Trump Signs Travel Ban, ECB Set To Cut Rates, Germany's Got a Problem
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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 5th of June in London. I'm Caroline Hepker. And I'm Stephen Carroll. Coming up today, Donald Trump signs a travel ban that blocks people from 12 countries from entering the United States. The European Central Bank is on track to cut interest rates for an eighth time.

Let's start with a roundup of our top stories. US President Donald Trump has signed a travel ban targeting 12 countries, including Afghanistan, Myanmar and Chad.

The measure also partially restricts entry from a host of other nations, including Cuba and Venezuela. It reinstates one of the most controversial policies from Donald Trump's first term. In a video posted online, the U.S. president claimed the move was necessary for national security, citing the recent attack on an event in support of Israeli hostages. The recent terror attack in Boulder, Colorado, has underscored the extreme dangers posed to our country

by the entry of foreign nationals who are not properly vetted. We don't want them.

Trump's comments follow earlier remarks blaming the immigration policies of former President Joe Biden for the suspect's presence in the US. However, Mohammed Salman is an Egyptian national who overstayed his visa and would not have been affected by the proposed ban. The president separately signed a proclamation suspending visas for foreign students seeking to participate in exchange programs at Harvard University.

Now, Elon Musk has ratcheted up his offensive against President Trump's signature tax bill. Musk took to social media to urge Americans to contact lawmakers to kill the legislation, citing its $2.4 trillion price tag.

However, Bloomberg understands that the Tesla CEO only came out against the bill after failing to convince Republicans to preserve tax credits for electric vehicles. Democratic Senator Chuck Schumer says that what the former White House adviser says matters on the other side of the aisle. He's not my cup of tea.

to put it mildly. But Republicans are already listening to him. They're already listening to him. You've heard some of the right-wing groups uplift Elon Musk against Donald Trump. Minority Senate leader Chuck Schumer there speaking as the nonpartisan U.S. Congressional Budget Office projected that President Trump's tariffs could generate more federal revenue than would be lost through his tax cut.

plan. The CBO estimates that the tariffs could shrink the budget gap by $2.8 trillion over a decade. However, that calculation assumes tariffs remain at high levels for the entire 10-year period.

Donald Trump says Russia's Vladimir Putin warned that he will retaliate for a recent Ukrainian drone strike. The outcome from a call between the two leaders is the latest sign that US efforts to bring about peace have stalled. Former commanding general of the US Army in Europe, Ben Hodges, was extremely critical of Trump's social media post. This embarrassing truth social post...

confirms for anybody that still was wondering that the Trump administration has zero interest in doing anything to put pressure on Russia to help Ukraine or to get to some kind of sustainable peace. I mean, it was too hard for them. Their approach was doomed to failure from the very beginning. Ben Hodges speaking there. Ukraine's President Vladimir Zelensky said yesterday that peace talks so far have not been productive and stressed that he's willing to speak directly with Putin.

Now to Europe. The European Central Bank is likely to lower interest rates for an eighth time as its economic outlook projections dim. All analysts surveyed by Bloomberg predict a quarter point cut as the central bank responds to the shocks caused by U.S. tariffs. Bloomberg senior euro area economist David Powell explains why there's such consensus.

The impact of the U.S. tariffs on the euro area is going to be disinflationary. So it's going to lower inflation pressures as cheaper goods come in from China and weaker demand weighs on the economy. So as a whole, they're pretty much all in favor of a cut.

Bloomberg's David Powell there, who adds that there's far more uncertainty about where policy goes after today's meeting. ECB President Christine Lagarde has to contend with both tariff uncertainty and the prospect of a colossal boost in European defence spending.

Some of the world's biggest banks are pushing British regulators to move faster with plans to loosen rules on bonuses. UK regulators asked for views on whether to shrink how long senior bankers need to defer their bonuses from eight years to five years. They promised new policies by the end of 2025. Bloomberg has learned the finance sector wants action much faster than that. James Wilcock has more.

The post-financial crisis thinking went, bonuses reward a banker for bets that pay off. But if banks hold on to those bonuses for longer, they can penalize the professionals who took overly risky choices when the downsides emerge. Yet now, the UK wants to encourage more risk in its financial system.

And the world's banks are privately asking regulators to get a move on with changing the rules so they can apply them to this year's pay packets. In London, James Alcock, Bloomberg Radio.

Three quarters of pride organisers in the UK have seen a decline in partnerships this year. That's as the Trump administration's aversion to workplace diversity, equity and inclusion policies seemingly reverberates across the Atlantic. Bloomberg's Tiwa Adebayo has more. Pride funding from corporate partners is down over 50% this year. That's according to new data from the UK Pride Organisers Network.

The cuts have hit smaller parades and celebrations the hardest, even leading to several cancellations.

Pullback from American companies has been the most noticeable in the wake of President Trump's executive orders demanding the end of what he calls illegal DEI. Declining LGBTQ support is a trend already documented in the US, where two in five corporate executives are scaling back pride engagement this year. In London, Tiwa Adebayo, Bloomberg Radio.

