'Bloomberg Surveillance: Early Edition' Full (04/21/23)
>> THIS IS BLOOMBERG SURVEILLANCE EARLY EDITION WITH FRANCINE LACQUA. >> GOOD MORNING EVERYONE AND WELCOME TO BLOOMBERG SURVEILLANCE EARLY EDITION. I AM FRANCINE LACQUA IN LONDON. SERVICES PMI COMING IN LONGER THAN EXPECTED OF BOTH MESS ON MANUFACTURING. WE WILL BRING YOU YOUR ZONE ZONE FIGURES IN JUST A MOMENT. PRESIDENT BIDEN IS SET TO BE PREPARING AN EXECUTIVE ORDER TO LIMIT BEST BUSINESS INVESTMENT IN THE PARTS OF CHINA'S ECONOMY. PLUS FROM PRICE CUTS TO HIKES.
TESLA INCREASES THE COST OF ITS MODEL S AND MODEL X VEHICLES IN THE U.S. AFTER COMPANY SHARES SLUMPED, WIPING $13 BILLION OFF ELON MUSK'S FORTUNE. WE HAVE THE PMI AND THE GREAT EXCLUSIVE INTERVIEW FROM GOVERNOR VISCO TALKING ABOUT THE DYNAMICS OF PMI'S IN THE EURO ZONE AND HOW THAT CONTRIBUTES TO THE PRICE HIKES. APRIL MANUFACTURING PMI'S COMING IN SOFTER THAN IT ACTED LIKE WE SAW FOR GERMANY, 45.5. THE FORECAST WAS 48. NOT MUCH OF AN IMPACT ON EUROPEAN STOCKS BUT IT WILL HAVE AN IMPACT ON CENTRAL BANK THINKING.
EUROPEAN STOCKS DOWN .1%. THE EURODOLLAR 1.0957. IRON ORE DRAGGING BASIC RESOURCES DOWN 6.3%. INDUSTRY GROUPS THAT ARE FOLLOWING THE MOST, BASIC RESOURCES AT THE BOTTOM OF THE LIST. LET'S LOOK AT THE EUROPEAN MAP FOR THE DIFFERENT PMI'S OVERALL.
THE PICTURE HERE IS PRETTY MUCH UNCHANGED. A LOT OF THE EUROPEAN MARKETS HAVE TO MAKE A CALL WHETHER THE FIGURES THAT WERE CONCERNING IN THE U.S. YESTERDAY WILL ALSO HAPPEN IN EUROPE AND WHAT THAT MEANS ON WHETHER WE ARE GETTING CLOSER TO A RECESSION OR NOT. JOINING US NOW IS BLOOMBERG'S ZOE. WE HAD THIS CONVERSATION WITH GOVERNOR BISCOE OF BANCO DE ITALIA. IF YOU LOOK AT A ARE SOFTER THAN EXPECTED.
>> OVERALL, THE EURO AREA IS GROWING. MANUFACTURING PMI'S ARE THE THINK WE ARE WORRIED ABOUT HERE. THEY DROPPED A LOT MORE THAN ANTICIPATED AND WERE ALREADY IN NEGATIVE TERRITORY WITH PMI'S JOYCE HAVE TO LOOK AT THE NUMBER 50. ABOVE THAT IS GROWTH AND BELOW THAT MEANS THEY ARE CONTRACTING. PMI'S, MANUFACTURING PMI'S HAVE BEEN IN THAT CONTRACTUAL AREA FOR MONTH NOW. FOR THE EURO AREA AS A WHOLE, IS MORE RELIANT ON SERVICES WHICH MEANS THE OVERALL HAVE GROWTH FOR MANUFACTURING OBVIOUSLY IS WORRYING AND ALSO WHAT IT SAYS ABOUT INFLATION.
BEFORE THESE NUMBERS JUST NOW WE HAD GERMANY AND FRANCE. AGAIN, BOTH CASES HEADLINE NUMBERS OR POSITIVE. MANUFACTURING WAS PAINFUL. FOR FRANCE THIS IS LESS OF AN ISSUE THAN GERMANY. GERMANY WAS KNOWN AS A MANUFACTURING POWERHOUSE AND MANUFACTURING IS A BIGGER PART OF THEIR ECONOMY OUTPUT THERE. THAT IS PAINFUL AND THAT MAYBE
PARTIALLY EXPLAINS WHY GERMANY PROBABLY JUST WAS IN RECESSION. WE ARE GETTING GDP NUMBERS A WEEK FROM NOW BUT THAT WILL PROBABLY SHOW THAT. FRANCINE: WE ALSO SPOKE TO THE GOVERNING COUNCIL MEMBER OF THE ECB WAS THAT WE SHOULD STICK TO THE ECB APPROACH OF RAISING INTEREST RATES. WHAT DOES THE PMI MEAN OR WHAT THE ECB SHOULD OR SHOULD NOT DO GOING FORWARD? ZOE: THE BIG QUESTION FOR MAY 4 IS WELL THEY RAISED BY 25 OR 50 BASIS POINTS? SOME CENTRAL BANKERS, THAT'S PARTICULARLY THE DOVISH ONES SAY MAYBE IT BE -- IT MAY BE TIME TO PAUSE BUT REALLY, DATA DOES NOW SUGGEST IF THE EURO AREA AS A WHOLE IS GROWING AND AS WE KNOW THEY HAVE AN INFLATION TARGET NOT A GROWTH TARGET. BUT IF IT IS GROWING, THAT GROWTH IS SOMETHING THEY DON'T NEED TO WORRY ABOUT. IT COULD MEAN THEY ARE MORE AGGRESSIVE. THE DATA DEPENDENT APPROACH IS
SOMETHING THAT WE HAVE TO TAKE INTO ACCOUNT IN THIS TIME IT WILL BE PARTICULARLY EXCITING BECAUSE JUST TWO DAYS BEFORE WE HAVE THE RATE DECISION WE HAVE THE INFLATION READINGS FOR APRIL, AND THOSE REALLY WILL BE VITAL. FRANCINE: ZOE, AS ALWAYS THANK YOU SO MUCH. ZOE SCHNEEWEISS, AND CHARGE OF ALL OF OUR EUROPEAN COVERAGE ON THE ECONOMY. FED OFFICIALS HAVE BACKED ANOTHER INTEREST RATE HIKE IS A MANTRA THE ECONOMIC FALLOUT FROM THE BANKING CRISIS WHICH COMES AS FRESH EMERGENCY LOAN DATA SHOWS FINANCIAL STRESS CONTINUES TO LINGER.
LORETTA MESTER FAVORS GETTING RATES ABOVE 5% BECAUSE INFLATION IS STILL TOO HIGH. LORETTA: I ANTICIPATE THAT MONETARY POLICY WILL NEED TO MOVE SOMEWHAT FURTHER INTO RESTRICTIVE TERRITORY THIS YEAR WITH THE FED FUNDS RATES MOVING ABOVE 5% AND THE REAL FED FUNDS RATE STAYING IN POSITIVE TERRITORY FOR SOME TIME. NOW, PRECISELY HOW MUCH HIGHER THE FED FUNDS RATE WILL NEED TO GO FROM HERE AND FOR HOW LONG POLICY WILL NEED TO REMAIN RESTRICTIVE WILL DEPEND ON ECONOMIC AND FINANCIAL DEVELOPMENTS. FRANCINE:
JOINING US NOW IS BLOOMBERG'S JUSTINA LEE. WHEN YOU LOOK AT EVERYTHING GOING ON IN THE MARKET, SENTIMENT DEFINITELY TOOK A HIT AFTER JOBS DATA YESTERDAY. WHAT ARE THEY TELLING US ABOUT THE FUTURE PATH TOWARDS A RECESSION OR NOT? JUSTINA: IT DOES FEEL LIKE MARKETS INTERPRETATION IS THAT MAY BE A RECESSION IS COMING AND SO THE FEDERAL RESERVE WILL END UP HAVING TO CUT RATES LATER THIS YEAR. THAT IS BECAUSE IF YOU LOOK AT U.S. DATA, THE JOBLESS CLAIMS AS WELL AS HOME SALES HAVE SLOWED DOWN A LOT MORE.
WHAT IS INTERESTING AS IF YOU LOOK AT THE EQUITY MARKET, THAT SEEMS TO HAVE JUST COMPLETELY ALONE OVER EQUITY TRADERS HAD SPEARED IT WILL BE INTERESTING TO SEE WHETHER THAT STARTS TO HIT THE EQUITY MARKETS AS WELL. FRANCINE: WHAT ARE YOU LOOKING OUT FOR NEXT? I DON'T KNOW IF THIS CHANGES THE NARRATIVE ON WHAT MARKETS ARE EXPECTING THE FED TO DO IN THE RUN-UP TO SUMMER. JUSTINA: TODAY'S PMI NUMBERS WILL BE KEY. ECONOMISTS ARE EXPECTING A LITTLE BIT OF A SLOWDOWN BECAUSE THINGS ARE STILL THE EXPANSION OR AREA. GOING FOR INFLATION DATA IS KEY. WITH MARKETS ALREADY EXPECTING THE FED TO CUT RATES LATER THIS YEAR, I THINK THE QUESTION IS WHETHER THEY ARE GOING TO BE DISAPPOINTED IF INFLATION STAYS STICKY BECAUSE THAT IS WHAT WE HAVE BEEN SEEING ALL ALONG. FRANCINE:
WE ALSO HAD PMI'S IN THE EURO ZONE. WE HAD A GOOD CONVERSATION WITH THE EUROPEAN CENTRAL BANK GOVERNOR SAYING WE SHOULD BE MORE CAUTIOUS BECAUSE WE DON'T REALLY KNOW HOW LONG IT TAKES FOR ALL THE HIKES THAT THEY PUT LAST YEAR TO COME INTO FORCE. IS THAT A WARNING FROM CENTRAL BANKS AROUND THE WORLD? JUSTINA: YEAH, AND I THINK THAT'S WHAT CENTRAL BANKERS IN THE U.S. AND EUROPE ARE THINKING ABOUT BECAUSE IT CONSIDER THE IMPACT OF CREDIT SUISSE OR SILICON VALLEY BANK COLLAPSING, WHAT NORMALLY HAPPENS IS BANKS GET A LOT MORE CAUTIOUS START TO TIGHTEN LENDING.
IT TAKES TIME FOR THAT TO ACTUALLY FEED THROUGH TO THE REAL ECONOMY, AND SO WHAT CENTRAL BANKERS ARE THINKING ABOUT IS EVEN IF THE DATA IS HOLDING UP STILL FIND, ARE THEY ACTUALLY IGNORING THE TROUBLES THAT ARE BREWING UNDER THE SURFACE AND ARE THEY ACTUALLY DEEPENING THOSE TROUBLES BY STICKING TO THEIR PATH OF MONETARY TIGHTENING? FRANCINE: JUSTINA, WHAT ARE YOU LOOKING OUTSIDE OF THIS? WE SEE IRON ORE BEING SLAMMED AND THAT IS TAKING DOWN BASIC RESOURCES COMPANIES. IS THAT ALSO RELATED, IS IT AN OVERSUPPLY QUESTION FOR IRON ORE OR IS IT ABOUT A RECESSION DENTING DEMAND? JUSTINA: WHEN IT COMES TO COMMODITIES, CHINA IS GOING TO BE A BIG FACTOR. WE HAVE SEEN STRONGER DATA COMING OUT OF CHINA RECENTLY. I THINK THE QUESTION REALLY IS KIND OF WHAT IS GOING TO HAPPEN TO CHINA AND THAT IS ALSO GOING TO FEED THROUGH TO GLOBAL INFLATIONARY TRENDS AS WELL.
FRANCINE: JUSTINA LEE THEY FROM OUR MLIV TEAM. COMING UP, CREDIT SUISSE KICKS OFF THE EUROPEAN BANK EARNINGS NEXT WEEK. WHAT ARE INVESTORS LOOKING OUT FOR IN THE SECTOR? WE HAVE A PREVIEW OF THAT NEXT. THIS IS BLOOMBERG.
