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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg daybake At podcast, available every morning

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Speaker 2: on Apple, Spotify or wherever you listen. It's Wednesday, the

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Speaker 2: fifth of February in London. I'm Caroline Hepka and.

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Speaker 1: I'm Stephen Carroll. Coming up today, Donald Trump says the

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Speaker 1: United States should take control of the Gaza Strip and

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Speaker 1: rebuild it into a new riviera.

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Speaker 2: Stormy Weather Brewing Alphabet's cloud sales fall short of expectations

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Speaker 2: as the firm's AI spending drives concerns.

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Speaker 1: Plus how the slump in demand for diamonds has caused

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Speaker 1: a crisis at De Beer's.

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Speaker 2: Let's start with a roundup about top stories.

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Speaker 1: Donald Trump says the United States should take control of

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Speaker 1: the devastated Gaza Strip, sparking rebukes and ridicule from allies

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Speaker 1: and adversaries. Speaking during a White House news conference alongside

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Speaker 1: Israeli Prime Minister Benjaminetta and Yahoo, Trump suggests deploying US

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Speaker 1: troops to secure the area and assume responsibility for reconstruction.

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Speaker 3: We have an opportunity to do something that could be phenomenal,

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Speaker 3: and I don't want to be cute. I don't want

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Speaker 3: to be a wise guy. But the riviera of the

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Speaker 3: Middle East. This could be something that could be so bad,

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Speaker 3: This could be so magnificent.

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Speaker 1: Well, not directly endorsing Trump's proposal, Nataniahu didn't offer any opposition.

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Speaker 1: During the press conference last week, Trump suggested he'd like

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Speaker 1: to see the Gaza strip cleared out as part of

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Speaker 1: a post war operation. Much of the territories in ruins

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Speaker 1: after Israel's fifteen month war with Hamas following the group's

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Speaker 1: October seventh attack on the country.

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Speaker 2: President Trump's intervention comes as as well and Hamas continue

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Speaker 2: to exchange prisoners and hostages as part of a six

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Speaker 2: week CEASEPA. Reacting to the US President's Gaza proposal, the

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Speaker 2: former NATO Supreme Allied Commander in Europe, Wesley Clark, warned

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Speaker 2: that it would be exceptionally challenging to deliver.

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Speaker 4: There are huge problems at the bottom, not to mention

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Speaker 4: strategic consent at the top. So look, he's a president

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Speaker 4: of the United States, better listen to him. But I've

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Speaker 4: done these things. I can tell you how difficult this is.

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Speaker 4: This is unimaginably difficult.

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Speaker 2: Wesley Clark spoke as Saudi Arabia reiterated its support for

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Speaker 2: a Palestinian state with East Jerusalem as its capital and

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Speaker 2: rejected quote any infringement on the legitimate rights of the

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Speaker 2: Palestinian people. US Senator Chris Van Holler, and a Democrat

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Speaker 2: on the Foreign Relations Committee, was more blunt, calling Trump's

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Speaker 2: proposal quote ethnic cleansing by another name.

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Speaker 1: The US Postal Service has temporarily suspended the acceptance of

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Speaker 1: inbound international parcels from China and Hong Kong. According to

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Speaker 1: its website, the flow of letters from China and Hong

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Speaker 1: Kong will not be impacted. The move comes after President

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Speaker 1: Trump imposed a ten percent tariff increase on Chinese goods.

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Speaker 1: The suspension of inbound parcels from Hong Kong and mainland

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Speaker 1: China by US Postal Service has led to a drop

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Speaker 1: in Chinese e commerce stocks.

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Speaker 2: A former Google software engineers facing new US charges related

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Speaker 2: to stealing technology to boost China's AI industry. Chinese national

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Speaker 2: Linuei Ding, who was first indicted in March, now faces

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Speaker 2: seven counts of economic espionage along with counts of theft

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Speaker 2: of trade secrets. US prosecutors alleged that he stole chip

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Speaker 2: technology used by Google to train its AI models such

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Speaker 2: as Gemini Linwei Ding pleaded not guilty to the original charges.

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Speaker 1: In March, Swedish police say at least eleven people have

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Speaker 1: been killed in what has been described as the country's

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Speaker 1: worst massed shooting. The incident happened at an adult education

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Speaker 1: center in It, said he two hundred kilometers west of Stockholm. Yesterday,

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Speaker 1: Prime Minister of Christersen has responded to the attack.

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Speaker 5: The short darkness is being cast over Sweden tonight. It

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Speaker 5: is with bottomless sadness that we have received the news

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Speaker 5: from the police that about ten people have been killed

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Speaker 5: and several have been injured in a school shooting in Eurebro.

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Speaker 1: Or Fleerl Horscadots, Swedish Prime Minister of Christison speaking there

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Speaker 1: through a translator. Authorities say they do not know the

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Speaker 1: perpetrator's motive, but do not believe it is terrorism.

