Europe Arms As Trump Cheers, Fed Succession, The City Wants More
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Bloomberg Audio Studios. Podcasts. Radio. News. This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Thursday the 26th of June in London. I'm Stephen Carroll. Coming up today, Donald Trump recommits to NATO after European leaders agree to hike spending on defence.

Reports suggest the US President's considering naming Jerome Powell's replacement as Fed Chair early. And I'm Caroline Hepka, live at the City UK Conference, where the industry body is warning that London's future as a financial centre is not guaranteed. Let's start with a roundup of our top stories. A landmark NATO summit has ended with a bold commitment to all 32 allies will raise military spending to 5% of GDP.

On his flight to The Hague, President Trump voiced doubts about his willingness to honour the Alliance's commitment to collective defence. However, he later said that discussions with other leaders had changed his view.

When I saw the passion they had for the country, almost everyone, and you probably have the tapes, it was very public, but almost every one of them said, thank God for the United States. Without the United States, we couldn't, they couldn't really have NATO. It wouldn't work. It wouldn't work. It will in the future because now they're paying much more money, but it wouldn't work. It was great. And I left here differently. I left here saying that these people really love their countries. It's not a ripoff. And we're here to help them protect their country.

Whether all member states eventually reach the spending goal remains an open question. Spain and Slovakia have already expressed doubts about allocating that much money to defence. Spain's reluctance to meet the 5% targets drew direct threats of economic retaliation from President Trump. That drove Spain's IBEX 35 index to its biggest decline since early April, closing down 1.6%.

President Trump, meanwhile, says that America will hold talks with Iran next week. The news came as the US leader also cast doubt on the necessity of a diplomatic agreement regarding Iran's nuclear programme. Meanwhile, Donald Trump again disputed an intelligence assessment from his own government which stated that Iran's nuclear programme had only been delayed by a matter of months. His message was echoed yesterday by his Defence Secretary, Pete Hegseth.

When you actually look at the report, by the way, it was a top secret report. It was preliminary. It was low confidence. All right. So this is a you make assessments based on what you know. They said it could be very devastating, very moderate, severe, and we believe far more likely severe and obliterated.

Pete Hexsatt speaking there as Iran issued a statement claiming its nuclear facilities had in fact been badly damaged, though no further details were provided. The Wall Street Journal is reporting that in recent weeks the US president has toyed with the idea of selecting and announcing Powell's replacement by September or October. Yesterday, Trump publicly mused over who could succeed Powell. Yeah, I know within three or four people who I'm going to pick. I mean, he goes out pretty soon, unfortunately, because I think he's terrible.

We have no inflation. We have a tremendous economy.

The US President has referred to the Fed Chair as too late Powell due to his reluctance to lower rates. The Wall Street Journal says former Fed Governor Kevin Warsh and NEC Director Kevin Hassett are on Trump's shortlist alongside former World Bank President David Malpass and the current Fed Governor Christopher Waller. Jerome Powell was back on Capitol Hill for a second day of congressional testimony yesterday. He said the US central bank is still struggling to determine the impact of tariffs on consumer prices.

Nvidia shares surged to a record high on Wednesday, overtaking Microsoft to become the world's most valuable company. The stock rose by more than 4%, lifting the chip giant's market cap to $3.77 trillion.

NVIDIA has gained 63% since April, fuelled by massive demand for AI hardware and strong earnings. The Director General of the British Chambers of Commerce has warned against raising taxes further on UK companies. Speaking to Bloomberg, Siobhan Haviland said a hike could lead to an economic slowdown in a message to the Chancellor ahead of the BCC's annual conference today. We want the government to look at how they can ease that cost of doing business.

Taxes are really dragging our businesses down. We need them to be released to grow. So where's the long-term roadmap for easing the cost of doing business? Siobhan Haviland speaking there. Her warning comes as Rachel Reeves faces pressure from her own party over planned benefit cuts while also seeking to revive the country's flagging growth. Taxes were raised by £40 billion in Reeves' last budget, including a £26 billion hike to the National Insurance Payroll Tax, which took effect in April.

And as the UK searches for fresh sources of economic growth, the government says it's seeking to increase the recognition of British professional certifications abroad. Bloomberg's Ewan Potts has more. With services making up more than 80% of the country's GDP, the government is turning its attention to boosting the sector's exports. It wants to make it easier for highly skilled employees to work for clients overseas.

Number 10 says it wants to use trade deals to expand acceptance of professional accreditations outside the UK, opening up new markets for law, accounting and other highly regulated sectors. Meanwhile, a new report lays bare the economic challenges facing the government, saying the 2020s are on course to be the worst decade for living standards in the past 60 years.

According to the Resolution Foundation, a typical UK family's real disposable income in the five years to 2030 is set to rise just 1% after adjusting for housing costs. Over the whole decade, the think tank says real disposable incomes are set to see no growth whatsoever. In London, I'm Ewan Potts, Bloomberg Radio.

