'Bloomberg Surveillance: Early Edition' Full (02/27/23)

'Bloomberg Surveillance: Early Edition' Full (02/27/23)

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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, here's what's coming up on today's program, where she soon CAC and Ursula underline meet today in the UK on the cusp of an agreement on Northern Ireland. But the prime minister still faces obstacles in settling any deal. Investors weigh up rate bets, falling hot inflation data from the U.S.. We speak exclusively to address the German chairman of the Swiss asset and wealth manager funked about. Plus, Nigeria's election results have

been marred by glitches in a new electronic system being used to verify identities. We're live in Lagos. So we start with our top story. An EU commission president, Ursula Underline is on her way to the UK to meet prime minister really soon CAC to finalize a deal on a post Brexit settlement for Northern Ireland. Speaking to Bloomberg earlier, the UK shadow chancellor of the Exchequer, Rachel Reeves said Labour will support the government on a Brexit deal. We hope that the deal improves upon the Northern Ireland protocol. And we've been very clear. Labour, the party of the Good Friday

Agreement, secured 25 years ago. We'll do nothing to put that in jeopardy. We're not going to play party politics with this. Now for more on all this, we're joined by Bloomberg's Lizzie Borden, who's in Westminster in central London. So, Lizzie, talk us through. Good morning.

First of all, talk us through the choreography of the day. Well, Francine, as you say, Ursula von der Leyen is set to meet rescue sooner. Karen, late lunch time they're expected to meet in Berkshire, which of course is the county home to the Royal Castle of Windsor. It's not clear yet whether she's going to meet with the king.

There was controversy over the weekend, accusations that that would be dragging the royal family into politics. But if they can get a deal and the expectation is they would it would be weird, frankly, if they didn't. After all of this hype, then they will come back to Westminster. There'll be a cabinet meeting at which the prime minister, the foreign secretary and the secretary of state for Northern Ireland will brief ministers on the deal. Then there'll be a joint press conference between Vonda Lyon and soon, OK, taking questions from the press and then soon CAC will make a statement to the Commons.

Now, we're not expecting a vote to take place today. But when it does, it's expected to be a three line whip. And as you heard there from shadow chancellor Rachel Reeves, Labour has offered its support to get the deal through parliament.

So, Lizzie, can the prime minister get the backing needed? Well, the Democratic Unionist Party and the hardline Brexit is within reach sooner party have scuppered the plans so far. But it seems that he's been on the charm offensive over the weekend trying to make any last minute tweaks that they need to get on board. There have been DP hard liners saying that they're not going to get on board with anything that keeps part of the Northern Ireland protocol.

But the DP is a broad church. So soon I will be hoping that he can still get a deal through. The other issue is that he's on resignation. Watch for Steve Baker, the Northern Ireland minister. He reportedly was left out of the talks, but he gave a thumbs up to the cameras as he came out of Downing Street over the weekend. Read into that what you will.

There's also Boris Johnson, the former prime minister. He has said that sooner needs to keep the Northern Ireland protocol bill as the gun on the table with Brussels. It, of course, allows the government to override unilaterally parts of the Northern Ireland protocol. And let's trust the other former prime minister was instrumental to drawing up that bill when she was foreign secretary.

She's not going to want to drop it. So it may look very weak of Russia soon. If they he loses their support and he has to rely on labor to get a deal through parliament. Leslie, thanks so much. His burden at Westminster here in London.

Now let's dig into this with our two guests, Janet Moy, head of Market Analysis and Brewin Dolphin. Also joining in the conversation, our markets reporter, Christine Aquino. So thank you both for joining us. Janet, when you look at Brexit, I don't know how that changes your view of the market or what that means going forward. Hi. Good morning, Francine. Thanks for having me. We still don't know exactly what this the shape of the entire deal. But I think any any deal that involves less red tape, less disruption to trade, less paperwork for companies, I think that would be good for growth going forward. And also that would provide more clarity

and confidence for businesses to invest. I think, you know, fixed investment is a perennial weak point for the UK ever since Brexit. So I think that would be great. And of course, if the supply chains are improved because there is less red tape, then obviously that's good for inflation. So generally that would be a good thing for the UK economy if the deal reduces red tape.

Christine, I mean, we don't again, we're very thin on details and as always, the devil's in the detail. But how could that change investment opportunities in the UK overseas? Janet was saying, right. I think you really will have to do with the bureaucracy that businesses are going to have to deal with. And if there's any chance that the deal at all kind of reduces some of those challenges, we've seen how exactly all these kind of situations can can really blow up in the face of the UK economy, what with a supply chain difficulties at the border and what not. And so anything that kind of takes us away from that very dire situation certainly could be good news for businesses, especially because a lot of them at the moment are struggling with a bunch of other things right across a living crisis. Having declined to find staff, given

it's a very tight labor market. So less effort on this front helps a little bit at the very least. Does it change with the Bank of England? Could do. Yeah, it's going to be interesting. I think this probably weighs into their calculus for growth in terms of the potential that businesses have in propelling that. I mean, we've already seen some green shoots and promising signs from the business side of things over the last couple of weeks with some of the data that we've been seeing. And so that's that's that's really quite

good news for the Bank of England, which themselves are now saying that they're expecting a shallower recession than maybe previously thought. But overall, it's very clear that it's inflation and what that means for Fed forecast that is moving and changing everything. Markets are now expecting Fed fund raise to be at five point four percent. That's pretty steep. Yeah, we have seen quite a big reevaluation of the peak Fed funds rate and the duration of elevated rates over the past couple of weeks. And that's why the markets have a bit of

a wobble. I think that's fair because, you know, there has been such a big disconnect between markets and the Fed. And we thought that, you know, the Fed public is right, given that there they put policy on controlling inflation. And as we saw the inflation data, I mean, it is coming down. But last week's data was pretty bad for

market participants, given it is so elevated, it is still pretty shaky and that is likely to stay given the state of the labor market. Right. It's still far from what we have seen is all resilience in labor market and also spending details. Also, I think that would keep the Fed hawkish and we are expecting a hawkish Fed. The concern is that actually to understand what the Fed does, we have to understand inflation. And again, that has a huge interrogation, Mark.

