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

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

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Speaker 1: twenty second of May in London. I'm Stephen Carroll and

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Speaker 1: I'm Lizzie Burden.

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Speaker 2: Coming up today. UK inflation calls less than expected, with

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Speaker 2: sticky services costs damaging hopes for rapid rate cuts.

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Speaker 1: One man dies and dozens of people remain in hospital

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Speaker 1: in Thailand following severe turbulence on a flight from London

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Speaker 1: to Singapore.

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Speaker 2: Plus Wall Street bets on blowout quarterly results from AI

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Speaker 2: Leader in video. Later today, we'll dig into what to

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Speaker 2: expect next.

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

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Speaker 2: UK inflation has fallen to two point three percent. Economists

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Speaker 2: surveyed by Bloomberg had expected headline annual CPI to slow

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Speaker 2: to two point one percent in April, down from three

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Speaker 2: point two percent in March.

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Speaker 1: The core CPI number rising also higher than or rather

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Speaker 1: coming in higher than expected a slow down from March.

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Speaker 1: Three point nine percent is the figure for course CPI

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Speaker 1: in the UK, and in the immediate aftermath of those

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Speaker 1: figures we im published, we have seen the pound strengthen

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Speaker 1: on cable up three tenths of one percent to one

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Speaker 1: twenty seven forty two against the dollar. I. Meanwhile, the

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Speaker 1: European Center Bank president Christine Laguard has entered there's a

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Speaker 1: strong likelihood of an interest rate cut at its next

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Speaker 1: meeting in two weeks time. Here's what she told the

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Speaker 1: Irish broadcaster RTE.

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Speaker 3: No predicament, no prescription, no commitment, but it is a

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Speaker 3: case that if the data that we receive reinforce the

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Speaker 3: confidence level that we have that we will deliver two

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Speaker 3: percent inflation in the medium term, which is our objective,

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Speaker 3: our mission, our duty, then there is a strong likelihood.

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Speaker 1: Christine la Guard speaking, there are at eas primetime program.

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Speaker 1: ECB governing council members are starting to differ on the

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Speaker 1: rate path beyond the first cut. Bundusbank president Joachim Nagel

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Speaker 1: said yesterday uncertainty is still high and they should not

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Speaker 1: cut rates hastily.

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Speaker 2: Fed officials are saying that the US needs to think

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Speaker 2: about interest rates staying higher for longer. The comments from

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Speaker 2: Lorettamester and Susan Collins reinforced the gap opening up between

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Speaker 2: central banks in the US and in Europe. Mester, who

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Speaker 2: heads up the Cleveland Fed, said months. More data are needed.

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Speaker 4: It's too soon to tell what payath inflations on, so

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Speaker 4: we just need to collect more information on that. You know,

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Speaker 4: last year people were worried about, oh, the FEN maybe

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Speaker 4: getting too restrictive and therefore it's going to dampen the economy.

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Speaker 4: Those risk one down. At the same time the risk

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Speaker 4: to one inflation, I think are tolded to the upside

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Speaker 4: and remain so. And so that's the balance thing that

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Speaker 4: we have to do as we sit policy going forward.

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Speaker 2: Mester's comments calling for more time and data have been

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Speaker 2: echoed in recent days by other FOMC members. Swaps markets

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Speaker 2: are now pricing in around forty bases points of rate

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Speaker 2: cuts by the end of the year, and bond traders

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Speaker 2: digest the Central banks caution.

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Speaker 1: One passenger has died after a Singapore Airlines aircraft suffered

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Speaker 1: a sudden high altitude turbulence on the a flight from London.

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Speaker 1: A seventy three year old man has expected himself heard

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Speaker 1: a heart attack. Several others have been seriously injured. Paul Williams,

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Speaker 1: a professor of atmospheric science, says turbulence like this is unusual.

