'Bloomberg Surveillance: Early Edition' Full (11/22/22)

'Bloomberg Surveillance: Early Edition' Full (11/22/22)

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This is Bloomberg Surveillance early edition with Francine Lacqua. Good morning, everyone, and welcome to Bloomberg Surveillance early edition of Francine Lacqua here in London. And here's what's coming up on today's program. Downshift to gains momentum. The Fed's Mary Daly warns about the lag effects of rate hikes.

While Lou Retton Mestre says 75 basis points is not needed, next month's RTX Fallout crypto firm Genesis warns of bankruptcy as it struggles to raise cash. U.S. prosecutors began probing Sam Vonnie Quinn empire months before its collapse. Plus, keeping the lid on oil sales as Saudi Arabia denies. Reports saying OPEC plus is weighing a production increase at its December meeting. Now we have plenty of stories to get her teeth into. But first things first.

Let's check on the markets, the markets a little bit, if not subdued, certainly mixed. When you look at European stocks overall, the 600 index is getting some two tenths of a percent. But, for example, the footsie is not doing the same thing as a CAC for you.

We'll get him to the European map in a second. Technology under pressure, down eight tenths of a percent. And the picture not only is what happens in China, but many questions as we have about three to four Fed speakers later on that could give us a clue on the path of interest rate hikes. And of course, the other story is oil bitcoin. Also, we'll have a full roundup of

exactly what's happening with that genesis going bankrupt, fifteen thousand seven hundred and three. What does it mean for the viability of crypto currencies in general for the future? All right. We talk about mixed stocks. So let's look at the difference, for example, between the footsie one hundred, where you see a seven tenths of a percent gain compared to the DAX two tenths of a percent higher. But actually it was a lot more mixed just 15, 20 minutes ago where you had some of the indices, including the DAX on the downside. Now a bit of a lift.

So we're definitely on to today's highs. The footsie may into the getting three tenths of a percent. So fresh turmoil in the world of crypto brokerage firm Genesis, warning that they need to file for bankruptcy. That's a big contagion from the rapid demise of FTSE, which has contributed to reduced liquidity in crypto markets. Now, the saga spooking investors with

Bitcoin trading around the lowest level since November 20 20. Well, joining us now is I Rarer Bloomberg's senior crypto editor. What exactly is going on? How many more companies could go under because of FTSE ex? We don't really know.

And that's what's spooking investors, I guess, is that people didn't really think that this could happen to the act. So someone told me this week, if you can trust RTX, who can you trust that now we're seeing something happening with Genesis. They're trying to raise and they've warned their potential investors that if they don't raise, they might have to file for bankruptcy. And that's scaring everyone a lot, because Genesis, you know, is one of the Hallmark crypto companies. They were a large brokerage. They brought in lots of like Wall Street investors into crypto. And so then they became a lender.

And so if they go down, you know, they are everybody's counterparty, which means that someone else might collapse and that sort of a chain that might never, never end. And then I know we're trying to get to the bottom of exactly what happened at FTSE. When do we find out? I know there's investigations. Regulators are looking into it, too. So everybody seems to be looking at it.

Regulators in the US, even the company itself, now they have a new CEO. They're trying to figure out what happened exactly if customer funds were used in sort of illegal ways, how they got into trouble in the first place. If it was like a trading hole. So, you know, it's so much is known, so much has been written about this company, but so much still has to be figured out. And what happens next set in terms of timeline. What are you looking at for the next couple of weeks and then months? Obviously, we're looking at Genesis now, seeing what happened there. And then, you know, we've already seen

that from Genesis. There've been a sort of contagion into Gemini, the trading platform owned by the Winklevoss twins. They had to stop redemptions on their lending on one of their lending products. So I guess we're going to follow and see sort of everywhere, really. There were also lots of hedge funds that had accounts with FTSE. So we're going to follow there and see who some of the biggest creditors might be.

There was a list that came out, but it was redacted. So we don't really know who the big creditors are. I'm not. Thank you so much. NARRATOR Bloomberg Markets, senior crypto editor, of course, on the fallout and the story that just keeps on unfolding in unexpected ways.

Now we're also joined by Hannah Smith, vice president for State Street's ETF business. Hannah, thank you so much. Every time you come on, there's like a big news story. So I was thinking like, you know, Hannah's coming home.

What's it today? Do you have any exposure to crypto through any of the ETF funds? No. We are so. Well, firstly, I get. Good morning, Francine. Thanks for coming on the show. We don't have any exposure. I think what we're seeing at the moment is there's still quite a lot of uncertainty within the crypto market. So I think it's you know, we have to see how it plays out and what the implications are. So today you look at markets, again, a

bit of a mixed bag. Like we often have when you have a lot of Fed speakers and then the focus is on China and what happens at the old price. Like, what do you think will be the driving momentum for the markets? I think the market. LIBOR, the central banks have been

driving a lot of the volatility that we've seen and they've been really focused on bringing down inflation. I think what we're expecting is that's going to actually shift soon and to more of a growth focus. The slowdown in growth and the implication that that's going to happen. So we sort of expect that rates are likely to peak in Q1 2023 and then we're actually anticipating cuts typically 25 to 30 weeks after that. So around Q4 2023, that's our expectation. And so given all of that, where do you put your money right now? What seems good value? Yeah, I think it's really difficult right now. I think at the moment what we're

recommending is to have underweight in equities at the moment. Equities aren't actually really pricing in much of recession risk that the PS is still quite toppy. And so we would recommend sort of being underweight in that area, overweight cash given the yields that we've seen there. And obviously commodities given the inflation environment, it's a similar story to what I discussed last time, but commodities as well, overweight cash dollar. Yes. Yes, exactly. Just at some point, the dollar. And there was talk about that.

