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ANNOUNCER: NEWSMAKERS AND MARKET MOVERS. THIS IS "THE PULSE" WITH FRANCINE LACQUA. FRANCINE: GOOD MORNING EVERYONE AND WELCOME TO "THE PULSE." EXPECTATIONS OF A FED RATE HIKE AT THE U.S. CARRIES OUT MORE MILITARY STRIKES AGAINST IRAN. WE DISCUSSED INFLATION OUTLOOK IN JUST A MOMENT BUT FIRST, ASML HAS LIFTED THE ANNUAL SALES FORECAST FOR THE SECOND TIME THIS YEAR. THAT COMES AS A SURGE IN AI SPENDING DRIVES DEMAND FOR THE DUTCH COMPANY CHIPMAKING MACHINES. ASML REMAINS A KEY PART OF THE SEMICONDUCTOR SUPPLY CHAIN. THANK YOU SO MUCH FOR BEING HERE. THIS IS ANOTHER BLOWOUT FOR THE MOST VALUABLE COMPANY IN EUROPE. WHAT IS WITH THE DRIVING THIS
DEMAND, AI -- WHAT IS REALLY DRIVING THIS DEMAND, AI? THEY BASICALLY BUILD THE MACHINES THAT MAKE THE CHIP. IT DOESN'T MAKE CHIPS ITSELF. IF YOU LOOK ACROSS THE BORDER, SK HYNIX, SAMSUNG, INTEL, ALL OF THEM HAVE ANNOUNCED THEIR BUILDING NEW FABRICATION PLANTS, I.E. THE FACTORIES WHERE THEY MAKE AND MANUFACTURE CHIPS. FOR THOSE, THEY NEED ASML'S MACHINES. MORE FACTORIES BEING BUILT, THE MORE DEMAND YOU WILL SEE FOR ASML'S EQUIPMENT. WHY THIS MORNING IS VERY POSITIVE IS NOT JUST ABOUT SALES.
WE KNOW THAT EVERYONE WANTS ASML'S MACHINES. THEY ARE VERY COMPLICATED TO MAKE. THEY ARE MADE IN MODULAR FASHION, SO A REALLY IMPORTANT PART IS ASML SAYING WE ARE GOING TO BE ABLE TO MAKE MORE MACHINES OVER THE NEXT COUPLE OF YEARS, SO IT'S ABOUT MEETING DEMAND, NOT SIMPLY SEEING RISING DEMAND. FRANCINE: HOW CERTAIN IS IT THAT INTEL IS USING SOME OF THEIR MOST ADVANCED CHIPS? SHONA: THE TOP-OF-THE-LINE, VERY CUTTING EDGE MACHINES THAT ASML IS PRODUCING COST $400 MILLION APIECE, SO THAT IS VERY EXPENSIVE, THAT'S A LOT OF MONEY. AND INTEL ANNOUNCED THIS MORNING THAT THEY ARE ACTUALLY USING ONE OF THESE MACHINES IN
PRODUCTION. THAT'S POSITIVE NEWS BECAUSE AS I SAY, THE CHIPMAKERS ARE ASML'S BIGGEST CUSTOMERS. INTEL ISN'T THE BIGGEST, BUT IT IS SIGNIFICANT, CLEARLY. ANNOUNCING THAT THESE MACHINES ARE NOT USED JUST IN RESEARCH BUT THE AVERAGE DAY-TO-DAY PRODUCTION OF CHIPS, BY CONTRAST, THERE BIGGEST CUSTOMER HASN'T SAID THAT. THEY SAID THESE MACHINES ARE TOO EXPENSIVE FOR US TO USE RIGHT NOW. THERE WILL BE EVEN BETTER NEWS, BUT IT IS PRETTY POSITIVE NEWS THAT INTEL IS SAYING THIS.
FRANCINE: AS THE AI TRADE GATHERS FRESH MOMENTUM THIS MORNING, MY NEXT GUEST SAYS AI IS FOLLOWING A CLASSIC POSITION OF UNWINDING CYCLE. AS ALWAYS, THANK YOU SO MUCH FOR JOINING US. IF WE START WITH VALUATION, DO YOU STILL HAVE MANY QUESTIONED MARKS ABOUT THE VALUATIONS? EVALUATION I'M COMFORTABLE WITH. EARNINGS ARE STILL STRONG, CAPEX IS STILL ONGOING. THE PART WE STARTED GETTING A BIT UNCOMFORTABLE HIS EXPECTATIONS BECAUSE EXPECTATIONS ARE VERY HIGH. THAT'S WHY, FOR US, ONE OF THE MOST IMPORTANT THINGS FOR US TO WATCH IS LOOKING AT POSITIONING, AI TRADE IS A VERY CROWDED TRADE. THAT'S WHY MENTIONED IS A CLASSIC POSITION ON WIND, BECAUSE POSITIONING WAS VERY HEAVY IN JUNE. AND WHAT WE'VE SEEN IN THE LAST FEW WEEKS WAS AN UNWIND OF
THOSE POSITIONING'S. SOME MEDIUM-TERM, STILL POSITIVE ON AI, BUT WE HAVE TO BEAR IN MIND THAT EXPECTATIONS ARE VERY HIGH. FRANCINE: WHAT ARE YOU BUYING OR SELLING RIGHT NOW? MOHIT: WE TOOK A STEP BACK FROM TECH. EARLY JUNE WE TOOK A STEP BACK THINKING POSITIONING WAS STILL HEAVY. I THINK WE ARE GETTING TO THE LEVEL WHERE MEDIUM-TERM, WE ARE STILL POSITIVE. FRANCINE: OVERALL, WHAT IS DRIVING EQUITIES RIGHT NOW? OIL ACTUALLY DIDN'T REALLY BEHAVE LIKE THE MAJORITY OF INVESTORS THOUGHT THEY WOULD. MAYBE INVESTORS KNEW SOMETHING THAT THE OTHERS DIDN'T. YOU HAVE KEVIN WARSH AND YOU ARE STILL TRYING TO FIGURE OUT WHAT HAPPENS NEXT WITH THE FED.