Absolutely frenzied. I we we asked investor this in the latest online poll survey, which is out today and you could see it, the John Authors column. And basically, yeah. There is a big debate over the trajectory of inflation and how it factors into what we're going to see of the US economy this year. I think the consensus from that survey is that if inflation does get at least below 3 percent. So not even necessarily to the Fed's

target of 2 percent, but just that under 3 percent mark and growth doesn't slow materially, then that would be considered a soft landing. But for those things to kind of come together, right, like growth kind of slowing down, but not too much and inflation getting below 3 percent. I know you have to have a lot of stars aligning for that situation. Yes. Speaking of stars or lightning, we also understand there's a China lithium probe which is shutting down about a tenth of global supply. Now it's breaking news.

So we're trying to figure out more on it. How do you view China in this context? Yes, I think this is an incident that may worry market on the supply of resources. I think that brings us to a longer term issue on China, which is the geopolitics. So the U.S. China tension. I think this would continue to fall to investors because this is just one off incident.

But I think for investors, we worry about the general resource nationalism because China hosts much of the rare earth and important commodities of the world. And if there is an escalation of, yes, short attention, you know, there is a risk that China may withhold some of its important resources and that would obviously disrupt supply chains before trade raise prices. I think this is something that investors have to consider for the longer term. And. Christine, what are some of the big questions that you're asking the live blog? So we have also a note by J.P. Morgan talking about value versus growth.

What do you think will be the catalyst for some of these markets? Yeah, I think that's going to be interesting for me. It really is all about kind of how investors are wrapping the heads of around this new inflation trajectory and what the Fed incentivize are expected to do to tackle that. And yet the value versus growth debate I did see that can be quite interesting because, you know, the argument is that, oh, this year is going to be a great year for value, especially in the European space. And so the fact that J.P. Morgan's kind of making the argument for the other side and making the case for growth in the sort of environment where it's high, inflation low, a lot of expectations for growth at the very least. Slow down. That's quite a bold call, I would say.

But, you know, growth has definitely had its challenges with the tax slowdown last year that we saw and still a lot of valuation issues that we're facing at the moment. And he's going to be a case of how much further do those valuations come down. They're still quite lofty at the moment. But you know what's? Investors really get a grip on what the new higher rate trajectory is going to do to asset markets. I would expect those valuations to reprice is the downside. All right, Christine Jana, thanks so much for joining us.

More ahead of market analysis at Brewin Dolphin Bloomberg's Christine NIKKEI. Now let's get straight to your stocks on the move today with the Northern Ireland protocol flavor. Our Joe Easton from our equities team joins us. Joe, what do you have? That's right, Francis. We wanted today to look at some of the

stocks most exposed to the U.K. economy. So we're going to start with M.A. here on the screen. Quick thinking the retail spaces, the middle income of the U.K.

economy is really exposed to some of those concerns, not only around Brexit, but also the cost of living crisis. That stock up today did sell off around one point five percent when I last checked on my screen gaming with the pound, potentially a bit of a boost there, given that a lot of the income input costs are in pounds. So that would be a benefit. But we do see that heavy loss over the past year given the cost of living crisis, as I mentioned. Then I wanted to look at Lloyd's.

This company makes 100 percent of its sales in the U.K., so it's the only footsie one hundred bank that is purely U.K. based. And their corporate lending was really

hit quite hard due to Brexit, given the uncertainty around investment in the country. Also, those supply chain issues, some companies held off from doing those loan deals. That stock was also up in early trading, about 1 percent as well. You can see it's kind of recovered from that big slump we saw in September. Given the mini budget fallout, though, of course, the main issue there is the mortgage market not recovering, people putting off buying new homes.

The final one I wanted to look at was J.B. Weatherspoon. As you know, I can't resist talking about the pubs anyway, but you can see that massive drop over the past year, down 45 percent. You'll remember that Tim Martin actually

backed Brexit. He campaigned in favor of it. But then around six months later, he then complained that he couldn't get enough migrant workers to pull points in his pubs. So I thought he deserved a special shout out there. That stock was trading about a thousand points last year. Now down to about 500 big losses. That one heading up as well in early UK

trading today. Joe, thank you so much. Always good on Monday morning to speak about the pubs. ISE percent agreed Bloomberg's equity was reporter Jo Easton. Coming up, Goldman Sachs chief executive officer David Solomon will be put to the test as he faces stockholders at an Investor Day tomorrow. More on that next. And this is. Economics, finance, politics, this is Bloomberg Surveillance, the addition of Francine Lacqua here and now Goldman Sachs holds its second ever Investor Day tomorrow. This comes just weeks after

acknowledging they have lost six billion dollars in consumer banking since entering the market. Company leaders will be looking to rally investors around the stock and quell internal dissatisfaction. For more on all of this, we're joined by Michael Moore, managing editor for EMEA finance here in London. Mike, I mean, so much going on, right?

