'Bloomberg Surveillance: Early Edition' Full (06/07/22)

'Bloomberg Surveillance: Early Edition' Full (06/07/22)

Show Video

I think what we're going to see is growth continued to be on the softer side. But growth continue to show resilience. We don't see a near-term recession. This has to provide more pressure towards accelerating the transition to clean energy. But it's going to be a bumpy road to get there where we do provide further support for people. It should be temporary timely and targeted. This is Bloomberg Surveillance early edition with Francine Lacqua. Well good morning everyone and welcome to Bloomberg Surveillance Early Edition on this Tuesday the 7th of June. I'm Francine

Lacqua here in London. And here's what's coming up on today's program. Boris Johnson survives a confidence vote but the mutiny suggests his days as prime ministers may be numbered. The RBA hikes rates by a jumbo 50 basis points but points to inflation spiraling higher than expected even a month ago. Bloomberg Commodities Edge index hits an all time high. And the Elan Musk

provides his assertion that Twitter has a bot problem. In a filing on Monday the stock trades 15 dollars below his offer price. So first thing is first let's check in on the markets. We look at the RBA we look at some of the risk off mood out there. Again investors actually fretting about monetary policy what that means for growth and what that means for valuations. The

fact that surging borrowing costs will definitely dent growth and that means they're now getting rid of risk assets. I don't know whether this will be short lived or actually long lived. But you can see the S&P futures down three tenths of a percent. I think we're seeing a similar move into these European stocks. We look at yields at 3 point 0 2 and then Bitcoin. Why not bitcoin at twenty nine point five six yen. Extremely interesting to look at this. Perry 132. A lot of investors a lot of traders saying this could also touch a hundred and thirty five. It's actually four yen at a 20 year low. Now the picture across Europe is one of wait and see because it is on Thursday that we have the ECB. This would be a

huge policy shift from what we've heard in the ECB. I think money markets 50 percent pricing in a 50 basis point hike. Again this would be a huge move. We're just speaking to a group of BlackRock. She was saying that's not their base case scenario. So you have the footsie flat the DAX down some six tenths of a percent the footsie move in Italy and the CAC forty down four tenths of a percent. So the Aussie dollar and three year yields have spiked after the RBA delivered a bumper 50 basis point hike. Now for more we're joined by Bloomberg's chief Asia economics correspondent and occurrence. So first of all. And why did the RBA make this big move and especially why did it surprise markets.

Well it seems to be all about energy costs in particular Francine. There was a line in the statement that the energy outlook has changed even a month ago in fact that the RBA said they will do whatever is necessary to contain inflation. That does suggest interest rates in Australia will continue to go up from here. The broader statement was somewhat upbeat on the economy though it was pointing to a very strong labor market. It was also saying that house prices even though they've come off their tops are still 25 percent higher than where they were ahead of the pandemic.

So obviously a very hawkish move. Markets didn't expect that only a handful of economists all coming on. It does put the RBA know in that bracket of central banks that are hiking rates by by jumbo amounts and Mongo. We also have this great story in the Bloomberg terminal. I've also posted on social media. It's a tongue twister. So we're seeing peak inflation signs flashing in chips shipping and fertilizer. So could we see signs of peak inflation globally. I won't try to tongue twister Francine but I think that is the view among you know a lot of people watching this do look to these key parts of the supply chain to see where some of the stress is being relieved. And we are seeing some relief in

shipping and the fertilizer prices like you mentioned with the easing of the Shanghai lockdown DAX expected to have a flow on effect in terms of global supply chains. But then the big question becomes even if inflation has peaked when does it start coming back to the kind of levels that the central banks around the world target and of course levels of consumers in the high street are fairly comfortable with. We are a long way from that at the moment of if prices remain very elevated as an ongoing shock going through global food and energy markets and nobody sees that reversing in a hurry. But for now at least perhaps there's some evidence we're at the peak. But obviously we've got a long way to go before we get back to a pre pandemic levels.

Yes we do have a long way to go. Thank you so much. And as always Bloomberg's chief Asia economics correspondent there occurred. Now we're joined to talk about the markets by Ciro Malik chief investment officer at New VIX. Thank you for joining us. First of all Levine I mean I know everybody knows you've been but you have a lot of money under assets under management one point two trillion dollars. Are you nervous about all of this. Monetary policy shifts how to deal with inflation and the fact that it could hurt growth. But suddenly a different world out there and our clients are nervous.

The European Union is dealing with the same issues that the US is and that's three issues higher higher inflation hits to economic growth and higher interest rates. But this similar to the US we think there's more concern in the European Union because of GOP political risk in places such as Russia Ukraine and China. It's going to be a fine line for the central banks over here to raise interest rates to fight inflation. And while also trying to keep those growth rates from declining too much we think that's going to be a challenge for this region. So sir do you expect actually some kind of policy mistake. And again

money markets are actually expecting by July a 50 basis point hikes or at least 50 percent of the money markets are saying that. That seems huge especially if you believe what Christine Lagarde the president has been saying that the risk around a policy mistake has to do with that path of interest rates. Hopefully we'll get more clarity on that. This week is it going to be 25 or 50. And also how front end loaded is it going to be. I think it's tough because while we're talking about peak inflation we look at inflation is more like plateauing from here. So how quickly can they battle inflation without taking

such a hit to economic growth is the challenge. It increases the chances of that policy mistake. So where do you see value. What are you buying right now. We like companies that have tailwinds so higher interest rates are good for banks. We also like the high end consumer who is resilient to this kind of environment. And with China reopening it's good for high end luxury goods companies like Caring. They have an Analyst Day coming up. Very strong brands from why a sell Gucci recovering on China reopening good cost management caring. And then on the bank side IAG high quality management team valuations are cheap for banks.

