Ukraine’s Audacious Strike, US Flamethrower Attack, China-US Deal Fractures
20:26 Share

This is an iHeart Podcast. When you have bars in the sky, onboard showers, and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations, and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better. How can you free your team from time-consuming office tasks? Amazon Business empowers leaders to not only streamline purchasing, but better support their teams.

Smart business buying tools enable buyers to find and purchase items fast so they can focus on strategy and growth. It's time to free up your teams and focus on your future. Learn more about the technology, insights, and support available at AmazonBusiness.com. Bloomberg Audio Studios. Podcasts. Radio. News.

This is the Bloomberg Daybreak Hour podcast available every morning on Apple, Spotify or wherever you listen. It's Monday the 2nd of June in London. I'm Caroline Hepker. And I'm Stephen Carroll. Coming up today, Ukraine uses drones hidden in trucks in an audacious strike on Russia's strategic airfields as the two countries prepare for talks. A nationalist candidate backed by Donald Trump wins presidential

Poland's presidential election with just over 50% of the vote. Plus, no deal. China accuses the US of breaking their recent trade accord and vows retaliation, sending safe haven assets higher. Let's start with a roundup of our top stories. Ukraine has used drones hidden in trucks to hit strategic airfields across Russia in a series of dramatic strikes.

ahead of peace talks due to take place later today. Kyiv's security service says more than 40 Russian aircraft were damaged, including long-range bombers capable of deploying nuclear weapons. Ukraine claims the operation caused losses totaling at least $2 billion. Here's Ukraine's President Vladimir Zelensky.

34% of the strategic cruise missile carriers stationed at air bases were hit. Our personnel operated across multiple Russian regions in three different time zones, and the people who assisted us were withdrawn from Russian territory before the operation.

They are now safe. It is genuinely satisfying when something I authorized a year and six months ago comes to fruition and deprives Russians of over 40 units of strategic aviation. We will continue this work.

Zelensky's comments came as his country also came under one of the longest barrages from Russian missiles and drones on Sunday. At least 12 people were killed in a strike on a military training centre.

The attacks from both sides come as Moscow and Kiev prepared to send delegations to Turkey for a second round of talks today. The opening round last month ended with a prisoner exchange agreement and discussions on a potential ceasefire. The UK plans to build new submarines, munitions, factories and cyber warfare technology to counteract

to the threat posed by Russia. The multi-billion pound purchases are part of the government's review of the country's military capabilities. Defence Secretary John Healey says threats are increasing. The country's armed forces are only as strong as the industry that stands behind them. The investment is not just about filling warehouses with fresh missiles. It's about making sure that in Britain we have an industrial base that can innovate and that can scale up its production if we're faced with conflict in the future.

Defence Secretary John Healey there, who was speaking ahead of the official launch of the Strategic Defence Review. The UK Army is at its smallest size since the Napoleonic era due to chronic underinvestment.

A nationalist candidate backed by Donald Trump has won Poland's presidential election. Karol Nowrocki defeated the centrist mayor of Warsaw in a blow to the country's pro-EU government. According to Bloomberg News calculations, the conservative historian and former boxer won 50.9% of the vote, while his opponent, Rafał Trzaskowski, took 49.1%.

While Poland's Prime Minister Donald Tusk holds political power, the president can veto legislation, nominate the central bank governor and serves as commander-in-chief of the armed forces. Six people have been injured in an attack on an event for Israeli hostages in Colorado. Police and FBI officials say that the suspect was heard to shout free Palestine and threw an incendiary device into the crowd during the attack in the town of Bukowin.

Boulder local police chief Stephen Redfern says that the neighborhood will stand strong. Boulder is not immune to tragedy, sadly, and I know a lot of people are scared right now. A lot of people are upset and questioning how this happened and why. All I know is Boulder has recovered before from acts of violence and we will again...

Boulders Police Chief Stephen Redfern speaking there. Authorities have confirmed a 45-year-old man has been arrested.

Trade tensions between the US and China are ratcheting up. China has accused the US of violating a recent trade deal between the two countries. The Chinese Ministry of Commerce rejected President Trump's claim that Beijing breached the agreement in a statement issued on Monday. Beijing accuses the US of discriminatory restrictions, including new AI chip export controls and the revocation of Chinese student visas. Speaking on Friday, Donald Trump told reporters he hopes talks will continue soon.