GOLDMAN I mean, we have this great story saying, well, this is a make or break moment for one of the units as the chief executive is really put to the test. Yes. I think, you know, we're talking about that unit being the asset and wealth management unit that has been for a long time. What Goldman has pointed to is this is

the path to us getting a higher multiple. We make a lot of money in trading. We make a lot of money, investment banking. But investors don't give that a very

high multiple because it's so volatile, because it swings around so much. So this can be the steady ballast of our bank. That's what Morgan Stanley has done so successfully under James Gorman. And that's where Goldman is trying to get more credit. And I think the Investor Day will be a big piece of that CAC can do.

It's all on turn this round. Well, if you look at a year ago, Jamie Diamond used his Investor Day to really kind of head on, take on criticism of the bank spending and really kind of change the narrative that I think that's what Solomon will try to do here, kind of change in there. It's all been about the flop. That was consumer banking.

But if they can show some momentum in this other business that investors tend to like, that could help change some of the momentum of some momentum. So this is what, negative narrative. So he basically I mean, will he say that everything's on the table? And how much is is his job on the line? Actually, I think, you know, the stock has been doing OK. It hasn't been doing terribly. But if, you know, I think what investors

look to is that difference with Morgan Stanley in terms of the multiple, which is a far cry from a decade ago when Morgan Stanley was looking up at Goldman. So I think they want to see a turnaround there. There obviously has been agita over, you know, the partner bonuses were cut pretty dramatically in what was a decent year for the trading and investment banking businesses. So I think it's about getting confidence back in the direction that they're going. Mike, we also had actually set some news

on the legendary investor Warren Buffet. What did we learn about the U.S. economy through what he put out? Yeah, I think, you know, Warren is kind of you can view him in two ways as a stock picker and a business operator. And I think that dichotomy is playing out this year. You know, 20, 22 was really painful for the markets. But the growing expectation is the 20, 20, three will be more painful for the economy. And we started to see signs of that in the slowdown in the fourth quarter, even though 20 22 overall for his operating business for the railroad was pretty good.

But the fourth quarter really started to show a slowdown in profit. And I think that's generated some concern because Berkshire is such a broad business and shows a lot about the real economy. And one of the most fun weeks I've had was actually trying to follow Warren Buffett around Europe ages ago when he was looking for targets. What did he say about buybacks? So he you know, he's changed his tune a bit there, like he's more aggressive with the buybacks. He's shied away for those four years. And partly because he views his stock as a better value than a lot of other companies out there.

But he was very critical of people, the critics of buybacks saying they don't understand economics if they attack this. And that's relevant on a political stage because there have been talks of increased taxes around buybacks, trying to force companies into more investment. And he does not think that's the right approach. Mike, as always, thanks so much. Michael Moore there, who heads all of

our EMEA finance. Coming up, the opposition are outraged after Nigeria's election results have been delayed. We'll get all of the details next. We're live from Lagos.

This is. Economics, finance, politics. This is Bloomberg Surveillance early edition of Francine Lacqua here in London. Now, there was an interview with Christine Legarde earlier in the weekend saying that they're expecting a 50 basis point hike for the month of March. Traders now pushing back against that peak ECB rate bets into 2024 for the first time. So we'll keep an eye on that.

I'm not seeing a huge movement when it comes to euro dollar. And you can see the driven 10 year yield 2.5 6. Now, results have begun trickling in from the U.S. presidential election two days after voters in Africa's biggest democracy went to the polls. The country's electoral commission says glitches in a new electronic system used to verify citizens identities won't have any impact on the results. Bloomberg's Jennifer ISE joins us now

from Lagos. So, Jen, good morning. How is vote counting going? Yeah, friend, I mean, what we're hearing from the electoral commission, as you just mentioned, was that there are there were a number of issues over the weekend, but that the results are not going to be affected. But if you talk to voters in a lot of people who did spend most of their weekend standing in line voting, they're getting a little bit frustrated by this fact just because of what you said. It's been 48, 48 hours since people actually cast their vote.

And we only have results from one of 36 states plus Abuja, that seat that we have as of Monday morning. And ISE as of this this time right now is a key state, which is a small, small state in the southwestern part of Nigeria. And the ruling party candidate, Bullets Newby, won that. But really, what we need to hear is a

few more states just to get some indication of where this is headed at this point in time. And in particular, what we're paying a lot of attention to is Lagos State, where I am right now. It is the smallest area, is smallest state by area, but most important state, really, if you think about the financial and the business community here in Nigeria, it accounts for 40 percent of the GDP in Nigeria.

And it is. It could be a massive indicator for where this is going. For the past several decades and several elections, it has gone to the ruling party candidate, which in this case is Bullet Nuba. He used to be the governor of Lagos State. So we're going to be watching to see where where the Labor Party candidate potentially falls in there and what happens thereafter. But but like I mentioned, we still have

a number of other states that we're paying attention to just to get some sense of where this is headed. So if you give us context, what's on the ballot for Africa's biggest economy? Right. I mean. I mean, we're seeing people now driving around the economy. At least the economy, the business

activity, it seems like it is picking back up after a weekend really of no movement whatsoever. But when you think about what this economy has gone through over the past several months and years, it's really been in decline. We have inflation that is up close to 22 percent. Unemployment is close to 33 percent. There's a lot of young people here that are educated or that are not in school that are waiting to get jobs. And what we've seen over the past year or so is a lot of them leaving this country. And so this next president is inheriting an economy that has really an economy.

