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

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Speaker 1: Daybreak Europe podcast. Good morning, It's Monday, the eleventh of August.

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Speaker 1: I'm Stephen Caroll in London. Coming up today, in Vidia

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Speaker 1: and AMD agree to pay the United States fifteen percent

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Speaker 1: of their China AI chip revenue to secure export licenses

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Speaker 1: to the country. The head of NATO says Ukrainian land

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Speaker 1: will have to be on the table in any peace

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Speaker 1: deal with Russia. Plus crumbling Dreams Germany's property collapse exposes

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Speaker 1: pension funds to risky private credit losses. Let's start with

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Speaker 1: a roundup of our top stories. Bloomberg understands that Nvidia

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Speaker 1: and AMD have agreed to pay fifteen percent of their

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Speaker 1: revenues from Chinese AI chip sales to the US government

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Speaker 1: in a deal to secure export licenses to the country.

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Speaker 1: The highly unusual arrangement reflects President Trump's effort to engineer

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Speaker 1: or financial payout for America in return for concessions on

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Speaker 1: trade or China. Correspondent mid Minlo has more, this is something.

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Speaker 2: Quite unprecedented because no US company has done this before.

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Speaker 2: It does give us a new precedent for the type

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Speaker 2: of compliance costs that companies could face as they.

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Speaker 3: Do business with China.

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Speaker 2: It also raises the question as to whether or not

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Speaker 2: the US is willing to trade off some of these

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Speaker 2: security concerns by rolling back even more of these export

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Speaker 2: controls in exchange for a cut of the revenue from

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Speaker 2: US companies.

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Speaker 1: Mid Menlo speaking there with less than twenty four hours

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Speaker 1: to go until the US China trade truce expires. The

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Speaker 1: Trump administration has previously signaled that the agreement is likely

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Speaker 1: to be extended. In its truth Social post. Overnight, the

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Speaker 1: US President called on Beijing to quadruple its soybean orders

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Speaker 1: to reduce China's trade deficit with America. NATO's Secretary General

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Speaker 1: Marcrota says this Friday is somewhat between Donald Trump and

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Speaker 1: Vladimir Putin, may open the doors negotiations over Ukrainian territory.

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Speaker 1: President Zelenski has continued to reject the idea of seeding

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Speaker 1: land currently occupied by Russia. Speaking to ABC's this Week,

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Speaker 1: Russa says Kiev may have to accept that it has

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Speaker 1: lost control of some of its territory without formally relinquishing sovereignty.

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Speaker 4: These two big issues have to be on the table.

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Speaker 4: One is territory, and we have to acknowledge at this

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Speaker 4: moment that Russia is controlling some of Ukrainian territory, and

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Speaker 4: the question will be how to go forward past a ceasefire,

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Speaker 4: including what it means in terms of security guarantees for Ukraine.

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Speaker 1: Native Chief Mark Ruta spoke to ABC's this week, as

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Speaker 1: Bloomberg learned that European leaders have been seeking to talk

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Speaker 1: to Trump ahead of his meeting with Putin. Ukraine and

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Speaker 1: its European allies have been pushing for a ceasefire that

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Speaker 1: freezes the current front line as a first step towards

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Speaker 1: negotiations on a more lasting settlement. Israel's Prime minister has

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Speaker 1: defended his widely condemned plans for a military sweep against

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Speaker 1: Hamas strongholds in Gaza. Bennaminettanie, who described the proposal as

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Speaker 1: the best available option for recovering the country's hostages and

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Speaker 1: safeguarding its security.

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Speaker 3: Given Hamas's refusal to lay down its arms, Israel has

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Speaker 3: no choice but to finish the job and complete the

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Speaker 3: defeat of Hamas. Contrary to false claims, this is the

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Speaker 3: best way to end the war and the best way

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Speaker 3: to end it speedily.

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Speaker 1: Benyminettane, whose plans have been criticized at home and by

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Speaker 1: foreign leaders, dozens of whom have spoken out against the

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Speaker 1: humanitarian crisis in Gaza after Israel cut off aid between

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Speaker 1: March and May. Australia has become the latest country to

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Speaker 1: announce it will recognize a Palestinian state at the United

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Speaker 1: Nations General Assembly meeting in September. The news comes as

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Speaker 1: London's Metropolitan Police say five hundred and thirty two people

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Speaker 1: were arrested during a demonstration on Saturday for supporting band

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Speaker 1: group Palestine Action. Al Jazeira says five of its journalists

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Speaker 1: were killed when an Israeli airstrike hit a tent in

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Speaker 1: Gaza on Sunday.

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Speaker 5: The news organization reports the deaths of.