♪ FRAN>> WE ARE UNDERSTANDING IT'S NOT REALLY RELEVANT DIRECTLY FOR THE EURO AREA. THAT CONTAGION MAY BE THERE AND RISKS MAY BE THERE. FRANCINE: THAT WAS OUR EXCLUSIVE INTERVIEW WITH THE BANK OF ITALY GOVERNOR, IGNAZIO VISCO.
LET'S BRING IN JOOST BEAUMONT. SO MUCH ABOUT THE INTERPLAY BETWEEN CENTRAL BANKS AND WHAT THEY DO ON HIKES AND HOW MARKETS ARE INTERPRETING IT. WHAT IS THE BIGGEST MISTAKE RIGHT NOW THE A CENTRAL BANK COULD DO? >> WELCOME AS A DIFFICULT QUESTION OF COURSE. THEY INDEED NEED TO STRIKE A FINE BALANCE BETWEEN FIGHTING INFLATION AND PRESERVING FINANCIAL STABILITY. I THINK IT WOULD BE WRONG FOR CENTRAL BANKS IF THEY WOULD EASE LITTLE BIT THE FIGHT TO INFLATION AS THAT COULD CAUSE MORE DAMAGE ALONG THE ROAD. ON THE OTHER HAND, THEY ALSO
NEED TO LOOK QUITE CLOSELY IS HOW THE ECONOMY EVOLVES, HOW BANKS BALANCE SHEETS DEVELOP. ACTUALLY, I HEARD AN INTERVIEW WITH MR. VISCO AND HE SAID BANKS ARE IN PRETTY GOOD SHAPE AND INDEED FROM A SOLVENCY PERSPECTIVE, THAT IS INDEED THE CASE. FRANCINE: WHAT DOES THAT MEAN FOR WHERE YOU WANT TO BE INVESTED IN AT THE MOMENT? WE ALSO SAW SOME JOBS DATA THAT WAS WEAK IN THE U.S.
AND WEEK PMI DATA HERE IN EUROPE. ARE YOU LOOKING AT IT REGIONALLY OR DO YOU GO FOR CERTAIN SECTORS MORE THAN OTHERS? JOOST: WELL, IN TERMS OF WHERE WE NEED TO BE INVESTED IF YOU LOOK FOR INSTANCE A CLOSER LOOK AT BANKS AND WHAT WE ARE SEEING IS THE KEY ONE FIGURE SO FAR FROM THE U.S. BANKS, MOST U.S. BANKS BETTER THAN EXPECTED. WE ALSO SEE INVESTORS BEING PRETTY OPTIMISTIC AGAIN AFTER THE TENSIONS FLARED UP IN THE FAILURE OF SILICON VALLEY BANK. IF YOU LOOK FOR EURO BANK SPREADS, BASICALLY THERE -- THEY ARE BACK WHERE THEY WERE BEFORE. THE TENSIONS BROKE THAT WERE STARTED AND THAT MATCHES THE GOOD BANK FUNDAMENTALS BUT ON THE OTHER HAND, FINANCIAL MARKETS AND INVESTORS ARE NOT PRICING IN THE WEEK ECONOMIC CONDITIONS THAT ARE AHEAD OF US. FRANCINE: WHAT IS THE ONE THING YOU WOULD NOT BE BUYING RIGHT NOW? EVERYTHING IS FLAGGED BECAUSE COMMERCIAL REAL ESTATE IS THE NEXT THING THAT WILL GO UNDER IT.
WHAT IF IT WERE SOMETHING ELSE? YOU WORRY ABOUT PARTS OF THE MARKET WHETHER LIQUIDITY OR SHADOW BANKING THAT THE REST OF THE MARKET IS NOT FOCUSED ON THAT? JOOST: YEAH, THE CURRENT MARKET CONDITIONS ARE STABLE. WE CLEARLY HAVE CALMER WATERS. OF COURSE, THE WHOLE STATE OF THE MARKET IS STILL FRAGILE SO IS DIFFICULT TO SEE WHERE THE NEXT CRISIS WOULD COME FROM. OF COURSE, COMMERCIAL REAL ESTATE IS IN FOCUS, BUT I ALSO GUESS THAT A LAW OF REGULATORS LOOKING AT THIS AND LOOK AT THE BANKS THAT ARE MOST EXPOSED TO COMMERCIAL REAL ESTATE. TO BE VERY HONEST, WE DO SEE SOME WEAKNESS THERE, BUT WE ALSO EXPECT ACTUALLY INTEREST RATES TO REACH THE PEAK QUITE SOON.
SO ONCE THE RATES COME DOWN, THAT WILL OF COURSE BE SUPPORTED FOR THIS PART OF THE SECTOR. SO, I THINK IF YOU LOOK AT CORPORATE EARNINGS, THEN WE SEE A BIT OF SIGNS OF SOME COMPANIES MORNING FOR EARNINGS AHEAD OF US . ALSO IN TERMS IF YOU LOOK AT THE BANKS, FOR INSTANCE, I THINK THE REGIONAL U.S. BANKS ALSO SHOWED THAT THE COST OF DEPOSITS AND MARKET FUNDING IS RISING. I THINK BASICALLY IT'S MORE
THAT WE WILL SEE THE EARNINGS SLOWDOWN FOR THE REST OF THE YEAR. FRANCINE: WHEN YOU LOOK AT SPREADS ON EURO BANK DEBT, THEY HAVE TIGHTEN CONSIDERABLY THIS WEEK. I GUESS THAT POINTS TO CONFIDENCE IN THE FINANCIAL SECTOR. WHAT IF THEY WERE WRONG? JOOST: IF THEY ARE WRONG, SPREADS WILL SPIKE AGAIN OF COURSE. THAT'S CLEAR.
THE LESSONS OF COURSE REGULATORS ARE LOOKING AT THE LESSONS THEY WANT TO LEARN FROM THE FAILURE OF SILICON VALLEY BANK BUT ALSO THE RESCUE OF CREDIT SUISSE. SO, IT'S CLEAR THAT THE FINANCIAL STABILITY BOARD'S AND BANK INTERNATIONAL SETTLEMENTS ALL SAY WE WILL LOOK AT ITS. WE MIGHT COME WITH ADDITIONAL MEASURES TO LIMIT RISKS AHEAD OF US. THAT IS A BIT OF A LONGER-TERM ISSUE OF COURSE. BUT I DO THINK THAT INVESTORS NEED TO TAKE INTO ACCOUNT BANK LENDING CONDITIONS ARE ALREADY TIGHTENING SIGNIFICANTLY. WE SEE LENDING GROWTH SLOWING, AND FUNDING COSTS FOR BANKS WILL RISE.
WE ARE LIKELY TO SEE A RECESSION IN A LOT COMPANIES STILL BENEFIT FROM GOVERNMENT SUPPORT AND THAT WILL GO AWAY. IF YOU AT THAT ALL UP, WE MIGHT SEE MORE CORPORATE DEFAULTS AND I THINK LOAN LOSS PROVISIONS MIGHT NEED TO RISE IN THE BANKING SECTOR. THAT TOGETHER WITH HIGHER FUNDING COSTS AND THE IMPACT OF THE SUDDEN AND STRONG INCREASE IN RATES WILL HAVE AN IMPACT ON THE SECTOR. I DO THINK INVESTORS ARE AT THE MOMENT A BIT AT LEAST MORE OPTIMISTIC THAN I AM BECAUSE I'M PRETTY CAUTIOUS ABOUT THE OUTLOOK FOR SPREADS. FRANCINE: THIS MAY BE AN UNFAIR QUESTION BUT IS THERE ANOTHER CREDIT SUISSE? JOOST: THERE WILL ALWAYS BE ANOTHER BANK THAT WILL RUN INTO TROUBLE OVER TIME, BUT AT THE MOMENT, I DON'T SEE REALLY BIG TROUBLES HAD -- AHEAD. IF YOU TALK ABOUT SOLVENCY, I GUESS THE BIGGEST LESSON WE HAVE LEARNED FROM EVERYTHING THAT HAPPENED IN MARCH IS THAT IT'S ALL -- YOU NEED TRUST AS A BANK BECAUSE IF THERE IS NO INVESTOR TRUST IN YOU ANY LONGER, THEN THE MONEY CAN FLOW OUT QUITE QUICKLY, AND THEN YOU CAN HAVE A HIGH C 21 RATIO.
GOOD LIQUIDITY BUFFERS AND THAT IS NOT HELPFUL. TO BE HONEST SOMETHING THAT MIGHT BE INTERESTING FOR REGULATORS TO THINK ABOUT AS WELL, WE HAVE SEEN OF COURSE THESE FAILURES IN THE U.S. AND THE RESCUE OF CREDIT SUISSE. I STILL DO BELIEVE THAT WE ARE -- THEY WERE SPECIAL CASES IN A WAY. THE MARKET HAS COME DOWN SO QUICKLY AND THAT IS A MESSAGE THAT THE FINANCIAL SYSTEM ACTUALLY IS STRONG. REGULATORS SHOULD ALSO TAKE THAT INTO ACCOUNT BEFORE THEY COME WITH ALL KIND OF ADDITIONAL MEASURES I WOULD SAY.
FRANCINE: THANK YOU SO MUCH, JOOST BEAUMONT, FROM ABN AMRO BANK. WE WILL BRING YOU MORE STORIES NEXT. THIS IS BLOOMBERG. ♪ FRANCINE: ECONOMICS, FINANCE, POLITICS. THIS IS BLOOMBERG SURVEILLANCE EARLY EDITION. I AM FRANCINE LACQUA IN LONDON. PRESIDENT BIDEN WILL SIGN AN EXECUTIVE ORDER LIMITED -- LIMITING INVESTMENT IN CHINA FOR CHIPS, AI, AND QUANTUM COMPUTING.
JOINING US NOW IS JOHN. WHAT DO WE KNOW ABOUT BIDEN'S LAND EXECUTIVE ORDER? JOHN: THE OBJECTIVE OF THESE ORDERS IS TO STOP CHINA'S MILITARY FROM BEING ABLE TO CLOSE THE LEAD THE U.S. HAS OVER BEIJING AT THE MOMENT. WHAT WE DO NOT KNOW ARE THE SPECIFICS OF WHAT THOSE RULES WILL LIMITS AND HOW BUT I DO NOT THINK IT IS DIFFICULT TO GUESS WHAT WILL BE TARGETED.
SEMI CONDUCTORS, AI, SUPERCOMPUTING. IF YOU LOOK AT THE VARIOUS STEPS OF THE BIDEN ADMINISTRATION HAS ALREADY TAKEN TO STOP AMERICAN COMPANIES FROM SELLING SENSITIVE TECHNOLOGY AND OTHER PRODUCTS CHINA, IT WILL BE PRETTY EASY TO GUESS WHAT INVESTMENT AREAS THE BIDEN ADMINISTRATION WILL TARGET WHEN IT TELLS AMERICAN COMPANIES THEY CAN NO LONGER INVEST IN CHINESE FIRMS THAT ARE MAKING THESE TECHNOLOGIES. FRANCINE: JOHN, ELSEWHERE OR OFFICIALS ARE ALSO -- TAIWANESE OFFICIALS HAVE URGED THE U.S.