It kind of reaching peak and then slowly coming down. Is this the time for it? Yeah, I think it's. I think given the weaker CPI number that we saw coming out of the US, it definitely feels like we may have reached the peak. But obviously, one data point doesn't create a trend.

And so we still need to see what the subsequent numbers are. And given the volatility that we've seen within the CPI print, I think it's challenging, but we do definitely think that we are starting to reach that peak right now. Is there a misunderstanding of the markets that they see actually peak inflation? And is there maybe a belief or a warning for inflation to come down more quickly? And you have fed speakers, you know, they keep on saying, yes, we'll have to raise interest rates again, maybe not as aggressively, but if we were going to hit that hard target, it'd be quite painful. Yeah, I think there's obviously a huge focus on peak rates. And I think the market is really on tenterhooks every time we have a CPI print because it's really dependent on the performance of many asset classes rates and what the what the path is going to be from here. As I mentioned, I think that we are coming closer to that point and I think the time to go pro risk is probably when the curve, the yield curve starts to flatten. It's still inverted and typically it

stays inverted for three to five quarters. So we would expect it will probably flatten around mid next year and that would be when would be the time to go progress within equities. So the Fed obsession is that is not abating any time soon? No, I don't think so. Wherever the Fed goes, the world leads. And so obviously there's a huge focus on the Fed and there should be. They've been laser focused on bringing down inflation. And, you know, that's their job, that's their credibility.

And so the market is going to be watching that with a keen eye. What do you make of the yield curve? I think on the yield curve at the long end of the curve is now looking very attractive. So given where rates are at the moment on the 10 year, I think that that's kind of where the spot is, particularly if we're now reaching peak rates and when it comes to China. So again, we had the surprise that the market was pretty happy that it was opening and maybe we could have a more stable or certainly putting aside the zero Covid policy doesn't seem the case. Yeah, it's interesting. I one of one thing that we say regarding

China is watch what they do, not what they say. And so obviously last week we saw this rhetoric that perhaps there'll be a more soft approach to the zero Covid policy. And now that seems to change given the death that we saw more recently related to Covid.

And so I think China's interesting. It's obviously trading very cheap versus the developed markets. Emerging markets in general are trading, I think on the debt side, a 95 percentile. So they've only been chief of 5 percent of the time. And on the equity side, at a 40 percent discount to develop market.

So that's definitely attractive valuations. But as we know, with emerging markets, valuations aren't enough of a catalyst. We have to see that zero Covid a change the zero Covid policy in order to give investors some some reassurance that, you know, that that's not going to continue to damage the economy. So you're not playing the China market,

right? I don't know. Not at the moment. Is there anything else in emerging markets that looks attractive? As you say, it's not all about valuations. It's also the path forward. Yeah, absolutely. I think if if investors do want to gain exposure to emerging markets, then LatAm, where that huge commodity exposure exporters and so they can benefit from the rising commodity prices. So that would be the area with an emerging market which looks more attractive.

But obviously investors have to have the risk appetite for it. Yes, they certainly do. Thanks so much, Dennis Smith, the vice president for State Street's ETF business stays with us. We'll talk about the UK and the EU shortly. Coming up, Fed officials have broadly maintained their steadfast stance in the fight against inflation. JP Morgan's Kalina, though, sees more downside risks until the Fed stops hiking.

We'll discuss more of that next. And this is Bloomberg. As we work to bring policy to what we call a sufficiently restrictive stance, which really in simple terms means the level required to bring inflation down and restore price stability, we will need to be mindful, adjusting too little, believe inflation too high and adjusting too much could lead to an unnecessarily painful downturn. Well, that was the San Francisco Fed president, Mary Daly, speaking about the potential impact of Fed policy. Her Cleveland counterpart read a Mr. Said she's open to slowing the pace of rate hikes. And then JP Morgan's kind of it says the Fed will have to start reducing interest rates for there to be sustained rally in risky assets.

But that's not likely in the near term. We're back with House Means Vice President for State Street's ETF business. And we're talking a little bit before about inflation dynamics in the U.S.

and the fact that, you know, you said rightly so, that one CPI number in October does not make a trend. It seems that inflation in Europe would be stickier anyway. Is that a fair assessment? Yeah, definitely. Obviously, Europe has the implication of the Russia Ukraine war. It's more heavily felt.

And so the inflation there is definitely going to be slightly more stubborn than than what we're seeing in the US. So are you buying any or you you know, should clients be exposed to European equities? European equities are actually really interesting because if you look at the valuations that currently trading at a 35 percent discount to the US, the average is around 70 percent. So if you look at that, it's we believe that there's more there's a significant amount factored in for the Russia Ukraine war. And so it could it could pose an attractive entry point. However, there is still a lot of uncertainty related to Europe. So, again, it depends on investors and

their risk appetite. But it is one to watch what's right entry point. I mean, how do you call it bottom giving all of the uncertainty. And this is that this is the million

dollar question. I think it's as I mentioned earlier, the peak rates could be, you know, within the US could signal an interesting point at which to to reassess. That would be the U.K.. There's been so much going on. I know every time there is a prime minister leaving or so or something happening, it is now because of the, you know, I guess stabilization to some extent with the fiscal autumn statement. Is it a good time to come into the UK

assets? Yeah. UK assets have had a really good run this year. And the reason for that is because they're very defensive in nature in terms of the sector allocation. They have also have high exposure to energy consumer staples as well. In addition, the portfolio pound is

beneficial as 18 to 80 percent of companies generate their revenues overseas. So the UK is a good defensive play and it has performed relatively well. What's your world of the ETF right now? There's always a guess for four years. So much, you know, copy written about the fact that's the because of the tax incentives in the US. It's just such a bigger market compared to Europe. Are we catching up? Yeah.

