>> THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION" WITH FRANCINE LACQUA. FRANCINE: GOOD MORNING AND WELCOME TO "BLOOMBERG SURVEILLANCE: EARLY EDITION." HERE IS WHAT IS COMING UP ON TODAY'S PROGRAM. EUROPEAN STOCKS MUTED AS CAUTIOUS INVESTORS AWAIT U.S.
CPI DATA THAT MAY PROVIDE CLUES OF FUTURE FED POLICY DECISIONS. LITTLE PROGRESS IN AVERTING A FIRST-EVER U.S. DEFAULT, BUT PRESIDENT BIDEN AND REPUBLICANS PLEDGED TO CONTINUE TALKS ON THE DEBT LIMIT. PLUS, ITALY SAYS THEY WILL QUIT CHINA'S INVESTMENT ACT BY THE END OF THE YEAR. HAPPY WEDNESDAY. I AM HERE IN PARIS AHEAD OF JP MORGAN'S ANNUAL CONFERENCE JUST A WEEK AFTER IT TOOK OVER THE TROUBLED U.S. BANK FIRST REPUBLIC. TOMORROW I WILL SIT EXCLUSIVELY
WITH JP MORGAN CHASE EXECUTIVE JAMIE DIMON. THE CONVERSATION IS NOT ONLY GOING TO BE ABOUT BANKS, BUT IN GENERAL WE WILL ASK ABOUT MARKET SENTIMENT AND EVERYTHING GOING ON WITH THE U.S. DEFAULT AND DEBT CEILING LIMIT CONCERNS. THE MARKETS PRETTY CAUTIOUS
AGAINST THE U.S. CPI NUMBER. THAT SHOULD GIVE US A GOOD INDICATION ON FUTURE FED HIKES OR NOT. EUROPEAN STOCKS ALSO CAUTIOUS. IF YOU LOOK AT BANKS, THE STRONGEST PERFORMERS AMONG EUROPEAN STOCKS WITH A HIGHER FALL IN YOUR RECORD FIRST QUARTER FOR THE FRENCH FIRMS INVESTMENT BANK. IF YOU LOOK AT THE INFLATION
FIGURES OUT OF THE U.S., IT IS TOP OF MIND FOR INVESTORS. THE REPORT EXPECTED TO SHOW LENGTH CPI RISING 5.4% FOR THE YEAR, STILL ABOVE THAT 2% LEVEL TARGET BY THE FED.
PRESIDENT BIDEN AND CONGRESSIONAL REPUBLICANS SAY THEY WILL HOLD FURTHER TALKS ON RAISING THE DEBT LIMIT AS THEY ATTEMPT TO AVERT A FIRST-EVER U.S. DEFAULT. >> EVERYBODY IN THIS MEETING REITERATED THE POSITIONS THEY ARE AT. I DID NOT SEE ANY NEW MOVEMENT. PRESIDENT SAID THE STAFF WILL GET BACK TOGETHER AND WE WILL GET BACK TOGETHER ON FRIDAY. WE EXPLICITLY ASKED SPEAKER
MCCARTHY, WOULD HE TAKE DEFAULT OFF THE TABLE? HE REFUSED. >> THE UNITED STATES IS NOT GOING TO DEFAULT. IT NEVER HAS AND NEVER WILL. FRANCINE: FOR MORE, LET'S BRING IN BLOOMBERG'S ROS MATHIESON. NO TANGIBLE PROGRESS RIGHT NOW, BUT THEY WILL CONTINUE TALKS. WHAT DO YOU MAKE OF IT? >> THEY MET FOR JUST ONE HOUR YESTERDAY AND THAT WAS THEIR FIRST MEETING SINCE FEBRUARY, SO NO ONE WAS EXPECTING THEM TO COME OUT AND SAY WE HAVE STRUCK A DEAL.
