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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Day piccurate podcast, available every morning on Apple, Spotify or

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Speaker 1: wherever you listen. It's Wednesday, the twenty sixth of June.

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Speaker 1: Here in London.

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Speaker 2: I'm Caroline Hepkit.

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Speaker 3: And I'm Stephen Carroll. Coming up today, France's leading parties

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Speaker 3: clash on the economy and immigration as Day look to

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Speaker 3: win over undecided voters.

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Speaker 1: The ECB's Ollie Wren tells us it's reasonable to expect

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Speaker 1: two more interest rate cuts this.

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Speaker 3: Year, plus hitting turbulence. Air travels set to hit a

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Speaker 3: new record this year, but the world's two biggest planemakers

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Speaker 3: are struggling to take advantage.

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

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Speaker 3: Representative from France's three main political groupings clashed in their

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Speaker 3: first TV debate ahead of the first round of parliamentary

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Speaker 3: elections there this weekend. The Prime Minister Gabriella tale National

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Speaker 3: rally leaders Jon Dane Bardella and Manuel Bompa from the

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Speaker 3: New Popular Front Alliance frequently at and interrupted each other

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Speaker 3: as they laid out their plans for the country.

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Speaker 4: Every time, Jordan Bardella explains that he's going to lower

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Speaker 4: v eight by magic. He never says how he will

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Speaker 4: finance it, because the reality is what he'll give you

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Speaker 4: with one hand he will take back with the other.

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Speaker 5: It's extremely interesting because we have here a prime minister

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Speaker 5: who is preparing to leave power in less than two weeks,

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Speaker 5: who has just told us, in fact, that the state

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Speaker 5: that he is responsible for is incapable of applying the law.

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Speaker 5: I will tell you VAT cuts have been put in

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Speaker 5: place in many European countries.

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Speaker 3: That was the National rallyader Jean d'in Baldella and Francis

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Speaker 3: Prime Minister Gabriella Tale there during the TV debate a

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Speaker 3: TFI yesterday. The three candidates taking part also exchange views

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Speaker 3: on immigration and on the retirement age. Polls suggest President

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Speaker 3: Emmanuel Macron's party is set to lose its majority in Parliament,

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Speaker 3: with most polls putting the far right National Rally in front.

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Speaker 3: Macron decision to call a snap vote initially sent markets

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Speaker 3: into turmoil, though recent moves suggests investors are getting used

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Speaker 3: to the idea of potential disruption.

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Speaker 1: Now to the UK, where Labor leader Kis Starmer says

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Speaker 1: that he would target annual GDP growth of two and

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Speaker 1: a half percent if he wins the general election. The

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Speaker 1: British economy has lagged behind peers, with stagnant productivity gains

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Speaker 1: and a shrinking labor force. Starma was asked by ITV's

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Speaker 1: Paul Brand where he sees GDP growth under labor.

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Speaker 2: To be the top of the G seven.

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Speaker 6: You have to appreciate that is slightly meaningless because it

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Speaker 6: could just be zero point one percent. We could even

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Speaker 6: be in recession and still have to be better off

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Speaker 6: than the rest of this.

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Speaker 7: We want significant growth.

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Speaker 6: You don't know.

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Speaker 7: I don't accept this defeated. I understand the challenge you're

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Speaker 7: putting to me.

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Speaker 6: It'll be nice to have a ballpark figure of how

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Speaker 6: large you want the economy to be in five years time.

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Speaker 2: Under the last labor government, we grew by about two

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Speaker 2: and a half percent.

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Speaker 6: So you're looking for that kind of growth two and

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Speaker 6: a half per certainly.

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Speaker 1: Yes, kis Starma there on ITV's Tonight program. Meanwhile, the

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Speaker 1: Bank of England's forecasts predict only one point two five

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Speaker 1: percent growth by twenty twenty six.

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Speaker 3: Italy is said to be offered the chance to fill

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Speaker 3: a senior role in the next European Commission he will

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Speaker 3: be up to Prime Minister Georgia Maloney to decide who

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Speaker 3: will be put forward for the job, which Bloomberg has

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Speaker 3: learned is likely to be an executive vice president role.

