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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. They say it's the

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Speaker 1: Bloomberg Daybreak. Youurate podcast available every morning on Apple, Spotify

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Speaker 1: or wherever you listen. It's Wednesday, the seventh of May

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Speaker 1: in London. I'm Stephen Carroll coming up today. India and

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Speaker 1: Pakistan exchanged military strikes as fears of further escalation grow.

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Speaker 1: The US and UK are locked in intensive trade negotiations,

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Speaker 1: with hopes for a deal soon. Plus second time Lucky

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Speaker 1: Fredrich Mertz takes power in Germany as he aims to

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Speaker 1: move past a chaotic start to his premiership. Let's start

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Speaker 1: with the undup of our top stories. India has conducted

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Speaker 1: what it says are targeted military strikes against Pakistan, hitting

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Speaker 1: seven locations. Pakistan has called the strikes an act of

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Speaker 1: war and claims to have shot down five Indian jets

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Speaker 1: in response. The escalation between the nuclear armed neighbors comes

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Speaker 1: after gunman killed twenty six people and Indian administered Kashmir

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Speaker 1: last month. Pakistan's Defense Minister Kauwaji Muhammad Asif has been

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Speaker 1: speaking to Bloomberg.

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Speaker 2: We'll never initiated anything hostile towards India, but if we

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Speaker 2: had attacked we'll respond. If India backs down, we will

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Speaker 2: definitely wrap up these things, you know. But as long

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Speaker 2: we are under a tag under fire, we have to respond.

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Speaker 2: We have to defend ourselves.

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Speaker 1: As Pakistan's defense minister, speaking to Bloomberg As, India said

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Speaker 1: it only targeted known terror camps and hit no Pakistani civilian, economic,

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Speaker 1: or military targets. The news came just hours after India

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Speaker 1: announced a landmark new trade deal with the UK. The

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Speaker 1: world's fifth and sixth largest economies, cut tariffs on each

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Speaker 1: other's cosmetics, vehicles, alcohol, and other goods. For British Prime

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Speaker 1: minister career Starmer, it's a major achievement.

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Speaker 3: This is the biggest trade deal that we the UK

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Speaker 3: have done since we left the EU, and it's the

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Speaker 3: most ambitious trade deal that India has ever done. This

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Speaker 3: will be measured in billions of pounds into our economy

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Speaker 3: and jobs across the whole of the United Kingdom.

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Speaker 1: Starmer's deal ends more than three years of trade negotiations.

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Speaker 1: The UK expects the deal to add more than twenty

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Speaker 1: five billion pounds a year to the economy in the

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Speaker 1: long run. Meanwhile, the UK and US are in intensive

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Speaker 1: talks about a trade deal with a British team in

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Speaker 1: Washington negotiating terms. According to Bloomberg sources, it's still too

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Speaker 1: early to say if any agreement may come this week.

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Speaker 1: James Wilcock has more.

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Speaker 4: Britain has been talking up the prospects of a trade

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Speaker 4: deal with America since Brexit, but the looming trade war

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Speaker 4: seems to have sharpened minds on both sides of the Atlantic.

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Speaker 4: The Ft reports the deal will include steal and car exemptions,

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Speaker 4: with pharmaceutical goods still being argued over, but officials tell

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Speaker 4: Bloomberg although there's optimism a deal can be struck, it's

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Speaker 4: unlikely to happen this week. In London, James Worcock, the radio.

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Speaker 1: US Treasury Secretaries Got Bessant, and Trade Representative jameson Greer

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Speaker 1: will hold trade talks with China's Vice Premier Holifeng this weekend.

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Speaker 1: The three representatives are due to meet in Switzerland on

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Speaker 1: Saturday and Sunday as both sides seek to de escalate

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Speaker 1: the ongoing trade standoff. These will be the first confirmed

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Speaker 1: talks between the two countries since President Donald Trump announced

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Speaker 1: tariffs up to one hundred and forty five percent on

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Speaker 1: Chinese imports and Beijing retaliated with its own levees on

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Speaker 1: US goods of up to one hundred and twenty five percent.

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Speaker 1: Here is the Treasury secretaries got beston speaking on Fox News.

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Speaker 5: We have shared interest that this isn't sustainable, as I've

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Speaker 5: said before, especially on the Chinese side. And you know,

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Speaker 5: one hundred and forty five percent, one hundred and twenty

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Speaker 5: five percent is the equivalent of an embargo. We don't

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Speaker 5: want to decouple. What we want is fair trade.

