It's 5 a.m. in New York City, 10 a.m. here in London. Good morning. I'm Anna Edwards in today for Vonnie Quinn with your Bloomberg Brief. Let's get set up for the day ahead. Tech stocks lead declines after leaders of the biggest AI firms called for slowing the technology's developments. Oil rises after Saudi Arabia closes a major crude pipeline. Oman says the meeting between Iran and Gulf nations has been delayed, and markets braced for this week's Fed decision as mounting inflation risks put pressure on the central bank. Let's get a check on the markets around the world. Here's Alice French in Tokyo for the latest from Asia. Alice, good morning.
Yes, and look, a down day here in Asia, particularly for those tech-heavy indexes, the KOSPI and the Nikkei. As you say, those worries that AI development may be slowed down for safety reasons not really doing well with investors here today. Of course, as well, the news that OpenAI's IPO will not be coming within this calendar year. Now, that weighed especially on SoftBank Group, which we know have committed more than $60 billion to the ChatGPT maker, SoftBank having its worst day since June. There now, of course, is still a lot of focus on the yen here in Tokyo. We do have the big decision coming at the end of this week. Now, pretty much we have a rate hike already priced into the market, but we can see the yen weakening a little bit against the dollar. I think there will be some jittery moves this week as we move towards that central bank decision. Now moving more towards that 155 level, which is a sort of psychological level, and we may see some more kind of warnings from authorities if we see too much weakening later in the week.
Alex, thanks very much. Alex with a look at what's happening throughout the Asia session into Europe then. And this is the picture, the same technology story weighing on sentiment. In Europe, we're down by just two-tenths of a percent in Europe today, and that's the European stocks picture, because we have some offsetting factors: energy names going higher, pharmaceutical companies going higher. The dollar is on the front foot, up by four-tenths of one percent on the dollar index. That means the euro is weaker. We also see weakness coming through in the pound. So that's the European narrative. And over in the bond markets, we see yields rising in various geographies, not by a huge amount, a few basis points also. But is the narrative in France changing a little bit as we head towards a presidential election? We've seen the National Rally and Marine Le Pen suggesting that maybe she could be persuaded to come round to a French budget. We'll watch that story. Let's check out on some of the other assets that we are keeping an eye on. And this is what we have for U.S. futures right now. Here we see the effect of that technology story into the U.S. trading day. So down by 1.7% on Nasdaq, and all of this on the back of OpenAI and Anthropic and even xAI suggesting that they could be on board with some sort of pause. President Trump not on board with the pause in terms of the rollout of some of these frontier models. S&P futures, Russell 2000 futures also on the back foot. On to Treasuries, a big week for Treasuries, of course, as we have the Fed rate decision, we have a rate decision, a central bank decision here in the UK as well from the Bank of England. But meanwhile, a lot of focus on how the bond market is going to prepare for and respond to that Federal Reserve decision come the middle of the week. What is putting pressure upwards on European bonds right now on the yield story? And that is the energy complex. So let's look at that. WTI and Brent, both of those moving higher. European gas prices also moving higher. European gas up like 5% this morning. Let's get more details on the stocks that we're watching. Is Justine Alia a leaked story to CNN. Good morning, Anna.
Now today is all about the ramifications of those AI leaders calling for a slowdown in the development of the most advanced models. You know, we're seeing a lot of the early beneficiaries of that AI spending falling today. You know, for instance, Micron Technology down almost 5% in premarket today. And you know, for instance, another beneficiary, Oracle, also dropping today, even after the company announced further job cuts. And also, you know, the chairman Larry Ellison canceling a plan to sell his shares earlier kind of over the weekend. But some companies are still enjoying those tailwinds from the AI funding. You know, for instance, CoreWeave, formerly known as Grain, gaining a lot today after The Information reported that the company has struck a $13.7 billion compute pact with Anthropic here. So we're going to be watching what all these tech stocks are doing when the U.S. opens later today.
Yeah, there's a lot at stake, isn't there? Just, thank you very much. Just to leave with those stocks in focus and coming up this hour, RBC's Amy Silverman will be joining us, seeing a massive rotation within tech that's sent in the story here in Europe today, but it goes more widely. She joins us later this hour. What options opportunities are there in a potential slowing of frontier models? Plus, 50 days to the U.S. midterm elections. Adam Hodge will be with us of Bully Pulpit International. He joins us with a look at what is at stake. Let's kick off with that warning then from AI leaders to slow the technology's development. Joining us now is Matt Bloxham of Bloomberg Intelligence. So Matt, this sort of started last week. Then we had a lot of very vocal warnings from within the tech community, from within these frontier model companies saying we need to slow down. This would be a good idea. We should do this for humanity. Then over the weekend, we've seen Anthropic's CEO writing a piece that suggests, yes, this is a good idea. We need to slow down. And this is in broad agreement, even Elon Musk on the same page. What stands out to you in the latest news flow on this?