TO TONE DOWN RHETORIC ABOUT CHINA. JOHN: TAIWAN IS IN A TRICKY POSITION AND IT NEEDS THE AMERICAN SECURITY UMBRELLA TO PROTECT IT BUT AT THE SAME TIME, THE CROWN JEWELS AS YOU WOULD SAY OF THE TAIWANESE ECONOMY IS SEMI CONDUCTORS. WHEN TAIWANESE OFFICIALS HEAR PEOPLE SUCH AS CONGRESS SECRETARY ARMANDO SAYING THE U.S. NEEDS -- DEPENDING ON TAIWAN
FOR SEMI CONDUCTORS IS UNSAFE THAT IS UNSETTLING FOR TAIWANESE OFFICIALS AND THAT IS WHY THEY HAVE BEEN SPEAKING PRIVATELY TO AMERICAN COUNTERPARTS TO TRY TO CALM RHETORIC COMING OUT OF WASHINGTON. FRANCINE: JON LUTHER AND BEIJING WITH THE VERY LATEST ON CHINA. LET'S GET STRAIGHT TO THE BLOOMBERG FIRST WORD NEWS WITH ALEX MORGAN. >> THE EURO AREAS TWO BIGGEST ECONOMIES HAVE SURGED AT THE START OF THE SECOND QUARTER, WITH PRIVATE SECTOR OUTPUT JUMPING TO THE HIGHEST IN AROUND A YEAR. THE LATEST COMPOSITE PMI FOR FRANCE ROSE TO 53.8 IN APRIL, A MUCH BIGGER INCREASE THAN ECONOMISTS PREDICTED, LED BY THE SERVICES SECTOR. GERMAN DATA ALSO BEAT
FORECASTS, AGAIN DRIVEN BY SERVICES. THE U.K. PRIME MINISTER RISHI SUNAK IS WEIGHING THE FATE OF HIS DEPUTY AFTER RECEIVING THE FINDINGS OF A FIVE-MONTH INVESTIGATION INTO BULLYING ALLEGATIONS AGAINST DOMINIC RAAB. BLOOMBERG UNDERSTANDS THAT THE THE REPORT SAYS THE CASE AGAINST THE DEPUTY PRIME MINISTER IS NOT CLEAR-CUT. RAAB MAINTAINS HE HAS NOT ACTED IMPROPERLY. SOME OF UKRAINE'S KEY ALLIES, INCLUDING THE U.S.
ARE WEIGHING AN OUTRIGHT BAN ON MOST EXPORTS TO RUSSIA. G7 OFFICIALS ARE DISCUSSING THE IDEA AHEAD OF A LEADERS SUMMIT IN JAPAN NEXT MONTH. IF THAT IS AGREED, IT WOULD BE A SIGNIFICANT TIGHTENING OF RESTRICTIONS WITH ALL EXPORTS TO MOSCOW BANNED UNLESS EXEMPT. CANADA'S NATIONAL POLICE FORCE IS INVESTIGATING A HEIST AT THE COUNTRY'S BUSIEST AIRPORT THAT MAY HAVE NETTED THIEVES MILLIONS OF DOLLARS IN GOLD AND OTHER VALUABLES. REGIONAL POLICE SAY A CONTAINER WORTH ABOUT $15 MILLION U.S. DOLLARS WORTH OF VALUABLES WAS TAKEN FROM A CARGO HOLDING AREA AT THE PEARSON INTERNATIONAL AIRPORT.
GOLD MINED IN CANADA FREQUENTLY TRAVELS THROUGH THAT HUB ON ITS WAY TO CUSTOMERS AROUND THE WORLD. I AM ALEX MORGAN IN LONDON. FRANCINE: THANK YOU SO MUCH ALEX. COMING UP, U.K. PMI DATA IS DUE IN JUST A FEW MINUTES.
WE WILL BRING YOU THE LATEST UPDATE ON THE U.K. ECONOMY. EUROPEAN INDICES, SENTIMENT A LITTLE BIT LOWER AFTER DISCOURAGING DATA OUT OF THE U.S. YESTERDAY. PLENTY MORE ALSO WITH ECONOMIC UPSWINGS THAT INTENSIFIES WITH SERVICES. THIS IS BLOOMBERG. FRANCINE: SERVICES PMI HAS COME IN STRONGER THAN EXPECTED IN GERMANY, FRANCE, AND THE BROADER EU EURO AREA FOR ALL THREE MANUFACTURING SIGNAL AND UNEVEN REBOUND FOR EUROPE'S ECONOMY. PRESIDENT BIDEN IS PREPARING AN EXECUTIVE ORDER TO LIMIT U.S.
BUSINESS INVESTMENTS IN PARTS OF CHINA'S ECONOMY. TESLA INCREASES THE COST OF ITS MODEL S AND MODEL X VEHICLES IN THE U.S. AFTER COMPANY SHARES SLUMPED, WIPING $13 BILLION OFF ELON MUSK'S FORTUNE. GOOD MORNING EVERYONE AND WELCOME TO BLOOMBERG SURVEILLANCE EARLY EDITION. I AM FRANCINE LACQUA IN LONDON. HERE'S THE PICTURE ACROSS THE BOARD FOR BONDS AND EQUITIES.
MIXED EARNINGS AND WE GET INTO THE BANK EARNINGS NEXT WEEK, AND THEN WE ALSO HAVE SOME DATA IN THE U.S. YESTERDAY, DISAPPOINTING ON JOBS. TRADERS TODAY ARE PERSONNEL LATEST DATA AND ALSO PMI FIGURES IN EUROPE AND THE OUTLOOK FOR INFLATION AND ECONOMIC GROWTH. THIS IS WHAT WE ARE SEEING AND
THE U.K. PMI'S APRIL SERVICES PMI RISING TO 54.9. THIS IS BETTER THAN EXPECTED. IF YOU LOOK AT WHAT WE SAW FOR THE EURO ZONE AND GERMANY, IT WAS WORSE THAN EXPECTED SERVICES PMI. HERE IN THE U.K. IT IS BETTER WE WERE EXPECTING 52.8 AND GOT THE THE -- 50 2.9. -- 54.9. TERRITORY MANUFACTURING WORSE THAN EXPECTED. YOU CAN SEE STERLING JUST ON
THE MOVE ON THE BACK OF THAT A TOUCH AT 1.2410. THAT IS CABLE. FOR MORE IN THE MARKETS LET'S GO TO KRISTINE AQUINO. WHEN YOU LOOK AT THE U.K. SERVICES DATA BETTER THAN EXPECTED IN MANUFACTURING NOT SO MUCH.
WHAT DOES IT MEAN FOR THE POUND? KRISTINE: A COMPLICATED PICTURE FOR THE POUND FROM HERE. WE HAVE SEEN OF COURSE QUITE THE RALLY IN STERLING THIS YEAR AND HAS BEEN HERALDED AS THE COMEBACK KID OF 2023 AMONG MAJOR CURRENCIES BUT I THINK IT STILL IS QUITE A MIXED PICTURE WHEN IT COMES TO THE U.K. ECONOMY. AS YOU MENTIONED SERVICES DOING A TOUCH BETTER AND THAT'S GREAT. A KIND OF HELPS SHORE UP THE STORY OF A STILL RESILIENT CONSUMER ALTHOUGH THAT MAY BE A LITTLE OFFSET BY THE LESS POSITIVE RETAIL SALES DATA THAT WE GOT EARLIER THIS MORNING.
VERY, VERY MIXED PICTURE FOR THE CONSUMER AT THE FRONT. MANUFACTURING WEAKER THAN EXPECTED STILL. THERE ARE STILL A LOT OF OBSTACLES FOR THE U.K. ECONOMY. WE GOT INTO A MODE WHERE WE ARE AVOIDING THE WORST CASE SCENARIO IN THAT THE EXPECTATION OF A RECESSION PROBABLY NOT THERE ANYMORE, BUT IS STILL NOT ROARING AND FIRING ON ALL CYLINDERS. FRANCINE: KRISTINE AQUINO FOR THE LATEST ON THIS DATA AND THE READER CROSS FOR STERLING. JOINING US OFF THE BACK OF THE U.K. PMI DATA IS BLOOMBERG'S SENIOR
EDITOR FOR MARKETS AND OPINION, THIS -- AND OPINION COLUMNIST JOHN. YOUR COLUMNS ARE FUNNY AND SMART. LAST ONE THE MINISTRY OF SILLY WALKS IS NOT RUNNING BRITAIN. WHAT ARE YOU LOOKING AT THE U.K.? JOHN: FIRST OF ALL ANY EXCUSE TO MENTION MONTY PYTHON IS GOOD BY ME SO I WILL TAKE THAT. IN THE U.K., YOU HAVE TO LOOK AT THE FACT THAT WE'VE HAD MORE OF AN INFLATION PROBLEM IN THIS COUNTRY THAN BOTH THE REST OF EUROPE AND THE U.S. AND THAT JAPAN. RELATE FOREVER.
IN THE 1970'S, BRITAIN AND BY FAR THE WORST INFLATION OF ANYBODY IN EUROPE. THERE IS SOMETHING IN THE WATER THIS COUNTRY THAT MAKES IT MORE PRONE TO INFLATION, AND THAT'S THE ISSUE. THAT IS WHAT HAS HELPED THE POUND SO FAR THIS YEAR IS THE GROWING GRASP THAT THE BANK OF ENGLAND WILL HAVE TO BE MORE HAWKISH THAN HOPED. FRANCINE: JOHN, YOU STARTED THIS INTERESTING SMART BUT FUNNY PIECE SAYING MORE INFLATION PLEASE, WERE BRITISH. THE BRITISH ARE FAMOUS FOR THE IDIOSYNCRASIES.
IS IT HARD TO BE THE BANK OF ENGLAND IN THE FED RIGHT NOW? JOHN: I THINK SO. THERE IS A LOT OF PRESSURE ON EVERYBODY BUT IN THE U.K. YOU HAVE THAT MUCH MORE OF AN IMMOVABLE OBJECT IN THE INFLATION NUMBERS PLAINLY ARE NOT RECOVERING IN THE WAY THAT MAKES IT EASY FOR THEM TO RELENT. AND I THINK THE LABOR SHORTAGE ISSUE WHETHER WE ARE GOING TO BLAME BREXIT FOR IT OR NOT IS VERY OBVIOUS THAT THE LABOR SHORTAGE ISSUE IN THE U.K. IS MUCH MORE SERIOUS THAN MORE OR LESS ANYWHERE ELSE. WHILE YOU'VE GOT THOSE KINDS OF IMPONDERABLES, I DON'T THINK IT'S A COINCIDENCE THAT ANDREW BAILEY HAS HAD TO ASK URGING EVERYBODY, SORRY ABOUT THE PRICES RISE SO MUCH. COULD YOU PLEASE NOT ASK FOR
ANY MORE PAY TO COVER THOSE. FRANCINE: THAT WAS AWKWARD. JOHN: THAT WAS NOT A GREAT MOMENT, AND I'VE ALSO CALLED HIM WINNIE THE POOH TO MY AID. THAT FINANCIAL WIZARD WINNIE THE POOH. JOHN: IT WAS WHEN ANDREW BAILEY BASICALLY SAID WE ARE GOING TO HAVE A RECESSION AND IS WENT TO LAST AT LEAST UNTIL THE END OF NEXT YEAR. IT'S REALLY GOING TO BE BAD. THAT VERY MUCH REMINDED ME OF YOUR THE DONKEY -- YOUR THE DONKEY FROM WINNIE THE POOH. FRANCINE:
FULL MARKS FOR ME JOHN FOR THOSE REFERENCES. YOU LOOK AT CHARTS AND THE ONE THAT IS THE MOST INTERESTING IS WAGES AS YOU SAID BUT ALSO DYNAMICS IN THE LABOR MARKET. WHAT DO PEOPLE MISUNDERSTAND ABOUT THAT? JOHN:EYORE TO THE LABOR MARKET IF YOU LOOK IN THIS IS ONE OF MY FAVORITE CHARTS THAT COMES FROM ABSOLUTE STRATEGY JUST TO CREDIT THEM, THE CPI HAVE BEEN KEEPING DATA ON THE PROPORTION OF COMPANIES THAT ARE COMPLAINING ABOUT LABOR SHORTAGES FOR ABOUT HALF A CENTURY. AND IF YOU LOOK AT THAT SERIES OVER TIME, IT'S QUITE REMARKABLE . THE MORE COMPANIES COMPLAIN THAT THEY ARE HAVING DIFFICULTY FINDING WORKERS, THE MORE INFLATION WILL BE WHERE THE YEARS LEAD. AND THAT IS -- THERE ARE REALLY GOOD REASONS TO QUESTION WHETHER THE PHILLIPS CURVE RELATIONSHIP AND THE IDEA THAT THERE IS A TRADE OPPORTUNITY IN INFLATION AND UNEMPLOYMENT STILL HOLDS WEIGHT A NUMBER OF OTHER COUNTRIES.