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Speaker 1: Two correspondents and cameramen close to Gaza's Al Shifa Hospital

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Speaker 1: in what it called a targeted assassination. The Israeli military

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Speaker 1: confirmed it had targeted Al Jazeera correspondent an Us al Sharif,

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Speaker 1: claiming on telegram that he had served as the head

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Speaker 1: of a terrorist cell and hamas. The Committee to Protect

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Speaker 1: Journalists told the BBC that Israel has so far failed

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Speaker 1: to provide evidence to back up the allegation that the

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Speaker 1: journalists they killed were terrorists. The UK's jobs market is

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Speaker 1: weakening as employers hold back due to fears around taxes

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Speaker 1: and an uncertain future. A poll by KPMG in the

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Speaker 1: Recruitment's and Employment Confederation showed starting salaries rising at the

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Speaker 1: slowest pace in over four years.

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Speaker 5: Bloomberg Exchange Wilcock has more.

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Speaker 6: Working people are seeing fewer pay rises. The KPMG RIC

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Speaker 6: survey is stark. It shows a sharp slowdown in hiring,

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Speaker 6: low wages and pessimism about the future, and with tomorrow's

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Speaker 6: official UK job stated being scene is less reliable. The

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Speaker 6: RC release has become a closely watched indicator for the

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Speaker 6: Bank of England. Companies blame a wall of global uncertainty

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Speaker 6: for the pullback, but they point their finger at the

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Speaker 6: labor government too, singling out higher payroll taxes, coming tough

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Speaker 6: employment laws and the fear of more taxes potentially headed

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Speaker 6: their way this autumn as key reasons for holding back.

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Speaker 6: In London.

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Speaker 5: James Wilcock Bloomberg.

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Speaker 1: Radio economists expect the European Center Bank to hold interest

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Speaker 1: rates steady until December. A Bloomberg survey says Center Bank

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Speaker 1: watchers are pushing back expectations for more rate cuts while

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Speaker 1: they wait to see the impact of the Global Trade

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Speaker 1: tariffs bill. Appears also show signs of taking a while

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Speaker 1: to determine their next move, with the Federal Reserve having

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Speaker 1: stayed on hold so far this year. At the Bank

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Speaker 1: of England, governor last week acknowledging genuine uncertainty. And those

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Speaker 1: are your top stories on the markets. The MSCI ASA

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Speaker 1: Pacific Index outside of Japan is up by four tens

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Speaker 1: of one percent this morning. Japanese markets are closed for

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Speaker 1: a holiday. Your Stocks fifty futures are up by two tens.

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Speaker 1: SMP Miani's on Wall Street are up by a tenth.

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Speaker 1: Oil prices are lower by six tens of one percent.

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Speaker 1: With Friday's meeting between Vladimir Prutin and Donald Trump and

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Speaker 1: focus the Brank cruise training at sixty six dollars twenty one,

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Speaker 1: Soybean futures have risen on that social media post from

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Speaker 1: Donald Trump calling on China to buy more. They're up

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Speaker 1: about two point three percent, and bitcoin close to a

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Speaker 1: record high one hundred and twenty two thousand dollars just

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Speaker 1: over per digital token at the moment. In a moment

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Speaker 1: we'll bring you more on that deal between chipmakers and

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Speaker 1: the US government to get export licenses to China. Plus

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Speaker 1: we'll have a story about how small pension funds in

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Speaker 1: Germany are filling the pain from the property market crash.

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Speaker 5: There.

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Speaker 1: But another story they've been reading this week and on

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Speaker 1: teaching your children to play poker. Apparently it's easy, or

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Speaker 1: so says Matt Levine. Anyway, if we're looking for something

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Speaker 1: to do in your family holiday this summer, perhaps you

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Speaker 1: can try it out. His essay is about teaching his

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Speaker 1: eight year old daughter and four year old twins to

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Speaker 1: play poker. Now, his strategy is you start with one card,

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Speaker 1: which induced the whole concept of betting and bluffing, and

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Speaker 1: that it doesn't matter essentially what cards your dealt, it's

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Speaker 1: what you do with them.

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Speaker 5: And he says that so much easier.

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Speaker 1: Concept to get across than trying to get someone to

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Speaker 1: learn off you know, whether a flush is better than

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Speaker 1: a straight flush, or so on and so forth. So

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Speaker 1: his strategy says that once your kids have mastered this,

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Speaker 1: you can then make things more complicated, make it a

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Speaker 1: two card game than a five card and so on.

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Speaker 1: He writes about it very well and I think it's

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Speaker 1: a lovely piece also about getting his children on board

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Speaker 1: with something that he's interested in too. Do wonder if

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Speaker 1: it depends on the temperament of your children though definitely

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Speaker 1: step off in monopoly games that I was playing with

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Speaker 1: my family as a child. Anyway, But it's a great

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Speaker 1: READI You'll find it on Blueberg dot com. We'll put

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Speaker 1: a link to it in our podcast show notes as well.