Those are your top stories. On the markets this morning, the MSCI Pacific Index up by four tenths of 1%. We're watching market reaction, though, to that report that Donald Trump is considering naming the Fed chair early to replace Jerome Powell in 11 months' time when his term ends. The Bloomberg Dollar Spot Index two tenths weaker this morning. The 10-year Treasury yield down two basis points, 4.27% is where

That's trading. European stock futures pointing slightly higher this morning, up a tenth of 1% for Euro stocks. 50 futures. NASDAQ futures two tenths higher as well, of course, in focus after the rally in Nvidia shares yesterday as well.

Well, in a moment, we will bring you more on what came out of the NATO Defence Summit as EU leaders meet in Brussels today. Plus, Caroline is at the City UK's annual conference. We'll speak to her in just a moment. But another story that caught our eye this morning, the new director of the next Bond film has been announced, the French-Canadian Denis Villeneuve, who has been announced by Amazon MGM Studios as the director of the next Bond film as well. Of course, he's the director and co-writer of the Dune films, as well as...

Blade Runner 2049 and Prisoners. He's been nominated for an Oscar for three of his last four films. His appointment, part of a shake-up of the Bond franchise. The longtime producers, Barbara Broccoli and Michael G. Wilson, had sold Creative Control of it to Amazon MGM earlier this year. A deal reported at the time to be worth a billion dollars. A film of fascination

for his part it says he's a die-hard Bond fan and he intends to honour the tradition and open the path for many new missions to come so plenty to watch out for in the next highly awaited Bond

Bond film to come in the franchise. European leaders are meeting in Brussels today after yesterday's NATO summit where many of them agreed to new defence spending targets of 5% of GDP and US President Donald Trump renewed his commitment to the alliance's collective defence principle. Let's speak to our correspondent Oliver Crook who was at the NATO summit. He's in Brussels today. Oliver, let's start with what happened at NATO then.

A win for Donald Trump, but also for European leaders present? I think that in a sort of rare transaction between European leaders and Donald Trump, this was really a good win for everybody, with potentially the exception of Spain. But, you know, Donald Trump came in with this demand in the sort of lead up to his inauguration for NATO to spend 5% of their GDP on defense. Again, this is a concept I think that was initially kind of shrugged off. It was written as impractical, impossible action.

totally unrealistic. And what Donald Trump achieved yesterday is to get all of the NATO members to sign on to spending 5% of their GDP on defense going forward. That is a massive win for the President of the United States. I think that it's fair to say that this would not have happened without the presence of Donald Trump in the Oval Office. There have been a lot of complaints through the years that the Europeans have not been pulling their weight on defense.

And this is something that he can, I think, justly go around and say has been a massive win for the president of the United States. That being said, he did also highlight the fact that Spain was reticent to sign on to that figure. He then threatened more trade action against the Spanish, which is really going to be one of the focuses for EU leaders today because we go from the last crisis, which was Article 5 and NATO, going forward into the trade negotiations with the United States as that deadline looms.

Just linking together that question of, that I'm sure to come up in the EU Leaders Summit today as well, around Spain. Donald Trump critical of Spain for holding out on increasing defence spending, saying tougher trade terms could be imposed on the country. Is it

as a result. What does that mean in the context of the ongoing talks between the EU and the US on trade? Yeah, I think right now it'll be treated a little bit like noise. I mean, as you know, Stephen, you know, the competence of trade is something that has been delegated from individual member states to the European Union. You know, there's a sort of kind of Article 5 on trade for the European Union. An attack on one is an attack on all. So it's, you know, it's not generally how it happens. But I think that

What is going to be concerning for European leaders now is from all the reporting we have done is there has not been a huge amount of progress between the U.S. and the EU as they sort of limp towards that deadline of July the 9th. And remember, Donald Trump ratcheted up the pressure on that now as of July the 9th. If there is no deal, there will be 50 percent tariffs between the United States and the

and the EU. And so there's different sort of ways in which different member states are suggesting approaching this. There are those who are saying, listen, we need to be very sort of hard with the United States, even if they impose a baseline tariff of 10%, which is, remember, what the UK was still stuck with. The EU should retaliate. Other member states say this will only infuriate the president, and this is going to create an even more escalating trade war. And then actually a fast deal, if imperfect,

is better than no deal at all. So I think that is going to be one of the main focuses for the leaders that are assembled here in Brussels, is to sort of look at the way that they are, where they're willing to compromise. Of course, there are also other issues, the fact that basically the United States is apparently demanding, according to some of the people we're speaking to, sort of unilateral terms and really unbalanced practices within this trade deal. Okay. Oliver Crook in Brussels, thank you very much for that.

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A warming planet, complex geopolitics, and fierce competition means business operations are under more scrutiny than ever before. Returning to Singapore this July, the Bloomberg Sustainable Business Summit is uniting leaders and investors to explore how sustainability efforts can bolster resilience and mitigate risk. Learn more at bloomberglive.com slash sbs-singapore. That's bloomberglive.com slash sbs-singapore.

Join us in Atlanta or via live stream on August 12th for Bloomberg's Business Value of AI event and networking reception. This event will gather business and technology executives to share their experiences and provide insight into how to best use data to optimize the customer experience.

