Global Chip Rout Deepens, Spain & France Count Cost, Vinted's US Ambitions

0:02 Bloomberg Audio Studios, podcasts, radio news.

0:09 This is the Bloomberg Dyba Cure podcastktboy. It's to say the twenty eighth of July. I'm Caroline Hepka in London and.

0:16 I'm Stephen Carolin Brussels. Coming up today. A global sell off in chipstocks gathers steam as competition and circular funding fears grow.

0:24 As worldfars continue to burn out of control, Spain and France rush to provide financial support to those worst hit.

0:32 Plus seeking a new fit.

0:34 Europe's eight billion euro fashion marketplace, vinted sets its sights on the United States.

0:40 Let's start with the roundup of our top stories.

0:43 A global sell off in AI related chip stocks is accelerating as investors question whether the industry's spending boom can deliver long term returns. South Korea's s k Heinex has now shared around five hundred and seventy billion US dollars in market value since peaking in June, while SAM has fallen more than twelve percent in today's trading. Across Asia, a Bloomberg index of semiconductor shares is on course for its biggest one day drop since March. Boca Capital Partners founder Kim Forrest sums up how many investors feel right now.

1:15 How much are these companies spending and will they ever get it back? Right? Is the business model sufficient to drive revenues and earnings higher? And probably at this point we're thinking more about margins and earnings in the future. Right, we don't really care about what's happening today.

1:35 Kin Forest as investors also for the AI spending boom is becoming increasingly circular. These concerns intensified after and Video unveiled more than seven hundred and fifty billion dollars in new AI deals, including financing for customers buying its own chips. Market fears are also mounting over China's rapid progress and advanced chip making after reports that a state backed company has begun mass producing sophisticated lithography machines.

2:00 In Spain are preparing emergency financial aid for communities devastated by the ongoing wildfires. Spain is set to declare the worst hit areas as emergency zones, unlocking government support for families and businesses. In France, insurers will cover relocation costs for more than two hundred thousand vacuees even if their homes escaped damage. French presidents in Many and MacCall has warned that the wildfire season is far from over, despite signs that the blazes are beginning to stabilize. His words are spoken by a translator.

2:32 It is difficult because we need to see too, faced with the never before seen fire. We have a situation today which is the most difficult we have ever measured government since the Second World War.

2:44 Macall also announced support for thousands of businesses hit by the fires. Temperatures in France and Spain are due to climb back towards a peak of forty one degree celsius this week.

2:54 President Donald Trump says that the United States and Iran are holding talks to end their conflict, but warn that military strikes will resume if negotiations fail. Trump's remarks came after the US held off attacking Iran for a third straight day on Monday. Tehran, in turn suspended retaliatory strikes on golf countries, including Kuwait. Speaking to reporters aboard Air Force One, Trump claimed the talks were only happening because the US had been hitting them very hard. They want to meet, and we're meeting.

3:22 We'll see what happens, is a chance we could make a deal.

3:25 Without what we did, they would need to be talking to us. They requested a meeting through their surrogate end directly, and.

3:32 We're meeting, and you know, good things can happen, I guess.

3:35 Despite President Trump's optimism, the two sides have repeatedly appeared close to a deal during the conflict, only for fighting to resume. It remains unclear whether Washington and Tehran are engaged in substantive negotiations. Iran's Foreign ministry says while messages maybe passed through mediators, no formal negotiations with the United States are currently taking place.

3:56 So that's the geopolitics. Now to earnings, a return to both that LVMH's fashion unit is being held back by the Iran war. The firm's fashion and leather goods division, home to the likes of Louis Ritos Or, sales increase by just one percent last quarter as the conflict deterred wealthy customers. While sales growth was below Estimer's, LVMH's revenue increased for the first time in two years. The European luxury sector has been mired in an extended slump. Gucci owner Curring reports earnings today. They're also expected to be subdued.

4:32 And the more breaking news on earnings this morning Mercedes downgrading its fullier revenue forecasting. It now expects income slightly below last year. That's versus expectations of flat it had announced previously. The German carmaker reported adjusted earnings of two point three billion euros in the second quarter, that was above expectations.

4:50 Back Bench Labour MPs here in the UK are warning Prime Minister Andy Burnham against pursuing what they call punitive welfare cuts, saying that he risks a repeat of the rebellion that derailed his predecessor's plans. Several Labour MPs have told Bloomberg that any reforms must focus on helping people into work rather than cutting support, warning that they could refuse to back the legislation otherwise. The warnings follow Burnham's BBC interview in which he said that he wanted to reduce the welfare Bill by making it harder for some people to claim benefits. The pushback comes as two new opinion polls put Labor ahead of or level with Nigel Paraja's Reform UK Party for the first time since March

5:32 last year.

5:34 I Meanwhile, the Prime Minister has pledged new military support for Ukraine during his first face to face meeting with President Vladimir Zelenski. Britain will supply its new Stone Cloak electronic warfare technology to help protect Ukrainian drones, which have become one of Kiev's most effective weapons against Russia. Zelenski called the meeting an important signal of support from Britain's new government.

