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

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Speaker 2: This is the.

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Speaker 3: BlueBag Day BAQ podcast. Good morning, It's Wednesday, the eighteenth

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Speaker 3: of March. I'm Caroline Hepge here in London.

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Speaker 1: And I'm Stephen Caroline Brussels. Coming up today, US President

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Speaker 1: Donald Trump ditches his appeal for Iran war support as

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Speaker 1: more European leaders say no.

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Speaker 3: The death of Iran's pragmatist security chief clouds hopes for

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Speaker 3: a diplomatic resolution to the conflict.

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Speaker 2: Plus the Code of Conflict.

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Speaker 1: Tech investor Kathy Wood tells US she believes AI can

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Speaker 1: shorten wars and save lives.

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Speaker 4: Let's start with a roundup of our top stories.

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Speaker 1: The US and Israel are continuing their attacks on Iran

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Speaker 1: as President Trump has abandoned his efforts to recruit partners

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Speaker 1: for the war. There's been little signed that European and

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Speaker 1: Asian countries would join the fray or attempts to end

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Speaker 1: the effective closure of the Strait of Hormuz, oil price's

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Speaker 1: remainer and T one hundred dollars a barrel as Iran

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Speaker 1: has secured an effective veto over which ships can transit

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Speaker 1: the key shipping lane with a trickle of vessels hugging

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Speaker 1: the Iranian coast to pass through. The US President's scolded

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Speaker 1: his NATO allies for their lack of military support to

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Speaker 1: reopen the strait.

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Speaker 2: So I think NATO's making a very foolish mistake. And

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Speaker 2: I've long said that, you.

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Speaker 5: Know, I wonder whether or not NATO would ever be

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Speaker 5: there for us. So this is a This was a

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Speaker 5: great test because we don't need them, but they should

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Speaker 5: have been there. The other thing is, and I think,

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Speaker 5: you know, very important, we didn't have to be there

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Speaker 5: for Ukraine.

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Speaker 1: Trump singled out the UK Prime Minister for refusing his

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Speaker 1: request to use British bass for offensive operations. Asked about

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Speaker 1: cair Starmer, he pointed to a bust of Winston Churchill

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Speaker 1: and said the current leader did not compare favorably. But

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Speaker 1: speaking alongside the US President, Arlen's Tishukmihil Martin came to

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Speaker 1: Starmer's defense.

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Speaker 6: I do believe that he's a baron, is a sound

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Speaker 6: person with You have a capacity to get on with

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Speaker 6: and you've got on with them before, and old are

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Speaker 6: European leaders of the West, and I think you have

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Speaker 6: that capacity again, and I think everyone expists. I mean,

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Speaker 6: you cannot have a rual state with a nuclear weapon.

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Speaker 1: Neil Martin was speaking as the traditional visit by the

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Speaker 1: Irish leader to the White House on same Patrick's day

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Speaker 1: was clouded by tensions between the US and its allies.

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Speaker 5: Well.

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Speaker 3: The Oval Office exchange came as more European leaders have

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Speaker 3: told Donald Trump that they will not support the American

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Speaker 3: an Israeli military campaign. Germany's Chancellor Fredrick Mertz said that

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Speaker 3: his country will not participate in this war. Norway's prime

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Speaker 3: minister made similar comments. Even French President I manue and

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Speaker 3: Macar ruled out involvement, despite President Trump specifically saying that

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Speaker 3: he expected.

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Speaker 4: France would help.

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Speaker 3: Here's what Greek Prime Minister Kiriakos mitsotak Is told a

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Speaker 3: Bloomberg event in Athens.

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Speaker 7: Unless there is a European endorsed mission, Greece will not

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Speaker 7: participate on its own, and I think the likelihood of

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Speaker 7: such a mission right now is very lovely.

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Speaker 3: The sharpening rhetoric from Mitsattakis and other leaders represents a

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Speaker 3: high stakes gamble for Europe. While leaders are on firm

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Speaker 3: political ground. Domestically, the US continues to support Ukraine with

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Speaker 3: intelligence while facilitating weapons sales funded by European allies.

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Speaker 1: Israel has killed Ali Larajani, Iran's top security official, leaving

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Speaker 1: the Islamic Regimes leadership increasingly filled with hardliners. Larajani had

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Speaker 1: a central role in the successful twenty to fifteen nuclear

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Speaker 1: deal and was seen by foreign diplomats as someone who

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Speaker 1: could be a conduit for talks.

