy

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Speaker 2: with the criticism that's being leveled against them, and they

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Speaker 2: used this as an opportunity to do that. Whether or

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Speaker 2: not they wanted anything more concrete is still uncertain, I

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Speaker 2: would say.

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Speaker 1: Bemberg Xeculus Rollander says Sweden's NATO membership will be finalized

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Speaker 1: within days. The accession comes as the possibility of a

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Speaker 1: second Trump presidency looms over the alliance. Earlier this month,

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Speaker 1: the Republican front runner said he'd welcome a Russian attack

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Speaker 1: on NATO allies who fell short of their defense spending commitments.

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Speaker 1: The European Union wants to make as much as half

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Speaker 1: of its defense system purchases from within the block by

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Speaker 1: twenty thirty five. The new draft plans seen by Bloomberg

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Speaker 1: would reverse a trend of the EU buying a majority

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Speaker 1: of military equipment from third countries. It comes after Rusha's

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Speaker 1: invasion of Ukraine exposed the Union's reliance on other countries

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Speaker 1: for key capabilities. The draft documents seen by Bloomberg also

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Speaker 1: includes measures to secure critical supplies and changes to the

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Speaker 1: European Investment banks lending policies. China's state backed funds have

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Speaker 1: bought more than fifty seven billion dollars worth of onshore

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Speaker 1: shares this year. That's according to estimates from UBS, which

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Speaker 1: expects further purchases as part of a bid to prop

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Speaker 1: up the market. Calculations by the Swiss Bank on excess

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Speaker 1: transactions of fifty four Chinese exchange traded funds found more

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Speaker 1: than seventy five percent of the inflows went into products

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Speaker 1: tracking the benchmark COSI three hundred index Sonil Coal Apak.

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Speaker 1: Equity strategist at Go and Sacks says the national team

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Speaker 1: buying is boosting optimism towards the market.

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Speaker 3: In the market, we have been sort of emphasizing this

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Speaker 3: theme of China rebalancing. At the broad level. I would

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Speaker 3: say we like the China domestic market more than the

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Speaker 3: offshore markets because in the domestic market ob cior is

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Speaker 3: some policy support but also evidence of national team buying,

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Speaker 3: so that's sort of a over edge. And within that,

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Speaker 3: as I said, I think the China rebalancing team, which

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Speaker 3: sort of speaks to both sort of heart deech as

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Speaker 3: well as sort of the technology self sufficiency team. I

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Speaker 3: think those teams can do do well.

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Speaker 1: That's called been Sacks, strass, saneil cool. Speaking there, the

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Speaker 1: CSI three hundred index has written by more than seven

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Speaker 1: percent this month, while index of Chinese shares traded in

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Speaker 1: Hong Kong is climbed by more than nine percent. Bloomberg

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Speaker 1: has learned the global behemoth of fast fashion, Shane, is

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Speaker 1: considering listing in London, but only because of resistance to

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Speaker 1: an IPO and its preferred location New York. Tia Adebayo

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Speaker 1: has the details.

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Speaker 4: A pioneer of cheap style, she In could now become

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Speaker 4: a trend setter in the IPO world too. Breaking the

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Speaker 4: pattern of corporate migration away from London, the Chinese founded

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Speaker 4: company is weighing an LC listing after judging approval by

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Speaker 4: the US Securities and Exchange Commission unlikely. According to Bloomberg data,

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Speaker 4: the move would provide a much needed cash injection after

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Speaker 4: the UK suffered one of the worst years for IPOs

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Speaker 4: in modern history, raising just one billion dollars in twenty

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Speaker 4: twenty three. Hong Kong and Singapore also in the running

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Speaker 4: for the ultra fast fashion listing amidst scrutiny from the

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Speaker 4: US over she In's operations in China. In London, tiwa

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Speaker 4: Adebayo Bloomberg Radio, UK.

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Speaker 1: Shop price inflation has fallen to its lowest level in

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Speaker 1: nearly two years. The British Retail Consortium data shows prices

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Speaker 1: are two and a half percent higher in February than

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Speaker 1: last year. James Wilcock has.

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Speaker 5: More resailers are doubling down on promotions and passing on

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Speaker 5: lower co to consumers. Although prices are still up on

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Speaker 5: last year, it's the ninth consecutive month the rate of

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Speaker 5: increase has fallen. It all adds to evidence of a

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Speaker 5: broader slowdown in inflation and recovering real household incomes, But

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Speaker 5: bosses pointed to one big unknown, how delays from Red

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Speaker 5: Sea disruption will weigh on prices in the long term.