"It was very nice that I helped them because they were in trouble with the stoppage of a massive amount of business. But I'm sure that I'll speak to President Xi and hopefully we'll work that out. But yeah, that's a violation of the agreement." President Donald Trump speaking there following the news Asian shares dropped along with US stock index futures. A gauge of Chinese stocks traded in Hong Kong fell as much as 2.9 percent, the most in nearly two months.

Morgan Stanley is forecasting a 9% drop in the US dollar index in the next 12 months. The bank joins the chorus of voices questioning the outlook for the currency as fears over growth and trade grow. The dollar index has already dropped nearly 10% from its peak in February. The scrutiny

of American assets comes alongside worries over fiscal discipline. Treasury Secretary Scott Besant was asked if the U.S. Treasury could run out of cash as the deadline for increasing the federal debt ceiling gets closer. The United States of America is never going to default. That is never going to happen. We are on the warning track and we will never hit the wall.

Treasury Secretary Scott Besson speaking to CBS's Face the Nation yesterday. Republican congressional leaders have attached an increase in the debt limit to President Trump's tax and spending bill that potentially puts avoiding a default at the mercy of negotiations over the bill.

At least 10% of the UK's wealthy non-dom population is estimated to have left the country. That's according to a new report from former Treasury economist, which estimates that 26,000 non-doms left last year. Bloomberg's James Wilcock has more. The report from economist Charles Walker uses migration and tax data to say the number of ultra-wealthy taxpayers leaving the UK surged last year.

But the main question for the government is if the figures are right, is this potential exodus going to become a fiscal problem? A separate recent report said the Treasury would start to lose money if 25% of this wealthy non-dom population were to leave. Both papers were commissioned by Andrew Barclay, an entrepreneur and policy fellow at the centre-right Onward think tank. In London, James Woolcock, Bloomberg Radio.

And those are our top stories for you this morning. Looking at the markets, Asian shares are down. The MSCI Asia-Pacific Index dropping by eight-tenths of 1%. It had declined the most in about a month earlier this morning on continued trade tensions. U.S. stock futures are also down this morning, both for the Nasdaq and the S&P 500.

You've also got the Bloomberg Dollar Spot Index down a tenth of 1%, macroeconomic headwinds for the dollar. Oil prices are up after OPEC Plus agreed to lift output 2.3%, almost 2.4% higher now for Brent crude futures.

You remember how President Trump, talking about doubling tariffs on steel and aluminium imports over the weekend, got lots of key data this week. ISM manufacturing did the jobs data out on Friday and the ECB rate decision on Thursday. Ten-year Treasury yields this morning up one and a half basis points at 4.42. But it's going to be a busy week, Stephen.

Certainly is. In a moment, we'll bring you more on Ukraine's attack on Russia's long-range bomber fleet, plus why China's accusing the US of violating their recent trade deal. But another story that we've been reading as well today, and listening to, I should say, the latest weekend interview from Michelle Hussain with Euromaidan.

Succession creator Jesse Armstrong about his new film looking at the tech industry. Unsurprisingly, what ripe ground given the characters involved in the tech industry in the real life to try and create a satirical drama in the style of Succession, a film called Mountainhead. Apparently it's sort of funnier, it's darker humour, but yes, it's

It's much faster because it's not going to have the multiple sort of seasons that Succession had. But it's such an interesting interview with Jesse Armstrong and our own Michelle Hussain. She asked some really interesting questions about, you know, how close to real life is this whole movie? Who inspired which character, clearly. But also, it's really interesting to see his comments about the British film industry in this as well, talking about something that he worries about with so many big name creations coming out of the US, the future of

of British drama and the importance of the BBC in that as well. So, I mean, a really interesting conversation. You can hear the podcast and read the interview on our website. We'll put a link in our show notes. Now, Ukrainian and Russian officials are due to hold a second round of talks later today, which could pave the way for a potential ceasefire.