They could increase their are away at their up. Are we at their upcoming Investor Day and strong cost management from them too. I mean I actually saw the Gucci film recently so it was long but it was it was interesting family dynamics. Were you expecting China. Mean there's a lot of hope in the markets yesterday certainly that China's reopening of certain big cities were reopening but it's not a given that they stay open. So how do you deal with that as an investor or somewhat cautious on China

too. Because it's been fits and starts while the reopening now we could see further lockdowns going forward. Also regulatory. Yes. Is in China. We see them kind of alleviating and then coming back on more strongly cautious in that area. We like carrying because they tend to be performing well even without China. We think that's upside for them and a silver lining. But we like the company even without China reopening. So you like high end luxury and retailers have a tough time. Some of them don't really know whether they can pass on this consumer. And disinflation to the consumers is exactly right. Pricing power is key for these companies. High end consumer should hold up in this kind of environment. We have seen a tough environment for

retail. Partly that's in companies that have goods and services. We saw it with Wal-Mart and Target in the U.S. a shift in spending from goods to services high inventories in those areas. And then you don't have the pricing power in place. Consumers are sensitive to inflation. But if you have a strong brand name with a lot of brand heat like caring does with beauty and why is

cell brands like that and think they are more resilient in this kind of environment. So we're talking a little bit there about you know possible signs of peak inflation and against the tongue twister which I've said it once and I said it correctly. I'm not going to say it again. Do you see signs that it could get easier from here or are we underestimating still the impact of the Ukraine war. The key to watch will be wage inflation in the U.S. We're seeing some signs of it moderating certain areas but it remains pretty strong overall. The labor markets are strong mostly around the world and that's going to be a challenge. So you know as we increase interest rates will we see some cracks in the labor force. We're seeing some hiring freezes and layoffs

starting to occur that could dampen wage inflation. But it's still we see that as a sustainable sign of it becoming less hot. I think it's going to be challenged. Inflation may peak but it's going to plateau from here not go back to pre pandemic levels. So in the luxury space like herring you also mentioned the banking space as interest rates go up you like i n g is that cost control. We like IAG and cost control but also they're very leveraged to higher interest rates. We think they could increase their ROIC targets at their upcoming Analyst Day. Their net interest income could continue to improve from here. So we like

them for a lot of reasons not just a good management team with conscious control over costs but also some nice tailwinds to their top line growth going forward because of higher rates. Is there anything that you'd be selling off at the moment. I don't have had a position on tech stocks and whether valuations just make little sense now which you'd like growth stocks here because as the economy slows these stocks should actually start to form even better because they're more resilient when it comes to slowing economic growth. Areas we don't like are consumer staples. That's been where investors have been hiding year to date because they're worried about what's going on in the global economies. Those stocks look expensive to us and they tend to have just low single digit growth there. We do like his energy within within the commodity space. We have a strong view on energy since last year tight supply strong demand and most importantly producer discipline. They're returning cash to

shareholders which will keep that cycle tight for many years to come. Anything specifically on the energy. And there's also the transition. And we had a great piece actually the Bluebird term looking at batteries for example for Evie's and the fact that we don't have the components that go into these battery storage as well. We like the energy producers. Also the refiners tend to be a bit of a laggard trade when it comes to energy. They tend to make most more of their money after the barrels come out of the ground and on some of their margins and energy production. So that's another area of energy that we like. So commodities are

we in a super cycle commodity supercycle or if it feels like that but it's also a very different set of cards. Commodities overall I think it's more of just a cycle than a super cycle and that it will remain cyclical. While supplies tight in many of these non energy commodity sectors because there's been underinvestment we're more worried about demand destruction. As

global economies start to slow interest rates start to go up. I think you'll see demand destruction in some of these cyclically sensitive commodity sectors. That does not include energy as much because of that producer. Sara thank you so much. I could speak to you for hours here. Their chief investment officer at New Veen joining us on a number of topics this morning. Now coming up Boris Johnson may have survived a crucial vote but are his days as a UK prime minister numbered. We'll have the details next. This is Bloomberg. Economics finance politics. This a lot of politics to see. This is Bloomberg Surveillance early edition Francine Lacqua here in

London. Now let's get straight to the Bloomberg First World News. Here's the endurance. Hi Leon. Hi Francine. Russia house and definitely bound 61 senior U.S. officials and executives from entering the country in retaliation for what it calls constantly expanding sanctions. Treasury Secretary Janet Yellen and BlackRock Larry Fink are among those on the list. Ukraine meanwhile says it is in talks with the U.N. on ways to export grain from ports and blocked by Russia's military. Now President IRD one says his government will continue to cut interest rates despite one of the world's

worst inflation problems. Turkey's central bank has kept its benchmark rate up 14 percent since December. Last month saw the country's annual inflation rate accelerate above 73 percent. And South Africa's Justice Ministry says that two members of the Gupta family have been arrested over in the UAE. The move is the biggest step yet in the African nations judicial inquiry into state graft which has spanned more than three years. The Gupta brothers have always denied the allegations. Global news 24

hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than one hundred and twenty countries. The UN guarantees. This is Bloomberg Francine Lacqua. Thanks so much. Now the UK Prime Minister Boris Johnson has survived a confidence vote within his own party. But the scale of the mutiny against him suggests the danger is that his days could be numbered. The vote in favour of having confidence in Boris Johnson as leader was two hundred and eleven votes and the vote against was a hundred and forty eight votes. And therefore I can announce that the parliamentary party does have confidence.

