'Bloomberg Surveillance: Early Edition' Full (04/06/23)
♪ FRANCINE: GOOD MORNING, EVERYONE. WELCOME TO BLOOMBERG "SURVEILLANCE" EARLY EDITION. I’M FRANCINE LACQUA IN LONDON. HERE IS WHAT IS COMING UP ON
TODAY’S PROGRAM. EUROPEAN INDUSTRIES OPEN UP HIGHER DESPITE REDUCTION FIERCE WEIGHING ON U.S. STOCKS AND CHINESE FUTURES. XI WELCOMED MACRON IN BEIJING. THE PRESIDENT EUROPEAN COMMISSION VISITING THE COUNTRY FOR EFFORTS TO FURTHER DEFINE THEIR RELATIONSHIP WITH CHINA. E NOW BEFORE WE HEAD ONTO SOME OF OUR TOP STORIES, LET’S CHECK ON THE MARKETS. THIS IS THURSDAY BEFORE A LONG
WEEKEND. WE DO HAVE JOBS DATA OUT OF THE U.S THAT IS THUNDERSTORM. EUROPEAN STOCKS YOU CAN SEE HOLDING ONTO GAINS. WHEN WE LOOK AT HOW WE’RE
LOOKING AT INFLATION, THE POSSIBILITY OF WHAT THE FED DOES NEXT, IT IS REALLY WHAT’S HAPPENING IN FIXED INCOMES. THE U.S. TWO-YEAR -YEAR YIELDS, THE TWO-YEAR GOVERNMENT YIELD SLIDING FOR THE FIFTH DAY AND THE 10-YEAR WITNESSING A SEVEN-DAY DROP. WE’LL SEE HOW THAT PLAYS OUT IN SOME OF THE RISK ASSET CLASSES. THIS SEEMS TO BE A WIDER MOVEMENT THAT MAYBE WE WERE EXPECTING.
THE FTSE GAINING SOME .7% AND THE DAX ALSO. IT IS NOT 100% APPARENT BUT WE’LL LOOK OUT FOR ANY SIGNING OF DEALS BETWEEN SOME OF THE FRENCH COMPANIES, MACRON IN CHINA NOW, WENT WITH A 60-STRONG ENTOURAGE TO MAKE DEALS. THE U.S. SERVICES SECTOR LOST IN MARCH. IT MAY BE A RED FLAG FOR THE ECONOMY. U.S.
TREASURY YIELDS DECLINED FURTHER WITH THE 10-YEAR REACHING ITS LOWEST LEVEL SINCE MID SEPTEMBER. THIS COMES AS INVESTORS LOOK AHEAD TO THE U.S. JOBS REPORT TOMORROW. LET’S BRING LET’S BRING IN JANET HENRY.
WHAT ARE YOU EXPECTING FROM THE JOBS DATA IN THE U.S.? >> GOOD MORNING, FRANCINE WELL, ACTUALLY WE’RE LOOKING FOR AN INCREASE IN PAYROLLS BUT STILL MUCH HIGHER THAN THE NUMBER OF PEOPLE JOINING THE LABOR FORCE EACH MONTH. ECONOMISTS HAVE BEEN LOOKING AROUND THE 250,000 MARK. IT IS REALLY ABOUT THE AVERAGE EARNINGS.
WHAT WE HAVE SEEN IN RECENT MONTHS IS EUROPEAN WAGE GROWTH HAS BEEN ACCELERATING AND U.S. WAGE GROWTH HAS BEEN MOVING IN THE RIGHT DIRECTION. IT HAS BEEN SLOWING. AS LONG AS WE GET SOMETHING AROUND THE.3 LEVEL OR HOPEFULLY A LITTLE BIT BELOW THAT WILL BE BETTER NEWS. WE’RE GOING.3 ON AVERAGE EARNINGS. FRANCINE: WHAT ARE YOU EXPECTING THE FED TO DO FROM NOW UNTIL THE END OF THE YEAR? FINANCIAL CONDITIONS ARE TIGHTENING. AT THE SAME TIME CORE
INFLATION, IT COULD REMAIN VERY PERSISTENTS FOR A LONGER TIME. >> THEY HAVE BEEN TIGHTENING WHETHER YOU LOOK AT THE FED OR THE E.C.B. LENDING SURVEY FOR THE LAST SIX TO NINE MONTHS, THEY HAVE BEEN TIGHTENING IN TERMS TO HAVE SUPPLY FOR CREDIT AND DEMAND FOR CREDIT HAS BEEN SLOWING DOWN AND NOW WE’RE SEEING EVENTS THAT MEAN THEY ARE GOING TO TIGHTEN EVEN MORE. THE MAGNITUDE OF THAT TIGHTENING, JAY POWELL HAS MADE CLEAR, THE FOMC, DOESN’T KNOW WHAT THE IMPACT OF THAT WILL ACTUALLY BE.
THAT IS OBVIOUSLY TIGHTENING A MONETARY POLICY YOU WOULD EXPECT THAT. CORE INFLATION HAS BEEN A BIT MORE PERSISTENT. THEY KNOW CERTAIN ELEMENTS OF THAT, THE HOUSING WILL DROP OUT OVER THE NEXT YEAR. WAGE GROWTH IS THE PRIMARY CONCERN. GIVEN BY LOW PRODUCTIVITY GROWTH IS THAT SERVICE SECTOR ELEMENT OF INFLATION IS LIKELY TO KEEP CORE INFLATION PERSISTENT. WE EXPECT IT TO SLOW INTEREST CURRENT LEVELS. NOT JUST IN 2023 BUT ALSO IN
2024. FRANCINE: WHEN YOU LOOK AT THE TROUBLES IN THE BANKING SECT OF HOW MUCH DOES IT HAVE TO BE ON THE AGGRESSIVE TIGHTENING CYCLE? >> I THINK THE FED REMEMBER HAS A MANDATE, INFLATION AND EMPLOYMENT. AT THE MOMENT EMPLOYMENT IS BELOW -- IT NEEDS TO GO ABOVE 4% BEFORE IT IS CONSIDERED FULL EMEMPLOYMENT. IT REQUIRES TIGHTER POLICY. THAT’S WHY WE EXPECT THE FED TO CONTINUE TO TIGHTEN AT LEAST IN MAY. WE HAVE BEEN LOOKING AT TWO RATE RAISES. THE JURY IS STILL OUT WHETHER THEY ARE ABLE TO PUSH THROUGH THAT JUNE INCREASE. OBVIOUSLY, ON THE BANKING
CONDITIONS AND TURMOIL, THE U.S. DISEASE NOT CURRENTLY HAVE A BROAD -- THE U.S. DOES NOT CURRENTLY HAVE A BROAD ASSET PROBLEM. BUT IF WE WERE TO SEE A REAL CREDIT CRUNCH COMING THROUGH THAT GENERAL ATED A DEEP RECESSION -- GENERATED A DEEP RECESSION, THAT WOULD TIP THE BALANCE FOR FED MUCH MORE FANTASY.
AT THE MOMENT, WE THINK THE FED PAUSES FOR A MORE EXTEND PERIOD. IF WE GET STRAINS IN THE BANKING SYSTEM, THAT THEY ARE ABLE TO CONTROL THE LIQUIDITY PROVISION BUZZ OF AN ASSET QUALITY PROBLEM THAT WE DO NOT ENVISION THIS YEAR, YES, WE COULD GET A DIFFERENT SCENARIO COMING THROUGH FROM THE FED. FRANCINE: YOU’RE ALSO EXPECTING AN OUTRIGHT RECESSION IN THE EUROZONE AND THE U.K. ARE YOU MORE CONFIDENT FOR G.D.P. GLOBALLY AND HAVE QUESTIONS ABOUT 2024? >> WELL, IT IS AN UNSYNCHRONIZED GLOBAL PICTURE. THIS IS ONE OF THE THINGS THAT THE MARKETS HAVE BEEN STRUGGLING WITH TO SOME DEGREE. THE MARKET’S VIEW HAS BEEN
FRAMED OVER THE LAST 20 OR 30 YEARS HOW THINGS WORK AND ONE OF THE THINGS THAT WORKS IS USUALLY YOU GET SOME FINANCIAL INSTABILITY RISKS AND THE FED CHANGES COURSE AND CUT RATES. THIS IS NOT THE SYNCHRONIZED STORY. YOU HAVE THE CHINA REREOPENING AND THE EUROPEAN STORY HAS CHANGED DRAMATICALLY IN RECENT MONTHS BECAUSE OF THE IMPACT OF SHARPLY LOWER GAS PRICES. WE HAVE TAKEN OUT OUR EXPECTATION OF A RECESSION AND ACTUALLY REVISED UP OUR NUMBERS FOR THE FIRST HALF OF 2024 IN PARTICULAR FOR THE EUROZONE AND EVEN A LITTLE BIT FOR THE U.K. BUT IT IS SOMETHING -- OBVIOUSLY STILL A TIGHTENING POLICY FEEDING THROUGH FOR THE BANK OF ENGLAND AND MORE TIGHT TONGUE COME THROUGH FROM THE E.C.B. WE STILL LOOK FOR SOME WEAKENING IN THE COURSE OF 2023
LATER IN THE YEAR AS WE DO WITH THE U.S WE HAVE A MARKED SLOWDOWN IN THE U.S PROBABLY WHERE WE DIFFER IS 2024. WE HAVE NO RATE CUTS FROM THE E.C.B.
OR THE BANK OF ENGLAND. NO QUICK EASING FROM THE FED. IT IS OUR 2024 FORECAST WHERE WE DIFFER MUCH MORE FROM CONSENSUS. FRANCINE: THANK YOU SO MUCH. OUR GUEST STAYS WITH US AND WE’LL TALK MORE ABOUT CHINA’S REOPENING AND WHAT THAT MEANS FOR INFLATIONARY PRESSURES. COMING UP MACRON WAS WELCOMED BY HIS CHINESE COUNT PART XI JINPING. YOU’RE LOOKING AT LIVE PICTURES OF THE PRESIDENT OF CHINA ADDRESSING THE FRENCH CONTINGENCY. MORE ON THAT NEXT.
THIS IS BLOOMBERG. >> WE HAVE NEVER SPOKEN WITH ONE VOICE WHEN IT COMES TO CHINA. WE HAVE GRON ADMINISTRATION TO ADMINISTRATION.
146 TEMPERATURES VOTED 146 DEMOCRATS VOTED FOR IT. CHINA WOULD UNDERSTAND WHERE OUR BOUNDARIES ARE. THEY WON’T WORRY ABOUT WELL, ONE PARTY IS SAYING SOMETHING.
FRANCINE: THAT WAS U.S. HOUSE SPEAKER KEVIN MCCARTHY AFTER MEETING WITH TAIWAN’S PRESIDENT. ALSO THE CHINESE PRESIDENT XI JINPING HAS WELCOMED HIS FRENCH COUNTERPARTLESS THAN AN HOUR AGO. HE IS ON A THREE-DAY STATE VISIT JOINED BY THE EUROPEAN COMMISSION PRESIDENT.
WE’RE GETTING BREAKING NEWS AS THE TWO SIDES SPEAK. I THINK WE HAVE SOME LIVE PICTURES. XI JINPING IS SAYING FRANCE AND CHINA TIES HAVE REMAINED A STEADY DEVELOPMENT. THE CHINESE PRESIDENT IS FLANKED BY HIS FINANCE MINISTER ON HIS RIGHT JINPING SAID THE VISIT WILL INJECT NEW IMPETUS INTO THESE TIES.
