Live from Brussels. This is Bloomberg Daybreak Europe. I'm Stephen Carroll with your top stories. Tech stocks get trounced. The global selloff deepens after the Nasdaq's worst day since June. Treasuries soar as investors flock to safety. Bloomberg lines OpenAI slashed its valuation targets by $150 billion in its latest funding round, in another sign of concern over AI spending cuts. Volvo Cars and Saab report this hour. We'll hear from the CEO of Volvo in just a few minutes.
Well, let's start with checking in on where markets are trading. More pressure on tech stocks in Asia as well. The MSCI Asia-Pacific index is on track now for its lowest close since June, down 4/10 of 1%. European stock futures a little lower as well. Interesting to see though, Nasdaq futures pretty flat. They were slightly higher a little bit earlier on this morning as well, perhaps indicating we might be near a pause in the selloff that's dominated markets this week.
In terms of the other assets we're following for you this morning, further upward pressure on oil prices today as well. We're now still approaching $114 on Brent crude on the latest headlines out of the Middle East. The euro holding above 1.12. But we're still keeping that French and German bond spread in mind. 174 basis points is where it closed yesterday, the highest since 2011. And treasuries benefiting from that haven trade yesterday, having their best day in more than two years. A little bit higher on yields today, but still holding on to much of yesterday's gains, ten years below 5%.
The key risk events we're watching for you today. We do have UK retail sales coming up at 7 a.m. in the UK, and from 8:15 a.m. in the UK, 9:15 here in Brussels, we will start to get global flash PMIs as well, giving us a sense of where private sector activity has been developing. And after the close tonight, Moody's updates its rating on French debt. That's all to come. That's got you set out for the day ahead.
Let's get into the moves on Asian markets in a trading session that's been pretty negative. Averil Hong has the latest for us from Singapore. Morning, Averil.
Yeah, Stephen, morning. Really interesting session today. You are seeing Asia trade, yes, coming under pressure amid the lingering concerns about the durability of this AI boom. But it is managing, the region's benchmark, to pare earlier declines. Even the Kospi, which earlier sank four plus percent, is not looking that bad now, and certainly not as violent a reaction as we saw in Thursday's session. And maybe the idea that the selling had been a bit overdone. There is another reason, though. I'll get to that in a bit, but just highlighting what we're seeing on the Hang Seng: after three days of heavy, heavy selling, a bit of a turnaround there as well. Even the CSI 300, which was in a bear market, is looking quite flat for the moment. Maybe some help from the national team stepping in.
And we also have this concern still lingering, though, among investors of Chinese stocks, that they really need to see a turnaround when it comes to consumption and investment, or at least a sort of AI development catalyst, which would certainly help the model developers that have been very badly beaten up of late. Now, flip the board. Part of the reason as to why the Kospi is paring those declines is to do with the stock move in SK Hynix. We did see how, in a regulatory filing, it is going to be shelving the US listing of one of its units, Altium. There's, of course, a flash memory maker that's going into storage for data centers. And this was because in part to capital market conditions. But as some of our colleagues have been highlighting, it also faced this listing regulatory pushback.
So overall, there seems to be an easing of investor concerns of dilution. So you're seeing the stock paring the earlier declines and surging about two plus percent versus what you're seeing in the other chipmakers in the region. Of course, don't forget we do have SK Hynix and Samsung earnings next week. Now flip the board. Because when it comes to the AI rout, what has sort of benefited from that is the haven demand. And certainly when it comes to GBS, we are seeing them tracking the rally in treasuries overnight across the curve. This move particularly also highlighting what we're seeing on the ten-year yield, where earlier it moved lower by about 11 basis points. It's interesting also when it comes to the yen, it seems to have revived its haven characteristics, but it is reversing towards the 157 level now versus the closer to 156 that we saw earlier today, where it was actually the strongest we've seen it since the greenback. So again, the mood might be shifting as the Asia session progresses, Stephen.
Okay, everyone, thanks so much for bringing us up to date. That's Averil Hong there in Singapore. Well, let's talk further about that global rise in technology spreads. It's also been having an effect on credit spreads, pushing them higher, particularly for those AI-exposed firms. Our market supporter Anthony Stevens has been tracking this part of the story for us. Anthony, how big are the moves that we've seen in credit spreads, and what does that tell us about the wider sentiment around some of these AI investments after the week that we've had?