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Speaker 5: In London, James Wilcock, Limberg Radio.

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Speaker 1: And the Chancellor Jeremy Hunt has told conservative MPs that

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Speaker 1: limited fiscal headroom means he'll be pursuing smart tax cuts

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Speaker 1: in the budget next month. Bloomberg has learned that he

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Speaker 1: told MPs the giveaways wouldn't be on the same scale

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Speaker 1: as last November's autumn statement. He was speaking to a

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Speaker 1: meeting of center right conservatives from the One Nation Group.

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Speaker 1: He's under pressure from his party, who wants to see

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Speaker 1: the UK's tax burden reduced ahead of a general election.

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Speaker 1: In a moment, we'll get more on Sweden joining NATO

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Speaker 1: on that draft EU defense purchases Plan plus will tell

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Speaker 1: you about cocoa prices hitting an old time high. But

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Speaker 1: also this morning an interesting reading from our colleagues in

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Speaker 1: China about how the crackdown on so called headonist bankers

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Speaker 1: and how it's led many finance workers to rethink their careers.

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Speaker 1: So president cheating things call for common prosperity is hit

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Speaker 1: salaries hard and triggered bell tightening in many parts of

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Speaker 1: the industry. On top of that, there's been this drive

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Speaker 1: against alleged corruption that's ensnared more than one hundred financial

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Speaker 1: and executive officials last year alone, unnerving the entire industry.

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Speaker 1: So our article, quoting the finance professor of the University

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Speaker 1: of Hong Kong, is saying that he sees a new

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Speaker 1: Chinese economy being shaped, which will see government run banks

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Speaker 1: and insurance companies dominate and she with Chen says Quota

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Speaker 1: in the article that this could lead many people who

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Speaker 1: currently work in the finance industry to find jobs elsewhere.

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Speaker 1: Our colleagues speak to several people who are working in

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Speaker 1: the industry worrying about fears for their future and what

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Speaker 1: shifting government attitudes might mean. A very interesting read from

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Speaker 1: the inside of the Chinese financial industry about its future.

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Speaker 1: This morning. Well, let's get more detailed now on those

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Speaker 1: defense stories we've been telling you about in Europe. Sweden

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Speaker 1: has cleared the final obstacle to join NATO, while the

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Speaker 1: EU has drafted a new plan for buying military equipment.

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Speaker 1: Bloomberg's Oliver Crook joins us from Berlin for more. Good

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Speaker 1: morning to you, Oliver. This has been a complicated road

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Speaker 1: for Sweden to join NATO. How significant is it for

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Speaker 1: Stockholm and for the alliance overall?

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Speaker 2: Yeah?

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Speaker 6: Absolutely, Almost two years to the day since Russia's invasion

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Speaker 6: of Ukraine. Now Sweden will become the thirty second member

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Speaker 6: of NATO, and it was about a year and a

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Speaker 6: half of DeLay's first by Turkey, now by Hungary. It

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Speaker 6: seems that the sort of path to NATO is paved

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Speaker 6: by fighter jets because in both cases it was in

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Speaker 6: Turkey and in Hungary. The Key was basically selling them

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Speaker 6: more fighter jets that basically got the green light for

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Speaker 6: these for Sweden to join, so they could join as

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Speaker 6: soon as Friday. What is interesting is that basically the

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Speaker 6: significance for Sweden here is that it ends basically a

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Speaker 6: policy of military non alignment neutrality during the World Wars.

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Speaker 6: Has not been to war since eighteen fourteen, so a

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Speaker 6: really sort of a sea change for Sweden.

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Speaker 7: And strategically, no, it does not have.

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Speaker 6: A border with Russia, but it is obviously buttressed right

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Speaker 6: up against Finland which does. It has a huge proportion

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Speaker 6: of the Baltic Sea advanced submarines, and had the defense

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Speaker 6: contractor SOB which makes the fighter jets that were in question,

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Speaker 6: which by the way hit an all time high on

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Speaker 6: the stock yesterday. And financially, of course, it's a substantial economy,

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Speaker 6: about six hundred billion euros of an economy and two

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Speaker 6: percent of that now will go to military spending that

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Speaker 6: is part of.

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Speaker 1: NATO dase oliver As we've had the French president of

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Speaker 1: Emmanual Micron rallying support for Ukraine at a meeting in Paris.

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Speaker 1: What did we hear there.