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Speaker 1: Let's turn though, back to our top story in video

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Speaker 1: and AMD agreeing to pay fifteen percent of their revenues

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Speaker 1: from Chinese AI chip sales to the US government secure

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Speaker 1: export licenses. Are Tech editor of latsavav is with me

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Speaker 1: now for more. What can you tell us then about

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Speaker 1: this agreement that I Nvidia ANDAMD were told of signed

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Speaker 1: up to.

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Speaker 7: Right well, I think first of all, it's worth taking

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Speaker 7: a step back to understand what band they were trying

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Speaker 7: to get over because as of April this year, these

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Speaker 7: chips that we're talking about, in Nvidia's case, the H

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Speaker 7: twenty chips that it was it had initially designed specifically

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Speaker 7: for China and we're shipping and selling over there. That's

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Speaker 7: when a Trumpe administration decided that they will be caught

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Speaker 7: up in its limits on shipments to China. So this

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Speaker 7: limitation on Nvidia and AMD shipments through the country didn't

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Speaker 7: exist until April. That's when the Trump administration imposed them.

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Speaker 7: And from our reporting, what we understand is it was

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Speaker 7: a straightforward as saying the Trumpet administration is saying to

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Speaker 7: Nvidia and AMD, if you give us fifteen percent of

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Speaker 7: the proceeds, you will be allowed to ship those again.

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Speaker 1: Okay, So I mean, how value while are these chips

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Speaker 1: sales to these companies that they be willing to do this.

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Speaker 7: Well, if you listen to Invidia CEO Jensen Huang, he's

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Speaker 7: made this case very strongly and very consistently that if

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Speaker 7: Nvidia is not present in China, that costs US interest.

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Speaker 7: Obviously it costs in Video's own interest, but his case

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Speaker 7: is more nuanced. He's saying that he can both serve

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Speaker 7: China's interests by providing them AI accelerators, which his company

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Speaker 7: is the leader in manufacturing those, but he can also

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Speaker 7: serve US interest by getting China attached to the US,

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Speaker 7: as he calls it, technology stack right, So what in

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Speaker 7: VideA sells isn't just the GPU or the hardware, The accelerator.

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Speaker 7: It also sells the connective tissue. It sells the infrastructure

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Speaker 7: that goes into all these data centers and video even

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Speaker 7: likes to talk about so called AI factories, which really

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Speaker 7: are just data centers full of the video hardware. And

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Speaker 7: Jensen and Kwang's premise is if you get all of China,

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Speaker 7: when you're talking about the Buydance Tens and Ali Baba's

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Speaker 7: of the world, building their data centers around a video hardware,

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Speaker 7: that is geopolitically, strategically advantageous for the US because it

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Speaker 7: means that the US has more negotiating leverage in future negotiations.

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Speaker 7: It means the US still has some sort of influence

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Speaker 7: over China. And you know, the idea is that if

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Speaker 7: there is no US tech allowed in there, China will

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Speaker 7: not just say we're not interested in AI anymore because

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Speaker 7: they don't have access. They'll build their own.

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Speaker 1: So what does this mean that for the tech industry

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Speaker 1: more broadly, that companies as big as Nvidian AMD would

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Speaker 1: sign up to something like this.

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Speaker 7: Well, again, you kind of have to rewind a little

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Speaker 7: bit when you look back to the end of January

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Speaker 7: when the TikTok ban in the US was just about

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Speaker 7: to happen, and then Donald Trump started a series of

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Speaker 7: extensions to that deadline. One of the things that he

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Speaker 7: made really clear is that everything is on the negotiating

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Speaker 7: table with his administration. Up until that point, it was

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Speaker 7: all built on national security grounds. It was ticked US

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Speaker 7: operations cannot operate here because they have access to young

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Speaker 7: Americans postal information, which Donald Trump literally shrugged off in

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Speaker 7: the White House. He said, Eh, what's the big deal,

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Speaker 7: It's just kids information.

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Speaker 5: So he was making the point.

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Speaker 7: Then that TikTok could be as big as a one

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Speaker 7: trillion dollar business and the US should have a slice

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Speaker 7: of that. And really, what we're seeing now with this

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Speaker 7: deal with Nvidia ANDAMD is the actual manifestation of what

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Speaker 7: the envisions. It's we're going to strike a deal, you

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Speaker 7: will literally give us a cut of the sales, and

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Speaker 7: then you go ahead and proceed.

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Speaker 1: Okay, flat, Thanks very much for joining us with the

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Speaker 1: latest on that story.