IT IS NOT IN THEIR INTEREST TO ANNOUNCE A DEAL YET WHEN WE ARE STILL SOME WAY FROM JUNE 1, BUT WHAT WE ARE SEEING IS AN ABILITY TO GET IN A ROOM TOGETHER AND HAVE A CONVERSATION AND THE DESIRE TO KEEP TALKING, AND WE LOOK FOR FURTHER SIGNS OF MEETINGS INTO NEXT WEEK. THE QUESTION IS, DOES THAT FORCE THE RESIDENTS TO CANCEL HIS TRAVEL TO ASIA TO THE G7 SUMMIT IN THE MIDDLE OF NEXT WEEK AND ONTO AUSTRALIA AND PAPA NEW GUINEA IF THIS IS REACHING A CRESCENDO? DOES HE NEED TO STAY HOME AND DEAL WITH THAT? THAT IS ONE THING WE NEED TO LOOK FOR, ANY INDICATIONS HE IS CHANGING HIS TRAVEL PLANS. AT LEAST WE KNOW THAT THEY ARE WILLING TO TALK. THEY ARE TRYING TO FIND SOME WAY TO COMPROMISE WITHOUT GIVING IN TOO MUCH ON CONTENTIOUS ISSUES, WHICH IS THE SPENDING QUESTION. REPUBLICANS WANT TO CUT SPENDING SIGNIFICANTLY, DEMOCRATS DO NOT WANT TO. CAN THEY ATTACH OTHER THINGS TO THE DEAL TO MAKE IT AMENABLE AND GET SOME KIND OF AGREEMENT THROUGH CONGRESS? SUPPORT FOR FOSSIL FUEL'S, FOR EXAMPLE, OR A GREATER CALLBACK FROM THE PANDEMIC AID. SO THOSE ARE THE SIGNALS THAT
WE ARE WATCHING FOR THE NEXT 48 HOURS. FRANCINE: THE MARKET IS JUST LOOKING AT THESE INTENSIFIED NEGOTIATIONS AND PUTTING SOME OF THE WORST TO ONE SIDE. WHAT IS THE INCENTIVE OF REACHING A DEAL BEFORE JUNE 1? ROSALIND: THERE ARE INCENTIVES TO DO SO AND CANNOT DO SO BECAUSE THE BIGGEST INCENTIVE IS THE DAMAGE IT COULD DO TO THE U.S. ECONOMY. HUNDREDS OF WORKERS WOULD LOSE THEIR JOBS BECAUSE OF THIS AND REPUBLICANS GOING INTO EVER ELECTION -- AN ELECTION IN 2020 FOR HAVING CAUSED THIS, SO THAT IS AN INCENTIVE TO REACH A DEAL AS SOON AS JUNE 1, BUT THERE ARE ALSO INCENTIVES TO KEEP IT GOING UNTIL THE LAST MINUTE. WE ARE IN DEBT ELECTORAL CYCLE AND REPUBLICANS HIM TO BE HOLDING THE LINE ON SPENDING. DEMOCRATS MAKING SURE THEY ARE NOT BEING SEEN GIVING INTO REPUBLICAN DEMANDS, SO THEY WANT TO STAY BASE SHOWING THAT THE OTHER SIDE IS GIVING GROUND, SO THAT MEANS WE WILL PROBABLY CONTINUE UNTIL THE LAST MINUTE TO GET A DEAL OVER THE NEXT COUPLE OF WEEKS.
EVEN THE U.S. PRESIDENT SAID IN AN ERA NOW WHERE WE CAN EXPECT NEGOTIATIONS TO CONTINUE, BUT IN THE END, YOU WOULD NOT WANT TO BE RESPONSIBLE FOR WHAT WOULD HAPPEN IF YOU DRIVE THE U.S. ECONOMY INTO A DEFAULT. FRANCINE: THANK YOU. ROSALIND MATHIESON.
MARKETS WILL ALSO BE WATCHING FOR U.S. CPI DATA LATER TODAY, SO LET'S BRING IN PAUL DOBSON. RUN ME THROUGH THE THINKING. IT IS ALL ABOUT CPI. COULD WE BE GETTING TO A POINT WHERE SOME OF THE CREDIT DATA OUT OF THE FED IS MORE IMPORTANT TO TRY TO FIGURE OUT THE CREDIT CRUNCH AND WHAT THAT MEANS FOR THE CONSUMER THAN THE ACTUAL CPI DATA? PAUL: IT IS A GOOD QUESTION, ISN'T IT? PEOPLE ARE ALREADY STARTING TO LOOK AHEAD TO HOW BIG A SLOWDOWN WE WILL HAVE AND WHAT IS THE CENTRAL BANK GOING TO HAVE TO DO ABOUT THAT LATER IN THE YEAR AND HOW DEEP THE CUTS WILL BE. THAT IS WHERE THE PRICING
GYRATIONS ARE GOING ON. PEOPLE MAY BE LOSING SIGHT OF THE FACT THAT THE FED STILL HAS NOT GOT INFLATION UNDER CONTROL YET AND WILL NEED TO KEEP THOSE INTEREST RATES HIGH IF IT IS GOING TO BE ABLE TO HELP THEM GET TO GRIPS WITH THAT. SOME OF THE BIGGEST BANKS ON THE STREET HAVE BEEN MAPPING OUT SCENARIOS FOR WHAT THE MARKET CAN DO TODAY. WE ARE LOOKING AT JP MORGAN'S FORECAST, FOR EXAMPLE, BASICALLY UNDER 8% GOOD, OVER 8%, BAD, IS THEIR CALL. SOME PRETTY HEFTY AMOUNTS OF VOLATILITY AND SHARP NEWS IN THE EQUITY MARKETS, BUT I THINK BECAUSE INVESTORS ARE TAKING THEIR EYE OFF THE BALL A BIT IN TERMS OF THE CPI NUMBERS. FRANCINE: IF YOU LOOK AT INDICES, THE U.S.