You'll also learn how companies have successfully implemented AI agents that have led to improved productivity and profitability. This program is proudly sponsored by IBM. Register at BloombergLive.com slash AI slash Atlanta. Well, let's go to Caroline this morning, who is at the City of UK's annual conference. The group represents UK-based financial services, and it's a moment to hear from the industry about what they want when it comes to UK competitiveness today.

Caroline, good morning. How supportive is the government then of financial services? What's the mood for this conference? Well,

Well, this is the financial industry gathering in the heart of Westminster. So it's really a marriage of finance, business and politics. And we're a year into this Labour government, of course. Remember last year, we were also here, there was a lot of engagement with the government in waiting as it was lots of optimism about a fresh start. Financial services is one of the growth areas that the government has earmarked in the recent industrial strategy. But there are

Others, too, eight in all. Keir Starmer's government said on Wednesday that they're going to try to expand this recognition of professional certifications abroad. So that could help things like accounting and law and other occupations and boost services exports from the UK. But there is still a huge hill to climb. Speaking to Miles Selleck, who's the CEO of the City UK...

He says he just wants action faster on regulation, on planning, on attracting talent to the UK. And it needs to be delivered, he says, in a much more effective way. So this feels to me like we might be getting close to a scorecard from the financial industry on this government. Have a listen to what Myles Selleck told me.

We cannot be complacent on this. We have no God-given right to be a successful, one of the world's two most successful international financial centres. And I do worry about complacency. We cannot afford to be complacent. So that was Miles Selleck, the CEO of the City UK, speaking to me ahead of this event today.

The government, Stephen, does have some huge issues. Sluggish economic growth in the last quarter. The UK did do a trade deal with the US, but it still faces this 10% tariff. And exports to the US have obviously gone down. Additional taxes on business that the British Chambers of Commerce said only today must not be repeated. A very difficult fiscal position with much higher borrowing costs for this government than, let's say, on the continent.

So there are really huge headwinds and the government seems to be casting around to lots of different industries to try to drive economic growth, but it has to do more to deliver.

What about, Caroline, questions of deregulation as well, very much at the forefront of the debate happening in the financial services industry? Yeah, we've tracked lots of reviews and consultations from the PRA, from the FCA, the regulators here in the UK on remuneration for banks and building society bosses, on consumer protections and financial redress, on politically exposed people, perhaps lots of issues, ESG, ratings agencies, so many issues. But

The question is, what does that amount to in total? What is the actual drive on deregulation now? And it also does feel like the government maybe is helping business with one hand, but then taking away with another. I mean, the ending of the non-DOM tax benefit overhangs everything. It's prompted something of a wealth exodus. We've seen also swift delistings from the London Stock Exchange in the past year.

an area, you know, where again, the government has tried regulatory changes, but have they really made a difference? Perhaps they take a long time to take effect. So the question is whether it's also too late to reverse that exodus from the London Stock Exchange or not. So deregulation is happening bit by bit. What does it amount to? What is it delivering? I think that's some questions really for the panel that I'm going to be speaking on later. Yeah.

Yeah, indeed. And that's one of the key conversations that we're watching and we'll bring it to our listeners on Bloomberg Radio later as well. This, Caroline, all ahead of the Chancellor's Mansion House speech in a couple of weeks' time, what should we be expecting? What are we expecting to hear from the industry around that? Look, the Chancellor's under pressure.

not just because of her own MPs, but also because of the bond markets. Her headroom is incredibly narrow and it is under constant scrutiny. The Bank of England Governor Andrew Bailey recently warned about this. So there will be lots

to look at in the Mansion House speech. Look, the City UK want more details on how the financial services sector can deliver economic growth. They want the actual sort of framework. Will there also be maybe changes to visas, maybe an investment visa or changes to ISAs? That's also been floated. The bottom line is...

Will financial services make a difference to productivity and economic growth? How is the government going to do that when their fiscal room to kind of pick winners and losers in the economy is very, very limited? And when you step away from that, why is it so important? It's that Resolution Foundation report that we mentioned just earlier. Household incomes are expected to stagnate this decade. And remember, you have Reform UK riding high in the polls today.

The Labour government's polar rating has sunk rapidly, much more rapidly than past governments have. And Reform UK has been swift to offer things like a flat tax for wealthy people wanting to move into the UK or a flat tax.

for people up to £20,000 in income. So they're there, you know, on the sidelines making their offers as the Labour government has to come up with their own answers. So, yeah, lots of expectation for the Mansion House speech on the 15th of July too.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa, play Bloomberg 1130. I'm Caroline Hepker. And I'm Stephen Carroll. Join us again tomorrow morning for all the news you need to start your day, right here on Bloomberg Daybreak Europe.

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A warming planet, complex geopolitics, and fierce competition means business operations are under more scrutiny than ever before. Returning to Singapore this July, the Bloomberg Sustainable Business Summit is uniting leaders and investors to explore how sustainability efforts can bolster resilience and mitigate risk. Learn more at bloomberglive.com slash sbs-singapore. That's bloomberglive.com slash sbs-singapore.

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