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Speaker 5: That's our tech editor of Vlad Tsavov. There.

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Speaker 1: Well to Germany now, with a commercial property bubble that

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Speaker 1: burst under higher interest rates, it's continuing to cause pain

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Speaker 1: small pension funds that have helped to finance major projects

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Speaker 1: when rates were near zero are now proving to be

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Speaker 1: some of the biggest losers are distressed at Reporter Lebby

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Speaker 1: Cherry joins us now from Frankfurst for more on this

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Speaker 1: story that she's been reporting on Libby Good Morning. First

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Speaker 1: of all, why did these occupational pension funds invest in property?

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Speaker 8: So in the lead up to exactly this bubble bursting,

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Speaker 8: we were in a very ultra low interest rate period

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Speaker 8: and a lot of these occupational pension funds have required

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Speaker 8: annual returns, so they need to make for the pensioners

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Speaker 8: that pay into them. And suddenly, in this ultra low

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Speaker 8: interest rate period, buying the very safe government bonds, mortgage

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Speaker 8: debt and so on was no longer providing the returns

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Speaker 8: that they required. So it needs to look for slightly

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Speaker 8: more arcane, higher risk products that would enable.

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Speaker 5: Them to meet those annual returns.

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Speaker 8: And if you think about how this financing was structured,

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Speaker 8: it was designed for them. People were syndicating this debt

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Speaker 8: out so that even very small occupational pension funds were

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Speaker 8: able to invest.

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Speaker 5: So remind us then what happened when that property bubble burst,

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Speaker 5: So the kind.

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Speaker 8: Of immediate repercussions was a lot of these developments, for example,

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Speaker 8: building office buildings in major cities. You know, residential developments

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Speaker 8: ground to a halt. The uncertainty was just so much,

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Speaker 8: and also the transaction market ground to a halt as

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Speaker 8: buyers and sellers suddenly couldn't agree on valuations anymore. And

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Speaker 8: all of the stem from the very rapid increase in

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Speaker 8: interest rates from the European Central Bank, which put immediate

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Speaker 8: pressure on valuations and also increased financing costs. And at

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Speaker 8: the same time you also had Russia's invasion of Ukraine

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Speaker 8: and the consequent increase in raw materials and so.

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Speaker 5: On, all of which led to a lot of these.

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Speaker 8: Developments running out of money and basically idling, with people

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Speaker 8: unwilling to invest more into these projects.

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Speaker 1: So how much pain then, have these pension funds suffered

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Speaker 1: as a result of this? And do we know the

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Speaker 1: full extent of it? Are there further losses still expectors?

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Speaker 8: So a lot of these cases are very idiosyncratic. But

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Speaker 8: where we have been able to understand what's happened in

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Speaker 8: these frastructurings. If there are pension funds invested in this

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Speaker 8: so called mezzanine or subordinated financing, a lot of them

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Speaker 8: are facing the risk of losing potentially their entire investment.

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Speaker 8: A lot of the valuations of the developments were based

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Speaker 8: on very optimistic views of where they'd be able to

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Speaker 8: sell the property at the end of you know, when

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Speaker 8: they finished developing it, and suddenly that value is just

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Speaker 8: completely lost. And in terms of, you know, where we

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Speaker 8: might go from here, people in the market say that

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Speaker 8: there are definitely more losses to come. A lot of

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Speaker 8: these developments are still being restructured, still being negotiated, are

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Speaker 8: in very long drawn out insolvency processes, and we might

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Speaker 8: not see the kind of final extent of the losses,

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Speaker 8: you know, maybe for another year or so.

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Speaker 1: In the restructurings that have already happened, though, what's been

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Speaker 1: the outcome for these pension funds.

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Speaker 8: So one case that we look at in particular is

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Speaker 8: the first project, which is a very large development in Berlin.

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Speaker 8: They actually came to London to restructure their debt and

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Speaker 8: what happened was the valuation of the property was so

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Speaker 8: much lower that it had been initially envisaged when they

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Speaker 8: started building, that the entirety of the debt that was

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Speaker 8: sort of more junior to the most sort of the

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Speaker 8: more junior debt that subordinated the mezzanine financing was completely

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Speaker 8: wiped out to save for a small compensation payment, and

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Speaker 8: that would have been very painful for those funds. We've

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Speaker 8: also seen in a development in Frankfurt where there are

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Speaker 8: two pension funds that are invested in the mezzanine financing

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Speaker 8: and they two were facing sort of total write downs

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Speaker 8: on their investment. But as I say, you know, a

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Speaker 8: lot of these negotiations are private, a lot of the

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Speaker 8: solutions are very unique to the property, so it's hard

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Speaker 8: to sort of generalize.

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Speaker 4: I would say.

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