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

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Speaker 2: This is the Bloomberg Day Baku podcast, available every morning

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

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Speaker 2: twentieth of May in London. I'm Caroline Hepke.

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Speaker 1: And I'm Stephen Carroll. Coming up today.

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Speaker 3: Donald Trump's two hour call with Vladimir Putin hands Russia

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Speaker 3: a win as the US President steps back from Ukraine peace.

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Speaker 2: Talks a landmark deal that leaves many details unresolved. Britain's

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Speaker 2: big EU reset turns out to be just the start

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Speaker 2: of negotiations.

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Speaker 1: Plus betting on Europe why a growing number of Wall

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Speaker 1: Street banks expect European stocks to see their best performance

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Speaker 1: versus the US in at least two decades.

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

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Speaker 3: US President Donald Trump says Russia and Ukraine will start

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Speaker 3: talks immediately on ending the war after a two hour

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Speaker 3: call with Vladimir Putin, But there was no threat of

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Speaker 3: US sanctions, no demand for a timeline, and no pressure

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Speaker 3: on the Russian leader from his US counterpart. Trump later

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Speaker 3: told reporters that the United States wasn't withdrawing from the conflict,

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Speaker 3: but that he was considering it.

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Speaker 4: This is not my war, This is not the war.

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Speaker 4: I mean, we got ourselves entangled in something that we

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Speaker 4: shouldn't have been involved in, and we would have been

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Speaker 4: a lot better off, and maybe the whole thing would

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Speaker 4: have been better off, because it can't be much worse.

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Speaker 4: It's a real message, a death trap. So I think that, Yeah,

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Speaker 4: I wish I do have a certain line, but I

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Speaker 4: don't want to say what that line is because I

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Speaker 4: think it makes the negotiation even more difficult than it is.

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Speaker 3: Reacting to the comments in the US president, one European

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Speaker 3: official told Bloomberg that leaders fear Trump is disengaging from

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Speaker 3: the diplomatic efforts. An others said the US President had

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Speaker 3: made it clear he didn't want to impose more sanctions

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Speaker 3: and was retreating from his own proposal for a ceasefire.

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Speaker 2: The UK and the European Union signed an agreement to

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Speaker 2: ease border checks on food. Prime Minister Kirstarmer called a

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Speaker 2: landmark deal, but the bigger reset moment that was built

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Speaker 2: up by the Starmer government turns out to be only

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Speaker 2: the start of talks in many key areas, with no

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Speaker 2: concrete result on a defense and security pact. The UK

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Speaker 2: government says that the deal on agri food products will

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Speaker 2: add nine billion pounds or zero point two percent of

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Speaker 2: GDP to the UK economy every year by twenty forty.

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Speaker 2: The two sides agreed, though only to work towards a

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Speaker 2: youth visa program, and while the UK claims a victory

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Speaker 2: on the use of eGates for British passport holders, the

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Speaker 2: actual agreement talks about their potential use where appropriate. Meanwhile,

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Speaker 2: Brussels secured twelve years of ongoing access to British fishing waters.

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Speaker 2: Kiirs Starmer says the deal is a win win.

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Speaker 5: Britain is back on the world stage, working with our partners,

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Speaker 5: doing deals that will grow our economy and putting more

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Speaker 5: money in pockets of working people.

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Speaker 2: The UK Prime Minister has signed a series of trade

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Speaker 2: deals in recent weeks. His charts that told the BBC

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Speaker 2: that a pact with the six member Golf Cooperation Council,

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Speaker 2: including Saudi Arabia, the United Arab Emirates and Cutter was

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Speaker 2: the next goal.

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Speaker 3: Israel says it will take over all of Gaza. As

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Speaker 3: some democracies warned the country is breaking international law and

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Speaker 3: could be sanctioned. The Israeli military told Gazans to evacuate

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Speaker 3: their second biggest city, can Unice ahead of what it

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Speaker 3: called an unprecedented attack on Hamas. British Prime Minister Kiir

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Speaker 3: Starmer says, Israel's conduct is unacceptable.