THERE IS OBVIOUSLY SOMETHING ABOUT THE U.K. LABOR MARKET THAT MAKES THIS COUNTRY MUCH MORE PRONE TO THE RISK OF A WAGE PRICE SPIRAL. FRANCINE: WHICH IS WHY WE ARE ALSO LOOKING AT SKILLED AND UNSKILLED LABOR SINCE 1972. WHAT DOES THE PAST TELL US ABOUT THE FUTURE? JOHN: IN THE 70'S WHEN THE U.K. AS I SAID EARLIER SUFFERED MUCH
WORSE INFLATION THAN SAY, THE U.K. -- SORRY THE U.S.. THE 70'S WERE WORSE THAN THE 30'S IN THIS COUNTRY. AGAIN, YOU SAW WHAT'S HAPPENED WITH THAT DEGREE OF A BREAKDOWN WITH LABOR. I THINK I CAN REMEMBER THE WINTER OF DISCONTENT IN 1979. WHAT IS GOING ON IN THE MOMENT
THE PUBLIC SECTOR DOESN'T REALLY COMPARE WITH THAT AT ALL THUS FAR, BUT WHEN YOU HAVE LARGE PUBLIC SECTOR UNIONS ASKING FOR DOUBLE-DIGIT PAY RAISES AND GETTING QUITE A LOT OF PUBLIC SYMPATHY, WHICH WAS NOT THE CASE THAT IN 1970 AND 1979, THAT SUGGESTS AGAIN THERE IS A WAGE PRICE, INCIPIENT WAGE PRICE SPIRAL HERE IN A WAY THAT IT IS NOT ELSEWHERE. YOU COULD SAY WE ARE IDIOSYNCRATIC TO THAT EXTENT. FRANCINE: THE MARKETS ARE SAYING IF YOU LOOK AT THE BANK OF ENGLAND IT'S A BIT OF A NIGHTMARE BUT IF YOU SPEAK TO POLITICIANS THEY SAY WE ARE NOT IN A WORSE PLACE THAN ANYONE. KRISTINE: CLASSIC POLITICIAN TACTIC TO PRESENT IT IN THE BEST LIGHT POSSIBLE, BUT IT IS HEAVY FOR THE BANK OF ENGLAND FOR SURE BECAUSE WHAT WE ALSO SAW FROM THE INFLATION DATA THIS WEEK IS THAT IT'S BEING DRIVEN NOT BY THINGS THAT PEOPLE WANT. IT IS NOT DISCRETIONARY SPENDING. IT IS THINGS THAT PEOPLE NEED AND THE PRICE OF EGGS, VEGETABLES, MILK.
WHAT CAN THE BANK OF ENGLAND REALLY DO WITH TRYING TO RAIN AND INFLATION VIA RATE HIKES WHEN THESE ARE STAPLES? THESE ARE THINGS PEOPLE NEED AND THEY ARE NOT NECESSARILY WITHIN THE BANKS CONTROL. IT IS DUE TO GLOBAL TRADE, WHETHER. WHAT CAN RATE HIKES REALLY DO IN THE FACE OF THAT? THAT IS THE PROBLEM FOR THE BANK OF ENGLAND. FRANCINE: KRISTINE AQUINO AND ALBERT SENIOR EDITOR FOR MARKETS AND BLOOMBERG OPINION COLUMNIST JOHN AUTHERS. WE GEAR UP FOR THE EUROPEAN BANK EARNINGS SEASON AND TAKE A DEEP DIVE INTO THE HISTORY AND UNCERTAIN HISTORY OF SWISS BANKING. THAT IS NEXT IN THIS IS BLOOMBERG.
>> WHEN YOU THINK ABOUT SWITZERLAND YOU THINK OF MOUNTAINS AND SKIING AND LUXURY WATCHES, BEAUTIFUL CHOCOLATE AND BANKING. >> BANKING A SUPER IMPORTANT SWITZERLAND BOTH FROM A GDP AND ECONOMY PERSPECTIVE BUT ALSO JUST AS A NATIONAL IDENTITY. >> PEOPLE ARE ACTUALLY PROUD OF THEIR BANKS AND A LOT OF PEOPLE WORK IN FINANCE. >> THERE IS HISTORICALLY A LOT OF EXPERTISE HERE WHEN IT COMES TO BANKING, PARTICULARLY AROUND BANKING FOR THOSE WHO ARE RICH THIRD >> THAT WENT QUITE WELL AND UP UNTIL IT DIDN'T. >> THIS ENDS 166 YEAR RUN FOR CREDIT SUISSE.
>> IT WAS A HISTORIC DAY ANY DAY WE HOPE WOULD NOT HAVE HAPPENED. >> UBS AFTER THE TAKEOVER HAS PROVIDED STABILITY BUT CREATES A POTENTIALLY BIGGER PROBLEM IN THE FUTURE. FRANCINE: SWISS BANKING HAS BUILT A REPUTATION FOR RELIABILITY, STABILITY, AND DISCRETION. UNDERPINNING THOSE ATTRIBUTES ARE TWO POLICIES, SECRECY AND NEUTRALITY. >> SECRECY WAS ALWAYS A REALLY BIG SELLING POINT FOR THE INDUSTRY AND IT IS PART OF WHAT HELPED ATTRACT SO MUCH MONEY AND GROW SO LARGE. THE NEUTRAL STATUS OF THE
COUNTRY MADE IT A VERY RELIABLE PLACE FOR THE RICH PEOPLE ALL OVER THE WORLD. FRANCINE: ALL THINGS BEING EQUAL, SWISS BANKS WOULD NOT HAVE BEEN ABLE ACTUALLY TO COMPETE WITH FINANCIAL CENTERS SUCH AS LONDON OR PARIS THAT WERE REALLY AT THE HEART OF HUGE INDUSTRIAL ECONOMIES, BUT IT DID HAVE ONE EDGE. THE PRINCIPLE OF SECRECY THAT DATED BACK TO THE EARLY 18TH CENTURY. SO AT THE START OF 20TH CENTURY OTHER EUROPEAN NATURES -- NATIONS START INCREASING THEIR TAXES, SWISS MAKERS SENSED AN OPPORTUNITY.
THIS IS AN AD TO PUBLISH IN A NEWSPAPER AND 1911. IT SAYS THAT ANY DEPOSITS MADE BY A FOREIGNER WHO IS NOT RESIDENT OF SWITZERLAND IS ACTUALLY EXEMPT FROM PAYING ALL SWISS TAXES. PLENTY OF OTHER LENDERS FOLLOWED A SIMILAR TACK. IN THE YEARS THAT FOLLOWED, THE TWO WORLD WARS MEANT THAT SWITZERLAND'S NEUTRALITY MADE IT AN EVEN MORE APPEALING LOCATION TO DEPOSIT YOUR CASH WITHOUT ANYONE KNOWING ABOUT IT. >> AS SWITZERLAND BECAME MORE OF A PLAYER ON THE INTERNATIONAL STAGE, ONE OF THE WAYS THAT BANKING DEVELOPED WAS TO TAKE THE STATUS OF THE STABILITY OF POLITICAL SYSTEM AND NEUTRALITY OF THE COUNTRY TO OFFER A SAFE HAVEN FOR PEOPLE. FRANCINE:
AT THE HEART OF IT ALL OUR CREDIT AND UBS, TO BANKS HEADQUARTERED JUST A FEW HUNDRED YARDS APART IN CENTRAL ZÜRICH. >BUT THE 1970'S, GLOBAL BANKING HAS STARTED TO CHANGE WITH INCREASED GLOBALIZATION CAME UP MORE OPPORTUNITIES BUT ALSO INCREASED COMPETITION AND SCRUTINY. >> OVER TIME, PEOPLE STARTED TO DEMAND HIGHER RETURNS, MONEY LAUNDERING BECAME MORE OF AN ISSUE IN 80'S AND 90'S.
TERRORIST FINANCING BECAME A REALLY BIG ISSUE IN THE EARLY 2000. FRANCINE: A FEW MAJOR IF HISTORICAL SCANDAL STARTED NOT ONLY TO CHIP AWAY AT SWITZERLAND'S REPUTATION AROUND THIS TIME BUT THEY ALSO DREW THE ATTENTION OF INTERNATIONAL REGULATORY AUTHORITIES. AS ATTENTION FOCUSED ON SWITZERLAND'S BANKING SECRECY IN THE 1980'S, A NEW BUSINESS MODEL HAD BEGUN TO EMERGE. WHAT IF THE BANKS COULD TAKE THE VAST WEALTH THEY WERE ATTENDING FOR THEIR CLIENTS AND PARENT WITH AN INVESTMENT BANK THAT COULD DIRECT THE CAPITAL INTO AN EXCITING NEW OPPORTUNITY LIKE THE INITIAL PUBLIC OFFERINGS AND DEALMAKING. >> CREDIT SUISSE BOUGHT FIRST BOSTON AND THEN LATER ON DONALDSON, LUFKIN AND UBS BOUGHT PAINEWEBBER.
>> THE COMBINATION OF PAINEWEBBER AND UBS IS A MATCH MADE IN HEAVEN. >> THAT WENT QUITE WELL BUT -- WELL UP UNTIL IT DIDN'T IN 2007. >> THE BANKING SECTOR BORE THE BRUNT OF THE COLLAPSE WAS SHARES IN EUROPE'S MAJOR BANKS THINKING BY AS MUCH AS 9%. >> MAJOR FINANCIAL INSTITUTIONS HAVE TEETERED ON THE EDGE OF COLLAPSE AND SOME HAVE FAILED.
>> WE HAD A HISTORIC DAY ON WALL STREET. LEHMAN BROTHERS, THE 158 YOUR OLD FIRM FILED FOR CHAPTER 11 U.S. BANKRUPTCY COURT TODAY. FRANCINE: THIS IS WHEN THE TWO BANKS PATHS REALLY DIVERGE. >> UBS FINDS ITSELF IN CRISIS ALONG WITH THE GLOBAL FINANCIAL WORLD, AND IT HAS TO TAKE A STATE BAILOUT. >> IT DECIDED ONE, SERIOUSLY CUT BACK EVERYTHING IT DID IN THE BOND TRADING AND TWO, THERE WAS A KIND OF RESET OF THE CULTURE. IT CAME OUT OF THAT A MUCH MORE
HUMBLE, MUCH REDUCED BANK. FRANCINE: WHILE UBS WAS FORCED TO CHANGE AND TAKE FEWER RISKS, CREDIT SUISSE WAS NOT. IN FACT, IT MADE THINGS WORSE. >> RISK CONTROL HAS OBVIOUSLY MANY, MANY FACETS. WHAT IS COMPLIANCE? ANOTHER LEVEL FOR INVESTMENT BANKING IS KNOWING YOUR TRADING POSITIONS AND ONE THING THEY DID AS FIRE A LOT OF SENIOR PEOPLE WHO WERE WATCHING OUT FOR RISKY TRADING POSITIONS. INSTEAD, THEY HIRED A LOT OF YOUNG PEOPLE WHO PROBABLY DID THIS JOB FOR THE FIRST TIME. THAT LATER BACKFIRED. FRANCINE:
WHAT AT THE SAME TIME, THEY ARE STILL LIVING ON THAT OLD REPUTATION FOR STABILITY AND RESPONSIBILITY. >> WHAT SWISS BANKS ENDED UP KIND OF SELLING TO INVESTORS, TO THEIR PRIVATE CLIENTS WAS IS KIND OF OLD IDEA OF QUALITY AND SAFETY AND SECURITY THAT THEY'D ALSO ALWAYS KIND OF PRAYED OFF OF. WHEN THINGS STARTED TO GO WRONG, WINDS STARTED TO LOSE MORE MONEY ON BEHALF OF OF THEIR CLIENTS TO UNDERMINE THE REPUTATION FOR SAFETY AND SOUNDNESS. >> SVB BANK CLOSED, CLOSED BY THE REGULATORY. >> STOXX ZERO 600 BEING DRAGGED DOWN BY THE FINANCIAL SERVICES SECTOR, DOWN BY THE BANKING SECTOR BY 2.75%.