Europe's definitely catching up. I think what we're seeing within Europe is that the investors are utilizing ETF because of their liquidity, and particularly during this year where we've seen so much volatility when the VIX spikes, we do tend to see more flows into our ETF range. For example, after the CPI print, the US CPI print, we saw two point seven billion inflows into the ETF usage. So European domiciled ETF space. And so it definitely does respond. So how is it changing the nature of the market? I think that it's providing additional sources of liquidity. So, for example, in the fixed income

space, I'm trading fixed income ETF. They trade in today. They trade on the secondary market. And so what we're seeing is when investors want to enter our exit the market quickly or if they want to make tactical bets, then they utilize ETF to do that because they're able to trade relatively quickly with these. And also the price point is attractive for ETF as well. All right. Thanks so much, as always for coming on. How to their vice president for Seed Street's ETF business. Now coming up, chaos at Twitter leads

Tesla into a tailspin. More on the world's richest man and his company is next. This is Bloomberg. Economics, finance, politics. This is Bloomberg Surveillance early edition on Francine Lacqua here in London.

Now let's get straight to the Bloomberg first, where news here is Atlas that gets High Flyers. Hi, Francine Lacqua. The restrictions now weigh on a fifth of China's economy as infections continue to rise, undermining Beijing's call for more targeted Covid 0 measures. More than 27000 new cases were reported on Monday near a record with the southern manufacturing hub of guns out. The current epicenter. Many local authorities have been expanding testing and shutting schools and offices. Despite recent directives to ease measures, Malaysia's king has summoned political leaders for an audience at the palace later today. Lawmakers from key bloc Parasite National earlier inform the monarch that they don't support X Premier Mujahidin Yassin as Malaysia's next leader. The country's politics were thrown into

disarray after the weekend snap polls led to a hung parliament. Italy has approved a 35 billion euro budget law for next year, including plans to raise a windfall tax on energy profits. The new budget, the first by Georgia Maloney's right wing government, will increase the windfall tax rate from 25 to 35 percent. Over 20 billion euros will be allocated to relief for families and businesses facing high energy prices. NASA's new Orion crew capsule has come within 18 miles of the moon. Its path took the spacecraft over the Apollo 11 landing site, where astronauts first touchdown down on the moon in 1969. NASA's unscrewed Optimus 1 mission

launched from Florida last week and a first step toward sending people back to the moon. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred, done less and less and more than one hundred and twenty countries. This is Bloomberg. Francine, I was thinking so much now.

Elon Musk has laid off more Twitter workers from sales side of the business, further trimming a headcount already diminished by cuts and resignations elsewhere for Musk. Well, signs that China's increasing Covid zero curbs rather than moving away from them is adding to a litany of investor worries over Tesla. Joining us for more on Tesla's Bloomberg's Global Auto sorry, Craig Trudeau. Craig, I mean, what is going on with with, you know, Elon Musk tweets? But frankly, I just don't have the time. He's on it all the time. And Tesla is not doing great. Yeah, I think the highly mine CEO giveth

and the highly online CEO taketh away. Right. I think, you know, absolutely. China is a big concern for them. They've had to cut price recently. And there was this sort of bearish note late on Friday that maybe there's there's sort of, you know, concerns were swirling in the market about the need for further price cut. Yes. We're seeing it become an even more competitive market with even Mercedes last week doing a big price cut.

And I think, you know, that the sort of amount of tweeting that he is doing is it's just a very obvious signal to the market that he's extremely distracted and has his hands full with Twitter. Yeah. So if you're a shareholder, you're probably not all that happy with your Tesla stock right now. What do you do about it? You're not. And you're asking increasingly for for a stock buyback. That's been the sort of buzz of all

places on Twitter. You know, Ellen's fans asking for the company to consider a big buyback. This was actually something that came up on the earnings call last month. And Ellen addressed it in a highly unconventional way, sort of openly talking about the idea that the board is deliberating over this, the possibility of a five to 10 billion dollar buyback being something that could be done. But he's also more recently referred to

the idea that this is up to the board. So he's sort of deferred to them. So what kind of timeline are we talking about if there is a potential buyback? I think, you know, the the comment on the earnings call was 20, 23. I think, of course, that's going to be dependent on just how confident, you know, management and the board are about cash flow and sort of the state of the business. And so, you know, maybe this is a way for for the board to signal confidence. But also it may be a little bit of, you know, sort of there may be a bearish takeaway from this that, you know, the stock that the cash couldn't be put to use, you know, in other ways.

So it could cut both ways, whether they do this or not. You know, actually Elon Musk and how he thinks any more than most. What's his strategy right now? I know every time I ask a difficult question also, which surprises me on Twitter, there's always someone on Twitter that, you know, tweets at Elon Musk as if he was going to tell us off like it is. He now become kind of the policeman of the world on social media. I think he he thinks that he seems to obviously think that he can cut to the bone here without really damaging the service. And, you know, even if it's a sort of,

you know, car crash that he is putting on, it's going to attract eyeballs. I think the thing that breaks down for people trying to understand what he's doing here is how. He's going to turn this into a business that advertisers are interested in. I think, you know, there are people in

Silicon Valley who are willing to work for this guy, even if it is, you know, a really difficult environment. Clearly, he's he's pulled this off before. But the big question at this point is, you know, how the heck he's going to get advertisers back on the platform. Is there a danger that actually if he focuses too much on Twitter, then he forgets the rest? Absolutely.

And I think there's a question of, you know, does he need to bring in help for one business or the other? Because he'd clearly there's a confidence problem on the part of both of these companies and the sort of intermingling of them. Craig, thanks so much, as always, for coming on. Bloomberg. Global Autos SA Haidi Lun Musk Whisper Crater. Coming up, we talk about the growth of gaming and sports with the co-founder of Games Workshop. Su Keenan Livingstone. That's coming up next. And this is Bloomberg.