SEEMED TO BE RANGING OR TRADING RANGE BOUND IN A NARROW RANGE SINCE THEY ARE JUST TRYING TO FIGURE OUT INFLATION VERSUS RECESSION OUTLOOK. PAUL: YEAH, SO THAT IS THE LONGER-TERM THING. WHAT IS THE NEW CATALYST WE WILL GET? WE ARE STILL SHAKEN FROM THE TURMOIL WE HAVE SEEN IN THE BANKING SECTOR. THOSE REGIONAL BANKS. HAS NOT GONE AWAY? QUITE EXTRAORDINARILY, THE NEWS THAT PACWEST WAS CUTTING ITS DIVIDEND BY 96% AS A GOOD NEWS SIGN. THEY ARE GETTING TO GRIPS WITH THEIR CAPITAL REQUIREMENTS, SHORING UP RESERVES. BUT IF ALL OF THE BANKS WILL NEED TO CUT THEIR DIVIDENDS BY THAT MUCH, THAT CANNOT BE GOOD NEWS FOR THE BANKING SYSTEM OVERALL AND IT CANNOT BE GOOD NEWS FOR THE LIKELIHOOD OF THE BANKS EXTENDING MORE CREDIT TO CUSTOMERS IN THE SECOND HALF OF THE YEAR.
LOOKING AT HOW FAST THAT SLOWDOWN WILL COME, WHETHER INFLATION CAN COME DOWN AT THE SAME TIME AND GIVE THE FED ROOM FOR CUTS, OTHERWISE IF WE MOVE INTO THAT STAGFLATIONARY ENVIRONMENT, WHICH NO ONE WANTS TO SEE BECAUSE THAT CREATES GREATER TURBULENCE ACROSS ASSET CLASSES. FRANCINE: IN TERMS OF THE MARKET MOVES, WE TALKED EXTENSIVELY ABOUT WHAT HAPPENS TO THE PRICE OF OIL AND T-BILLS. IS THERE ANOTHER PART OF THE MARKET THAT YOU THINK IS PARTICULARLY INTERESTING? PAUL: YEAH, AND THAT IS ALL TO DO WITH THE DEBT CEILING AS ROS WAS DISCUSSING EARLIER, WHETHER A COMPROMISE CAN BE REACHED. OUR DISCUSSING THOSE SHORT-TERM
BILLS FOR FOUR WEEKS AND OUT TO THE MIDDLE OF AUGUST TRADING WITH THIS BIG PREMIUM IN TERMS OF YIELDS BECAUSE PEOPLE CANNOT HOLD THEM IN INTEREST IS -- IN INSTANCES WHERE THEY ARE WORRIED ABOUT DEFAULT, SO THAT IS CREATING A SKEW IN THE MARKETS, AND UNEVEN CURVE WHEN PEOPLE TRY TO PRICE IN THOSE DEFAULT RISKS AND PROBABILITIES. WITH YIELDS ABOVE 4.5% IN EARLY JULY, THE MARKET HAS NEVER SEEN THOSE INTEREST RATES ON THOSE KINDS OF BILLS AS HIGH. IT IS PARTLY BECAUSE OF THE FUNCTION THEY HAVE NOT BEEN AROUND THAT LONG AND THE FED RATES HAVE BEEN LOW FOR SO LONG, BUT THERE IS ALSO EMBEDDED RISK. THAT TELLS YOU AT THE MOMENT IT IS NOT THE SORT OF THING MOVING MAJOR ASSET CLASSES IN A BIG WAY, BUT IT IS RISING UP THE LIST OF WORRIES FOR GLOBAL INVESTORS AND SOMETHING THEY WILL HAVE TO SPEND MONEY, TIME, AND EFFORT EVALUATING. FRANCINE: THANK YOU SO MUCH. BLOOMBERG'S EXECUTIVE EDITOR FOR MARKETS, PAUL DOBSON.
INFLATION DAY IN THE U.S., MARKETS KEEPING A CLOSE EYE FOR CLUES INTO THE FED'S NEXT DECISION. IN THE U.K., WE ALSO GET A BOE DECISION TOMORROW. WE WILL DISCUSS BOTH NEXT. THIS IS BLOOMBERG.
