WEBVTT - Bloomberg Daybreak Weekend: Nvidia Earnings Preview 0:00:00.240 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio News. 0:00:10.000 --> 0:00:13.160 This is Bloomberg Daybreak Weekend, our global look at the 0:00:13.200 --> 0:00:15.960 top stories in the coming week from our Daybreak anchors 0:00:16.040 --> 0:00:18.640 all around the world. Straight Ahead on the program, a 0:00:18.720 --> 0:00:21.479 look ahead to earnings from Chip Giant, Nvidio in some 0:00:21.560 --> 0:00:25.440 of America's biggest retailers. I'm Nathan Hager in Washington. 0:00:25.680 --> 0:00:28.320 I'm Carolin headka Hey London. While we're looking ahead to 0:00:28.400 --> 0:00:30.440 the European Business Summit, I'm. 0:00:30.320 --> 0:00:34.519 Doug Prisner looking at an expected pivot in Japan's economic growth. 0:00:37.479 --> 0:00:41.480 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:41.520 --> 0:00:45.240 eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, 0:00:45.720 --> 0:00:50.839 Bloomberg ninety two nine, Boston, Dad Digital Radio, London, Sirius 0:00:51.040 --> 0:00:54.160 XM one twenty one, and around the world on Bloomberg 0:00:54.240 --> 0:00:56.760 Radio dot Com and the Bloomberg Business Own. 0:01:02.520 --> 0:01:05.320 Good day to you. I'm Nathan Hager. We begin today's 0:01:05.319 --> 0:01:09.360 program with earnings. Third quarter reporting seasons coming close to 0:01:09.400 --> 0:01:11.840 an end, but before it does, we are about to 0:01:11.880 --> 0:01:16.120 hear from some heavyweights, including the most valuable company of 0:01:16.280 --> 0:01:19.920 all AI Chip Giant Nvidia wraps up results from the 0:01:19.920 --> 0:01:23.679 Magnificent seven after the close of trade this Wednesday for 0:01:23.760 --> 0:01:26.720 more and what we can expect, were joined by Kunjohn Sabani, 0:01:26.840 --> 0:01:30.959 senior semiconductor analysts for Bloomberg Intelligence. Kunjohn, it's great to 0:01:30.959 --> 0:01:33.080 have you with us on the weekend program. And it 0:01:33.080 --> 0:01:37.200 seems like every quarter the expectation is for Nvidia to 0:01:38.080 --> 0:01:42.160 more than beat expectations. How high is the bar this 0:01:42.240 --> 0:01:42.840 time around? 0:01:43.240 --> 0:01:45.640 Yeah, So, just to add some context, the last two 0:01:45.720 --> 0:01:49.080 quarters were the only quarters in which they did not 0:01:49.680 --> 0:01:53.560 beat and raise significantly, after having beating and raising for 0:01:53.640 --> 0:01:57.320 almost eight to twin quarters before that consistently in a row. 0:01:57.440 --> 0:02:00.520 The key factors last two quarters were the head from 0:02:00.520 --> 0:02:03.880 the China revenues. Also, not all the Street estimates had 0:02:04.000 --> 0:02:08.440 China removed, so the consensus was not really clean. However, 0:02:08.600 --> 0:02:12.320 looking into fiscal three Q, we now believe Street has 0:02:12.360 --> 0:02:14.560 most of the China revenues removed, so that's out of 0:02:14.600 --> 0:02:18.840 the way, and now we believe in Media's latest Blackwell 0:02:18.919 --> 0:02:23.000 three hundred is ramping stronger, so they could return to 0:02:23.040 --> 0:02:27.200 their normal race cadence of mid single digit beats and races, 0:02:27.200 --> 0:02:30.359 and anything above that or a low double digit would 0:02:30.400 --> 0:02:33.280 be a significant upside that could really help the sentiment. 0:02:33.880 --> 0:02:36.920 Another point to add here is most of the hyperscalers 0:02:36.919 --> 0:02:39.799 and cloud providers did raise their second half twenty twenty 0:02:39.800 --> 0:02:43.040 five CAPEX projections by about a total of twenty billion 0:02:43.360 --> 0:02:46.800 and their twenty twenty six projections by about one hundred billion. 