Downshift gains momentum. The Fed's Mary Daly warns about the lag effect of rate hikes, by the way, the maestro says 75 basis points is not needed. Next month takes five crypto from Genesis, warns of bankruptcy as it struggles to raise cash. U.S. prosecutors began probing some banking fleets empire months before its collapse. Plus, keeping the lid on oil. Whipsaw says Saudi Arabia denies reports

saying OPEC plus is weighing a production increase and its December. Well, good morning, everyone, and welcome to Bloomberg Surveillance Early Edition on Francine Lacqua here in London. Now let's turn to the U.K. prime minister, where she soon CAC addressed a meeting of the country's biggest employers yesterday, doubling down on break on his Brexit to your credentials. Under my leadership, the United Kingdom will not pursue any relationship with Europe that relies on alignment with EU laws, having the regulatory freedom to do that is an important opportunity of Brexit.

And that's my agenda. And I'm confident that that agenda is not only right for the country, but can deliver enormous benefit for people up and down the UK in the years to come. So we'll get it back, of course, to Birmingham and the CBI. It's now talked to a living legend of a

global video game industry. He's Ian Livingstone, who received the knighthood for his services to the UK's gaming sector earlier this month. He co-founded two billion dollar game companies, Games Works and a DOS, the latter, the company behind Lara Croft, Tomb Raider, now an angel investor.

Ian is general partner of the Gaming V.C. Fund. Hero Capital. And we're very pleased to welcome him on Bloomberg Surveillance. Early Edition Shery Ahn. There's so much to talk about. First of all, thank you so much for coming in.

Look, the gaming industry is one of the big booms that we've seen over the last 10, 15 years. If you're a gamer, you live it. You breathe. You don't talk about anything else. Maybe for outside investors, it's not something that you spend a whole lot of time on. How does a metaverse change this? Well, the game's history is as risen to stay waste 250 billion dollar a year industry. Some 3 billion people play every time as an advance in technology, offers a new platform for games to be enjoyed.

So it was originally pieces and consoles and Facebook became a platform. Smartphones, tablets, smartphones obviously became a huge platform for casual games. And then these VR AR E sports and now we're talking about the metaverse, but it's the games in that's actually built the metaverse. Games like fortnight where you don't just play together, you hang out together, you can transact together. You can go and watch a Travis Scott concert together.

Yeah, cause it together. So it's a place where the digital world can meet the physical world. So how much bigger do you think the game industries can actually be in the next five, 10 years? The numbers, were we overoptimistic about how big it could get and how quickly are we underestimated? I think people have always been surprised that, I mean, no one talks about it because we don't have celebrity like film or TV or music. There then no kind of video game stars are all virtual. And in the UK particularly, we create some of the biggest franchise in the whole world. But people don't know that. They think they come from the states or

China or Japan. But it's set to grow because it speaks to generations Z because everything they do is interactive. The British for use of social media, they live their lives together with their friends. And guess what? They want to know? It's time to be interactive. So of course, game speaks to that. It could give some agency control, so they want to be in control of their same as well as instead of just being a kind of passive passive reception of whatever you your fed by a director.

When you started the Games workshop, I know you were talking. You like what it was like. It was tough, right? For a couple of years. But what did you see in the future so

that others didn't? Well, we started off in 1975 and we kind of made it up as we went along. Loads of mistakes and delivered a band for three months. You go to a bank manager, say, I've got this great game as a role playing game and he looks rather like a dog. Watching television has no understanding whatsoever what you're talking about.

But we were passionate about the play. I mean, when you arrive in this world as babies, you interact with that world. You learn through play. And I think it speaks to us as human beings.

That's kind of social aspect. So I could see that the game just it was bound to grow. Once you've got enough games of that spoke to embody the pace of change is incredible, right, in the gaming industry of the last ten years because of our devices and VR and things like that. Is that pace of change going to increase even more? And what does it mean for for putting capital at work? Where were companies who will become the next big thing? Well, there's been a disconnect between the makers and the money. I think I don't think games come as well

as being investor ready. They don't have to speak to the money. And I don't think the money really understood what good looks like. So I think there's a much, much greater engagement because now what makes a good game? Investors don't really know whether it's about investing in teams, not just the game. When people ask me what's the three most important things about a game was a gameplay. Gameplay, gameplay, technology and graphics play a critical but supportive role. Plus, the team is so important. Those who've actually done it before got

some skin in the game because technology got some intellectual property and they've failed before. And so you leverage all the expertise and likely as not, they're going to be successful one day. So if you're a good investor or you're either a gamer or you have and you're close to sanity, someone who can test games for you, you don't have the next big thing. You don't have to be a game where you need to have somebody on your team who really understands that. I mean, it's there are there are incredible success stories.

There's a company in Winslow that I've put some seed capital into called play that MCC is generating two in a million dollars top line revenue per annum, 100 million a bet. And the companies ultimately sell its electronic costs, one point three billion dollars. Only 80 people in that company. I don't know of any other industries where 80 people could generate that kind of enterprise value and so post Covid.

The Games and it's all the right boxes for success. Intellectual property creating high salaries, high tech regional space. The government's wish is an instant export story because it's access global markets to whatever. There's just no red tape, right, to export it because it's on digital platform. Exactly. So you can connect dialects of kind of

business to consumer propositions. It is a UK losing its star somewhat that used to be. Or have a lot of developed results from the outside. And I don't know whether it's a cost of living crisis, you know. Brexit, maybe weaker pound that will

hurt that. Well, the games industry in the UK has always been successful as some 2000 studios here. Most of those are micro studios, but some of the biggest franchises, well, from Grand Theft Auto to Tomb Raider to full guys to Golf Clash have all been created here. The common denominator, sadly, might,

some might say, is that they're all foreign owned. So whilst it secures inward investment and jobs, a lot of the prophecies banked overseas. So I'd like to see greater investment in the UK in particular so they can go further up the value chain of IP ownership. What's your favourite game right now that we haven't heard of? Well, that's under Christmas.