IF YOU PUT THIS IN PERSPECTIVE, THIS IS QUITE SIGNIFICANT. WHAT DOES EACH SIDE HAVE TO GAIN FROM THIS? >> YES, FRANCINE. YOU HAVE PLAYED THE PICTURES, THE IMAGES THAT WE GET FROM CHINA. OBVIOUSLY THEY HAVE MAJORLY ROLLED OUT THE RED CARPET FOR THE FRENCH PRESIDENT. A MORE MUTED BY THE WAY WELCOME TO VANDER LION IN CHINA. THIS IS A RELATIONSHIP THAT HAS MANAGED TO STAY STEADY. THE FRENCH PRESIDENT PUT OUT A
TWEET GOING INTO THE MEETING THAT WE SHOWED YOU ON BLOOMBERG TV SAYING I AM CONVINCED -- THOSE ARE HIS WORDS -- I’M CONVINCED THAT CHINA CAN PLAY A ROLE IN GLOBAL IN GLOBAL PEACE. IT IS ALSO A DECLARATION OF INTENTIONS. WHEN IT COMES TO BOTH SIDES, WHAT HAVE THEY GAINED FROM IT? YOU LISTEN TO THE CHINESE, OBVIOUSLY FOR THEM THIS IS A WAY TO SHOW THEY ARE ON A MAJOR DIPLOMATIC STROLL. WE HAVE SEEN MAJOR DIPLOMATIC MOVES IN THE PAST MONTH FROM THE CHINESE AND REERT? ING THEMSELVES AS A BIG GLOBAL PLAYER.
WHEN IT COMES TO THE FRENCH, MACRON BELIEVES THEY CAN PLAY A ROLE WHEN IT COMES TO UKRAINE AND ALSO REBALANCING THE SITUATION IN FAVOR OF EUROPE COMPANIES. HE SPEAKS ON BEHALF OF THE FRENCH REP. WHEN YOU LOOK AT THE E.U., THE IDEA MEDIATION, THIS IS NOT CONSENSUS. I KNOW A LOT OF EUROPEAN OFFICIALS DO NOT BELIEVE CHINA WILL PLAY THIS ROLE. WILL NOT CALL THEIR PLAN A
PEACE PLAN. THEY SAY THIS IS A PROPOSAL. WHEN IT COMES TO TRADE VANDER LINE TALKS ABOUT DERISKING. IT WILL BE INTERESTING TO SEE WHAT THE FINAL COMMUNE CALIFORNIA INDICATING WILL LOOK LIKE. FRANCINE: I GUESS THERE IS A LOT OF CONCEPT SITABOUT WHAT PRESIDENT XI IS DOING. A LINE OF THOUGHT IS HE IS
TRYING TO COURT MACRON TO DRIVE A WEDGE BETWEEN EUROPE AND THE U.S. WHAT DO YOU THINK CHINA’S END GAME IS HERE? >> BEIJING CERTAINLY HAS ROLLED OUT THE RED CARPET FOR FRANCE AND FOR THE OTHER EUROPEAN AND GLOBAL LEADERS THAT HAVE VISITED BEIJING IN RECENT DAYS AND IT IS REALLY PART OF HIS BROADER CHARM OFFENSIVE THAT JINPING HAS LAUNCHED TRYING TO PRESENT CHINA AS A NEUTRAL MEDIATOR IN RUSSIA’S WAR WITH UKRAINE AND TRYING TO PROJECT THIS IMAGE OF CHINA AS A RESPONSIBLE ACTOR ON THE WORLD STAGE. BEIJING SEES CHINA AS CRITICAL TO THAT.
SOME OF THE MOST IMPORTANT EUROPEAN POLITICIANS FOR CHINA. MACRON HAS EMPHASIZED THIS PROPONENT OF A THIRD PATH, A MIDDLE WAY BETWEEN THE U.S. AND CHINA. AND EVEN IF WE WOULD NOT GO SO FAR AS TO SAY CHINA IS SEEKING TO CREATE A WEDGE, WEDGE, IT IS TRYING TO CREATE THIS BUFFER AS THE U.S. INCREASINGLY TRIES TO ISOLATE
CHINA PARTICULARLY WITH THIS HOST OF TECH CURBS. CHINA IS VERY, VERY CONCERNED WITH THE MOMENTUM THAT WE HAVE SEEN WITH THE NETHERLANDS, JAPAN JOINING THOSE CURBS. AND LIKE IN ITALY WHERE CONCERNS OVER THE INVOLVEMENT IN PERELLI. EVEN AT THE CORPORATE LEVEL, WE
SEE THIS MOMENTUM PICKING UP. FRANCINE: THANK YOU VERY MUCH. WE’LL CONTINUE OF COURSE WATCHING THOSE LIVE PICTURES OUT OF BEIJING, THE PAGEANTRY CHINA HAS FOR THE FRENCH. WE’LL BRING BACK OUR CONVERSATION WITH JANET HENRY. FIRST OF ALL HALF OF THE PEOPLE
WE SPEAK TO THINK THERE IS GOING TO BE A REAL DECOUPLING BETWEEN CHINA AND THE REST OF THE WORLD AND OTHERS THINK IT WILL BE A FUDGE. WHERE DO YOU STAND ON THIS? >> I THINK PARTS OF THE CHINA ECONOMY WILL DECOUPLE FROM THE REST OF THE WORLD AND PARTS OF THE ECONOMY ARE FEELING THE IMPACT OF THE REST OF THE WORLD. SERGE THE REOPENING STORY IS ON TRACK. IT IS INTERESTING, THE INDUSTRIAL SIDE, THE MANUFACTURING SIDE IS STILL QUITE SOFT. AS FAR AS GLOBALLY YOU HAVE A DIFFERENCE. THE U.S.
SURPRISING ON THE DOWNSIDE. CHINA SERVICES ABSOLUTELY REBOUNDING VERY, VERY FIRMLY AS CHINA’S EXPORTS ARE STILL DISAPPOINTING BECAUSE OF THE GLOBAL CYCLE. WHERE YOU’RE SEEING THE CHINA STORY IS ABSOLUTELY ON THE SERVICE SECTOR SIDE. DOMESTIC ECK TRAVEL. PUBLIC TRANSPORT IS BACK TO PREPANDEMIC LEVEL. INTERNATIONAL TRAVEL JUST A TINY FRACTION OF IT. 5% OF WHAT THEY WERE PREPANDEMIC.
THAT WILL BE A SLOW BUILD DURING THE REST OF THE YEAR. THE REST OF THE WORLD WILL FEEL THAT ON THE TOURISM SIDE AND CERTAINLY THE SERVICE SECTOR IN CHINA WILL REVIVE AND PROPERTY MARKETS. EVEN THERE YOU HAVE A DIVERGENCE. TOP TIER CITIES. TIER ONE AND TIER TWO CITIES. ACTIVITY REVIVING STRONGLY. IT IS A MUCH SLOWER STORY ON THE PROLT SIDE IN THE THIRD AND FOURTH TIER CITIES A DEGREE OF DECOUPLING. FRANCINE:
HOW DO YOU SEE THE CHINESE ECONOMY CHANGING? THEY WANT TO ADD VALUE OF 30% TO THE SUPPLY CHAINS, WHEN DO WE KNOW IF THAT IS A REALITY? >> I THINK THAT IS A MULTI-YEAR STORY. THE CHINA STORY OVER THE LAST YEAR, INFRASTRUCTURE SPENDING YOU SEE QUITE FIRM. EXPORTS WERE FIRM. MANUFACTURING INVESTMENTS WAS REASONABLY STRONG.
CERTAIN ELEMENTS OF THAT STORY WERE SLOW THROUGH 2023 AND THAT IS REALLY A CYCLICAL STORY. BUT OBVIOUSLY THEY HAVE CERTAIN INDUSTRIAL POLICIES AND CERTAIN AREAS WHERE ALREADY THEY ARE FACING TO HAVE A DEGREE OF ADVANTAGE GLOBALLY AND THINGS LIKE ELECTRIC VEHICLES THEY ARE THE FOREFRONT OF AND THAT IS WHERE THE DEMAND IS LIKELY TO STRENGTHEN. WE KNOW WHAT THEY ARE TRYING TO DO ON THE TECHNOLOGY SIDE REGARDING SEMICONDUCTORS IS GOING TO TAKE MANY YEARS TO CATCH UP WITH WHAT’S HAPPENING ELSEWHERE IN THE WORLD. I THINK TIMELINE ALSO VARY. THERE WILL BE INDUSTRY DIVERGENCES BUT THERE ARE CERTAIN SEGMENTS OF THE ECONOMY WHERE THEY WILL BE ADDING A LOT OF VALUE ON FIVE TO 10-YEAR VIEW. FRANCINE: THANKS. JANET HENRY OF HSBC.
COMING UP, GOLDMAN SACHS ADJUSTS RATINGS ON THE STOCK. THIS IS BLOOMBERG. FRANCINE: EXHIBITION, FINANCE, POLITICS, THIS IS BLOOMBERG "SURVEILLANCE" EARLY EDITION.
LET’S CHECK IN ON SOME OF THE STOCKS ON THE MOVE. HI, JOE. WHAT DO YOU HAVE? >> STARTING IN THE N.G. SPACE. SHELL SAYING THEIR GAS BUSINESS IS MAKING UP FOR A BIT OF WEAKNESS IN THE OIL UNIT AND THEIR CHEMICAL BUSINESS IS DOING PRETTY WELL. UP AROUND 1.4%. ADDING TO SOME GAINS THAT WE SAW EARLIER IN THE WEEK AS SAUDI ARABIA CUT PRODUCTION AND LIFTED OIL PRICES. MEANWHILE OVER IN FINANCIAL
TECHNOLOGY, THE SWISS FIRM IS BACK LOOKING FOR -- TEMENOS. THEY PROVIDE FINANCIAL SERVICES TECH FOR CREDIT SUISSE AND OTHER WEALTH MANAGERS AS WELL. THERE IS A BIT OF PRESSURE ON THE C.E.O. TO TURN THAT BUSINESS AROUND SO NOW THEY ARE LOOKING FOR A NEW OWNER ACCORDING TO OUR REPORT. THEN WE’RE MOVING OVER TO FERRARI. THIS ONE LITTLE CHANGED AT THE MOMENT BUT IT HAS AN INTERESTING BROKER MOVE.
GOLDMAN SACHS FINALLY UPGRADING THAT ONE. THEY WERE ONE OF THREE ANALYSTS THAT HAD IT AT SELL AND MISSED OUT ON A BIG RALLY ON THAT STOCK FERRARI IS EXPECTED TO BE ONE OF THE MORE RECESSION PROOF CARS AS THE ECONOMIC DOWNTURN HITS. UNCHANGED AT THE MOMENT ACCORDING TO OUR DATA. THE WORST PERFORMER IS UNIVERSAL MUSIC GROUP DOWN 6%. THIS IS AFTER B.N.P. PARIBAS DOWNGRADED IT TO
UNDERPERFORM. THIS LOOKS LIKE A EVALUATION CALL. ANOTHER STOCK THAT HAS DONE REALLY WELL. TAYLOR SWIFT HAS EARNED MORE
THAN $200 MILLION WITH HER NEW ALBUM. THAT STOCK IS PROBABLY OVERRUN ITS COURSE. CUTTING A COUPLE OF ANALYSTS AT SELL. FRANCINE: DOWN 6.3%.
THANKS SO MUCH. NOW THIS IS A PICTURE ACROSS THE BOARD FOR SOME OF THE INDUSTRY GROUPS. EQUITIES VS. BONDS A LOT OF STUFF IS GOING IN THE BOND MARKET RIGHT NOW. TREASURY YIELDS HEAD FOR ONE OF THE LONGEST STREAKS OR DECLINES SINCE 2020. BETS ON THE WORLD ECONOMY ARE SET FOR A SHARPER SLOWDOWN SEEM TO BE AT THE MOMENT OUTWEIGHING CONCERNS FOR ELEVATED INFLATION AND MONETARY TIGHTENING. WE SAW SIGNS OF A SLOWDOWN IN U.S. MANUFACTURING ACTIVITY THAT
PUSHED MONEY MARKETS TO ASSIGN A LOWER PROBABILITY THAT THE FED WILL RAISE INTEREST RATES BY 25 BASIS POINTS IN MAY. YOU CAN SEE THE FTSE MOVING INTO THE .7. IN THE U.K. GAINING HALF A PERCENT COMING UP AS WE KICK OFF Q2, BLOOMBERG U.K. WILL LOOK AT THE BRITISH ECONOMY. THIS IS BLOOMBERG.
