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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: Bloomberg Day BAQ podcast, available every morning on Apple, Spotify,

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Speaker 3: or wherever you listen. It's Tuesday, the eighteenth of February

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Speaker 3: in London. I'm Caroline Hipkitt.

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Speaker 1: And I'm Stephen Carroll. Coming up today, the United States

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Speaker 1: and Russia are set to begin peace talks, but Ukraine

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Speaker 1: won't be there.

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Speaker 3: The EU and uk scramble to fund a ramp up

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Speaker 3: in defense spending as America pulls back.

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Speaker 1: Plus a miraculous escape eighty passengers and crew survive after

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Speaker 1: a Delta plane flipped over while landing in Toronto.

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Speaker 3: Let's start with a roundup of our top stories.

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Speaker 1: America and Russia's most senior diplomats are expected to meet

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Speaker 1: this morning to begin direct negotiations over ending the war

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Speaker 1: in Ukraine. It's understood that a representative from Ukraine will

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Speaker 1: not be attending the meeting between the US Secretary of

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Speaker 1: State Marco Rubio and the Russian Foreign Minister Sergei Lavrov.

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Speaker 1: In Riad. Yesterday, Ukraine's President Vlashimir Zelenski reiterated that he

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Speaker 1: won't recognize any agreement reached without the country.

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Speaker 4: Ukraine is not participating. Ukraine knew nothing about it. Ukraine

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Speaker 4: regards any negotiations on Ukraine without Ukraine as negotiations with

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Speaker 4: no result, and we cannot acknowledge anything any arrangements about

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Speaker 4: US that were made without us Zelenski.

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Speaker 1: They're speaking via a translator, after both the US and

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Speaker 1: Russia clarified that Ukraine would be involved in future negotiations,

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Speaker 1: although as yet it's unclear what forum that would take well.

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Speaker 3: Ukraine isn't alone in not being invited to the meeting

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Speaker 3: in Saudi Arabia. Europe is also not represented at the talks.

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Speaker 3: Russia's Foreign Minister Sergei Lavrov says that they didn't want

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Speaker 3: them there good the.

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Speaker 5: European philosophy hasn't gone anywhere. If they're going to wheezsel

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Speaker 5: out some cunning ideas about freezing the conflict, what actually

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Speaker 5: intending as is their custom nature and to continue the war.

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Speaker 5: So why should we invite them at all?

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Speaker 3: Russia's Foreign Minister Sergei Lavrov, speaking there through a translator.

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Speaker 3: According to Russia's Interfac's news agency, the discussions will focus

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Speaker 3: on restoration of bilateral relations as well as the preparation

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Speaker 3: of possible direct negotiations. Between leaders lasmiir Putin and Donald Trump.

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Speaker 1: The dogs came after Francis Emanuel Macran held a hastily

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Speaker 1: arranged mini summit in Paris yesterday in response to the

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Speaker 1: US President's push to rapidly end the conflict. Speaking after

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Speaker 1: the gathering, the UK's Prime Minister Kia Starmer urged President

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Speaker 1: Trump to offer Ukraine security guarantees.

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Speaker 6: This isn't just about the front line in Ukraine. It's

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Speaker 6: the front line of Europe and of the United Kingdom.

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Speaker 6: It's about our national security and I think that we

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Speaker 6: need to do more. We need to step up in

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Speaker 6: terms of our collective response in Europe, and by that

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Speaker 6: I mean capability.

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Speaker 1: Starmer's comment and his pledged to send peacekeeping troops to

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Speaker 1: Ukraine if needed, came as Macron separately held talks with

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Speaker 1: Donald Trump and Vladimir Zelenski on aligning with the US

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Speaker 1: on ending the war. Mean while Bloomberg has learned that

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Speaker 1: the Trump administration is seeking details on how European allies

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Speaker 1: could contribute to guarantees for Kiev and the TERMASCO and future.

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Speaker 3: As European nations scramble to fill the void left by

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Speaker 3: a pullback in the US security guarantees. EU states are

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Speaker 3: now looking at ways to increase defense spending. Options being

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Speaker 3: discussed include loosening the blog's fiscal rules or repurposing existing funds.

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Speaker 3: France's europe Minister Benjamin Hardad is calling for unprecedented action.

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Speaker 7: You have also the European stability mechanism, where you have

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Speaker 7: potential funds that could be redirected towards defense. We also

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Speaker 7: need to all continue to step up our effort at

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Speaker 7: the national level. But in the face of this emergency,

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Speaker 7: I think it is time to take historic decisions, and

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Speaker 7: indeed the question of Europe, for instance, is one of

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Speaker 7: the mechanisms that we should be talking about, I think

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Speaker 7: in the coming days.