FRANCINE: ECONOMICS, FINANCE, POLITICS. THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION." I AM FRANCINE LACQUA IN PARIS. ONTO THE MARKETS. BILLIONAIRE INVESTOR JORGEN MILLER SAYS HE THINKS THE U.S.
ECONOMY IS TEETERING ON A RECESSION. AMID THOSE ECONOMIC CONCERNS, STRATEGISTS ARE INCREASINGLY CALLING FOR JOB MARKET DECLINES. MORGAN STANLEY, GOLDMAN SACHS, AND THE BANK OF AMERICA ALL SEE THE S&P 500 ENDING THE YEAR AT FOUR THOUSAND OR BELOW. JOINING US NOW IS JOSIE DENT, THE MANAGING ECONOMIST AT THE U.K. CENTRE FOR ECONOMICS & BUSINESS RESEARCH.
THERE IS THIS DICHOTOMY OF WHAT WE CANNOT FIGURE OUT, THAT A LOT OF PREDICTIONS ON THE ECONOMY IS WITH RECESSION, BUT MARKETS ARE HOLDING STRONG. WHO IS RIGHT? JOSIE: IT IS A TOUGH ONE TO MAKE BECAUSE THERE ARE SO MANY FORCES AT PLAY AT THE MOMENT. IN THE U.S., WE HAVE INFLATION COMING OUT TODAY, AND THAT IS EXPECTED TO STOP DECLINING TO THIS DECELERATION FOR THE CONSECUTIVE MONTHS, BUT IN TODAY'S, -- TODAY'S DATA, WE ARE GETTING FEARS THAT INFLATION WILL START DECLINING. BUT THEN WE HAVE GOT THE GDP GROWTH, AND THAT WAS REALLY DISAPPOINTING IN THE LATEST DATA AS WELL, SO THAT IS ANOTHER NEGATIVE SIGN FOR 1.1% ANNUALIZED RATES. WE ARE FORECASTING 1.9% GROWTH FOR THE YEAR IN 2023, SO PERHAPS WE COULD AVOID A RECESSION, BUT -- IS NOT OUTSIDE THE REALM OF POSSIBILITY.
OVERALL WE THINK IT WILL BE NOT A TERRIBLE YEAR, BUT A LOT OF THIS DEPENDS ON WHAT HAPPENS WITH BANKS AND WITH FINANCIAL SECTOR TURMOIL, WHICH IS REALLY WORRYING THE FED, AND THIS IS A BIG RISK FACTOR. WE HAVE WEAK GDP GROWTH, POSSIBLE RISING INFLATION, FLATTENING INFLATION IS WHAT IS EXPECTED, SO THERE ARE SO MANY FORCES AT PLAY. WHETHER OR NOT WE SEE A RECESSION THIS YEAR IS THE BIG QUESTION. FRANCINE:
I HAVE TO SAY I HAVE SEEN SO MANY CHARTS ABOUT CREDIT, THE LABOR MARKET, THAT MY EYES ARE A LITTLE SQUARE TO THE CHARTS I LOOK AT. HOW DOES THE FED LOOK AT THE CREDIT CRUNCH? SO FAR THEY HAVE BEEN ABLE TO KEEP THE BANKING CRISIS TO ONE SIDE WHILE DEALING WITH INFLATION. IS THERE A MOMENT WHERE INTEREST RATES COULD DEAL WITH THE BANKING CRISIS AND THE CREDIT CRUNCH? JOSIE: IT IS A REALLY TOUGH QUESTION. THE LATEST MEETING'S NOTES AND STATEMENTS WERE INTERESTING BECAUSE THE FED AT FIRST WOULD SAY WE WILL DEAL WITH THIS CREDIT CRUNCH AND FOCUS ON INFLATION, BUT NOW THEY ARE SAYING, CREDIT TIGHTENING AND BANKS WILLING TO LEND AS HAVING AN EFFECT ON INTEREST RATES ANYWAY.