FRANCINE: GOOD MORNING EVERYONE. WELCOME TO BLOOMBERG U.K. I’M FRANCINE LACQUA IN LONDON. TODAY WE FOCUS ON THE U.K. ECONOMY THROUGH THE EYES OF TWO BUSINESS LEADERS WHO OPERATE IN DIFFERENT PARTS OF THE ECONOMY BUT FIRST LET’S TAKE A LOOK TALENT LATEST FORECAST FOR THE ECONOMY. BLOOMBERG EXHIBITION HAS SCRAPPED ITS PREVIOUS FORECAST FOR A RECESSION AND NOW SEES THE BRITISH ECONOMY STAGNATING THIS YEAR WITH A FULL YEAR OF G.D.P. GROWTH AT JUST 0.1%. NOW ON A MONTHLY BASIS U.K. G.D.P. REBOUNDED IN JANUARY FOLLOWING A CONTRACTION IN DECEMBER.
MEANWHILE POLICY MAKERS ARE KEEPING AN EYE ON THE BANKING CRISES. THAT ALONG WITH SLOWING WAGE GROWTH AND TIGHTENING FINANCIAL CONDITIONS WILL WEIGH ON THINKING AT THE BANK OF ENGLAND. BLOOMBERG EXHIBITION EXPECTS IT TO HOLD ITS RATE AT .25%. HOWEVER, THERE IS A WARNING THAT THE TERMINAL RATE MAY NEED TO GO HIGHER TO PREVENT PRICE PRESSURES. THE MOST RECENT READINGS HAVE SHOWN THE UPSIT HITTING DOUBT DIGITS AGAIN.
IT IS EXPECTED TO DROP SHARPLY THIS YEAR AFTER A DROP O IN ENERGY PRICES. JEREMY HUNT DELIVERED HIS BUDGET LAST MONTH. NOW BLOOMBERG EXHIBITION BELIEVES THE EFFECTS FROM HIS POLICY WOULD BE OFFSET BY FINANCIAL TIGHTENS. LET’S GET ONTO ALL OF THIS. BLOOMBERG HAS FOUND THAT MANCHESTER, THE FORMER INDUSTRIAL POWERHOUSE OF NORTHERN ENGLAND HAS BECOME AN EMPLOYMENT HOT SPOT IN WHAT MAY BE AN EARLY VICTORY. LET’S TALK ABOUT WHAT BUSINESS HAS BEEN BATTLING, SEVERE WORKER SHORTAGES WITH HIGH DEMAND FOR STAFF FEELING THE STRONGEST WAGE GROWTH. WE’LL LOOK AT THE LABOR MARKET
AND SOME OF THE COMPANY’S NECESSITIES GOING FORWARD INCLUDING SOME RESTRUCTURING. LET’S BRING IN OUR EXPERT PANEL. WE CAN BE MORE EXCITED BRINGING THESE TWO GEM TOGETHER. JAMES REED, CHAIRMAN OF REED RECOURTROOM. ALSO HERE WITH US, CHIEF EXECUTIVE OF ALEX PARTNERS, A FINANCIAL ADVISORY AND CONSULT A.T.M.ANT FIRM. JAMES, LET’S START WITH YOU. YOU’RE IN THE JOBS BUSINESS.
WE KNOW THAT BUSINESSES ARE STRUGGLING TO FIND STAFF. IS IT GETTING EASIER AS THE DYNAMICS OF WORK ARE SHIFTING? >> WE’RE SEEING A SLIGHT CHANCE BUT ONLY A SLIGHT ONE. JOB NUMBERS, VACANCIES ARE STILL VERY HIGH.
THIS HAS SURPRISED A LOT OF PEOPLE WHO WERE EXPECTING A RECESSION AND ONE THAT HAS NOT APPEARED YET. VACANCIES ARE STILL VERY HIGH. THERE ARE GREAT SHORTAGES OF SKILLS ACROSS THE U.K. ECONOMY. EVERY SSHTOR IS STRUGGLING TO HIRE AT THE MOMENT. I CAN’T SEE THAT CHANGING QUICKLY. FRANCINE: HOW DO YOU SEE CLIENTS CHANGING?
HAVE TO GET BETTER RETURNS FOR SHAREHOLDERS AND ALSO FOR THEIR STAFF. WHAT IS THE SITUATION LIKE IN THE U.K.? >> I THINK IT IS VERY CHALLENGING FOR EXECUTIVES AND COMPANIES. I THINK IT IS A TIME OF
PROFOUND DISRUPTION. I THINK ALL OF THE THINGS WE TALKED ABOUT, INFLATION GOING UP SIGNIFICANTLY, I THINK THIS IS ARE HARD TIMES FOR COMPANY. FRANCINE: JAMES, IT IS VERY EXCITING ACTUALLY NOW THAT BLOOMBERG IS ANALYZING YOUR DATA AND YOU SEE BRIGHT SPOTS IN MANCHESTER. LEVELING UP HASN’T WORKED.
DO YOU SEE A PICKUP IN JOBS? >> BUSINESSES HAVE TO THINK MUCH MORE CAREFULLY ABOUT WHERE TO LOCATE TO ATTRACT PEOPLE. THAT HAS BECOME A PRIMARY DRIVER. MANCHESTER HAS PROVEN TO BE A GOOD LOCATION. I THINK IT SURPRISED SOME PEOPLE. THAT HAS COME OUT AS A TOP
LOCATION FOR JOB CREATION, WAY AHEAD OF LONDON. I THINK THAT COULD BE THE BEGINNING OF A TREND BUT THERE IS A LOT MORE WORK THAT NEEDS TO BE DONE FOR LEVELING UP TO REALLY HAPPEN. FRANCINE: JAMES, WHAT SURPRISED YOU WHEN YOU LOOK AT THE DATA. COMPANIES SAY I CAN HIRE IN MANCHESTER THAT IS NOT THE WORKING FROM THE OFFICE CULTURE AND I PAY THEM CHEAPER OR PACES SHIFTING TO OUTSIDE LONDON? >> I THINK PEOPLE ARE SHIFTING. BUSINESSES ARE SHIFTING BECAUSE THEY CAN GET CHEAPER PROPERTY AND BETTER ASSETS IN OTHER PARTS OF THE COUNTRY AND ALSO WORKERS ARE MOVING BECAUSE THEY CAN WORK REMOTELY.
A LOT OF JOBS THAT USED TO BE LONDON CENTRIC. FRANCINE: DO YOU SEE A SIMILAR PATTERN? I KNOW A LOT OF THE BIG COMPANIES ARE HEADQUARTERED IN LONDON. DO YOU SEE A SHIFT HOW THEY SERVICE IN THE REST OF THE COUNTRY? >> ABSOLUTELY. WE HAVE GOTTEN USED TO HYBRID THAT IS PROBABLY GOING TO RESET WHAT THE NORMAL IS. I THINK THERE IS ACTUALLY PHYSICAL LOCATION IS LESS IMPORTANT.
COMPANIES HAVE TO TAKE THEMSELVES WHERE THE TALENT IS. IF THAT MEANS SOME VERSION OF HYBRID WORKING IN THE LONG-TERM, SO BE IT. FRANCINE: I’M GOING THE ASK YOU BOTH QUESTIONS. ARE YOU MORE BULLISH OR BEARISH
ON THE ECONOMY THAN YOU WERE SIX MONTHS AGO? >> MORE BULLISH. >>> THE SAME. FRANCINE: I’M GOING TO FIND SOMETHING THAT YOU DISAGREE ON. >> OUR DATA WASN’T BEARISH SIX MONTHS AGO. IT IS NOT NOW. FRANCINE: IF YOU LOOK AT THE DYNAMICS OF WAGE GROWTH, POSSIBLE POLICY MISTAKES FROM THE BANK OF ENGLAND, WHAT ABOUT GO WRONG AND WHAT COULD GO RIGHT? >> LOTS OF MISCAKES COULD HA HAPPEN -- MISTAKES COULD HAPPEN AND WILL HAPPEN. I THINK INFLATION WILL COME
DOWN. I THINK IT IS GOING TO COME DOWN MORE SLOWLY THAN EXPECTED AND I THINK CONFIDENCE WILL SLOWLY RETURN TO ECONOMY IT IS MORE ROBUST THAN A LOT OF PEOPLE CREDIT IT FOR. FRANCINE: WHERE ARE YOU MORE BULLISH? I REMEMBER IN DECEMBER ARE WE GOING TO SEE ZOMBIE COMPANIES? BECAUSE OF THE ENERGY PRICE? WE THOUGHT AT THE TIME IT WAS END OF THE WORLD. IT HA HASN’T BEEN THE END OF THE WORLD AND YOU’RE NOW MORE BULLISH.
>> I THINK RICHARD SUMAC IS DOING A GOOD JOB. I FEEL MORE BULLISH ABOUT THE STABILITY. I FEEL MORE BULLISH ABOUT HOW EUROPE IS COMING THROUGH THIS PROFOUNDLY DISRUPTIVE TIME. NOT JUST COVID BUT THIS HUMAN DISASTER OF A LAND WAR IN EUROPE. I THINK THE SUPPLY CHAIN HAS BEEN SUCH A CHALLENGE FOR BUSINESS EXECUTIVES. PEOPLE HAVE STRATEGIES JUST IN
CASE, NOT JUST IN TIME. I FEEL PEOPLE HAVE PIVOTED WELL AND THAT’S WHY I FEEL MORE BULLISH. FRANCINE: WHEN A CHIEF EXECUTIVE CALLS YOU IN DISTRESS DO THEY WORRY ABOUT INFLATION OR SUPPLY CHAIN? >> ALL OF THE ABOVE. THEY ARE KEPT AWAKE BY ALL OF THEY SEE THUNDER AND LIGHTNING.
THERE IS AN ANXIETY THEIR BUSINESSES ARE NOT CHANGING QUICKLY ENOUGH. 3,000 GIVES AROUND THE WORLD. THE U.K. IS THE MOST DISRUPTED COUNTRY OTHER THAN CHINA AND JAPAN. EVERYBODY IS WORRYING THEY ARE
NOT TRANSFORMING QUICKLY ENOUGH. FRANCINE: ARE THERE INDUSTRY GROUPS THAT ARE NATURALLY HIRING MORE BECAUSE THEY ARE BOOMING IN THE U.K.? >> AUTOMOAT I HAS COME UP AS A BIG SECTOR. TECHNOLOGY IS CONTINUING TO BE AND ENERGY.
THOSE ARE POINTING TO WHAT IS COMING I THINK SO. EDUCATION IS ALSO REALLY BUSY THAT IS A FACTOR I THINK OF A LOT OF TURNOVER IN EDUCATION AND WAGES. WE’RE SEEING A LOT OF JOBS IN THOSE SECTORS. FRANCINE:
IS THIS FOREIGN COMPANIES INVESTING MORE IN THE U.K. OR HOME GROWN COMPANIES? >> TYPICALLY HOME GROWN. MORE JOBS CREATED DOMESTICICALLY THAN COMPANIES COMING INTO THE U.K. THERE ARE PLENTY OF VACANCIES. WE’RE SEEING THEM COME DOWN. THEY ARE DOWN 14% YEAR-ON-YEAR IN THE FIRST QUARTER. THAT IS NOT SURPRISING BECAUSE LAST YEAR THERE WAS A HUGE JOBS BOOM FOLLOWING THE PANDEMIC. IT IS NOT A BIG LABOR CRISIS IN
THE LABOR MARKET. WAGES ARE GOING UP BUT NOT KEEPING UP WITH INFLATION. SOME SECTORS, I THINK THIS IS REALLY INTERESTING, SOME ARE PAYING AHEAD OF INFLATION AND THEY ARE THE SECTORS WHERE PEOPLE HAVE TO ATTEND IN PERSON. SO THINGS LIKE MANUFACTURING, RETAIL, CUSTOMER SERVICE JOBS WHERE YOU HAVE TO BE THERE IN PERSON. COMPANIES HAVING TO PAY A PREMIUM TO ATTRACT THOSE PEOPLE NOW. FRANCINE: DO THE CHIEF EXECUTIVES WORRY ABOUT THE WAGE SPIRAL OR ARE THEY PRETTY HAPPY MATCHING INFLATION OR GOING ABOVE INFLATION AS LONG AS THEY CAN PASS ON SOME OF THE HIGHER PRICING TO THEIR CUSTOMERS? >> SHAY DILUTE WORRY ABOUT THAT FRANCINE BECAUSE THE COST OF LIVING HAS RISEN SO SIGNIFICANTLY.