0:02:47.280 --> 0:02:50.880 So that combined with the five hundred billion pipeline that 0:02:51.080 --> 0:02:55.480 Gentien shared during GDC last month for their black vel 0:02:55.520 --> 0:02:59.000 and Rubin ramps significantly sets it up for a massive 0:02:59.080 --> 0:03:00.760 upside in twenty six, to. 0:03:00.800 --> 0:03:04.040 The point of getting some of that China revenue off 0:03:04.080 --> 0:03:07.239 the books. We have seen the CEO Jensen Wang making 0:03:07.320 --> 0:03:11.560 moves like improving ties with Taiwan. He was just there 0:03:12.919 --> 0:03:16.760 doing the relationship with Taiwan Semiconductor. How do you see 0:03:16.960 --> 0:03:20.919 Jensen Wang building these relationships and how could that play 0:03:20.960 --> 0:03:21.680 into the results. 0:03:21.960 --> 0:03:24.919 I mean, Taiwan is a key, you know, manufacturing hub, 0:03:25.000 --> 0:03:27.000 not just for nd media but for most of this 0:03:27.560 --> 0:03:32.600 the semiconductor semis and media is also leading TSMC's move 0:03:33.280 --> 0:03:36.360 on shoring and building its products into the US in 0:03:36.400 --> 0:03:39.520 the Arizona Plan, So that's going to be significantly critical. 0:03:39.760 --> 0:03:42.840 On the China point, it doesn't seem like there is 0:03:43.000 --> 0:03:45.800 enough clearance yet of course they're going to try because 0:03:45.840 --> 0:03:49.160 there's the second largest market for them outside of the 0:03:49.280 --> 0:03:53.240 US and they would really like to capture that market. 0:03:53.600 --> 0:03:56.520 So far, we don't believe this quarter we'll see any 0:03:56.720 --> 0:03:57.960 material revenues though. 0:03:58.440 --> 0:04:03.000 Are those barriers in kinda a continued headwind beyond this 0:04:03.080 --> 0:04:03.920 quarter for Nvidia? 0:04:04.360 --> 0:04:07.680 They will, But on the good side, you know, most 0:04:07.720 --> 0:04:10.320 of the investors in the street now have sort of 0:04:10.560 --> 0:04:13.880 baked that in that you know, they're not adding this 0:04:14.160 --> 0:04:17.680 back anytime soon. Also, since the head wind has come up. 0:04:17.720 --> 0:04:19.880 You know, China right now is about fifty billion dollars 0:04:19.920 --> 0:04:24.479 accelerator market right there have been other larger and other 0:04:24.640 --> 0:04:27.919 large markets that have appeared in terms of SO and 0:04:28.000 --> 0:04:32.320 AI spendings. One is the Middle East region, other is Japan, 0:04:32.480 --> 0:04:35.560 and more and more countries like for example, in Europe 0:04:35.600 --> 0:04:40.040 are coming in which could easily offset that tam that China, 0:04:41.120 --> 0:04:42.880 that China had been took out of Invidia. 0:04:43.560 --> 0:04:46.440 I wonder what you're expecting to hear from the CEO 0:04:46.640 --> 0:04:50.800 himself after we heard in recent days from the CEO 0:04:51.160 --> 0:04:55.919 of Innvidia's maybe closest competitor, Advanced micro Devices, talking about 0:04:56.360 --> 0:04:59.560 a big revenue outlook for AMD over the next three 0:04:59.600 --> 0:05:02.240 to five years. What does Jensen Wong need to say 0:05:02.240 --> 0:05:04.240 in terms of in videos outline. 0:05:04.480 --> 0:05:06.400 Yeah, and you know, in his normal way, I think 0:05:06.720 --> 0:05:10.520 definitely is going to give more updates of how strong 0:05:10.600 --> 0:05:13.800 the demand is, how strong the use case and performance 0:05:13.839 --> 0:05:16.760 bench marks of the new Blackwell ramp is what we 0:05:16.800 --> 0:05:20.400 would like to ask if you know, we as key 0:05:20.440 --> 0:05:23.560 our investors should know is going to be more clarity 0:05:23.640 --> 0:05:28.159 on that five hundred billion dollar pipeline that could really 0:05:28.520 --> 0:05:30.960 set up the models and the estimates to go up. 0:05:31.720 --> 0:05:35.359 Another key point is getting clarity on the cross margin 0:05:35.400 --> 0:05:38.960 trajectory as these new products ramp and if they will 0:05:39.000 --> 0:05:41.080 be staying close to in twenty six to the mid 0:05:41.120 --> 0:05:43.200 seventies person gross margin range. 0:05:42.960 --> 0:05:47.040 In terms of those newer products. What are you expecting 0:05:47.240 --> 0:05:50.719 on the pipeline beyond Blackwell. 