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Speaker 5: This is a really serious, intolerable situation and that's why

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Speaker 5: we are working intensely to coordinate with other leaders how

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Speaker 5: we respond to this.

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Speaker 3: Starmar was joined by the leaders of France and Canada,

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Speaker 3: who said they will take action if AID isn't allowed

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Speaker 3: into Gaza. Food security experts say all Gazans are now malnourished,

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Speaker 3: with one in five facing extreme starvation.

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Speaker 2: Now let's turn our attention back to the UK, because

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Speaker 2: Bloomberg has learned that the Bank of England is considering

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Speaker 2: loosening post financial crisis rules that force lenders to separate

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Speaker 2: their retail and investment banking arms. Bloomberg's un pots has more.

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Speaker 6: Staff at the Potential Regulation Authority is said to be

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Speaker 6: looking at relaxing the ring fencing requirements for UK banks,

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Speaker 6: but without scrapping them entirely. Some of the country's biggest banks,

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Speaker 6: including HSBC, Newest and Lloyd's Road to the Chancellor in

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Speaker 6: April calling for ring fencing to be abolished, saying it

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Speaker 6: makes British banking less competitive. But scrapping the rules, which

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Speaker 6: finally came into force in twenty nineteen, is not with

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Speaker 6: our controversy. John Vickers, a former BOE chief economist who

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Speaker 6: led work on the rules, warns that the loosening could

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Speaker 6: end up reducing the capital invested in the UK, harming

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Speaker 6: economic growth in London.

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Speaker 2: I'm youw in pots of Bloomberg Radio.

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Speaker 3: The United States risks a fiscal disaster if a recession hit,

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Speaker 3: as Republicans push ahead with their sweeping package of tax cuts.

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Speaker 3: That's according to Jim Milstein, the co chair of Guggenheim Securities,

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Speaker 3: who spoke to Bloomberg after a key US House committee

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Speaker 3: advanced President Donald Trump's massive tax and spending package. Meanwhile,

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Speaker 3: the Joint Committee on Taxation has estimated the bill's total

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Speaker 3: cost at three point eight trillion dollars over the next decade.

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Speaker 3: But Milstein told Bloomberg the figure assumes the US avoids

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Speaker 3: a recession.

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Speaker 7: These projections are all made on a ten year basis. Yeah,

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Speaker 7: and they assume, you know, consistent economic growth. So just

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Speaker 7: imagine the Trump pariffs. Because of the uncertainty and the variability.

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Speaker 7: Imagine we have a recession in a you know, in

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Speaker 7: the last five or six recessions, the budget deficit actually

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Speaker 7: blows out.

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Speaker 3: Guggenheim's Jim Milstein spoke to Bloomberg as President Trump plans

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Speaker 3: to go to the capital today to urge fractious Republicans

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Speaker 3: to overcome divisions and unite behind his signature tax cut legislation.

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Speaker 2: So that was the Guggenheim warning. There's been another. JP

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Speaker 2: Morgan CEO Jmie Diamond has warned that inflation and stagflation

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Speaker 2: are more likely than many people think, and that today's

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Speaker 2: markets aren't pricing in the impact of a potential downturn

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Speaker 2: in the US. Speaking of the Bank's invested day, Diamond

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Speaker 2: emphasized the uncertainty at play.

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Speaker 8: You haven't seen in effective tariffs. The market came down

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Speaker 8: ten percent, it's back comes ten percent. I think that's

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Speaker 8: an extraordinary amount of complacency. That's my own view that

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Speaker 8: when I've seen all these things adding up that are

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Speaker 8: on the fringes of extreme kind of thing, I don't

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Speaker 8: think we could predict the outcome. And I think there's

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Speaker 8: a chance of inflation going up and stagflation is a

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Speaker 8: little higher than other people think.