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Speaker 3: Those familiar with talks say the deal with Italy includes

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Speaker 3: nominating Ursula Vonderline for a second term as Commission President,

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Speaker 3: and in that capacity she will negotiate with Maloney. Centrist

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Speaker 3: parties are looking to wrap up a deal on the

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Speaker 3: block's top jobs before a summit later this week.

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Speaker 1: European Central Bank policymaker Ollie Wren says that it's reasonable

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Speaker 1: to expect the ECB to cut interest rates another two

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Speaker 1: times this year. The Finish central banker has told Bloomberg

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Speaker 1: that while officials must ensure inflation returns to two percent,

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Speaker 1: they shouldn't overly dampen economic activity. Ren says this, if

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Speaker 1: inflation continues to slow, investors expectationations for cuts are fair.

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Speaker 8: Me this, for example, to assume that we stay with

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Speaker 8: this direction and continual grade cuts. Having said that, I

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Speaker 8: don't take any stand on when and how much, so

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Speaker 8: we are not pre committing ourselves to any particular red bath.

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Speaker 1: The ECB's Olie Wren, speaking there to Bloomberg in Helsinki.

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Speaker 1: Investers currently expect around forty five basis points of right

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Speaker 1: cuts from the ECB in twenty twenty four, which would

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Speaker 1: imply a second quarter point move and about a seventy

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Speaker 1: five percent chance of a third this year. Market see

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Speaker 1: the next move potentially coming as soon as September, and

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Speaker 1: they have fully priced one in by October.

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Speaker 3: Federal Reserve Governor Lisa Cook says it will be appropriate

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Speaker 3: to cut rates at some point, however when that is

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Speaker 3: remains unclear. Delivering prepared remarks at the Economic Club of

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Speaker 3: New York, Cook says she expects inflation to improve gradually

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Speaker 3: this year before more rapid progress in twenty twenty five.

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Speaker 9: With significant progress on inflation and the labor market cooling gradually,

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Speaker 9: at some point, it will be appropriate to reduce the

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Speaker 9: level of policy restriction to maintain a healthy balance in

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Speaker 9: the economy. The timing of any such adjustment will depend

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Speaker 9: on how economic data evolve and what they imply for

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Speaker 9: the economic outlook and balance of risks.

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Speaker 3: Lisa Cook is the latest FED rate setter to share

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Speaker 3: her thoughts on inflation after the US Central bankers opted

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Speaker 3: to hold borrowing costs at are multi decade high earlier

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Speaker 3: this month. The Fed's preferred measure of inflation, the PCE deflator,

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Speaker 3: comes out on Friday.

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Speaker 1: Now to some corporate news, Rivian's shares jumped to more

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Speaker 1: than fifty percent after the bell in New York, as

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Speaker 1: Volkswagen announced plans to invest five billion dollars in a

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Speaker 1: joint venture with the ev maker. The tie up will

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Speaker 1: give VW access to Rivian's technology for its cause. Bloomberg's

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Speaker 1: David Welch says that it's also a much needed source

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Speaker 1: of fresh cab for Rivian.

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Speaker 10: We do that much of a hint that it was coming,

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Speaker 10: but Rivine was clearly out there raising money and they

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Speaker 10: needed cash. They've been burning cash and given the world

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Speaker 10: production numbers that they had, really didn't seem like they

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Speaker 10: were going to get the cash for a positive anytime soon,

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Speaker 10: so they needed money. There were maybe financial partners out

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Speaker 10: there they could have gone with, but this helps them

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Speaker 10: a lot.

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Speaker 1: Bloomberg's David Well She adds that Volkswagen's business strust she

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Speaker 1: often involves joint ventures or tie ups. Bloomberg Intelligence says

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Speaker 1: that the deal highlights VW's need to bridge the gap

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Speaker 1: with the likes of Tesla. Now in a moment we'll

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Speaker 1: discuss more about that election debate in France and also

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Speaker 1: bring you more on how Europe's aerospace sector has seen

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Speaker 1: its shares pummeled over supplied difficulties at air bars. But

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Speaker 1: before that, this story really caught my eye this morning

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Speaker 1: banner Alnor Elegance and Exclusivity, the story of how he

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Speaker 1: created LVMH. It's a totally absorbing piece with beautiful photographs

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Speaker 1: and all the history around the creation of this European

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Speaker 1: giant really and it's in Bloomberg Business.