You know, we've seen these credit spread concerns kind of extend through the complex, right? We started with the riskiest corners of credit, and everyone could kind of, you know, wrap their head around it, right? Not the new clouds. They have an implicitly debt-heavy business model, so it made sense for their models to weaken, you know, when optimism did come out of the highs of AI sentiment, right? But now we're seeing this kind of malaise extend out into the ecosystem. We had Meta CDS blow out as well as they continue to plan to spend on AI. And we've also seen finally credit spreads move in Asia when the Chinese have started to ramp up AI spending as well. So clearly the credit market has now reached their point of maximum indigestion. They don't look like they want to take any more AI-specific risk.
And of course, you know, we had several reports in the last month of how AI is becoming a much bigger part of credit indices as a whole, right? So you had AI catch up to banks as part of the CDS indices and bonds very, very quickly. And maybe this concentration risk is now too much to handle for the bond market, especially given the very strong pipeline of debt. Now, lastly, we continue to see these special structures in terms of leveraged loans, computing loans, and other kind of creative financing that is also pressuring the market. There is just so much credit to absorb in the AI space. And I think markets are basically taking a pause here to reassess which parts of this capital expenditure they want to finance.
Which is such an interesting development at this point when we're looking at what we're getting out of those earnings as well. Meanwhile, Anthony, we're told that OpenAI is now targeting a valuation of $1.25 trillion in its latest fundraising range, proving that even the biggest names aren't immune from some of these jitters.
Yeah, it's interesting that it's, you know, the second kind of valuation trim following Anthropic's reported valuation trim. What's interesting to me also, as part of this $30 billion raised, is the leadership. The leadership of the raise is a hedge fund-cum, you know, deep tech fund. But it's interesting that that leadership is, you know, fast money, smart money, alongside US funds. So, you know, that kind of specificity of the investor base is now required, probably, given the lack of optimism around the AI trade, right? We need people who really understand the business to be putting in money at this late stage. So that's a really interesting dynamic.
We continue to see the private market, on balance, though, being a little bit more healthy towards AI than the public market. Remember that DeepSeek, for example, raised $15 billion from investors locally, even though the Chinese tech industry has been really struggling in the listed stock market. The Nasdaq and China stocks are really struggling. So there is this bifurcation of the AI capital structure between a very rampant venture capital market that continues to fund these deals as they head into IPOs and the weak public market. Of course, the kind of two worlds will have to collide at some point when these stocks get listed, and it's the date of that listing that will be the big catalyst and a big proving point for these big AI labs.
Okay. Bloomberg's Anthony Stevens, thank you very much for bringing us up to date. We'll stay with the markets action and talk a little bit more about the haven trade that's benefited treasuries. They had their best session in more than two years yesterday, as investors look for protection from the AI headlines that have roiled markets. Our MLive strategist, Van Rossum, is with us. For more on this, what's the trajectory for treasuries from here? Van, we did get the ten-year back below 5% yesterday. Yield ticking up by a basis point this morning. But is the rally going to continue?
Morning, Stephen. I think the longevity of the rally will come down to predominantly one thing: is this surge in crude oil prices. And now Brent crude is approaching almost $115 a barrel. Is this surge and continued surge in crude oil prices weighing on activity, economic activity, to a degree large enough to slow the global economy? If so, that would prompt fears of a stagflationary impact, and that will actually spur a bid for bonds, because investors who have so far been overstating concern about inflation will then pivot to being concerned about, you know, slowing growth, the effect that these spiraling energy prices are having on growth. So I think today's crucial, today's PMI trends, and I'm going to call you, my friends, from here are going to be crucial, much more crucial than we have seen in the recent past.
Why is that? Because, you know, so far it's been about the price hike in crude prices. But now we are entering, we're soon going into the ninth month since prices started spiraling. So it's about the longevity of the spiraling as well.
Meanwhile, here in Europe, we're watching, of course, the stress on French bonds deepening. That spread widened to a 15-year high in trading yesterday. Is another Euro debt crisis looking more likely? Are we near the point where the ECB is going to have to do something?
Well, I don't think that the ECB will have to jump in just yet. So if you look at French yields and risk spreads, as you mentioned, they blew out yesterday. And in fact they've blown out this week. I mean, the moves this week are the highest in years in terms of the spread widening. But what you see in the peripherals and the semi-core, if you look at Italy, spreads widened as well. If you look at the other peripherals, Portugal, Spain, elsewhere, spreads widened, but not so much to the extent where we have seen in France. But the fact that other spreads are widening shows us that there is some collateral damage, albeit not to the same degree as France. So this is just starting to bubble up through the surface, really.