That's our friend. Back to you. All right, John, thank you so much. Of course, the economy will be changing after a pretty disastrous couple of years. Jennifer is up. Coming up, the chairman of the Swiss

asset manager of one to balance dress, Dimon. He joins us to discuss the industry and the economy for 2023. That's an exclusive conversation. This is Bloomberg. She soon, CAC and Ursula underlined me today in the UK on the cusp of an agreement on Northern Ireland. But the Prime Minister still faces obstacles in selling any deal. Investors weigh up rate bets, falling

inflation data from the US. We speak exclusively to Address Ultraman, chairman of the Swiss and wealth manager from Tibet. Plus, Nigeria's election results have been marred and glitches in a new electronic system being used to verify identities. We're also live in Lagos. Well, good morning, everyone, and

welcome to Bloomberg Surveillance early edition of Francine Lacqua here in London. Now, the Swiss asset manager for Montebello recently posted a decline in profit for 2022 as industry continues to navigate inflationary headwinds. Joining us now is Andrés Waterman, the chairman of FROM About. Thank you so much dress for joining us.

I have many Marcus questions and then we'll get onto a little bit of the business overall. There's so much speculation, of course, on what inflation does in the US that's changing the markets almost on a daily basis. Given what we're expecting the Fed to do. Are you expecting a lot more volatility in markets overall? Yes, I would.

Because as you quite rightly point out, we're going to go through a phase in which markets will anticipate inflation falling. They'll then anticipate falling interest rates. And that will then be followed by renewed concerns about inflation like we're seeing at the moment. And I expect this to go on for at least the next 18 months to 24 months because the inflation trajectory is not yet fully set. So how do you expect inflation to actually behave from our end? If the Fed were to bring it down to 2 percent, does it crush the economy? Well, I think I think that's for me, that's wishful thinking. I don't think inflation is going back to

2 percent at all. I'm not even sure the central banks really want that. They do want inflation to come down relatively quickly, maybe 2, maybe 2 below 5 percent.

If that were to be achieved, that would be a great thing. I think the key issue here is speed, because if inflation doesn't come down very quickly, people's expectations will start to include higher inflation expectations. And that will make it more difficult to get inflation under control in the medium to long term. How quickly do you think it does and does it come back on its own or come down on its own? Or is it really this monetary policy like from last year? I don't think at the moment monetary policy is the real issue. I think it's energy prices still. And I think we're with, you know, some aggressive forecasts for the UK predict 2 percent in the second half of the year. I think that's probably, again, quite optimistic.

But I think the speed of the fall in energy prices and how it feeds through the economy will be one important factor. And then, of course, wage which? Wage inflation? I mean, we're seeing wage deals that are well, well in excess of 5 percent at the moment in many, many countries. And that obviously, if that's repeated next year, is going to lead to higher wage inflation.

This is the first interview we do as as chair of fund about used to be very generous with your time where you were at the UN's global investors and in trying to make us understand that market dynamics would decline. Ask you most since you've been out front about, well, clearly quite concerned about inflation and the real the purchasing power of their money. And that's actually not dissimilar to the to the phase that we had going into this inflation phase because people weren't getting any return on their assets. Now they're getting returns which are in excess of zero, but lower than inflation.

So once again, we've got this issue of of of financial repression still at play. And that's the way let's remind ourselves why we are where we are today. It's because the budget deficits and the debt to GDP ratio is in so many NYSE countries are too high.

And one of the ways to get this lower in real terms is financial repression. But how long does that last for? I mean, forever, if you look at I mean, I was reading something at the end over how much interest rate payments for U.S. debt is back. I think they went from 1 billion to 2 billion. Well, I don't know. In the long run, we're all dead. Right.

But I think it'll probably go on for the next four Amanda Lang for the next five years, let's say, OK, where do you see China going and how much does that impact? Actually, the I guess, your clients worries going forward. I think China. The question is, where do we see it going in terms of the macroeconomics or in terms of the geopolitical impact? What do you mean? Well, both. I mean, how do you see China actually changing the game for. For how markets behave? Well, I think one of the reasons why why the Covid policy is that there isn't a repressive put forward policies were lifted so quickly was that the economy was really taking a hit. And so I think one of the one of the critical factors is going to be how does the Chinese economy recover? Are we going to see some positive growth? I think that's going to be top foremost a Chinese policymakers minds. And that's probably why the geopolitical tensions out of China are slightly less than there were three or four months ago.

So economy first. That, of course, would be good news for the global economy and would give us a higher probability of a soft landing, which is kind of what we would like. And just talk to me a little bit about outflows. So you reported some full year results

for a fund about two two weeks ago, I believe. What were the main driver? Why did you see outflows? So we had we had outflows in asset management. We had inflows and private. Management, neither of neither of which particularly surprising. And then we had lower trading activity for our structured profit business. So overall, that's that's that's the

context for the lower operating profits that we that we report. Now, you know as well as I do. We've discussed this many times on the show. Active asset management is still under pressure. And in particularly when markets sell

off, obviously all global asset managers have seen drops not only in a U.N. levels, but also net outflows. Now, fund troubles, strategies are very active. We really take risk for clients and of

course, active strategies, which had a long beta principally suffered most last year. We're seeing this recover quite significantly already this year. And so it comes back. So the trend is now a recovery and stabilized, but performance is certainly recovering. And that goes not just for the more aggressive equity strategies that we have, such as our quantitative qualitative growth strategies where emerging market strategies, but also for our fixed income strategies. For instance, those of 24 asset management out of London here. How interested are you in the U.S.? And actually, does that mean how do you grow the US? Very well. That's that's it.

