Global Bond Rout Deepens, China Economy Slows, 250% UK Deals Frenzy
Bloomberg Daybreak Europe covers a deepening global bond sell-off driven by the US-Iran war and rising oil prices, China's sharply slowing domestic economy, and a 250% surge in UK M&A activity. Bond yields are hitting multi-year highs globally, with Japan's 30-year yield surging and US 30-year Treasuries at their highest in nearly three years. UK political instability continues as leadership rivals debate rejoining the EU.
Summary
The episode opens with a report on an intensifying global bond rout, with 30-year US Treasury yields reaching their highest levels in nearly three years and Japan's 30-year yields surging 20 basis points to levels last seen in 1996. Markets Live strategist Mark Cranfield explains that central banks have limited control over the long end of bond markets, particularly amid soaring global fiscal deficits and the inflationary pressure caused by the ongoing US-Iran conflict. Bloomberg Economics analysis warns that triple-digit oil prices could push global inflation to 4.2% by Q4 2025, with a war escalation scenario potentially driving it to 5.5%. Brent crude rose above $111 per barrel, up over 50% since the US and Israel attacked Iran in late February, with the Strait of Hormuz blockage creating broader supply chain disruptions beyond just energy.
Markets Live executive editor Mark Cudmore elaborates that the inflation shock stems from both demand-side pressures (AI capex spending) and a massive supply-side shock from the Middle East conflict. He argues the Fed cannot cut rates and that a hike is more likely than a cut, though not imminent. He warns that the AI capex-driven US economy provides short-term insulation but that sustained high yields will cause deeper underlying pain, and when the AI capex bubble eventually bursts, the combined effect could be severe.
China's economic data came in worse than expected across all metrics in April, with retail sales rising just 0.2% — below every economist's forecast — industrial production at a three-year low, and investment unexpectedly shrinking. HSBC's Greater China Chief Economist Jing Liu noted China is more resilient than some peers but not immune to the Middle East conflict's fallout. Analysts described China as a 'two-speed economy' with booming exports masking a deeply struggling domestic sector.
In UK politics, the Labour government is facing a leadership crisis, with former Health Secretary Wes Streeting — who resigned from cabinet citing loss of confidence in Keir Starmer — calling Brexit a 'catastrophic mistake' and advocating for EU rejoining. Greater Manchester Mayor Andy Burnham also supports eventual EU membership but urges a domestic-first focus, particularly as he campaigns in a constituency that heavily voted Leave in 2016.
On M&A, Bloomberg's Ruth David reports that UK takeover activity has surged 250% to approximately $150 billion in value this year, driven by the FTSE 100 trading at just 13x estimated earnings versus 22.4x for the S&P 500. Major deals include Unilever's $45 billion food business sale to McCormick and Schroders being acquired by Nuveen. David warns that while M&A is booming, London Stock Exchange IPOs have raised only $600 million this year, raising concerns about the long-term viability of the UK's public equity markets as companies are taken private faster than new ones list.
The episode also briefly noted Aaron Rye's win at the US PGA Championship, making him the first English player to win the tournament in over 100 years.
About this episode
<p>Your morning briefing. All the news you need to start your day.<br /><br />On today's podcast:<br /><br />(1) A selloff in global bonds extended as the deadlock over the Iran war drove oil prices higher, fueling inflation concerns and raising bets that central banks will need to keep tightening policy.<br /><br />(2) Oil prices above $100 a barrel, with US-Iran ceasefire talks stalled and trade through the Strait of Hormuz heavily disrupted, continue to stoke global inflation pressures<br /><br />(3) Oil rose for a third day as President Donald Trump again pressured Iran to come to a deal to end weeks of war and reopen the crucial Strait of Hormuz.<br /><br />(4) China’s growth slowed across the board in April with investment resuming declines, as booming exports no longer offset a deteriorating economy at home.<br /><br />(5) The thorny question of whether Britain should unwind a decade of estrangement from the European Union is resurfacing as the Labour Party starts to imagine a future beyond Prime Minister Keir Starmer.<br /><br />(6) A British dealmaking boom has London’s M&A advisers on track for their best year in more than a decade, <a href="https://www.bloomberg.com/news/articles/2026-05-18/london-m-a-advisers-see-best-year-in-10-years-despite-political-flux?sref=AuZ8DRMf">standing in contrast to investor fears over the country’s latest political crisis</a>.<br /><br />Podcast Conversation: <a href="https://www.bloomberg.com/news/articles/2026-05-16/swatch-stores-cancel-audemars-piguet-swatch-sale-as-crowds-surge">Swatch Shops Shut as Audemars Piguet Collaboration Causes Mayhem</a></p><p>See <a href="https://omnystudio.com/listener">omnystudio.com/listener</a> for privacy information.</p>
Key Insights
- Mark Cudmore argues that the Strait of Hormuz blockage is creating a broader petrochemical supply chain shock beyond just energy prices, and that long-end oil futures hitting crisis highs suggests the inflation impact has not yet been fully priced into markets.