0:05:50.520 --> 0:05:53.640 Yeah, I mean they have clearly laid out their road maps. 0:05:53.680 --> 0:05:56.760 So the next product, the Rubin. We don't think they'll 0:05:56.760 --> 0:05:59.479 announce much details for this three cube, but we will 0:05:59.520 --> 0:06:03.400 get more clarity in the GDC early part of next year. 0:06:03.480 --> 0:06:06.440 That's when we'll get a lot more specs. But again, 0:06:07.160 --> 0:06:09.160 what we have seen from our channel checks is the 0:06:09.360 --> 0:06:12.919 Blackwell Ultra, the GB three hundred seems to have gotten 0:06:13.000 --> 0:06:17.560 much stronger traction when we had anticipated. And so unless 0:06:17.600 --> 0:06:21.400 we don't run into any transition paines going to Rubhin, 0:06:21.480 --> 0:06:23.719 we expect a similar stronger traction. 0:06:24.279 --> 0:06:26.880 Of course, one of the issues that has long been 0:06:26.920 --> 0:06:30.080 an issue for in video, something that's tried to meet 0:06:30.120 --> 0:06:33.560 the challenge of is just keeping up with this robust 0:06:33.680 --> 0:06:37.200 demand for chips and AI centers. Do you see in 0:06:37.320 --> 0:06:38.240 Vidia keeping up? 0:06:39.000 --> 0:06:43.400 They have been incrementally increasing supply every quarter, but we 0:06:43.480 --> 0:06:47.640 still think, you know, demand continues to stay ahead of supply, 0:06:47.920 --> 0:06:51.719 and we don't think supply will exceed demand anytime soon, 0:06:51.760 --> 0:06:53.280 not at least until twenty twenty six. 0:06:53.400 --> 0:06:56.600 En all right, coun John Sabani, thank you for this. 0:06:57.040 --> 0:07:01.800 That's Bloomberg Intelligence Senior Semiconductor analyst Konjohn Sabani. Again, we 0:07:01.839 --> 0:07:05.680 get those video results after the close of trading on Wednesday. Now, 0:07:05.760 --> 0:07:09.279 let's get to earnings from some of America's biggest retailers. 0:07:09.440 --> 0:07:12.640 Target opens up it's third quarter books before the opening 0:07:12.680 --> 0:07:15.960 bell on Wednesday. Then about twenty four hours after that, 0:07:16.080 --> 0:07:20.160 we hear from Walmart. Let's hear now from Jen Bartashis. 0:07:20.320 --> 0:07:23.480 She's a Senior analyst for retail staples and package Foods 0:07:23.720 --> 0:07:26.280 at Bloomberg Intelligence. It's great to have you with us 0:07:26.320 --> 0:07:28.240 on the program, Jen, And of course we look to 0:07:28.280 --> 0:07:31.240 both these companies for a read on the consumer. Of course, 0:07:31.280 --> 0:07:34.680 I'll look ahead to the holidays. What's the setup as 0:07:34.680 --> 0:07:37.320 we await these results from Target and Walmart. 0:07:38.200 --> 0:07:41.920 It's a very interesting time for these retailers because we 0:07:42.000 --> 0:07:46.480 hear about the disparity in consumer shopping behavior. On one hand, 0:07:46.800 --> 0:07:50.560 Walmart is pulling more hire income households into its ecosphere 0:07:50.600 --> 0:07:53.280 than ever before. And on the other hand, we have 0:07:53.360 --> 0:07:58.080 Target that's going through a huge your reset as it's 0:07:58.120 --> 0:08:01.520 trying to reconnect with its core customer base, and so 0:08:01.800 --> 0:08:05.160 it's a it's a very dynamic time for these companies. 0:08:05.200 --> 0:08:07.680 And it's the back to school season is what's really 0:08:07.720 --> 0:08:10.400 in this quarter. So it's a good read on how 0:08:10.480 --> 0:08:13.680 people are going to be entering into the holiday shopping period. 0:08:13.840 --> 0:08:17.360 Okay, so let's start off with Target. Of course, in 0:08:17.400 --> 0:08:20.360 your latest note, one of your latest notes, you make 0:08:20.440 --> 0:08:23.680 note of their goal to add fifteen billion dollars in 0:08:23.800 --> 0:08:26.760 revenue over the next five years. Could this be a 0:08:26.840 --> 0:08:29.680 quarter where we start to see them on their way there. 0:08:31.040 --> 0:08:33.040 I think it's going to be a little bit of 0:08:33.040 --> 0:08:37.040 a mixed quarter for Target, and that's really because they're 0:08:37.160 --> 0:08:41.199 still trying to find their footing and what's going to 0:08:41.280 --> 0:08:45.679 resonate with customers. Target is its best when people are 0:08:45.679 --> 0:08:50.200 willing to buy apparel and buy discretionary items, and that 0:08:50.440 --> 0:08:54.040 willingness is still a little bit dampened. They've done some 0:08:54.440 --> 0:08:57.439 good things this quarter to kind of help reset their business. 