But it comes after a series of major attacks on both sides this weekend. Our EMEA News Director Roslyn Matheson joins us now for more on this. Good morning, Ros. Let's start with the Ukrainian attacks on Russian airfields all over Russia as far away as Siberia. What do we know about what was damaged and how significant those attacks are given this three-year war?

Well, what we've heard from Ukraine is that there was significant damage to a number of airplanes, including long-range bombers that are designed to carry both conventional but also nuclear weapons. And as you say, the real thing here is that they hit so deep inside Russia. It seems like this was an 18-month planned operation.

where they managed to get drones inside Russia on trucks and then launch them using wooden-based systems. And so this was, you know, very audacious, really, by Ukraine. And to show again that drones

that anywhere in Russia really is territory that they can reach. Russia is disputing the damage claim and saying that they managed to deflect at least some of these drones from some airfields and that the damage to airplanes was minor. Obviously, Ukraine says that it managed to do several billion dollars worth of damage. But either way, again, it's more the symbolism of what they've done in hitting so far, right the way, as you say, to eastern Siberia.

And at the same time, Ukraine came under attack. One of the longest barrages that it's seen from Russian missiles and drones, air sirens lasting for more than nine hours. I mean, how do all of these escalations set the tone for the talks that are due to take place in Istanbul today?

Well, it's interesting to see that at least for now the talks are going ahead, given this backdrop, as you say, of mutual attacks across the weekend. But the idea probably is to again demonstrate that even after a number of years of war, and with Ukraine obviously struggling for long-range missiles and access to certain weapons, is that they can still hurt each other and still hit each other.

Ukraine is saying we may not have masses of troops on the ground in Kursk, but we can still come at you inside Russia. And Russia obviously wanting to send the same message with its strikes on the weekend. So they're coming into these talks both sort of showing, you know what, this is what we can do. Does that necessarily lay the groundwork for a conducive

It's a bit hard to say. I mean, the first rounds of talks that we saw led to some prisoner swaps, which is obviously something, but no real conversation around a ceasefire. Ukraine says that it's yet to receive this apparent memorandum from Russia detailing what its demands would be. So it's very hard to see how these conversations can move forward together.

without that list. And Ukraine, again, saying fundamentally what they really need is the leaders to get together. And so that's the leaders of Ukraine and Russia to be sitting in a room together because the only person who can really agree to end this war from the Russia side is Vladimir Putin. So these talks are going ahead. But obviously, you know, we're moving pretty slowly here. Yeah. And I suppose the last thought is about how the US is playing into these discussions right now.

Well, that's right. And we know that the Secretary of State, Marco Rubio, spoke with his Russian counterpart on the weekend. And the message from that seemed to be it's really up to Russia and Ukraine to talk directly and to find solutions here. And the U.S. is obviously still very much in the conversation, but not wanting to be the direct mediator. And the frustration that we've seen growing from U.S. President Donald Trump, who had hoped to get a very quick deal here,

and a quick ceasefire and that's obviously not happened as now said really it's up to you guys to do so and so you know the message from the US is they're obviously on the phone a lot to the Ukrainians or on the phone to the Russians but they're not wanting to be the ones in the middle of the negotiation at least for now.

And meanwhile, of course, everyone around the world is watching the footage because the footage also, the Ukrainian footage, unverified, of the attack on the aeroplanes has got the attention of military surely all over the world because the attacks were

on sitting aircraft on the tarmac, 40 Russian aircraft, at least according to Ukrainian authorities. So I think everyone's going to be looking at that. And those are the images that are being played as we're counting down to those talks as well. Ros, I just wanted to ask you briefly about the UK as well, though the government here set to launch its strategic defence review today. The goal, we're told, is to send a message to Moscow. What do we know about what's going to be announced?

Well, that's right. I mean, look, a lot of countries, the UK is looking around and saying, well, what are the future challenges and threats going to be and how can we prepare for those? You know, we've got conflict, as you say, still in Ukraine, in the Middle East. You've got the US making clear that countries in Europe, including the UK, need to become more self-reliant. And so how do you adapt for that and how do you make your military more flexible, more nimble?

and how do you invest and where do you invest? And so we're expecting announcements, confirmation around that in terms of building new munitions factories, for example. So building the pipeline in the UK for weaponry, possibly also investing in future attack

submarines. I mean, those take decades to build, but you've got to make a decision at some point to invest in them. And also just retention. How do you make the UK military more appealing for people? And then how do you keep your top shelf talent when they join? So a lot there in that to come today.