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Speaker 2: Week this ye.

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Speaker 3: And the construction of an empire that really spans the

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Speaker 3: globe now, of course, bringing together all of these brands

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Speaker 3: that symbolized Europe's post war influence and bringing them to

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Speaker 3: the rest of the world as well. It's a conglomerate

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Speaker 3: now that's you know, a major international brand and of

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Speaker 3: course their products known everywhere. But that's something that's really

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Speaker 3: been put together by Abo.

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Speaker 1: Yeah, and it has a lovely story about really the

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Speaker 1: inception of why he came up with this idea. It

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Speaker 1: was actually a New York taxi driver, that's the story

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Speaker 1: that he got into a New York taxi driver and

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Speaker 1: he asked the driver whether he knew who the president

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Speaker 1: of France was is back in the nineteen seventies, and

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Speaker 1: the man said, the only name I know is Christian Dio.

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Speaker 1: The only French name I know is Christo and that

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Speaker 1: gave him the inspiration for building this forty year business. Anyway,

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Speaker 1: it was one of the little factoids that was just

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Speaker 1: lovely in that Bloomberg.

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Speaker 3: Well, let's think about the name who might be the

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Speaker 3: next Prime Minister of France. Representatives of the three leading

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Speaker 3: groups in the election took part in a televised debate

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Speaker 3: last night, clashing over tax, pensions and immigration. This as

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Speaker 3: Bloomberg has been looking at President Emmanuel Macron's role in

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Speaker 3: this election campaign. Our Paris Burea chief Alan Katz is

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Speaker 3: with us for more this morning. Alan. Last night's debate

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Speaker 3: was at times fractious, but also revealing about some of

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Speaker 3: the policy differences between the groupings. What will voters have

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Speaker 3: taken away from it, hig.

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Speaker 7: Morning, I don't know that it really will have changed

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Speaker 7: many people's minds. The three candidates Jordan Bardella for their

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Speaker 7: national rally. Gabriel Attal, who's the current Prime Minister, is

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Speaker 7: the representive for the majority of the presidential majority. In

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Speaker 7: many of both pacos representing the leftist alliance of the

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Speaker 7: New Popular Front, it sort of stuck mainly to their positions.

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Speaker 7: One of the things that I think people might take

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Speaker 7: away is that Gabriel Attel doesn't actually come off as

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Speaker 7: being particularly nice. He was actually the one who interrupted

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Speaker 7: the others the most, to tried to speak over others

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Speaker 7: the most. And in Bardella and Manuel Bompa both came

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Speaker 7: off as sort of more in many ways more reasonable people.

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Speaker 7: They were at least willing to be quiet and let

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Speaker 7: their opponent speak in a way that got ahead at

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Speaker 7: town didn't seem to and so excluding any of the

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Speaker 7: policy issues and policy differences and arguments that they had,

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Speaker 7: sort of just from a behavioral standpoint. One of my

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Speaker 7: thoughts was that that might be some people's takeaway.

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Speaker 1: Okay, that's really interesting. I mean, it was also quite

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Speaker 1: a significant test, wasn't it. For Jordan Bardella from the

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Speaker 1: National Rally he is leading in the polls. Did we

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Speaker 1: get more details about his party's economic plans?

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Speaker 7: Now much a little bit. I mean, he discussed a

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Speaker 7: little bit more about how retirement reform would work under

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Speaker 7: the Under the National Rally, if he were to become

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Speaker 7: prime minister. He did point out that you know, while

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Speaker 7: some people would end up with their retirement age reduced slightly,

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Speaker 7: others would end up with the retirement age actually potentially

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Speaker 7: extended slightly. Again, one of the things that he has

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Speaker 7: repeatedly done is that that he can't really make too

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Speaker 7: many promises because he keeps claiming there needs to be

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Speaker 7: an audit of public finances before he releases a lot

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Speaker 7: of financial details. That is largely it's not really true.