Well joining us now is our UK reporter Lizzie Borden and Bloomberg's David Merritt. I have to say the one thing that also really intrigued me today was the telegraph usually pro stories pro Burrus giving him a little bit of a slap on the wrist. Lizzie good morning. So he's won this. He's won this not by a huge amount. So can he move on from this. Yeah. This was the culmination of months of discontent over party gate. The cost of living crisis. And it's a year now until Boris Johnson can face

another vote like this. So his party his allies will be hoping that he can draw a line under party gate. But it's not likely to be back to business as usual because remember his predecessors Margaret Thatcher and Theresa May were out six months and a day respectively after their confidence votes. And this was a bigger rebellion than Theresa May faced in 2018. There were more rebels than his working majority was in the House of Commons before. So they're likely to try to stall his legislative agenda. He could try to bounce back and control that by reshuffling his cabinet. But it's not going to be back to business as usual. I don't know

whether there is anything that he can do. There have been a hundred forty. 148 is quite a large number of your own employees only against you. So you know they are putting on a brave face and saying this was a decisive win but actually can't be feeling too good about his reform agenda and how he is able to pass that through the House of Commons. No it's a horrible result for the prime minister. However they're spinning it this morning. More than 40 percent of his own MP is wanting him gone. A Labour politician has described it as the best possible result for the Labour Party. In fact it's because it keeps an unpopular prime minister in position and it keeps the Tories fighting amongst themselves rather than taking the fight to Labour. We have a key

election coming up in just a few weeks time to in fact. But looking tonight the Tories may lose some of these seats that they've gained in the past to keep on in the north of England in these red walled areas. If Boris Johnson can no longer hold onto those sorts of seats the rest of the Tory party will be thinking why keep him as prime minister. So this is crucial because there's something else in the House of Commons. I think the head of the Liberal Party was saying you know I'm giving a motion of

no confidence against Boris Johnson but that probably will go nowhere. So it's really byelection that we're watching. Yeah. And sorted backdrops in both in the south west of England seat. The MP was caught watching pornography on his computer in the House of Commons in the North. The MP has been convicted for sexual assault. So paint on that backdrop the party gate scandal. And it doesn't look good for the conservatives but it will be less bruising because the result is coming after the vote of no confidence at least for Boris Johnson personally. I mean I haven't seen Dave since the July Jubilee celebrations. And for me it was really quite shocking to hear the prime minister being booed as he was walking up the steps because that's also his constituency. So does is it that he's unpopular but the Tories are still popular. Or could this be a big moment

for Labour. Well it was a really kind of woodshed moment. Wasn't that him being booed on the steps of St Paul's Cathedral at the Thanksgiving service for the queen's jubilee amongst you know the royalist crowd out there. And I think that really struck a chord I think with a lot of employees. They also spent the GBP came back in their constituencies hearing the level of discontent and anger that is still bubbling around the country about these lockdown breaking policies at Downing Street. So yes this is a prime minister whose popularity has plunged across the country. That is really hitting home with his own employees. And you know that the agenda of the government is leveling up agenda. That's

that big benchmark policy that is going nowhere as well because economic growth is not being spread around the country. People are really suffering. But the cost of living crisis as Lizzie mentioned people are spending every month less money in their pockets than no government does. Well where the public is feeling the pinch. Oh it always goes back to the economy. Also the headline without a doubt of the Jubilee was or actually after the vote was Tories Rafael saying Mr. Johnson song as a player or Bloomberg Lucy Burton and David Merritt. Now coming up. Twitter repeats that it will hold Elon Musk accountable for the 44 billion dollar takeover deal as he threatens to pull out in a battle over spam and box. We'll have plenty more on that

next. And this is Bloomberg. Economics finance politics. This is Bloomberg Surveillance through the addition of Francine Lacqua here in London. Now to the latest twists in the Twitter takeover saga. And there are many social network. This social network has responded to Ilana

Musk's renewed demands for information about spam and fake accounts saying it will continue sharing information in line with their agreement. While Musk has threatened to walk away from the deal to buy the company if it doesn't prove the bots make up fewer than 5 percent of its users. Well let's bring in our tech reporter Giles Turner Giles. So first off what is going on. He's going on about the spam of the bots. Is his buyer's remorse is he trying to walk away from the deal without paying the 1 billion or does he just want to buy it at a cheaper price. I think both those things are key here. All this bickering between Elon Musk you often using Twitter this is kind of a sideshow. What he really wants either to get a cheaper deal or

to walk away from a deal because it's completely changed from when he first came in. The price is now in the 30s versus his 54 dollars 20 price he put in. So he's just instructed his lawyers to desperately try to find a way to get out of this deal. Firstly he tried to use the material adverse effect which is really looking at whether that 5 percent figure of spam bots how is it going to be greater. But that's that's kind of very relevant right now. I think the problem I guess with that is that he was talking who's going on about the bots even before he made the deal. But the fact that the share price has fallen by so much. Would that not be a materially adverse effect. No. It's all comes down to essentially very legal terms which is why I think eventually this will end up in the local. He has to show is a percentage above 5 percent. A big deal is really going to

affect the deal. Is that going to affect his financing. Now maybe if it was 90 percent of all the all the accounts and Twitter was banned obviously that would be a huge deal. But it's not going to be that is very very likely. I mean Twitter would have to be lying to us all this time. I very much doubt that. So he's going to try to figure out OK is this percentage somewhere perhaps 50. Can I get away with that in the law courts and say that's a huge deal. We don't know. It's not a known figure. So therefore you'll have to be decided perhaps by by a judge. I think in Delaware this Romaine Bostick