Wrexham Football Club is considering selling a stake which would put its valuation at up to £350 million. Bloomberg understands the Welsh team, owned by Hollywood stars Ryan Reynolds and Rob McElhenney, is working with advisers to gauge demand. The move comes four years since the duo purchased the side for £2 million and just months after Wrexham's valuation hit £100 million after the Allen family bought a near 15% stake.

A new valuation of around £350 million would easily make Wrexham the most expensive team in the English Football League Championship.

Those are our top stories for you this morning. Ryan Reynolds, interestingly, I heard recently that the Hollywood actor says he just turns a deaf ear now to accusations maybe that he'll get bored with that football club. Anyway, the valuation, huge for a football club in the UK. Let's get to the markets, though. European stock futures are flat this morning. Germany's Zetrodax, though, yesterday hit a record high. S&P 500, E-mini futures are right now. Also, very little action, of course, the overhang online.

of Friday's jobs report slowing things down. It was seen S&P 500, E-minis, down just a tenth of 1%. Japanese stocks, though, are down this morning. Bonds are rallying. That's despite demand for Japan's 30-year government bond auction, seeing the weakest demand since 2023. The bid-to-cover ratio, 2.92%, versus the average over 12 months of 3.39%. So that's seen maybe as ramping up pressure on the government to adjust issuance.

There have been concerns, though, overall about rising yields globally. So that's of note this morning in the markets. And I'll just end on the dollar, which is actually firmer, a tenth of 1% this morning. Those are the markets. In a moment, more on Donald Trump's latest travel ban, plus why the ECB is expected to cut rates again today, and why Germany is uniquely vulnerable to America's approach to trade policy as the Chancellor goes to Washington to meet Donald Trump. But on the story that caught our eye this morning...

Is that a buzzing we hear in our ears or is it my food delivery arriving? A new project launching between Deliveroo and a company called Mana Drones in West Dublin is going to see a three kilometre area of the city being open to drone deliveries for the first time. So an option being allowed there as well. This is something that we've heard quite a lot of being promised, but the fact that it's actually starting.

is a bit of a milestone. I have a vision of you jumping up and down on your doorstep trying to reach the food parcel. No, look, joking aside, yes, apparently food delivery companies have been adding a lot and investing a lot in drone and robot delivery technology. Basically, it makes the deliveries faster. They go really fast, 80 kilometres an hour or something.

So they really whizz through the air quickly. And it means that you don't have to rely on gig economy workers as much. So maybe does that bring down costs? Although I guess this company that signed this agreement in Dublin, Mana Drones, I don't know how expensive it is to develop that technology. Yeah, indeed. I mean, it's interesting to see some of the reports in Irish media about this as well, talking about local residents complaining about the test runs that were done for those two because of the noise involved. Apparently it sounds like a lawnmower test.

I like the joke that the drone company is called Manor Drones. So it's a kind of reference to Manor from Heaven. You can read the full story at Bloomberg.com. We'll put a link in our show notes as well.

Let's bring you more now, though, on Donald Trump banning people from 12 countries from entering the United States and placing restrictions on several more countries, too. Our senior editor, Bill Ferries, joins us for the details. Bill, the U.S. president reinstating this controversial measure from his first term, but adding more countries to the list, including Afghanistan. What is his rationale for selecting these countries?

Hi. Well, thanks for having me. It is a little bit of a hodgepodge of countries scattered from Venezuela all the way to Laos in Southeast Asia with several African countries in the mix. The president said that he was doing this as partly as a response to that attack in Boulder, Colorado on protesters by an Egyptian man who had overstayed his visa. But then the

None of these none of these new regulations apply to Egypt and it wouldn't have affected this the suspect in that case from from getting into the country. So he said that's the reason. But then it wouldn't have done anything in this situation. So if I you know, if I look at the list here and it's really 19 countries that are either full bans or restrictions, some of them are politically very unstable. Some of them are Muslim majority, which was a target of Trump in his first term.

And some of them, you know, I just don't know. Some of them are not going to be major sources of immigration to begin with or of even visitors or tourists. So it probably affects in some cases a very, very small number of people like Iran, for instance. But President Trump has a sweeping immigration agenda in his first term and now. How significant are these shifts in U.S. immigration policy?

Yeah, I think overall we've already seen the number. The administration is coming down much harder on visa applications, even if you're a student trying to go to Harvard, for instance. And we know that we've seen already some of the travel data, tourist data,

that those numbers are down from a year ago as well. There is really, you know, it's looking like, you know, an America first policy is about, you know, people who are already in the country and not bringing in a lot more at this point. So it looks like they are really trying to make the U.S. a harder place to get into just in general. And in some cases, as we see today, they want to make it impossible to get in.

Another story that you've been watching for us, Bill. Elon Musk continuing his efforts to stop President Trump's tax bill from being passed by the Senate. This is the Congressional Budget Office says the version passed by the House would add $2.4 trillion to the deficit. Is the bill in real trouble?