That's a critical question, isn't it? I mean, everybody needed to in the last couple of years, I think, readjust the business strategy to the new global geopolitical realities for fund told. Well, that has meant a real reinforcement towards the developed markets. And let's not forget most of the savings, 90, 90 percent plus of the global savings are in the developed markets. And of course, the United States, the United Kingdom, Canada, Australia are key in those markets. And therefore, we are we are reinforcing our effort in the United States, both in terms of the institutional asset management, but also for private wealth management. As you know, last year we took over the U.S.

offshore proclaim wealth management business from UBS. But so does that mean you could have further bolt on acquisitions in the US to grow? I wouldn't I wouldn't exclude that in terms of size. Is there something that you could be targeting already or something that you're looking at? Like, what would you like to own if everything is an option? Well, I think one of the you asked earlier about what Klein's asking asking us for. One of the classic questions that we get is what about non-public markets? Non-public markets is currently not in our offer. Neither institutionally nor for our private clients. But that's something we're looking at very carefully. Are there good opportunities out there?

Not because of depressed valuations or. I think there's plenty of opportunities out there, not just because of depressed valuations, but simply because a lot of strategies were set up in the last 10 or 15 years. And they're looking at the founders potentially are thinking of what happens in the next 10, 15 years. And they would like longevity, I guess, in terms of survivability of their businesses for the long term. I just talk to me a little bit about deleveraging. So how much deleveraging do you think we'll see in the system this year? Well, hopefully quite a lot, because the I mean, obviously, it's driven by the central banks winding back their their balance sheets.

That's happening. And I think the quicker that happens, the better it is for the overall system. I think it's happening quite a lot already on the private client side. We're certainly seeing that there is there is a lot of deleveraging there. And, you know, I expect that to continue. But it seems odd, actually, if you look

from the interest rates go from 0 5 to 4 percent and we haven't seen more deleveraging or companies in trouble. Will that come? Well, I think that's coming. Yes, I think that's coming. And certainly we as you're starting to see that in the sort of in these sort of startup startup scene, seen sort of the the early seed, there's a quite a lot of carnage there. Valuations dropping very significantly. You know, companies trying to to launch convertibles to finance themselves.

So we're starting to see that there. And that will obviously go as far as a year or two progresses. And this is across the regions or more, Europe and UK. I think this is particularly the case in the Western world. So Europe, UK, United States. Yeah. All right. Address. Thank you so much.

I'm going to pronounce that. All right. So is that OK? I finally did address vitamin D in their treatment of John Tucker. Coming up, we return to the Mobile World Congress in Barcelona, where IBM is showcasing innovations in a quantum computer. We speak to the IBM vice president of strategy next. And this is blue. I want to be clear, we have not yet seen inflation going down to target fast enough, so central banks need to stay the course until we are comfortable that price stability is returning. That was the IMF managing director,

Christine George gave, urging central banks to keep up the fight against inflation. Now global giants of the telecoms industry are gathered in Barcelona for the Mobile World Congress to discuss the future of connectivity. Bloomberg's Tom Mackenzie joins us now from Barcelona with another great conversation. Over to you, Tom. Francine, thank you.

Yes, I am joined now by Marissa Mayer, has flown over from New York. The global vice president of strategy when it comes to telecoms, media and segments at IBM. Marissa, thank you for joining us. Let's start this show. Mobile World Congress.

It used to be very much focused on a smartphone, on the consumer. It shifted now to enterprise. And this is a space that IBM plays in significantly. What are you seeing in terms of the corporate spend within enterprise for your solutions, the hardware and the software? How much demand is there and what are your corporate clients spending it on? So does the you know, the I've got product line. Yes.

Which includes many of the largest companies across all day about the goals, including telecommunications, where we said, say, 85 percent of the stuff. But on day one, we think about this spend now in sort of projecting into the future cloud and hybrid cloud is one of the is clearly the hybrid cloud spend is going to do out of almost any other aspect. So hybrid cloud mobile applications from one cloud to another being less sort of then being vendor in defense. And by doing that, we are using VIX often chief operating system that runs across all this cloud and that's how we are presenting to our clients.

The second idea is a set of ability. So artificial intelligence has been around for more 15 years. And you know, I think and now we're finally making it ready, applicable and really producing got concrete results. So we see that across manufacturing plans. We see that sort of the operational technologies, we see diode in banking shutdowns. Of course, in media use things to come up with three different communication industrial property.

The networks are daddy's sort of automation. Not to forget, you know, from an IBM perspective, security is something so maybe we can invest in for the last I would say seven to eight years security across the stock. I know every time you Covid technology shift, such as cloud, such as a game, the hackers would be laid on you to to attack the system and to get to penetrate and produce damage and all that into US manufacturing organizations. I guess I'm always against security. I was. They say it will never go away. Okay. So it does. And then it kind of cloud.

Obviously, you you're going to be meeting a number of your clients and partners over the next few days. How much caution is there? Are you getting a sense that budgets are being constrained, given the recessionary risks, given the question marks about inflation input costs? I think it all of us, the technology providers I of worry about expense, but when we talk to our clients, they are you seen this year a transition year to do more innovation. So instead of saying, oh, my gosh. Of course, there is something about lowering costs and that's always going to happen because you can always improve. You can always count on it or not. OK, can you station into our operations

when it comes to not getting ready for the future? And customers are looking into the CAC to innovate. How can I carve in your business not only technology, but our business model that compete with my, you know, with others in the market? New entrants are coming in, so they need to be ready for that. Are you having to look across your team and make decisions around reducing headcount? Do you expect that to happen this year? Absolutely. I mean, when I was shifting headcount, where the needs are in my most important, you know, when I was killing, you know, our sales, our Liberty product and product developers, product managers, what I was getting in more risky ISE. In fact, we completed 20 modules section and, you know, throughout the Christmas New Year time frame and everyone in the company had to take these microbes. Every module was at least five ways and end it.