said the fact that the Twitter share price has fallen significantly doesn't impact this deal at all. No not at all. In fact this is in Twitter's favor now. When we started this whole process with Twitter not wanting to get bought by you must quite clearly trying to get him on the board trying to stop him taking over. And now we have complete year of the plea reversal. This deal is great for Twitter because where share prices and the worst case are the best case story for Twitter and the worst case scenario perhaps Tom Mackenzie has to pay a billion to try and get out of this deal. But he still has to find a good enough reason to pay ISE billion. He can't just walk away. So just basically the fact that he did this filing which actually

legally he wasn't meant to do is basically to leave a paper trail. Exactly. When they go to court. Exactly. He's just trying to find any way or his lawyers are trying to find any particular reason that these folks were covenants. For example don't go into too much detail about that. They just send you trying to pick holes in anything to show that Twitter are trying to stop him completing this deal. And obviously Twitter coming back and saying we're doing everything we can. The ball's in your court.

Yeah I'm not talking about legal covenants but not before 10:00 a.m. on a Tuesday. Giles thanks so much. Our tech reporter Giles Turner coming up in Liberty has gone from a PowerPoint presentation to a bank with a market cap of nearly one billion euros in three years while we speak to the chief executive founder Corrado Peseta. That's coming up next. We'll talk of course about working from home how some of these digital banks are changing the way they attract talent. The other question is also crypto currencies and whether we go into the digital space what that means for a lot of the banks. This is Bloomberg. Boris Johnson survives the confidence vote but the mutiny suggests his days as prime minister may be numbered. The RBA

hikes rates by a jungle 50 basis points pointing to inflation spiraling higher than expected even a month ago when Bloomberg Commodities Edge DAX. It's an all time high. And Elon Musk provides his assertion that Twitter has a bot problem in the filing on Monday. The stock trades fifteen dollars below its offer price. Well good morning everyone. Happy Tuesday. Francine Lacqua here in London. Welcome to Bloomberg Surveillance Early Edition on Tuesday the 7th of June. I know the newsroom is a little bit more tired than usual just because we're all glued to our TV screens looking for that

Boris Johnson vote yesterday. Now to a conversation the markets and finance with a finance veteran. After 25 years career working at names such as McKinsey Olivetti and Bostick that Yana cut out the parts that are stamped his name on Italian finance history. When he took a role as chief executive at Banking Taser in 2006 he was one of the main proponents who helped carve out a process that ultimately led to the merger of banking days on some Paolo where he became chief executive of what is now Italy's largest bank. He left his role in 2011 to take over as to these minister for economic development. Now he's moved into

competition with his old employer. What could I do. Launched in Lima to a Challenger bank specializing in S.A. Me is now with a market cap of one billion euros. Cut out the bus that joins us as Liberty celebrates its three year anniversary. So as always thanks so much for coming out. You have quite a CV and now you're a challenger bank. You want to challenge the big ones in terms of finance digital banking. How's it going. Italians you know drinking the Kool-Aid.

First of all the best is yet to come in terms of what my boss says in the first three years we just built it. Now we have 800 top quality professionals. And what is really nice about that we're bank is that we combine the best of traditional banking with the advantages of Phoenix because sometimes both of them have problems but putting them together integrating the strength of wealth with Phoenix into a strong body of of good traditional credit management that makes the success. We're growing more than the market because we focus on SMB is a large and huge market. The underserved especially in

Italy let me remind everyone they have a family asset me owned companies. And the reason is that those companies sometimes are difficult to evaluate and underwriting credit with them needs to understand their industry's needs to understand that their continuous updated performance data. And at the same time if you closed the branches and that is what is happening they lose the channel. So we are focusing there and we're going to worry about non-performing loans right. Crossroads where inflation is high.

We don't exactly know whether there is a policy mistake. We don't know whether the spread between the time between peace and German banks goes up. A new wave a high wave of non-performing loans will arrive that's for sure. And actually the market is ready. Ltd is ready for that too. Obviously the amount to the size of this wave will depend on the length of the war and would

depend on the initiatives we will be able to take both at the national level and at the European level to avoid a recession. Having said that they've just taken an eye on stage two positions on European banks loans because there there is a pipeline coming up in terms of loans and a UTI piece will be the crucial segment. And we have to make sure that we follow and we manage the UTI piece in the right way. They're likely to be position because you can bring them back to performing status or

they become better than. Could it be as bad as during the crisis. It might be. If this is a big warning you're giving it might even the war last long. And if not on two years one year one year would still be quite a long period of time. At the same time the balance sheets of the banks are strong. The capital base of the banks are stronger than the beginning of the previous quarter. The previous crisis is. So we are ready to face with such a problem. But the wave would arrive is arriving. Talk to me a little bit about how Covid has changed of course how you evaluate some of the loans how you give out you know how you support some of the SMP is what it means also for working from home. Has it changed. Are there legacies that will stay

here forever. Okay. Covid. And then Ukraine changed the little bit the criteria because obviously you have to stay close to those companies that are reacting to the tighter resilient in some of them are very resilient in the last three crises. The selection amongst the DAX. There has been such that now most of those companies especially the mid-sized the big companies are really strong. And we see every day a lot of dynamism in terms of an MFA in terms of investment that's there. Having said that there are a number of companies that are not catching up. New your work and knew your ways. And it's not working. Yeah. I