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Speaker 1: Scott beson't speaking on Fox News. President Trump has said

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Speaker 1: in recent days that he's open to lowering tariffs on

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Speaker 1: China at some point, though he also says the US

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Speaker 1: is losing nothing by not trading with Beijing. China has

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Speaker 1: reduced its policy rate and lowered the amount of cash

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Speaker 1: lenders must keep in reserve. The move aims to guide

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Speaker 1: borrowing costs lower and release about one trillion y one

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Speaker 1: in long term liquidity. These stimulus measures reflect Beijing's intensified

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Speaker 1: efforts to support an economy grappling with the escalating US

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Speaker 1: trade war. Survey data released yesterday showed that China's services

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Speaker 1: activity has fallen to its lowest level in seven months. Meanwhile,

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Speaker 1: analysts pulled by Bloomberg expect GDP growth to slow to

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Speaker 1: four point two percent this year. And in Germany, Fredrick

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Speaker 1: Smertz has secured parliamentary backing as Germany's new chancellor on

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Speaker 1: his second attempt. The Conservative leader has vowed to reboot

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Speaker 1: the economy and revive the country's military, but Bloomberg's Oliver

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Speaker 1: Crooks says his initial loss casts a shadow over the

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Speaker 1: strength of his coalition.

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Speaker 6: Frederick Mrse really wanted to cast himself as that strong

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Speaker 6: leader of Germany and potentially within Europe, and he comes

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Speaker 6: into the office now with great doubts about how strong

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Speaker 6: this coalition is and how effective they're going to be

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Speaker 6: a governing particularly with the deployment of that one trillion

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Speaker 6: euros worth of debt finance assets to build out infrastructure

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Speaker 6: and to build out the defense industry. How certain are

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Speaker 6: they that they're going to have the agreements in order

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Speaker 6: to effectively deploy that capital. In a day that was

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Speaker 6: supposed to bring political stability into Germany really has brought

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Speaker 6: a lot of sort of chaos and a lot of

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Speaker 6: sort of doubt about the future of this coalition government.

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Speaker 1: Mertz's confirmation as Chancellor comes as the European Union prepares

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Speaker 1: to hit about one hundred billion euros worth of US

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Speaker 1: goods with additional tariffs in the event that ongoing trade

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Speaker 1: talks with the Trump administration fail. Bloomberg understands the proposed

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Speaker 1: retaliatory measures will be shared with member states as early

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Speaker 1: as today, and consultations will last for a month before

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Speaker 1: the list is finalized. Those are your top stories on

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Speaker 1: the markets. Dollar. The dollar and equities have gotten a

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Speaker 1: boost from those planned US China trade talk set to

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Speaker 1: begin on Saturday in Geneva. We've got SMP Mini features

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Speaker 1: up by six tenths of one percent this morning. Nastok

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Speaker 1: features are six tens high. The Bloomberg Dollar Spot Index

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Speaker 1: is up by three tenths of one percent. European stock

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Speaker 1: features looking pretty flat ahead of the trading session today.

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Speaker 1: Asian equity is also getting a boost by the moves

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Speaker 1: by the Chinese Center Bank we were just telling you about.

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Speaker 1: The CSI three hundred is up by four tenths. The

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Speaker 1: Shanghai Composite six tenths higher this morning as well, and

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Speaker 1: we've seen the main Pakistani stock market index, the ks

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Speaker 1: E one hundred, falls some six percent on the open.

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Speaker 1: On those escalating trenches with India. India's Nifty indexes trading

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Speaker 1: marginally lower, and the rupee is weakened slightly versus the dollar.

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Speaker 1: Well in a moment, we will bring you the latest

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Speaker 1: on what's happening between India and Pakistan, plus trade news

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Speaker 1: out of the UK doing a deal with India and

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Speaker 1: hoping for an agreement to lower US tariffs on as well.

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Speaker 1: But before that, another interesting read this morning from Bloomberg

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Speaker 1: opinion columnist Lionel laurent As. We're looking ahead to Germany's

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Speaker 1: new chanceller taking a trip to Paris to meet Emmanuel

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Speaker 1: Macron after passing that parliamentary hurdly yesterday. Will they be

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Speaker 1: talking about Emily in Paris? Perhaps? Leanel's been looking at

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Speaker 1: the media landscape in Europe and perhaps how Mertz is

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Speaker 1: reviving a proposal for a European media platform to rival

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Speaker 1: the lights of Netflix. You remember Emmanuel Macron a couple

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Speaker 1: of months ago bemoaning Emily in Paris potentially moving to Rome.