And we can't sign in that. My adult education was done from the lowest level in the ranks all the way through. It's like precedent. And so so Skilling will never end in this new environment. The metaverse is a hot topic at the event this week. Is it the future or is it a fad?

We are always looking at a technology company and they've been in the technology industry for more than 30 years. From a research and from a development and services perspective, we're always looking for new experiences and we want to produce, you know, get in your experience for everyone, whether it is for education, for training, you know, carving new entertainment. Entertainment is going to drive this game is going to drive them better. I think. Are you pushing internally for IBM to put more resources to. We are we are kind of selecting what a big place for us in others.

In John. That is a huge play in security, in identity management itself, when you move from one mid IBEX world to the next subject to identity management security. You are secure a wallet, a digital wallet that's going to be super important. And that's what IBM is placing a bet that in also creating without customers or getting fired or creating with a number of customers across multiple industries or cut up like the mid IBEX within investing.

Just briefly touched on artificial intelligence. The critics would say IBM is lagging the likes of end video in providing the hardware needed to drive that revolution around, track GBC and those kind of offerings. How do you close the gap? I would say different. We weren't the first one. I remember what it really was. In October, a few years ago, when we're now Watson A.I. and Jarred know we were the first ones

to announcement. The next day, if the company was just so, I posted that, I'd say I was fired here. And we continue to develop hardware. So we cut a deal. We have already announced a process in a process done by your research team here in studio. So we continue to evolve our technology.

In fact, in the cloud, when working on a number of figures, calculating algorithms ourself, we we lobbied to get engaged and we've not I wouldn't call is to make it real merits of us. Thank you very much indeed. The global vice president of strategy for telecoms, media and statements at IBM Front. Tom, thanks so much. Tom Mackenzie at the Mobile World Congress in Barcelona.

Coming up, leaders Keir Starmer is set to lay out his vision to boost growth in the UK as the government attempts to finally strike a trade deal with the European Union. We'll have more details next. This is. Economics, finance, politics. This is Bloomberg Surveillance early edition of Francine Lacqua here in London.

Let's get straight to the Bloomberg First World News, usually Indians. Hi, Leon. Hi, Francine. Bloomberg has learned the US held talks recently with three Asian nations on the global semiconductor supply chain. A Taiwanese official said the video meeting of the so-called chip ful group discussed an early warning system to ensure steady supply. We are told export controls were not on the agenda and that no companies were involved in that meeting.

Warren Buffet has urged shareholders to keep the faith in the U.S. economy. After Berkshire Hathaway reported weaker results and some of its key businesses, operating earnings fell 14 percent in the fourth quarter as higher priced prices hit its railroad and insurance unit. In his annual letter, Buffett says he's just yet to see a time when it's right to make a long term bet against America. Hong Kong is reportedly looking to scrap its mosque mandate as soon as early March. A local newspaper says indoor and outdoor requirements may be removed. At the same time, though, mosques would

still be compulsory in hospitals and other high risk places. The mandate is Hong Kong's latest, a pandemic, a restriction. And HSBC is reported to be looking for a new global headquarters. Less than half the size of its current space and London's Canary Wharf. The Sunday Times says the bank is considering an office of between 4000 and 5000 square feet. HSBC is looking to cut global office

space by 40 percent compared with pre pandemic levels. Global news powered by more than twenty seven hundred journalists and analysts and over one hundred and countries. I'm the UN guarantees and this is Bloomberg Francine Lacqua. We thank you so much. Now, Labour's Keir Starmer is due to give a speech in the next few minutes outlining his party's growth vision for the UK. The speech by the leader of the UK's opposition party comes on the same day that Prime Minister, which he soon CAC, is also expected to seal a long awaited trade deal with the EU. For more on all this, let's go back to Bloomberg's Lizzie Borden, who's at Westminster.

So, Lizzie, what do we expect Starmer to say? Well, Francine, he's going to be speaking at UK Finance. He's going to elaborate on the first of his five missions, which is to grow the economy, to make the UK the highest, the fastest growing economy with the highest sustained growth in the G7 during Labour's first term in office. If it can secure one, he's then going to have a boardroom discussion with corporate leaders alongside his shadow chancellor.

Rachel Reeves, we spoke to her earlier this morning. Take a listen to what she had to say. Today, Labor is publishing its own ambitions on our mission to secure the highest sustained growth for the UK in the G7 with good jobs and productivity growth in all parts of the United Kingdom. I'm growth that is felt by everyone, all of our plans to be fully costed and fully funded and that we have set ourselves a set of tough fiscal rules. Sir Keir Starmer has said that he is going to be unapologetically focused on the long term.

But the question I have, Francine, is how much money Labor is going to devote to child care. For example, it would be expensive to make a difference to growth that way. And planning that she also mentioned is going to be controversial. So looking forward to detail on both of those. You know, it's always a question of

money and timeline. It's a big day for Brexit with Labour's Rachel Reeves also retreating. The party will support the government's trade deal with the EU. So, Louisa, what do we expect the deal to look like? Well, we hear that it's going to be a 100 page document, although we've not seen it yet. No one has much to the frustration of many employees in the Conservative Party and the Democratic Unionist Party. The deal is expected to have three focuses trade, addressing the democratic deficit and Northern Ireland's police within the European Union, within the United Kingdom.

But the deal is expected to go further than other prime ministers have secured. And the hope is that Russia's unite can get the Democratic Unionists and the Brexit as on board so that he can claim to be the prime minister who got Brexit done. Leslie, thanks so much. Leslie Bergen there at Westminster Bloomberg Surveillance EARLY EDITION continues in the next hour at Matt Miller in New York. And the Edwards here in London. And this is Bloomberg. I think a recession is likely. Will it be a deep recession?