That's the passing was my favourite child. I mean, I'm old so I can only play started the games. I play games like civilization. There's a lovely little pixel game called Kinsey coming out soon than usual hits.

It will always be the new fee for games of extraordinary. It's whatever you whatever you enjoy playing yourself because it's where this single player most play and whether you won dexterity or just strategies. It's up to you. There is something for everybody now. As a venture capitalist, how hard is it to have one game that's very popular for a company to come up with, one game that's done amazingly well and then to build on that successes? Some of the companies are a one game wonder. Yeah, but it is a great one to me. I mean, games like Candy Crush and The Clash of Times, they've been running for 10 years now. So it's games as a service and they're

optimized over time through analytics and data. So understanding consumer behaviour, improving the monetization, the retention and making give them more of what they actually enjoy doing inside the game. You couldn't really move it from being the risk profile of the games has just changed dramatically because you used to be a premium price product in a physical box managing the supply chain to get to ultimately to a consumer on a retail store.

And if that game wasn't as good as people expected it, come back in to ads. Now you can address the global in the global markets and get run game to service, optimize it through data and you can get 2, 3, 4, 5, 6, 7 years of revenue out of that game in WhatsApp groups of mothers all over the world. One question is how do I get my kids off some of the game because they want to do it 24 hours a day. It's early advice. Like what? What happens with anything you enjoy? Do you want to do it a lot? I mean, I know people who play golf seven days a week if you had them. You have to manage people's time.

It's the responsibility of adults in particular to manage their child's activities. Do you see China coming back? And actually, there was a lot of regulation for Chinese to limit the amount of time they spend on screen, on gaming. Do you think that it will reverse at some point? Yeah, absolutely. Definitely. I mean, I know several Chinese games companies, Tencent in particular, because they acquired Seabed Group, which I was chairman up until January this year. And there's definitely a mood now to to

relaxing those constraints. All right. Really interesting. Sir Ian Livingstone, thank you so much for joining us today. It's just one interview of went to CAC, co-founder of Games Workshop and general partners at Heathrow Capital. Now, let's get back also to the CBI conference. Bloomberg's Lizzie Burton joins us from Birmingham.

Lizzie, opposition Labour leader Keir Starmer as treasurer to address the meeting today. So what's he expected to say? Yeah, this storm is about to speak any moment now from seed, and he's expected to say that the UK is overreliant on immigration to boost its growth and therefore he wants to end this era of low pay and stop the reliance on cheap labour. But of course, we've heard this time and again, in fact, from various conservative prime ministers.

So the question really is going to be, how can he do that? Can he convince the roomful of business leaders that he's got a plan to make things any different? And in fact, I was speaking to the CBI president, Brian McBride, earlier. He said that we do need some low skilled labour in the UK like the baggage handlers. And he also said on the growth question that Labour would face many of the same fiscal constraints that the government has faced. And that means it's going to be even more difficult to balance fighting inflation with driving the economy. But growth is what the CBI wants to see. Lizzie, thanks so much. Lizzie Borden there at the CBI conference in Birmingham. Coming up, it's the circle of life.

Bob Iger takes his first hits to reshape Disney after returning as chief executive officer. We'll have all the details of the turnaround. That's coming up next. And this is Bloomberg. Economics, finance, politics, this is Bloomberg Surveillance, the addition of Francine Lacqua here in London, not a whole new world at Disney. Well, Bob Iger got straight back to business after making his surprise return as chief executive, taking the first steps to reshape the media giant.

Now for more on all of this is Alex Webb, who leads our tech media coverage for Bloomberg. Quick take. I dare you to sing all of us. It's a brave new world. Tell me, Alex, when you look at it, it feels like actually he has a plan and he needs to strike hot. What does it tell you about what's been happening in the last couple of months? Well, it hasn't been shining, shimmering, splendid. It's simply that they say, like, look, what's happened is that in the earlier in the pandemic, activist investor came in set to Disney. You need to cut the dividend, invest that money in content for Disney. Plus, Netflix is trading at 50 plus

price to price to forward earnings. Disney was trading at 25 ish. In doing so, it became a growth stock essentially, and its earnings valuation overtook that of Netflix. Now, since then, we've seen growth stocks punished as interest rates go up. Netflix has come down. Disney has come down with it. At the same time, there's been a huge amount of internal disgruntlement, partly because creative decision making has been taken away from TV, studio leaders, films, you do all that sort of thing. So what the first step we're seeing now from Iger is giving that back, not back. So that was a mistake.

So says this basically him trying to fix the mess of the person that's been charged for two years. Is it different strategy? It seems as though he's kind of righting the ship a little bit. There are two pieces to this. He does, as I alluded to, the kind of investor element. They've lost a little bit of confidence in the company. At the same time, internal morale also

been suffering. So what we've seen now, he's letter to a memo to employees, which went out yesterday. Bloomberg obviously got it. It's fixing the second piece. It's fixing the internal morale. What then happens on the investor side?

We're yet to see. You know, Disney had completely scrapped the dividend. It's being reintroduced. It's about 20 cents per share at the moment.