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Speaker 3: However, Benjamin Hadad's cool for some form of joint financing

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Speaker 3: faces legal and political hurdles. According to analysis by Bloomberg Economics,

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Speaker 3: protecting Ukraine and expanding their own militaries could cost the

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Speaker 3: continent's major powers and additional three point one trillion dollars

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Speaker 3: over the next ten years.

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Speaker 1: Defense maybe one area deeply affected by the new US administration,

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Speaker 1: but the EU's economy is also starting to suffer from

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Speaker 1: the uncertainty over US tariff plans. The European Economy Commissioner

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Speaker 1: Valdostan Brovska says trade tensions with the US or damaging investment.

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Speaker 1: He says America's friendship can no longer be taken for granted.

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Speaker 8: The recent announcements from the new US administration shows that

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Speaker 8: the commitment to the transatlantic partnership cannot be taken for granted.

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Speaker 8: We regret the recently announced you of measures and will

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Speaker 8: be ready to respond in a firm and proportionate way.

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Speaker 1: Dan Varovski is there, speaking after a meeting of Euro

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Speaker 1: Area finance ministers. The US President Donald Trump has cited

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Speaker 1: barriers in the EU, including value added tax, as an

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Speaker 1: example of unfair trading rules of the US is looking

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Speaker 1: to respond to now.

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Speaker 3: The UK government is contemplating budget cuts of as much

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Speaker 3: as eleven percent as it tries to find money for defense.

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Speaker 3: Bloomberg has learned that the government is increasingly looking at

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Speaker 3: its worst case scenario for cuts. Bloomberg ex James.

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Speaker 4: Walcock has more.

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Speaker 9: Britain Civil Service is setting out its budget this summer.

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Speaker 9: It looks grim. Health, education and defense are safe, but

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Speaker 9: every other department has been asked to model both a

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Speaker 9: real term spending cut of five percent alway more radical

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Speaker 9: eleven percent cut in spending, sources are told Bloomberg the

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Speaker 9: sudden need for defense funding is making those bigger cuts

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Speaker 9: which had been seen as the disaster scenario more Although

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Speaker 9: no final decision has been taken, even the small option

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Speaker 9: is likely to be politically unpopular. It all adds up

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Speaker 9: to show how difficult the UKSE funding situation is. In London,

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Speaker 9: James Wilcock Bloomberg Radio.

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Speaker 1: Eighteen people have been injured after a Delta Airlines plane

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Speaker 1: flipped over and came to rest upside down whilst landing

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Speaker 1: in high winds in Toronto. The aircraft, which is flying

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Speaker 1: from Minneapolis to Canada, had seventy six passengers and four

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Speaker 1: crew on board, with no fatalities reported. The exact cause

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Speaker 1: of the incident is yet to be determined. According to

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Speaker 1: Fire Chief Todd Aitken.

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Speaker 10: The cause of the crash is still under investigation and

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Speaker 10: being led by the Transportation Safety Board. This is an

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Speaker 10: active investigation. It's really important that we do not speculate.

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Speaker 10: What we can say is a runway was dry and

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Speaker 10: there is no cross wind conditions.

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Speaker 1: Toronto Fire Chief Todd Akin speaking there. This is the

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Speaker 1: latest accident during a turbulent period for air safety in

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Speaker 1: North America. Ten people died aboard a commuter plane that

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Speaker 1: crashed in Alaska earlier this month, and in January, sixty

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Speaker 1: seven people died after a regional jet operated for American

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Speaker 1: Airlines collided with a military helicopter in Washington, DC.

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Speaker 3: And HELASI. When it comes to earnings, PHP has revealed

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Speaker 3: profits for the first half of the financial year fell

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Speaker 3: twenty three percent as Chinese economic wows dampened demand for

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Speaker 3: an or underlying A tributable profit came in at five

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Speaker 3: point zero eight billion dollars for the period, that was

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Speaker 3: below the analyst expectations of five point three nine billion dollars.

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Speaker 3: The slowdown prompted the miner to trim its interim dividend

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Speaker 3: to an eight year low, but CEO Mike Henry believes

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Speaker 3: improvement is on the horizon.

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Speaker 11: The sectors of the economy that are important to BHP's

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Speaker 11: commodity demand, for the most part, have been performing strongly.

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Speaker 11: The exception, of course, as a property sector that has

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Speaker 11: been under some pressure. But we're starting to see some

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Speaker 11: green shoots there by way of increased news starts property

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Speaker 11: price rises in some sectors, So I think we'll see

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Speaker 11: some some momentum building into twenty twenty six.

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Speaker 3: C Mike Henry there speaking to Bloomberg. He added that

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Speaker 3: demand for BHP products remain strong despite global uncertainty. Those

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Speaker 3: are top stories.

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Speaker 1: On the markets. On Monday, we saw European bonds sliding

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Speaker 1: and defense docks jumping on expectations of further defense spending.