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Speaker 2: Jamie diamond says that he believes the bank, though, will

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Speaker 2: be fine hemid the turbulence. Wall Street's biggest bank say

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Speaker 2: that it is sticking with its forecast for full year

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Speaker 2: net interest income of ninety four point five billion dollars

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Speaker 2: at JP Morgan.

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Speaker 1: Those are your top stories on the markets.

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Speaker 3: We saw the S and P five hundred rives for

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Speaker 3: eight sixth straight session yesterday. It's on the customer bullmarkt

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Speaker 3: now nineteen point seven percent from lows on the eighth

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Speaker 3: of April. Stocks six hundred Stox fifty futures are up

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Speaker 3: by half of one percent this morning. They finished the

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Speaker 3: stoxice hundred fish yesterday up a tenth of one percent.

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Speaker 3: European stocks are up eight point three percent so far

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Speaker 3: this year, out performing the SMP five hundred. We did

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Speaker 3: see also the thirty year yield you're watching closely yesterday

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Speaker 3: for reaction to.

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Speaker 1: The Moody's downgrade as well.

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Speaker 3: It did come down later the yield at the end

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Speaker 3: of the session, so four point nine one percent is

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Speaker 3: where that is trading at the moment. The Bloomberg Dollar

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Speaker 3: Spot Index so holding steady after yesterday's losses as well.

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Speaker 3: It fell by point six percent yesterday as well, and

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Speaker 3: an ipo of note in Asia as well. At COTL,

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Speaker 3: the Chinese battery maker, shares up seventeen percent in Hong Kong.

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Speaker 3: It's the world's biggest listing this year.

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Speaker 2: Wow. Interesting. Okay, so those are the markets. Well, in

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Speaker 2: a moment, we're going to bring you more about the

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Speaker 2: repercussions of that Trump putin two hour call yesterday. And

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Speaker 2: also while an increasing number of Wall Street banks actually

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Speaker 2: expect Europeans stocks to outperform their American equivalence this year.

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Speaker 1: That is.

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Speaker 2: But there's another story that we've been reading about this morning.

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Speaker 2: This is the latest list of must have travel items

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Speaker 2: for this summer. Yes, I think we're clearly highly anticipating.

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Speaker 2: Are some holidays. The team over at Bloomberg BusinessWeek have

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Speaker 2: compiled this. How many have you got, Stephen caroll On.

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Speaker 3: I have none, And to be frank, I had a

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Speaker 3: few difficulties understanding some of them. I mean I was

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Speaker 3: confused by For example, there was a candle called hotel lobby,

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Speaker 3: and I was like, oh, candle sounds like smells like

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Speaker 3: a hotel lobby. That's an interesting idea, but no, actually

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Speaker 3: that's the name of the company, and the scent that

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Speaker 3: has been recommended by our colleagues is the Capri scent,

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Speaker 3: which is citrus, jasmine and amorollicure, which unds like a

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Speaker 3: good holiday.

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Speaker 2: But hang on that. So if you don't go on

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Speaker 2: holiday shortly, that's the candle that you say.

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Speaker 1: Your holiday at home.

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Speaker 2: Okay, fine, that's your staycation. Yeah, they had instant coffee

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Speaker 2: pods and yeah, lots of other things that you can

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Speaker 2: put into your recycled luggage if you want to buy

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Speaker 2: recycled luggage as well.

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Speaker 3: Yeah, plenty tips will give the travel expert. It's a

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Speaker 3: chance to check out that letter of time Bloomberg dot com.

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Speaker 3: We'll put a link to it on our show notes

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Speaker 3: as well.