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Speaker 5: If you're flying through severe turbulence, gravity can't pin you

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Speaker 5: to your seat. Deploying can be moving down more rapidly

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Speaker 5: than gravity can keep you pin to your seat, So

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Speaker 5: if you're not seatbelted, you will start to lift up,

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Speaker 5: and sadly that is what appears to have happened, So

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Speaker 5: it's quite rare in the atmosphere.

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Speaker 1: Paul Williams speaking there. The Civil Aviation Authority of Thailand

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Speaker 1: is investigating the cause of the incident. Singapore Airlines has

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Speaker 1: a robust safety record, consistently ranking among the world's safest.

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Speaker 2: A British man charged with spying for a foreign intelligence

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Speaker 2: service from Hong Kong has died for what's been described

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Speaker 2: as unexplained reasons. Thirty seven year old Matthew Trickett was

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Speaker 2: found dead in a park in Maidenhead, west of London

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Speaker 2: on Sunday, just days before. He'd been charged under the

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Speaker 2: National Security Act last week and was on bail pending

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Speaker 2: a court hearing. Police are appealing for witnesses to contact them.

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Speaker 1: Stricter financial regulation in the United States as prompting Barclays

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Speaker 1: to consider a return to the office for some employees.

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Speaker 1: Some managers have even started warning their staff to prepare

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Speaker 1: for a return to the daily commute. Bloomberg's Teawa at

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Speaker 1: a Bio has the details.

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Speaker 6: The pandemic brought with it widespread changes to work in culture,

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Speaker 6: and for many in the city that meant an end

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Speaker 6: to the five day office workweek, But new rules from

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Speaker 6: the financial industry regulatory Authority could be set to disrupt

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Speaker 6: working culture once again. Barclays, who declined to comment on

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Speaker 6: the news, is among firms considering whether to mandate office

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Speaker 6: attendance after US brokerage regulators announced new requirements for keeping

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Speaker 6: tabs on workers. Bloomberg understands that the guidelines, due to

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Speaker 6: take effect in a matter of weeks, may only affect

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Speaker 6: operations overseen by the regulator. Amongst the incoming regulation will

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Speaker 6: be a mandate for brokerages to list some home offices

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Speaker 6: in their records, which will become subject to inspection. Many

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Speaker 6: firms still plan to allow remote working on a part

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Speaker 6: time basis in London to you add a buyer Bloomberg Radio.

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Speaker 1: Now in a moment, we'll dig more detail into that

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Speaker 1: latest UK inflation data. But another story that caught my

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Speaker 1: eye this morning is why Monaco might have to pay

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Speaker 1: more to keep hosting its iconic Grand Prix Our colleagues

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Speaker 1: Thomas Buckley and Hannah Elliott have been writing about this

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Speaker 1: ahead of this weekend's race. Now, Monico pays around twenty

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Speaker 1: million dollars every year to Liberty Media, which owns Formula One,

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Speaker 1: to host the race. That's actually the lowest of any

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Speaker 1: race on the calendar. Saudi Arabian Bahrain, for example, pay

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Speaker 1: more than fifty million dollars. Now, Monico's contract with F

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Speaker 1: one expires next year, and Bloomberg has learned that Liberty

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Speaker 1: wants the price to increase. The spokesperson for Formula one

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Speaker 1: declined to comment on the current talks, but said the

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Speaker 1: company's not considering pulling out of Monaco, and the Automobile

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Speaker 1: Club of Monicco, which organizes the race, didn't respond to

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Speaker 1: our requests for comment. But organizers speaking have been unwilling

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Speaker 1: to change the business model all that much because, according

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Speaker 1: to one person speaking to Bloomberg, they're confident the history

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Speaker 1: and prestige of the race, which has been nearly one

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Speaker 1: hundred years old. Now on the circuit of Monaco Trump's

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Speaker 1: financial considerations. A lot of Formula One drivers also live

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Speaker 1: in Monaco, although Lewis Hamilton has complained that it's the

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Speaker 1: most boring race he's ever participated in, so an interesting

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Speaker 1: one to watch there and more to read on Bloomberg

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Speaker 1: dot com and on the terminal. Well, let's turn back

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Speaker 1: to our lead story this morning and the latest inflation

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Speaker 1: data out here in the UK cooling but not by

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Speaker 1: as much as had been expected. Lizzie, We're lucky to

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Speaker 1: have you with us, with your UK correspondent hat On

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Speaker 1: this morning. What should we be paying attention to in

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Speaker 1: the figures that we've just had out.