MOHIT: OIL, WHETHER IT IS THE FED OR ECB AND AI, EVERYONE TRIES TO SAY IS HE HAWKISH, IS HE DOVISH? I HAVE A SLIGHTLY DIFFERENT TAKE. I THINK WARSH IS POSITIONING HIMSELF INTO THE CREDIBILITY CAMP. HE WANTS TO SAY THAT HE IS CREDIBLE. INFLATION IS NOT SOMETHING THAT THE FED WANTS TO TOLERATE BUT THE KEYWORD IS SUSTAINED INFLATION. IN ERROR VIEW WHEN WE LOOK AT MEDIUM-TERM INFLATION FORECAST, INFLATION IS STILL LIKELY TO MOVE LOWER. OF COURSE AT DEPAUW LONG -- IT DEPENDS HOW LONG OIL PRICES STAY AT THESE LEVELS. WHEN YOU LOOK AT INFLATION BREAKEVENS WHICH IS THE MEDIUM-TERM INFLATION EXPECTATION, AS LONG AS MEDIUM-TERM INFLATION IS
CONTINUING, I DON'T THINK THE FED NEEDS TO HIKE RATES. FRANCINE: YOU ARE REALLY RIGHT ON THE CREDIBILITY PART. HE ALSO HAD A GREAT REPUTATION. HE'S BEEN FED GOVERNOR BEFORE DURING THE FINANCIAL CRISIS, AND FOR ME WHAT WAS INTERESTING IS WHEN THEY WERE TALKING ABOUT THE FACT THAT HE DIDN'T NEED TO RAISE RATES, AND THAT WAS APPEALING TO PRESIDENT TRUMP, HE WAS LOOKING AT IT FROM AN AI PERSPECTIVE. WHEN DO WE HAVE TO ACTUALLY START LOOKING AT AI IMPACTING AIR ECONOMIES INSTEAD OF THE VALUATION QUESTION? MOHIT: WHEN WE THINK ABOUT AI, PARADOXICALLY, INITIALLY AI IS INFLATIONARY. THE FIRST FEW MONTHS, THE FIRST
FEW QUARTERS -- FRANCINE: BECAUSE OF THE SPENDING. MOHIT: ALSO COMMODITY PRICES. MEDIUM-TERM, IT SHOULD BE DEFLATIONARY. IT NEEDS TO IMPROVE PRODUCTIVITY BUT LOWER INFLATION. BUT MEDIUM-TERM WE ARE TALKING TWO OR THREE YEARS. THE QUESTION FOR CHAIR WARSH OR ANY OTHER CENTRAL BANKER IS DO WE LOOK TO THAT INITIAL IMPULSE AND FOCUS ON THE MEDIUM-TERM, OR DO WE FOCUS ON THE NEAR-TERM? I THINK OIL ADDS A LOT OF COMP LICATION TO THAT PICTURE. THE FED HAS TO RESPOND TO WHATEVER DATE IT IS. I THINK CHAIR WARSH IS GENUINELY ONE OF THE BEST CANDIDATES. HE HAS TO RESPOND TO DATA. AND IF MEDIUM-TERM INFLATION IS ANGERED, THEY DON'T NEED TO HIKE RATES. FRANCINE: DON'T GO ANYWHERE BECAUSE WE'RE GOING TO TALK ABOUT THE MIDDLE
EAST IN A SECOND. THE U.S. IS CARRIED OUT ANOTHER ROUND OF STRIKES AGAINST IRAN AFTER RE-IMPOSING ITS NAVAL BLOCKADE. PRESIDENT TRUMP HAS BACKED DOWN FROM HIS PLAN TO CHARGE A FEE ON CARGO SHIPS TO THE STRAIT OF HORMUZ BUT CONTINUES TO THREATEN MORE MILITARY ACTION. LET'S BRING PAUL WALLACE, MANAGING EDITOR FOR THE MIDDLE EAST AND AFRICA. HOW SIGNIFICANT WAS THE CLIMB DOWN THE IDEA OF A HORMUZ TOLL, AND WHAT DOES THAT REVEAL ABOUT U.S. STRATEGY? IT WAS SIGNIFICANT. I THINK NOT BECAUSE PEOPLE IN THE WORLD OF SHIPPING OR HERE IN THE PERSIAN GULF OR IN DUBAI LITERALLY THOUGHT OF THE U.S. IS GOING TO CHARGE 20% OR MORE ON SHIPS PASSING THROUGH HORMUZ, BECAUSE THIS WAS
SOMETHING THAT WAS ANNOUNCED OUT OF THE BLUE BY TRUMP, IT WOULD HAVE MEANT ROUGHLY $35 MILLION FOR THE BIGGEST OIL TANKERS. THESE ARE FEES THAT WERE WAY ABOVE EVEN WHAT IRAN ITSELF WAS SAYING IT WANTED TO CHARGE. BUT THE FACT THAT TRUMP REVERSED SO QUICKLY WITHIN 24 HOURS, I THINK IT UNDERSCORES JUST HOW FRUSTRATED HE IS WITH IRAN RIGHT NOW AND HAVE THE IS STRUGGLING TO COME UP WITH A STRATEGY TO GET THE WATERWAY OPEN AND TO EVENTUALLY END THIS CONFLICT ONCE AND FOR ALL. SO IT SHOWS ONCE AGAIN HOW THE U.S. PRESIDENT IS SORT OF
VACILLATING BETWEEN DIFFERENT TACTICS AND DIFFERENT MOODS BECAUSE OF THE FACT THAT HE IS STUCK IN A BIND OVER HORMUZ AND BY EXTENSION, THE WAR ITSELF. FRANCINE: WHAT IMPACT ARE THE STRIKES ACTUALLY HAVING, IS THERE ANY SUGGESTION THAT HE COULD HAVE MORE OF AN IMPACT THAN BEFORE? THIS IS HARD TO TELL. IN MARKETS WE'VE OBVIOUSLY SEEN OIL SHOULD BACK UP TO ABOUT $85 PER BARREL, UP 13% THIS WEEK. STILL WAY BELOW THE HIGHS FROM APRIL, BUT STILL UP SIGNIFICANTLY OVER THE PAST WEEK. IN TERMS OF THE DAMAGE IT IS DOING TO IRAN, THAT IS DIFFICULT TO TELL. THE U.S. SAYS IT IS STRIKING A LOT OF THINGS LIKE RADAR SITE AND MISSILE AND DRONE SITES, BUT
IRAN IS NOT BACKING DOWN. IF ANYTHING IT IS ESCALATING ITS COUNTER STRIKES IN THE LIKES OF BAHRAIN AND KUWAIT. KUWAIT SORT OF HEAVY ATTACKS FROM IRAN IN THE EARLY HOURS OF THIS MORNING. AT THE MOMENT, BOTH SIDES ARE BEING VERY STUBBORN. HOWEVER, WE'VE BEEN HERE MANY TIMES BEFORE IN THIS WAR THAT IS NOW MORE THAN FOUR MONTHS OLD, ALMOST FIVE MONTHS OLD, AND IT IS TIMES LIKE THIS WHEN THE U.S. AND IRAN HAD ACTUALLY GOT BACK TO THE NEGOTIATING TABLE AND WORKED OUT SOME KIND OF TEMPORARY EASING OF TENSIONS. IT IS SOMETHING WE COULD POSSIBLY SEE AGAIN IN THE COMING WEEK OR SO.
TRUMP SAYING HE IS GOING TO ESCALATE U.S. STRIKES WITH IRAN UNTIL THEY COME BACK TO THE NEGOTIATING TABLE. FRANCINE: PAUL, THANKS SO MUCH. LET'S GET BACK TO KUMAR. IT'S UNCLEAR ACTUALLY WHAT THE REAL STRATEGY IS HERE. HOW MUCH DOES THAT COMPLICATE THINGS FOR INVESTORS? MOHIT: NO ONE REALLY KNOWS WHAT THE U.S. STRATEGY IS. THERE ARE MIDTERMS COMING. FROM CANNOT AFFORD OIL PRICES SIGNIFICANTLY HIGHER SO HE IS WORRIED ABOUT OIL PRICES. HE WANTS TO GET OUT, THE QUESTION IS WHO CONTROLS THE STRAIT? IRAN WANTS TO HAVE CONTROL OVER
THE STRAIT BUT FOR THE U.S. THAT IS TOTALLY UNACCEPTABLE. I THINK WHAT COULD HAPPEN, WE COULD GET SOME FORM OF DEAL, MAKE SURE OIL PRICES ARE $80 OR BELOW, BUT I DO BELIEVE THAT MIDDLE EAST IS FUNDAMENTALLY UNSTABLE TODAY COMPARED TO BEFORE. SO POST MIDTERMS WENT TRUMP DOESN'T HAVE THESE CONCERNS, IT IS POSSIBLE THAT WE COULD ESCALATE EVEN FURTHER. I FUNDAMENTALLY THINK WE ARE IN AN UNSTABLE SITUATION. FRANCINE: AND IF THE PRICE OF OIL GOES HIGHER FROM HERE, IT FEELS LIKE THE U.K. AND THE ASIAN ECONOMIES SUFFER THE MOST. MOHIT: ABSOLUTELY. IF YOU LOOK AT THE 20 MILLION BARRELS THAT COME OUT OF THE STRAIT, THEY ARE FINE. IT IS ASIA THAT IS THE MOST IMPACTED. AND IT IS NOT JUST ABOUT OIL, IT IS ALSO ABOUT GAS.