Previous year prior to the new strategy where they pivoted towards Disney, plus it was close to 90 cents. The question is now whether Iger continues to invest in Disney parks and just sells the story better or it reinstates a high dividend. But is that so? Is there a problem going forward? And you know, Bob Iger, we saw the share price up 10 percent yesterday now. So intrinsically, you know the name of

Disney, that is going to be difficult going forward to recruit anyone else? Not necessarily. I think Disney is still the biggest studio in Hollywood. Has Fox all these Fox assets as well. It's got these vastly successful franchises.

The difficulty they have is that the old cable model, which is really what printed money for them, ABC, ESPN, where the hugely profitable parts of that business. One of the reasons those things are so profitable is because of the way the cable works. You'd have 18 to two month, two year contracts.

That money would flow through the cable operators to Disney. Now, with the directors just customer streaming service from month to month, the customers can churn out. They can say, actually, you know what, I don't want Disney. Plus, that means you've got to invest

really heavily in content to keep the bait going to real demand and ensure that continuing to pay for it. Let's go with Bob Iger back. Does it put much more pressure on rivals? I potentially like, you know, that ultimately there's a huge bond fight for the best IP, the best intellectual property in terms of scripts, director's talent. Disney is the big beast in the middle of that. It's maybe had a slightly rough few months, but, you know, ultimately shape it wasn't in the job that long. And if you think about the cycles, how long it takes to make a movie, there could well still be films that are yet to be released that were ultimately greenlit still by Iger a few years ago. So, you know, he's not really been that

long enough to cause substantial damage. Brilliant. Alex, thanks so much. Alex Webster, who leads, are taking media coverage for Bloomberg Quicktake and did not break into song and dance. Let's get straight to your Bloomberg business flash. Here's Alyssa Watkins. Hi, Alice. Hi, Francine. Suction and Alliance Bernstein have

agreed on a partnership that merges large parts of equities trading businesses. The joint venture will be run out of London under the Nat Bernstein name and will unite the Cash, Equities and Equities Research Unit of the two firms. The French bank will hold 51 percent of the new business. Elon Musk has laid off more 20 workers from the sell side of the business, further trimming staff already diminished by cuts and resignations. Last week, the billionaire ISE Black is to commit to his more hardcore version of the company or leave the business.

Almost 5000 staff have quit open fired since Musk's takeover. Adele is to sell off assets worth 21 billion euros to cut debt. Italy's biggest power company has maintained its adjusted net income target for next year between six point one and six point three billion euros. The company had already reduced its guidance for this year, citing the effects of the energy crisis in Europe. And it was debt hit, a record of only 17 billion euros at the end of September. That's your bringing business class.

Francine, thank you so much. Coming up, we're back in guitars. Controversy continues to cast a shadow on the football World Cup. This is goodbye.

Economics, finance, politics. This is Bloomberg Surveillance Early Edition and Francine Lacqua here in London. Now, the first full day of the 2022 World Cup and guitar saw Iran versus England, the Netherlands against Senegal and the U.S. played well. So the tournament in full swing, but not

without more controversy. Well, Bloomberg Simone Foxman joins us from DOE announcement the England Iran match was a key focus yesterday. How did that play out? Yeah, well, there weren't signals of support for LGBTQ after those arm bands were bands as rainbow colored armbands were banned. But we did get a surprising show of support from the Iranian team for demonstrations back home.

The team did not sing the national anthem. Perhaps we should have known this because the captain on a Sunday night press conference mentioned how he wanted the team to be a force for good. But many of us surprised watching this to see so stark a statement from a team that's so typically been associated with the regime and in the stands.

And we got a measure of how much of the protests are impacting the spectators as well. Many came out with Persian flags. Some of those Persian flags were confiscated. It sounds like others were singing the Persian anthem note, not the Iranian anthem. And then others had banners reading Women, Life, Freedom, the Act, the slogan that has been so closely associated with those protests just across the pond in the Persian Gulf.

Just across the Persian Gulf, over in Oman. So similar yesterday, we saw seven European teams tell us they wouldn't wear rainbow colored armbands, which is exactly what you were just talking about and walked us through some of the reasons for that. Overall is a sense that the tournament and guitar will just crop up with controversies every day or are we expecting things to settle down a bit? Yeah. On this issue, particularly shows of support for LGBTQ rights. I think this is one we may start seeing

again and again. So we talked about that. Our main story, how free FIFA essentially threatened sporting sanctions for players who wore these armbands. And then we heard about the situation of several fans who were turned away from the particularly the USA Wales game for wearing rainbow colored hats and a shirt with a rainbow on it. It doesn't seem right. Organizers have said these displays should be allowed within the stadium. But what we're clearly seeing from security is that that is not necessarily being enforced. I've also heard perhaps of some scuffles on the ground essentially around this issue.

I think this is the issue that's going to crop up as more people pour into Doha as it gets busier here. Suzanne, thanks so much, Simone Foxman there in Doha with the very latest now. Bloomberg Surveillance EARLY EDITION continues in the next hour with Matt Miller and Kailey Leinz in New York. Anna Edwards in London. Now, the picture for the markets is an

interesting one. So let's see if we can get the boards up again. Quite a lot of Fed speakers over the next couple of hours. Now, because of this, we started the day with a mixed bag in terms of stocks. Now, if you look at what the momentum is for, a lot of stocks are gaining. All majors are also rallying. The European stocks, 600 overall, gaining nine tenths of a percent.