>> DEAL DONE. UBS WILL BUY CREDIT SUISSE FOR 3 BILLION U.S. FRANCS. >> THIS IS WHERE THE GOVERNMENT CAME IN WITH A LIFELINE OF LIQUIDITY. >> SPEAKING VERY CLOSELY WITH KEY REGULATORS, NOTABLY OR MOST IMPORTANTLY THE ONES IN THE U.S. AND THE U.K. WHO ARE DIRECTLY INVOLVED. YOU HAVE SEEN TODAY THEIR SUPPORT FOR THE SOLUTION.
>> CREDIT SUISSE WILL NO LONGER BE AN INDEPENDENT ON ANY -- COMPANY. AT THE SAME TIME THIS MEANS A NEW BEGINNING IN HUGE OPPORTUNITIES AHEAD FOR THE COMBINED BANK AFTER THE SWISS FINANCIAL SECTOR AS A WHOLE. FRANCINE: WHILE UBS MIGHT BE A MORE TRUSTED BRAND, PART OF THE RESCUE HAS SOME QUESTIONING WHETHER SWITZERLAND IS A SAFE PLACE TO INVEST. >> THIS IS SWITZERLAND, BAILING IN THE BONDHOLDERS.
♪ FRANCINE: TYPICALLY, BONDHOLDERS TAKE PRECEDENCE OVER SHAREHOLDERS. THAT MEANS THE PEOPLE WHO LOAD THE COMPANY CASH GET THEIR MONEY BACK BEFORE THE PEOPLE WHO OWNED THE BUSINESS. WHAT HAPPENED WITH CREDIT SUISSE IS PEOPLE WHO OWNED THE COMPANY'S SHARES RECEIVED A TOTAL OF ABOUT $3 BILLION, FAR LESS THAN THE COMPANY HAD BEEN WORTH JUST DAYS EARLIER BUT A CLASS OF DEBT KNOWN AS ADDITIONAL TIER ONE BONDS HAS COMPLETELY WIPED OUT TO THE TUNE OF $17 BILLION.
>> THEY WERE ASKING, WE ARE LOSING ALL OF OUR MONEY NOW. WHY WOULD WE GIVE YOU MONEY IN THE FUTURE? THAT WAS ANOTHER BIG PROBLEM OF THIS MERGER BECAUSE IT WILL MAKE FINANCING FOR SWISS BANKS WHEN THEY WANT TO LEND MORE EXPENSIVE GOING FORWARD. FRANCINE: THE DEALER BROKERS MAINTAIN THAT THIS WAS THE BEST OF A BUNCH OF BAD SOLUTIONS. THERE IS ANOTHER REASON WHY THE NEW UBS MEGABANKS COULD BE PROBLEMATIC FOR A SMALL COUNTRY LIKE SWITZERLAND. >> THE SWISS STATE IS HOPING THAT BY MERGING THESE TWO COMPANIES YOU GET A BIT OF THE BEST OF BOTH WORLDS.
GET THE HAS BEEN DEVELOPED AT CREDIT SUISSE AND PERHAPS MORE INNOVATIVE STUFF BUT THEN ALSO, THE STABILITY AND THE SORT OF STOIC CULTURE THAT UBS HAS. >> UBS NOW AFTER TAKEOVER HAS PROVIDED STABILITY STRAIGHTAWAY, BUT IT CREATES A POTENTIALLY BIGGER PROBLEM IN THE FUTURE. >> UBS'S BALANCE SHEET IS NOW TWICE THE SIZE OF THE SWISS ECONOMY. THAT IS OBVIOUSLY MASSIVE AND BEGS THE QUESTION IF UBS WERE EVER TO RUN INTO TROUBLE, COULD SWITZERLAND AFFORD TO BAIL THEM OUT? FRANCINE: IN THE LAST FINANCIAL CRISIS WE TALKED ABOUT BANKS BEING TOO BIG TO FAIL MANY GOVERNMENT HAD TO BAIL THEM OUT. THE NEW EXPANDED UBS PRESENTS A DIFFERENT RISK, THAT THE SWISS GOVERNMENT JUST DOES NOT HAVE ENOUGH MONEY TO BAIL IT OUT.
FRANCINE: OUR SPECIAL REPORT LOOK IN THERE ON THE HISTORY AND FUTURE OF SWISS BANKING AFTER THE GOVERNMENT BROKER-DEAL TO TAKE OVER CREDIT SUISSE. YOU CAN ALSO FIND IT ON OUT OF ORDER -- ALL OF OUR SOCIAL PLATFORM. UBS WILL ALSO BE REPORTING ON TUESDAY ALONG WITH SANTA AND AIR. KEEP IT RIGHT HERE ON BLOOMBERG
AS WE BRING YOU THE NUMBERS AT TERMINAL SPEED. WE DID HAVE AN INTERVIEW WITH MR. VISCO OF THE EUROPEAN CENTRAL BANK. HE IS GOVERNOR OF THE BANK OF ITALY AND HE SEES CONTAGION RISKS AND A CREDIT SLOWDOWN.
HE SAYS THE ECB SHOULD PROCEED CAUTIOUSLY WITH ANY FUTURE INTEREST RATE HIKE ADDS CREDIT GROWTH HAS BEEN SLOWING AND FINANCIAL STABILITY RISKS HAVE BEEN PERSISTING. HE SPOKE TO US A VERY SHORT TIME AGO RIGHT HERE IN OUR HEADQUARTERS IN LONDON. THIS MEANS OF COURSE WE WILL LOOK FORWARD TO WHAT THE ECB HAS TO SAY NEXT WEEK. WE ARE ALSO GETTING A LOT BREAKING NEWS OUT OF THE U.K..
THIS IS DOMINIC RAAB, THE DEPUTY PRIME MINISTER, AND THERE HAD BEEN A LOT SPECULATION ABOUT WHETHER HE COULD STAY ON THE JOB AFTER ALLEGATIONS OF HIM BULLYING STAFF CAME TO THE FOREFRONT, BREAKING NEWS IN THE LAST SECONDS. THE DEPUTY PRIME MINISTER DOMINIC RAAB HAS RESIGNED. COMING UP, TESLA RAISES SOME OF ITS PRICES AFTER SHARES SLUMPED ON FIRST QUARTER RESULTS. WE WILL DISCUSS THAT NEXT, AND THIS IS BLOOMBERG. FRANCINE: ECONOMICS, FINANCE, POLITICS.
LET'S FOCUS ON THE U.K. AND ALSO ONE OF THE MEANS TORIES THAT HAS ROCK THE POLITICAL WORLD IN THE U.K.. THE PRIME MINISTER'S NUMBER TWO, HIS DEPUTY PRIME MINISTER DOMINIC RAAB HAS JUST RESIGNED. HE HAS RESIGNED FROM THE GOVERNMENT AFTER A REPORT INVESTIGATING BULLYING ALLEGATIONS AGAINST HIM THAT WAS HANDED TO THE PRIME MINISTER. THERE HAS BEEN NOTHING ELSE AND PEOPLE HAVE BEEN TALKING ABOUT WESTMINSTER LAST WEEK OR SO. MR. RAAB SAID HE WOULD RESIGN IF THE INQUIRY FOUND EVIDENCE
OF BULLYING. IT IS IMPORTANT, HE SAID, TO KEEP HIS WORD. THE TRANSPORT SECRETARY HAD DEFENDED HIM. COMPLAINTS OF BEHAVIOR FROM SEVERAL CIVIL SERVANTS WERE INVESTIGATED BY SENIOR LAWYER ADAM. JUST ABOUT TWO MINUTES AGO, WE
FOUND OUT THAT DOMINIC RAAB HAS RESIGNED. HE JUST WROTE THIS SHORT LETTER THAT WAS POSTED ON TWITTER SAYING, "I FEEL DUTY BOUND TO ACCEPT THE OUTCOME OF THE INQUIRY." DOBBINS AND -- DOZENS OF PEOPLE GAVE TESTIMONY INTO THE INQUIRY WHICH BEGAN LESS NOVEMBER. CAN WE EXPECT A RESHUFFLE OF
THE GOVERNMENT AFTER THIS? IT IS JUST ANOTHER SCANDAL AT THE PRIME MINISTER HAS TO DEAL WITH. JUST A REMINDER, WE DID GET DATA OUT OF THE U.K., APRIL SERVICES PMI BETTER THAN EXPECTED. IF YOU LOOK AT THE
MANUFACTURING IT WAS WORSE THAN EXPECTED. COMING UP, PLENTY MORE SURVEILLANCE EARLY EDITION WITH ANNA AND LONDON AND MATT MILLER IN NEW YORK. THIS IS BLOOMBERG. ♪ >> THE SITUATION IS CLEARLY IMPORTANT AND IT TIGHTENS FINANCIAL CONDITIONS, ACCESS TO CREDIT.
>> WE ARE STILL DEALING WITH THE CRISIS THAT WILL SLOW THE ECONOMY AND MAKE A RECESSION EVEN MORE LIKELY. >> AT THE END OF THE DAY, THE CRISIS IS TOO STRONG OF A WORD, AND WORDS LIKE THAT CAN CREATE A FAIR AMOUNT OF DISRUPTION. >> THE BANKS ARE PREPARING FOR A RECESSION AND CAPITAL GENERALLY IS MOVING IN THE RIGHT DIRECTION. >> THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION" WITH ANNA EDWARDS AND MATT MILLER. ANNA: IT IS 10:00 A.M.
IN LONDON AND 5:00 P.M. IN HONG KONG. FEDERAL RESERVE OFFICIALS ARE BACKING ANOTHER INTEREST RATE INCREASE AND UP THE SAME TIME THEY ARE WATCHING OUT FOR STRAINS IN THE BANKING SYSTEM. RUSSIAN ARMS SALES TO INDIA GRIND TO A HALT. BOTH COUNTRIES ARE FINDING A WAY FOR PAYMENTS TO BE TRANSFERRED WITHOUT VIOLATING U.S. SANCTIONS. AND TESLA SHARES PLUNGE AND ELON MUSK'S FORTUNE SHRINK. WELCOME TO "BLOOMBERG SURVEILLANCE: EARLY EDITION."
M ANNA EDWARDS IN LONDON WITH MATT MILLER IN NEW YORK. EVERYONE DISTRACTED BY THE LATEST POLITICAL NEWS FLOW SURROUNDING THE RESIGNATION OF THE DEPUTY PRIME MINISTER, REPORTED THAT HE WAS BULLYING HIS STAFF. BACK TO THE GLOBAL NEWS AGENDA AND THE GLOBAL MARKET MOVES, WE HAVE SEEN EVERYTHING RELATED TO COMMODITIES UNDER PRESSURE TODAY. MATT: ABSOLUTELY AND WE WILL CHECK ON IRON ORE IN A SECOND, BUT OIL IS NOT MOVING VERY MUCH, REGARDLESS OF THE FACT WE HAD STOCKPILES COME IN WEAKER THAN EXPECTED AND WE HAD THAT SURPRISE CUT A COUPLE OF WEEKS AGO BY OPEC+.