EUROPE IS NEXT, AND OF COURSE U.K. GETS IMPACTED AS WELL. SO IT IS ASIA, EUROPE, U.K. WHICH ARE MUCH MORE IMPACTED THAN U.S. FRANCINE: SO WHAT DOES THAT MEAN FOR INVESTMENT STRATEGY, ARE THERE QUESTIONS ABOUT EMERGING MARKETS THAT FRANKLY, SO FAR, HAVE HAD A GREAT YEAR, AND IS THAT A QUESTION FOR NEXT YEAR OR 2026? MOHIT: THERE IS A DIVIDE. COMMODITY PRODUCERS VS. COMMODITY IMPORTERS. IF OIL STAYS AT THESE LEVELS, IT IS THE COMMODITIES IMPORTERS BECKETT IMPACTED WHICH BASICALLY MEANS IF YOU THINK ABOUT ASIA, THE SOUTH ASIA BELT IS THE MOST IMPACTED. BUT IF YOU'RE TALKING ABOUT TAIWAN OR EVEN CHINA, CHINA DOES GET IMPACTED. SO THE FAR EAST ASIA NEEDS TO DO WELL. WHICH MEANS THE CONSUMER SECTORS GET IMPACTED. TECH SECTOR DOES NOT CARE WITH
THE GROWTH IS OVER THE NEXT SIX MONTHS. I THINK IT IS ABOUT WINNERS AND LOSERS. I DON'T THINK GROWTH IS FUNDAMENTALLY BAD. IT IS ABOUT WINNERS AND LOSERS AND IDENTIFYING EVEN WITHIN EMERGING MARKETS. FRANCINE: WE ALSO HAVE A CHANGE OF PRIME MINISTER IN THE NEXT COUPLE OF DAYS AND ON THE CUSP OF THE WORLD CUP. I DON'T WANT TO JINX IT, BUT THE U.K. HAS ITS OWN SET OF PROBLEMS. MASSIVE, AND I THINK BAILEY HAS BEEN FOCUSING ON GROWTH AND WHEN YOU THINK ABOUT OIL PRICE IMPACT, THERE IS THE GROWTH MIX AND INFLATION MIX. BANK OF ENGLAND HAS A DUAL MANDATE. THEY NEED TO LOOK AT GROWTH AND
INFLATION. INFLATION CAN BE HIGH, BUT AS THE GOVERNOR TOLD US, GROWTH IS NOT GREAT. THAT'S THE IDEA, WE THINK THE BANK OF ENGLAND DOES NOTHING. THEY STAY THE COURSE AND SEE HOW DID IT EVOLVES. FRANCINE: THAT'S INTERESTING. WAIT AND SEE MODE. COMING UP, OUR EXCLUSIVE INTERVIEW WITH THE BOSS OF CONSULTING FIRM MCKINSEY OF THE IMPACT AI AND GEOPOLITICS HAS ON BUSINESS. THIS IS BLOOMBERG. CONSULTING FIRM MCKINSEY OF THE IMPACT AI AND GEOPOLITICS HAS
FRANCINE: THE CONVERSATIONS THAT MATTER, THE INFORMATION YOU NEED. CONSULTING GIANT MCKINSEY SAYS THE FIRM IS ON THE BRINK OF A POSSIBLE GOLDEN AGE. IT HAS CUT STAFF FROM ITS SUPPORT TEAMS ON THE BACK OF THE AI WAVE, BUT IT'S BOSS SAYS THEY ARE HIRING MORE CONSULTANTS THAT ARE SET TO GROW HEADCOUNT OVERALL. IN AN EXCLUSIVE INTERVIEW, WE ASKED ABOUT THE IMPACT OF GEOPOLITICAL STORIES. I THINK THERE IS THE POTENTIAL THAT THIS IS A GOLDEN AGE FOR US, A TRULY GOLDEN AGE. THE REASON IS THE WORLD HAS SOME REALLY EXISTENTIAL CHALLENGES AND OPPORTUNITIES FACING IT AND YOU HAVE HAD MANY PEOPLE COME ON AND TALK ABOUT
THIS, BUT YOU THINK ABOUT THIS AI MOMENT, ABOUT COMPLICATED GEOPOLITICS, ABOUT A RESET IN THE ENERGY CLIMATE NEXUS, ABOUT CHANGING DEMOGRAPHICS, THESE ARE ALL WORLD-CLASS PROBLEMS TO SOLVE. WE TRY TO WORK WITH CEO'S ON THEIR MOST COMPLICATED PROBLEMS. AT LEAST WE SEE OVER THE NEXT FIVE YEARS THE COMPLEXITY OF THOSE PROBLEMS GOING UP, NOT DOWN. FRANCINE: DO YOU HAVE TO CHOOSE IF YOU ARE AN ALLY OF THE U.S. OR CHINA? IT'S LIKE TRYING TO PICK WHICH KID YOU LIKE BETTER. HONESTLY, I THINK AI AND GEOPOLITICS ARE THE TWIN BIGGEST ISSUES FACING US TODAY. BY THE WAY, I WOULD SAY CHALLENGES BUT EQUALLY OPPORTUNITIES. IF EVER I MEET A CEO, I SAY, DRAW A LINE DOWN THE CENTER OF
THE PAGE AND LET'S WRITE CHALLENGES AND OPPORTUNITIES FOR EACH OF THESE TOPICS. IT IS EASY TO TALK ABOUT THE CHALLENGES. WILL AI DISRUPT JOBS? WILL IT DOMINATE THE ENERGY STACK? WILL IT TAKE EVERYBODY'S WATER? BUT EQUALLY, COULD IT CREATE AND UNLEASH A WAIVER OF GROWTH THAT SOLVES MANY OF THE OTHER CRISES WE ARE FACING? FRANCINE: HOW DO YOU USE AI WITHIN THE FIRM? LIKE YOU TALK TO EVERY LEADER, THIS IS CHANGING SO FAST. WHAT I WOULD SAY IS WE ARE DOING TWO THINGS. THE FIRST IS WE ARE TRYING TO HELP OUR CLIENTS.
THIS IS ABOUT HALF THE WORK WE ARE DOING TODAY WITH CLIENTS AROUND THE WORLD, AND LARGE ENTERPRISES STRUGGLING WITH HOW TO REINVENT THEMSELVES WITH AI. COSTS ARE GOING UP. WE TALKED ABOUT TOKEN COSTS GOING THROUGH THE ROOF. WE HAVE SEEN MANY COMPANIES BLOW THEIR BUDGETS IN THE FIRST THREE OR FOUR MONTHS OF A YEAR. MASS EXPERIMENTATION DOES NOT NECESSARILY YIELD ENTERPRISE IMPACT. WE ARE FOCUSING ON HOW TO REALLY GET VALUE FROM AI FOR CLIENTS. FRANCINE: HOW DO YOU GET VALUE? IT IS HARD TO INTEGRATE, RIGHT?