Probably not. How deep are looking for the recession in the second half of this year? Earnings going to reset. Investors are not only trying to navigate the next 12 months, but because we at a critical time in capital markets history.

Investors are rethinking their strategic asset allocation. This is Bloomberg Surveillance early edition with Anna Edwards and Matt Miller. It's 10:00 a.m. in London, 5:00 a.m. in New York and 6:00 p.m. in Hong Kong. Our top stories today, the UK and EU appear to be on the verge of a post Brexit settlement for Northern Ireland.

Pretty soon, CAC Initiative owns a lion meat today for final talks in Nigeria. Opposition parties want results from Saturday's election released immediately. The ruling party is dismissing, CAC says, that the vote could be rigged and Goldman Sachs hopes to turn the page on a forgettable year. This week, the firm's executives will lay out new reasons for investors to get behind the stock.

Welcome to Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Matt Miller in New York. Good morning to you, Matt. It is Monday, but it still feels like we're dealing with Friday. Markets doing their best, though, to get

over that sort of post P.C. shock. Yeah, exactly. We do see actually futures rising here. So after a surprise to the upside for inflation and concern obviously for the markets, because that means the Fed has to raise higher or at least hold there for longer. We see a little bit of a bounce in terms of S&P futures right now up just shy of half a percent.

We also see a continued climb in 10 year yields. So this actually provides a little bit of a headwind to stocks right now. 396. So getting ever closer to 4 percent. And we're seeing in a lot of durations actually more yield on treasuries than you can get in terms of an earnings yield on the S&P, especially when you get down to six months and below, you're looking at more than 5 percent yield on six month T bills. And that's just about equal to what you

get in terms of S&P, the earnings yield right now, that Bloomberg dollar index is coming off just one one hundredth of one percent, but at twelve fifty seven, 12 fifty eight. That's the highest level we've seen in the Bloomberg Dollar Index since January 5th of this year. So that strength really continues in the dollar, even though today we see it coming down just a little bit. And the name ex crude also showing some strength again. I notice that Brent was rising a little bit steeper right now. Seventy six. Sixty three is what we see on 9x crude, even though we see a lot of other commodities dropping. And actually when you look at the Asia

board, you'll see one of those iron ore coming down. Now, this is for a separate reason, China. The government has ordered some steelmakers in a certain region to cut production pretty drastically by 30 to 50 percent ahead of some political meetings. And of course, that means less demand for iron ore. As a result, you see a 3 percent drop there in terms of the overall market in Asia, off about half a percent at the close. There weren't big movers in terms of the

Hang Seng or the NIKKEI. I did see that the S&P ASX 200 is down just over 1 percent at the close. That is pretty much an outlier, or at least it's the biggest drop among all of the other drops that we saw across Asia. And then I want to quickly look at the yen here, 136 36.

So the U.S. dollar getting a little bit weaker against the yen, but from a relatively strong level. Anna, what do you see in terms of the European trade here in Europe, then? Might we see positivity across the European trading space of many of these markets up by more than one point four percent? Certainly the German and the French markets are pretty strong.

The footsie made I've read easily also up by one point seven percent. And it seems that the European markets actually sold off a little too much on Friday and that sort of post P.C. shock experience for risk assets that we saw. Yes, it hit U.S. markets, but it also hit Europe. And then U.S.

markets rallied a little base away from those earlier lows. And so now Europe pays catch up with that. Although interesting to see the U.S. futures on our pointing highest stocks, Europe 600 is up by one point one percent. The chemical sets up by one point six percent. And that's really interesting because we've seen that really heavily sold off during Friday session to be sell off to March on that BASF story.

And the sector is bouncing a little bit. Germany's to the. I put in here the yield, which is going higher when we see this across many geographies. Not initially interestingly today, but, of course, many geographies. Those yields still going higher, still catching up with the higher yield narrative that dominated in Friday session. And now in Europe, more broadly in the eurozone, we're thinking about whether we might not see a peak in interest rates until 2020 for that for the first time being priced into markets.

This is the pound 1 1960 70s where we trade up by two tenths of one percent. And I put this in just because we are watching those Northern Ireland conversations very carefully. More from our colleague Lizzie Borden shortly. What kind of investment could be unleashed as a result of just more certainty around that relationship between the UK and the EU? Just want to mention another line coming through this from UniCredit. I mentioned that the Italian at the

story that the Italian stock market was doing pretty well today, and part of that is the banking sector. UniCredit headlines then suggesting that this bank is set to boost its 20 22 bonus pool by about 20 percent. And that might fly in the face of the the the trend that we've seen for other businesses. Of course, many in the banking sector cutting back on those bonuses after what was a really tough year for many asset classes last year. But under or channel, it seems that this bank is doing something different has turned to.

And has been selling assets and returning some cash to shareholders as well. And now it seems that standing out for other reasons, it is talking about higher bonuses than others outperforming the rest of the sector. Now let's get back to that Brexit narrative I mentioned. EU Commission president, as you have underlined, is on her way to the UK to meet with the prime minister really soon act to finalize a deal on a post Brexit settlement for Northern Ireland. Speaking to Bloomberg earlier, the UK shadow chancellor Rachel Reeves said that the Labour Party will support the government on any renewed or rejigged post Brexit deal. We hope that the deal improves upon the Northern Ireland protocol. And we've been very clear.

Labour, the party of the Good Friday Agreement secured 25 years ago, we'll do nothing to put that in jeopardy. We're not going to play party politics with this. UK shadow chancellor speaking there. For more, we're joined from Westminster by Bloomberg's UK correspondent, Lizzie Borden. Lizzie, talk us through what happens today for an international audience who may be taking their eyes off this story.