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Speaker 2: He was also.

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Speaker 1: Suspected of being a key instigator of the brutal suppression

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Speaker 1: of protests at the start of this year.

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Speaker 2: Who is Israel's Prime Minister Benjaminetta?

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Speaker 8: Now?

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Speaker 2: Who? This morning?

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Speaker 9: We eliminated Ali Larajani. He was the boss of the

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Speaker 9: Revolutionary Guards, which is the gang of gangsters that runs

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Speaker 9: around We also eliminated the commander of the besiege. These

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Speaker 9: are the gangsters assistants who spread terror on the streets

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Speaker 9: against the population.

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Speaker 1: Nataniel who they're speaking via a translator. Iran confirmed Larazani's death,

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Speaker 1: saying he was killed alongside his son.

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Speaker 2: Expert fears.

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Speaker 1: Experts fear Larazani's death makes a diplomatic solution to the

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Speaker 1: war less likely, with one analyst telling Bloomberg that Israel

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Speaker 1: seems to be turning its attention to targeting those that

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Speaker 1: could push for a political solution to the current crisis.

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Speaker 3: Iraq has signed a deal to resume oil exports via Turkey,

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Speaker 3: avoiding the Strait of Hormus. Oil prices edged lower after

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Speaker 3: Iraq agreed with Kurdistan to resume flows through a pipeline

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Speaker 3: in the semi autonomous region that goes to Turkey's Mediterranean

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Speaker 3: port of Jahan. A Landing Council's senior fellow, Ellen Walls,

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Speaker 3: says the move doesn't offset the disruption to the energy

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Speaker 3: markets that the war has already caused.

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Speaker 10: It's going to take Cutter at least a month to

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Speaker 10: get just to get its facilities back up and running.

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Speaker 10: So there's going to be some long term of liberations

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Speaker 10: of this and so while crude oil prices and futures

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Speaker 10: may definitely drop, we're definitely not going to see you

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Speaker 10: return to everything as usual.

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Speaker 3: That was the Atlantic Council's Ellen woold their brand. Crude

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Speaker 3: prices have surged by forty percent since the war began.

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Speaker 3: Military analysts have told Bloomberg that even if navy vessels

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Speaker 3: escorted tankers through the Straight of Worm moves, it would

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Speaker 3: do little to boost traffic through the waterway.

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Speaker 1: Oak Tree Capital Management co founder Howard Marx says artificial

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Speaker 1: intelligence is making the world more unpredictable than ever before.

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Speaker 1: Marx was speaking to Bloomberg's Lisa Bramo. It's the Capital

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Speaker 1: Markets Industry conference in New York.

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Speaker 11: Well, I think most people are under estimating the impact

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Speaker 11: of AI. Roughly eighteen days ago, on a Friday that

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Speaker 11: the company called Block, which had ten Thousandmploysoy announced that

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Speaker 11: four thousand and we're out. Forty percent of the workforce

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Speaker 11: gone in one day because AI could do the work

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Speaker 11: cheaper and faster.

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Speaker 2: It was Howard Marks speaking.

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Speaker 1: He added, investors are probably better off buying the shares

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Speaker 1: of an AI focused company rather than lending it money.

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Speaker 1: I Meanwhile, the Bondusbank president Kim Nagle says that AI

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Speaker 1: means that routine white collar worker is losing its intrinsic value,

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Speaker 1: but their artificial intelligence won't necessarily lead to job cuts.

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Speaker 2: In Europe.

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Speaker 1: Nagel cited European Central Bank studies saying that on balance,

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Speaker 1: AI isn't currently replacing jobs in Europe.

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Speaker 3: Here in the UK, Chancellor of Rachel Reeves says that

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Speaker 3: AI the EU and giving power to local regions will

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Speaker 3: drive her growth agenda. Britain's finance minister announced investment and

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Speaker 3: deregulation to try to revive stuttering the stuttering economy in

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Speaker 3: the UK amid global headwinds. Rachel Reeves was speaking in

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Speaker 3: the city of London, where she also ruled out rejoining

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Speaker 3: the European Union, in.

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Speaker 12: Which regulatory autonomy may be necessary for sectors with unique

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Speaker 12: characteristics or strategic importance. For the UK, that should be

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Speaker 12: the exception, not the norm. To get this right, we

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Speaker 12: must work more closely with businesses both here and across Europe.