IT IS HARD. THERE ARE, I THINK, A COUPLE OF PRINCIPLES EMERGING. THE FIRST IS YOU'VE GOT TO FOCUS. IF YOU JUST LET 1000 FLOWERS BLOOM, YOU WILL HAVE WASTE. OUR WORK INDICATES THAT 4 TO 6 END TO END PROCESSES CAN DRIVE 80% OF THE VALUE FROM AI. I OFTEN ASK, DO YOU KNOW HOW TO DOUBLE YOUR MARKET CAP THROUGH AI? IF YOU CANNOT DO THE MATH -- GOOD, OLD-FASHIONED STRATEGY -- YOU WILL BE AN EFFICIENT. PART ONE. PART TWO IS YOU HAVE TO CHANGE THE ORGANIZATIONAL MODEL. MY OTHER QUESTION IS DO YOU KNOW WHAT YOUR ORG CHART LOOKS LIKE IN THREE MONTHS' TIME? IF YOU CANNOT LINK THE VALUE TO THE ORG CHANGE, YOU WILL NOT GET THE VALUE. THE LAST THING IS HOW TO BRING
EVERYONE ALONG. CHANGE IS HARD AND IF YOU HAVE A LARGE WORKFORCE, YOU NEED TO CREATE THE INCENTIVES FOR PEOPLE TO WANT TO DRIVE ADOPTION. THOSE ARE SOME OF THE PRINCIPLES THAT ARE I THINK EMERGING NOW. FRANCINE: WHAT DOES THAT MEAN FOR MCKINSEY? YOU HAVE ALSO ANNOUNCED SIGNIFICANT JOB CUTS. PEOPLE LOVE TO LATCH ONTO HAVE TO HEADLINES. FRANCINE: NOT US. OF COURSE NOT, BUT WE ARE HIRING IN RECORD NUMBERS. WE HAVE TWO WORKFORCES, AND THE WORKFORCE THAT MOST OF OUR CLIENTS UNDERSTAND AND PEOPLE WHO LIVE AND BREATHE THE CLIENT AND WE ARE GROWING THAT WORKFORCE QUITE AGGRESSIVELY AND ARMING THAT WORKFORCE WITH AGENTS.
ON AVERAGE RIGHT NOW, EVERY CLIENT-DEPLOYED CONSULTANT HAS ABOUT THREE AGENTS. I WAS JUST WITH SOME NEW BUSINESS ANALYST. THE JOKE WAS IF YOUR AGENTS DON'T WORK ALL NIGHT, YOU WILL. I LOVED IT. IT WAS A LITTLE BIT OF YOU'VE GOT TO STEP UP. FRANCINE: HOW MUCH OF THE WORKFORCE ARE YOU REDUCING THAT YOU CAN REPLACE BY AGENTS, AND HOW MANY CONSULTANTS ARE YOU HIRING? I THINK YOU WILL SEE OUR WORKFORCE START TO RISE. LIKE ALL OF OUR CLIENTS, WE HAVE LOOKED FOR EFFICIENCIES IN OUR INDIRECT PROCESSES, AND THERE IS VALUE IN AI AND WE ARE TRYING TO LIBERATE THE FOLKS WHO COME OUT OF THAT TO BE
REDEPLOYED TO DO NEW THINGS, AND ALSO, NATURAL ATTRITION, BUT WE HAVE DONE A LOT OF THAT RESTRUCTURING, AND NOW WE ARE FOCUSED ON HOW WE GROW THE CONSULTING BASE. I THINK IT IS AN EXCITING TIME. ALSO, THERE ARE A LOT OF FOLKS WHO ARE NOT REALLY HIRING AND LOT OF YOUNG FOLKS, AND WE ARE LIKE, HEY, COME, THIS IS A GREAT PLACE TO BE FOR COUPLE YEARS. FRANCINE: AND YOU THINK FACE-TO-FACE CONSULTANTS ARE AI-PROOF? YES, I DO. THIS IS FOR ALL OF US. I LOOK AT WHAT THE MODELS CAN AND CANNOT DO, AND ONE OF THE THINGS THAT STARTS TO REALLY RISE IS I THINK, WHAT IS UNIQUELY HUMAN IN THIS? WHAT WE START TO FOCUS ON IS YOU ARE FREEING UP A BUNCH OF TIME.
YOU WILL USE THAT TIME TO SPEND MORE OF IT WITH THE CLIENT. WHAT ARE YOU DOING WITH THAT TIME? THE MODELS DO NOT SET A GOAL, THEY DO NOT SET AN ASPIRATION. IT IS A UNIQUELY HUMAN THING TO SAY, SHOULD WE GO TO THE MOON OR TO MARS? DO WE BOTH BELIEVE IN THAT? THERE IS A UNIQUELY HUMAN THING OF HOW DO WE ASPIRE? WE ARE FOCUSED ON BUILDING THAT SKILL. THE OTHER IS JUDGMENT. THE MODELS DO NOT KNOW RIGHT AND WRONG. YOU HAVE TO TRAIN THEM. HOW DO YOU WORK WITH A CLIENT AND SAY, YOU SHOULD BE THE CUSTODIAN OF JUDGMENT WITHIN YOUR OWN COMPANY. YOU CAN REFERENCE YOUR OWN
VALUES TO HAVE THE MODELS REINFORCE THE VALUES OF THE COMPANY. THAT IS A HUMAN THING. THE LAST ONE IS WORKING WITH OTHER HUMANS. THE HUMAN TO HUMAN INTERACTION AND SKILLS. WE ARE FOCUSED ON A COUPLE OF THOSE THINGS WITH OUR FOLKS, AND I DO THINK THOSE ARE AI-PROOF. MAYBE AI-ENABLED AS WE THINK ABOUT IT. FRANCINE: STRIPED AND ADVENT HAVE OFFERED TO BUY PAYPAL IN A VALUATION TOPPING $53 BILLION ACCORDING TO REUTERS. YOU CAN SEE PREMARKET PAYPAL GAINING ALMOST 15%. THIS IS A PICTURE FOR U.S.
FUTURES. A LOT GOING ON WHEN IT COMES TO TECH. WE HAVE AN ASML BLOWOUT. STOCKS RALLIED. I GUESS ASML EARNINGS OFFERED FRESH EVIDENCE OF STRONG DEMAND FOR CHIPS. COMING UP, UKRAINE IS EXPANDING ITS NAVAL ATTACKS AGAINST RUSSIA, INCLUDING OIL AND GAS TANKERS. WE DISCUSSED ALL OF THIS WITH CLAUDIA MAJOR FROM THE GERMAN MARSHALL FUND. THAT IS COMING UP NEXT AND THIS IS BLOOMBERG. THE OTHER THING WE ARE WATCHING OUT FOR, OIL PRICES RISING FOR A THIRD STRAIGHT DAY AFTER THE U.S. MILITARY CARRIED OUT ANOTHER WAVE OF STRIKES AGAINST DOZENS OF TARGETS NEAR THE STRAIT OF HORMUZ.
FRANCINE: GOOD MORNING EVERYONE AND WELCOME TO "THE PULSE." THESE ARE YOUR TOP STORIES. THE U.S. CARRIES OUT MORE MILITARY STRIKES AGAINST IRAN, BUT PRESIDENT TRUMP BACKS AWAY FROM HIS PAN TO IMPOSE A CARGO FEE ON THE STRAIT OF HORMUZ. EUROPE'S MOST VALUABLE COMPANY. AND TRADERS CUT BETS ON RATE HIKES AS INFLATION EASES. FED CHAIR KEVIN WARSH SAYS INFLATION IS NOT MISSION ACCOMPLISHED. LET'S GET MORE ON THAT STORY NOW AS KEVIN WARSH HAS DELIVERED HIS FIRST CONGRESSIONAL TESTIMONY AS CHAIRMAN, WARNING AGAINST COMPLACENCY ON INFLATION.