IT DOES NOT SEEM TO BE HELPING THE PRICE RISE MUCH HIGHER. TAKE A LOOK AT S&P FUTURES RIGHT NOW, JUST UP 0.04%. UNCHANGED AND WE MOVED DOWN BECAUSE FUTURES WERE HIRED TWO MINUTES AGO WHEN I WAS SITTING AT MY DESK. YIELDS ARE COMING DOWN A LITTLE BIT AS WELL. THE TENURE AT 3.52 -- THE 10 YEAR AT 3.52. THERE IS NYMEX CRUDE AND I WAS TALKING ABOUT THE FACT THAT WE ARE NOT MOVING VERY MUCH, STILL HOLDING OUT A LOW LEVEL CONSIDERING THE FACT WE HAVE SEEN DRAWDOWNS IN TERMS OF STOCKPILES AND WE HAVE SEEN CUTS IN TERMS OF PRODUCTION FROM OPEC+. NONETHELESS, THAT PRICE HAD
BEEN $93 LAST WEEK, AND NOW WE ARE LOOKING AT $77. BITCOIN COMING OFF AGAIN TODAY, DOWN TO 28,000 AND WE ARE LOOKING AT A DECENT DROP BELOW THE 30,000 LEVEL WE SAW EARLIER THIS WEEK. LOOKING AT ASIA, WE HAD BIG LOSSES IN TERMS OF STOCKS. THE BROADER MSCI ASIA-PACIFIC DOWN ONLY THREE QUARTERS OF 1%, BUT THE HANG SENG DOWN MORE THAN 1.5% AND WHEN YOU LOOK AT CHINA, ALSO A 2% DROP THERE. IRON ORE IS THE COMMODITY I WAS TALKING ABOUT UNDER PRESSURE, DOWN MORE THAN 6% RIGHT NOW, SO CONCERNS ABOUT THE ECONOMY HEADING INTO A RECESSION MAYBE GLOBALLY AND CONCERNS ABOUT THE ECONOMY IN CHINA PUTTING PRESSURE ON THAT PRICE. YOU CAN SEE THAT THE U.S. DOLLAR IS A BIT WEAKER AGAINST
THE YEN. MAYBE SOME MONEY GOING INTO THE JAPANESE YEN IS A SAFE HAVEN, THOUGH WE NEVER KNOW ANYMORE WHETHER THE DOLLAR IS A SAFE HAVEN COMPARED TO THE END. -- THE YEN. ANNA: SOME FX TRADERS BEING EXCITED AROUND THAT POINT, THE YEN GAINING ON CONCERNS BETWEEN THE U.S. AND CHINA.
LET'S LOOK AT WHERE WE ARE IN EUROPE AND WE ARE MIXED ACROSS THE CONTINENT. THE U.K. MARKET OUTPERFORMS, WOULD SURPRISING GIVEN THE UNDERPERFORMANCE OF THE MINING SECTOR AND BASIC RESOURCES. IT IS BY FAR AND AWAY THE WORST PERFORMING SECTOR. OIL PRICES RETREATING A LITTLE BIT, BACK DOWN TO THE LEVELS WE SAW AT THE TIME THAT OPEC+ CUT PRODUCTION, SO AS A RESULT, BASIC RESOURCES ARE DOWN. AS THE LORD, THAT STOCK IS UP BY OVER 7%. AMERICA IS BUYING SUNGLASSES. THIS IS THE EURO, DOWN 10%.
-- 0.1%. THE COMPASS AT PART AND THE WHOLE TELLING PRETTY MUCH THE SAME STORY. THE COMPASS IT RAISING -- THE COMPOSITE READING IS ALL IN SERVICES AND NOT IN MANUFACTURING. HE SAW THE SAME IN THE U.K. DATA BUT A REALLY INTERESTING DUAL TRACK RUNNING IN THE EURO ZONE ECONOMY WITH MANUFACTURING SLUGGISH ON THE SERVICES SIDE REPORTING STRONGLY. ON THE POUND, THERE IS THE POLITICS, NOT REALLY WEIGHING ON WHAT IS GOING ON HERE. WE HAVE GOT RETAIL SALES DATA THAT WAS LACKLUSTER BUT CONSUMER CONFIDENCE IS MORE FORWARD-LOOKING.
ALL IN ALL, THE MARKET CHOOSING TO SELL OFF AND WE HAVE GOT THE PMI DATA OUT OF THE U.K., WHICH TOLD US THE SAME STORY. THE TAKE AWAY WE GET FROM THE POLITICS STORY THAT WE MENTIONED ABOUT THE RESIGNATION OF THE DEPUTY PRIME MINISTER, MORE PROOF THAT THE SUNAK ADMINISTRATION IS NOT THE JOHNSON ADMINISTRATION. MATT: AND THE FACT THAT WE TAKE BULLYING VERY SERIOUSLY, YOU CERTAINLY DO IN THE U.K. FED OFFICIALS ARE BACKING ANOTHER INTEREST RATE INCREASE AT THE SAME TIME WHILE THEY ARE MONITORING THE ECONOMIC FALLOUT FROM STRESSES ON THE BANKING SYSTEM. CLEVELAND FED PRESIDENT LORETTA MESTER SPOKE YESTERDAY.
>> ANTICIPATE MONETARY POLICY WILL NEED TO MOVE SOMEWHAT FURTHER INTO RESTRICTIVE TERRITORY THIS YEAR, BUT THE FED FUNDS RATE MOVING ABOUT 5% AND THE REAL FED FUNDS RATE STAINS IN POSITIVE TERRITORY FOR SOME TIME. PRECISELY HOW MUCH HIGHER THE FED FUNDS RATE WILL NEED TO GO FROM HERE AND FOR HOW LONG POLICY WILL NEED TO REMAIN RESTRICTIVE WILL DEPEND ON CANONIC AND FINANCIAL DEVELOPMENTS. MATT: BLOOMBERG'S VALERIE TYTEL JOINS US FOR MORE ON THE FED'S THAT WE ARE HEARING. A LOT MORE SPEAKERS UP UNTIL THE BLACKOUT PERIOD COMES, AND ALSO YOU CAN TELL US HOW IMPORTANT THESE PMI'S ARE THAT WE ARE WAITING FOR TODAY. VALERIE: THE FED SPEAKERS YESTERDAY ARE FINALLY SINGING FROM THE SAME HEAD SHEET, ALL BACKING ANOTHER HIKE TO COME IN MAY. YOUR HEARING VERY LITTLE ABOUT
A CASE FOR A PAUSE ON WHO HAD LAST WEEK FROM DALY AND GOOLSBEE. MESTER SAYING RATES ARE LIKELY TO GO HIGHER THAN 5%, SO LET'S APPLY MORE MORE HIKE. A LOT OF THIS DID NOT COME AS MUCH OF A SURPRISE TO THE MARKETS. THE FRONT END PRICING DID NOT CHANGE MUCH DUE TO THE FED SPEAK. WE ARE PRICING A TERMINAL RATE OF FIVE AND A QUARTER UNTIL THE END OF THE YEAR. ANNA:
AND NOW WE GO INTO BLACKOUT SO WE DO NOT HEAR MORE FROM FED OFFICIALS. LET'S TALK ABOUT THE DATA WE GOT EARLIER ON. WE GET U.S. PMI LATER, REPORTING ON THE U.K. ANTI-E.U. SIDE OF THINGS REALLY UNBALANCED BETWEEN MANUFACTURING AND SERVICES. VALERIE: IT IS SHOWING A POSITIVE SIGN THAT THE U.K.
ECONOMY IS HOLDING UP AGAINST THE WEIGHT INCREASES. THE BEAT IN SERVICES WAS NOTABLE AND IT ALSO DROVE SOME JOB CREATION. IT WILL STRENGTHEN THE CASE FOR FURTHER RATE INCREASES FROM THE BANK OF ENGLAND. THE STORY IS SIMILAR WHEN IT COMES TO THE EURO ZONE AS WELL. THE COMPOSITE ROSE TO AN 11 MONTH HIGH, SHOWING AN EVEN BETTER PICTURE FOR THE EURO ZONE ECONOMY THAN THE U.K. AS IT GAINS FURTHER MOMENTUM. THE KEY THING IS THAT THE
DIVERSIONS FROM MANUFACTURING AND SERVICES IS THE MOST DIVERGED SINCE 2009. SOME ARE NOTING THAT THE MISS IN MANUFACTURING IS MOSTLY DUE TO THE PROTESTS WE HAVE HAD IN FRANCE RECENTLY, BUT THE DIVERGENCE IS NOTABLE. THERE WERE SOME MORE UNDERLYING DATA WE GOT FROM THE PMI'S THAT SHOWED PRICE PRESSURES ARE MODERATING, BUT THEY ARE STILL ELEVATED. IT IS LIKELY GOING TO KEEP THE ECB ON ITS TOES WHEN IT COMES TO STAYING ON THE HAWKISH SIDE FOR NOW. THE CURRENCY DID LIKE IT.
IT WAS DOWN A BIT EARLIER BEFORE THE DATA, SO IT DID SUPPORT THE EURO. STERLING IS STILL SUFFERING FROM LOSSES FROM THE WEAK RETAIL SALES WE GOT EARLIER THIS MORNING. ANNA: THANK YOU VERY MUCH. VALERIE TYTEL WITH A LOOK AT IMPORTANT DATA OF TODAY. BACK TO THE BREAKING NEWS WE MENTIONED, THE U.K. DEPUTY PRIME MINISTER HAS RESIGNED AFTER BEING THE SUBJECT OF A PROBE OF WHETHER HE BELIEVED HIS STAFF.
ROSALIND MATHIESON JOINS US NOW. WE WILL START WITH THIS AND WIDEN THE CONVERSATION INTO OTHER GEOPOLITICS, WHICH I KNOW IS OF INTEREST TODAY. WHAT DO TAKE AWAY FROM THIS? WE KNEW THIS REPORT WAS COMING SINCE NOVEMBER THAT THEY STARTED WORKING ON IT. IS THIS ANOTHER EXAMPLE OF
PRIME MINISTER SUNAK TRYING TO SHOW THAT THIS IS A DIFFERENT ADMINISTRATION TO ONES THAT HAVE GONE BEFORE? >> CERTAINLY THAT SEEMS TO HAVE BEEN THE CALL HE HAS MADE BECAUSE HE WAS WRESTLING WITH HIS DECISION FOR SEVERAL DAYS ON WHAT TO DO BECAUSE DOMINIC RAAB IS A KEY BACKER OF HIS AND HAS BEEN FOR SOME TIME. AND DOMINIC RAAB INSISTS HE HAS DONE NOTHING WRONG AGAINST THESE ALLEGATIONS MADE AGAINST HIM, SO IN THE END, HE HAS LANDED ON THE SIDE OF ASKING DOMINIC RAAB TO LEAVE AND RAAB NOW RESIGNING. HE IS INDEED SHOWING A DIFFERENT ADMINISTRATION AFTER CHAOTIC ADMINISTRATIONS BEFORE HIM UNDER THE TORIES. HE IS VERY MUCH FOCUSED ON A CLEANER ADMINISTRATION, A TIGHTER ADMINISTRATION. HE MAKES SURE THAT HE ALSO
TRIES TO RENEW THE RELATIONSHIP WITH EUROPE, FOR EXAMPLE, TRYING TO CLEAR HOUSE ON BREXIT. IS TRYING TO GET ALL OF THESE THINGS IN THE PAST SO HE CAN FOCUS ON HIS AGENDA GOING FORWARD. HE WILL FACE SOME BLOWBACK WITHIN THE TORIES FOR THIS DECISION, BUT HE HAS TAKEN THE CALL THAT HE WANTS TO PUT IT ALL BEHIND THE TORIES AND MOVE FORWARD. MATT: I WANT TO ASK ABOUT THE BIDEN ADMINISTRATION BECAUSE WE HAVE BEEN TALKING A LOT OVER THE LAST 24 HOURS ABOUT SANCTIONS THAT IT WANTS TO PUT IN PLACE IN DEALING WITH CHINA. THE SANCTIONS WE HAVE IN PLACE
ON RUSSIA SEEM TO BE WORKING. INDIA HAS DECIDED IT CANNOT FIGURE OUT A PAYMENT MECHANISM TO BUY RUSSIAN ARMS AND THEREFORE, $2 BILLION IN DEALS IS OFF. ROSALIND: THAT IS THE INTERESTING THING BECAUSE INDIA HAS BEEN A LONGTIME BUYER OF WEAPONS FROM RUSSIA FOR MANY YEARS, BUT RUSSIA OFTEN LETS THEM EXTEND THE CREDIT AND THE BILLS STACK UP AND THERE IS NO RUSH TO DEMAND PAYMENT.