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Speaker 2: Now, let's talk about some earnings reports out this morning.

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Speaker 2: The Spanish lender Santander is committing to spending ten billion

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Speaker 2: euros in buybacks over the course of twenty twenty five

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Speaker 2: and twenty twenty six. The lender reported net income for

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Speaker 2: the fourth quarter that beat the average analyst estimate. The

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Speaker 2: bank says that it is targeting about sixty two billion

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Speaker 2: euros in revenue for this year.

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Speaker 1: Alphabet earnings missed expectations during the last three months of

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Speaker 1: twenty twenty four after sales from its cloud business slowed.

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Speaker 1: The Google parent reported revenue of eighty one point six

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Speaker 1: billion dollars over the period, which was lower than the

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Speaker 1: analyst's forecast. The firm also announced higher than expected capital expenditure.

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Speaker 1: CEOs and our pitch ice as their AI offerings can

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Speaker 1: rival industry competition.

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Speaker 6: There's been a lot of observations on Deep Seek. First

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Speaker 6: of all, you know, I think tremendous team. I think

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Speaker 6: they've done very very good work. I would say both

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Speaker 6: are two point zero flash models or two point zero

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Speaker 6: flash thinking models. You know, they are some of the

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Speaker 6: most efficient models out there, including comparing two deep Seeks.

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Speaker 1: Half about CEOs und our pitch I speaking there, the

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Speaker 1: company's shares fell by more than nine percent and after

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Speaker 1: hours trading, and have gained nine percent so far this year.

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Speaker 2: Now, Francis pi Miners is expected to survive to no

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Speaker 2: confidence votes today, allowing him to implement a delayed twenty

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Speaker 2: twenty five budget. Frans Wabe, who use a special constitutional

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Speaker 2: provision to push the bill through Parliament without a vote,

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Speaker 2: triggering ballots that could force his resignation, but motions are

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Speaker 2: likely doomed to fail due to the Socialist decision to

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Speaker 2: abstain from the vote. Baby remains vulnerable, though to future

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Speaker 2: no confidence votes. He lacks an overall majority, with the

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Speaker 2: Socialists already planning to file another vote after the budget

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Speaker 2: is adopted.

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Speaker 1: And the Nike in Japan is reporting that Nissan is

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Speaker 1: leading towards abandoning plans to combine with Honda. The pair

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Speaker 1: had been negotiating the terms of a deal in which

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Speaker 1: Honda would offer Nissan a lifeline by absorbing its struggling

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Speaker 1: rival and bringing the two brands together under a single

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Speaker 1: holding company. BUS media reports said that friction has emerged

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Speaker 1: between the two this week. A termination of TOGS would

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Speaker 1: bring what could have been a historic deal for Japan's

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Speaker 1: auto industry to a swift end. Nissan's share suspended from

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Speaker 1: trading in Tokyo after slumping by almost five percent. Honda

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Speaker 1: shares up about nine point four percent on that reporting

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Speaker 1: from the NICK.

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Speaker 2: Now, let's get to the markets this hour after our

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Speaker 2: top story. So the msciahed S Pacific Index up part

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Speaker 2: half of one percent. China's markets reopening after Lunar New

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Speaker 2: Year holidays with the reality of a trade war skirmish

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Speaker 2: between the US and China and may Land. Chinese equities

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Speaker 2: are down. The CSI three hundred are down by seven

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Speaker 2: tenths of one percent. Also, you had a slump in

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Speaker 2: e commerce stocks, particularly in Hong Kong because of that

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Speaker 2: US postal service story. Alphabet and AMD tumbled after their

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Speaker 2: earnings disappointed yesterday. US and US and European stock futures

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Speaker 2: this morning are also in the red, down half of

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Speaker 2: one percent for the U s Stox fifty futures. And you've

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Speaker 2: also got this signal from the front end of the

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Speaker 2: treasuries that maybe the Fed might abandon actually loosening policy

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Speaker 2: to by the end of this year. This amidst all

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Speaker 2: of the Trump policies. We've also had gold hitting a

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Speaker 2: fresh record high this morning. Twenty eight hundred and fifty

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Speaker 2: seven is where we trade on brilliant right now. Those

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Speaker 2: are the markets.

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Speaker 1: In a moment, we'll bring you more on the US

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Speaker 1: trade tariff story and how China's reacting, plus our big

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Speaker 1: Take report on the slump in diamonds causing a crisis

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Speaker 1: at De Beer's. But just a moment first on the

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Speaker 1: latest announcement from Donald Trump, and this is to do

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Speaker 1: with the Middle East.