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Speaker 7: There are plenty of audits of Puble French public finances

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Speaker 7: that are done annually that you can consult. But it

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Speaker 7: allows him to maintain a bit of haziness around the

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Speaker 7: numbers around his his financial programs. I mean. One of

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Speaker 7: the things that though, that he came out with was

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Speaker 7: he discussed one of the main policies that would put

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Speaker 7: in place, at least initially as a reduction in the

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Speaker 7: VAT tax on energy products, particularly gasoline and energy to

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Speaker 7: heat your home. He said it would cost about twelve

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Speaker 7: billion euros a year. Tel jumped on him and claimed like, no, no,

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Speaker 7: this is going to cost seventeen billion dollars a year.

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Speaker 7: But then he made a really I thought revealing point.

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Speaker 7: He said that five billion dollar difference is the same

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Speaker 7: as the budget of the Culture Ministry every year, which,

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Speaker 7: as I was watching that, I was like, that's in

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Speaker 7: many ways absurd to most people watching this program. If

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Speaker 7: you live in Paris, perhaps you care about the Culture Ministry.

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Speaker 7: If feel ab outside of Paris, I don't think you

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Speaker 7: really do. And that is your example struck me as

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Speaker 7: a very urban and somewhat out of touch example to

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Speaker 7: use for most viewers.

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Speaker 3: Meanwhile, Alan, we have some new reporting today on the

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Speaker 3: role that President Macron is playing in this campaign, quite prominent,

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Speaker 3: not pleasing many of those running under his banner. Is

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Speaker 3: he a benefit or a liability to those who are

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Speaker 3: running from his party and their allies?

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Speaker 7: So there's not I guess that depends on perceptions a bit.

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Speaker 7: There's no sort of studies particularly to show whether not

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Speaker 7: maccall's interventions are benefiting or hurting his The people running

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Speaker 7: under his group, they certainly view it as a negative.

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Speaker 7: As we point out in the story today, many of

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Speaker 7: them don't want maconto appear on their posters, They don't

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Speaker 7: want to appear with him in campaign rallies. People have

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Speaker 7: asked him to not intervene so much. He said he

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Speaker 7: would not intervene very much, and that it was up

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Speaker 7: to the parties to campaign in this election. But yet

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Speaker 7: he can't seem to help himself, and he pops up

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Speaker 7: in editorials, he pops up, you know, on TV, he

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Speaker 7: pops up in a podcast for entrepreneurs. He really can't

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Speaker 7: seem to help himself, and I don't think it's helping

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Speaker 7: his group.

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Speaker 1: Alan. I have a last question about the debate, which

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Speaker 1: is that we've talked a lot about the far right

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Speaker 1: and the far left in France being at the heart

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Speaker 1: of this election, parliamentary election. How extreme did those two

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Speaker 1: candidates ultimately portray themselves as versus centrist That's.

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Speaker 7: A good question. So the answer is they portrayed themselves

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Speaker 7: as being extremely reasonable people. No one was calling for revolution.

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Speaker 7: So at one point Jordan Bardella did accuse Manuel bompass or,

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Speaker 7: the far right candidate, accused the far left candidate of

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Speaker 7: trying to impose a Cuban style economy on France, but

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Speaker 7: that was sort of as far as it went for

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Speaker 7: their own policies. They kept being portraying themselves as extremely reasonable,

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Speaker 7: as people who would be competent stewards of the French economy.

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Speaker 7: They portrayed themselves as perhaps a little bit less reasonable

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Speaker 7: when they attack each other on immigration, but certainly on

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Speaker 7: the economic side, they really all tried to present themselves

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Speaker 7: as being not necessarily the same, but they would all

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Speaker 7: do things that would actually in the long term boost

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Speaker 7: the French economy either either essentially either from the supply

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Speaker 7: side or from the demand side, and that all three

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Speaker 7: of them claimed that they would be positive for you know,

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Speaker 7: French consumer purchasing power and for French economic growth overall.

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Speaker 3: But what is the outlook then for Emmanuel Macron's party

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Speaker 3: in this as we do see more voters attracted by

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Speaker 3: those two ends of the political spectrum.

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Speaker 7: So it's relatively poor. I mean, one of the issues

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Speaker 7: for McCain is that he sort of occupies the broad

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Speaker 7: center of French politics right there. Previously before him there

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Speaker 7: had been sort of test the two biggest parties were

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Speaker 7: sort of a center left and a center right party.