Ros, all of this happening at a time we're also elsewhere in Europe watching the results out of the Polish presidential election over the weekend as well. The nationalist candidate coming out on top, beating the centrist mayor of Warsaw. This is continuing a sort of political stasis that we've seen in Poland following on from Andrzej Duda with putting the Prime Minister of Poland in a difficult situation from here.

Well, that's right. The result looks really, really tight. I mean, the exit polls were swinging last night between the two of them and now we see a very, very close result. But as you say, the anti-EU candidate in a way in front, it'll be interesting to see if there are any challenges to this result because it is very, very close. But as you say, what it shows again is that Poland is like other countries in Europe, exceptionally polarised and you've got

you know, those who want to stay very much close to Europe and those who are, I guess, seeing the appeal in some of the rhetoric of candidates who've embraced the agenda of those like Donald Trump. OK, Rosalind Matson, our EMEA news director. Thank you.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better. How can you free your team from time-consuming office tasks? Amazon Business empowers leaders to not only streamline purchasing, but better support their teams.

Smart business buying tools enable buyers to find and purchase items fast so they can focus on strategy and growth. It's time to free up your teams and focus on your future. Learn more about the technology, insights, and support available at AmazonBusiness.com.

Tension away from Europe to China, which has accused the US of violating its recent trade deal and has vowed to take measures to defend its own interests. Jenny Marsh leads our team covering economics and government in China and joins us now. Jenny, good morning. What exactly has Beijing said the US is doing, the accusation today? So the Ministry of Commerce in Beijing has come out this morning on a public holiday in China, basically saying, you know, if the US insists

on sort of continuing to go its own way, they're saying, then it's going to have to sort of respond with forceful measures. So they haven't sort of been specific about what those are, but it's sort of hinting here at retaliation. And this comes after last week, there's sort of this steady trickle of news

of extra restrictions that the Trump administration is applying in the tech industry. So sort of throttling access to chip design software that Chinese chip makers use. Also,

curtailing the export of jet engine parts that are crucial to China's ability to develop its own jetliner industry. And that came as well after sort of the global ban we saw right after the Geneva Agreement on the Huawei chips, trying to ban use of them anywhere in the world.

So the Chinese are basically saying you're violating the consensus, not only of the Geneva agreement, but of the last call that was had between Trump and Xi, which was on January 17th before Trump came into office formally. And I think the context there is, you know, over the weekend, Trump has been saying, you know, he needs to have a call with President Xi to sort things out. And they're kind of saying now, well, you know,

Trump isn't even sticking to what was agreed the last time the two leaders spoke. So the inference there kind of is, you know, it's very doubtful that Xi is going to get on the phone with Trump in this kind of climate. Jenny, we had seen this big turnaround in sentiment, as you mentioned, after the Geneva agreement again. How far does this set us back in terms of the relations between the U.S. and China?

I think this is a good reality check because you're completely right. There was so much optimism after that Geneva Agreement, which kind of brought the tariffs down from 145% all the way down to 30% for China. And so that was a great win in terms of the tariff pause, but it didn't really sort of fundamentally change anything about the U.S.-China relationship. It wasn't really a deal that they worked out in Geneva. They just agreed to sort of hit the brakes and pause things.

And all of the things that sort of the fundamentally sort of difficult issues that underpin this relationship, they still remain there. So the U.S. still wants to block China's access to high tech chips because the U.S. wants to be the world's tech superpower. China still wants to, you know, develop Huawei into a company that can rival NVIDIA.

And it's going to use the leverage it has, which is, you know, rare earths, these very sort of niche metals that are crucial to everything from sort of nuclear reactor rods to jet planes. And so it's becoming this interesting battle where the fight isn't really over the tariffs anymore. You know, the tariff fight we've sort of

seen that play out but now the real sort of leverage in the negotiations to come is going to be around the chip curbs and the rare earth export controls and it's interesting to see who actually has the most leverage on that.

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 Hepke. 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.

Let's talk about.

This is an iHeart Podcast.