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Speaker 2: Look, we wake up this morning in London to another

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Speaker 2: shock announcement from the US President that the United States

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Speaker 2: should take control of the devastated Gaza strip and turn

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Speaker 2: it into what the President has called a riviera, so

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Speaker 2: shunt the area's residents to other countries, is the proposal.

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Speaker 2: The reaction, as we've been describing, has been swift, the rebuke,

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Speaker 2: the ridicule, kind of some level of incredulity amid this

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Speaker 2: very tentative cease far between Israel and Hamas. Does President

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Speaker 2: Trump's proposal upend the Middle East? Or will the idea

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Speaker 2: be stopped in its tracks? I think it's an absolutely

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Speaker 2: open question. If you look at the Panama Canal and

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Speaker 2: with Greenland, the comments from the President, the US bully pulpit,

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Speaker 2: the power of that is so enormous that it has

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Speaker 2: changed conversations in those two instances. You have to say

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Speaker 2: Panama is considering counseling its contract with Hong Kong's Hutchinson Ports.

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Speaker 2: Are they operate two out of the five ports on

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Speaker 2: the Panama Canal route and Greenland. They've just announced that

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Speaker 2: they're going to be holding the election in the coming

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Speaker 2: few weeks in March, and already the Danish Prime Minister

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Speaker 2: says that Denmark is ready to allow the US to

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Speaker 2: boost its military presence in Greenland. So I shifted conversations

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Speaker 2: in those two spheres.

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Speaker 1: But the Middle East, Yeah, indeed, Look, we heard some

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Speaker 1: of the reactions from former NATO official Wesley Clark there

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Speaker 1: a moment ago as well, talking about the simple impracticalities

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Speaker 1: of this plan. As well. It's worth saying that our

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Speaker 1: reporting tells us that only a handful of people were

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Speaker 1: aware of this proposal ahead of Donald Trump making it public.

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Speaker 1: In that press conference with Benjamin Ettnia, who we talked

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Speaker 1: about some of the reactions from the region. Not good

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Speaker 1: so far, but a story to watch as it develops

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Speaker 1: throughout the day. Let's go back though, to the trade

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Speaker 1: issues and the opening volleys in the US China trade war.

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Speaker 1: A call between President Trump and She has not yet

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Speaker 1: taken place. Trump saying there's no rush to speak to

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Speaker 1: the Chinese leader. Let's bring in Jenny Marshall, leads our

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Speaker 1: team covering the Chinese economy. Jenny to talk us through

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Speaker 1: where things are now. We're about twenty four hours on

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Speaker 1: from the imposition of the it was extra tariffs on

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Speaker 1: Chinese goods. We had the response from Chinese yesterday as well.

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Speaker 1: Is there any sign that perhaps a compromise could be

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Speaker 1: reached here?

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Speaker 7: I think, you know, we're now in kind of a

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Speaker 7: bit of a holding pattern, and the next thing that

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Speaker 7: we're sort of looking out for is that phone call

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Speaker 7: I think between presidents she and Trump. Trump earlier in

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Speaker 7: the week has sort of been touting that it was

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Speaker 7: imminent going to happen in the next sort of twenty

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Speaker 7: four hours and Tuesday. Then overnight he's walked that back,

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Speaker 7: so you know, reading the tea leaves, it looks like

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Speaker 7: she is in sort of no hurry to have a

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Speaker 7: phone call with Trump just yet, and that's really sort

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Speaker 7: of the best opportunity for any kind of deal to

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Speaker 7: take place. So we're just looking for signs of that,

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Speaker 7: you know. I think with the Chinese tariffs that were

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Speaker 7: imposed in retaliation yesterday, the deadline for them coming into

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Speaker 7: effect now is February tenth, So Trump had his own

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Speaker 7: deadline of February fourth for his tariffs, and she didn't

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Speaker 7: speak to Trump before that. I guess now the question

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Speaker 7: is is Trump going to get on the phone to

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Speaker 7: She before the Chinese Atlantic expires and try to strike

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Speaker 7: some kind of deal.

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Speaker 2: The analysis of China's steps though, is that it's been

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Speaker 2: quite cautious so far. How much pressure is Hu jinping

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Speaker 2: under domestically from the economy to avoid a trade war?

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Speaker 7: Yeah, I mean that's a great point, and I think

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Speaker 7: that's one of the key differences between this trade war

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Speaker 7: and the last trade war, is that she enters this

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Speaker 7: one in a much more sort of precarious position economically,

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Speaker 7: and so he's got to do what he can to

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Speaker 7: protect the domestic economy. And you could really see that

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Speaker 7: with the way that they hit back yesterday. They didn't

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Speaker 7: go for sort of a blanket ten percent back at

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Speaker 7: the US as they would have done and did do

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Speaker 7: in the first trade war. It was much much more targeted,

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Speaker 7: so hitting things like oil, which China doesn't really buy

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Speaker 7: much off from the US, so making sure there was

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Speaker 7: no real blowback on the economy, which is struggling with

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Speaker 7: deflation with this ongoing property crisis. So you know, she

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Speaker 7: has sort of less to maneuver them last time, and

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Speaker 7: he has to be a bit more careful and that

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Speaker 7: you know, economists is sort of saying is actually more

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Speaker 7: likely the way that he'll respond to the trade war

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Speaker 7: is at home with the stimulus. So you'll see sort

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Speaker 7: of this tug of war almost between trying to these

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Speaker 7: measured responses to the US that don't hurt the Chinese

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Speaker 7: economy and then dishing out sort of stimulus at home

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Speaker 7: to compensate for whatever it is that Trump is throwing

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Speaker 7: their way.