THE REASON I CREATED A TASK FORCE ON DATA IS THAT I DON'T WANT TO OVER-READ OR CHERRY PICKED DATA. MAY BE WOULD LOOK AT THIS MORNING'S DATA AND SAY MISSION ACCOMPLISHED, EVERYTHING IS SWELL. THAT IS NOT MY VIEW. FRANCINE: LET'S BRING IN ONE OF OUR SENIOR EDITORS. ALASTAIR, WHAT DID THE DATA AND CHAIRMAN WARSH'S COMMENTARY TELL US ABOUT THE OUTLOOK? IT TELLS US THAT KEVIN WARSH IS A PRETTY LUCKY GUY. HE COULDN'T HAVE SCRIPTED IT BETTER. HE HAD A SOFTER THAN EXPECTED CPI PRINT ON HIS FIRST DAY IN FRONT OF CONGRESS. IT TURNED INTO A PRETTY COMFORTABLE PERFORMANCE FROM HIM.
IN THE DOWNTURN WHICH WAS STRONGER-THAN-EXPECTED, INCLUDING BLOOMBERG ECONOMICS, THAT INFLATION PEAKED IN MAY. IF THAT'S TRUE, KEVIN WARSH WHILE CONTINUING TO TALK ON INFLATION CAN PROBABLY JUST SIT ON HIS HANDS, KEEP RATES ON HOLD AND AS INFLATION GETS CLOSER TO THE 2% TARGET, THE CONVERSATION WILL START TO TURN TO RATE CUTS NEXT YEAR. BUT HE'S NOT GOING TO LET UP ON THE HAWKISH RHETORIC BECAUSE THERE'S A LOT OF DATA TO COME. AND IF IT DOESN'T GO THE WAY HE NEEDS IT TO GO, THEN A RATE HIKE IS CERTAINLY GOING TO BE BACK IN THE CONVERSATION. FRANCINE: WHAT ARE THE MEANINGS OF THESE TASKFORCES? WE KNOW HE'S PLANNING TO CHANGE FED COMMUNICATION. IS THIS ABOUT CHANGING THE FED OR IS IT JUST ABOUT BUILDING HIS CREDIBILITY?
IT'S BOTH. HE HAS COME AND SAYING HE WANTS REGIME CHANGE AND HE CERTAINLY NEEDS TO BUILD HIS CREDIBILITY AS A NEW FED CHAIR WHO HAS ARRIVED UNDER ENORMOUS SCRUTINY OF WHETHER HE CAN HOLD OUT AGAINST THE PRESIDENT WHO WANTS LOWER INTEREST RATES WHILE INDEED BEING INDEPENDENT, BUT HE'S NOT GETTING MUCH AWAY. HE WAS ASKED ABOUT THE TASKFORCES, HE SAID THEY WILL GET UPDATE ANY HOPES TO HAVE SOME CONCLUSIONS BY THE END OF THE YEAR BUT HE'S NOT GOING TO PREJUDGE, HE'S NOT GOING TO FRONT RUN, AND HE IS PLAYING HIS CARDS PRETTY CLOSE TO HIS CHEST. ONE THING WE CAN SAY, AND HE WAS ASKED ABOUT THIS YESTERDAY, IS THAT HE IS NOT GOING TO PRE-COMMIT TO HOLDING A PRESS CONFERENCE AFTER EVERY FOMC MEETING. FRANCINE:
THANK YOU SO MUCH. THE VERY LATEST ON KEVIN WARSH. GOVERNOR ANDREW BAILEY HAS CALLED ON THE INCOMING GOVERNMENT TO PRIORITIZE ECONOMIC GROWTH AND MAINTAIN FISCAL DISCIPLINE. ALSO SPEAKING AT WHAT IS LIKELY TO BE HER LAST ADDRESS YESTERDAY, THE U.K. CHANCELLOR HAD THIS MORNING ABOUT THE ECONOMIC OUTLOOK. THE RESUMPTION OF HOSTILITIES IN THE MIDDLE EAST IN THE LAST FEW DAYS HAS SHOWN THAT OUR ECONOMIC RESILIENCE WILL CONTINUE TO BE TESTED. AND THE MARKET RESPONDS TO THOSE CHANGES SHOWS THAT THERE IS STILL WORK TO DO TO ENSURE THAT OUR ECONOMY AND OUR COUNTRY ARE PROTECTED AGAINST A VOLATILE GLOBAL ECONOMIC LANDSCAPE.
BLOOMBERG GROWTH IN INCOMES AND LOWER GROWTH IN LIVING STANDARDS. IT MEANS FEWER RESOURCES ARE AVAILABLE FOR HOUSEHOLDS, BUSINESSES AND PUBLIC SERVICES. REVERSING THIS TREND AND CONTINUING TO REVERSE THIS TREND MUST BE A NATIONAL PRIORITY. I STRONGLY AGREE WITH THE CHANCELLOR ON THIS. FRANCINE: LET'S GET MORE ON THIS WITH ROSA PRINCE, CATHERINE, AND PHILIP. I LOVE IT, WE HAVE THE POLITICS AND ECONOMICS. WHAT DID WE LEARN, YOU WERE ALSO THERE LAST NIGHT. IN MANY WAYS WE DIDN'T LEARN THAT MUCH NEW FROM RACHEL REEVES BECAUSE THE TEAM HAS BRIEFED OUT THIS SPEECH LIKE NOBODY'S BUSINESS.
I THINK SHE CHOSE TO SORT OF GIVE QUITE A POLITICAL SPEECH WHICH WAS QUITE UNUSUAL IN THIS ENVIRONMENT. I THINK PEOPLE FELT IT WAS A WEIRD EVENT BECAUSE LIKELY RACHEL REEVES WON'T BE CHANCELLOR FOR THAT MANY MORE DAYS. THERE HAD BEEN A HOPE THAT THE EVENT WOULD BE DELAYED UNTIL THE NEW CHANCELLOR, WILL PROBABLY NOT BE RACHEL REEVES, COULD GIVE A SPEECH AND A REAL SENSE OF WHAT IS TO COME IN THE ANDY BURNHAM GOVERNMENT. THAT IS WHAT PEOPLE REALLY WANT TO KNOW. THEY WANT TO KNOW ON THE ECONOMIC FRONT WHAT HE IS GOING TO DO AND THEY ARE NOT LOOKING FORWARD TO A SUMMER OF UNCERTAINTY. FRANCINE: IT'S PROVING VERY DIFFICULT TO HAVE A LAME-DUCK CHANCELLOR.
WE ARE EXPECTING ANDY BURNHAM TO BE PRIME MINISTER ON MONDAY AND WE ARE HEARING THAT ADVISORS ARE FIGHTING ABOUT WHO TO PICK FOR CHANCELLOR. YEAH, IT IS HARDLY THE EASY RUNNING THAT YOU WOULD WANT FROM THE NEW PRIME MINISTER. KIND OF SHADES OF THE CHAOS WE HAD IN THE PAST. YOU'VE GOT RACHEL REEVES WHO IS THE CHANCELLOR, YOU'VE GOT WES'S TREATING -- WES STRETTING, YOU'VE GOT ED MILIBAND WITH IS THE FRONT RUNNER, AND SUDDENLY YOU'VE GOT THE MAIN NAME IN THE FRAY. THERE'S ONLY A COUPLE OF DAYS LEFT, SO WHEN BURNHAM TAKES OVER, HE IS KIND OF OFF TO A FLYING START.