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Speaker 3: Although Rachel Reeves is setting out her economic thinking with

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Speaker 3: at least three years before an election, many questioned her

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Speaker 3: political stability. An upcoming a local election in May is

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Speaker 3: seen as a key crunch point for her party and

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Speaker 3: indeed the party leader, Prime Minister kiss Starmer. Right, those

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Speaker 3: are the top stories for you this morning. Let's think

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Speaker 3: about markets right now, as breakthrough futures have declined this

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Speaker 3: morning two point three percent, so we're down, trading at

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Speaker 3: one hundred and one dollars about while I say down,

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Speaker 3: and yet that's reversal in terms of the oil price

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Speaker 3: is supporting sentiment for stock markets. So you've seen the

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Speaker 3: your country World Index up by four tenths of one percent.

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Speaker 3: You've seen a significant rally now in global stocks, all

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Speaker 3: of this ahead of the Federal Reserve interest rate decision.

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Speaker 3: Not expected to see a rate change, but there will

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Speaker 3: be much focus on the press conference of course later today.

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Speaker 3: You've also seen Asian equity markets gaining the nick for example,

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Speaker 3: up two point six percent, I mean, the costb surging

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Speaker 3: five percent, as Samsung Electronics a particular winner there. You've

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Speaker 3: got ten cent results to come then stop. Futures for

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Speaker 3: Europe also very buoyed, up nine tenths of one percent.

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Speaker 3: Tenny US treasury yields dipping two and a half basis

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Speaker 3: points at four point one seven percent.

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Speaker 4: Those are the markets.

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Speaker 1: Before we get into today's main story, we wanted to

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Speaker 1: mention another story that we've been reading this morning about

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Speaker 1: the neglected middle as I'm thinking of it, and this

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Speaker 1: is to do with fashion and men's wear in particular.

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Speaker 1: Chris Rolsarsben speaking to Todd Snyder, the designer for his

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Speaker 1: own brand, but also somebody who has been involved in

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Speaker 1: men's wearing the US for a long time, and the

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Speaker 1: promotion of the idea of a part of the fashion

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Speaker 1: world that sort of was disappearing post pandemic, and this

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Speaker 1: idea of, you know, something that's not necessarily high end fashion,

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Speaker 1: it's not fast fashion, but something in between for people

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Speaker 1: who are looking for, you know, clothes that essentially don't

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Speaker 1: cost the earth.

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Speaker 2: But that still gives some element of style.

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Speaker 1: And he got to follow him to Italy on his

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Speaker 1: beast for a fabric and a fascinating toward through this

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Speaker 1: idea of trying to revive a sector of the fashion

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Speaker 1: world that perhaps hasn't been getting as much love.

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Speaker 3: Yeah so, and also something that maybe high fashion might

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Speaker 3: take note of. So Snider of course ran men'swear for

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Speaker 3: J Crew in the two thousands. His own brand has

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Speaker 3: twenty three shops, so it's sort of meant to be

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Speaker 3: finely crafted suits effectively, but kind of, as you say,

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Speaker 3: a mid range price tag. So apparently suits under about

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Speaker 3: one thousand dollars. If you look at Louis Rita or

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Speaker 3: the other high end fashion names, you'd be paying more

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Speaker 3: than five thousand dollars. But yes, it looks like the

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Speaker 3: mid tier may actually be coming back in fashion. Apparently,

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Speaker 3: the luxury brands have lost millions and millions of customers

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Speaker 3: simply because the price tag has sowed so much.

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Speaker 1: And in case you're wondering, because one person's mid tier

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Speaker 1: is not another person's mid tier. You're talking about you're

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Speaker 1: talking about somewhere between one hundred and thirty and two

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Speaker 1: hundred euros for a shirt, and as I say, suits

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Speaker 1: up to that level of around in around one thousand

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Speaker 1: euros for a suit, which is not unreasonable if you're

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Speaker 1: looking for it, but it's also not as cheap as

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Speaker 1: you might get it elsewhere.

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Speaker 7: Yeah.

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Speaker 3: Absolutely, We're going to put a link to Chris Rovzar's piece,

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Speaker 3: which I think is really interesting on the future of

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Speaker 3: men's fashion. We'll put a link to it in our

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Speaker 3: podcast show notes.

