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This is the Bloomberg Daybreak Europe

podcast. Good morning. It's Thursday,

the 3rd of September. I'm Steven Carroll

in London. Coming up today, a global

battle for natural gas supplies

threatens to leave Europe facing a

massive winter bill. Robo taxis begin

picking up passengers across the

higgledy piggledy streets of London.

Plus, power to the people. How some

homeowners are using batteries and AI to

profit from volatile electricity prices.

Let's start with a roundup of our top

stories. Renewed fighting between the

United States and Iran is raising the

risk of a global battle for gas supplies

as Europe struggles to refill storage

before winter. Bloomberg calculations

show that at current prices, European

countries would need to spend more than

7 billion e to reach even their lowest

gas storage targets. President Trump

said the latest US bombing campaign will

likely be short-lived, but Iran has

continued to retaliate with fresh

missile and drone attacks across the

region today that threatens recovering

flows through Hormuz as Europe competes

with Asia for scarce winter gas. Steven

Stapchinsky is our energy editor in

Asia. Europe will be able to get through

its winter with inventories. The issue

though is that the lower inventories go

and as they get drained that will only

increase the price of natural gas in the

future which means that consumers in

Europe will have to pay more and that

just results in in more inflation.

>> We'll have more from Steven Stapinsky in

a moment. Analysts say that that could

force European gas prices up by a third

to around €100 a megawatt hour. that

could reignite inflation, raising the

prospect of further interest rate hikes

and a painful winter for Europe's

economy.

Rising global bond yields are tightening

the squeeze on Britain's public

finances. The sell-off has pushed the

yield on tenure guilt up nine basis

points to 5.23%.

Bloomberg Economics estimates that's cut

the government's fiscal headroom in

half. At his first prime minister's

questions, Prime Minister Andy Bernham

declined to rule out tax rises or

further borrowing.

>> We are taking the action needed to get

debt down. This will be a government

grounded in fiscal responsibility. It

will stick to the fiscal rules, but at

the same time, we will help reduce cost

of living pressure on our constituents.

And that's the approach that we will

take. And that's the one I would suggest

the party offers it. They should follow

too.

>> Paying for Burnham's cost of living

pledges now falls to the Chancellor John

Healey. Bloomberg understands that

Healey will set out his plans to drive

economic growth in a major speech next

Monday.

European officials have vowed more

support for Ukraine after Germany blamed

Russia for a drone attack at Leipig

airport. European Commission President

Ursula Vanderline says the escalation

marks a new normal for Europeans.

This was an attack using militarygrade

material

carried out by Russian operatives on

European Union soil. We will not

tolerate it. We stand in full solidarity

with Germany.

And if the intention was to make us

think twice about supporting Ukraine, I

can tell you it has only strengthened my

resolve.

Vanderion said the commission is looking

to cut deeper into Russia's war chest

and close the loopholes it exploits. Her

comments were echoed by NATO Secretary

General Mark Ruta and senior European

diplomats and foreign ministers. Some

are pushing for new visa restrictions on

Russians, while others want to revisit

using frozen Russian assets to fund

Ukraine.

The Dutch Central Bank has shifted

around 12 billion dollars of gold from

the US and Canada to London as it

strengthens its crisis preparedness.

London now holds almost a third of Dutch

gold reserves, up from about 18%. The

bank says bullion hells there can be

traded or mobilized more quickly through

the world's most liquid gold market. The

shift follows growing scrutiny across

Europe over where national gold reserves

should be stored.

Broadcom is predicting a surge in AI

chip sales over the next two years. The

bullish outlook is renewing optimism it

can challenge Nvidia's dominance of the

market. CEO Hawk Tan says chip revenue

will double to around $115 billion in

2027 and double again the following

year. Here is Bloomberg Intelligence

senior semiconductor analyst Kungjan

Sabani. More than that was this is the

first time ever where they laid out

clearly their top four XPU customers

Google open AAI meta and anthropic

gigawatts that they're going to deploy

for each 27 and 28 in detail. This is

something the company has not done in

the past again speaks to sort of the

pressure that the company's facing

around visibility of these concentrated

programs and the angst that is amongst

investors about demand continuing in

2028.

Savani sounded a note of caution over

Broadcom's lukewarm fourth quarter

forecast, but he says investors were

more impressed by the chipmakers

longerterm outlook.

And London's notoriously tricky streets

are getting a new kind of cab from this

morning. Uber and British AI startup

Waver are launching the capital's first

commercial robo taxi service.

Bloomberg's TWA Adabio has more.

Starting today, a fleet of autonomous

driving cars will be deployed across the

UK's capital, marking AI startup Waves

first ever commercial public service.

Passengers who order a ride through Uber

may be offered a trip in one of the 15

Wavepowered robo taxis for the same

price as a regular journey to anywhere

in the city except the airport. For now,

trained safety drivers with Transport

for London licenses will sit behind the

wheel and take control if needed as the

company works to build trust in the

technology and secure additional

approvals. But in the future, Wave CEO

Alex Kendall says he expects its

partnership with Uber to provide

thousands of rides per week. In London,

Tabio, Bloomberg Radio.