I think that there is agreement across xAI, Anthropic, OpenAI that something needs to be done. I think probably where things start to get a bit more messy is how those things get done, because I think asking for government to step in and regulate is, we're going to be waiting for a long time, and it'll probably be too late in many circumstances. So I think what's coming is some kind of industry guidelines that perhaps all those kind of U.S. tech firms agree to. And I think that becomes helpful for Anthropic and OpenAI's IPOs if and when they come, because I wouldn't be surprised if at least some of this has come from investor feedback that this is a rumbling concern. And how are you going to pitch this in your IPO? So I think both those two companies coming to market with clarity about what the industry is committed to do.
That's interesting. So you can cast this as a positive for their IPOs, not a negative.
Yeah, you can. And I think, you know, obviously it's not surprising we're seeing share prices under pressure today. But you know, the AI world has advanced incredibly in the last 12 months. I would think a lot of company chief technology officers are happy about it, of course, because if you're trying to implement AI technology into your firm, if it keeps changing, you don't quite know which technologies to deploy and how quick or slow to go. So I think a bit of a slowdown actually might help actually accelerate, strangely enough, kind of deployment in enterprises because they've got a more stable technology environment to operate with.
Yes. I mean, President Trump though doesn't seem to be on board with this because he's focused on rivalry with China, isn't he? Although he did talk about, yes, we can put in some guardrails. So is there a landing ground there?
Yeah, I think the landing ground is that the industry needs to come forward with its kind of self-regulated proposal, if you like, and move forward from there.
Okay. And what about the question of China? And yeah, very, I mean, this, any self-imposed regulation on the U.S. tech scene wouldn't do much for China and the potential for further progress, if that's the right word, on these frontier models.
Yeah. And we'll see. China's also come out with their own concerns about these developments. So I think I imagine you can see kind of, but yeah, both sides are kind of worried about what the other side can do in terms of technology advancement. So I think that in the background, they'll both kind of be trying to kind of progress as much as they can. I think obviously you're going to see the familiar constraints around U.S. technology going into China. And I think that's going to be the biggest kind of geopolitical break the U.S. has control over to kind of slow China's pace of.
As we mentioned, the IPOs. And I think we've had news about a slowing down of the suggested timetable for the, can I, yeah, IPO may be linked to this, but maybe to other factors, and also some further news about where it is that Anthropic is going to list when it comes to markets. What's the latest?
Yeah. So yeah, for sure, that OpenAI IPO isn't happening until next year. And so I think these safety issues is one of the big concerns about that. Yeah. Anthropic choosing Nasdaq, we don't know timing of that. Interestingly, the Financial Times reported that they've communicated to some shareholders that they're actually going to make an operating profit on the most recent quarter. I think the same for the previous quarter.
I mean, that's encouraging about the economics of the business model. In some ways, it might almost blur that IPO picture because, you know, the xAI IPO is based on a revenue multiple.
At this point, that's probably the kind of easiest framework to kind of work around. I think you start to kind of see some profit metrics come in and it starts to complicate things a bit more. So I think probably the market's going to continue to focus on revenue multiples. But yeah, you know, it's impressive that they're actually being able to turn a profit. When the IPO documents come, there'll be a huge amount of scrutiny about what's included and what's excluded in terms of costs, whether it's a real operating profit or not.
Okay. Wise words, I'm sure, Matt. Thank you very much. And Matt Bloxham from Bloomberg Intelligence on what to watch on the tech landscape right now, certainly dominating the news. But with those Nasdaq futures down by 1.7%, now oil prices are climbing this morning here at London time after Saudi Arabia shuts a critical pipeline that has helped its crude to bypass the restrictions on the Strait of Hormuz. It comes as a planned meeting between Iran and several Gulf nations has been postponed. Joining us now from Dubai is Bloomberg's Paul Wallace. So, Paul, lots of signs of a lack of progress, I suppose, in getting energy out of the Middle East to the rest of the world. Talk us through the latest on Saudi Arabia and their pipeline. This damage, I think, came on Friday, and there were some intriguing suggestions that perhaps the damage came from Iraqi territory. So what do we know here?
Yes. So the Saudi government says that the drones that caused the damage to this east-west pipeline, a key crude pipeline for the kingdom, came from Iraq. And of course, Iraq has many Iran-backed militias. A lot of them are very powerful. In fact, some of them more or less have members of Iran's, I think, embedded within them. And so, yeah, these attacks, according to the Saudi government, came from the north, from Iraq, and they seem to have caused quite extensive damage because Saudi Arabia has not said that that pipeline is open again. Now, this is a pipeline that takes Saudi Arabian crude from its fields, which mostly sit in the east, to the west, to the ports of Yanbu, which has been crucial. It's basically been Saudi Arabia's way of bypassing the Strait of Hormuz since the Iran war began more than six months ago. So if the Saudis can't get their oil out of Hormuz at the moment, we can only get very little out through Hormuz. And now this pipeline is shut, that really puts its oil industry and its ability to export that oil under a lot of strain. So it's a key worry for the oil market, and traders will be watching very closely to see when that pipeline is repaired and how quickly it's reopened.
And Paul, is there a link then between the activities of the Iranian proxies in the region and the cancellation of this meeting? The delay of this meeting between Iran and some of the Gulf Cooperation countries, is not the reason that there have been delays here? These people just don't want to talk to each other at this time.