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Speaker 1: In a moment, we'll bring you our interview with Kathy

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Speaker 1: Wood of ARC invest She's been speaking to us about

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Speaker 1: how she sees the Iran war affecting markets and the

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Speaker 1: development of artificial intelligence.

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Speaker 3: Now to our top story, the US President has angrily

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Speaker 3: dropped the idea of allies joining the war in Iran

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Speaker 3: while Israel has killed Iran's top security chief are confirmed

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Speaker 3: by Iran are living Ston Wallis, who heads our Middle

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Speaker 3: East and North Africa coverage joints US Now for more

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Speaker 3: in terms of what we know about the killing of

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Speaker 3: Ali Larajani. What happened and what does it mean now

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Speaker 3: for Iran's leadership?

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Speaker 8: Good morning, Yes, I mean it's sort of in the

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Speaker 8: same vein as what we've seen since well, I suppose

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Speaker 8: the being of this war, but even predating this war.

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Speaker 8: You know, this is of the classic playbook from these

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Speaker 8: radius of basically eliminating the leadership one by one, and

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Speaker 8: obviously you have the supreme leader on the first. This

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Speaker 8: is a very serious assassination that went on here and

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Speaker 8: it does, we think, probably have some implications for diplomatic

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Speaker 8: resolution to this, because in effect, what it seems to

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Speaker 8: do is remove someone that was very experienced with diplomatic arena,

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Speaker 8: was well known internationally, have a pretty serious social media

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Speaker 8: presence of was well known in general, and it does

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Speaker 8: appear to sort of consolidate potentially the power of the

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Speaker 8: the really serious hardliners into Ihran and across Iran, who

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Speaker 8: are going to be I think much less agreeable when

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Speaker 8: it comes to some sort of amatic solution. Now we

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Speaker 8: are speculating here. It's not entirely clear what the power

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Speaker 8: struption looks like in Iran right now, but that seems

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Speaker 8: to be the sort of the big takeaway from this,

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Speaker 8: And I would just sort of commend to you a

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Speaker 8: story that was done over the light on this very

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Speaker 8: topic by our reporter Gone. Now what a value and

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Speaker 8: you know, spent a lot of time in Iran, so

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Speaker 8: going to have a read of her analysis. She knows

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Speaker 8: a lot more about it than I do.

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Speaker 1: Well indeed, and very much added value from analysis. And

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Speaker 1: Goner this morning on the straight of Hormos, though, talk

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Speaker 1: to us about what is happening in terms of that

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Speaker 1: trickle of ships that are being allowed through the waterway

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Speaker 1: Bay Iron. It appears this is President Trump has pulled

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Speaker 1: back really on his demands for help to try and

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Speaker 1: reopen the strace.

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Speaker 8: Yeah, I mean, I think he's pulled back because he

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Speaker 8: asked and no one answered. You know, the best you

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Speaker 8: sort of got noncommission responsors and the worse you got

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Speaker 8: flat refusals. And I think, you know, part of that

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Speaker 8: is twofold number one, the people that he's called on

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Speaker 8: to come help, and largely from institutions like NATO that

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Speaker 8: he's sort of been quite disparaging about late, or it's

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Speaker 8: been internationalized that he's imposed huge tariffs on or Thirdly,

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Speaker 8: it's you know, nations that basically have no consultation before

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Speaker 8: he decided to enter this war, and they're looking at

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Speaker 8: the situation or moves and thinking that there are very

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Speaker 8: limited options here in terms of a military response. And

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Speaker 8: I think our big conclusion from this is, yes, you

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Speaker 8: could probably get a certain number of tankers or drag

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Speaker 8: ball carriers through with the naval escort, but it would

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Speaker 8: be a trickle and it's you know, it's going to

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Speaker 8: be more than you have now, but the potential cost

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Speaker 8: and risk of doing that doesn't really move the needle

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Speaker 8: in terms of global or supplies or the movement of

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Speaker 8: commodities in general. And it does feel here like the

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Speaker 8: probably the best path in order to resolve in the

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Speaker 8: whole moves straight. Ultimately, it's going to be a dipermatic

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Speaker 8: solution because military solution is very complex. As you know,

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Speaker 8: it's very very narrow and right now, you know it's

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Speaker 8: in the middle of a hot wall, so you can

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Speaker 8: throw in more armaments into the region, but it's not

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Speaker 8: necessarily going to solve the problem.