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Speaker 2: Now, let's bring you more and what emerged from Donald

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Speaker 2: Trump's phone call with Vladimir Putin. The leader spoke for

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Speaker 2: a couple of hours. Trump says that cees far talks

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Speaker 2: between Russia and Ukraine will start immediately, but apparently without

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Speaker 2: any pressure on Putin. Our EMEA news director was in Matheson,

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Speaker 2: joins us now for more. Good morning. Was was there

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Speaker 2: any progress towards ending the war? There seems to be

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Speaker 2: some consternation in Europe about what the call actually means.

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Speaker 9: Well, that's right, it's very unclear where where we're left

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Speaker 9: with all of this, because it was a lengthy phone call.

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Speaker 9: There were a lot of comments from everybody afterwards. But

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Speaker 9: also Donald Trump did speak with the Ukrainian president and

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Speaker 9: he spoke, as you say, with European leaders afterwards.

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Speaker 1: An awful lot.

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Speaker 9: Of telephone calls going on. And the upshot is that

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Speaker 9: we don't seem to be any further along the road

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Speaker 9: to understanding what the pathway is to end this war.

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Speaker 9: As you say, the US President says that talks will

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Speaker 9: start immediately, but we don't know exactly what that means. Where,

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Speaker 9: what are the parameters are these working level talks, ministerial

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Speaker 9: talks at some point do we get towards leadership talks?

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Speaker 9: Under what parameters would those talks be happening? And above all,

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Speaker 9: the message that comes from this is that Donald Trump

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Speaker 9: is now saying it's up to Russia and Ukraine to

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Speaker 9: talk directly and to sort this out, in the sense

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Speaker 9: that even though he says the US is not walking away,

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Speaker 9: that he really is disengaging from being the direct conduit

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Speaker 9: in that process. And he's saying, you know, Russia and

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Speaker 9: Ukraine need to sit down somewhere, possibly the Vatican, under

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Speaker 9: what terms we don't know, with what teams we don't know,

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Speaker 9: and find a way to end this. And he's really

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Speaker 9: saying if there's at some point he feels it's not progressing,

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Speaker 9: the US will indeed walk away. So he doesn't seem

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Speaker 9: to want to be directly involved at this point in

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Speaker 9: negotiating the end of this war.

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Speaker 3: Now, he spoke to several European leaders after this phone

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Speaker 3: call with thlasmry Putin as well, what do we know

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Speaker 3: about how those conversasations Wand well.

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Speaker 9: It's interesting again because Donald Trump afterward was saying this

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Speaker 9: is a European situation. He started to use that language,

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Speaker 9: this is Europe's issue, not the US's, and again clearly

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Speaker 9: pumpting it over to the Europeans. But arguably he's been

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Speaker 9: trying to cut them out of the process until now

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Speaker 9: and exclude them from some of the negotiations. Now he's saying,

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Speaker 9: this is yours to deal with. And we know from

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Speaker 9: the European side, the officials that we talk to afterward,

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Speaker 9: that high level of concern that it seems to be

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Speaker 9: that Donald Trump is saying he's washing his hands of

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Speaker 9: this in terms of directly negotiating the end to the war.

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Speaker 9: And does that mean that Donald Trump doesn't want to

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Speaker 9: keep imposing sanctions on Russia, He doesn't want to keep

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Speaker 9: the pressure up on Vladimir Putin and dangle the prospect

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Speaker 9: of economic sanctions and tightening those because the US still

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Speaker 9: does have some leverage on the sanctions front. And again

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Speaker 9: the concern that the ball has been put back into

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Speaker 9: a different court.

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Speaker 1: And where do we go from here?

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Speaker 2: Yeah, and I suppose many people are reading this surely

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Speaker 2: highly supportive of Vladimir Putin and Russia. And what does

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Speaker 2: the Ukrainian president say about the prospects of talks between

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Speaker 2: two countries that have been at war for three years?