BANKS ARE NERVOUS AND THEY HAVE SEEN THE DIFFICULTIES IN THE SECTOR AT THE MOMENT. AND NOW THEY ARE LESS WILLING TO LEND, WITH A CREDIT TIGHTENING. IN A WAY, THAT IS ARTIFICIALLY EQUIVALENT TO INCREASING RATES. NOW THE FED IS MUCH MORE HESITANT BECAUSE IT IS SEEING THE EFFECTS OF ITS HIGHER INTEREST RATES ON THE BANKING SECTOR, BUT ALSO BECAUSE IT DOES NOT WANT TO OVER TIGHTEN AND TIP US FURTHER INTO A POSSIBLE RECESSION. SO IT IS QUITE TRICKY. WE ARE NOT EXPECTING ANY
FURTHER RATE RISES FROM THE FED, PARTLY BECAUSE OF THIS, BECAUSE THE CREDIT CONDITIONS ARE TIGHTENING , SO IN A WAY, THAT SHOULD HAVE A SIMILAR IMPACT TO INCREASING INTEREST RATES ANYWAY. FRANCINE: ONTO THE BANK OF ENGLAND. INFLATION AT SEVEN MONTHS CONSECUTIVELY ABOVE 10%. WHAT DOES THE BOE DO TOMORROW? JOSIE: WE ARE EXPECTING THE BANK OF ENGLAND FOLLOW THE FED AND THE ECB BY RAISING BY 25 BASIS POINTS TO 4.5%. OF COURSE, INFLATION IN THE U.K. IS STILL ABOVE 10% THE TEST TO TAKE ACTION. BUT COMPARING THE U.K.
TO THE U.S., WILL THEY STOP NOW? THE ANSWER IS POSSIBLY YES. FOR SIMILAR REASONS, REALLY. WE ARE EXPECTING INFLATION TO CALM DOWN. THAT IS EXTREMELY LIKELY TO THE SIMILAR REASONS WHY THE U.S. HAS SEEN A DECLINE OF THE WHOLESALE ENERGY PRICES FALLING, PASSING THROUGH TO SLOWER RATES CONSUMERS IN THE U.K., SO IN NEXT MONTH'S INFLATION DATA WE WILL START TO SEE IT START TO DECELERATE.
THE BANK OF ENGLAND WILL SAY THAT INFLATION IS COMING DOUBT -- DOWN ANYWAY, AND THERE WILL BE CONCERNED THAT IF THEY KEEP ON RAISING RATES BY TOO MUCH, THE DAMAGE TO THE U.K. ECONOMY WILL HAVE THAT ON GROWTH RATES. IT IS A BALANCING ACT AT THE MOMENT. FRANCINE: ARE WE NOW IN A SECOND ROUND EFFECT OF INFLATION THAT WILL BE MUCH HARDER? IT IS STICKY, BUT IT SEEMS THEY MIGHT HAVE ALSO LOST CONTROL OF THE NARRATIVE IN THE U.K.
WHAT DOES THAT MEAN FOR A GROWTH PLAN FOR GREAT BRITAIN GOING FORWARD? JOSIE: SO IF INFLATION STARTS RISING AGAIN, CORE INFLATION IS THE KEY THING TO LOOK AT BECAUSE IF THAT IS RISING EVEN THOUGH ENERGY IS BRINGING THE TOPLINE RATE OF INFLATION DOWN, THAT IS A BIG CONCERN, BECAUSE THAT IS SHOWING INFLATION IS STICKY. THE LABOR MARKET IN THE U.S. AND U.K. STILL REMAIN -- THERE IS CONCERN ABOUT WORKERS BEING ABLE TO BARTER FOR HIGHER WAGES, AND INFLATION REMAINING HIGH. EVEN IF IT REMAINS AT 5% OR 6%, THAT IS STILL MUCH HIGHER THAN THE BANK OF ENGLAND'S TARGET, AND THEY WILL HAVE TO DO SOMETHING ABOUT THAT EVEN IF THEY WANT TO STOP RATES NOW TO AVOID A RECESSION IN THE BANKING SECTOR. IF THEY DO NOT SHOW ANY CONTROL OVER INFLATION BECAUSE THEY STOPPED RAISING RATES, IT RETURNS TO ACCELERATION, AND THAT WILL BE A BIG CONCERN. THE BANK WILL HAVE TO WORRY IF
THEY START TO SEE INFLATION TICK UP AGAIN. FRANCINE: THANK YOU SO MUCH FOR ALL THE INSIGHT. JOSIE ANDERSON, MANAGING ECONOMIST AT THE CENTRE FOR ECONOMICS AND BUSINESS RESEARCH. COMING UP, FRANCE TIMMERMANS TALKS EXCLUSIVELY ON THE CLIMATE CRISIS AND HAS A PLEDGE FOR FINANCE AND INVESTORS. WE WILL HEAR THAT INTERVIEW NEXT AND THIS IS BLOOMBERG. >> THIS IS THE CRISIS THAT TOPS ALL OF THEM BECAUSE IT IS AN EXISTENTIAL CRISIS. WITH AI, YOU CAN TAKE MORE TIME.