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Speaker 3: Well, you mentioned a hot war. Lebanon is being particularly

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Speaker 3: hard hit. The UAE is also trying to counter attacks.

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Speaker 3: How is the United Arab Emirates managing that.

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Speaker 8: So, I mean, it does have an incredibly advanced weapon system.

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Speaker 8: You know, it's got this sort of multi layered air defenses,

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Speaker 8: and by our calculation, it's been receiving more missiles drones

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Speaker 8: than I think any other theater on the Persian sorry,

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Speaker 8: the Arab Garlf States and even Israel I think you know,

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Speaker 8: it tops that. So you know, we do get regular

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Speaker 8: missile and of our telephones, you know, one went off

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Speaker 8: about five minutes ago, but the interception rates largely have

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Speaker 8: been incredible. You know, they're kind of up there with

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Speaker 8: Iron Dome in terms of effect. So yes, one or

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Speaker 8: two do you get through from time to time. Falling

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Speaker 8: debris has continued to be an issue, but in terms

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Speaker 8: of the interception rate, it's phenomenally high. So you know

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Speaker 8: there's a degree here obviously that no one is being

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Speaker 8: particularly comfortable about the situation. As I say, they have

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Speaker 8: been incredibly effective about knocking these projectiles out the sky.

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Speaker 1: Okay, Stewart, thank you very much for joining us this morning.

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Speaker 1: Stuart Livingston Wallace there who heads our Middle Eastern North

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Speaker 1: Africa coverage reporting from Dubai, and just another strand of

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Speaker 1: the story we've been talking about the travel disruption being

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Speaker 1: caused by the war to Cathe Pacific canceling its flights

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Speaker 1: to Dubai and readd nowt until the end of April,

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Speaker 1: according to a statement from the airline. Stay with us

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Speaker 1: more from Bloomberg Daybreak Europe coming up after this.

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Speaker 4: Well.

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Speaker 3: Despite the ongoing war, global stocks are rallying for a

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Speaker 3: third day as investors seek signs of stability. We've been

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Speaker 3: discussing the market reaction with Kathy Wood, the founder, CEO

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Speaker 3: and CIO of ARC invest. The prominent tech investor, also

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Speaker 3: gave us her view on the use of artificial intelligence

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Speaker 3: in warfare. In this part of the conversation, Kathy Wood

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Speaker 3: tells us why she thinks the situation in the Middle

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Speaker 3: East is a short term issue for markets.

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Speaker 13: The Iran war is placing more bricks into the wall

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Speaker 13: of worry that this ball market is climbing. In the

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Speaker 13: eighties and nineties, which were the golden age for active

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Speaker 13: equity management, it was the same kind of situation. There

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Speaker 13: were fears all along the way until nineteen ninety nine.

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Speaker 13: Nineteen ninety nine, no one seemed to have any fears

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Speaker 13: about anything anymore, But for the rest of that ball market.

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Speaker 13: It was one worry.

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Speaker 4: After the other.

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Speaker 13: It was inflation, it was the SNL crisis.

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Speaker 4: It was the.

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Speaker 13: Several wars, but the market did continue to climb that

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Speaker 13: wall of worry, and I do believe that we are

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Speaker 13: in the same kind of ball market.

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Speaker 4: Now in terms of the short term.

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Speaker 3: Then the rate decisions, central buying decisions this week, how

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Speaker 3: many cuts do you expect from the FED given the war,

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Speaker 3: the worries about inflation.

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Speaker 13: Well, I don't think they're going to cut at this one.

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Speaker 13: And one of the reasons is the core personal consumption

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Speaker 13: deflator ticked back up on a year over year basis

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Speaker 13: to three point one percent inflation, and that is one

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Speaker 13: of the primary inflation measures they watch. We watch another

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Speaker 13: measure called trueflation, and it's blockchain based. It's ten thousand

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Speaker 13: items goods and service is monitor twenty four to seven.

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Speaker 13: That measure of inflation is at one and a half.