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Speaker 2: So you've got beats on the headline, core and services levels.

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Speaker 2: Even if inflation is moving in the right direction, it's

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Speaker 2: still sticky here in the UK. So at the headline level,

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Speaker 2: two point three percent is what it's come in as

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Speaker 2: for April year on year. The expectation was two point

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Speaker 2: one percent. It's come down from three point two two

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Speaker 2: percent in just in the big Bloomberger survey only one

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Speaker 2: bank expected this. It was the highest forecast submitted. Then

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Speaker 2: if you go under the bonnet to the core level,

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Speaker 2: you've got a three point nine reading. The survey was

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Speaker 2: three point six, even though it's come down from four

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Speaker 2: point two percent. And services what the Bank of England

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Speaker 2: is really focused on is a lot higher than expected

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Speaker 2: five point nine percent, and that might be a real

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Speaker 2: worry for thread Needle Street. It is barely a budget

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Speaker 2: from the six percent that it was in March. So

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Speaker 2: before this print there was a lot of talk about

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Speaker 2: how it was all going to confirm that we'll have

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Speaker 2: a June cut from the Bank of England. But if

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Speaker 2: you look at the reaction in Sterling, three tenths of

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Speaker 2: percent higher one dollar twenty seven is where we're at.

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Speaker 2: That's a hawkish reading. And so we'll wait for the

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Speaker 2: Bank of England bets to open at seven thirty am.

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Speaker 2: But before this number, this set of numbers, it was

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Speaker 2: a coin toss on the June cut. It'll be interesting

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Speaker 2: to see whether traders have paired their bets at all.

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Speaker 1: Yeah, very interesting to consider the detail of this as

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Speaker 1: well as across the street from us here in tred

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Speaker 1: Needle Street, they will be combing very carefully through this too.

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Speaker 1: Where does this lead the Bank of England and the

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Speaker 1: likely right cutting path. Well, it's interesting.

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Speaker 2: I'm just looking at the statement from the Prime Minister

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Speaker 2: Rishie Sunak saying that today marks a major moment for

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Speaker 2: the economy with inflation.

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Speaker 1: Back to normal.

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Speaker 2: This is proof that the plan is working, that the

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Speaker 2: difficult decisions we have taken are paying off.

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Speaker 1: Brighter days are ahead.

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Speaker 2: But only if we stick to the plan. So actually

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Speaker 2: he's kind of embracing this as getting back to target.

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Speaker 2: So the fact that we're just two percentage points at

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Speaker 2: zero point two percent off the target the survey for

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Speaker 2: the target, you know, is still being embraced because it

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Speaker 2: is a tremendous drop from three point two to two

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Speaker 2: point three percent. But of course the Prime Minister would

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Speaker 2: welcome this because it was his top priority last year

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Speaker 2: to have inflation and this year, you know, it's still

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Speaker 2: focus on relieving this cost of living crisis. Will the

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Speaker 2: Bank of England read it in the same way, will

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Speaker 2: the market read it in the same later when we

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Speaker 2: get those BOE bets?

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Speaker 1: Yeah, I mean, look, this is an interesting one because,

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Speaker 1: as you say, the inflation is coming down, it's just

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Speaker 1: not down as much as we had been expected. So

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Speaker 1: it's an interesting one for to see that the differing

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Speaker 1: reactions that we're going to get from the markets and

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Speaker 1: also how politicians are painting it as well. This is

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Speaker 1: sort of an interesting moment to be keeping an eye

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Speaker 1: on where this trajectory goes because we're waiting for action

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Speaker 1: from the Bank of England to see what it does

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Speaker 1: in the rate path, but also of course we're looking

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Speaker 1: out towards an election.