mean I love. Sorry. I just I love the fact the Italians basically call work and remember smart working because it's kind of like a message to your boss like it's working. It's a positive thing especially if it is hybrid. I mean cannot be only from home can actually be only from office. But when we create the delimiter three years ago we gave our people since their very first day the possibility to choose between home and office or a mixture of them. So when Covid arrived for us it was business as usual as usual. Now people have get got accustomed to a very hybrid mechanism and each team inside the bank decides

how to organize their their their work. And we will never get back to why are you for working alone to give people the flexibility so that you can attract the best talent. Or does it also make it cheaper to you know not have a structure where you have to have a big fancy building. We want to have people that are happy about their life and work

is such an important part of it that it has to be combining all mixing all the two components. So giving these flexibility is a way to say we realize that you have providence with home over maybe with parents with children and with other interests. So it's really our limited way of working. That's the way we call it. Is it like that. Let's find for each of you the way to make you as easy as possible. Even the well for me mechanism we have each people each person in the liberty can design its own well mechanism choosing from a sort of manual because the needs of a normal person is different from a very young person a married one from a single so each one can design. Also from that point of view it's way to work at every meeting. But this is you

trying to keep your employees happy or also a way of attracting talent. What does it mean for how much you will grow with the next three years. You attract the best. You keep the best. You motivate the best. And you are doing are proving that being a responsible company is a real thing because sometimes people talk about the responsibility in a very generic way. I mean these are hard evidence of the way a company prove to its own employees that it cares about them. Talk to me about cryptocurrency. So first of all many people of course confuse digital currencies for example euro your digital currency or a number of digital currency with some of the stable coins or crypto currencies. Are you a believer in them. Let's make that clear because when we talk about crypto

sometimes we mix crypto platforms black the block chain kind of network. No problem. We can work on it can be an instrument to provide that. We have met. We manage them properly. Crypto assets like Bitcoin investment kind of assets. No problem with them. Provided we make sure that the retail market is made conscious. The refill the volatile the arrow energy terrible.

And that they can be manipulated very easily. And then we have crypto currencies and some of them are let me use the word illegal. The stable coin is not yet regulated. And the legal stable coins. A central bank. Digital currencies stable coins. Not regulated like free banks. The banks that are ready to issue a currency. So that is a real threat to the monetary sovereignty

of all of our countries. So why are they not regulated. Why is it taking so much time actually. To a certain extent they should not be they should simply be banned because of stable coin. If they are they should be regulated like a bank and they become banks. No problem. But they don't want to be banks. They want to be aware of the limits today. They have to become much more transparent in terms of the content of their reserves. Nobody knows where the money is. While the central bank digital

currencies like the digital founded the digital euro have all the advantages of the innovation of the crypto crypto platforms but at the same time they guarantee all mankind has been devalued. You're not a fan of a lot of these cryptocurrency. You're not offering Bitcoin on liberty. I'm very open to keep the platform right. I think we have to be very attentive to keep the assets free thinking markets. We have to be against stable currency and we have to be in favor of a legal digital currencies euro or found out the truth about God. Thanks so much. Always extremely clear NASDAQ. We'll get you back in

London in a couple of months. If anything changes in terms of your life I could be here for crypto Carol Massar chief executive founder of Liberty. Joining us this morning. Now this is a picture for European assets. There definitely does seem to be a risk off mood. U.S. futures are also down. Central banks resolute on tightening policy and that's fanning growth fears. The dollar advancing bond yields stabilizing when it comes to U.K. assets. On the back of that no confidence vote from Boris Johnson being one but still quite a big unity 148 of his own MPC voting against him.

We're not seeing huge reaction on for example cable when 25 50. Coming up more on the fallout from the confidence vote. We'll be joined by the legal and general CFO Jeff Davis. He's up next. And this is Brubeck. Economics finance politics. This is Bloomberg Surveillance early edition of Francine Lacqua here in London. Now let's get straight to a Bloomberg business flat. Here's the difference. Hi Leon. Hi Francine. Twitter says it will hold Elon Musk accountable to the terms of his proposed 44 billion dollar takeover offer after the billionaire again threatened to pull out of the deal over the issue of the box. Musk believes Twitter's reaching their agreement by not meeting

his demands for more information about spam and also fake accounts. Shares fell again in New York further widening the gap between market valuation and Musk's offer. Now Apple has unveiled the biggest overhaul for the MacBook Air in over a decade. The updated laptop previewed at its developer conference will have a new design at a faster end to processor from the company's own home. Gray brown checkout line. Apple also launched a flurry of new software features and services including a pay late option that pushes it deeper into finance. And Kohl's and exclusive talks with a franchise group

for a deal that would value the retail chain at about 8 billion dollars. Franchise groups offer its sixty dollars a share. That is Coles surging in premarket trading. In February Coles said it had rejected takeover offers because they undervalued the company and feel Bloomberg business. Flash Francine Lacqua. Thanks so much. Now the UK Prime Minister Boris Johnson has survived a confidence vote within his own party for the scale of the mutiny against him suggests a danger that his days could be numbered. Now these are some of the UK front pages that are covering the story. The Daily Telegraph leads with the headline Hollow Victory Tears. Tories apart of course are usually pro Boris Johnson and Tory. The star reads Carry on Pinocchio. The Time has a headline. A wounded victor and the front page of the Mirror says