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Speaker 7: And if in terms of democratic governance you think generally

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Speaker 7: there's going to be all you know, you're going to

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Speaker 7: go back and forth among administrations. That that was sort

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Speaker 7: of the back and forth attended to happen in France.

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Speaker 7: But with macall start taking over that broad center, what

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Speaker 7: he's created is a three body system with sort of

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Speaker 7: him in the center and then these two extremes at

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Speaker 7: the ends. And what the polls are showing is that

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Speaker 7: people are want a change in government right now. The

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Speaker 7: polls are showing roughly for the first round voting intentions

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Speaker 7: roughly thirty three to thirty five percent for the far right,

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Speaker 7: roughly twenty eight to twenty nine percent for the far left,

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Speaker 7: and more like nineteen to twenty percent for Matt CON's group,

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Speaker 7: So really pretty far behind. And so it looks like

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Speaker 7: what people are potentially interested in is a change in administration.

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Speaker 7: And that means either for right or for left. There

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Speaker 7: is no sort of alternate, alternative centrist group that they

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Speaker 7: can pick from.

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Speaker 1: Okay, Alan, thank you so much for your time this morning.

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Speaker 1: That is Blimberg's Paris bureau chief, Alan katz Well.

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Speaker 3: Now, the International Air Transport Association says it expects a

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Speaker 3: record number of passengers to take to the skies this year,

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Speaker 3: while industry data compiled by Bloomberg and EF shows that

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Speaker 3: ten and a half million flights are scheduled to take

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Speaker 3: place in the third quarter. That should mean those making

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Speaker 3: the planes are set for bigger takeoff and profits, but

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Speaker 3: problems ranging from safety issues to supply chain bottlenecks. That

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Speaker 3: meant the world's two biggest plane makers, Boeing and Airbus,

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Speaker 3: are struggling for altitude. Joining us how to discuss what's

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Speaker 3: going wrong. As our Globe Aviation editor Bandix Camel beny Bet,

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Speaker 3: good morning to you. Airlines are desperate for new planes,

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Speaker 3: but the world suppliers are struggling to deliver.

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Speaker 7: Why.

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Speaker 2: Yes, you're absolutely right, there is that huge need for

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Speaker 2: new planes. They want the fuel efficient planes. Remember, fuel

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Speaker 2: is the single biggest cost for airlines and therefore they're

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Speaker 2: desperate to lower that cost and that's the easiest way

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Speaker 2: to do that is with new planes. Now, both Boeing

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Speaker 2: and Abbus have very distinct problems. On the Boeing side

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Speaker 2: well documented. Since that January fifth blowout, they've really been

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Speaker 2: in crisis mode. They've had to cut back significantly in

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Speaker 2: terms of output to sort of get their factories in order.

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Speaker 2: Airbus hasn't had a similar issue, but they are still

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Speaker 2: struggling with the supply chain. So for them, it's not

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Speaker 2: a demand question, it's really a supply issue. Their supply

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Speaker 2: chain remains stretched, they don't they're not getting the parts

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Speaker 2: they need. And we had a profit warning from Airbus

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Speaker 2: just two days ago, or the stock drop quite significantly

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Speaker 2: yesterday as a result. And what we heard from the

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Speaker 2: Abbas CEO is it's really across the board in terms

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Speaker 2: of parts that they're missing. They're missing engines, they're missing

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Speaker 2: aero structures for the planes. They're missing interior, so things

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Speaker 2: like seats and tables and other parts of the galleys

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Speaker 2: and so on. And the moment you miss a part

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Speaker 2: of a plane to build it, you can't complete the

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Speaker 2: project and your plane is stuck on the tarmac. In

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Speaker 2: the factory, they're building what's called gliders, so you know,

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Speaker 2: completed planes that don't have engines. So all these kinds

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Speaker 2: of issues are rippling through the production line and are

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Speaker 2: leading to a lower than expected number of planes that

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Speaker 2: they can deliver.