>> And those are your top stories on the

markets. The MSEI Pacific index is up by

8/10en of 1% today. oil prices slightly

lower on the day with Brent crude down

7/10 to $95 a barrel. So still holding

on to much of the gains to the past few

days. The natural gas prices also

slightly lower but still close to those

levels that were the highest since 2023.

Euro stocks 50 futures this morning a

little lower and we've seen a pause also

in the global bond selloff. 10ear

Treasury yields down a basis point at

4.78%.

Now, in a moment, more on the high price

tag Europeans may have to pay for gas

this winter. Plus, is it time to start

selling electricity back to the grid?

We'll hear about the households turned

energy traders. But another story that

caught our eye this morning. Does

splurging on joy give you a guilt

hangover? That's the question that

Jessica Carl is asking in the latest

Bloomberg Opinion newsletter. inspired

inspired by a series of pieces from her

team and her own trip to the US Open

where the viral food seemed like more of

an attraction than the tennis. The

context though is a survey from Alli

Bank revealing that 75% of Americans

carry some guilt when they splurge on

joyful things, whether it's US Open

tickets or a Nintendo Switch or a fancy

car. At the same time, almost 70% say

that they say that they spend the right

amount on joy, an amount that our

columnist Allison Shrager notes

continues to rise. When you look at

credit card spending data, this is of

course a bigger picture thought when

we're thinking about people preparing

for retirement. Are we and not just

Americans spending too much on our joy

today, the expense of tomorrow? Now,

Allison, who is herself or an economist,

specialize in retirement savings,

concludes that the amount of guilt you

should feel about any purchase is

correlated to your capacity to manage

risk. if your circumstances change. So,

it's not about rewarding yourself or

feeling guilty about it afterwards. It's

about risk management. That's the way to

think about it. Some great pieces to

read. We'll put links to them in our

podcast show notes this morning. Well,

let's turn more to bring you more now on

Europe's winter worries as natural gas

prices have been rising over the renewed

tensions in the straight of Hormuz.

Bloomberg calculations show the

continent needs more than 7 billion

euros worth of gas at current prices to

reach their lowest storage targets.

Steven Stapinsky, who leads our team

covering energy in Asia, joins us now

for more. Stephen, first of all, talk us

through these numbers. How difficult is

it going to be for Europe to meet and to

pay for its energy needs this winter?

>> Well, it's not difficult to get the gas.

It's the the difficulty is paying for

the gas, as you say. Um because right

now prices are already double uh more

than double where we were at the

beginning of the war. and uh Goldman

Sachs, Ryad, Morning Star, all these

analysts are saying to hit that 75% full

target, they would basically have to

require injection pace not seen this uh

late in the season since the 2022 energy

crisis when Russia invad invaded Ukraine

and upended the gas market, pushing

winter prices above €100 per megawatt

hour. To give you some context, we're

about 30 euros uh before the war began.

Um, so that would that would cause that

would that that would be a spike in in

purchases that would risk further

inflation in Europe and and potentially

cause some issues for countries that are

already grappling or have for years been

grappling with high energy costs. Um,

Oxford Economics said that um that could

mean that inflation tops 6% roughly

double current levels due in part I mean

not just gas but in part to to higher

gas prices. Yeah, indeed. And I mean,

efforts that were made after the last

big energy crisis to try and

uh to boost some of those gas storage

efforts as well um have are helping

somewhat, but there's differences

between countries as our reporting

points out. Italy's filled its supply

stoages to about 83%, but Germany's

remain just over half full. Stephen, a

lot of people when we think about gas

and winter are going to be thinking

about 2022 when we saw prices rise

significantly after Russia's full scale

of invasion of Ukraine began. How

different is the situation on global

markets now to back then.

>> So the market is in a a slightly better

place. Prices are high and and this will

be potentially painful for households

and businesses. But, you know, when when

we're seeing risks of a hundred euro per

megawatt hour um gas prices, that's not

what we saw in 2022, which was over €350

per megawatt hour. Um the situation

there were sort of two big things that

happened in in 2022. Not only was it uh

Russia curbing gas supplies to Europe,

but the US uh which which was at the

time the world's biggest LG exporter,

one of their major LG export plants

called Freeport actually had an accident

and couldn't operate, further curtailing

LG supply in the market. Uh now uh North

American LG supply has risen

significantly and that's helped sort of

um uh uh reduce some of the worst impact

of the hormood's closure which you know

uh is a key waterway for about 20% of

global supply. Um so the situation is

better but still at these high price

levels it does cause pain and risk to

inflation for the region. But how is

your place though in a global market to

be able to secure supplies? As you say,

it's not a question of being able to get

it, but how much you're willing to pay.