Party's over Boris. Similar from the Metro as well. The party is over for Boris. I mean it's quite incredible to see some of the right wing faction of the UK press not turning against Boris Johnson certainly not being pro or not proclaiming as some of his most loyal supporters stunt reporters have said which is an overwhelming victory now for his take on the events. Joining us now is legal and general CFO Geoff Davies. Jeff thank you so much for joining us. I know you're out of Goldman Sachs conference in Rome. So probably missed all the festivities yesterday as we were all glued to our TV screens to look at the

vote. What does this mean in terms of the UK. Do you worry that he will not be able to pass on the legislation needed the House of Commons that the levelling up agenda will take even more of a backseat and that's it. That's a very good point. I think. We all have learned it's very difficult to predict U.K. politics. So I won't go down that road. But your your point is the right one. And we need to make sure that we continue with action. The levelling up agenda health inequalities the sort of

thing we're looking to do in regeneration is very important. And we all know of course that there is the climate transition that we also need to deal with in the wake of what's seen as as the energy crisis that's been accelerated. So. So you're right. The most important thing is is that the UK and the government can maintain a focus on action that they're able to pass the legislation. We know as investors and long term investors are not not concerned at this stage. You know we would see this agenda being something that's consistent across parties. And we in fact work with lots of the local mayors and local councils where a lot of this activity happens. Mr. Davies how uncertain do you think the outlook for 2022 is for the UK. And is there

anything that private companies can do to help the consumer. Yeah it's interesting. I mean we we've been very action focused and you know many companies go out and do an invest. As I say we see the local mayors. We've just announced a four billion pound deal with Birmingham where we're going to work in conjunction with them around housing etc.. And we're seeing huge demand for investment across the UK where it's aligned with the demands in us. So you'd see as I say housing and whether that's affordable

housing or of course we still have significant demand for our business to sell people moving post pandemic reviewing where they want to be situated. So you were talking earlier behind hybrid work and having an influence on that. And we're simply moving forward with all of that and continuing to invest. And so I think there is a lot of demand I think people about high employment which is an interesting feature and people feel reasonably secure but are still being selective. Where they're spending. So we're investing alongside these these big themes to ensure that they would be more stable and talked up and talk to me a little bit about. I know that legal and general investment management was voting against the election of certain of course

Amazon directors including the founder and former CEO Jeff Bezos. Why isn't. Yeah. That's as you say that's our asset manager as part of their engagement model. They look very seriously at their voting on many many topics and governance as part of the GM ESG is one of those. They have rules and thoughts around the splitting of duties. For example a chair and CEO they voted previously against companies where they haven't split the roles and that there's sufficient turnover on boards after periods of time. And that was really the issue they were looking to raise there as

part of that and voting against it. I don't think they were commenting personally on the capabilities of Jeff Bezos but more the governance overall and the sort of timescales people have been involved in. There's enough challenge and turnover. And when you look at working from home and of course we talk about the stand out for a lot of the financial companies. What does it mean for how you're running legal. And General will it change the flexibility that you give to a lot of your employees. Absolutely yes. And we're seeing that we're investing now in the brand new office in Cardiff. Now will be a lead in office both from environmental point of view but also developing that to allow hybrid work. Clearly it differs by divisions. And people

who need to be out on building sites on a regular basis are not going to be working this home as often. And you know we've had to make sure that our operations for our 14 million customers are maintained and they will quite often need to be in the office more often but not all of the time. But we are seeing that but we're also seeing that people want to be back. And so you know we've got really good attendance. People want to be back where they're working on projects where they want to work together they want to collaborate. And we do think it's important that people attend the office on a regular basis whatever that means whether that's two or three days a week or one weekend every fortnight and whenever people need to be back so that they build a culture. And of course for people to train as many many institutions have talked about you know people who

are new to the workforce they need to build relationships. But they also learn over time from that from that is really interesting. Thanks so much for our conversation. Legal general CFO there Jeff Davis is coming up. Did finance break securities rules as it was getting off the ground. Well we'll have a full investigation of that story. It's a Bloomberg exclusive and it's up next. This is Bloomberg. Economics finance politics. This is Bloomberg Surveillance early edition on Francine Lacqua here in London.

Now U.S. regulators are said to be investigating whether by NANCE Brook Securities rules by selling digital tokens just as a crypto exchange was getting off the ground five years ago. Well let's get more now with our senior crypto reporter John Alcindor. Diana great to speak to you on this. I mean there are quite a lot of issues at stake. Does it go back to how they started or does it impact how they'll carry on. It impacts both things. It's you know it's a probe not a probe

not only into the origins of the BMV token which is the fifth biggest in crypto. So it's a pretty big deal but actually into the origins of finance itself. Because the investigation is whether the initial coin offering in 2017 with the sale of the security that should have been registered with the S.E.C. and that's according to people who were granted anonymity to discuss the probe. But you know it's also probing possible trading abuses by finance insiders and whether American affiliate financed U.S. is appropriately hived off from global finance. So it's really into quite a lot of things related to a corporate operation. So Joanna what does this mean for the broader crypto world.

Yes. Well it means that you know crypto companies have to take the U.S. seriously about regulation and also the U.S. is often a bellwether for what other countries might do. And it's a reminder that countries are now serious about dealing with crypto and even things from prior years that you know companies might say oh well that was a long time ago. We're now doing things a different way. But it is a reminder that all countries are getting really serious about crypto and its impact on the broader ecosystem and even things from a prior period. Joanna thanks so much for joining us. Address an ocean over there on this wonderful and very important story which is a Bloomberg scoop on finance. Now Bloomberg Surveillance continues in the

next hour. Matt Miller Kailey Leinz in New York. Anna Edwards is you're in London and this is Bloomberg. There's no real reason to be worried about a recession. I'm not sure we've seen the high meals. We may go back and test those while we are factoring in this economic ratcheting down. We do want to take account of the fact that sentiment probably has know hit the parish as well. The market's going to settling down and being okay with what the piece it seems like what the Fed spends doing for the other central banks. They are still adjusting their guidance and that guidance is is unequivocally in the hawkish direction. This is Bloomberg Surveillance early edition with Anna Edwards