5:55 Our relationship with the UK is stronger than ever.

5:59 I thank ye for his commitment to.

6:03 This partnership and for giving so much attention to defense and to our security. Zelansky met Andy Burnham aboard a Royal Navy aircraft carrier, where the Prime Minister said he hopes to visit Ukraine soon. Zelensky is now heading to Washington for talks with President Trump, where he's expected to press for more Patriot missiles and tougher sanctions on Russia.

6:25 Now, those are our top stories. Let's get to the market. So stocks tumbling in Asia, the masciash Pacific Index down by three point one percent, the Cosby down almost ten percent this morning. It is only seven percent above its two hundred day moving average because of the significant jobs that we've seen. In terms of other benchmarks in Japan and Taiwan, they're down more than three percent this morning.

6:50 Stop futures for the US for now's that futures down eight tenths of one percent. Your socks at fifty futures are only actually declining about a tenth of one percent. But can we really have a down session given the ai related sell off, the sell off in chip makers. In terms of other markets that we're thinking about, brain Creud future is obviously key eighty seven dollars nineteen for Brankfreud currently down by one point three percent. We saw on Monday, the biggest decline in more than three months for Breakthrough, So let's see if that continues to hold in.

7:21 One last thought, which is that bets are mounting, risks mounting that the Fed may hike It seems so gold moving on the back of that, bullion trading down nine tens of one percent. There's the markets in.

7:33 A moment, more on what's driving that sell off and tex stocks in Asia, plus how the European fashion marketplace vented is setting its sites on the American market. But first, another story that we've been reading this morning, I'm being uncomfortable in midlife. Avian McClaskey has been writing about this for Bloomberg Opinion. She points to one of the key factors and losing cognitive abilities as we get older is that we stop putting ourselves in situations where we're forced to learn. She's currently on a five week stent of living in London Welcome to Europe Abby with her family, which she says is giving her a reminder of what a learning curve feels like. She's been enrolling in new classes,

8:08 figuring out how to use things like the washing machine in someone else's house and induction stovetops, and says that look, despite the fact that it's difficult and she doesn't like feeling like a novice, there's a sense of achievement in feeling, you know, out of place and nothing to learn to keep up. And this is something that you know, the science backs up. If you're learning more things at one time, it's a good source of mental rejuvenation.

8:31 Yeah, I like that idea. I hate reading these stories telling in the morning when my brain is still really really pretty, you know, sticky. Maybe I'm not quite up to speed. If you had to learn something new, Stephen Caroll. What would it be?

8:45 Oh, I was just talking about this as someone yesterday about the list of languages I'd like to learn.

8:48 I would like to go back.

8:49 I would like to complete my learning of Spanish, and I would like to brush up on my Irish as well, which I had learned for fourteen years but sadly is buried somewhere in the back of my brain.

8:58 Oh, excellent, I love that learning new things about you. What about mar jong and bridge or maybe something physical? I think there will be on my list of I think you'd have to have a weird combo of disciplines. New disciplines, I think, to really stretch yourself more mentally and physically. But yeah, I love this story, Abby McCloskey writing it for us, I see to think about.

9:18 Yeah, and we'll put a link on our podcast show notes as well. Let's turn back though to what's happening on markets, different kind of gyrations, ripping through what we're seeing, particularly in chip stocks today, we've got a record supporter when you see with us. Now for more, let's get into I suppose one of the two big factors that is driving what we're seeing today, the circular funding feares resurfacing after some announcing some Nvidia what's the issue.

9:43 Here, Yeah, exactly, Well, we have been hearing about these concerns since last year, but it really is resurfacing, as you just mentioned, because of these massive spendings from the US hyperskaters. Now how it works is basically, you know, the likes of Nvidia providing these financial support to its partners, its customers, and they in turn will buy more chips from Nvidia. And that is what we've been seeing from the likes of ESCA Group with Nvidia about five hundred billion dollars of commitment to do business together with another example, just yesterday, we're hearing that Nvidia and talks to help open AI by backstopping as much as two hundred and fifty billion dollars to lease this five hundred billion dollars

10:30 worth of data center from soft Bank that is based in Ohio. So it really is blurring this line of Nvidia being a KPEX beneficiary and being a KPEX spender. And the problem here is that it then will skew the underlying real demand for AI and potentially magnifying the losses if the AI story turns around. And that's why we saw Nvidia down about five percent yesterday with credit risk spike, the five year CDs at intra day high yesterday, and that is spilling over to the broader market in Asia chip sector that we're seeing today.

11:09 Yeah, these credit default swaps really important to you know, they sort of show the credit pressure that's building. Look, there's another factor though too that we have to think about. A report that a Chinese state back company has begun producing high tech chip making machines. The companies like ASML specializing this is really of interest surely in Europe. What do we know and why would it be such a big deal? Yeah, exactly.