Shell, BP amongst the biggest drivers. I'm also looking at, for example, U.S. premarket trading zoom video falling, though, after reporting slower sales and trimming its full year revenue forecasts. A dollar weakening against all major currencies. Treasury yields declining. The other thing in focus is, of course, these Fed officials broadly maintaining their steadfast stance to fight against inflation. But we heard from Red Ambassador and Mary Daly. So the San Francisco Fed president, Mary

Daley, saying that officials need to be mindful of the lags in the transmission of policy changes. Her Cleveland counterpart, Loretta Messer, thinks she's open to slowing the tempo of rate hikes. Let's also have a look at some of the groups that are on the move the most. It's very clear that oil coming up trumps when it comes to some of the biggest gainers that are on the move. Gold also rising on the weak dollar, of

course, cryptocurrency, cryptocurrency. I mean, where do we start? Cryptocurrency. Our biggest story of the day, prices there a little bit mixed. Investors bracing for more ructions as further digital asset sector bankruptcies could be looming following the demise of FTSE Energy. Coming up, Trump Basic Resources, Travel and leisure getting between three point eight and one point four percent. I only see consumer goods slightly on the downside.

So it does seem like there's momentum picking up for a lot of these stocks in Europe. We'll have a full roundup not only of the Fed speakers, but also on markets throughout the day. This is Bloomberg. Crypto going down will be sub ten thousand on Bitcoin.

I think that actually potentially happens even this year. It's the lowest it's been since 2020 and I think it's the highest it's going to be for years to come to bash. The overwhelming majority of participants in crypto are speculative investors who are just looking for a quick way. We've seen a failure of the financial

services industry around crypto and that looks like a liquidity crisis and liquidation cascade. It's extremely damaging, but it is not reflective of the underlying economy that's being built in crypto. This is Bloomberg Surveillance early edition with Anna Edwards, Matt Miller and Kailey Leinz. It's 10:00 a.m. in London, 5:00 a.m. in New York and 6:00 p.m. in Hong Kong. Top stories today. More fallout from the collapse of FTSE digital assets.

Brokerage Genesis is warning that it may need to file for bankruptcy if it can't raise new capital. Societe Generale and Alliance Bernstein are teaming up in a new partnership. The two will merge large parts of the equities trading businesses. And Bob Iger takes his step first steps toward reshaping Disney ICA once his deputies to rethink the corporate structure. And he announces that a top manager is leaving. Welcome to Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Matt

Miller and Kailey Leinz in New York and Kaylee. From European markets perspective, a focus very much on oil prices and oil stocks. Crypto stood in the headlines, but the macro backdrop still very topical. Yeah, and on the subject of that macro backdrop, Anna, we are just getting some breaking headlines out of the OED, publishing their new growth forecasts for 2023.

They expect growth to slow to two point two percent next year. That's down from three point one percent forecasted for 2020. To and of the big G7 economies, they expect the U.K. growth forecast will be the weakest over the next two years.

The chief economist at the OED saying that fighting inflation still must be the top priority, even as we are faced with slowing growth and goes on to say that further monetary policy tightening is, quote, essential. So, again, two point two percent growth forecasted for next year from the OED. And of course, the growth picture in China in particular is what Asian markets continue to focus on. As was the case overnight, where it

really was a mixed session for equity markets. You had markets like Japan higher, which lifted the MSCI Asia Pacific Index higher by about four tenths of a percent overall. But still seeing the weakness in Hong Kong and Chinese tech stocks listed there, especially the Hang Seng Tech India Index, down about 3 percent overnight. Interesting to see, though, that the yuan is still strengthening against the U.S. dollar today, although pretty much everything is stronger against the US dollar on this Tuesday morning than you on stronger by a little more than half of 1 percent to just shy of the 714 level to the dollar and the Japanese yen strengthening as well. Trading at 140, 128, man.

All right. I'm taking a look at S&P futures that are climbing by a bit right now, just up about a quarter of a percent. A lot of green on this screen. But don't be fooled because on the second row here, we have a color that should be red, actually basis points at three and a half basis point drop on the 10 year yield down to three seventy nine thirty two. Of course, that's green because bond traders want to know if their price is going up or down. But this is showing the yield with a down arrow.

IBEX crude right now up half a percent. We're seeing Brent rise about half a percent as well. Not huge moves in the energy sector sector if you look at it from a zero basis.

But if you look at the big swings that we've seen, it makes a huge difference, which is why and I'm sure you're focused on energy being a huge gainer in the European market. Interestingly enough, if you look at the stocks, six hundred tech stocks are down. So that doesn't fare well for U.S. futures. Even though we have U.S. cash rate, even though we have a gain in

futures, Bitcoin right now is up about a third of one percent, but still at fifteen thousand six hundred eighty one. So this is the lowest level, as you heard Patrick Armstrong saying, sort of gloating about at the top that we've seen since 2020. But it's crazy because to me, it feels like we should be at a decade low. Right. We're only at the lowest level that we've been in two years on Bitcoin.

So even though we're down under 16000, it just doesn't feel that bad to me. What do you see in terms of Europe? Yeah. Let's have a look at the European picture. As you rightly point out, that a lot of focus on energy names the bright green of Spain down here, the UK also not doing too bad. And both of those have some weighting towards energy stocks, in particular energy names on the rise, because, of course, we saw that wild swing that Matt was talking about there in oil prices yesterday around the time that European equity markets were closing up. And so Europe has some catching up to do

perhaps on that. But also European equity markets were more lackluster than they are since we've seen U.S. futures pick up a little bit. That has allowed risk appetite to

increase here in Europe as well. Let's have a look at where we are on energy stocks, then up by three point seven percent on those energy names as we've seen the oil price. And this is Brent here. Eighty seven seventy three. We dropped as low as 82 in session yesterday on those reports around whether Saudi Arabia was going to increase production. Saudi Arabia came out and denied that, said no way. We're not planning that.

An opiate class is, of course, biased towards cutting. That has been the most recent action. We have a meeting from them shortly. So that is going to be the focus of things so that taking the oil price back up to where we started, essentially backups. Eighty seven dollars a barrel. But the that volatility was intense in the meantime. Societe Generale, we mentioned, this is in the headlines, the French bank, the stock not on the move very much, but a really interesting story which will get more details on in a moment.