0:08:57.480 --> 0:09:00.400 If you remember they announced job cuts, if almost eighteen 0:09:00.480 --> 0:09:04.679 hundred positions that they were cutting, you know, that's the 0:09:04.720 --> 0:09:07.360 beginning of what should be a turnaround for Target. 0:09:07.520 --> 0:09:10.840 And it's interesting we just heard some reports earlier this 0:09:10.960 --> 0:09:15.160 week that Target is implementing a new greeting policy for 0:09:15.240 --> 0:09:18.520 those workers who are still on the job, basically telling 0:09:18.520 --> 0:09:21.400 them to smile more for the customers who come in. 0:09:21.520 --> 0:09:24.079 What's the balancing act for Target as it tries to 0:09:24.559 --> 0:09:25.840 navigate this turnaround. 0:09:26.640 --> 0:09:29.680 Yeah, I think it's a balance between not losing sight 0:09:29.840 --> 0:09:33.880 of your own core values that is what makes your 0:09:33.920 --> 0:09:38.720 customer base love you, and trying to chase other retailers. 0:09:39.080 --> 0:09:41.640 So you know, they keep doing price cuts. You know 0:09:41.679 --> 0:09:44.559 they want to stay priced competitive, but at the same time, 0:09:44.760 --> 0:09:47.480 Target has never been about being the low price leader. 0:09:47.880 --> 0:09:51.000 So there's a balance there between having the selection and 0:09:51.080 --> 0:09:54.920 the fun type of you know, offerings that they have 0:09:55.480 --> 0:09:57.920 while still offering values so that people feel like they're 0:09:57.920 --> 0:10:01.240 getting their money's worth. And that's that's what Targets really 0:10:01.280 --> 0:10:03.079 trying to focus on regaining its footing. 0:10:03.160 --> 0:10:05.120 Yeah, on the point of the price cuts, we just 0:10:05.200 --> 0:10:08.400 recently heard the Targets cut the prices on three thousand 0:10:08.600 --> 0:10:10.680 essential items. Is that the kind of thing that could 0:10:10.679 --> 0:10:11.760 eat into its margins? 0:10:12.640 --> 0:10:15.800 It could? It depends on what items they are. You know. 0:10:15.880 --> 0:10:18.760 For the most part, these are going to be more 0:10:18.800 --> 0:10:21.920 of your day to day household items, you know, and 0:10:21.960 --> 0:10:24.360 those items don't carry a whole lot of margin on 0:10:24.400 --> 0:10:27.840 them anyway, So you know, when you cut the prices 0:10:27.880 --> 0:10:30.600 on those, you become a little bit more competitive. The 0:10:30.640 --> 0:10:34.480 goal always is that you prompt people to buy greater 0:10:34.640 --> 0:10:38.559 volume and that makes up for any kind of discrepancy 0:10:38.600 --> 0:10:42.120 you might have from lowering your prices. But we'll see 0:10:42.120 --> 0:10:46.559 if that actually takes hold or not. And so the 0:10:46.640 --> 0:10:49.360 higher margin areas of the store are things like apparel, 0:10:49.720 --> 0:10:53.760 it's things like beauty, it's things like home decor, and 0:10:53.800 --> 0:10:55.760 those are the areas that just aren't selling as well 0:10:55.840 --> 0:10:56.240 right now. 0:10:56.400 --> 0:10:59.760 Of course, Walmart getting ready to report their earnings as well. 0:10:59.800 --> 0:11:06.040 They made their name on low prices. Is Target potentially 0:11:06.160 --> 0:11:09.360 eating in to what we could get from Walmart this quarter? 0:11:10.440 --> 0:11:15.760 I would say that usually on a price basis, Walmart 0:11:15.800 --> 0:11:19.000 is a clear winner and a clear leader. And for 0:11:19.120 --> 0:11:22.640 people who shop based only on price, I don't think 0:11:22.679 --> 0:11:25.640 you'll see a whole lot of shifting between Walmart and 0:11:25.679 --> 0:11:29.640 Target in terms of customer visits. It's really more about 0:11:29.720 --> 0:11:34.079 the overall perception and value perception of what you have. 0:11:35.679 --> 0:11:39.199 So for Walmart, it depends a lot of their success 0:11:39.480 --> 0:11:43.320 is the size of their grocery business because more than 