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Speaker 6: Yes, we had a bunch of heads of states, about

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Speaker 6: twenty from Europe and the heads of government and you really,

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Speaker 6: you know, at a time when Ukraine is having massive

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Speaker 6: issues with ammunition shortages and begining to lose territory. The

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Speaker 6: issue is that there's a lot of good will from Europe,

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Speaker 6: but there isn't really the capacity to produce the volumes

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Speaker 6: of ammunition and other supplies required to support Ukraine. And

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Speaker 6: it's also opened another debate which is I think probably

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Speaker 6: going to be the headline here, which is the question

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Speaker 6: of European troops potentially in Ukraine. So this is what

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Speaker 6: Micoon said about that. He said, clearly there is no

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Speaker 6: consensus today officially to send troops on the ground, but

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Speaker 6: in terms of dynamics nothing should be ruled out. We

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Speaker 6: should be willing to do everything necessary to ensure that

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Speaker 6: Russia cannot win this war. And of course, hanging above

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Speaker 6: all of this, Stephen, is the small matter of the

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Speaker 6: United States, by far the biggest spender in NATO waning

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Speaker 6: public support.

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Speaker 7: Ukraine aid still stuck in the House.

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Speaker 6: And this doesn't even begin to touch the question of

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Speaker 6: the election Donald Trump, who has been very skeptical about

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Speaker 6: the NATO alliance, so really Europe wants to demonstrate its

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Speaker 6: security autonomy.

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Speaker 1: One of the really key issues that we heard from

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Speaker 1: President Zelenski of Ukraine at the weekend as he was

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Speaker 1: welcoming the likes of the European Commission President our Slavander

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Speaker 1: line was this shortage of ammunition from what had been

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Speaker 1: promised from European countries. Do they seem to be coming

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Speaker 1: towards some sort of arrangement as to how they're going

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Speaker 1: to procure the ammunition that's needed.

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Speaker 6: So what's interesting is we got also know this plan

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Speaker 6: from the Czechs basically who said that they could source

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Speaker 6: hundreds of thousands of rounds of artillery shells, which is

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Speaker 6: basically what Ukraine needs right now now. And basically there's

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Speaker 6: been a lot of resistance from the EU to buy

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Speaker 6: use EU funds to buy ammunition from outside, but it

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Speaker 6: seems that position is a little bit weakening just because

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Speaker 6: they don't have the capacity to produce the kind of shelves.

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Speaker 6: We heard from Zelenski's yesterday saying that they've only got

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Speaker 6: about thirty percent of the million shows promised by the EU.

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Speaker 6: So the checks have put forward this proposal it's won

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Speaker 6: the endorsements of the French and the Dutch, and the

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Speaker 6: Dutch have also said, you know, one hundred million euros

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Speaker 6: willing to go to that, so they're go'll be able

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Speaker 6: to get these shells from outside of Europe.

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Speaker 1: Looking more broadly at the defense picture for the European Union,

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Speaker 1: Bloomberg's and reporting on this new draft EU plan to

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Speaker 1: develop its defense industry further. What's in the plan?

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Speaker 6: So let me just start with a quotation that we

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Speaker 6: got because we saw a draft of this here at Bloomberg,

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Speaker 6: and I'll just because this kind of sets the tone

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Speaker 6: for what is the goal here, and it is the

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Speaker 6: geopolitical developments point to a compelling need for Europe to

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Speaker 6: take increased responsibility for its own security and to get

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Speaker 6: ready to effectively address the full spectrum of threats it faces.

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Speaker 1: Right.

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Speaker 7: So this is in keeping also with what we've heard.

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Speaker 6: A lot about from the UK in terms of their

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Speaker 6: policies on raw materials, on energy policy. They basically want

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Speaker 6: to be sourcing a third to half of all of

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Speaker 6: their security systems, their defense systems within the EU by

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Speaker 6: twenty thirty five. So that means that they're going to

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Speaker 6: put a minimum Florida procure defense equipment collaboratively, but really

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Speaker 6: also to mechanisms to make sure that they are aware

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Speaker 6: of identifying where they have dependencies on third countries in

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Speaker 6: order to not have these shortages if things get serious.

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Speaker 6: And again this is all about Europe wanting to demonstrate

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Speaker 6: security autonomy, particularly a time when the sort of.

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Speaker 7: US security umbrella is perhaps more in doubt than it's

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Speaker 7: ever been.

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Speaker 1: Okay, Oliver Crook in Berlin, thank you very much. Now,

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Speaker 1: cocoa prices are at an all time high as production

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Speaker 1: in West Africa declines. Now an EU regulation meant to

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Speaker 1: stop deforestation around the world threatens to disrupt the coco

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Speaker 1: supply chain and push prices even higher. Our soft commodities

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Speaker 1: reporter momby guet How joins us in studio for more

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Speaker 1: mourning to you. It'd be great to see you. What

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Speaker 1: is this EU law all about and when does it

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Speaker 1: take effect?