WHAT THIS TELLS US IS THAT RUSSIA WANTS PAYMENT NOW AND IT NEEDS THAT MONEY TO FUND ITS ECONOMY AND ITS WARTIME MACHINE, BUT ALSO PUTS INDIA INTO A DIFFICULT SPOT BECAUSE HOW DO THEY MAKE THESE PAYMENTS? INDIA DOES NOT WANT RUBLES BECAUSE NOBODY WANTS RUBLES RIGHT NOW, BUT RUSSIA ALSO DOES NOT WANT RUPEES. THE HOW CAN THEY FACILITATE THIS PAYMENT? THAT IS THE PICKLE THAT RUSSIA IS CLEARLY SAYING TO DELHI SO WE WILL STOP SENDING YOU THE WEAPONS YOU NEED BECAUSE INDIA WANTS THESE WEAPONS FROM RUSSIA TO PROVIDE A DETERRENT NOT JUST AGAINST CHINA BUT ALSO PAKISTAN HAS A NUMBER OF ISSUES ON ITS ORDER AREAS AND IT NEEDS THIS WEAPON STOCKS COMING IN. ANNA: THANK YOU FOR THE UPDATE. ROSALIND MATHIESON COVERING A NUMBER OF GEOPOLITICAL THEMES THIS MORNING. A U-TURN FROM TESLA.
THE EV MAKER HAS INCREASED THE PRICES OF THE MODEL S VEHICLE IN THE U.S. AFTER THE COMPANY SHARES FELL FOLLOWING FIRST-QUARTER EARNINGS, A SLUMP DRIVEN BY WORRIES OVER RECENT CUTS TO ITS PRICES. ALEX WEBB JOINS US NOW. A DAY AGO WE HEARD FROM ELON MUSK TALKING ABOUT HOW THEY COULD CUT PRICES FURTHER. WHAT DO I NOT UNDERSTAND ABOUT
THIS STORY? ALEX: THESE ARE NOT MODELS THAT SELL AT HUGE VOLUMES. YOU LOOK AT THE MODEL S AND THE MODEL X, AND THESE ARE MODELS THAT SELL 50,000 UNITS APIECE, SO IT IS A GOOD THING TO TELL THE MARKET THAT WE ARE NOT CUTTING ALL THE MODEL PRICES, PARTICULARLY GIVEN THE FEAR THAT INVESTORS HAVE ABOUT COMMODIFICATION. THE REASON THEY INVEST IN ANYWHERE IS BECAUSE THE GROWTH IS GOOD BUT IT HAS BEEN PROFITABLE. THIS IS NOT NECESSARILY MASSIVELY CHANGING THEIR DYNAMIC. WE ARE NOT LOOKING AT THE MODEL 3, WHICH IS THE BIG SELLING MODEL, SO IT IS A CHANGE BUT NOT MASSIVE. MATT: I FEEL LIKE THEY WILL CHANGE
PRICES EVERY DAY SO WE TALK ABOUT TESLA AT THE TOP OF EVERY NEWSCAST. WE SHOULD BE TALKING ABOUT SPACEX BECAUSE MUSK HAD SAID THAT EVEN CLEARING THE LAUNCHPAD WOULD BE A SUCCESS. THEY DID THAT AND MORE YESTERDAY, BUT OF COURSE HIS STARSHIP ROCKET ENDED UP EXPLODING OR THEY PUSHED THE SELF-DESTRUCT BUTTON 30 MILES ABOVE THE EARTH'S SURFACE. TALK TO US ABOUT WHAT THIS MEANS FOR HIS AMBITIONS TO TAKE HUMANS TO THE MOON AND MARS. ALEX: IT CERTAINLY SEEMS TO SET IT BACK. NASA HAS SAID IT HOPES TO BE ABLE TO USE STARSHIP TO LAND PEOPLE ON THE MOON IN 2025. THE PROCESS TO DO THAT IS
VASTLY COMPLICATED. YOU'RE TALKING ABOUT SENDING A SHIP UP INTO THE EARTH'S ORBIT WHICH WILL CARRY THE FUEL, THEN YOU HAVE TO FUEL THAT THING UP, WHICH MIGHT TAKE 12 STARSHIPS TO DO. THEN YOU HAVE TO MAKE DOCS WITH IT SOME PEOPLE CAN GO TO THE MOON. THERE IS SO MUCH HAPPENING BETWEEN NOW AND THE MOON LANDING, AND THE FACT THAT THEY HAVE NOT YET MANAGED TO LAUNCH THE ROCKET INTO ORBIT SUGGESTS THAT 2025 IS VASTLY AMBITIOUS. ANNA: THANK YOU FOR THE UPDATE. MATT: MAYBE WE WILL HAVE TO DUST OFF THE OLD SATURN BECAUSE THOSE WORK.
LET'S LOOK AT PREMARKET TRADING IN THE U.S. THAT WAS OBVIOUSLY A SARCASTIC REMARK. SPACEX HAS MADE INCREDIBLE STRIDES AND IS ONE TO WATCH. TESLA ON THE OTHER HAND IS WISHY-WASHY IN TERMS OF PRICING.
THEY HAVE CUT PRICES SIX TIMES, BUT AS ALEX TOLD US, THOSE WERE ON THE HIGH VOLUME MODELS. THEY ARE RAISING PRICES ON THE S AND X THAT ARE ALREADY EXPENSIVE, SO THE SHARES ARE COMING BACK UP A LITTLE BIT, 1.5% IN THE PREMARKET. WE WILL SEE WHAT HAPPENS WHEN THE CASH TRADE KICKS OFF. BUZZFEED IS SHUTTING DOWN ITS NEWS OPERATIONS COMPLETELY. THIS STOCK COMING UP A LITTLE BIT IN THE PREMARKET, BUT OF COURSE IT IS A PENNY STOCK, TRADING AT 81 CENTS.
WE ALSO HEARD THAT THE BUSINESS INSIDER IS CUTTING STAFF BY ABOUT 10%, SOME NOT GREAT NEWS FOR PROFESSIONAL JOURNALISM ACROSS THE U.S. THERE IS A COMPANY CALLED WISH, WHICH IS LIKE AN AUCTION WEBSITE THAT SELLS A LOT OF DIFFERENT GOODS, A WIDE ASSORTMENT OF GOODS. IT IS RISING IN THE PREMARKET 20%, GAINING BY A FIFTH AFTER ANNOUNCING A $50 MILLION SHARE REPURCHASE PROGRAM.
IT IS NOT A HUGE COMPANY, SO THAT IS A HUGE AMOUNT IN TERMS OF THE SHARES OUT. ANNA: COMING UP ON THE PROGRAM, WE WILL TALK TO KOKOU AGBO-BLOUA , SOCIETE GENERALE'S GLOBAL HEAD OF ECONOMICS AND CROSS ASSET RESEARCH. WHAT DOES HE MAKE OF THAT DIVERGENT PICTURE IN EUROPE TODAY? WE WILL ALSO TALK TO NORWAY'S SOVEREIGN WEALTH FUND. WE WILL SPEAK WITH THE DEPUTY CEO TROND GRANDE. PLUS, BRIAN MOYNIHAN SAYS BANKS
ARE IN GOOD SHAPE. THE BANK OF AMERICA CEO SPOKE TO BLOOMBERG'S DAVID WESTIN. >> THE BASIC INDUSTRY HAS REPORTED GOOD EARNINGS ACROSS THE BOARD. DEPOSITS HAVE COME DOWN, BUT THAT IS INTENDED BY THE FED TO TAKE MONEY OUT OF THE SYSTEM.
BANKING THE SYSTEM IS WHAT THEY MATT: WELCOME BACK TO BLOOMBERG SURVEILLANCE. I AM MATT MILLER WITH ANNA EDWARDS AND WE ARE LOOKING AT AN INCREDIBLY TIGHT TRADING RANGE WHEN IT COMES TO STOCKS. WE HAVE ONLY BEEN GOING UP OR DOWN A LITTLE BIT AND THAT PUTS US ON TRACK FOR THE TIGHTEST MONTHLY RANGE WE HAVE SEEN IN TERMS OF THE TRADING BAND ON THE S&P 500 SINCE 2017. WHAT HAPPENED TO ALL OF THE VOLATILITY? IT COULD COME BACK TODAY AS OPTIONS EXPIRE AND MARKET MAKERS ARE SET TO BE LONG GRANDMA, WHATEVER THAT MEANS.
JOINING US NOW IS JUSTINA LEE, JOINING US TO EXPLAIN WHAT COULD HAPPEN AT THE OPTIONS EXPIRY TODAY. >> I DO NOT KNOW IF I AM ABOUT TO BECOME THE FIRST PERSON TO TALK ABOUT THE OPTION GRADES ON BLOOMBERGTV, BUT I CAN TRY TO TAKE UP THAT CHALLENGE. WHAT IS HAPPENING TODAY IS A LOT OF OPTIONS ARE EXPIRING, AND THE REASON THAT MATTERS IS BECAUSE IT AFFECTS THE OPTION MARKET MAKERS' POSITIONING.
THEY ARE TRYING TO HEDGE THEIR POSITIONS AS WELL AND THEY ARE HEDGING EVERY DAY WHICH HAS AN IMPACT ON THE MARKET. ALONG RECENTLY, MARKET MAKERS HAVE BEEN LONG GAMMA, AND THAT USUALLY MEANS THEY ARE HEDGING ON THE OPPOSITE DIRECTION OF THE S&P 500. THAT HAS HAD AN EFFECT ON REALIZING VOLATILITY, BUT AT THE SAME TIME IT IS INCREDIBLE AND SHOWS THAT CURRENT WHEAT TRADERS ARE IN THE STATE WHERE THEY ARE NOT TOO WORRIED ABOUT A CREDIT CRUNCH OR RECESSION JUST YET, BUT AT THE SAME TIME, NOT WORRIED ABOUT FED TIGHTENING EITHER. ANNA: ELSEWHERE IN THE MARKETS WE ARE FOCUSED ON COMMODITIES.
MATT MENTIONED UP THE TOP OF THE PROGRAM THAT IRON PRICES ARE BEING PUT DOWN TO THE LACKLUSTER CHINESE STORY. WHAT IS THE STORY HERE? JUSTINA: IT IS INTERESTING BECAUSE WE HAVE SEEN GOOD CHINESE DATA LATELY AND THE NARRATIVE HAS BEEN CHINA'S DEMAND PICKUP AS IT REEMERGES FROM THE COVID LOCKDOWN, SO IT IS INTERESTING THAT WE ARE SEEING NOT THAT STRONG CHINESE DEMAND, BUT AT THE SAME TIME WE HAVE TO CONSIDER THE SUPPLIES, AND IT SEEMS SUPPLY HAS BEEN AMPLE RELATIVE TO THAT DEMAND. WE ALSO HAVE THE CHINESE GOVERNMENT GRUMBLING A LITTLE BIT ABOUT IRON PRICES AS WELL. ANNA: THANK YOU. JUSTINA LEE WITH THE LATEST ON MARKETS. YOU CAN GET MARKET ANALYSIS ON THE MARKETS LIVE BLOG. MLIV <GO> IS THE FUNCTION TO
USE ON YOUR BLOOMBERG TERMINAL. THIS IS BLOOMBERG. MATT: KEEPING YOU UP-TO-DATE WITH THE NEWS FROM AROUND THE WORLD, HERE IS THE FIRST WORD. PRESIDENT BIDEN WILL CRACKDOWN ON U.S. INVESTMENT IN KEY PARTS OF CHINA'S ECONOMY.