WHILST THE LABOR MARKET IS TIGHT, THE SKILLS MARKET IS TIGHTER. THE CRITICAL SKILLS COMPANIES NEED TO PIVOT THEIR STRATEGIES, IT IS LARGELY DIGITAL, THOSE ARE TIGHT SUPPLIED. THERE ARE JUST NOT ENOUGH PEOPLE. THCREATING GREAT RAW TALENT. LOOKING AT HOW PEOPLE CAN RETRAIN THEMSELVES THE HALF-LIFE OF A SKILLSET IN A WHITE COLLAR JOB IS THOUGHT TO BE THREE TO FOUR YEARS. THESE ARE STRATEGIES PEOPLE ARE
WORRYING ABOUT. FRANCINE: CAN YOU REACCELERATE SOME OF THE RESCILG, JAMES? >> THERE HAS BEEN A DROP IN THE NUMBER OF TECHNOLOGY JOBS. IT IS ACTUALLY GETTING SLIGHTLY EASIER TO ATTRACT TECH TALENT BECAUSE THERE IS MORE PEOPLE ON THE MOVE. THAT IS A POSITIVE. RESCILG TAKES A LONG TIME. THE GOVERNMENT INTEREST IN SUPPORTING THAT. BACK ON THE AGENDA.
I HOPE THERE WILL BE A GOVERNMENT BUSINESS ALIGNMENT THERE TO HELP MORE PEOPLE LEARN NEW SKILLS THAT THEY CAN USE EFFECTIVELY AT WORK. FRANCINE: THANK YOU FOR JOINING US. BOTH STAY WITH US AND WE’LL PROBABLY ASK OURSELVES CAN INTERNATIONAL TRADE HELP REBALANCE THE U.K. ECONOMY? WE’LL TALK ABOUT GROWTH NEXT STAY WITH US. THIS IS BLOOMBERG. ♪ FRANCINE: EXHIBITION, FINANCE, POLITICS.
THIS IS BLOOMBERG U.K. I’M FRANCINE LACQUA IN LONDON. WE DISCUSSED THE PROBLEM OF THE U.K. ECONOMY AND JOBS MARKET. THERE HASN’T BEEN A STRATEGY FOR SUSTAINED GROWTH. LET’S BRING IN OUR EXPERT PANEL AGAIN.
CHIEF EXECUTIVE OF ALEX PERSON. THANK YOU BOTH FOR STAYING WITH US JAMES YOU BELIEVE ACTUALLY WE SHOULD PAY STAFF MORE. IS THIS THIS FOR RETENTION OR BECAUSE YOU CAN’T AFFORD TO LOSE GOOD PEOPLE? >> I THINK MANY COMPANIES ARE LOOKING AT WHAT THEY CAN DO TO RETAIN PEOPLE AND PAYING PEOPLE MORE IS AN OBVIOUS ONE.
WAGES HAVE TRAILED INFLATION. WAGES HAVE BEEN REALLY SQUEEZED. THIS PERIOD HAS NOT REALLY BEEN A RECESSION BUT A TOUGH TIME FOR A LOT OF WORKERS. WE HAVE SEEN THEIR WAGES SQUEEZED. MY VIEW IS EMPLOYERS SHOULD TAKE A MORE GENEROUS VIEW.
I THINK OVER TIME WORKERS HAVE HAD A WORSENING DEAL TO THE DETRIMENT OF BUSINESS MORE WIDELY AND THE ECONOMY TOO. THE NATIONAL MINIMUM WAGE IN THE U.K. HAS GONE UP TO 10 POUNDS AND 42. I THINK IT SHOULD GO UP HIGHER. THAT IS A 9.9% INCREASE WHICH IS A START.
I THINK THERE SHOULD BE A REAL EMPHASIS ON PAYING PEOPLE PROPERLY. THAT IS IMPORTANT FOR A DYNAMIC ECONOMY. FRANCINE: THIS IS PROBABLY ONE OF THE MOST DIFFICULT DECISIONS FOR CHIEF EXECUTIVES. HOW DO YOU RETAIN TALENT? DO CHIEF EXECUTIVES TEND TO OVERTHINK LOOKING AT BALANCE SHEETS WHERE REALLY THEY JUST NEED TO KEEP THE GOOD PEOPLE THAT WORK FOR THEM? >> THAT IS CERTAINLY PART OF IT BUT WE KNOW THE MOST SIGNIFICANT DRIVER OF EQUITY VALUE GROWTH IS REVENUE GROWTH.
IT HAS TO BE SUPPORTED BY THE WORKFORCE. THE RECRUIT MANAGEMENT AND RETENTION OF GOOD PEOPLE WHICH IS WHY RATES ARE SO IMPORTANT. I THINK SO FOR CHIEF EXECUTIVES IT IS HOW YOU RECRUIT AND RETAIN THE BEST PEOPLE AND PRESENT MARGIN BY THOUGHTFUL STRATEGIES OF GROWING THE BUSINESS. MAKE SURE IT IS NOT DEPRECIATED AS A RESULT OF THAT. FRANCINE: WHAT IS THE BIGGEST MACE TAKE?
>> FOCUSING ON ONE THING A TIME. NATURALLY THERE ARE SEVERAL THINGS THAT HA TO BE TO USED ON. INVESTORS DO REQUIRE EQUITY GROWTH. YOU HAVE TO HAVE A FAIR PAY POLICY THAT INCENTIVIZES PEOPLE TO STAY. IT IS LOOKING AT ALL OF THOSE CRITICAL ELEMENTS AT ONCE. FRANCINE: WHEN YOU LOOK ACTUALLY AT A LOT OF INVESTORS LOOKING AT THE U.K. SAYING STERLING IS MUCH MORE
STABLE. THE GOVERNMENT IS MUCH MORE STABLE. I WANT IN. THE QUESTION IS HOW DOES THE U.K. GROW IN THE NEXT FOUR TO FIVE
YEARS? WHAT’LL BE YOUR BLUEPRINT FOR THIS COUNTRY? >> I THINK THERE SHOULD BE A WORKFORCE STRATEGY. THAT IS A LIMITATION ON GROWTH. THE SHORTAGE OF SKILLS. THAT COULD APPLY TO REVAMPING THE APPRENTICESHIP SYSTEM. THE ADULT SKILLS SYSTEM. I THINK THE WORKFORCE STRATEGY WILL BE VERY IMPORTANT. A STRATEGY THAT ENCOURAGES THE DEVELOPMENT OF CLUSTERS OF EXPERTISE WE SEE THAT PLACES LIKE CAMBRIDGE WHERE SCIENCE AND TECHNOLOGY HAVE GROWING.
A LOT OF NEW JOBS ARE CREATED AT CAMBRIDGE. THE GROWTH THE MORE WIDELY SPREAD AND NOT TOO CONCENTRATED IN THE SOUTHEAST OF ENGLAND. FRANCINE: WHOSE JOB IS IT? >> EVERYONE. IT IS DOWN TO THE INDIVIDUAL. WE’RE SEEING MORE INDIVIDUALS COMING ONLINE TO LEARN NEW SKILLS AT THEIR OWN EXPENSE. COMPANIES ARE BEGINNING TO FINANCE THAT. THEY WILL GIVE PEOPLE A CHECK AND SAY SPEND THIS ON SOMETHING WHERE YOU’LL LEARN A A NEW SKILL AND GET A NEW QUALIFICATION.
THAT SORT OF FLUTIE IS IMPORTANT SO FLUIDITY IS IMPORTANT WHERE IT IS NOT TOO RIGID. PEOPLE ARE KEEN TO DO THAT. FRANCINE: HOW WOULD YOU GROW THE ECONOMY? >> I THINK THERE IS ANOTHER DIMENSION TO THIS. HOW TO LOOK AT HUMAN CAPITAL AN GET THE BENEFIT OF GREATER PRODUCTIVITY. OBVIOUSLY PAYING FAIR WAGES HAS TO BE DRIVEN BY PRODUCTIVITY. IT IS THE FUSION OF CAPITAL AND
TECHNOLOGY. B.M.W. SHOWED BY JOINING HUMAN CAPITAL AND TECHNOLOGY, THEY HAVE A 60% IN PRODUCTIVITY. >> A.I. AND SIMILAR A.I. TOOLS WILL BE CRITICAL TO EVERY JOB. I THINK IT WILL HELP AND SUPPORT RATHER THAN REPLACE. I THINK IT IS A WHOLE NEW REVOLUTION ABOUT TO START. FRANCINE:
AT THE SAME TIME PEOPLE ARE SAYING WE DON’T KNOW WHAT WE’RE DEALING WITH AND HOW MANY JOBS WILL BE LOST BECAUSE OF THESE NEW TECHNOLOGIES. IF YOU WERE TO GIVE A PIECE OF ADVICE TO SOMEONE GETTING TO THE JOBS MARKET NOW. IS IT THE HUMAN SKILLS OR IS IT THE A.I. SKILLS THAT ARE NEEDED FOR THE JOBS OF THE FUTURE? >> IT SHOULD BE TWO THINGS. EXCITING IN MANY WAYS. I WAS TALKING TO A YOUNG WOMAN WHO IS SETTING UP HER OWN BUSINESS. SHE ASKED FOR TERMS AND CONDITIONS THAT WOULD WORK FOR HER SECTOR.
SHE HAD IT WITHIN A MINUTE AND IT SAVED HER A LOT OF TIME AND MONEY. I DON’T KNOW HOW GOOD THE DECISIONS ARE. I THINK THAT IS INTERESTING. I THINK IT CAN ENABLE A LOT OF NEW ACTIVITY. I’VE BEEN RUNNING A RECRUITMENT
BUSINESS FOR A LONG TIME, RIGHT FROM THE BEGINNING OF THE WORLD WIDE WEB AND THE INTERNET. I DON’T APPROACH IT WITH FEAR BUT MORE WITH A SENSE OF OPPORTUNITY. FRANCINE: BUT THEY CHANGE JOBS SO MUCH.
>> HURRY. WHO KNOWS WHAT JOBS WE’LL BE -- SURE, WHO KNOWS WHAT JOBS WE’LL BE KNOWING 20 YEARS? FRANCINE: NOW OR THE WORKFORCE OF TOMORROW. >> A LOT OF IT IS BEING FLEXIBLE AND RESPONSIVE TO THE CHANGE P AND COMMITTING TO THE LIFELONG LEARNINGS OF CURRICULUM. WE USED TO THINK WHEN WE
FINISHED AT SCHOOL THAT WAS IT BUT IT IS NOT, IS IT? IT KEEPS GOING. BUSINESSES USED TO WANT CERTAINTY. THEY WILL NOT HAVE THAT. PEOPLE USED TO THINK LEARNING WAS DONE IN A FORMAL SETTING AND IT IS NOT. THAT IS TOTAL CHANGE. FRANCINE:
BUT THAT IS HARD. >> IT IS HARD. WHEN I TALK TO CHIEF EXECUTIVES EVERY DAY, THE PRESSURE ON LEADERS TO LEAD THEIR BUSINESS AND LEAD THEIR WORKFORCES THROUGH THIS PERIOD OF PROFOUND CHANGE IS EXTRAORDINARY. PROBABLY UNDER MORE PRESSURE THAN THEY HAVE EVER BEEN BEFORE. HAVING TO DO THINGS RIGHT AND
DO THEM NOW. STAYING AGILE. FRANCINE: WHO IS THE IDEAL CHIEF EXECUTIVE? SEEMS LIKE IT IS A RENAISSANCE WOMAN OR MAN. >> I’M NOT SURE IDEAL. I THINK SIMON ROBERTS HAS DONE A FANTASTIC JOB AT SAINSBURYS. THEY GOT THAT BUSINESS REFORMULATED. A GREAT EXAMPLE. FRANCINE: THANK YOU BOTH. OUR EXPERT PANEL TALKING ABOUT THE FUTURE OF GROWTH FOR THE U.K.