Matt Miller and Kailey Leinz ISE. It's 10:00 a.m. in London 5:00 a.m. in New York and 5:00 p.m. in Hong Kong on this Tuesday June 7th. Top stories today. A surprise move by Australia's central bank raises interest rates twice as much as forecast sending yields soaring. Meanwhile the ECB will lay the groundwork to join the global fight against inflation when it meets later this week. Boris Johnson manages to cling to power but his days as British prime minister may be numbered after surviving a confidence vote. Johnson will try to turn the page and Moscow appears to have

buyer's remorse. But that's not enough to get him out of the 44 billion dollar deal to buy Twitter. Welcome to Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Matt Miller and Katie Lyons in New York. And Katie we seem on a global level to be back to worrying about higher interest rates higher bond yields. Crucially what that's going to do to appetite for stocks. Yeah and of course what we saw out of the RBA overnight and it is

really just fuelling that narrative after that's the price 50 basis point rate hike that was double what economists were expecting the largest hike in twenty two years in order to rein in inflation. And the RBA saying there could be more coming. They're pledging to do what is necessary to rein in inflation. So that definitely created a drag on risk sentiment in Asia overnight. The MSCI Asia Pacific index as a whole was down the better part of 1 percent. But of course it was Australian stocks in particular really leading those losses. The ASX was down about one and a half percent. And of course you saw it really showing up in other asset classes as well. Big moves in the short end of the Australian bond market up about 17 and a half basis points on the two year yield to just shy of to eighty on that yield.

You also have the Aussie dollar was stronger against the US dollar earlier on now just fractionally weaker. While there is major weakness coming once again for the Japanese yen it comes back to that rate differential story of Bank of Japan keeping policy easy even as central banks around the world including the Fed and the RBA are getting more hawkish. So the Japanese yen at another two decade low against the US dollar. Right now trading at 130 to 77 now. And that rate concern really weighing on risk sentiment certainly. Futures are down right now. S&P futures off one third of one percent. And investors are buying bonds pushing

the yield down a little bit. But still it's over 3 percent still higher than where we were at this time yesterday. Three spots 0 1 5 9 9 ex crude changed very little from where we were yesterday. Still at around 1 19 a barrel right now. One eighteen fifty seven for Texas Intermediate and Bitcoin losing everything that we saw yesterday and then some. Right. Yesterday it was up

five percent to thirty one thousand change. Now it's back down 5 percent and changed to twenty nine thousand six hundred twenty seven. So it still is range bound and it looks like it really hits a hard limit up around thirty two thousand and down around twenty eight. We'll see if can move out of that range. Anna what do you see in terms of European movers the European equity markets then broadly speaking moving lower this morning mass again linked to that fear about higher interest rates setting. The ECB looms into focus on the horizon. That meeting coming up on Thursday laying the ground at least for higher interest rates. This is the picture across European stocks then right now. So some of the major markets are in negative territory in

France and in Germany. The London market doing a little bit better. A basic resources once again to the rescue when it comes to London and the different sector the sector makeup that is helping that. So basically resources up by six tenths of 1 percent. We saw the Bloomberg Commodities Edge index actually moving to a new all time high in yesterday's session. So working

that way through and some of those stocks that rely on those high commodity prices doing pretty well. Here's the pound. The pound down three tenths of 1 per cent against the US dollar this morning. We saw of course Boris Johnson keeping hold of control of the Conservative Party at least winning the no confidence vote. But 40 percent of his party don't have confidence in him. That leads to questions about how long he can stay in post. And so nervousness for the markets and nervousness for the pound

before just to just to go back to something we haven't don't talk about all that much. I guess at the moment that's anyway because of such full docility in markets. Certainly when we saw war in Ukraine start seeing that put an end to some of the emanate that we've been talking about. But before in the UK receiving a bid for a New Jersey based venture capital business. And it seems that recycling and waste management all very topical right now. And so that stock up by 27 percent as a result of that bid approach and say yes this is an airline over in Scandinavia. Scandinavia is largest airline. In fact the Swedish government has told the companies that they don't want to put any more money in. So the stock Katie down by eleven

point six percent. They will have to find alternative sources of income as they try to weather their way out of the global pandemic. All right. So some big movers on an individual stock level that will monitor throughout the trading session. As for what else we are monitoring today French President Emmanuel Macron will be meeting with Portugal's prime minister Antonio Costa at 7:00 a.m. New York time. We'll also be getting some U.S. economic data in the form of trade balance numbers. That's

at eight thirty a.m. Eastern. Then the World Bank will be releasing its Global Economic Prospects Report at 930 a.m. New York time. And finally. All day today it is primary day in many U.S. states including California Iowa Mississippi and New Jersey just across the river. All right. We'll be paying attention to that for sure. Now let's get back to the big market moving story. The RBA Reserve Bank of Australia surprised investors today by raising interest rates 50 basis points twice as much as had been forecast. The move sent yields soaring as predicted by just three of the twenty nine economists Bloomberg surveyed and

occur in Bloomberg's chief Asia. Economics correspondent joins us now to talk about I guess 50 is the new twenty five for central banks and a. It does seem to be the case the RBA certainly and them. This was all about energy prices. The statement was littered with references to how things are changing on the pricing front there