WITH LAWS, YOU CAN TAKE DIFFERENT ECONOMIC VIEWS. WITH THE ENERGY TRANSITION, YOU CAN DO THINGS DIFFERENTLY, BUT THE CLIMATE CRISIS DOES NOT GIVE US ANY TIME. WE HAVE TO DESPERATELY TRY TO REACH A SITUATION WHERE WE DO NOT GO BEYOND 1.5 DEGREES CELSIUS, BECAUSE OTHERWISE WE REACH A TIPPING POINT AND THE SITUATION WILL GET COMPLETELY OUT OF CONTROL.
>> I CAN FEEL YOUR FRUSTRATION. WHY ARE WE SO SLOW TO THIS? >> IT IS SUCH A FUNDAMENTAL TRANSITION AT A TIME WITH ALREADY SO MANY UNCERTAINTIES THAT THE HUMAN REACTION IS COMPLETELY UNDERSTANDABLE, TO BE MORE CAREFUL, BUT WE DO NOT HAVE THE LUXURY TO BE MORE CAREFUL. YOU HAVE TO BE BOLD, STEP FORWARD, AND MOVE NOW. FRANCINE: WHAT DOES THAT LOOK LIKE? IS IT MORE FINANCING, MORE COMPANIES, MORE POLITICIANS BEING ENTICING? >> IT IS ALL OF THE ABOVE. IT IS A CHALLENGE NOBODY CAN AVOID EMBRACING. WE NEED TO MAKE SURE
INVESTMENTS GET GOING MUCH FASTER. IT HAS TO BE PUBLIC INVESTMENT BUT WE ARE TALKING ABOUT TRILLIONS, SO IT ALSO HAS TO BE MASSIVE I'VE IT INVESTMENT. BUT FOR PRIVATE INVESTMENT TO COME IN, WE NEED TO GIVE ASSURANCES THIS MONEY WILL NOT BE LOST AND THE RISKS ARE MANAGEABLE. THE ENERGY TRANSITION IS THE BEST EXAMPLE. THAT IS GOING SO FAST AND IS A
NO-BRAINER. INVESTIGATING AND RENEWABLE ENERGIES. IS THE CLEVER THING TO DO. . FRANCINE: HOW MUCH MONEY ARE WE GOING TO GET FOR THE TRANSITION? >> WE NEED TRILLIONS A YEAR, AND IT IS A MIND-BOGGLING AMOUNT OF MONEY, BUT AT THE SAME TIME, THESE TRILLIONS WILL START RELEASING PROFITS VERY SOON AFTER THE INVESTMENTS BECAUSE THE ENERGY TRANSITION AND TRANSITION TOWARDS A CIRCULAR ECONOMY, LIMITING OUR REPLY -- OUR INDEPENDENCE -- NEW TECHNOLOGIES ARE COMING TO THE TABLE EVERY DAY. IT IS SUCH AN EXCITING TIME. IT IS A SCARY TIME BUT ALSO AN EXCITING TIME WITH THESE NEW TECHNOLOGIES. FRANCINE:
THAT WAS FRANS TIMMERMANS, THE EUROPEAN COMMISSION EXECUTIVE VICE PRESIDENT, TALKING EXCLUSIVELY ABOUT WHAT IS NEEDED ON THE CLIMATE CRISIS AT BLOOMBERG'S FUTURE OF FINANCE CONFERENCE IN PARIS. LET'S GET STRAIGHT TO THE BLOOMBERG FIRST WORD NEWS. A NEW YORK JURY HAS FOUND DONALD TRUMP LIABLE FOR SEXUALLY ASSAULTING AND DEFAMING WRITER E. JEAN CARROLL. THE COURT ORDERED THE FORMER PRESIDENT TO PAY $5 MILLION IN DAMAGES AFTER SHE ACCUSED HIM OF ASSAULTING HER IN THE 1990'S AND DEFAMING HER BY CALLING HER A LIAR WHEN SHE WROTE ABOUT IT. IT'S THE FIRST VERDICT AGAINST
TRUMP IN A STRING OF CASES THAT THREATEN TO ERUPT DURING NEXT YEAR'S PRESIDENTIAL CAMPAIGN. HE CALLED THE VERDICT A "POLITICAL HIT JOB." PAKISTANI OPPOSITION LEADER IMRAN KHAN IS TO APPEAR AT AN ANTI-GRAFT TRIBUNAL LATER TODAY AFTER HIS DRAMATIC ARREST SPARKED VIOLENT CLASHES ACROSS THE COUNTRY. KHAN WAS TAKEN INTO CUSTODY YESTERDAY IN RELATION TO A CASE INVOLVING A LAND DEAL.