This is stopped in at tying up in a joint venture for its equities, part of the business with Alliance Bernstein. And it is to do with cash equities. It's also also to do with equities. Research is going to be a business based in London. Interestingly, an NL is up by one point seven percent this morning. The energy major over in Italy.

They have been facing. They've been on a deal spree. They've been buying up renewable energy assets. They now have a big debt pile and they're going to have to sell off some of those assets. So reducing their exposure in South

America and also in Eastern Europe Max. All right. We're going to talk about a couple of those stories right now. But I want to get first to the crypto story. The brokerage firm Genesis warning it may need to file for bankruptcy unless it can raise a heck of a lot of money. One billion dollars.

Emily Nicole, reporter, Bloomberg crypto reporter, joins us now for details. So what's the latest we're hearing about Genesis and the continued fallout from RTX? Well, it's ISE you said it might. The warning investors now that if they don't secure the 1 billion loan that they're offered, that they may have to file for bankruptcy, which would make it just the latest in the names that we've seen so far this year. RTX Celsius voyage. But they're obviously still hoping that

that's not the case. People told us that that really is a last resort. At present, you know, they're still talking to potential investors about that one billion dollar loan. We reported that finance was potentially involved in the talks at some point. But as spokespersons, Glass declined to comment any further on that. OK. So there were these called talks with

finance, perhaps. Good to see you, Emily. We're now hearing the FTA. It's back to where this start story was going to say started. Didn't really start with RTX, but certainly a big recent participants and we're hearing that FTSE has one point to four billion dollars in cash across all its entities. Does that improve the situation? How does that sit in relation to expectations? It's a slight confidence boost, the credit is like that because, I mean, on Saturday they had filings, read texts and said they only had about five hundred and sixty million in cash. So that's only a matter of days. And they've managed to double the

amount, but it definitely shows that it's really proving to be a headache for those trying to manage the bankruptcy process for RTX. There are more than 130 entities that the group owns. They're desperate, disparate bank accounts, some that they've been able to identify and verify, some that they've been able to identify but not verify the cash inside them. And more bank accounts of the shore are out there, but I don't even know of where they are. And so it does seem like this will be a pretty drawn out process to see whether or not FCX does have enough money to be able to repay the creditors there on its lists. All right.

Bloomberg's Emily Nicole, thank you so much. And on the subject of FTSE, not even celebrities are immune to the fallout from its collapse. Sports stars, including Tom Brady, of course, a football, and Steph Curry, the basketball star, are among the big names. A Texas regulator is investigating over potential securities law violations tied to their promotions of FTSE ex. The State Securities Board says it's looking at payments they received to endorse FTSE us, along with what disclosures were made and how accessible they were to retail investors gloating. Well, for the record, Tom Brady, I am

not his biggest fan. So that is why Matt asked that question. And we can continue this conversation, Matt, and talk more about the broader fallout from FTSE later today on Bloomberg Crypto with Matt and myself. 1:00 p.m. New York time, 6:00 p.m.

in London. We'll be speaking with Chain Alyssa's co-founder, Jonathan Levine and Circle CEO Jeremy Blair. OK, so that's the story around Crypto SOC Gen and Alliance Bernstein, as I mentioned earlier, are merging large parts of their equities trading business is Bloomberg. Banking reporter Stephen Ahrens has been covering this story for us. Very good to have your thoughts on the program. So what exactly is happening then by the putting together of these two equity parts of the business acquisition? Yeah. Well, it's a J V.

First of all. But again, we'll have the majority stake and we'll own 51 percent if the deal actually happens. Said they expected to close before the end of next year. They will helpfully 50 what? Five? Fifty one percent. Sorry, but they have an option of buying

the entire thing within five years. So they will actually have the option of becoming a really big player in equities or boosting their already sizable business. Clearly seeking growth here, especially after BNP. You know, the big sort of arch nemesis,

if you will, in investment banking in France for them has already grown extensively buying stuff. And so, you know, I think they're trying to keep up with competition. I am of the school, Stephen, that the word merger is a PR spin term. There is no such thing. This is an acquisition, which is why SOC Gen comes away with 51 percent. What does it mean, though, for the competition? Yeah, OK. I mean, I give that to you actually on

the competition, BNP, as I said, you know, they've been buying. I was you may remember they bought the prime brokerage business from Deutsche Bank a couple of years ago. And they also sort of took on clients from Credit Suisse when they pulled out of prime brokerage not too long ago in the wake of all this guy scandals they had. So they've been growing crisis. It's been quite successfully since

successful for them how they're going to expand an equities business. Many European business sort of U.S. banks are pulling back. And BNP has become bigger. And now it seems like the new the incoming CEO, the subject in his name is Leslie Krupa.

He's the current investment banking head. It seems he's got big plans to expand business for the bank to make sure it doesn't fall behind. All right, Stephen, great story. Thanks so much for joining us. Stephen Aarons runs our bank coverage out of Frankfurt. Now let's get to the media story. Disney's returning CEO Bob Iger taking his first steps toward reorganizing the entertainment giant. Iger has asked his top deputies to

rethink the corporate structure to their benefit. Guggenheim is Michael Morris spoke with Bloomberg yesterday on his outlook for Disney under the new old leadership. I think that this company needs to really refocus itself on its Disney branded content more than anything else and right size its spending to maximize that value as opposed to just sort of growing a subscriber base without necessarily that type of profit objectives that I think a great company like this could achieve. Alex Webb Bloomberg Quicktake joins us with the latest on ISE plan. So what do we know so far? It's only been one day, right? Yeah, we've seen a memo that he has sent to the employees in which he outlines plans for a reorganization, which ultimately seems to be takin

2022-11-27 00:52

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