JAMES REED AND AND THE CHIEF EXECUTIVE OF ALEX PARTNERS. WE TAKE A LOOK AT THE LEGACY OF THE TREATY AND WHAT IS MEANT FOR NORTHERN IRELAND OVER THE PAST 25 YEARS. THAT IS NEXT. THIS IS BLOOMBERG. FRANCINE: NEXT WEEK MARKS 25 YEARS SINCE POLITICIANS SIGNED THE LANDMARK AGREEMENT IN BELFAST IT CHANGED THE COURSE OF NORTHERN IRELAND’S HISTORY SEEKING TO END MORE THAN 30 YEARS OF ARMED CONFLICT.
>> 25 YEARS AGO POLITICIANS IN BELFAST SIGNED THE GOOD FRIDAY AGREEMENT. OFFICIALLY ENDING MORE THAN 30 YEARS OF CONFLICT IN NORTHERN IRELAND. KNOWN AS THE TROUBLES AROUND 3,500 PEOPLE WERE KILLED IN VIOLENCE INCLUDING BOMBINGS AND RIOTING. THE PROS EXPECT OF PEACE WAS MET WITH OVERWHELMING SUPPORT. TONY BLAIR AND BILL CLINTON PAID A KEY ROLE IN HELPING WITH THE AGREEMENT.
CATHOLIC NATIONALISTS FAVORITE INDEPENDENCE. THE JOURNEY HAS NOT ALWAYS BEEN SMOOTH. DISTRUST REMAINS. ALONG WITH VIOLENCE.
>> WE WISH IT WASN’T BUT IT IS. YOU KNOW, YOU HAVE THESE -- TO PREPARE FOR A LONG TIME. >> IT HAS BEEN UNABLE TO FUNCTION FOR 40% OF ITS LIFE SPAN DUE TO DISAGREEMENTS BETWEEN THE SIDES. THE EXECUTIVE COMMITTEE HASN’T MET SINCE FEBRUARY 2022, -- POST BREXIT TRADING ARRANGEMENTS. NO MAJOR DECISIONS CAN BE MADE. BUT DESPITE MANY CONTINUING CHALLENGES, OPTIMISM REMAINS.
>> WHATEVER THE PROBLEMS IN NORTHERN IRELAND, WHAT PEOPLE SHOULD NEVER FORGET IS IT IS A WORLD BETTER THAN WHERE IT WAS. IF WE EXERCISE COMMON SENSE AND REALISM TODAY, WE CAN KEEP THE PEACE INTACT. FRANCINE: WELL THAT WAS THE GOOD FRIDAY MOVEMENT. NEXT WEEK THE 25TH ANNIVERSARY OF THE SIGNING OF THE AGREEMENT.
TREMENDOUS PROGRESS SINCE THE SIGNING OF THE PEACE TREATY AND THE UNITED STATES TO SUPPORT THE NATION’S ECONOMIC POTENTIAL. BIDEN WILL TRAVEL TO BELFAST AND THEN THE RB REP OF IRELAND THREE DAYS LATER. BE SURE TO SUBSCRIBE. JOIN ME ON APPLE PODCASTS, SPOTIFY OR WHEREVER YOU GET YOUR PODCASTS. NEW EPISODES DROP EVERY THURSDAY. THIS WEEK WE SPEAK WITH JIM MILLEN WHO PREDICTED THE FINANCIAL CRISIS. WHY HE IS SO BULLISH ABOUT INVESTING IN THE U.K.
BLOOMBERG "SURVEILLANCE" EARLY EDITION CONTINUES WITH MATT MILLER IN NEW YORK AND DANI BURGER IN LONDON AND THIS >> OUR JOB IS NOT YET FINISHED, IN THE WAR AGAINST INFLATION HAS TO CONTINUE. >> I THINK THE FED CONTINUES TO POUND THE TABLE THAT THEY ARE CONCERNED ABOUT INFLATION. >> WE WILL HAVE TO GO HIGHER FROM WHERE WE ARE, A LITTLE BIT MORE AND THEN HOLD THERE FOR SOME TIME, IN ORDER TO MAKE SURE THAT INFLATION IS ON THE SUSTAINABLE DOWNWARD PATH. >> THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION" WITH ANNA EDWARDS AND MATT MILLER. >> IT IS 10:00 A.M. IN LONDON AND 5:00 P.M.
IN HONG KONG, THE TOP STORIES TODAY, THERE ARE SIGNS THAT THE U.S. LABOR MARKET IS STARTING TO COOL OFF. THE LATEST JOBS REPORT COMES OUT ON FRIDAY. HOUSE SPEAKER MCCARTHY REASSURES TAIWAN THAT RELATIONS WITH THE U.S. ARE STRONG. A BIPARTISAN GROUP OF CONGRESS MEMBERS MET WITH THE PRESIDENT OF TAIWAN.
CREDIT SUISSE EXECUTIVES PLATE -- PAID THE PRICE. THEY ARE SLASHING THEIR BONUSES UP BY 50%. WELCOME TO "BLOOMBERG SURVEILLANCE: EARLY EDITION." MATT MILLER IS IN NEW YORK.
I AM FEELING JUST A TINY BIT GUILTY THAT TODAY IS OUR LAST DAY BECAUSE PITY THE BOND OR FX TRADERS THAT ARE GOING TO HAVE TO NAVIGATE THE JOBS REPORT WHILE EQUITIES MATT: FOLKS ARE OUT OF HERE. MATT:THE SURVEILLANCE TEAM IS IN TOMORROW AS WELL. THEY HAVE DRAWN THE SHORT STRAW, BUT ON THE OTHER HAND IT IS A VERY BIG AND IMPORTANT NUMBER, ESPECIALLY AS MARKETS SEEM TO THINK THEY ARE HEADING CLOSER AND CLOSER TO A RECESSION OR MAYBE WE ARE ALREADY IN ONE. I WILL SHOW YOU THAT IN JUST A SECOND. TAKE A LOOK AT FUTURES, UNCHANGED. YESTERDAY WE HAD A BIFURCATION CONTINUING WHERE THE MEGA CAP STOCKS DID WELL AND THE DOW WAS UP.
BUT THE NASDAQ UNDERPERFORMED THE S&P. YOU HAD SMALLER STOCKS DOING POORLY ESPECIALLY THE TECH STOCKS THAT DO NOT MAKE A PROFIT DOING POORLY. AND YOU HAD THE BIG STOCKS DOING WELL. THE U.S. 10-YEAR YIELD COMING DOWN THREE BASIS POINTS WHICH IS THE LOWEST LEVEL WE HAVE SEEN IT SINCE SEPTEMBER. YOU HAVE YIELDS COMING DOWN, FLOCKING TO BONDS FOR THE PERCEIVED SAFETY OF GOVERNMENT DEBT.
NYMEX CRUDE IS STILL AROUND $80 A BARREL AND I AM GETTING A LITTLE BIT OF THE GAINS WE SAW YESTERDAY AS WE HEAD INTO THE LAST TRADING DAY OF THE WEEK FOR COMMODITIES AS WELL. OF COURSE WE WILL CONTINUE TRADING BUT HOVERING JUST UNDER $28,000. I THINK ONE OF THE MOST FASCINATING ASPECTS OF THE YIELD CURVE IS THE THREE-MONTH 10 YEAR AND TO JAY POWELL HE SAID THAT IS WHAT THE FED WATCHES CLOSELY. WE ARE AT AN INVERSION OF ALMOST 160 BASIS POINTS, THE WORST IT HAS BEEN IN DECADES AND THIS IS A 20 YEAR CHART. IT IS WORSE THAN IT WAS IN THE GREAT FINANCIAL CRISIS AS WELL WHICH MIGHT PORTEND A RECESSION WHICH IS WHY INVESTORS WERE TO SOME EXTENT SELLING STOCK AND RISK ASSETS AND DEFINITELY BUYING GOVERNMENT DEBT. LOOK AT WHAT HAPPENED IN ASIA, WE HAD A DROP IN THE ASIA-PACIFIC INDEX OF ABOUT .75%. THE NIFTY 50 WHICH WE DO NOT ALWAYS SHOW YOU IN INDIA GETTING A LITTLE BIT OF A LIFT ONLY A QUARTER OF A PERCENT AFTER THE CENTRAL BANK SURPRISED MOST INVESTORS WITH A PAUSE. I THINK SEVEN OUT OF 33
ECONOMISTS WERE EXPECTING THE PAUSE, SO ADDING TO THE GROUP OF CENTRAL BANKS PUTTING RATE HIKES ON HOLD. THE NIKKEI CAME DOWN 1.2% AND THE DOLLAR GAINED A LITTLE BIT OF STRENGTH AGAINST THE YEN. WHAT ARE YOU SEEING IN EUROPE
TODAY? DANI: EQUITIES ARE MOVING HIGHER IN CONTRAST TO AMERICAN FUTURES AND WHAT HAPPENED IN THE ASIA SESSION. MAYBE THERE IS MORE OPTIMISM OVER THE ECONOMY THAT THAT WILL DETERMINE INDUSTRIAL PRODUCTION NUMBERS MOVING HIGHER BY 2%. THE EXPECTATION WAS A DROP OF POINT 1%. IT IS A LONG WEEKEND IN EUROPE, NOT JUST FRIDAY BUT MONDAY. THERE WILL NOT BE MUCH TRADING. WE ARE STILL BUYING AHEAD OF THE RISK EVENT WHICH IS NO TRADING DURING THE JOBS REPORT. THE STOXX 600 GAINING .5%.
ONE THING THAT IS GAINING IS EQUITIES. SHELL CAME OUT WITH GREAT -- WITH TRADING NUMBERS AND THEY WERE STRONGER THAN EXPECTED DESPITE THE FACT THAT WE HAVE SEEN NATURAL GAS PRICES BELOW THEIR FEET -- BELOW THEIR PEAK. THERE ARE SIGNS THAT WE ARE WORRIED ABOUT THE ECONOMY. THE SWISS FRANC IS TO -- DOLLAR VERSUS THE SWISS FRANC IS DOWN TO 1%. THIS IS AS LOW AS IT HAS BEEN DESPITE A DOLLAR GAINING AGAINST PRETTY ANYTHING -- PRETTY MUCH ANYTHING ELSE. IT IS ALSO CLEAR THROUGH THE YIELDS PLAY, THE GERMAN 10-YEAR YIELDS ARE DOWN THREE BASIS POINTS DESPITE THE FACT WE HAD THE STRONG GERMAN DATA. AT THE MOMENT IT IS BUY BONDS
NOW AND ASK QUESTIONS LATER. MATT: WE SEE THE CORRELATION BETWEEN BONDS AND STOCKS AT A RELATIVELY HIGH LEVEL. WE ARE ALL WAITING FOR THE U.S. PAYROLL REPORT OUT ON GOOD FRIDAY TOMORROW. MANY OF US WILL SLEEP THROUGH IT AND THEN CHECK THE BLOOMBERG AFTER WE WAKE UP BECAUSE THE STOCK MARKET IS CLOSED. WE ARE EXPECTING THAT TO SHOW THAT EMPLOYERS ADDED A QUARTER OF A MILLION JOBS IN THE UNEMPLOYMENT RATE HELD AT AN HISTORICALLY LOW LEVEL. ONE THING FOR SURE, IF WE BEAT, IT WILL BE 11 OR 12 MONTHS IN A ROW THAT THE NUMBER HAS COME OUT BETTER THAN ANTICIPATED.