- Mark Cudmore contends that the Fed is more likely to hike than cut rates, and that the AI capex-driven US economy currently provides short-term insulation from rising yields — but that when the AI capex bubble bursts, sustained high yields will compound into a 'really, really big problem.'
- Bloomberg's Ruth David highlights a stark divergence in UK capital markets: while M&A targeting UK companies has reached $150 billion this year, London Stock Exchange IPOs have raised only $600 million, meaning companies are being taken out of public markets far faster than new ones are entering.
- Ruth David reports that the UK's post-Brexit regulatory environment — where deals no longer require EU approval — is being cited by M&A advisors as a tangible factor attracting overseas acquirers, alongside cheap valuations and the absence of nationalist political rhetoric against foreign takeovers.
- Bloomberg Economics' analysis, as reported by Ewan Potts, warns that in a war escalation scenario where crude surges to $170 per barrel, global inflation could hit nearly 5.5% later in 2025, with advanced economies potentially seeing inflation peak around 3.4% even in the base case scenario.
Topics
Transcript
If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day. A fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned, it's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise, and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions. Their approach is grounded in experience, follow-through, and trust built over time. Bad days happen, and when they do, you deserve an insurance partner who understands risk, respects…
Full transcript available for MurmurCast members
Sign Up to AccessMore from Bloomberg Daybreak: Europe Edition
Daybreak Weekend: US PCE, Iceland Eco Conference, Australia CPI
Bloomberg Daybreak Weekend covers three major economic stories: the upcoming US PCE inflation data and its implications for Fed policy, the Reykjavik Economic Conference where central bankers will discuss responding to geopolitical-driven inflation, and Australia's CPI reading amid persistent inflation pressures from the Iran war.
A $50 Trillion Problem, Poland Troops U-Turn, Ebola Aid Cuts Impact
Bloomberg Daybreak Europe covers the economic and geopolitical fallout from the US war with Iran, focusing on the Strait of Hormuz closure driving oil above $100/barrel, surging inflation threatening the $50 trillion G7 sovereign bond market, and the worsening Ebola outbreak in Central Africa exacerbated by global aid cuts.
Nvidia Fails To Excite, SpaceX IPO Revelations, Booze Firms' Sobering Times
Bloomberg Daybreak Europe covers NVIDIA's strong but underwhelming quarterly results, SpaceX's IPO filing revealing a $4.3B loss, and the accelerating decline of the global alcohol industry. Additional stories include AI-driven banking job cuts, Iran-US tensions, and UK cost-of-living measures.
Surging Borrowing Costs, EU-US Deal Advances, Nuns Get Financially Savvy
Bloomberg Daybreak Europe covers surging global bond yields driven by inflation fears tied to high oil prices, the EU finalizing its US trade deal text ahead of a July 4th deadline, and Spain's Catholic religious orders professionalizing their financial management as membership and donations decline.
US Delays New Iran Attack, AI Banking Job Cuts, Milan’s Wealth Boom
Bloomberg Daybreak Europe covers President Trump's decision to delay strikes on Iran after Gulf state appeals, Standard Chartered's announcement of 8,000 AI-driven job cuts, and Milan's wealth boom driving professionals to commute from cheaper Turin. Markets are reacting negatively to unresolved Iran tensions, with oil at ~$110/barrel and bond yields elevated.