I'D SAY THIS IS A LITTLE BIT DISTURBING TO HAVE THIS KIND OF CHAOS SO CLOSE FOR SUCH AN IMPORTANT APPOINTMENT. FRANCINE: I KNOW FROM FOREIGNERS, ESPECIALLY AMERICANS, THEY ARE ALWAYS SURPRISED THAT THE PRIME MINISTER GOES TO SEE THE MONARCH AND THEN THAT IS IT, THEY MOVE INTO NUMBER 10 THERE AND THEN. WHAT DO WE KNOW OF THE SERIES OF EVENTS THAT MAY COMPLICATE THINGS IF ENGLAND MAKES IT TO THE FINALS? AS YOU SAY, BRITAIN DOES NOT HAVE A TRANSITIONAL PERIOD BUT ON FRIDAY ANDY BURNHAM WILL FULLY BECOME LEADER OF THE LABOUR PARTY. HE'S THE ONLY CANDIDATE THAT BECAME SOMETHING OF THE CORONATION, ALL THE OTHER RIVALS FELL AWAY. THEN HE WILL HAVE THE WEEKEND TO FINALIZE HIS PLANS.
USUALLY IT WOULD BE EXPECTED THAT KEIR STARMER WOULD RESIGN MONDAY MORNING BUT WITH THE WORLD CUP, ENGLAND POTENTIALLY BEING IN THAT FINAL, IF THAT HAPPENS HE WILL GO TO NEW YORK AND THEN HE WILL HAVE TO HOP ON A PLANE AND FLY BACK AND THEN HE WILL PROBABLY MORE LIKELY BE HANDING IN HIS RESIGNATION AROUND NOON TO KING CHARLES AND THEN ANDY BURNHAM MAKES HIS DRIVE TO BUCKINGHAM PALACE TO COME UP WE CALL IT KISSING HANDS WITH THE KING. THESE DAYS THEY DON'T LITERALLY KISS HIS HAND BUT THEY WILL HAVE A FORMAL HANDSHAKE AND HE WILL BECOME PRIME MINISTER. AND THEN WE PROBABLY BEGIN TO GET THE NAMES OF HIS CABINET AND THAT ALL-IMPORTANT CHANCELLOR PICK. FRANCINE: YOU WERE SAYING THAT THE CITY OF LONDON
, DO WE KNOW ANY OF THESE NAMES, WHERE THEY STAND ON TAXES FOR BANKS? WE DON'T KNOW WHERE THEY STAND ON THOSE THINGS. THE CITY IS OPERATING ON THE BASIS OF ED MILIBAND, THE CURRENT ENERGY SECRETARY IS ON THE LEFT SIDE OF THE CANDIDATES, WES STREETING IS ON THE RIGHT SIDE OF THE CANDIDATES. QUITE A LOT OF THE CITY LIKE THAT ABOUT HIM THAT THEY DON'T LIKE HIS LACK OF ECONOMICS EXPERIENCE. I THINK THEY HAVE REALLY IDEA -- NO IDEA WHERE THEY MIGHT LAND ON THESE ISSUES. THE WORKING SECRETARY HAS BEEN THE MP FOR A GOOD TWO DECADES, HE DOESN'T WANT TO BE PRIME MINISTER.
I THINK THEY WOULD FAVOR PAT MCFADDEN. FRANCINE: IS IT JUST EVERY NAME, A RETEST -- ARE WE JUST GOING TO HAVE A LOT OF NAMES BEFORE THEY SETTLE ON SOMETHING? EVEN SENIOR FIGURES HAVEN'T BEEN IN THE WAY SOME DEEPLY IMMERSED POLITICAL PEOPLE ARE, THEIR VIEW IS THAT BURNHAM HAS STILL PROBABLY NOT CHOSEN. FRANCINE: SO EVERYBODY UNDERSTANDS, IS THIS BECAUSE THE LABOUR PARTY IS STILL SO DIVERSE THAT THEY ARE TRYING TO FIND A CANDIDATE THAT APPEASES ALL FACTIONS? OR IS IT JUST THAT THEY DON'T HAVE A NAME THAT THE MARKETS WOULD BE HAPPY WITH?
THE DIFFICULTY BURNHAM IS HAVING IN DECIDING IF IT IS THE CASE THAT THERE IS A DIFFICULTY HERE TO DECIDE WHO IS GOING TO BE AS CHANCELLOR WOULD REFLECT AS YOU SAID THE DIFFERENT PARTS OF THE PARTY. PAT MCFADDEN, MONTHS AGO HE WAS THE NAME THAT WAS BEING TALKED ABOUT AND HE WAS TALKING TO ALL THE OTHER POTENTIAL LEADERSHIP CONTENDERS. SO HIS NAME HAS BEEN SORT OF ABSENT QUITE A LOT FROM THIS. FRANCINE: WHAT DO YOU THINK ANDY BURNHAM'S BIGGEST CHALLENGE WILL BE? WE DON'T REALLY KNOW WHERE HE STANDS ON UKRAINE. HE IS UNTESTED ON FOREIGN POLICY.
I THINK IT IS THAT KIND OF EVERYTHING ALL AT ONCE ASPECT OF BEING PRIME MINISTER. YOU ARE THERE IN THIS 19TH-CENTURY BUILDING, IT'S NOT GOT A GREAT INFRASTRUCTURE TO SUPPORT, SO I THINK THAT WILL BE A MASSIVE CHANGE FOR HIM. HE'S ONLY BEEN BACK IN PARLIAMENT A WEEK OR SO. HE WAS RUNNING A BIG CITY, BUT THAT'S VERY DIFFERENT FROM EARNING A COUNTRY. I THINK WHAT IS GOING ON HERE IS THAT HE WOULD QUITE LIKE ED MILIBAND WHO IS HIS OLD FRIEND, PROBABLY GOT QUITE SIMILAR POLITICS, BUT AS YOU WERE PICKING UP, NOT VERY POPULAR IN THE CITY, PROBABLY NOT THE FIRST MESSAGE HE WANTS TO SEND. SO I THINK HE'S KIND OF BEEN GOING TO AND FRO WHETHER TO PICK SOMEONE WHO IS A BIT MORE
FRIENDLY TO THE MARKETS LIKE PAT MCFADDEN. I THINK THAT IS THE DILEMMA HAUNTING HIM AT THE MOMENT. ANOTHER NAME TO THE MANY, JOHN HEALY, THERE WAS THIS INTRIGUING BIT OF INFORMATION GOING AROUND LAST NIGHT THAT HE'S BEEN OUT THERE IN THE CITY TALKING, SO WE SHALL SEE. FRANCINE: THE OTHER THING WHICH I FIND MAYBE A LITTLE BIT SURPRISING AS THE BANK OF ENGLAND GOVERNOR MAINTAINING FISCAL DISCIPLINE. THIS WAS REALLY TO ANDY BURNHAM, WASN'T IT? GET YOUR GROWTH STRATEGY LINED UP. THE PRODUCTIVITY CAME AFTER THE 2008 FINANCIAL CRISIS. SOMEBODY BORN THAT YEAR IS NOW AN ADULT AND WE BASICALLY HAD VERY WEAK PRODUCTIVITY GROWTH IN THE PREVIOUS DECADE. THAT HAS BEEN THE ACHILLES' HEEL OF THE U.K.