Well, here in Westminster, we have seen the Northern Ireland secretary and minister, Chris Heap and Harris and Steve Baker heading into Downing Street. We haven't seen us live on the line yet, but she is due to meet Ritchie soon. The prime minister in Berkshire, which, of course, is the county home to the Royal Castle of Windsor. We're not yet sure whether she's going

to be meeting the king, though. Speculation over the weekend and criticism today by Brexit here. BACKBENCHER saying that it's not right to bring the royal family into politics. But after this meeting, if they can get a deal, we're expecting really soon to brief his cabinet on the deal and then have a joint press conference with Vonda Lyon, where they'll take questions from journalists and then he'll make a statement to the House of Commons in parliament. We're not expecting to have a vote in

the parliament today. But as Rachel Reeves there said, Labour has offered the government its support to get a deal through parliament. If she's not relying on that support, it may make him look very weak. We've heard so I guess some criticism that you mentioned there. But can Sumac win the support of Brexit fears and of unionists in his party? Well, they have been what scuppered the plan so far? Richie C. DAX been out lobbying employees over the

weekend, trying to get them behind a deal, but they haven't seen the deal. What's frustrating them? So far, you've also heard from hard line unionists in Northern Ireland saying that they're not going to back anything that continues parts of the Northern Ireland protocol. But it's a broad church. The WP, so it might be possible to still get them onside. You've also heard from the former prime minister, Boris Johnson, who's been banging the drum, telling Rashi soon that he needs to maintain the Northern Ireland protocol bill as a backup plan, a gun on the table to have leverage against Brussels. And the other former prime minister, Liz Truss, was played a big role in writing that bill when she was foreign secretary.

So she's unlikely to want to drop it. So the headache remains for Ritchie soon. And we will see when we have the deal whether he's going to be able to get it through parliament.

All right, Lizzie, thanks very much. Lizzie BURDEN there reporting from Westminster will bring you, of course, any breaking lines as they come. And if an agreement comes in, we'll bring you that as well. Now let's get to another big political story. The Nigerian ruling party's presidential candidate, Bola Tinubu, has won the most votes in a small South-West state. As the results from Saturday's election

began trickling in, voting in Africa's biggest democracy has been marred by glitches in a new electronic system. For the latest, we're joined by Bloomberg's Jennifer Zarb saga in Lagos, Nigeria. Jen, how is the vote counting going, especially with these concerns? All right, Matt, I mean, it's been 48 hours since the voting actually started, and at this point in time, as you mentioned, Bola Tinubu, which is the ruling party candidate, he has officially won the most votes of one. Sorry, excuse me of one state. But we're also getting some reporting that he potentially won another state. And we're hearing some reporting, too,

that there is one other state that's slowly coming in. So, you know, as we mentioned, results are slowly trickling in, 48 hours after people began voting. But it's unlikely that we're actually going to see the next president or the next president will be officially declared today because there's 36 states within Nigeria that still need to report their official results. And in particular, what we're going to be watching out for is here in Lagos State, where I am. It is the most populous state within Nigeria. It accounts for 40 percent of the GDP and is really home to it's the financial hub of Nigeria. So seeing what happens here and in

particular, whether or not to Nuba, which is who is the ruling party candidate, whether or not he is able to hold on to the state. But still, pretty early on, we're expecting a press conference in the next few hours. So hopefully we'll have an update after that. So that's where we've got to on the counting and where we haven't got to get on the counting.

But give us the background, give us the context on what it really is people are voting on here. What's on the ballot for Africa's biggest economy? The biggest issue and the biggest challenge, I think that everyday Nigerians are facing is really this issue with the NIRA. We even saw earlier today the NIRA weakened against the dollar ever so slightly. But I think it's so significant and just shows just how concerned and anxious people are about what this outcome is going to be. And what we're seeing right now, even in regards to the NIRA.

There's not enough Nyro notes to go around. So without Nira, you can't pay people, you can't do business. And so it's really making it difficult for people in their everyday lives. And on top of that, there's also a fuel scarcity. And so this new next president is really going to have to come in quite aggressively. I'll say at to deal with a lot of these

economic issues that people are dealing with on a daily basis and creating a lot of challenges for this economy, especially an economy that has slowed down and growth is not producing enough oil as it is, isn't even refining its own oil as it is. And so the president is going to have his hands full with issues to get this economy back on track. Africa's biggest economy and really going to be the third biggest and most populous in the world in 2050. So very significant. Jan, thank you very much. B, IBEX that Jennifer sabotaged your reporting there from Lagos for us. Let's take it back to financial

services. Goldman Sachs holds its second ever Investor Day tomorrow, just weeks after acknowledging it has lost six billion dollars in consumer banking. Company leaders will be looking to rally investors around the stock and quell internal dissatisfaction. Michael Mobley, that finance editor, joins us now with more on what we should expect. Michael, this really is a fascinating story and there's the sort of broader context of things that have been weighing on Wall Street. And then there's the Goldman Sachs specifics around that foray into consumer banking, for example.

So what's the message going to be from Goldman this week? Well, I think the Goldman is going to try to move the conversation from the consumer. Bet that didn't quite work to the asset and wealth management business that they've been building for a while. And that is seen as potentially the way that this firm gets a higher multiple from investors. You know, the investment banking and

trading businesses are quite strong. They've been strong for a long time. Investors don't give it as much credit because it is volatile, because it goes up and down the market. Asset management is seen as a steadier business. Morgan Stanley has done a good job of balancing those two and they've gotten a higher multiple than Goldman. So it's real

2023-03-01 16:41

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