0:11:43.360 --> 0:11:45.640 fifty percent of their revenue in the US comes from 0:11:45.720 --> 0:11:50.439 grocery type items, and so they when they keep prices 0:11:50.520 --> 0:11:52.960 low there, they bring people in, but then they're shopping 0:11:52.960 --> 0:11:55.920 the rest of the store, and so I think that's 0:11:55.960 --> 0:11:58.160 one of the tactics that we'll see, and it's it's 0:11:58.200 --> 0:12:02.000 part of what's bringing higher income households into Walmart as well. 0:12:03.080 --> 0:12:05.280 Because if you're going to buy a box of ceurios, 0:12:05.559 --> 0:12:08.160 you know, why wouldn't you buy that at the lowest 0:12:08.200 --> 0:12:11.240 price because it's the same box of curios no matter 0:12:11.240 --> 0:12:12.320 what retailer you go to. 0:12:12.800 --> 0:12:14.440 Well, there's certainly a lot to keep an eye on 0:12:14.480 --> 0:12:17.400 as we get ready for those big box retail earnings 0:12:17.640 --> 0:12:19.520 later this week. Thank you so much for this, Jen, 0:12:19.559 --> 0:12:22.079 really great having you on with us. That's Jen Bartashi's 0:12:22.080 --> 0:12:26.240 Bloomberg Intelligence senior analysts for retail, staples and packaged food, 0:12:26.520 --> 0:12:28.719 and coming up on Bloomberg day Break weekend, we'll look 0:12:28.720 --> 0:12:32.520 ahead to the European Business Summit. I'm Nathan Hager, and 0:12:32.600 --> 0:12:47.120 this is Bloomberg. This is Bloomberg day Break weekend, our 0:12:47.160 --> 0:12:49.719 global look ahead of the top stories for investors in 0:12:49.760 --> 0:12:52.640 the coming week. I'm Nathan Hager in Washington. Up later 0:12:52.679 --> 0:12:55.240 in our program we look ahead to some key economic 0:12:55.320 --> 0:12:58.880 data in Japan. But first, the challenges facing Europe are 0:12:58.960 --> 0:13:03.560 unprecedented but clear of belligerent Russia, frictions with China, and 0:13:03.640 --> 0:13:06.920 ongoing trade spats with the US. Even if the impact 0:13:06.920 --> 0:13:10.360 from Trump Tariff's faded faster than expected, the task is 0:13:10.400 --> 0:13:14.480 building Europe's resilience and competitiveness. That's the backdrop to the 0:13:14.520 --> 0:13:18.960 European Business Summit, which gathers Brussels top bureaucrats and policymakers 0:13:19.000 --> 0:13:22.240 every year. Let's get more from Bloomberg Daybreak Europe anchor 0:13:22.320 --> 0:13:24.720 Caroline Hepger in London, Nathan. 0:13:24.800 --> 0:13:27.559 The European Business Summit in the next few days in 0:13:27.640 --> 0:13:31.640 Brussels will play host to captains of European industry, Nobel 0:13:31.679 --> 0:13:36.880 Prize winning economists, and top bureaucrats, including the EU Commission 0:13:37.000 --> 0:13:41.120 president of Slavondaline. It comes as European firms grapple with 0:13:41.280 --> 0:13:46.240 high deck costs, energy reliance, strained relations with China and 0:13:46.280 --> 0:13:51.400 the US, and criticism ongoing of its regulatory environment. The 0:13:51.480 --> 0:13:55.720 EASE Justice Commissioner Michael McGrath says that Brussels needs more 0:13:55.840 --> 0:14:01.160 power to enforce consumer protection standards amid investigators into illegal 0:14:01.240 --> 0:14:05.960 products being sold by Chinese e commerce platform Shean. He 0:14:06.120 --> 0:14:09.400 says that relations with China can be challenging. 0:14:09.960 --> 0:14:13.000 We have a trading relationship at the moment that is 0:14:14.000 --> 0:14:18.480 quite unbalanced in favor of China. So that's why issues 0:14:18.640 --> 0:14:22.640 like market access barriers for European companies within the Chinese 0:14:22.640 --> 0:14:27.120 market is a key issue for US. China is a partner, 0:14:27.200 --> 0:14:31.520 but also a systemic rival and indeed a competitor of 0:14:31.560 --> 0:14:32.440 the European Union. 0:14:32.840 --> 0:14:37.160 That was Michael McGraw, EU Commissioner for Democracy, Justice and 0:14:37.200 --> 0:14:41.160 the rule of Law as well as consumer protection. Speaking 0:14:41.240 --> 0:14:44.680 there to Bloomberg Radio. Well joining us now as Bloomberg's 0:14:44.760 --> 0:14:48.920 Brussels bureau chief Susanne Lynch. Susan, great to speak to you. 0:14:49.600 --> 0:14:52.480 Just give us a sense of this gathering and what 0:14:52.520 --> 0:14:56.000 business and policy makers are focused on right now in Brussels. 