11:38 So the key point here is that they are mass producing these deep ultravallet lithography machines, so we ca the DUV machines. They are in fact less advanced compared to ASML's extreme ultra lithography tools, which we call EUV machines. But because they can mass produce it, and they're aiming about five DV machines this year, targeting twenty next year, that puts them in a good position to be able to pose a threat on ASML, and that's why we saw ISML stocks falling so much and the likes of Japanese manufacturers Nikon and Tokyo Electron also down more than nine percent today. And the broader implication of this is that it's showing you how China is really ramping up their production capabilities for advanced chips, and that is coming

12:31 after the memory giant CXMT had its debut yesterday, which turned it into the biggest listed company on shore China. So in different aspects, when you pull together all these pieces of information, it's really showing you how the competition of these Chinese makers and manufacturers are really coming back into the global race. And that is why we're seeing how these other piers corually are falling today as well.

13:06 Just briefly, Winny, like we're I suppose wrapping up a couple of weeks, where not wrapping up perhaps, so we've seen a couple of weeks of pretty extreme volatility in these chip stocks in Asia. It feels like every day the story is either there're a lot or they're down a lot. I mean, what does this tell us or I suppose, how do we think about today's movements in the context of all that volatility.

13:28 Yeah, well, today is pretty much a great example of just how old how this market has become. Right, we're looking at Cosby down some ten percent and having already the exchange triggered about two circuit breakers, and that it's triggering that big cell off in Asia as well, with the benchmark headed for a technical correction down about ten percent since June. Now, this is also exactly why some of these long only fund managers are still preferring to stay on the sitelines. I've talked to the likes of east Spring and even Fidelity. They say that they're keeping their trading size is small and they need a bigger safety of margin, So basically they need to see a bigger draw down before they potentially buy into the dip,

14:14 just because how volatile this market really has begun. So most likely because of the volatility, we're likely going to see investors staying away and only would be buying a dip until they see a bit more calmness in the market.

14:29 Winnie Bekay, very interesting. Thanks for being with us our equities reporter, Winnie Sue. Stay with us. More from Bloomberg Day Baqube coming up after this.

14:40 The fashion resale platform Vented has turned Europe's five hundred billion euro clothing industry upside down now. The company, which is headquartered in Lithuania, is planning to do the same for the US. Our reporter Melda Sheperdita joins US now from Vilnius for more Melda, good morning. Secondhand clothing sales are eating into the fashion based But what's driving this global resale boom?

15:03 Yes, indeed, the resale boom is real. It's no longer an each market, but rather a sector that's eating into the fashion business. Analysts estimate that about sixty percent of global customers will be shopping resale this year and the market will grow two to three times faster than the new fashion through next year. So the shift is really driven by economics. Shoppers one deals and sellers one extra cash.

15:31 Years of infilation have made secondhand mainstream, especially for the younger generation which no longer considers shopping secondhand at taboo or it doesn't carry a stigma, and the trend is picking up, especially when celebrities like Paris Hilton or Irish Factor all mes call openly discussed reselling on such platforms.

15:54 So this is the sentiment that companies like Vinted are capitalizing on.

16:00 Wow. So tell us about Vinted's growth in particular and how it's managed to capture the market in Europe.

16:07 While we're looking at Windo more closely. The startup was founded in Lithuania about two decades back as a simple clothes swapping platform, but now it's grown into Europe's dominant customer to customer customer fashion marketplace and is one of your biggest success storys. Investors say that then that has the potential to become the Amazon for a second hand.

16:32 The company is now valued at eight billion euros and it helped sell almost eleven billion euros worth of goods last year. Now, how built a platform that European rivals struggled to matches. As we mentioned in this toy, Vinted's edge started with somewhat counterativative decision In the beginning, it scrapped sellers these and started charging buyers instead, so that's simple, which encouraged more people to list their items, creating more inventory, and that attracted more biased and ultimately made it a profitable marketplace. It is now investing heavily into its own shipping network, payment system, customer software servers, and that's something that rivals struggle to replicate.

17:24 So really a booming enterprise. But it's the next target is the United States. Why is this such a big test for Vented? What does it mean for the company's potential IPO?

17:35 Entering the US market is the next Majorstvented. The US resale market is known for being highly competitive and difficult to crack, so when the company entered the US in January and is now in early stage testing that the initial results are encouraging. The company says, but Vinted that is under no illusion about how hard it will be to crack. We were openly told by the company that it's a big question if they will succeed or how long it will take. But if they do, this will be a big milestone both for Europe for Lithuania, you know, a small country on the eastern flank. Now, Vinta has been preparing for an IPO for the past few years and considers itself operationally already, but what markets don't like

18:27 is surprises, and until the US entry becomes more predictable, the company doesn't want to commit to public date of the i p O, but that the ambition is there, and that the ambition is there to pick something to build something bigger, much bigger. It's clear, the CEO told us, or actually made a broader argument how Europe has produced very few tech tech tech giants in recent decades, he pointed and pointed out a Spotify as one example. But in the time, in the meantime, the US has been building multiple trillion dollar businesses and Europe needs to catch up or risks becoming a dark place, as he put it, So Linden is looking to become the NEXTTIC heavyweight and to put Lithuania on the global tech map.

19:25 Thanks for listening to Bloomberg Daybreak Europe.

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