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Speaker 1: Yeah, and as you mentioned, Airbus shares led the declines

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Speaker 1: in Europe yesterday. In some senses, it's quite surprising though

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Speaker 1: that airlines are seeing such problems with supply constraints. I mean,

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Speaker 1: most other industries have moved beyond the sort of pandemic

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Speaker 1: era concerns. Is it still to do with the pandemic

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Speaker 1: or is it other issues.

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Speaker 2: Well, the pandemic obviously was sort of the big It

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Speaker 2: really amplified the issues that existed previously. Supply chains have

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Speaker 2: always been quite stretched in the aviation industry. You've got

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Speaker 2: to remember, these are incredibly complex products to put together,

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Speaker 2: so the supply chain has to work perfectly, and the

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Speaker 2: moment there was a glitch somewhere there, At the moment

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Speaker 2: there's a supplier that might be smaller, might not be

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Speaker 2: as financially sound as the bigger ones, that's where the

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Speaker 2: problems start. And Airbus and Boeing have taken a very

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Speaker 2: close look at these suppliers over the years and making

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Speaker 2: sure that that supply chain does not tear in some

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Speaker 2: kind of way or show even strain. They've sometimes put

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Speaker 2: people in, they've sometimes even put resources in. And the

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Speaker 2: most extreme example might be Spirit Aerospace, which is a

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Speaker 2: big supplier to Boeing and to some degree also to

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Speaker 2: airb Us that's being reintegrated by Boeing just to get

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Speaker 2: a better grip onto that on that supplier. So those

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Speaker 2: are some of the measures that they're taking, but it's

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Speaker 2: a valid question that we have put to Airbus in particular.

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Speaker 2: So why can't you get your supply chain sorted out?

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Speaker 2: Even when everyone else the car industry, are the manufacturing

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Speaker 2: industries have emerged from the pandemic. And the answer is

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Speaker 2: always it's the complexity of our products. It's the complexity

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Speaker 2: of the supply chain. It's the sort of high skill

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Speaker 2: of our workers. A lot of people have left that

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Speaker 2: workforce don elsewhere and have not returned. So you have

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Speaker 2: to replenish the factories, both with kit and with people,

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Speaker 2: and that seems to take longer than everybody thought. The

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Speaker 2: outlook isn't that great. Abbus did say it's going to

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Speaker 2: take two to three years to get this sorted out.

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Speaker 3: Just this give a chance for any other companies to

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Speaker 3: step in and try to muscle in on this geoopoly

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Speaker 3: that's been held so closely by our Bos and Boeing.

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Speaker 2: I mean, you'd think, and if you look at it

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Speaker 2: from the outside, that this is a strange arrangement that

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Speaker 2: you have essentially two companies sort of globally dominating you know, what,

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Speaker 2: is a very sizable industry. I can't really think of

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Speaker 2: very many other industries where only two players play a role.

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Speaker 2: You might have it to a degree and sort of

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Speaker 2: the you know, iOS versus Android game, But other than that,

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Speaker 2: you know, it's not like you only have two car

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Speaker 2: makers or you only have two plane sort of airlines

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Speaker 2: out there. But that's the world we live in in aviation.

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Speaker 2: And again it's the complexity of the product, it's the

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Speaker 2: it's the sort of the hurdle eventry is so high

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Speaker 2: that getting into that market is incredibly complicated. The Chinese

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Speaker 2: are probably in the best position to get there eventually.

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Speaker 2: They have a product of the Comac nine to one

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Speaker 2: nine that is certified in China and it's picking up

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Speaker 2: orders in China, but is not certified outside of China.

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Speaker 2: So the FAA and the US or YASA over here,

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Speaker 2: those are the regulators. They have not signed off on

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Speaker 2: this plane. So that might happen eventually. And if you

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Speaker 2: look at the plane, it looks a lot like an

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Speaker 2: A three twenty or seven three seven. It's sort of

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Speaker 2: in that bracket. But again it'll take time. That plane

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Speaker 2: is picking up orders in China, which isn't great new

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Speaker 2: for Aurboston's bone because that's a really important market, and

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Speaker 2: every plane that is sold to Comac means one less

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Speaker 2: order for Ourboston Boeing. So nothing that's going to happen

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Speaker 2: in the short term. We're talking years, possibly even decades

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Speaker 2: for this to really change, but eventually that popoly will

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Speaker 2: be broken up.

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

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