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Speaker 2: Yeah, and I would note that when we heard from

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Speaker 2: Andrew Bailey yesterday he was speaking at the London School

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Speaker 2: of Economics, he was not as clear as Christine Legarde

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Speaker 2: saying that a June cut is likely. He was expecting

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Speaker 2: quite a drop you heard him there, and that the

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Speaker 2: next move in rates will be a cut, but he

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Speaker 2: was not saying that that cut would come in Gue

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Speaker 2: or August specifically, so hedging his bets essentially on when

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Speaker 2: the cut is coming. I'm sure that they'll be looking

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Speaker 2: at these particularly sticky services and core readings and waiting

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Speaker 2: for the rest of the data that we're going to get.

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Speaker 1: Yeah. Interesting to see some of the commentary coming out

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Speaker 1: of the Office for National Statistics on the stickiness in

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Speaker 1: this inflation. The chief economist at the O and S

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Speaker 1: talking about the prices of goods leaving factories rising a

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Speaker 1: little over the last year, while the price of raw

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Speaker 1: materials and fuels grew in the last month. Although as

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Speaker 1: Grant Fazner points out, this is they still remained below

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Speaker 1: where they were a year ago. So the detail in

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Speaker 1: this this is a very interesting as well. And at

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Speaker 1: that services number you made reference to it already coming

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Speaker 1: in very close to where it was last month's really

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Speaker 1: not much of a movement at all, and that's of

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Speaker 1: particular importance.

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Speaker 5: Yeah.

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Speaker 2: You might not expect the outspokenness from the chief economist

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Speaker 2: of the ONS, but Grant Fitzner has been speaking out recently,

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Speaker 2: and he points out here that services companies, such as

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Speaker 2: in hospitality are particularly exposed to wage costs. Hence it

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Speaker 2: has been such a sticky number here, barely budging, as

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Speaker 2: I say, five point nine percent, only down from six

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Speaker 2: percent there.

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Speaker 1: Yeah, okay, well, we'll have been watching a force closely

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Speaker 1: for further market reaction to that story too. I just

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Speaker 1: wanted to bring you up to date with another breaking

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Speaker 1: news story we've had out in the UK this morning,

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Speaker 1: and this is of two fines coming from UK regulators

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Speaker 1: for City Group, the Financial Conduct Authority finding City Groups

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Speaker 1: Global Markets twenty seven point eight million pounds for failures

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Speaker 1: and its trading systems and controls. The Prudential Regulation Authority

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Speaker 1: also finding City Group for the same reasons just under

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Speaker 1: thirty four million pounds, so a total fine in fact

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Speaker 1: for the bank of just under sixty two million pounds

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Speaker 1: for what's being described as these failures and trading systems

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Speaker 1: and controls. That is some breaking news we're getting around

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Speaker 1: City Group this morning.

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Speaker 2: I think it's fair to say, Stephen that today is

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Speaker 2: the most exciting day for the market.

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Speaker 1: Of the week.

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Speaker 2: The other thing that's on the agenda, of course, are

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Speaker 2: the Nvidia earnings, the AI leader set to report its

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Speaker 2: results after the Wall Street close today, capping off reports

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Speaker 2: from America's big tech giants, and video shares have been

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Speaker 2: inching ever higher this month, within a whisper of its

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Speaker 2: all time high from March, and we can get a

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Speaker 2: preview now of those earnings with Matt Bloxam from Bloomberg Intelligence. Matt,

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Speaker 2: what are you looking out for in these results today?

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Speaker 7: Yeah, well, I think the big focus is going to

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Speaker 7: be on revenue, not just for the quarter they're going

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Speaker 7: to report, so that's the quarter at the end of

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Speaker 7: the end of April, but also the forward quarter. So

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Speaker 7: for the quarter they're going to report, the market's looking

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Speaker 7: for about twenty four point seven billion dollars, which is

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Speaker 7: a little bit ahead of the twenty four billion dollar

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Speaker 7: guidance they set at their last set of results, and

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Speaker 7: then if you look forward to the next quarter, that's

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Speaker 7: where you know the market's looking for the guidance they're

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Speaker 7: going to give. The consensus is around twenty six point

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Speaker 7: eight billion dollars, so I think looking for a number,

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Speaker 7: let's say around twenty seven billion dollars for that forward guide.