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Speaker 1: German tenure yields closed six basis points higher. The defense

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Speaker 1: company Ryan Mattal surged fourteen percent, taking its year to

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Speaker 1: date gain to over fifty percent. More broadly, the EUROSTOCS

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Speaker 1: fifty index had its second record close in the last week.

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Speaker 1: Today we're looking at cash trausuries resuming trading after the

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Speaker 1: US holiday, yields rising there as well, four basis points

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Speaker 1: on the tenure to four point five to one percent.

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Speaker 1: Australia Center Bank cut its key interest rates by twenty

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Speaker 1: five basis points, remained cautious on further easing. Not much

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Speaker 1: effect on the Aussie dollar from that as well. In

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Speaker 1: Asia today equities are rising up a tenth of one

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Speaker 1: percent on the MSCI specific index, Hang saying tech indexel

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Speaker 1: up by one point seven percent this morning.

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Speaker 3: Those are the markets in a moment we will bring

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Speaker 3: you more on the talks between Marco Rubio and Sergei

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Speaker 3: Lavrov on Ukraine that are expected to begin today. But

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Speaker 3: before that, a story that caught my attention. We've been

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Speaker 3: talking a lot about AI. I really like the story

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Speaker 3: by pame Olsen this morning. Why did Microsoft admit that

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Speaker 3: AI is making us dumb? How is AI making us dumb? Well,

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Speaker 3: apparently participants in a survey have talked about how when

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Speaker 3: they trust AI for certain tasks, it means that they

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Speaker 3: then don't practice those skills themselves, things like writing and

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Speaker 3: analysis and critical evaluations, and sort of atrophying of those skills, which,

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Speaker 3: weirdly is something that I think I've noticed with AI.

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Speaker 3: You don't necessarily then kind of grapple with the core

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Speaker 3: material that you might plug into an AI system.

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Speaker 1: And how much do you trust the ASI to perhaps

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Speaker 1: do the tricky bit of the thinking that you either

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Speaker 1: don't have time to or can't do. I mean, this

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Speaker 1: is analogous to the does anyone know where anything is?

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Speaker 7: Anymore?

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Speaker 1: Do we just trust GPS to get us there? Instead?

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Speaker 1: Do we remember as much about directions or the map

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Speaker 1: of a place as we used to? And one of

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Speaker 1: the risks with this, though, Parmeelsen writes, is that it

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Speaker 1: could leave us less able to do core professional work

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Speaker 1: or more vulnerable to propaganda because we're not exercising that

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Speaker 1: part of our brain just as much. Is this something

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Speaker 1: that AI developers need to think about as well? You know,

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Speaker 1: could it promptus to come up with our own original

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Speaker 1: thoughts maybe more often?

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Speaker 3: Yes, Although I mean the flip side of the argument,

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Speaker 3: as Parmi points out, is you know, calculators didn't stop

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Speaker 3: us all from doing maths, did they? There were sort

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Speaker 3: of the augmented things anyway. Lots of debate around AI.

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Speaker 2: Of course.

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Speaker 1: Well, let's bring you more down our top story where

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Speaker 1: nearly three years since Russia's full scale invasion of Ukraine,

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Speaker 1: US Secretary of State Mark Rubio and the Russian Foreign

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Speaker 1: Minister Sergei Lavrov, meeting in Read today expected to begin

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Speaker 1: direct negotiations over the future of the conflict as well.

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Speaker 1: This as Ukraine's president watches on along with European leaders

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Speaker 1: joining us now to discuss. Tony Halpen, who leads our

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Speaker 1: team covering economics and government in Russia in the region,

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Speaker 1: and Bloomberg's EMEA and news director Rosla Matheson is with

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Speaker 1: US as well, Tony, to you first, this meeting between

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Speaker 1: Rubio and lavrav in Saudi Arabia, country that's previously hosted

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Speaker 1: Puttin on a rare overseas trip. What should we be expecting.

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Speaker 2: Good morning. Well, the two sides are giving fairly different

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Speaker 2: spin on what to expect from the outcome this meeting,

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Speaker 2: and the US side is casting them as exploratory talks

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Speaker 2: which are intended to establish whether Russia is serious in

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Speaker 2: trying to trying to find some resolution or the conflict.

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Speaker 2: The Russian side is viewing them as an opportunity to

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Speaker 2: re establish full blown relations with the US and together

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Speaker 2: to work out some way that this conflict can be

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Speaker 2: brought to an end. It's very much been a long

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Speaker 2: goal to have direct talks with the US about the

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Speaker 2: war in Ukraine while sidelining Ukraine as a party to

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Speaker 2: those talks, and that seems to be what's taking place today.

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Speaker 3: Meanwhile, Roz Mackwell held this meeting of European leaders yesterday.