KHAN'S PARTY SAYS AT LEAST FOUR PEOPLE WERE KILLED AND 20 INJURED IN FIGHTING WITH SECURITY FORCES. AND THE U.S. HAS ANNOUNCED A $1.2 BILLION PACKAGE TO BOLSTER UKRAINE'S AIR DEFENSES AND AMMUNITION STOCKS. THE AID ALSO INCLUDES SATELLITE IMAGERY SERVICES AND EQUIPMENT TO INTEGRATE WESTERN SYSTEMS. THIS AFTER RUSSIA'S PRESIDENT VLADIMIR PUTIN VOWED TO PRESS ON AND WIN THE WAR DURING YESTERDAY'S VICTORY DAY PARADE IN MOSCOW.
WE WILL HAVE PLENTY MORE OF OUR TOP STORIES. WE HAVE CPI TODAY. ALSO COMING UP, A BIT OF ADVICE FROM A FORMER CENTRAL BANKER TO THE CURRENT ONE. HE HAS SOME WORDS OF WISDOM FOR JAY POWELL. THAT IS NEXT AND THIS IS BLOOMBERG. FRANCINE: EUROPEAN STOCKS LOWER AS INVESTORS AWAIT CPI DATA THAT MAY AFFECT FED FUTURE POLICY DECISIONS. PRESIDENT BIDEN AND REPUBLICANS PLEDGED TO CONTINUE TALKS OF THE DEBT LIMIT. PLUS, SOURCES SAY ITALY HAS
SIGNALED IT WILL LEAVE CHINA'S BELT AND WROTE INVESTMENT INITIATIVE BY THE END OF THE YEAR. THE FOCUS IS ON CENTRAL BANKS. TREAD CAREFULLY. THAT IS THE MESSAGE FOR THE BANK OF ENGLAND FROM WADHWANI. HE IS CURRENTLY A MEMBER OF CHANCELLOR JEREMY HUNT'S ECONOMIC ADVISORY COUNCIL. BLOOMBERG ASKED HIM ON WHAT TO EXPECT FROM THE FED AND THE POSSIBILITY OF A U.S. RECESSION. >> I THINK THE BEST WAY TO INTERPRET THE RIGHT -- RATE CUTS PRICED IN IS PRICING IN SOME SORT OF EVENT, WHICH MAY BE A 20% OR 30% CHANCE, WHICH THEN REQUIRES THE FED TO MOVE AGGRESSIVELY BY CUTTING BY TWO OR THREE BASIS POINTS -- 200 OR 300 BASIS POINTS, NOT JUST THE RATE CUTS THAT ARE PRICED IN.
ONE ALWAYS HAS TO RECOGNIZE THE LIMITATIONS AND THE POSSIBILITY OF THERE BEING SOME UNKNOWN ACCIDENT IN THE U.S. FINANCIAL SECTOR, WHICH THEN REQUIRES THE FED TO MOVE AGGRESSIVELY, OR INDEED, IF THE DEBT NEGOTIATIONS GO SO BADLY, THAT YOU GET MEANINGFUL FISCAL TIGHTENING, WHICH THEN REQUIRES THE FED TO RESPOND BY CUTTING RATES MEANINGFULLY. SO WE SHOULD NOT DISCOUNT THIS POSSIBILITY. ALSO A RECESSION CAN COME VERY QUICKLY. THINK OF IT AS A WILE E. COYOTE MOVEMENT -- MOMENT.
YOU ARE FACTORING IN A RECESSION AND THE FED DOES RESPOND. SO I WOULD NOT COMPLETELY DISMISS MARKET PRICING AT THIS POINT IF YOU THINK ABOUT IT AS A VIABLE MODEL. THAT IS THE MOST LIKELY SCENARIO WHERE THE FED DOES NOT CUT, AND THEN THIS TALE RISK SCENARIO WHERE THE FED HAS TO CUT A LOT. DANI: A BIMODAL MARKETS, A BLACK-AND-WHITE OUTCOME WHEN IT COMES TO THINGS LIKE THE DEBT CEILING. HAVE YOU HAD TO RETHINK YOUR TRADING STRATEGIES? THEY ARE QUANT IN NATURE. THEY HAVE THESE AUTOMATED
INPUTS, BUT HAVE YOU HAD TO RETHINK THE MODELS? HAVE YOU HAD TO RETHINK THOSE INPUTS IN THIS TYPE OF BIMODAL ENVIRONMENT? >> I THINK ONE ALWAYS HAS TO REFINE ONE'S MODELS OVER TIME. ECONOMICS IS NOT PHYSICS, AND IT IS VERY IMPORTANT TO ENSURE THAT ONE IS RESPONDING TO NEW INFORMATION AND STRUCTURAL CHANGES. FOR EXAMPLE, IN 2020, WE MEANINGFULLY REVAMPED OUR MODELS IN LIGHT OF VARIOUS THINGS GOING ON. VACCINES BECAME RELEVANT, MONEY SUPPLY GROWTH WAS AT VERY HIGH LEVELS, SO WE CLEARLY DID NEED TO LOOK AGAIN AT OUR MODELS. IN THIS CURRENT ENVIRONMENT, WE ARE VERY AWARE THAT THE LACK OF STAGES OF A TIGHTENING CYCLE ARE QUITE TREACHEROUS, AND THEREFORE FOR THAT REASON, WE KEEP RISKS AT LOWER LEVELS THAN YOU NORMAL.