0:14:56.400 --> 0:14:56.600 Yeah. 0:14:56.680 --> 0:14:59.880 Look, this is a significant moment for business representatives to 0:15:00.080 --> 0:15:02.320 come into close contact, if you like, with some of 0:15:02.360 --> 0:15:06.320 the big hitting EU policy makers and Brussels. The reality 0:15:06.440 --> 0:15:09.600 is the EU, everyone thinks politics in fact, you know, 0:15:09.800 --> 0:15:12.640 is one of the world's biggest regulators, does have impact 0:15:12.800 --> 0:15:15.560 on business. And I think this year in particular, people 0:15:15.600 --> 0:15:17.880 would be very interested to hear what's coming out of 0:15:17.920 --> 0:15:21.360 the European Commission because there is such a focus, particularly 0:15:21.360 --> 0:15:23.680 i'd say over the last year or so on the 0:15:23.800 --> 0:15:27.360 challenges facing the European economy and the whole issue of 0:15:27.440 --> 0:15:28.920 EU competitiveness. 0:15:29.120 --> 0:15:32.560 Yeah, indeed, and this summit talks about what choices Europe 0:15:32.640 --> 0:15:37.080 must make today to remain resilient and globally competitive tomorrow. 0:15:37.080 --> 0:15:40.520 I think that kind of neatly sums up the issues 0:15:40.640 --> 0:15:44.240 for Europe as well. Over a year since Mario Daghy's report, 0:15:44.240 --> 0:15:48.600 which exposed Europe's need for greater competitiveness, the discussion around 0:15:48.640 --> 0:15:51.640 high energy costs and reliance on bank loans, and the 0:15:51.720 --> 0:15:56.160 regulatory burden and so many other of the recommendations. But 0:15:56.920 --> 0:15:59.520 more than a year since since that report, and even 0:15:59.560 --> 0:16:03.240 his own up some that was quite negative about the 0:16:03.240 --> 0:16:07.400 progress that Europe had made. Where are we absolutely. 0:16:06.800 --> 0:16:10.320 And Mario DRAGLEI was speaking himself recently on the anniversary 0:16:10.480 --> 0:16:12.800 of this landmark report and made the point that there 0:16:12.880 --> 0:16:14.520 has been very little progress. 0:16:14.600 --> 0:16:14.800 Now. 0:16:15.360 --> 0:16:18.880 One reason is because the EU is this very unique institution. 0:16:19.080 --> 0:16:22.040 It includes twenty seven countries. It's not a sovereign body 0:16:22.080 --> 0:16:24.920 that can make decisions. It means that decision making is 0:16:25.040 --> 0:16:27.360 very laborious. You have to have people on board. You 0:16:27.400 --> 0:16:30.520 can't just plow through on different issues. And what the 0:16:30.520 --> 0:16:34.400 European Commission, which is the main executive arm of the EU, 0:16:34.840 --> 0:16:37.240 what you're hearing a bit from them is, look, we 0:16:37.280 --> 0:16:41.800 want to, for example, advance more cross border mergers, we 0:16:41.880 --> 0:16:44.280 want to develop the banking union. But when it comes 0:16:44.320 --> 0:16:47.400 to it and the negotiations starts, EU members says, EU 0:16:47.520 --> 0:16:50.800 countries sometimes just don't want to play the game. They 0:16:50.840 --> 0:16:54.080 are worried about their own national industries, their own national companies, 0:16:54.120 --> 0:16:56.920 and they are reluctant to take that step forward for 0:16:57.000 --> 0:16:59.600 more integration. So this has always been a bind for 0:16:59.640 --> 0:17:01.880 the EU. How do you advance, how do you integrate 0:17:01.920 --> 0:17:05.080 more when you've got all these different countries with different priorities. 0:17:05.400 --> 0:17:08.080 But I do think there is a real awareness that 0:17:08.600 --> 0:17:11.840 the Draggy Report is something that did impact, that did 0:17:11.840 --> 0:17:14.360 break through. I think a lot of the listeners may 0:17:14.359 --> 0:17:17.440 have been at Davos this year. I remember myself being 0:17:17.440 --> 0:17:20.199 there and hearing it. This report by a former ECB 0:17:20.359 --> 0:17:24.440 president had everyone talking and realizing that now something needs 0:17:24.440 --> 0:17:26.960 to be done. That the reality is that Europe has 0:17:27.000 --> 0:17:31.320 been diverging from the United States since the Great Financial Crisis. 