KRITI: SO 235,000 IS THE ESTIMATE IN THE PRIOR NUMBER IS 311,000 AND THE PRIOR NUMBER WAS LARGER. THE MARGIN IS DECELERATING WHICH GIVES INVESTORS A LOT OF HOPE THAT COUPLE THAT WITH THE ECONOMIC DATA THAT WE HAVE GOTTEN. WE HAVE THE ADP NUMBERS, AND FACTORY ORDERS POINTING TO A SLOW DOWN AND DECLINE IN THE ECONOMY. AT WHAT POINT IS THIS SIMPLY A SLOWDOWN KIND OF CREATED AND REALLY PUSHED AHEAD BY THE FEDERAL RESERVE’'S AGGRESSIVE MONETARY TIGHTENING SCHEME OR A SLOWDOWN COMING FROM OTHER FACTORS AND IS INFLATION FINALLY BEATING THE CONSUMER? RIGHT NOW IT IS IMPORTANT TO TALK ABOUT HOW MUCH THE MARKET WILL REACT TO THIS BECAUSE AGAIN, TO YOUR POINT, IF YOU ARE A BOND TRADER AND POSITIONING FOR THE PAYROLLS REPORT OR AN EQUITY TRADER YOU COULD BE A LOT -- IN A LOT OF TROUBLE. DANI: AT LEAST BOND TRADERS GET THE HALF DAY, OR MAYBE THEY WANT TO SLEEP IN AND FIND OUT WHAT THE NUMBER IS. WE ALSO HEARD FROM THE
CLEVELAND FED PRESIDENT WHO SAID THAT RATES NEED TO MOVE A LITTLE BIT HIGHER AND WE HAVE A DISCONNECT WHERE MARKETS ARE SAYING ONE THING AND FED OFFICIALS ARE SAYING ANOTHER. KRITI: IT IS A QUESTION OF THE INFLATION OR RECESSION, WHICH ONE COMES FIRST AND WHICH YOU ARE BETTING AGAINST. YOU ARE SEEING THAT DEVELOP IN THE TREASURY MARKET. THE TWO YEAR YIELD BELOW 4% AND A YIELD CLOSER TO THE 3% LEVEL WHICH SHOWS SIGNS OF AN ECONOMIC RECESSION WHERE YOU ARE SEEING 100 BASIS POINTS OF CUTS PRICED IN BY THE END OF THE YEAR. I STOLE THIS OFF OF YOUR TWITTER FEED THIS YEAR. DANI: STEAL AWAY.
KRITI: A U.S. RECESSION WILL OCCUR AS SOON AS JULY, THEY ARE BASICALLY SAYING THE IMPACT OF THE BANKING AND OIL STORY AND THE HIKES WILL MATERIALIZE. I'M GOING TO THROW ONE MORE NUMBER, WHEN WE ARE QUANTIFYING THE BANKING CRISIS, THE NEGATIVE IMPACT ON GDP IS 1.25%.
PUT THAT IN PERSPECTIVE FOR THE FINANCIAL CRISIS. THAT IS SIGNIFICANTLY ADDING TO THE PAIN EVEN THOUGH THE BIGGEST BANKS SEEM JUST FINE. MATT: THANK YOU VERY MUCH. JOINING US ON SET AT 5:00 IN THE MORNING, TOO EARLY FOR ANYBODY SO WE APPRECIATE THAT. U.S.
HOUSE SPEAKER KEVIN MCCARTHY HAS PUSHED CONTINUED SUPPORT FOR TAIWAN AS IT FACES ASSERTIVE ACTIONS BY CHINA. HE SPOKE TO ANNMARIE HORDERN AFTER MEETING WITH TAIWAN'S PRESIDENT IN SOUTHERN CALIFORNIA. >> WHAT CHINA NEEDS TO UNDERSTAND IS THEY CAN DICTATE WHO THE SPEAKER OF THE HOUSE CAN MEET WITH FOR THE SAME REASON THAT MACRON IS SITTING DOWN WITH PRESIDENT XI, THAT IS GREAT I WOULD. MATT: REBECCA, THE BLOOMBERG ASIA GOVERNMENT AND POLITICS CORRESPONDED JOINS US FROM HONG KONG FOR MORE. REBECCA, HOW IS THIS RELATIONSHIP HOLDING UP AND HOW DOES CHINA VIEW THIS? REBECCA: IT HAS BEEN A VERY CAREFULLY CURATED TRIP BY THE PRESIDENT. NO LESS BECAUSE SHE HAS SUCCESSFULLY CONVINCED MCCARTHY TO MEET ON AMERICAN SOIL RATHER THAN IN TAIPEI WHICH WOULD HAVE BEEN FAR MORE PROVOCATIVE.
THE RESPONSE WE HAVE SEEN HAS BEEN RELATIVELY MUTED AND THAT IS IN PART BY BOTH MCCARTHY AND THE MORE MODERATE STATEMENTS COMING OUT FROM THAT MEETING ALLOW SOME SPACE FOR CHINA NOT TO NECESSARILY ROLLOUT THE FIRE AND FURY RESPONSE AND THE UNPRECEDENTED MILITARY DRILLS THAT WE SAW AFTER PELOSI'S VISIT LAST YEAR. DANI: IT ALWAYS STANDS IN STARK CONTRAST TO THE EUROPEAN APPROACH VERSUS THE AMERICAN APPROACH. EMMANUEL MACRON AND URSULA VONDA LINE HAVE HEADED TO BEIJING AND HE HAS MADE COMMENTS IN KEEP -- IN THEIR ROLE IN KEEPING PEACE WITH UKRAINE. WHAT ARE WE EXPECTING OUT -- OUT OF THE MEETING AND WHAT IS LIKELY TO BE THE REACTION? REBECCA: WE HAVE SEEN HIM DOLING OUT SOME FRENCH CHARM AND SAYING THAT HE CAN COUNT ON THE CHINESE PRESIDENT TO BRING THE RUSSIANS BACK TO THE TABLE.
HE HAS ALREADY UNDERSCORED THAT CHINA CAN PLAY A MAJOR MEDIATING ROLE AND IT IS NOT EXIST -- INSIGNIFICANT ENDORSEMENT, THE MOST IMPORTANT EUROPEAN POLITICIAN IN CHINA. IT COMES AT A TIME WHEN THE U.S. IS INCREASINGLY TAUGHT -- TRYING TO ISOLATE BEIJING. I THINK THE BIG QUESTION IS WHETHER OR NOT THIS IS A TURNING POINT FOR SOME KIND OF POLITICAL SETTLEMENT OVER RUSSIA'S WAR IN UKRAINE. ASIDE FROM THE GEOPOLITICAL EMPHASIS WE ARE LOOKING TO SOME KIND OF DEALS. MCCRONE IS TRAVELING WITH A HOST OF EXECUTIVES FROM FRENCH FIRMS SO HE IS TRYING TO REOPEN.
THE OTHER THING TO WATCH IS ANY KIND OF DEALS THAT COME THROUGH WITH AIRBUS. MATT: THANK YOU VERY MUCH. SHE IS TALKING TO US ABOUT U.S.-CHINA AND U.S.-TAIWAN RELATIONS AND IT IS GREAT TO GET AN UPDATE.
WE WILL HAVE MORE ON ANNMARIE HORDERN NORD -- AND RING HOLD TURN'S -- ANNMARIE'S INTERVIEW. WHAT IT -- CREDIT SUISSE EXECUTIVES WILL HAVE BONUSES CANCELED A WORKOUT. THIS IS FOLLOWING THE TAKEOVER. WE ARE JOINED BY OLIVER WHO WAS
IN ZURICH. WE ARE TALKING ABOUT 1000 TOP MANAGERS WHO HAVE ALREADY NEARLY BEEN WIPED OUT ON THEIR EQUITY HOLDINGS. OLIVER: THAT IS RIGHT. WE ARE TALKING ABOUT ALL OF THE EXECUTIVE BOARD NOT BEING PAID A BONUS AND 25% BEING WITHHELD SO EVEN BELOW THAT. IT TOUCHES ABOUT 1000 PEOPLE AND IT IS AN EXTENSION OF THE TEMPORARY MEASURE THAT THE SWISS GOVERNMENT TOOK ON MARCH 21. THE TOPIC OF CONVERSATION HAS BEEN A MAJOR ONE FOR UBS AND CREDIT SUISSE.
AT UBS THE MORE PALPABLE VERSION IS HOW MUCH WILL THEY HAVE TO PAY HIM GOING FORWARD TO OVERSEE A VERY LARGE TASK AND THE EXECUTIVE TEAM IS A MUCH LARGER BANK, BUT QUESTIONS FOR CREDIT SQUEEZE AND COULD THERE BE CLAWBACKS GOING BACK IN TIME. AND AVOIDING THE SITUATION WHERE A LOT OF SHAREHOLDERS THINK THAT THE PROBLEM WAS THE COMPENSATION WAS OUT OF WHACK AND ENCOURAGED RISK TAKING. THE TEAM CRUNCHED THE NUMBERS AND OVER THE LAST 12 YEARS 35 BILLION FRANCS HAVE BEEN PUT INTO THE BONUS POOLS.
THE PROFIT OVER THAT TIME WAS $35 MILLION. WE HAVE HAD ANOTHER BIG WEEK FOR SWISS BANKING, SO WHAT NEXT? OLIVER: IT IS HARD TO TALK ABOUT WHAT COMES NEXT BUT WE WILL TRY TO DO SO. THERE QUITE IT -- CREDIT SUISSE IS VERY EMOTIONAL AT TIMES AND VERY UPSET, KIND OF WEIRD. ONE OF THE SHAREHOLDERS SHOWED UP WITH A BAG OF WALNUTS THAT HAD BEEN HOLLOWED OUT AS AN ELABORATE METAPHOR FOR THE VALUELESS SHARES. ANOTHER ONE WAS SINGING ABOUT MAN, MONEY AND CAPITALISM. BUT REALLY THE CREDIT SUISSE IS ABOUT CONTRITION AND UBS A LOT OF IT WAS SPENT ON HIGHLIGHTING THE RISKS FROM THIS DEAL THAT YOU CANNOT IGNORE THE OPPORTUNITIES.
THE OTHER SIDE IS THAT THEY BOUGHT THEIR MAIN CONTENT -- COMPETITOR FOR CENTS ON THE DOLLAR AND WHILE THAT CARRIES AN EXECUTION RISK YOU CANNOT IGNORE THAT. IT IS REALLY UP TO THE NEW CEO TO PAVE THE PATH GOING FORWARD. CONCRETELY THE NEXT THING WE LOOK FOR OUR EARNINGS FROM UBS. DANI: HONESTLY SO IMPRESSED WITH THE UBS SHAREHOLDERS AND THOSE BAGS OF WALNUTS. THANK YOU SO MUCH. OLIVER KIRK IN ZURICH. COMING UP WE WILL BE SPEAKING
TO RAFAELLA WHO IS THE ADA ECONOMY X FOUNDER AND CHIEF ECONOMIST. WE WILL BE TALKING TO DAVID DINDI ON WHERE IT STANDS ON THE BANKING CRISIS. PLUS HOUSE SPEAKER KEVIN MCCARTHY SAYS THAT WALL STREET SHOULD BE WORRIED ABOUT THE U.S. DEBT CEILING. PART OF OUR INTERVIEW AHEAD. >> WE ARE ABOUT TO BE AT THE TIPPING POINT, WE HAVE NEVER BEEN HERE WITH THE AMOUNT OF DEBT THAT WE HAVE HAD SINCE WORLD WAR II. WHAT I TOLD THE PRESIDENT IS LISTEN, WE ARE BRINGING IN MORE REVENUE THAN ANY TIME IN THE MATT: WELCOME BACK TO "BLOOMBERG SURVEILLANCE: EARLY EDITION."
ANNA EDWARDS IS OFF THIS WEEK. I WAS TALKING EARLIER ABOUT THE AMOUNT OF MONTHS IN A ROW THAT WE HAVE SEEN, THE NAM -- THE NON-FARM PAYROLLS NUMBER. IT BEAT THE JOB ESTIMATE. WE DO IT AGAIN TODAY AND IT WILL BE A FULL YEAR. JOINING US IS BLOOMBERG'S EQUITY REPORTER.