Okay. And we'll continue to watch how it plays out through today's session as well. Bloomberg MLive strategist Van Rossum, thank you very much. Well, coming up, revenue at Volvo Cars comes in well below estimates as the company announces it's cutting 2,500 jobs. We'll speak to the CEO next. This is Bloomberg.
Welcome back to Bloomberg Daybreak Europe. Now, Volvo Cars has reported much deeper operating losses and lower revenue than expected in the third quarter. The Swedish car brand, controlled by China's Geely, is planning to cut 2,500 jobs. And we're joined now to discuss by the Volvo Car CEO, Håkan Samuelsson. Great to have you with us on the program. Håkan, this morning, what's gone wrong in this quarter of the year?
Basically, it is the market is much tougher than we thought just some six months ago, and especially China. It's very challenging. I mean, the possibility to sell the Western developed cars in China is more or less gone, and the customers there are expecting to get Chinese cars with the Chinese software features, and they're going national. And that's a problem for everybody in China. And then we are of course also hit by that. So I think that's the main reason: China is not contributing to profitability anymore.
Is this, do you think, the lowest point for this? Is there any hope for a recovery in that environment?
Yes, I think so. And I mean, right now, short term, you just need to cut costs. But of course we are not going to make a successful company with cost cutting. So we need to come back, and in China you need to come back with the regionally developed products with Chinese software. And there we of course have a huge advantage that we can work and develop those cars together with Geely. So we need those cars, and the first two are being rolled out already the next year, and then more will come. And with that, I think we have a very good opportunity to stay on the market as a global brand, which would be very difficult if you did not have this cooperation with Geely.
Is there also a question, though, of the cost to consumers? You've pointed to the fact that Chinese competitors are much cheaper. Are you going to have to offer a lower cost version of your products?
Yeah, in China, of course, I think we will be very competitive as we will develop the cars together based on Chinese platforms and then Chinese software, but they will of course be designed and developed by us, so they will be really Volvo. I think we will be very competitive. And in Europe, outside China, of course, also China's car industry is putting pressure on all of us. And there of course also we need now to utilize all the energies with Geely, where we can have more common hardware parts in our car, and that's something that we are going to do. It's included in this 5 billion package that we are now announcing, and that will help us on the cost side as well. But in Europe we need, of course, electric cars. We have a very strong electrification going on. We have strong product offering, with new cars also coming out. So we will very soon have a really complete offer on the market.
You're facing squeezing though on two sides, because of course the market in Europe also has strong competition from China. Are the efforts that are being made at an EU level to try and restrict imports, particularly of hybrid cars, most recently, going to help Volvo Cars?
I think it's really good for everybody. And in Europe, I think the car industry does not necessarily need protection, but we need a level field of competition. And I think that requires that, of course, Chinese newcomers, they will need to come to Europe and to invest in our markets, to invest in production and supply chain exactly as we did when we entered China. So I think that competition will come about the low-priced cars imported into Europe. I think that has to be limited, which will happen with the European Union restriction, which I think is good for the industry.
Are you concerned that a worsening of trade relations, as we know that there have been efforts and a push at the European level to be more robust with China, are you worried that your company could be caught up in any exacerbation of trade tensions?
No, not really. I think first of all, with the Chinese ownership, I think we have a solid position on the Chinese market. And I don't think there will be that much tension. I mean, what the European Union is doing is more or less equal to what the Chinese did 20 years ago. So I think they have no reason to be upset for that. And I know also our own EU, I think, also have a very realistic approach to this. And they fully realize to really be part of the European market, you need to be present here also industrially. And that's of course something that they are planning and doing.
You are announcing these job cuts today. Another 2,500 jobs are to go. Will this be the end of the cost cuts? Will you have to do more?
You never know. I mean, realistically, we don't expect a tailwind to come from the markets. I mean, the improvement we need to see from the company has to come from cost actions. And I think we were quite successful in executing the packages and the cost cutting we have done so far. So I'm optimistic we will be successful doing this as well. Hopefully it's the last one. But now the markets are moving as well. So I think it would be wrong to guarantee anything and say this is the last time.
You're painting quite a bleak picture of the outlook and the challenges that your company is facing. You're due to hand over the reins to Jim Rowan by next year. I wonder, are you hopeful that a recovery will be underway by the time that transition happens?