AND THAT HAS SEEPED INTO POLITICS AND THE ISSUES THAT WE FACED. ANDREW BAILEY IS ABSOLUTELY RIGHT THAT IS THE BIG ISSUE. THERE SEEMS TO BE NO EASY SOLUTION, ANDY BURNHAM'S WAY OF ADDRESSING IT APPEARS TO BE THAT HE WANTS TO GET REGIONAL GROWTH TO BE LIFTED. IT'S A SLOW PROCESS, AND THERE IS CERTAINLY NO MAGIC BULLET TO RESTORE GROWTH. FRANCINE: DO WE KNOW WHO HE WILL SURROUND HIMSELF WITH IN TERMS OF ADVISORS? WE HAVE ANY SENSE OF WHAT KIND OF WORKING PROCESSES WILL BE LIKE? ONE OF THE PIX THAT CAME A COUPLE WEEKS AGO WAS JAMES PURNELL WHO IS GOING TO BE HIS CHIEF OF STAFF.
HE'S ANOTHER THROWBACK TO THE TONY BLAIR ERA. I THOUGHT THAT WAS A GOOD CHOICE, HE'S VERY SMART, HE HAS RUN INSTITUTIONS IN THE PAST. HE'S BEEN HEAD OF THE UNIVERSITY. HE KNOWS HOW TO GET THINGS DONE. WE THINK HE WILL HAVE HIS TWO CLOSE ADVISORS AND THE DEPUTY LABOR LEADER, WE'VE BEEN TALKING ABOUT THAT, SHE MIGHT BE RUNNING THAT AS DEPUTY PRIME MINISTER. FRANCINE: SO INTERESTING BETWEEN FOOTBALL AND ANDY BURNHAM WE ARE GOING TO HAVE A VERY INTERESTING FEW DAYS. THANK YOU ALL FOR JOINING US. I HAVE A FEELING WE ARE GOING TO SEE A LOT MORE OF EACH OTHER IN THE COMING DAYS.
UKRAINE SAYS IT HITS 20 RUSSIAN TANKERS IN THE BLACK SEA OVERNIGHT, NEARLY ALL OF WHICH WERE CARRYING OIL. HE HAD HAS BEEN TARGETING ENERGY INFRASTRUCTURE TO TRY TO WEAKEN PUTIN'S ABILITY TO FIGHT THE INVASION. THIS COMES AS EUROPEAN ALLIES PREPARED TO PLAY A LARGER ROLE WITHIN NATO. THANK YOU SO MUCH FOR JOINING US. IT DOES SEEM LIKE UKRAINE, PRESIDENT ZELENSKYY AND KYIV HAVE REALLY INCREASED THE ATTACKS. DOES THAT MEAN THEY FEEL STRONGER? I THINK WE ARE HAVING DIFFICULTY. THERE MAY BE A MUTE BUTTON OR SOMETHING LIKE THAT. WE WILL GET BACK TO CLAUDIA AND A SECOND TO HEAR.
I THINK I CAN HEAR YOU? CAN I HEAR YOU? WONDERFUL. IT WORKS. IF I CAN HEAR IT, IT IS 50% OF THE JOB DONE. I WAS ASKING WHETHER UKRAINE FEELS STRONGER. IS THIS WHY WE ARE SEEING MORE STEPPING UP OF ATTACKS? UKRAINE HAS BEEN SUCCESSFUL OVER THE LAST WEEKS AND MONTHS IN HITTING RUSSIAN STRATEGIC TARGETS ON CRIMEA AND IN THE RUSSIAN MAINLAND. THE BAD NEWS IS THIS PRESSURE TO GET OF ECONOMIC PRESSURE HAS NOT YET TRANSLATED INTO RUSSIAN WILLINGNESS TO NEGOTIATE OR EVEN TO ACCEPT A CEASE-FIRE SO THE PRESSURE ON RUSSIA'S MOUNTING. UKRAINE IS SUCCESSFUL BUT SO FAR IT HAS NOT YET CHANGED THE RUSSIAN CALCULUS. IT HAS NOT CHANGED THE RUSSIAN
WILLINGNESS TO END THE WAR OR ENTER MEANINGFUL NEGOTIATIONS. FRANCINE: WERE YOU EXPECTING MORE FROM THE NATO SUMMIT? WHAT HAPPENED IN PARIS IN THE LAST TWO DAYS? OR WAS AS GOOD AS IT WAS EVER GOING TO BE? CLAUDIA: WE HAVE SEVERAL ELEMENTS. THE EUROPEANS TRY TO SIGNAL THEIR SUPPORT FOR UKRAINE IS SUSTAINABLE. AT THE NATO SUMMIT, NATO ALLIES AGREED TO STAND FOR THE NEXT TWO YEARS -- SPENT FOR THE NEXT TWO YEARS 70 BILLION EUROS TO SUPPORT UKRAINE SO THERE IS LONG-TERM SUPPORT AND THEN WE HAVE THE MEETING OF THE COALITION OF THE WILLING IN PARIS YESTERDAY WHERE EUROPEANS CONFIRMED THEY WILL SUPPORT UKRAINE AND THE FRENCH PRESIDENT ANNOUNCED THEY WOULD -- THEY WERE DOING EXERCISES OF
THE COALITION OF THE WILLING IN NEIGHBORING COUNTRIES. UKRAINIAN SOLDIERS PARTICIPATED IN THE MILITARY PARADE IN PARIS. YOU HAD FRENCH AND UKRAINIAN PILOTS FLYING SO YOU HAD A STRONG POLITICAL SIGNAL AND TODAY YOU HAVE COMMISSION AND PRESENT WATERLINE GOING TO KYIV, UNDERLINING THAT THE E.U. SUPPORT. SO YOU HAVE EUROPEANS TRYING TO SIGNAL THAT THERE IS A LONG-TERM SUSTAINABLE SUPPORT FOR KYIV EVEN IF THERE ARE INCREASINGLY DOUBTS ABOUT THE U.S. ROLE. FRANCINE: OVERALL, IS THERE WORRY ABOUT U.S. COMMITMENT? U.S. MONEY AND ARMS HAVE BEEN FAR BETWEEN AND SLOW IN THE LAST COUPLE MONTHS. DOES IT MAKE A MASSIVE DIFFERENCE AND DO YOU WORRY ABOUT THIS ALSO BECAUSE THE U.S.
IS CLEARLY FOCUSED ON THE MIDDLE EAST? CLAUDIA: I DIDN'T HEAR THE LAST ELEMENT OF THE QUESTION. I APOLOGIZE. CAN YOU REPEAT THE LAST ELEMENT? FRANCINE: THE U.S. IS SO FOCUSED ON THE MIDDLE EAST. DOES IT MAKE THEM LESS RELIABLE PARTNER FOR UKRAINE? CLAUDIA: IT IS NOT SO MUCH THE FOCUS ON THE MIDDLE EAST. FROM A EUROPEAN PERSPECTIVE, MANY EUROPEAN EYES WONDER WHERE THE U.S. IS REALLY IN HIS POSITION WITH REGARD TO THE WAR IN UKRAINE AND RUSSIA. IF YOU LOOK BACK, THE U.S. PRESIDENT TRIED TO BROKER A CEASE-FIRE SINCE HE ENTERED OFFICE, WHICH EUROPEANS SUPPORTED.