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Speaker 1: Newlyanel has been cataloging some of the efforts that were

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Speaker 1: made at a national level in Europe and France and

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Speaker 1: Italy that haven't worked to try and rival some of

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Speaker 1: those American giants in the sector. The big production still

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Speaker 1: mostly been made by the likes of Netflix and Disney

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Speaker 1: Plus and so on. But now that Donald Trump is

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Speaker 1: threatening tariffs on foreign made films, will that help to

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Speaker 1: create a so called air bus of streaming in Europe?

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Speaker 1: One option that Lenel looks at is potentially boosting the

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Speaker 1: Franco German broadcaster ATTE. But he says that we shouldn't

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Speaker 1: underestimate as significant national interests can come to be when

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Speaker 1: it comes to the media landscape. But perhaps the consequences

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Speaker 1: of not doing anything will be even bigger this time.

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Speaker 1: This might be the shock that prompts a revival of

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Speaker 1: some of those European proposals for a greater European giant

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Speaker 1: in media. You can read more in Leonel's piece at

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Speaker 1: bloomberg dot com for its last opinion, and we'll put

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Speaker 1: a link to the article in our podcasts show notes. Well,

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Speaker 1: let's turn to the latest now and those rising tensions

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Speaker 1: between India and Pakistan. After India conducted military strikes against

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Speaker 1: its neighbor and Pakistan says that it's shot down five

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Speaker 1: Indian jets and response, Bloomberg's Swati Pandi joins me. Now

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Speaker 1: from more, It'swati great to have you with us. What

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Speaker 1: is the latest that we're hearing from both sides, so.

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Speaker 7: To understand what's going on. I would just like our listeners.

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Speaker 7: I would just like to take our listeners to April

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Speaker 7: the twenty second, when a terrorist attack in Indian Kashmir

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Speaker 7: had targeted civilians, specially tourists, and twenty six people had died,

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Speaker 7: mostly Hindu men. India had blamed Pakistan for that attack

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Speaker 7: and had said it would retaliate, and then today was

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Speaker 7: the day when it decided to act and hit military

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Speaker 7: camps in Pakistan. India said its response was focused measured

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Speaker 7: in non escalatory in nature, and then Pakistan said it

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Speaker 7: has retaliated as well to India's military strikes. Pakistan said

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Speaker 7: it has shot down five Indian planes. India has not

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Speaker 7: confirmed those losses. Pakistan had earlier said it had taken

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Speaker 7: five Indian soldiers as prisoner, but later clarified that no

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Speaker 7: Indian soldiers were taken. So this is also a reminder

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Speaker 7: to our listeners, especially those who might be living through

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Speaker 7: their first South Asian crisis. There will be a tremendous

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Speaker 7: amount of misinformation and fake news, and it will take

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Speaker 7: a while to sort through what actually happened in twenty

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Speaker 7: nineteen when the last time India and Pakistan had a

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Speaker 7: major conflict, they took handless about three to four days

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Speaker 7: after the strikes to get a clear sense of what

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Speaker 7: actually happened.

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Speaker 1: And with that in mind, then Swati, what does those

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Speaker 1: previous incidents tell us about where things could go from here?

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Speaker 7: So the last time, like I said, was twenty nineteen.

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Speaker 7: At that time, suicide bomber had killed forty members of

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Speaker 7: India security forces. India had again blamed Pakistan for that

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Speaker 7: and responded with the first air strikes on Pakistani soil

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Speaker 7: since nineteen seventy one, and then Pakistan retaliated by shooting

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Speaker 7: down an Indian jet and arresting an Indian pilot who

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Speaker 7: was later released. And after that tensions had died down.

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Speaker 7: So people who are watching this conflict are wondering whether

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Speaker 7: the same pattern would repeat. There have been repeated conflicts

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Speaker 7: over the past three decades since both countries went nuclear

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Speaker 7: in nineteen ninety eight, and both sides have shown restraint,

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Speaker 7: So whether it happens again this time is yet to

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Speaker 7: be seen.

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Speaker 1: This is something that of course will be watched the

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Speaker 1: world over as well. Because of the scale of the

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Speaker 1: two countries involved. I mean, what about a path to

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Speaker 1: de escalation from here.

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Speaker 7: Look, this is a difficult one because the relation is

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Speaker 7: pretty acrimonious. As we speak. India has already suspended a

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Speaker 7: long standing Indus waters treaty. Pakistan has said that India

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Speaker 7: has almost entirely stopped the flow of water across the

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Speaker 7: border through the Chainab River, which is crucial for farm irrigation.