0:17:31.320 --> 0:17:33.280 You can see that in the banking sector, you can 0:17:33.320 --> 0:17:35.439 see that in terms of innovation, you can see that 0:17:35.760 --> 0:17:38.440 in the number of startups, and in fact the real problem, 0:17:38.480 --> 0:17:41.760 which is scaling up European businesses, that is really an issue, 0:17:41.800 --> 0:17:44.520 and it does look like it continuing to lag behind 0:17:44.560 --> 0:17:44.840 on that. 0:17:45.320 --> 0:17:48.680 Do you get any sense that things are speeding up 0:17:49.000 --> 0:17:52.199 when there are so many pressures, namely, let's look to 0:17:52.320 --> 0:17:57.000 China first, managing that relationship supply chains and rare earths, 0:17:57.240 --> 0:18:01.360 which is from years and years of me movement by Beijing, 0:18:01.480 --> 0:18:04.480 has suddenly become so essential everywhere else. 0:18:04.600 --> 0:18:07.680 Yeah, I mean, I think the issue facing Europe now 0:18:07.760 --> 0:18:10.720 is that on the one hand, you've got this increasingly 0:18:10.840 --> 0:18:14.120 isolationist United States, and on the other hand you've got 0:18:14.119 --> 0:18:17.760 an increasingly belligerent some would say, China, and the EU 0:18:17.880 --> 0:18:20.920 is belatedly waking up to the fact that not only 0:18:21.200 --> 0:18:23.840 has it built up a dependency on the United States, 0:18:23.960 --> 0:18:27.040 particularly in terms of the defense sector, but it also 0:18:27.280 --> 0:18:29.760 has built up a dependency on China, particularly for the 0:18:29.840 --> 0:18:32.920 rare earth's material. Now this isn't just a europe wide problem, 0:18:33.400 --> 0:18:36.560 but you now can see the European Commission realizing this. 0:18:36.720 --> 0:18:39.920 So a couple of weeks ago at the Berlin Global Dialogue, 0:18:39.960 --> 0:18:42.760 we were there for Bloomberg and European Commission President earthl 0:18:42.760 --> 0:18:46.639 Of Underline gave a very strong speech where she directly 0:18:46.960 --> 0:18:49.600 addressed this issue about coming from Beijing, about the rare 0:18:49.680 --> 0:18:53.480 earth and she, you know, said that EU has has 0:18:53.520 --> 0:18:56.240 got options. But the reality is, you know how much 0:18:56.320 --> 0:18:59.280 leverages the EU have here, It really has more than 0:18:59.400 --> 0:19:02.400 ninety percent of these magnets that are going into everything 0:19:02.480 --> 0:19:05.639 from electric vehicles to the defense are coming from China. 0:19:05.720 --> 0:19:09.560 It's now scrambling elsewhere to try and find like minded partners. 0:19:09.560 --> 0:19:11.840 But so is the United States and everyone else. So 0:19:12.000 --> 0:19:14.520 will the EU have that urgency Like the EU does 0:19:14.560 --> 0:19:16.960 not move quick as an institution, that that's for sure. 0:19:17.240 --> 0:19:19.439 So you know, will it be able to garner its 0:19:19.480 --> 0:19:23.200 resources and make sure it's there at the table when 0:19:23.600 --> 0:19:26.560 countries across the world are trying to negotiate and trying 0:19:26.560 --> 0:19:30.040 to look at different alliances and different relationships. That's that's 0:19:30.080 --> 0:19:31.160 one of the key challenges. 0:19:31.520 --> 0:19:34.000 Yeah, indeed, and we know that kind of lack of 0:19:34.160 --> 0:19:37.040 minds that there are actually in Europe for those where 0:19:37.080 --> 0:19:39.320 earth in and of itself, and it takes years to 0:19:39.400 --> 0:19:42.280 kind of to deliver those sorts of minds. And then 0:19:42.520 --> 0:19:45.040 they're also quite polluting as well. So it's very very 0:19:45.080 --> 0:19:45.879 difficult challenges. 0:19:46.320 --> 0:19:48.560 And I mean we saw in the last few weeks 0:19:48.600 --> 0:19:52.600 that you know, German particularly German factories you know, were 0:19:52.840 --> 0:19:55.679 slowing down their production because they had these supply chain issues. 