BLOOMBERG HAS LEARNED HE WILL SIGN AN EXECUTIVE ORDER IN THE COMING WEEKS, WHICH WOULD LIMIT INVESTING ON SEMICONDUCTORS AND QUANTUM COMPUTING. THE PRESIDENT IS HOPING TO GET THE BACKING OF THE U.S.'S G7 PARTNERS. MEANWHILE, PRESIDENT BIDEN IS SET TO LAUNCH HIS REELECTION ANNOUNCEMENT NEXT WEEK. HE HAS BEEN SIGNALING HE
INTENDS TO SEEK A SECOND TERM NEXT YEAR FOR QUITE A TIME, MAKING IT SOMEWHAT OF AN OPEN SEEN IT -- OPEN SECRET. AND IN CANADA, THEY ARE INVESTIGATING A HEIST THAT MAY HAVE NETTED THIEVES MILLIONS OF DOLLARS IN GOLD AND OTHER VALUABLES. POLICE SAY A CONTAINER WITH ABOUT $15 MILLION WORTH OF VALUABLES AND GOLD WAS TAKEN FROM A CARGO HOLDING AREA AT THE PEARSON INTERNATIONAL AIRPORT. ANNA: ANNA: THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION ." HERE'S WHAT YOU NEED TO KNOW. FEDERAL RESERVE OFFICIALS ARE BACKING ANOTHER INTEREST RATE INCREASE AT THE SAME TIME THEY ARE WATCHING FOR THE FALLOUT FROM STRAINS ON THE BANKING SYSTEM.
REDDISH PRIME MINISTER'S -- BRITISH PRIME MINISTER RISHI SUNAK'S DEPUTY PRIME MINISTER HAS STEPPED DOWN. AND TESLA SHARES PLUNGE. I AM ANNA EDWARDS IN LONDON WITH MATT MILLER IN NEW YORK. WE HAVE U.K.
POLITICS AND IT HAS BEEN INTERESTING DATA OUT OF EUROPE IN THE FACE OF ALL OF THAT. MATT: THE FUTURE IS DOING A LOT OF NOTHING IN A MONTH THAT HAS SEEN THE TIGHTEST TRADING RANGE SINCE 2017. RIGHT NOW ABSOLUTELY UNCHANGED ON THE S&P 500.
WE DROPPED YESTERDAY TO THE LEVEL OF 4129. WE SEE A REVERSAL IN THE 10 YEAR YIELD THAT HAD BEEN COMING DOWN AS INVESTORS BOUGHT THE BONDS. IT IS NOW RISING AS INVESTORS SELL THE BONDS, BUT NOT A LOT OF MOVEMENT RIGHT NOW AT 3.53. NYMEX CRUDE ALSO UNCHANGED.
WE ARE WAITING FOR AN OPTIONS EXPIRY TODAY AS JUSTINA LEE WAS TELLING US EARLIER THAT COULD MOVE MARKETS IN ONE DIRECTION OR THE OTHER. WE COULD SEE VOLATILITY COME BACK TO THE MARKETS, BUT AS OF YET, WE ARE NOT SEEING IT. BITCOIN CONTINUES TO FALL FOR THE SECOND DAY IN A ROW. IS AT 28 THOUSAND, BUT STILL ABOUT DOUBLE THE LEVEL WE SAW AT THE BOTTOM AFTER THE EXPLOSION OF FTX. IN TERMS OF MOVERS, WE SEE TESLA INCREASING PRICES OF THE MODEL X AND MODEL S YESTERDAY. IT WAS MARKING DOWN PRICES OF
THE MODEL 3 AND MODEL WHY. THERE ARE DIFFERENT SEGMENTS FOR THE CARMAKER. NONETHELESS, INVESTORS SELL THE STOCK WHEN THEY CUT THE PRICE AND BUY THE STOCK WHEN THEY RAISE THE PRICE. IN LESS FUNNY NEWS, BUZZFEED HAS SHUT DOWN COMPLETELY IT'S NEWS OPERATIONS, SO BAD NEWS FOR PROFESSIONAL JOURNALISM ACROSS THE COUNTRY. IS THIS INSIDER IS ALSO CUTTING 10% OF ITS STAFF -- BUSINESS INSIDER IS ALSO CUTTING 10% OF ITS STAFF.
WE HAVE NOT SEEN THE JOB LAW OFFICES JOSH -- THE JOB LOSSES PRETENDING THAT THE RECESSION IS UNDERWAY. AND THEN CONTEXT LOGIC, THE TICKER IS WISH BECAUSE IT OWNS THAT WEBSITE WHICH IS AN AUCTION WEBSITE THAT SELLS A BROAD ARRAY OF GOODS. THOUGH SHARES ARE UP 21% AFTER ANNOUNCING A SHARE BUYBACK PROGRAM OF $50 MILLION. WHAT DO YOU SEE IN EUROPE? ANNA: EUROPEAN STOCKS STILL GAINING BUT NOT BY MUCH, UP BY JUST 0.1% ON THE STOXX 600 MAKING MODEST GAINS AS WE HEAD TOWARD THE END OF THE EUROPEAN TRADING SESSION. NOT THE END -- THE END OF THE WEEK I WAS SAYING.
MATT WAS TALKING ABOUT THE IRON OR PRICE AND THAT IS UNDER PRESSURE. AS A RESULT, WE SEE THE BASIC RESOURCE SECTORS AND ALL OF THE MINING STOCKS LISTED IN LONDON UNDER PRESSURE TODAY. ESSILOR LUXOTICA IS AND I MET -- IS AN EYEWEAR MAKER, AND IT IS DOING BETTER AFTER SALES OUT OF THE U.S. AND THE POUND RESPONDING TO THE MIXED PICTURE. THE PMI DOING WELL BUT THERE WAS A DIVERGENCE BETWEEN POOR MANUFACTURING AND GOOD SERVICES DATA. WE SAW THAT ACROSS EUROPE. WE ALSO HAD LOTS OF OTHER DATA OUT OF THE U.K., A BRIGHTER
LOOK WHEN IT COMES TO CONSUMER CONFIDENCE, A WEAKER LOOK WHEN IT COMES TO RETAIL SALES. ALL OF THAT ADDS UP TO POUND WEAKNESS THIS MORNING. MATT: JOINING US NOW IS KOKOU AGBO-BLOUA, SOCGEN GLOBAL HEAD OF ECONOMICS, CROSS ASSETS, AND RESEARCH.
LET ME FIRST GET YOUR TAKE ON WHAT IS GOING ON OVER THERE. DOMINIC RAAB RESIGNING. IS THIS GOVERNMENT STRENGTHENING ITSELF OR ARE YOU CONCERNED THAT THEY ARE LOSING KEY PLAYERS? KOKOU: I FEAR IT WILL BRING MORE INSTABILITY WHEN IT COMES TO GOVERNMENT POLICY. THAT BEING SAID, I THINK THE BIGGER PICTURE THAT THE MARKETS ARE FOCUSING ON IS WHETHER WE WILL HAVE THIS RECESSION OR NOT BECAUSE THE U.K. HAS MANAGED TO ESCAPE A RECESSION AND MOST OF THE FORECAST ARE POINTING TO A RESILIENT ECONOMY. THAT IS THE CONCERN AND PUZZLE PIECES THAT A LOT OF INVESTORS ARE FACING RIGHT NOW. ANNA: WHAT DO YOU MAKE OF THOSE
MOVING PARTS AND THE WAY THEY DO NOT ALL ADD UP? ON THE SAME DAY WE HAVE CONSUMER CONFIDENCE THAT LOOKS BRIGHT, RETAIL SALES LOOKING WEEK. WHAT DO YOU TAKE AWAY FROM THAT SET OF DATA AND THE OVERALL PICTURE IN THE U.K. ABOUT WHERE WE ARE HEADED? KOKOU: ABSOLUTELY. THE OPINION ON THAT IS WIDESPREAD AND IT IS SOMETHING THAT WAS MENTIONED.
IT IS ESSENTIALLY GREED-FLATION, OR THE ABILITY OF COMPANIES TO PASS ON HIGHER PRICES TO PROTECT THEIR MARGINS, IN SOME CASES HIGHER THAN WHAT THEIR INPUT COSTS WOULD DICTATE. THIS LEADS TO A SITUATION WHERE THE PROFIT MARGIN HAS BEEN STABLE. CONSUMERS WERE ABLE TO TAKE THOSE HIGHER PRICES BECAUSE WE HAD AN EXPECTATION THAT PRICES ACROSS THE BOARD ARE RISING. IN ADDITION TO THAT, YOU HAVE EXCESS SAVINGS THAT HAVE BEEN BUILT ON THE CONSUMER BALANCE SHEETS AND THE GOVERNMENT POLICIES TO SHIELD LOWER INCOME HOUSEHOLDS.
HAVE A SITUATION WHERE DESPITE SIGNIFICANT TIGHTENING, THE CORPORATE'S HAVE BUILT NATIONAL IMMUNITY AGAINST INFLATION. THIS LEADS TO A SITUATION WHERE THEY ARE NOT UNDER A BIG PRESSURE TO CUT. IN ADDITION TO THAT, WE ARE USED TO DEMAND BEING CONSTRAINED, AND TODAY WE ARE IN A POSITION WHERE IT IS SUPPLY THAT IS CONSTRAINED. WE HAVE EXCESS DEMAND BECAUSE OF ALL OF THE FISCAL STIMULUS OVER TIME AND STRONG PROFIT MARGINS. THIS CREATES A POSITION WHERE WE MIGHT HAVE TO RAISE INTEREST RATES BY MORE TO DESTROY ENOUGH DEMAND TO GET INFLATION BACK ON TRACK. ANNA: WHERE DOES THAT LEAVE THE
EUROZONE STORY? BECAUSE WE HAVE HEARD A LOT OF PEOPLE SUGGESTING THE EUROZONE IS GOING TO KEEP HIKING LONGER THAN THE FED DOES. WHERE DO YOU THINK THAT TAKES US? KOKOU: VERY GOOD VERY GOOD POINTS, AND THE POINT I MENTIONED IS SPECIFIC TO EUROPE AS WELL. BECAUSE WE HAVE A SITUATION OF TIGHT SUPPLY AND EXCESS DEMAND. THIS IS WHY WE DO NOT SEE THE EUROZONE GOING INTO A RECESSION, AND THE FED HAS DONE QUITE A LOT OF TIGHTENING ON MONETARY POLICY.
THE ECB WILL HAVE TO TIGHTEN EVEN FURTHER BECAUSE A LOT OF THE DATA WE ARE LOOKING AT ARE POINTING TO STRONG AND RESILIENT ECONOMIES, AND PARTICULARLY STRONG CORE INFLATION DRIVEN BY WAGE PRESSURES. WE SEE PEAK INTEREST RATES IN THE EURO ZONE AT ABOUT 4.5%. IN THE U.S., WE SEE THE PEAK INTEREST RATES AT 5%. MATT: SPEAKING OF THE ECB, THE BANK OF ITALY GOVERNOR IGNACIO VISCO TALKING TO FRANCINE LACQUA EARLIER. >> WE HAVE TO BE CAUTIOUS. IT DOES NOT MEAN WE STOP.
IT MEANS WE DECIDE ON A MEETING BY MEETING BASIS ON THE INFORMATION WE GET FROM WAGES AND PROFITS. THIS IS WHAT WE ARE LOOKING AT, WHETHER THE WAGES WILL MAKE UP AND WHETHER THE PROFIT MARGINS WILL REMAIN UNCHANGED. MATT: TWO INTERESTING THINGS. FIRST OFF ON WAGES IN THE U.S., THEY OUTPACED INFLATION, SO THAT IS A CONCERN FOR THE FED. THE SECOND ISSUE IS PROFITS, AND THAT COMES TO EARNINGS SEASON. HOW ARE THESE TWO THINGS COMPARING OR HOW ARE THEY
DIFFERENT IN THE U.S. AND IN EUROPE IN TERMS OF THE WAGE GROWTH AND THE EARNINGS PICTURE? KOKOU: THIS IS A VERY GOOD POINT. IN GENERAL, THERE IS LACK OF SUPPLIES AND GOODS AND SERVICES, BUT ALSO LABOR. IN THE U.S., IT IS THE ISSUE AROUND THE GREAT RESIGNATION POST COVID-19, AND THAT HAS LED TO A TIGHT LABOR MARKET WHERE YOU HAVE TWO JOB OFFERS FOR EVERY UNEMPLOYED.
IN EUROPE,
2023-04-27 13:59