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Speaker 7: There are also skirmishes in the border. So Pakistan's Defense

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Speaker 7: minister was on Bloomberg TV earlier and he said China

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Speaker 7: is a third party to Kashmir and called China a

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Speaker 7: very relevant player who can use it influence. Beijing is

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Speaker 7: also a major backer and financial investor in Pakistan and

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Speaker 7: has we to rated its support for Islamabad. So you know,

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Speaker 7: it is a difficult situation. There are diplomatic efforts that

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Speaker 7: are ongoing to de escalate tensions. Pakistan has said it

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Speaker 7: is willing to talk to India as long as India

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Speaker 7: does not resort to hostile acts quote unquote, So we

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Speaker 7: have to wait and see what either party decides to do.

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Speaker 1: Bloomberg's Swati Pandi thank you very much for bringing us

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Speaker 1: up to date on that story. Well, then, he's coming

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Speaker 1: out of India and Pakistan, somewhat over shadowing announcement that

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Speaker 1: had come just hours earlier that the UK and India

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Speaker 1: had finally concluded a trade deal that had been under

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Speaker 1: negotiation for many years. This is British and American officials

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Speaker 1: are in intensive discussions about a separate deal that could

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Speaker 1: reduce the impact of some US tariffs. Our UK correspondent

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Speaker 1: Lizzie Burton is with me for more. Lizzie, firstly on

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Speaker 1: the UK India trade deal. How significant is this for

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Speaker 1: the economy?

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Speaker 8: So this will cut tariffs on cosmetics, vehicles, alcohol and

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Speaker 8: various other goods. And the point of course is to

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Speaker 8: offset the disruption of Trump's tariffs. And at the same time,

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Speaker 8: the UK and India are looking for trade deals of

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Speaker 8: their own with the US. So it's all about reducing

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Speaker 8: the impact of the trade war. It's a diplomatic feat.

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Speaker 8: The talks for an India trade deal started in twenty

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Speaker 8: twenty one and the aim had been to conclude them

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Speaker 8: by Devali twenty twenty two, but it was notoriously hard.

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Speaker 8: You hear experts saying when India looks to reach a

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Speaker 8: trade deal, it ends up researching itself and that takes

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Speaker 8: a long time. Then you had elections on both sides

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Speaker 8: getting in the way. So in a way, Donald Trump's

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Speaker 8: done a favor to both the UK and India by

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Speaker 8: accelerating the process here and for context, this is the

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Speaker 8: UK's biggest trade deal since Brexit, it's India's first with

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Speaker 8: the European economy. But our economists saying it's only going

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Speaker 8: to add zero point one percent to economic growth long run,

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Speaker 8: so really it's a drop in the ocean compared to

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Speaker 8: Brexit or Trump's trade war.

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Speaker 1: Has it been received politically then in the UK.

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Speaker 8: Well, there's one particular detail that's explosive, an exemption from

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Speaker 8: national insurance payments for Indian workers who are staying here

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Speaker 8: less than three years, so it makes them much more

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Speaker 8: attractive hires for employers than other nationalities, including British citizens.

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Speaker 8: And remember it's just a month after the implementation of

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Speaker 8: that controversial hike on employers national insurance here in the UK,

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Speaker 8: which is a cost of business the government's still trying

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Speaker 8: to live down. So that is a win for the opposition,

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Speaker 8: particularly Reform, which of course had a victory lap last

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Speaker 8: week in Westminster after those bumper election results. Local election

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Speaker 8: results just hands them another attack line.

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Speaker 1: This Lizzie, as we've been also looking at the latest

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Speaker 1: reporting on hopes for a deal between the UK and

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Speaker 1: the US.

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Speaker 8: Well source of tell us that they're in intensive discussions.

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Speaker 8: Now You've got a team of British officials in Washington

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Speaker 8: to negotiate terms this week, so there is that a

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Speaker 8: deal can be struck. But a senior UK official told us,

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Speaker 8: and this repeats the Chancellor Rachel Reads's line from the

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Speaker 8: IMF meetings, Britain's not going to be bounced into a

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Speaker 8: deal that isn't in its interests just because the Trump

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Speaker 8: administration's keen to announced deals to soften the impact of

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Speaker 8: its tariffs. But still this would be another boon for

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Speaker 8: Keir Starmer as he's trying to protect British industry from

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Speaker 8: the impact of US tariffs, especially those twenty five percent

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Speaker 8: levees on steel and car imports.

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Speaker 2: Mm hmm