HOW IMPORTANT IS THIS NUMBER TOMORROW AND WE SHOULD POINT OUT THAT IT IS ALSO ODD BECAUSE IT FALLS ON A DAY WHEN A LOT OF STOCK MARKETS ARE CLOSED. >> ABSOLUTELY, I THINK THE JOB NUMBER WILL BE CRUCIAL FOR STOCK MARKET ACTION NEXT WEEK. WE HAVE ALREADY SEEN SENTIMENT BECOME A LITTLE BIT SUBDUED IN THE FIRST FEW TRADING DAYS.
AND A LOT OF THAT HAS COME DOWN TO THE FOCUS REALLY SQUARELY BEING ON WHAT ARE THE RISKS OF A POSSIBLE RECESSION. THE BAD NEWS IS THAT IT IS NO LONG -- BAD NEWS IS NO LONGER BEING PERCEIVED AS GOOD NEWS. WE HAD WEAKER JOB NUMBERS AND THE STOCK MARKET REACTION WAS SLIGHTLY NEGATIVE AND IT COMES DOWN TO, AS YOU MENTIONED WITH THE U.S. AND EUROPEAN STOCK MARKETS BEING CLOSED IT IS LIKELY THAT WE WILL SEE THE FULL IMPACT OF THE REACTION ON MONDAY. DANI: HOW MUCH COULD EARNINGS SEASON SHAKE THINGS UP? SAGARIKA: YOU HAVE ASKED THE QUESTION OF THE HOUR. WE WILL START HEARING FROM THE BIG BANKS.
JP MORGAN AND SITTING -- AND CITIGROUP. ONE OF THE LINGERING QUESTIONS REMAINS WHAT INFLATION WILL CONTINUE TO DO OR CONTINUE TO MEAN FOR CONTROLS, BUT GIVEN THE BANKING TURMOIL IN THE REGIONAL LENDERS IN THE U.S. THAT WE SAW LAST WEEK THAT IS A BIG QUESTION MARK FOR INVESTORS AS TO HOW AND IF AT ALL THAT WILL HAVE IMPLICATION WHETHER IT BE ON THE BIG LENDERS WERE CORPORATE AMERICA MORE BROADLY.
MARKET HAVE SAID THAT THE RISKS ARE NOT TOO BIG AT THE MOMENT, WE JUST HEARD FROM GOLDMAN THIS MORNING INCLUDING DAVID AND HE SAID THAT THE EXPLOSION FOR SMALL-CAP FUNDS ARE LARGER BECAUSE THEY HAVE A BIGGER EXPOSURE TO REGIONAL LEVELS AS OPPOSED TO THE LARGE CAPS. DANI: WE SAW THE RUSSELL 2000 FALL. THANK YOU FOR JOINING US. AND FOR MORE MARKET ANALYSIS, CHECK OUT THE BLOG. THIS IS BLOOMBERG. MATT: THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION." I AM MATT MILLER IN NEW YORK. NOW KEEPING YOU UP-TO-DATE WITH NEWS AROUND THE WORLD, HERE'S THE FIRST WORD.
IN FRANCE, UNIONS ARE LEADING ANOTHER ROUND OF STRIKES AND PROTESTS AGAINST THE PENSION REFORM. THE BILL TO RAISE THE MINIMUM RETIREMENT AGE TO 64 FROM 62 HAS ALREADY PASSED PARLIAMENT BUT UNIONS ARE BETTING THAT THEY CAN FORCE A U-TURN. ANTI-VACCINE ACTIVIST ROBERT F KENNEDY JR. WILL CHALLENGE JOE BIDEN FOR PRESIDENT IN 2024. THE SON OF THE LATE SENATOR
ROBERT F ENTITY -- ROBERT F KENNEDY LISTED HIMSELF AS A DEMOCRAT. HE HAS PUT FORTH CONSPIRACY THEORIES ABOUT THE DANGERS OF VACCINES AND SERVED IN VARIOUS ROLES FOR ENVIRONMENTAL GROUPS AS WELL. IN MACAU, CASINOS HAVE BEEN FORCED TO SHUT THOUSANDS OF HOTEL ROOMS BECAUSE OF A LABOR SHORTAGE AND CUT BACK ON GUEST SERVICES LIKE HOUSEKEEPING. SOME FIVE-STAR HOTELS HAVE FEWER THAN HALF OF THEIR ROOMS AVAILABLE. DURING THE PANDEMIC MACAU LOST ITS TITLE AS THE WORLD'S BIGGEST GAMBLING HUB TO LAS VEGAS. CHASE COLEMAN'S STOCK -- TIGER GLOBAL HEDGE FUND ROSE 7.3%.
A RALLY HELPED THE FIRM DIG OUT FROM RECORD LOSSES. FOUR OF THE BIGGEST STOCK HOLDINGS JUMPED AT LEAST 20% DURING THE FIRST THREE MONTHS AND THEY WERE LED BY A 76% SURGE IN META PLATFORMS BUT THEY HAVE A LONG WAY TO GO TO MAKE UP FOR THE LOSSES. DANI: I GOT THE NUMBERS. ONE OF THEIR FUNDS NEEDS TO GAIN 144% AND THE OTHER ONE NEEDS TO GAIN 216% WHICH IS A BIG TURNAROUND THAT THEY NEED.
MATT: COMING UP, THE ADA ECONOMICS FOUNDER AND CHIEF ECONOMIST JOINS US. THIS IS BLOOMBERG. DANI: THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION," HERE'S WHAT YOU NEED TO KNOW. THERE ARE SIGNS THAT THE U.S. LABOR MARKET IS STARTING TO COOL. THE LATEST JOBS MARK -- JOBS REPORT COMES OUT TOMORROW. HOW'S THE CURTAIN MACARTHUR -- HOUSE SPEAKER MCCARTHY MET WITH TAIWAN'S PRESIDENT IN SOUTHERN CALIFORNIA. CREDIT SUISSE EXECUTIVES PAID THE PRICE.
THE GOVERNMENT IS CANCELING OR SLASHING THEIR BONUSES UP TO 50%. I AM DANI BURGER IN LONDON AND MATT MILLER IS IN NEW YORK. I HAVE ONE POINT TO CORRECT OR CLARIFY MYSELF. ACCORDING TO DANIEL CURTIS,
EQUITY FUTURES WILL BE OPEN BUT UNTIL 9:15 A.M. NEW YORK TIME SO THEY HAVE THE TREAD -- THE PLEASURE OF TRADING THE JOBS REPORT. MATT: THE NYSE CLOSED, THIS IS THE ONLY NONFEDERAL HOLIDAY WHY THE -- WHERE THE NYSE CLOSES. THEY ARE CONSERVATIVE ABOUT THE DAYS THAT THEY SHUT DOWN. FUTURES ARE OFF .1% A LITTLE BIT LESS AFTER THE DROP OF A
QUARTER PERCENT IN THE CASH TRADE. SMALLER STOCKS AND TECH STOCKS DOING WORSE AND THE NASDAQ WAS DOWN 1%. THE DOW JONES INDUSTRIAL AVERAGE ACTUALLY GAINING AMIDST THE RECESSION FEARS THAT HAVE COME TO THE SURFACE. THE U.S. 10 YEAR YIELD IS EVIDENCE OF THAT.
3.2 791, AND THIS IS THE LOWEST LEVEL SINCE SEPTEMBER. THEY HAVE REALLY COME DOWN, BUT CONCERN ABOUT A RECESSION TRUMPING FEARS THAT THE FED IS GOING TO BE ABLE TO FIGHT INFLATION AND AS A RESULT YOU SEE A YIELD CURVE INVERSION THAT IS PRETTY STUNNING. LOOKING AT NYMEX CRUDE AT $80 A BARREL AND HAS BEEN STABLE SINCE THE SURPRISE LAST SUNDAY FROM OPEC-PLUS JUMPED THE PRICE ABOUT FIVE DOLLARS AND WE HAD BEEN ABOVE 81 YESTERDAY SO WE ARE COMING DOWN FROM THAT. BITCOIN IS INCREDIBLY STABLE AFTER ITS JUMP FROM 16,000 TO 28,000, IT HAS HELD HERE EVEN AFTER THE CFT BROUGHT THE LAWSUIT AGAINST BUYING AND.
-- FINANCE. SO LET US LOOK AT THE ALL IMPORTANT 10 YEARS SPREAD. NORMALLY WE LOOK AT THE TWO'S AND TENDS, BUT JEROME POWELL SAYS THAT THE FED FOCUSES ON THIS. IT HAS BEEN CUT IN HALF AND IT IS LESS THAN 50 BASIS POINTS. THE THREE-MONTH 10 YEARS SPREAD IS INVERTED TO THE TUNE OF 160 BASIS POINTS. IF YOU LOOK BACK ON THE 20 YOUR
CHART THAT IS WORSE THAN THE GREAT FINANCIAL CRISIS WHICH COULD PORTEND A RECESSION AND THAT IS WHAT THE MARKET IS WORRIED ABOUT. WHAT YOU SEEING ABOUT -- WHAT ARE YOU SEEING IN THE TERMS OF THE EUROPEAN TRADE. DANI: WE ARE STILL RISK ON. WHEN IT COMES TO AS GOODIES WE WERE SPEAKING TO OUR REPORTER ABOUT THIS THERE HAS BEEN A LOT OF BAD NEWS AND VOLATILITY. WE ARE STILL BUYING EUROPEAN EQUITIES AHEAD OF A FOUR-DAY WEEKEND. THOSE ARE UP ONE THIRD OF A PERCENT.
SHELL IS OUTPERFORMING AND HAS A REALLY STRONG QUARTER WHEN IT COMES TO GAS TRADING DESPITE THE FACT THAT GASES BELOW ITS ALL-TIME HIGH. HERE IS WHERE YOU ARE SEEING THOSE RECESSION PLAYS COMING UP. THE DOLLAR VERSUS THE SWISS FRANC IS DOWN ABOUT .2%. THE DOLLAR IS HIGHER AGAINST
MOST EVERYTHING. THIS IS MORE OF A HAVEN BID. AND FINALLY THE GERMAN 10-YEAR YIELD, DESPITE STRONG GERMAN DATA FROM PRODUCERS FOR INDUSTRIAL PRODUCTION, IT IS A BUY FOR GERMAN BONDS IN SYMPATHY WITH WHAT YOU ARE POINTING OUT. WE ARE LOOKING WITH YIELDS MOVING 3.5 BASIS POINTS. MATT: JOINING US IS THE FOUNDER AND CHIEF ECONOMIST AT ADA ECONOMICS, I REALLY APPRECIATE HER TIME. LET ME GET YOUR TAKE ON THE ODDS OF THE U.S.
ENTERING A RECESSION AND MARKETS ARE BETTING MORE AND MORE FOR IT. >> GOOD MORNING EVERYONE. THE U.S. RECESSION I THINK NOT REALLY THIS YEAR, OF COURSE IT DEPENDS ON HOW AGGRESSIVE THE FED REALLY GOES. AT THIS STAGE, YOU HAVE A RELATIVELY MODEST EXPANSION. I THINK THE PROBLEM IS IN 2024 THAT THE RISK WE GO INTO A RECESSION IN 2024 WHICH WOULD BE A MEANING TOTAL -- WHICH WOULD BE A MEANINGFUL SURPRISE IS GOING UP, AND IT DEPENDS ON HOW THE CENTRAL BANKS PLAY THIS. MATT: I CAN SEE FROM THE WORLD
INTEREST RATE POP -- PROBABILITY PAGE THAT WE ARE ASSESSING A 43% CHANCE OF A RATE HIKE. NOW IT IS 70% JUST THE BEGINNING OF THIS WEEK AND MARKETS ARE PRICING IN FOUR CUTS THROUGH JANUARY OF 2024. YOU THINK THAT THEY ARE OFF? RAFFAELLA: I THINK THE ECONOMIC DATA ESPECIALLY IN THE LAST DAYS ARGUE IN FAVOR OF THAT IN THE U.S. AND THE EURO ZONE. FOR CUTS, YOU ARE GETTING ONLY ONE CUT AT THE END OF THE YEAR AND THE BULK OF IT INTO NEXT YEAR BECAUSE OTHERWISE THE FED IS PIVOTING A BIT TOO FAST FOR ITS COMFORT ZONE ON THE INFLATION FRONT. DANI: I AM GOING TO MAKE YOU GO
HEAD-TO-HEAD WITH BLOOMBERG ECONOMICS. YOU DO NOT SEE A RECESSION UNTIL NEXT YEAR BUT BLOOMBERG ECONOMICS THINGS THAT IT WILL HAPPEN IN JULY AND THAT THE BANKING TURMOIL CREATED UNCERTAINTY OIL PRICES SPIKED AND WE HAVE NOT YET SEEN THE FULL IMPACT OF MONETARY POLICY TIGHTENING. WHY WON'T THOSE THREE FACTORS LEAD TO A RECESSION THIS YEAR? RAFFAELLA: FIRST OF ALL, ESPECIALLY IN THE U.S. THE SAVINGS BUFFER IS STILL VERY LARGE. SO THE BULK OF THE SAVING EFFECT IS COMING AT THE END OF THE YEAR AND INTO NEXT YEAR.