But this is a global race to try and

stock up. Yeah. I mean, it's a matter of

when are you priced out, right? So,

Europe has because it's a developed

region, households and businesses are

willing to pay more to ensure that they

have electricity and they have heating

during the winter. Um, and utilities are

willing to pay usually as well. Um the

countries that are unable to are those

in the developing world, most often in

Asia. So that's uh Pakistan and

Bangladesh specifically, but also

potentially even Southeast Asia. Um we

just saw earlier this week Pakistan

rejected um uh replacing an LG shipment

from Qatar that was disrupted by the

Hormuz uh closure because the price was

just too high, three times the price of

pre-war levels. Bangladesh is paying uh

quite expensive quite to paying for

quite expensive shipments to ensure that

it has electricity and that it's um it's

its fertilizer factories are operating.

But the question now is it's draining

their their dollar reserves and how long

can they continue this. It is it is a

painful question because right now these

governments are considering what what do

they want more? Do they want the um

electricity flowing or do they want

affordable electricity bills for their

for their consumers, for their

households? Because if if if you're in

Bangladesh or if you're in Pakistan and

you have to pass on those very expensive

LG shipment purchases to just the

general population, that's going to make

their power bill so much more expensive.

That's that's another type of pain. So

the government has to make those

difficult decisions whether to have load

shedding, which is rolling blackouts for

a few hours, um to help ease some of

that issue.

Yeah, I mean look, it's it's a really

interesting uh story to keep an eye on

given those massive challenges countries

are facing globally now. Uh Stephen,

thank you very much for bringing us more

details of the situation in global gas

markets. Steven Chapinsky there leading

our team covering energy in Asia.

Stay with us. More from Bloomberg

Daybreak Europe coming up after this.

Now more homeowners are making money

buying power when prices are low,

storing it, and selling excess energy

back to the grid when demand spikes.

It's an opportunity that used to only be

available to professional traders, but

volatile prices and cheaper batteries

have opened up the market. Our climate

reporter Olivia Rodgar joins us now for

more on this story. Olivia, how does

this work?

>> Well, you need a few bits of uh

equipment, bits of kit in your home. Um,

most importantly, you need a battery,

some form of energy storage so that you

can buy that power at the cheaper rate

um and then sell it back when the grid

really needs it. So, at that more

expensive rate. A lot of the other a lot

of people who do this also have some

form of um their own power generation.

So, a solar panel which is even better

because that's free power. Um, and the

other the other thing that you need is a

um is a smart meter which actually

allows you to access those um more

volatile wholesale linked prices which

historically is something that consumers

have not been able to access. So if you

have all the pieces of kit, what's the

potential? How much money can you make

or what's the risk involved?

>> Yeah. So some of the people we talk to

are making a lot of money. So you know,

hundreds of pounds or hundreds of

dollars a month. Um and you know, don't

forget as well that a lot of these

people are also that that is offset

against say the cost of their electric

car. So they're not buying petrol

separately. You know, they're actually

making money um and not having to buy uh

buy petrol separately. And that because

they're using the really cheap

electricity to power their car. The risk

is that um you know especially if you're

kind of going it alone and some of the

people we talked to they've set up their

own systems to do this using AI using

chat bots um if the if the chatbot ers

as we know that they can um you can end

up buying power at quite a high price um

and paying more than you really need to

um some of the utilities that offer

these types of services do cap that

price though at the moment. So Octopus

Energy their agile tariff which is one

of the tariffs that allows you to do

this um you're only ever going to going

to pay a pound per kilowatt hour. So

that's quite a lot more than the than

the consumer um price cap which is about

a quarter of that at the moment for

electricity. Um and you know you really

don't want to be doing that all the

time. Um but that does offer some

protection at the upper end.

>> I was really interested reading your

piece about the people who are doing

this. What's motivating them to get

involved because they're not

professional traders.

>> Yeah. I mean making lots of money is a

great motivation.

>> Always a classic. Um, and I think on top

of that, you know, this was really

interesting listening to the uh the

segment about uh gas prices and I think

consumers uh really have a growing sense

over the last few years not just of high

prices but of really volatile prices and

of being exposed to to those prices

through the gas market and a lot of them

are going into electrification because

they you know they think oh it's cheaper

and then they're realizing that actually

also offers them this much greater mod

of control and it means they're not

exposed to to those really like crisis

hit volatile um prices on on the market

as well.

>> What's the the big picture from all of

this? I mean, it's very interesting to

see how people are are making money

using these pieces of equip equipment

and AI as you say, but what does it mean

for energy markets?

>> I mean, the reason utilities want to get

involved in this is that it's offering

them um a greater source of power to,

you know, renewables um introduce that

extra element of unpredictability to the

grid. And what you really want is is

backup. You want people who are going to

say when the market's really tight and

there's not enough power, okay, great.

I've got some stored in my battery. Here

it is. So, um, you know, I think the

idea, the reason they're getting into

this is that it's allowing them to to

kind of ride ride over those peaks in

demand. Um, and, um, and also, you know,

bring more more um, customers to their

particular businesses. I think it's been

really interesting to see the roll out

of these tariffs in new places. And it's

it's really become a kind of sales um,

tactic for for utilities as well.

>> This is Bloomberg Daybreak Europe, your

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Look for us on your podcast feed every

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Bloomberg Daybreak Europe.