in particular even two only months ago the RBA said things had moved on faster than expected. They said they will do whatever is necessary to pull in inflation and more interest rate hikes are coming. They also talked up the economy. They cited a strong labour market. They said the housing market has come off a little bit but prices are still 25 percent above their pre

pandemic levels suggesting that the economy can take these interest rate hikes. So economists responded by ratcheting up their own rate hike forecasts for Australia. And only all indications are that the RBA is very hawkish on interest rates are going up. It's a question of at what pace from here. Yeah the rates may be very different ends up at the narrative so similar in many parts. Well thank you so much. Bloomberg Surveillance Current with the latest on Australia and linking to the global picture back to the UK. Boris Johnson survived a no confidence vote but his hollow win shows there's a war raging in

the Conservative Party. The vote saw 148 Conservative MP was trying to oust him. The vote in favour of having confidence in Boris Johnson as leader was two hundred and eleven votes and a vote against 148 votes. And therefore I can announce that the parliamentary party does have confidence. Bloomberg's Lizzie Burton joins us now from Downing Street. Lizzie a lot of talk today about a cabinet meeting that's going to take place whether we'll see a reshuffle of his top team whether we'll see policy changes introduced. But so much of this wasn't about the top team and it wasn't about policy. It was about the man at the top. Exactly. That meeting will happen in Downing Street no time

behind me now. Victory for Boris Johnson. But the question is how long can he hold on for. The current rules say that there can't be another vote like this for another year. Boris Johnson has come out guns blazing saying he wants to move on. But just look at the history books. Margaret Thatcher and Theresa May his predecessors lasted a day and six months after respectively after they won their no confidence votes. And actually Boris Johnson's rebellion was bigger than Theresa May's in 2018. Also

there were more rebellions rebels for Boris Johnson than his working majority before the vote last night. So they may try to stall his legislative agenda. Now if you add up the numbers it looks like many of them were on the government's payroll. What's most worrying for Boris Johnson though is the disparate random nature of the rebellion. You've got North-South left right. Brexit remain young old. It's not going to be as easy to tame as one rebel factions. So no wonder the runners and riders lists are circulating today. The surprise now would be for Boris Johnson to call an early election. That's all the markets care about really. But the focus now turns to the by elections on June the twenty third two on the same day one in the southwest

of England one up north in Wakefield. Both the conservatives are expected to lose. All right. Just a couple of weeks away we will all be watching with interest to see how those elections go. Thank you so much to Bloomberg's Lizzie Bert and outside Downing Street. Now from U.K. politics to U.S. politics it's another busy Tuesday for primary voting with elections across seven

states including California and New Jersey. And one issue on voters minds the gun debate. Jack Fitzpatrick Bloomberg government reporter joins us now from D.C.. So Jack Congress is back in session focusing on gun control legislation after a recent string of mass shootings here in the United States. Where do negotiations stand. They're still working and they seem to be pumping the brakes a little bit on the timeline. You know a little while back Chris Murphy who's the Democrat who had been taking the lead in these conversations had been saying they wanted to try to see if they could get a deal by this week. Some of the Republicans talking about this have slowed the timeline down a bit. John Cornyn from

Texas who's really been the Republican leader in these conversations is saying good late good legislating take some time. They're trying to make sure Chuck Schumer doesn't rush them does not sound like we're gonna have a deal this week but it has not fallen apart. However it is going to be a very very limited deal. If there is a deal. They're talking about things like state level red flag laws trying to strictly limit this to a measure that would focus on people with a criminal history or a history of mental health issues rather than for example House Democrats are going to hold a vote on something that would raise the age of purchasing a semiautomatic weapon from 18 to 21. That's not something that looks to have a much bipartisan support. So anything that would come out of the Senate would be quite limited. Jack inflation also obviously still in focus with the book out that Janet Yellen that says Janet Yellen urged Biden to reduce the one point nine trillion dollar stimulus package. Plus we had an opinion piece yesterday saying Joe Manchin his decision to go against a three and a half trillion dollar legislation looks pretty prudent from this vantage point. Yellen is going to testify before a Senate panel today. What do

we expect to hear today and tomorrow. She's talking to Senate Finance and House Ways and Means. Even aside from the book excerpt which Yellen has put out a statement denying saying she she liked the March stimulus. Republicans have hammered away at pretty much any economists any Democrats testifying in this kind of setting on the role of the March 20 21 stimulus and to what extent that has contributed to inflation. A lot of the conversation on Capitol Hill regarding inflation has turned toward the midterms. It's basically campaign season now. Not a lot of forward looking legislating but a lot of sort of litigating politically over the role of that law and how it has played into inflation. So I

would expect a fairly politicized debate and certainly some questions about that book and the assertions that she was on Larry Summers side all along. Jack thanks so much. Thing DAX Patrick in Washington. Now in a securities filing yesterday Elon Musk said he thinks Twitter is breaching their agreement by not meeting his demands for more information about spam and fake accounts. But behind the scenes both sides are said to be cooperating. Let's get the latest with Bloomberg's Dani Burger. Sometimes things look smooth from the outside but a chaotic within and sometimes it's the reverse. Yeah like the opposite duck effect where everything's busy. Up top but calm underneath the waters perhaps. But yeah. What a time to be. Elon Musk's lawyers. So we've talked about before how Elon Musk just complaining about the Twitter bots wasn't enough to terminate this deal. Perhaps he was trying to use it as a negotiating context. This was a

little bit more interesting because there's a covenant within the agreement that basically says that Twitter needs to supply Elon Musk with all reasonable information pertinent to the deal. Now Musk's lawyers are saying by not giving him the details

2022-06-09 12:20

Show Video

Other news