SECOND OF ALL THE CHINA REOPENING EFFECTIVE GLOBAL GROWTH IS THERE AND IT IS STILL HAPPENING. ON THE HOUSING FRONT AS IN THE LABOR FRONT. CRACKS ARE APPEARING BUT IT IS A SLOW MOVING TRAIN.
I DO NOT DISAGREE THAT THERE ARE -- THAT THERE ARE SOME REALLY WORRYING DATA IN THE U.S.. IF YOU LOOK AT THE MONEY NUMBERS YOU SHOULD PANIC. BUT I DISAGREE AND I THINK IT WILL TAKE A LITTLE LONGER. DANI: DO YOU MEAN THE MONEY MARKET FUNDS AND THE FLOWS TO THOSE? RAFFAELLA: IF YOU LOOK AT DEPOSIT GROWTH OR CREDIT CREATION BUT ESPECIALLY DEPOSIT GROWTH WHICH IS A GOOD BAROMETER OF ACTIVITY WITH A SIX TO 12 MONTH LAG IT IS CONTRACTING. THAT IS AN ASTONISHINGLY BAD SIGNAL. MATT: HOW DO YOU SEE LENDING PLAYING OUT BECAUSE IT STRIKES ME THAT IT IS NOT ENOUGH TO PAY HIGH RATES, BUT NOW EVEN AT THOSE RATES A LOT OF PEOPLE ARE NOT BEING THE CREDIT TO BUY HOMES AND CARS AND ETC.. THEY ARE GETTING TIGHTER IN
TERMS OF LENDING. RAFFAELLA: THIS IS EXACTLY WHERE THE CENTRAL BANK COMMUNICATION BECOMES THE MOST IMPORTANT BECAUSE WE DO KNOW THAT THE LENDING CONDITIONS ARE TIGHTENING BUT WE DO NOT KNOW FOR HOW MUCH MORE AND SO FOR HOW LONG WHICH IS THE CREATIVE INGREDIENT. THE CENTRAL BANKS NOW GUIDE THE ECONOMY AND SAYING WE HAVE MORE OR LESS STABILIZED THE ACTIVITY AND WE DO NOT REALLY WANT THE CREDIT CRUNCH, WE JUST WANT SLOWER CREDIT AND YOU MIGHT HAVE A VERY BAD THREE MONTHS OF CREDIT TIGHTENING BUT THEN THERE IS AN ADJUSTMENT.
WE HAVE SEEN DURING COVID HOW LENDING CONDITIONS CAN TURN VERY QUICKLY ONCE THE POLICYMAKER HAS MADE CLEAR WHAT IS THE GOAL. I THINK THE BIGGEST PROBLEM IS THAT THE CENTRAL BANKS ARE NOT BEING CLEAR. IT JUST EXACERBATES THE ISSUE. THAT IS WHY I AM MORE WORRIED ABOUT 2024 BECAUSE IF YOU ACTIVATE A CREDIT CRUNCH NOW THE HOUSING MARKET WILL CRACK AND THEN YOU WILL ARE QUICKLY IN A SITUATION WHERE IT IS EXTREMELY PAINFUL IF NOT AS BAD AS 2008. DANI: WHAT DO YOU WANT TO HEAR FROM POLICYMAKERS THAT WOULD MAKE IT MORE CLEAR.
AT THE END OF THE DAY, DO THEY KNOW WHERE THEY -- WHERE WE ARE HEADED? CAN THEY BE MORE CLEAR AT THIS POINT? RAFFAELLA: I THINK THEY CAN. I THINK ALL OF THIS INFLATION -- FOCUS ON CORE INFLATION VERSUS HEADED -- HEADLINE INFLATION. EVERYBODY KNOWS THAT CORE PEAKS AFTER HEADLINE INFLATION.
YOU KNOW THAT 40% OF THE LANDSCAPE IS INFLUENCED BY ENERGY OR FOOD, BUT THE 60 RISK -- 60% REMAINING IS INFLUENCED BY PRODUCTIVITY AND HOUSING. SO I THINK CENTRAL BANKS SHOULD ACKNOWLEDGE THAT THERE IS A CYCLE AND TREND. THE CYCLE RIGHT NOW IS FAVORABLE FOR INFLATION BUT THE TREND REQUIRES HIGHER COST OF CAPITAL WITHOUT CAUSING THE CREDIT CRUNCH. SO IN COMMUNICATION -- THE COMMUNICATION I WANT TO SEE IS THEM ACKNOWLEDGING THAT THEY HAVE DELIVERED ENOUGH TIGHTENING AND WE HAVE CRITICAL MASS OF EVIDENCE THAT SAYS THE ECONOMY IS PERFORMING MEANINGFULLY BELOW POTENTIAL GROWTH AND THEY HAVE PATIENTS. THERE IS NO REASON THAT THEY NEED TO HAVE INFLATION AT 2% NEXT YEAR. ON THE CONTRARY, YOU TRY TO GET THERE THAT FAST YOU WILL PUT IN JEOPARDY PRODUCTIVITY AND HAVE A BITTER -- BIGGER PROBLEM.
DANI: THAT IS A WHOLE DIFFERENT CAN OF WORMS THAT WE WILL HAVE TO GET INTO. THANK YOU SO MUCH FOR JOINING US. COMING UP WE WILL SPEAK TO DAVID DINDI, COFOUNDER AND CEO OF ATOMIC INVEST. WHERE HE SEES THE PORTFOLIO COMPANIES PUTTING THEIR MOM -- PUTTING THEIR MONEY. THIS IS BLOOMBERG.
COMING UP LATER TODAY AND INTERVIEW WITH THE IMF MANAGING DIRECTOR. THIS IS BLOOMBERG. THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION," I AM MATT MILLER WITH DANI BURGER. A WAVE OF CASH PLOWING INTO THE SAFEST MONEY MARKET MUTUAL FUNDS HAS ONLY JUST BEGUN WITH THE ANOTHER ONE POINT -- $1.5
TRILLION SET TO ENTER OVER THE NEXT YEAR. JOINING US TO TALK ABOUT THE FLOWS IS THE CEO OF ATOMIC INVEST. HIS COMPANY HAS HELPED MOVE $1 BILLION IN THE WAKE OF THE COLLAPSE OF THE SILICON VALLEY BANK.
SO GREAT TO GET YOU IN THE STUDIO AND THANK YOU FOR JOINING US. HOW DO YOU SEE THIS CONTINUING? AS BANKS RAISE INTEREST RATES TO TRY AND MATCH WHAT WE SEE IN MUTUAL FUNDS OR ALTER SHORT TREASURY ETF'S, DOES THIS FLOW OF MONEY CONTINUE OUT OF BANKS AND INTO BROKER-DEALERS? DAVID: I THINK IT WILL IF THERE IS ANYTHING WE HAVE LEARNED FROM THE LAST MONTH, THAT THE FRACTIONAL RESERVE BREAK -- BANKING SYSTEM HAS A FUNDAMENTAL WEAKNESS. IT RESEMBLES A STACK OF DOMINOES THAT DEPENDS ON THE PRESENCE OF FRICTION. BUT IN A WORLD WHERE PANIC CAN SPREAD LIKE WILDFIRE THROUGH SPOKE -- THROUGH SOCIAL MEDIA AND AN INDIVIDUAL CAN THROW ALL OF THEIR ASSETS IN MINUTES, THERE IS NO LONGER ANY FRICTION IN THE SYSTEM.
WE CAN EXPECT FUTURE BANK RUNS LIKE THIS TO HAPPEN AND AS A RESULT WE ARE SEEING A LOT OF COMPANIES AND FOUNDERS START TO THINK ABOUT HOW CAN I BE MORE STRATEGIC ABOUT WHERE I PLACE MY CASH TO RESPOND TO THAT. MATT: IN A SENSE DOES IT MAKE BANKING LESS COMPETITIVE BECAUSE I AM SURE THAT THE VC'S AND TECH FIRMS THAT YOU ARE WORKING WITH ARE GOING FROM A UNIVERSE OF 5000 BANKS TO A UNIVERSE OF MORE LIKE FIVE BANKS. YOU ARE MOVING FROM EVERYONE INTO JUST THE BIGGEST PLAYERS. DAVID: IT DOES CREATE SOME
CONCENTRATION. WE SAW THAT IN MANY COMPANIES, WE ON BOARDED 400 COMPANIES IN MANY COMPANIES CAME TO ACCESS OUR PAYMENT -- STACK AND WE HAVE PARTNERED WITH ANOTHER BANK TO OPEN THOSE ACCOUNTS. BUT WE TYPICALLY TELL FOUNDERS IS THAT ONE BETTER ACCOUNTS -- APPROACH FOR HOLDING ASSETS INCLUDING MILLIONS OF DOLLARS IN YOUR BALANCE SHEET IS TO HOLD IT WITH A BROKER-DEALER AND IN SECURITIES LIKE TREASURY BILLS THAT ARE FULLY BACKED BY THE U.S. GOVERNMENT. IF YOU THINK ABOUT IT, BACK IN 2008 WHEN LEHMAN BROTHERS COLLAPSED WE ARE NOT GOING TO CLAIM TO REMEMBER IT, I WAS PROBABLY TOO YOUNG FOR THAT. MATT:
I REMEMBER IT QUITE WELL AND I WAS SITTING RIGHT HERE. DAVID: IT WAS NEVER A QUESTION OF WHETHER THE BROKERAGE CUSTOMERS WOULD RECEIVE THEIR ASSETS BACK AND IT WAS JUST A MATTER OF THEM BEING TRANSFERRED TO A SOLVENT DEALER. THOSE DYNAMICS ARE GOING TO BECOME MORE PERTINENT IN THE YEARS TO COME. DANI: I AM WITH YOU, I DO NOT REMEMBER IT EITHER. BUT LOOK, IN THE U.S. MONEY MARKET FUNDS INVESTING IN SHORT-TERM CASH LIKE INSTRUMENTS WE HAVE $5.2 TRILLION AND THAT MORE MONEY
WILL GO INTO IT. THESE ARE THE THINGS THAT WERE A SOURCE OF TURMOIL DURING COVID AS INVESTORS TRIED TO DRAW DOWN CASH AND THE FED HAD TO PROVIDE MORE LIQUIDITY. JANET YELLEN HAS RUNG ALARM BELLS THAT THERE ARE VULNERABILITIES IN MONEY MARKET FUNDS THAT HAVE NOT BEEN ADDRESSED. ARE YOU WORRIED IF THERE IS A RUN ON THESE THINGS THAT THERE WILL BE SUFFICIENT LIQUIDITY FOR YOUR CLIENTS TO GET THAT MONEY BACK? DAVID: AS A MATTER OF FACT WE FIRST AND FOREMOST PROVIDE OUR CLIENTS ACCESS TO TREASURY BILLS SO RATHER THAN THEM INVESTING IN MONEY MARKET FUNDS THAT HOLD TREASURY BILLS THEY ARE DIRECTLY INVESTED IN THE ACTUAL SECURITIES IN THAT RESPECT. SO I DO ENVISION THAT THERE
COULD BE
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