OVER THE LAST YEAR, WE HAVE SEEN ROUNDS OF NEGOTIATIONS IN ISTANBUL AND OTHER PLACES BUT SO FAR THEY HAVE NOT COMMENCED THE RUSSIAN TO STOP THE WAR. AT THE MOMENT WE SEE LOTS OF AIR ATTACKS AND THEY DO NOT ONLY TARGET CIVILIAN INFRASTRUCTURE. THEY ALSO TARGET CULTURAL PLACES SO THE VERY IDENTITY OF UKRAINE. FROM A EUROPEAN POINT OF VIEW, THE QUESTION IS WHERE DOES THE U.S. STAND ON THIS WAR. ARE THEY SUPPORTIVE UKRAINE? ARE THEY MODERATOR BETWEEN RUSSIA AND UKRAINE OR MIGHT THEY BE MORE ON THE RUSSIAN SIDE? SO THE IMPRESSION IS THAT IT IS UP TO THE EUROPEANS TO GIVE THE POLITICAL AND ECONOMIC SUPPORT
UKRAINE, WHICH IS JUSTIFIED BECAUSE IT IS HAPPENING IN EUROPE. THE IRAN WAR IS TAKING AWAY ATTENTION, THAT IS TRUE, BUT I THINK THE QUESTIONS OF THE EUROPEANS IS FOR MORE GENERAL. IT IS HOW DOES THE U.S. GOVERNMENT SEE RUSSIA? IF YOU LOOK AT THE NATIONAL SECURITY DEFENSE STRATEGY, THEY DO NOT SEEM TO SEE RUSSIA AS THE MAIN THREAT SO THE QUESTION FOR THE EUROPEANS IS MORE WHERE DOES THE U.S. STAND ON RUSSIA? WHERE DO THEY STAND ON UKRAINE? THERE ARE MANY QUESTION MARKS. FRANCINE: THANK YOU FOR YOUR TIME TODAY, CLAUDIA MAJOR. COMING UP, EXUBERANCE ACROSS EQUITY TRADING ON WALL STREET.
WE WILL UNPACK BANK EARNINGS NEXT. THIS IS BLOOMBERG. FRANCINE: WALL STREET'S BIGGEST BANKS HAVE SHATTERED EQUITY TRADING RECORDS FOR SECOND QUARTER. SO WHAT WE LEARNED IS THAT THEY ARE FINE. THIS IS A HUGE BAR FOR ANY OTHER QUARTER. YOU HAD JAMIE DIMON GOING, IT IS AS CLOSE -- IT IS CLOSE TO AS GOOD AS IT GETS. J.P. MORGAN CAME UP WITH SOME HUGE EQUITIES NUMBERS BUT THEN GOLDMAN BLEW THEM AWAY WITH I
THINK NORTH OF 7 BILLION, THE FIRST TIME ANYONE HAS EVER DONE THAT, SO REALLY INTERESTING. I THINK IT SPEAKS TO HOW STRONG THE MARKETS BUSINESSES ARE NOW. STILL SORTED WITHIN THE RESULTS WITH CALLS FOR CAUTION AMONG SOME INVESTORS PRINCIPALLY AROUND COSTS. FRANCINE: AND I GUESS TIED TO AI OR DIGITAL TOKENS. WHAT ARE WE EXPECTING FROM MORGAN STANLEY? TOM: A STRONG PERFORMANCE. CAN THEY ACTUALLY -- WILL IT IMPRESS THE MARKET? MY SENSE IS YOU LOOK AT J.P.
MORGAN AND I EXPECT MORGAN STANLEY WILL ALSO PLAY A PART IN THESE ESTIMATES. FRANCINE: IS A DIGITAL TOKENS OR COSTS IN GENERAL RISING? TOM: SHARES ARE DOWN BECAUSE THEY MIGHT HAVE INVESTMENT IN THE NEXT FEW QUARTERS. AND J.P. MORGAN AS WELL MOVING AWAY FROM THIS BLOCKBUSTER SORT OF MARKET, SAYING OUR FULL-YEAR COSTS ARE SLIGHTLY HIGHER THAN WE EXPECT AND THAT CERTAINLY AT THE START OF THE TRADING SESSION SEEMED TO DISMAY SOME. FRANCINE: TOM METCALF THERE, BLOOMBERG'S MANAGING FINANCER FOR EMEA FINANCE. RICHEMONT IS LIFTING THE WIND OR LUXURY SECTOR. FIRST QUARTER SHARES HAVE GROWN
TWICE AS MUCH IS EXPECTED. IS THIS ALL ABOUT U.S. DEMAND? U.S. DEMAND IS A LOT OF IT, BUT ASIA SEEMS TO BE DOING -- ASIA IS GOING IN THE RIGHT DIRECTION. CHINA SEEMS TO BE GOING IN THE RIGHT DIRECTION. SOUTH KOREA HAS BEEN GOOD BECAUSE OF THE AI BOOM BUT IT IS PRINCIPALLY U.S. FRANCINE: WHAT DOES IT MEAN FOR THE LUXURY SECTOR? IS IT BECAUSE REGIONAL HAS GREAT PRODUCTS OR IS THERE A REVIVAL FOR LUXURY IN GENERAL? ANDREA: IT SHOWS LUXURY OFF A CLIFF WITH THE IRAN WAR. THERE WAS A WORRY THAT WOULD HURT DEMAND NOT ONLY IN THE MIDDLE EAST BUT MORE BROADLY WE
TEND TO BUY LUXURY WHEN WE FEEL HAPPY, WEALTHY, CONFIDENT, AND THAT WAS NOT REALLY HAPPENING. SO NOT FALLING OFF A CLIFF BUT I'M NOT SURE ANYONE ELSE WILL BE AS GOOD AS RICHEMONT. IT IS IN THE RIGHT PLACE. IT HAS JEWELRY, WHICH HAS BEEN A GREAT AREA. IN THE JEWELRY NUMBERS, WE KNOW CARTIER WATCHES HAVE BEEN DOING WELL WITH A SHIFT FROM BEING SPORTY WATCHES, SMALLER GOLD WATCHES. THE BANGLE WATCHES ARE BECOMING MORE POPULAR SO IT IS DEFINITELY IN THE RIGHT PLACE. FRANCINE: THE WATCHES ARE DOING GREAT. ESPECIALLY FOR FEMALE.
HOW DOES IT COMPARE WITH HIGH END BEAUTY PRODUCTS OR BAGS? ANDREA: BAGS HAVE BEEN A PROBLEM. LEATHER GOODS HAVE BEEN AN ISSUE FOR LUXURY BRANDS BECAUSE THEY PUT UP PRICES SO MUCH PLUS THERE WAS NOT MUCH IN FASHION. THEY RELIED ON OLDER STYLES SO THERE IS LITTLE REASON WHY. WE HAVE SEEN THE SUCCESS OF CHANEL AND THE WINNING BRAND GETS IT RIGHT WITH THERE'S INNOVATION AND EXCITEMENT. CUSTOMERS WILL BUY. FRANCINE: THANK YOU SO MUCH. BLOOMBERG OPINION FOCUSED ON LUXURY. THIS IS THE PICTURE OVERALL FOR U.S. FUTURES. YESTERDAY WAS A BIG DAY.
TODAY WE HAVE TECH STOCKS RALLYING OR TECH STOCKS IN GENERAL LEADING EQUITY MARKETS HIGHER AFTER SOME FRESH EVIDENCE OF THE RELENTLESS DEMAND FOR TRIPS ENABLING THIS GLOBAL AI BUILDOUT. THE OTHER THING I WOULD SAY IS WE HAD KEVIN WARSH YESTERDAY AND CONSUMER PRICE DATA TUESDAY DELIVERED STRONG DOWNSIDE SURPRISED. THAT PROMPTED TRADERS TO DIAL DOWN EXPECTATIONS FOR NEAR TERM INTEREST RATE HIKES AND GAVE A BOOST TO EQUITIES. NEXT, BLOOMBERG BRIEF. A LITTLE BIT OF FOOTBALL BUT ALSO MARKETS. THIS IS BLOOMBERG.