It's in real trouble. It's hard to know if the bill is going to get more affordable or not. But even when the House, as soon as the House passed that legislation, you had Republican senators saying, you know what, we're going to we're probably going to have to make some changes, whether it was they didn't like some of the cuts to Medicaid or they thought there was more room for spending cuts, for instance, or smaller tax breaks. One of the big things on the House side was that state and local tax deductible.

deduction that's so important to people in New York, New Jersey area. That's something the House, the senators, Republican senators have said may need to be renegotiated. The challenge for Republicans is they can only lose three votes in the Senate. And I think they only have they have about the same margin in the House. So you don't have a lot of bandwidth to make changes without losing too much support on the other side. Bill, thank you so much for being with us. Our senior editor, Bill Fairey's.

The European Central Bank is expected to cut interest rates by a quarter point at its meeting today, bringing its deposit rate to 2%. This as Donald Trump's jolts to global trade dim the prospects for inflation and growth. Our European economics editor Zoe Schneeweiss is with us for more. Good morning, Zoe. Markets are certain that the ECB will cut today. Is the real question then, what are policymakers going to do next?

The cut today is going to happen. There's really no question about that. The next step is now the July rate meeting will actually be a hold and then there should be another cut in September. That may then be the final cut in this cycle, but we'll have to see.

In terms of the changes in US trade policy, how is that affecting the Euro area and the economy so far? So one unexpected element of the trade policy has been that the Euro really has strengthened. Overall, one has expected

that all this America first stuff would push the dollar up, but as we all know, the Euro has instead strengthened. That then has had an effect on inflation. One would have thought that if the Euro weakens, that that would have had an impact on inflation, but now inflation has actually cooled down just as we had kind of hoped. So inflation now is under that 2% that had been anticipated.

The economy is a different story. We're getting data today for factory orders from Germany. Those are likely to be down. Overall, we know that this Trump trade policy is a hit to growth. And that is one of those questions. If the ECB actually does have to do maybe a July cut.

just because the economy is in such trouble. Watching the press conference later on, Zoe, we'll also be looking to see if Christina Gard might face some questions about her own future and her job at the European Central Bank. Yes, she's almost certain to face questions on that. Bloomberg and other media have reported that the WEF have been wooing her, the World Economic Forum has been wooing her quite extensively.

actively to become the chair of that organization. As we know, they organized a big powwow in Davos every January, generally a big high profile job. But then one does have to ask if you're the world's number two most important central banker after Jerome Powell, do you really want to leave to run the conference?

Interesting, because the head of the conference leaving early, leaving the job early, effectively. So that put that role up in the air. Zoe, thank you so much for being with us. Our European economics editor, Zoe Schneeweiss.

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Yeah, it won't be an easy meeting for him as the stakes are very high. Germany is particularly vulnerable to Trump's trade policies because the post-war growth model of Germany relies heavily on exports and the US and China are the key markets here for German firms. But now taking China, it has turned increasingly from a consumer of German goods to a competitor. So the trade deficit with China has roughly, yeah, has increased in

from 9 billion euros in 2000 to 86 billion euros in 2022. So this just goes to show that the US market has become increasingly important for Germany's firms. And by now, it's the country's largest export market. Now, with tariffs, the country's firms are uniquely exposed. Trump has repeatedly called out what he says are unfair trade practices. And that spells trouble for Germany and its new Chancellor Merz, who actually promised to reinvigorate growth.

Companies have already withdrawn their profit forecasts due to the trade uncertainty. And now they see how they can adapt, for example, by moving production to the U.S. Mercedes has already announced, for example, moving another model to Alabama production sites.

Okay, so today could be pretty delicate then. In terms of German companies and the German economy, how prepared are they to deal with a deterioration, any deterioration in relations with the US? Yeah, it actually comes at a very bad timing because the industry, which is the backbone of the economy, is already in decline. So the production levels have been on a downward path since the end of 2017 and they've never really recovered from the pandemic.

and more and more companies are announcing job cuts. One economist we've talked to has said that the German industry is losing around 10,000 posts in a month, and the general economic sentiment is very pessimistic. The economy has shrunk for the past two years since the energy crisis due to Russia's war. So,

There is an increasing pressure on the economic model and the new German government has recognized this challenge and it has already cleared the way for higher defense spendings and a 500 billion euro infrastructure fund. That's roughly 570 billion dollars. But the key question is how this money will be spent and whether it will translate into putting the economy on a long-term sustainable footing.

And of course, Marlon Friedrich Merz is only in the job a very short period of time after the elections in February. What does this shift in policy and these challenges mean for the political situation in Germany? It's true. He's only been elected in February and while his party came first, he's increasingly under pressure because the second party or the second party that came after his party is the far-right extremist party, the AfD.

And now, like after the elections, his party has actually fallen in polls. And one survey even showed the AfD ahead of them. So there's a lot of pressure on him now to act.

And the Trump team is not really helping him and making the situation any easier, just because looking at Vice President Barnes, who met with Alice Weidel, the AFD candidate, just before the election, and on another more recent occasion, the German Domestic Intelligence Agency has labeled the AFD as a right-wing extremist organization, and Marco Rubio, the Secretary of State,

And then as response to that, posted on the X that this is quote unquote tyranny in disguise. So you'll see this will be a very delicate meeting for Chancellor Miles.

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 11.30. I'm Caroline Hipker. 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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