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Speaker 7: That's really where the market's going to be is obviously

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Speaker 7: big questions about how how long can Nvidia continue to

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Speaker 7: grow at this incredibly fast pace. Is there going to

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Speaker 7: start to be some kind of headwinds from competition, or

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Speaker 7: as we saw in the week, some clients maybe holding

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Speaker 7: back on the current technology of chips and pushing their

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Speaker 7: demand and their orders into the new technology of chips.

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Speaker 7: So that's kind of really where the big focus is

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Speaker 7: going to lie.

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Speaker 1: I think how much competition is in Nvidia facing from others?

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Speaker 1: We know that the demand is pretty instable in this area.

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Speaker 1: Are there others who are stepping up to the place.

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Speaker 7: Yeah, there are, although you know it's kind of a

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Speaker 7: slow burn. So all of their big customers, so the

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Speaker 7: so called hyperscalers, people like Google and Amazon and Meta

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Speaker 7: and Microsoft, because they're so reliant on in the video.

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Speaker 7: They've been developing their own chips so they can do

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Speaker 7: some of this processing themselves, but it's a relatively early stage,

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Speaker 7: and they're still doing that in parallel with buying KIP

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Speaker 7: from Nvidia. And then you've got some of the more

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Speaker 7: traditional chip manufacturers like AMD who are saying, wow, this

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Speaker 7: is an enormous market. Must be able to weaken figure

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Speaker 7: some of what we do already to tap into this demand.

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Speaker 7: So I think, you know that that stuff's all coming,

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Speaker 7: but it doesn't just happen overnight. So I think if

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Speaker 7: you kind of look a year out from now, there'll

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Speaker 7: be a lot more competition foreign video to kind of

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Speaker 7: fight against. But I think by then the market's going

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Speaker 7: to be even bigger. And obviously the market's evolving. You know,

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Speaker 7: we heard earlier in the week that Dell's launched a

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Speaker 7: new range of PCs that are kind of AI focused,

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Speaker 7: So you know, there's a lot of different moving parts

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Speaker 7: in how the overall chip and technology industry is shifting.

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Speaker 2: Just thinking about the reaction that we can expect after

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Speaker 2: these results, I feel like good isn't good enough for

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Speaker 2: investors in this space. I was looking at the shares

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Speaker 2: in advanced micro devices they felt nearly ten percent even

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Speaker 2: though it raised its sales forecast. And then you had

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Speaker 2: super micro Computer falling fourteen percent even though their forecasts

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Speaker 2: went above and beyond the estimates. So even if in

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Speaker 2: video does well today, will good be good enough for investors?

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Speaker 7: I mean it's a really good question, and I think, yeah,

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Speaker 7: you know that the sense would be, you know, possibly not,

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Speaker 7: because the markets can be so fickle, and you know,

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Speaker 7: whilst the market's looking for a significant increase in the

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Speaker 7: forward quarter, I think in the back of people smiling

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Speaker 7: of yeah, you know that they're easily going to post

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Speaker 7: something better than this because of the last three or

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Speaker 7: four quarters they've always come up with guidance that's been

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Speaker 7: way better than the markets expected. But you know, every

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Speaker 7: quarter that goes by the market starts to anticipate that

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Speaker 7: more and more. So you need a really big beat

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Speaker 7: for people to kind of, you know, be pleased and

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Speaker 7: possibly surprised by the numbers. And that as you know,

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Speaker 7: the stocks at closer in all time high, there's a

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Speaker 7: lot of growth already factored into that share price.

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Speaker 1: This is Bloomberg Daybreak Europe. You're morning brief on the

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