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Speaker 9: Well, he says he's keen for talks, but he obviously

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Speaker 9: wants to understand what the plan is. He said he's

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Speaker 9: willing for there to be talks in the Vatican in

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Speaker 9: Istanbul again, and of course we had recently those working

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Speaker 9: level talks in Turkey between Russia and Ukraine that seemingly

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Speaker 9: went nowhere. What he's saying is he expects Russia to

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Speaker 9: now lay out every single demand to end this war

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Speaker 9: in a memorandum, so it's on the table. This is

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Speaker 9: exactly what you want. I mean, you kin't of already

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Speaker 9: know what Vladimir Putin wants. He's got quite his maximus

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Speaker 9: demands going, including on territory, but at least have a

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Speaker 9: very clear sense from Russia, these are the things we

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Speaker 9: want to end this war and then to have those negotiations.

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Speaker 9: But he also wants promises in a way from the

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Speaker 9: US that they will keep open the door to further

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Speaker 9: sanctions on Russia and further pressure on Russia Europe as well,

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Speaker 9: though Europe is actually keeping some of those sanctions going

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Speaker 9: as we know, But he says he just wants to

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Speaker 9: now have a plan to sit down and have that conversation.

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Speaker 3: This was all playing out as the UK and the

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Speaker 3: EU were unveiling their new partnership agreement, but looking at

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Speaker 3: the detail of it, it seems like progress on key

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Speaker 3: issues like UK access to the EU's defense funds appeared

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Speaker 3: more aspirational than immediate.

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Speaker 9: Yeah, it's interesting that meeting yesterday between the leaders of

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Speaker 9: the UK and some of the European leaders is a

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Speaker 9: sense that they want to have a pathway and all

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Speaker 9: these things, but they're putting it all down the road.

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Speaker 9: I mean, there was a lot of we'll do this,

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Speaker 9: but we don't quite know when or how in the

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Speaker 9: whole outlines of the EU and UK agreement on the

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Speaker 9: defense side, you know, we know that the EU has

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Speaker 9: given initial approval to this fund and formal approval will

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Speaker 9: probably come next week. And this is about, you know,

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Speaker 9: distributing funds to member states and others possibly to support

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Speaker 9: them as they build things like ammunition and drone. So

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Speaker 9: you raise the money in the capital market, so you

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Speaker 9: disperse it to member states.

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Speaker 2: But they've left the door open to.

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Speaker 9: The UK being part of that, but we just don't

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Speaker 9: know how. Again, they're talking about you have to pay

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Speaker 9: a fee maybe if you're outside the EU to be

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Speaker 9: a participant. There might be other conditions that we don't

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Speaker 9: know about. They were asked about that yesterday and they

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Speaker 9: both said they were very unclear from the EU and

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Speaker 9: the UK side, and it could be weeks, if not months,

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Speaker 9: if some of that is laid out. So the pathway

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Speaker 9: for the UK and for British companies particularly to take

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Speaker 9: part in this and have access potentially to some of

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Speaker 9: this investment money that also remains very unclear.

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Speaker 2: Yeah, of course, you know, the UK and some census

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Speaker 2: has led the way in the defense of Ukraine along

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Speaker 2: with all of those European partners. So yes, there's a

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Speaker 2: big question mark about how much Britain will be involved.

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Speaker 1: I think as well.

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Speaker 3: One of the more concrete elements of what was talked

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Speaker 3: about was the use of the passport gates, which is

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Speaker 3: something that people have seen as an actual, you know,

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Speaker 3: an actual change that's happened since breadgits that affect individuals

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Speaker 3: who are traveling, And it's very unclear because that's something

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Speaker 3: that has to be implemented at a national level. So

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Speaker 3: there's no timeline as to when that could be done

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Speaker 3: because each individual country would have to change their own

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Speaker 3: systems for it to be available to do so. Although

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Speaker 3: announcement in principle very well and good, the practicalities again

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Speaker 3: do seem quite unclear from here on in because the

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Speaker 3: change that would have to be made will take time.