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Speaker 1: Okay, my books, Jenny Marsh, thank you very much for

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Speaker 1: bringing us up to date on that story.

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Speaker 2: Now to something different. Once the Titan of the diamond industry,

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Speaker 2: it created the slogan a diamond is Forever. But the

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Speaker 2: Beers is floundering. The market for natural stones has seen

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Speaker 2: a prolonged crash, and the beer's select group of buyers

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Speaker 2: have become frustrated with the one time monopoly. Joining us

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Speaker 2: now is our managing editor for Energy and Commodities, Liesel Hill,

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Speaker 2: who's been writing about this. Good morning, Liesel. Look how

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Speaker 2: big is the slump in a rough diamond prices? How's

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Speaker 2: the Beers handled this crisis?

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Speaker 8: Yearning so well, that's a complicated question on this. It's

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Speaker 8: a really interesting and quite sopaque market. There's literally thousands

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Speaker 8: of different categories of rough diamonds of different sizes and qualities,

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Speaker 8: but overall, our reporting suggests that rough diamond prices have

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Speaker 8: dropped by roughly half over the past two years, which

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Speaker 8: really is a quite a dramatic slump. That's fifty percent

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Speaker 8: is with the wholesale market, which is where different players

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Speaker 8: sort of trade diamonds amongst each other. But the way

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Speaker 8: that the Beer's diamonds get into that market is through

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Speaker 8: these ten sales that they hold every year in the

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Speaker 8: capital of Botswana. And so the way that the Bias

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Speaker 8: has tried to handle it is they've tried to keep

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Speaker 8: a floor under prices to avoid contributing even more to

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Speaker 8: the collapse. So it's been reducing its own production, it's

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Speaker 8: been trying to keep its prices up and putting lots

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Speaker 8: of money into marketing for its diamonds. But even so,

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Speaker 8: by November its prices were about twenty five percent higher

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Speaker 8: than the going rate when its buyers arrived for the sale.

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Speaker 8: So they've been growing increasingly frustrated because obviously that means

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Speaker 8: that they'll be taking big glasses on the diamonds that

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Speaker 8: they're buying. From the beers. The company eventually capitulated in

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Speaker 8: December reduced prices by about ten to fifteen percent. But

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Speaker 8: even so, its prices we're still much more expensive than

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Speaker 8: the rest of the market. And it's also just sort

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Speaker 8: of adding to the frustration with its buyers. It sent

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Speaker 8: out notifications that it plans to sharply reduce the number

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Speaker 8: of its accredited customers. So, as I said, it's customers

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Speaker 8: have been getting increasingly frustrated by all of this. They've

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Speaker 8: been buying fewer diamonds and growing numbers have stopped showing

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Speaker 8: up with the sales tour.

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Speaker 1: How important does China to all of this?

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Speaker 5: As well?

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Speaker 1: It had been a diamond buying behemoth, and what role

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Speaker 1: does it have today?

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Speaker 8: That's right, So China has typically been the world's second

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Speaker 8: largest diamond market after the US, so it's hugely important.

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Speaker 8: But demand has fallen sharply since the pandemic, in part

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Speaker 8: because of macroeconomic uncertainty leading to weakness broadly in luctury spending.

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Speaker 8: If you don't know what makes us starting to look

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Speaker 8: like you might not splash out on that diamond ring.

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Speaker 8: But there's also this broader trend that we're seeing both

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Speaker 8: in China and globally, which is this explosion in production

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Speaker 8: and popularity of lab grown diamonds. They're dramatically cheaper consumers

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Speaker 8: who don't want to pay that much. You can still

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Speaker 8: get flawless stones, where before that wouldn't have been the case.

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Speaker 8: And so we're seeing lab growns replacing a lots of

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Speaker 8: the smaller, cheaper diamonds in jewelry being bought around the world,

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Speaker 8: which has really been quite a fundamental change in the market.

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Speaker 8: And then just coming back to China just for a

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Speaker 8: sense of how significance it is. A diamond demand there

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Speaker 8: we think is roughly half of what it was before

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Speaker 8: the pandemic, so that just gives us sense of the scale.

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

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