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Speaker 8: So, as you mentioned, coco prices are at an all

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Speaker 8: time high, and I was here to discuss the supply

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Speaker 8: issues that West Africa is facing a couple of months ago,

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Speaker 8: and now the industry is also focused on an EU

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Speaker 8: deforestation regulation that comes into force at the end of

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Speaker 8: this year. Now, this regulation is one trade that correctly put,

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Speaker 8: it is to make sure that EU citizens are not

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Speaker 8: complicit when it comes to deforestation. So the EU's aim

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Speaker 8: is to try and stop deforestation across the world. That's

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Speaker 8: in West Africa, in the Amazon, in Asia, and it

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Speaker 8: just doesn't target coco, so it also targets palmel, timber, kettle,

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Speaker 8: soy beans, and coffee. So that means your instant coffee,

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Speaker 8: your leather, all of that will have to be checked

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Speaker 8: by the EU. And that's at the end of this year.

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Speaker 1: So how exactly do they plan to achieve this to

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Speaker 1: ensure that it's not contributing to deforestation.

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Speaker 8: Now, some of these supply teams are very complex. When

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Speaker 8: you look at coffee and it comes from very many

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Speaker 8: small holders farmers, that's going to be very complex. So

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Speaker 8: what the EU wants to try and do is that

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Speaker 8: every time a trader brings in a shipment into the EU,

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Speaker 8: they must have GPS coordinates of every plot where they

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Speaker 8: source that coffee or coco. So you can imagine if

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Speaker 8: you're bringing in a bag of coco or coffee, you

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Speaker 8: have to show every GPS coordinate for every plot where

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Speaker 8: you got that coco from. And this is very difficult

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Speaker 8: for an industry that is very low tech, very disorderly.

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Speaker 8: So if you go to West Africa or Avery course,

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Speaker 8: for example, you will find that very very few farmers

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Speaker 8: have a smartphone. So this is really a responsibility for

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Speaker 8: traders and for companies to do this on their own,

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Speaker 8: to try and make sure that for every bag that

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Speaker 8: they're bringing that they have a GPS coordinate of where

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Speaker 8: they got that coffee or coco from.

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Speaker 1: So you've been reporting from West Africa for their story

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Speaker 1: as well, I mean what did you learn there and

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Speaker 1: what does that mean for the companies that trade cocoa

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Speaker 1: and make chocolate as well.

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Speaker 8: Yes, I was in North Africa about two three months ago,

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Speaker 8: and what I thought was a very was an organized

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Speaker 8: supply chain. I came to realize it's very fractured, and

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Speaker 8: so coco will be mixed together at nearly six stages.

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Speaker 8: So before you see your chocolate at the supermarket shelf,

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Speaker 8: it's probably changed hands, maybe six, seven, eight times, and

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Speaker 8: with every change of hands, there's blending, there's mixing, and

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Speaker 8: so you can imagine for a company to try and

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Speaker 8: trace every single bean from the farm to the supermarket shelf,

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Speaker 8: that's at all order. So this means huge investments for

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Speaker 8: companies and they have a lot to lose because you

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Speaker 8: could be penalized four percent of your profit in the EU,

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Speaker 8: you could be banned from trading in the block. So

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Speaker 8: there's a lot for companies to lose. That's why you're

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Speaker 8: seeing Nestleie, Cargill, Mars mondelis spending a lot of money

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Speaker 8: on sustainability and on mapping every single farmer. But it

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Speaker 8: raises the question of are they going to be able

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Speaker 8: to do that in time? There are so many millions

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Speaker 8: of farmers to farm, both in coffee and if you

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Speaker 8: look at Nesley, it has coffee, it has cocoa in

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Speaker 8: its apply chain. Will it be able to map all

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Speaker 8: those farmers before their regulation comes into FoST.

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Speaker 1: And does this mean higher prices for consumers?

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Speaker 8: Eventually that could mean a higher higher prices for consumers.

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Speaker 8: There's someone who has to absorb these costs. It's a

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Speaker 8: lot of money. It's a lot of money to spend

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Speaker 8: on technology, on infrastructure, on making sure that this data

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Speaker 8: is up to date. I don't think the companies will

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Speaker 8: be ready to absorb all these costs and shield the consumers.

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Speaker 8: So either the farmer will take on the tub and

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Speaker 8: the consumer will also see higher prices for chocolate.

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