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Speaker 13: And it's interesting during COVID it peaked at eleven to

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Speaker 13: twelve percent, whereas the CPI peaked at nine percent, and

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Speaker 13: it has tended to lead the CPI. Right now, we

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Speaker 13: do have energy prices probably an upward pressure, but that

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Speaker 13: is true for true inflation. As well, so it's gone

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Speaker 13: from it was lower than one percent to one point

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Speaker 13: five percent. If that's if this is as high as

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Speaker 13: it goes, I think the CPI by the end of

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Speaker 13: this year will resolve below below that two to three

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Speaker 13: percent range.

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Speaker 3: In terms of the war and your investments, do you

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Speaker 3: think that there should be limits to how the US

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Speaker 3: uses AI in war? I know that you were talking

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Speaker 3: earlier about the use of joint technology and your own

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Speaker 3: experiences of understand daying how joint technology is used by

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Speaker 3: these cutting edge businesses.

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Speaker 13: Yes, I think it's this is a question probably beyond

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Speaker 13: my ken but I would say if if a I

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Speaker 13: is limiting wartime because targets are hit directly and quickly,

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Speaker 13: and you know, the war is over much more quickly

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Speaker 13: than it might have been in the past. You know,

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Speaker 13: I'm sure that the generals out there are saying, we

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Speaker 13: are saving we are saving a lot of lives, certainly

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Speaker 13: American lives, unfortunately. And you know, when when Americans do

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Speaker 13: go into war zones where there are civilians, they always

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Speaker 13: warned civilians to clear out. I think that has been

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Speaker 13: the case for civilian parts of economies in Iran. So

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Speaker 13: you know, it's this is This is maybe a little

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Speaker 13: bit beyond my investment orientation. But if if if ai

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Speaker 13: helps bring wars to an end much more quickly then

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Speaker 13: they have ended historically, I think everyone would agree that's

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Speaker 13: a good thing.

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Speaker 3: Just tell me broadly about where your expectation is now

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Speaker 3: for your own investments by the end of the year.

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Speaker 3: How optimistic are you about growth in the industry. I mean,

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Speaker 3: you know, we've just been talking about n Video, hearing

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Speaker 3: from Nvidia that they want a trillion dollars worth of

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Speaker 3: sales over the next couple of years, and some people

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Speaker 3: don't see that actually as very big, but there has

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Speaker 3: been such growth in the industry. How optimistic are you

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Speaker 3: about this year?

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Speaker 2: Well, we monitor.

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Speaker 4: The revenue run rate.

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Speaker 13: You look at the revenues per month for some of

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Speaker 13: these large language model companies, and we're astonished at what's happening. Anthropic,

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Speaker 13: for example, was at a nine billion revenue run rate

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Speaker 13: in December and it's already up to nineteen billion, so

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Speaker 13: really justifying the investment that they're undertaking. Open Ai has

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Speaker 13: gone from twenty to twenty five billion. This is in

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Speaker 13: the span of a little more than two months. So

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Speaker 13: I think what that's telling us is the impact on

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Speaker 13: productivity of these tools is astonishing, and more and more

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Speaker 13: people are willing to pay not just twenty dollars a month,

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Speaker 13: but in our case two hundred dollars a month for

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Speaker 13: the many seats that we have on open AI and

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Speaker 13: anthropic and we're even getting to the point where we

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Speaker 13: can see justification for two thousand dollars a month. And

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Speaker 13: what that means is we would not be hiring another

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Speaker 13: research associate. We would be engaging these large language models

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Speaker 13: to help us with our research. And it's the results

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Speaker 13: we are getting, and we use both Palanteer and all

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Speaker 13: of the large language models, the results we're getting are astonishing.

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Speaker 13: And many times have we showcase all the breakthroughs during

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Speaker 13: our morning meeting. It's just a fifteen minute business meeting.

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Speaker 13: But on many days we're now having people from all

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Speaker 13: parts of the organization, you know, show and tell, show

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Speaker 13: what they're doing with AI that they could have never

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Speaker 13: done before. They just couldn't do it before. In terms

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Speaker 13: of the kinds of tables and graphs and you know,

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Speaker 13: iterations on some kind of some kind of idea that

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Speaker 13: we're throwing out there. They're taking us places where you know,

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Speaker 13: we probably would have taken us. I'm going to say

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Speaker 13: months before, and now we can do it in days.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 1: stories making news from London to Wall Street and beyond.

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Speaker 2: I'm Stephen Carroll.

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Speaker 1: Join us again tomorrow morning for all the news you

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Speaker 1: need to start your day right here on Bloomberg Daybreak

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Speaker 1: Europe