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Speaker 2: Yeah, I would say, you know, one can weigh the

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Speaker 2: speed of you getting through passport control in Europe for

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Speaker 2: your holiday versus a defense and Security Pact for the

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Speaker 2: strength of the European continent as being really quite different

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Speaker 2: political propositions. Thank you, so much wils for being with

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Speaker 2: us this morning and talking about all of these major

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Speaker 2: issues for Europe. That is our EMEA News director was

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Speaker 2: in Matheson.

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Speaker 3: A number of top Wall Street strategists are betting that

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Speaker 3: European stocks will continue their recent strength and outperform the

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Speaker 3: US by the best margin in at least two decades.

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Speaker 3: Are Equity strategy reporter Sagarika Jackson Ghani joins US now

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Speaker 3: for more. Sagurika, Good morning. Who is making these bets

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Speaker 3: and how well do they see European markets performing?

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Speaker 10: Good morning, Stephen. We pulled about twenty strategists in top

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Speaker 10: US as well as European banks, and the two projections

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Speaker 10: that stand out are from JP Morgan and City Group. Now.

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Speaker 10: Both banks expect European stocks to rally further this year,

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Speaker 10: while they see the S and P five hundred dropping

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Speaker 10: from current levels. So all in all, we tallied up

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Speaker 10: the two forecasts and what we found was that JP

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Speaker 10: Morgan's forecasts show that it would be the best year

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Speaker 10: for the stock six hundred on record relative to the

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Speaker 10: S and P five hundred, and City's estimates are for

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Speaker 10: the best relative performance since two thousand and five.

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Speaker 2: Okay, huge Chip from the European side then surely, But

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Speaker 2: is it about European strength or is it about us?

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Speaker 2: On the performance and an uncertainty, I mean, what is

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Speaker 2: driving this trend?

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Speaker 10: You know, it's a factor of both. It's been a

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Speaker 10: very unusual setup for European markets this year, I have

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Speaker 10: to say.

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Speaker 2: Now, in the past.

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Speaker 10: Few years, the region has mostly been seen as a

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Speaker 10: diversified trade so when investors wanted to swap out of

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Speaker 10: the US, Europe was stouted is cheap and you would

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Speaker 10: see a brief rotation back into European markets. Some of

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Speaker 10: that is at play again as investors question the resilience

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Speaker 10: of US assets in the trade war. Importantly, Europe's had

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Speaker 10: some factors that have independently drawn investors as well, mainly

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Speaker 10: the historic fiscal reform in Germany that's boosted economic growth

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Speaker 10: estimates over the coming years, and so the outlook has

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Speaker 10: brightened for beyond just twenty twenty five. Strategists say it

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Speaker 10: is a sustainable improvement in the Union outlook. Independently, that's

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Speaker 10: what the market is betting on that Europe will win.

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Speaker 3: Zach Gregor what which sectors rather distract to see is

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Speaker 3: likely to perform well in Europe or is this a

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Speaker 3: broad performance they're looking at.

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Speaker 2: It's it's both.

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Speaker 10: Europe's benchmark carries quite a few sectors that are particularly

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Speaker 10: exposed to global growth and global trade. So you know,

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Speaker 10: some of these sectors are miners, automakers, luxury goods makers.

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Speaker 10: They have a big market in China, in the US

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Speaker 10: as well, so in market jargon, these are known as

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Speaker 10: cyclical sectors. They tend to do well when the global

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Speaker 10: economy is on an upswing, and they do poorly when

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Speaker 10: growth is weakening. Now, as the trade uncertainty with the

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Speaker 10: US clears up, we have the big temporary trade truth

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Speaker 10: between the US and China. These are some of the

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Speaker 10: sectors that's religious are particularly recommending.

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Speaker 3: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 3: stories making news from London to Wall Street and beyond.

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Speaker 1: I'm Caroline Hepka and I'm Stephen. Carol.

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Speaker 3: Join us again tomorrow morning for all the news you

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Speaker 3: need to start your day right here on Bloomberg Daybreak.

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Speaker 1: Europe