We think so, yes. That's our understanding from sources. And Iran has also said in the last few hours that the reason for this meeting today in Oman being cancelled was essentially because Saudi Arabia asked for a postponement. Saudi Arabia is frustrated. It's angry not just because of what's happening with this pipeline being shut because of attacks from Iraq, but also because of Houthi attacks from the south, from Yemen. Those are causing quite extensive damage to some infrastructure in the southwest of the kingdom. And the understanding is that Saudi Arabia essentially said, we can't hold this meeting with Iran at the moment. This would have been the first sort of meeting between Gulf Arab states as a whole and Iran since the war started, so it would have been quite significant. And it might have been Iran sort of unveiling a deal it's been negotiating with them on to restart traffic through the Strait to some level.
Paul, thanks for the update. Bloomberg's Paul Wallace with an update from the Middle East. Now it's a pivotal week for the world's biggest central banks, with the Fed, the Bank of England and the Bank of Japan all on deck. The U.S. will be most closely watched after core inflation came in hotter than expected. That was during Friday's session, of course. Joining us now with more, Bloomberg's Ben Ramm. So Ben, it seems we were pricing in what, 80% chance, north of 80% chance that we get a hike this week from the Fed. Some economists seem a little more skeptical, but broadly the market seems to be pricing a hike. What kind of volatility are you bracing for around this decision?
Well, as I said, the rates strategists are pricing in a 90% chance of a rate hike this week. But if you look at the options market, you get a very completely different picture there. The market, in the past five years, if you parse the iterations, what you see is that the market is priced at 35 rank, meaning that it's well below the median, and the markets are pricing in a 28 basis point move in the two-year option over the next month, which is basically less than what we have just done in just the first two weeks of the month. So it's remarkable composure in this options market, probably because traders are thinking, look, you know, the Fed is priced to hike, and they will kind of hike is the hope, is the message from the markets.
Mhm. What kind of, I mean, we see a lot of political pushback, don't we, from President Trump against the idea that we get higher rates in the States, and the president makes the link to trade policy. Is this because he thinks that a hike will push up the dollar and that weighs on U.S. exporters? Is that the thinking that seems to be uppermost in Washington circles, do we think?
Well, I think that, you know, there's no, I wouldn't pin any particular rationale to Trump's thinking because, you know, we know for a very long time that regardless of tariffs, regardless of his policies, he's always wanted lower rates. But it would be foolhardy to disregard inflation. Last year we were getting core prints of 2.7%, 2.8%. This month, this year we are getting used to 3.2%, 3.3%. That is not good for a Fed central bank that is targeting, at least on paper, a 2% inflation mandate. So, you know, for Trump to be asking for lower rates at this point is completely against economic theory, against orthodox monetary policy.
Ben, thanks very much. Ben Ramm from the Markets Live team. Now to other top stories today that are trending on the Bloomberg Terminal. Sweden's election is the tightest in history. The results are still too close to call. The opposition, headed by Social Democrat Magdalena Andersson, commands 176 seats versus 173 for the ruling bloc led by Prime Minister Ulf Kristersson. Late-arriving overseas ballots will be counted beginning on Wednesday. A top Iranian official was blocked from addressing the International Atomic Energy Agency general conference in Vienna after pressure from the Trump administration. Austria had denied him entry. U.S. Energy Secretary Chris Wright is set to use the forum to deliver a warning to Tehran. The Trump administration is expected to roll back another major climate rule as soon as today. The EPA is set to scrap Biden-era carbon standards for fossil fuel-fired power plants. The rules required some plants to use emissions-cutting technology, including carbon capture and storage. Coming up on the program, then, U.S. Deputy Energy Secretary James Danley sees, quote, profound opportunities in Venezuelan oil. More from our exclusive interview with him next. This is Bloomberg. Anna Edwards live in London now. Continued disruptions of Gulf energy supply flows is adding to the steady rise in global energy prices. Bloomberg's Haslinda Amin spoke to the U.S. Deputy Energy Secretary in an exclusive interview on how Venezuela fits into the story.
The opportunities that are there in Venezuelan oil are profound, right? The entire Western Hemisphere is extremely rich with resources, and I wouldn't say that any of the plans are contingent on one particular source. The objective is to get as much production wherever it's economically feasible and technically viable.
So how quickly do you think you can get Venezuela north?
That's a difficult question. That sounds both in the physical infrastructure that has to be built. The Venezuelans did not do a great job of maintaining all of the infrastructure they had, and so the companies that are going to be operating down there are going to have to make their assessments and conduct the ordinary process of production. My hope is that it's as quickly as possible, though.
Can you hazard a guess? Because some reports I've read suggest perhaps it may take as long as ten years.
That's way too high. I don't think it's going to take that long, but when you say hazard a guess, that's all it would be.
The world is watching the price of oil really closely at 108 bucks a barrel currently. I'm just wondering whether the U.S. and U.S. supply can stop prices from getting to 150, which is detrimental to the global economy.