0:19:56.280 --> 0:19:58.119 But really what's worrying I think for the EU. We 0:19:58.119 --> 0:20:00.880 were reporting last week that there were some Chinese officials 0:20:00.880 --> 0:20:04.520 in Brussels for negotiations, but really the EU wasn't making 0:20:04.520 --> 0:20:07.160 that much progress, it seems. Now let's see how how 0:20:07.200 --> 0:20:08.720 this works out in the next few weeks. But with 0:20:08.760 --> 0:20:11.000 the big focus being on Trump and g where did 0:20:11.000 --> 0:20:13.320 the EU sit, it's kind of difficult for it to 0:20:13.320 --> 0:20:14.360 make its own voice heard. 0:20:14.600 --> 0:20:17.320 Yeah, indeed, and it's not just China, obviously the European 0:20:17.359 --> 0:20:19.960 businesses have to keep an eye on. It's also the 0:20:19.960 --> 0:20:24.520 White House's stance towards Europe and there too, there are 0:20:24.600 --> 0:20:27.239 lots of challenges. I mean, you mentioned Ivondeline and has 0:20:27.280 --> 0:20:30.399 strong speech a couple of weeks ago. But it was 0:20:30.440 --> 0:20:33.719 that meeting, wasn't it, between Trump and Vondeline, I mean, 0:20:33.760 --> 0:20:36.760 forgive me, I just remember the flowers that were between 0:20:36.960 --> 0:20:40.399 Trump and Vonderline that seemed to speak volumes of the 0:20:40.480 --> 0:20:42.880 kind of gap between the two and maybe the fact 0:20:42.920 --> 0:20:45.400 that they didn't want Vondallion and Trump to be right 0:20:45.440 --> 0:20:48.240 next to each other. And it was also a moment 0:20:48.280 --> 0:20:50.480 where there was some criticism for Vondalatin and how she 0:20:50.560 --> 0:20:51.280 handled it. 0:20:51.359 --> 0:20:53.880 There certainly was I myself actually was at term Breef 0:20:53.880 --> 0:20:56.760 for that event during the summer, Yes, because it happened 0:20:56.800 --> 0:21:00.000 very quickly. You know, we forget this with international diplomacy, 0:21:00.119 --> 0:21:02.320 that no one really expected this meeting to happen, and 0:21:02.320 --> 0:21:04.920 then it did. And even the optics of earthly vonder 0:21:04.960 --> 0:21:08.119 lynd flying to Donald Trump's golf course in Scotland and 0:21:08.600 --> 0:21:11.399 part of not in the EU and making that trip 0:21:11.440 --> 0:21:14.600 over especially to see him. So yes, the EU came 0:21:14.800 --> 0:21:18.000 under a lot of criticism from EU countries, in particular, 0:21:18.119 --> 0:21:20.560 saying it could have got a better deal. It locked 0:21:20.560 --> 0:21:23.920 in a fifteen percent tariff rate. It also not everything, 0:21:24.119 --> 0:21:26.359 but it also got some exemptions. For example, there were 0:21:26.400 --> 0:21:28.960 lots of worries about the pharmaceutical sector, a lot of 0:21:29.080 --> 0:21:32.840 exporters in Germany, Ireland, etc. GenMark, how would they be affected? 0:21:32.880 --> 0:21:35.119 They did get a deal on that, but again this 0:21:35.240 --> 0:21:37.280 is where the different bits of the EU kind of 0:21:37.280 --> 0:21:41.840 blame each other. Vanderline and the Commission we're saying privately, 0:21:42.000 --> 0:21:45.040 really well, hang on, you know, we did these negotiations 0:21:45.080 --> 0:21:47.000 with the backing of the EU countries and if they 0:21:47.040 --> 0:21:49.639 had an issue, they could a shouted stop. But I 0:21:49.720 --> 0:21:53.800 do think there is a kind of a wider statement 0:21:54.000 --> 0:21:55.440 to be made about this, and that is the fact 0:21:55.520 --> 0:21:58.439 that the EU has always prided itself on being, you know, 0:21:58.480 --> 0:22:01.800 this global trading power, that the single market, that market 0:22:01.840 --> 0:22:05.480 of four hundred and fifty million people, that integrated market 0:22:05.640 --> 0:22:08.080 is its big power, that it's a big caughting card. 0:22:08.400 --> 0:22:10.760 And yet when it came to it, it didn't have 0:22:10.800 --> 0:22:13.120 a stronghand with Trump, it felt like it had to 0:22:13.480 --> 0:22:16.840 really compromise there. And I think that's been a real 0:22:17.000 --> 0:22:20.360