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Speaker 3: How close is Europe to increasing defense spending whilst also

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Speaker 3: not having a seat at this table, whether it's a

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Speaker 3: negotiating table or not.

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Speaker 12: Well, that's right, and as Tonny was saying this is

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Speaker 12: for Russia an opportunity for it to get back at

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Speaker 12: the table, whereas Europe is at the door really trying

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Speaker 12: to get in and trying now to show Donald Trump

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Speaker 12: that they are serious about amping up their defense spending,

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Speaker 12: they are serious about European security themselves. And there was

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Speaker 12: a lot of conversation at this meeting yesterday of some

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Speaker 12: leaders of the EU and a lot of proposals, no

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Speaker 12: doubt discussed, but it's going to be at least a

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Speaker 12: month away before all the leaders talk about them in detail,

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Speaker 12: and it's unclear if that meeting is supposed to be

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Speaker 12: able to make a decision or whether it's likely to

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Speaker 12: get pushed off further, because there's got to be a

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Speaker 12: lot of assessment around things like fiscal rules, for example,

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Speaker 12: and obviously the political climate that these leaders find themselves

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Speaker 12: in in their own countries, and no doubt in their minds,

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Speaker 12: a question of how much support would voters have for

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Speaker 12: a big increase in defense spending at the expense of

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Speaker 12: other things in their economy, for example, and his fatigue

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Speaker 12: sets in over Ukraine in general. So we are probably

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Speaker 12: some way from a concrete decision in Europe, but a

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Speaker 12: lot of conversation yesterday about the need to do something and.

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Speaker 1: Did Ukraine Carlin razan Europe to name an envoy for

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Speaker 1: peace talks and to do so quickly. Who could that be?

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Speaker 12: Well, I was curious whether someone might self nominate for that,

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Speaker 12: and that's obviously the French president Emmanuel Macron. He's really

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Speaker 12: the one who called some of the leaders to Paris yesterday.

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Speaker 12: We know he's spoken on the phone with a variety

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Speaker 12: of leaders, including Donald Trump, the US President, and the

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Speaker 12: Ukrainian leader of Volonimir Zelensky. So he's clearly trying to

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Speaker 12: be a voice for Europe in those conversations already. And

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Speaker 12: we've got, obviously, you know, a week less than a

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Speaker 12: week from an election in Germany. It's going to be

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Speaker 12: some time potentially before we have a new government there.

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Speaker 12: So is Germany in a position to take the lead

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Speaker 12: on this, And it's very clear that Ukraine is saying

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Speaker 12: this needs to be someone at a leader level who

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Speaker 12: can negotiate their way to the table. So it seems,

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Speaker 12: you know, the most likely candidate, you'd have to say

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Speaker 12: at the moment, would be Emmanuel Macron.

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Speaker 3: Meanwhile, Tony Ukraine's presidence Zelenski has been deft and you know,

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Speaker 3: globe trotting. He's in Turkey today. What message can he

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Speaker 3: hope to deliver whilst also not actually taking part in

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Speaker 3: the talks in Saudi Arabia.

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Speaker 2: Yes, he's been very clear that there can be no

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Speaker 2: agreement about Ukraine without Ukraine's involvement, and that's been his

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Speaker 2: line consistently, and he's been stressing again while visiting Turkey

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Speaker 2: today and yesterday in the United Arab Emirates that they

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Speaker 2: want clear guarantee security guarantees and that anything such as

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Speaker 2: a fragile ceasefire for exact sample, would serve Russia's purposes

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Speaker 2: far more than Ukraine and Europe's. So he's really trying

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Speaker 2: to rally Europe behind Ukraine and to make a joint

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Speaker 2: pitch to Trump not to make any commitments that would

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Speaker 2: disadvantage Ukraine on the battlefield and in negotiations going forward.

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Speaker 1: And Tony, what do we know about the prospects for

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Speaker 1: a meeting between Trump and Putin?

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Speaker 2: Yes, Trump said when he held his phone call with

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Speaker 2: Vladimir Putin last week that they would likely meet in

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Speaker 2: Saudi Arabia. And so today's talks in Saudi Arabia are

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Speaker 2: adding to the speculation around that we don't yet have

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Speaker 2: any confirmation that the two leaders will meet, but it's

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Speaker 2: one of the things we're looking for today, some sign

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Speaker 2: that they have enough agreement and grounds for discussion to

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Speaker 2: warrant a leader's meeting. Clearly, Putin would very much like

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Speaker 2: to have a direct meeting with Trump that would bolster

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Speaker 2: his status in these talks, but Trump needs to feel

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Speaker 2: that something would come out of the meeting that would

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Speaker 2: justify his being there and look like a win for him.

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Speaker 2: So it's afar from a done deal right now, but

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Speaker 2: it's one of the things we're looking for today.

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

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