WE HAVE ALWAYS DONE THAT. FRANCINE: THAT WAS SUSHIL WADHWANI ON U.K. CHANCELLOR JEREMY HUNT'S ADVISORY COUNCIL. FORMER U.K. PRIME MINISTER TONY BLAIR HAS ALSO SOME ADVICE FOR LABOR LEADER KEIR STARMER AHEAD OF THE NEXT GENERAL ELECTION. HE SPOKE WITH LIZZY BURDEN. LIZZIE JOINS US NOW. WHAT MESSAGE DID BLAIR GIVE
KEIR STARMER? LIZZY: IT WAS INTERESTING TO GET TONY BLAIR ON BECAUSE HE IS THE MOST ELECTORALLY SUCCESSFUL PRIME MINISTER IN THE U.K. WHO IS STILL ALIVE. AND WE DID JUST HAVE THOSE LOCAL ELECTIONS, AT WHICH THE U.K. LABOUR LEADER KEIR STARMER DID NOT GET THE DOUBLE-DIGIT POLL LEAD MAJORITY THAT HE NEEDED TO GET A LANDSLIDE AT THE NEXT GENERAL ELECTION ALL AT TONY BLAIR IN 1997, SO HIS ADVICE TO STARMER IS THAT YOU ARE DOING WELL, BUT YOU CANNOT AFFORD TO BE COMPLACENT.
HE SAID WE CAN EXPECT A PIPELINE OF MORE DETAILED POLICY ANNOUNCEMENTS BEFORE THAT ANNOUNCEMENT. WE KNOW THAT BLAIR IS ADVISING STARMER AS HE IS GEARING UP FOR GOVERNMENT. THE OTHER THING ON THE INTERVIEW IS THAT ON BREXIT, BECAUSE WE KNOW TONY BLAIR HAS BEEN ANTI-EUROPEAN UNION. WE HAVE DONE THAT NOW, BUT HE SAID FOR THE CITY OF LONDON, THERE IS A RISK OF LOSING ALTITUDE IF THE GOVERNMENT DOES NOT WORK ON EQUIVALENTS AND PAY ALL OF THAT ATTENTION, THE HANGOVER FROM BREXIT. SO I ASKED HIM, WOULD YOU ENLIST MULTI-VERSE IN U.K. CAPITAL? HE DID NOT SAY THAT EITHER WAY, BUT HE DID SAY THE IPO IS SOME WAY OFF, INTERESTING FOR MULTI-VERSE GIVEN THAT YOU COULD MAKE HUNDREDS OF MILLIONS OF POUNDS FROM AN IPO.
>> HE HAS DONE A GOOD JOB OF PULLING THE LABOUR PARTY BACK FROM WHERE IT WAS. WE WERE MEMBER 2019 WAS THE WORST FEET IN THE LABOUR PARTY'S 120 YEAR HISTORY. I THINK HE HAS DONE A GOOD JOB OF LEADING THE LABOUR PARTY, AND OF COURSE YOU CANNOT BE COMPLACENT AT ALL. THE POLLS MAY SHOW HIM IN THE
LEAD, THE LOCAL ELECTION RESULTS ARE REALLY GOOD, BAD FOR THE CONSERVATIVES, BUT YOU CANNOT TAKE THINGS FOR GRANTED. LIZZY: THAT WAS TONY BLAIR ON KEIR STARMER. HE ALSO TALKED GEOPOLITICS. I ASKED HIM ABOUT THE SPECIAL RELATIONSHIPS ACROSS -- IT WAS PRETTY SPECIAL WHEN HE WAS AT NUMBER 10 DOWNING STREET, AND MORE RECENTLY, JOE BIDEN DID NOT COME TO THE U.K. FOR HIS CORONATION AND SPENT MORE TIME IN IRELAND'S THAN THE U.K. WHEN HE WAS HERE FOR THE GOOD
FRIDAY ANNIVERSARY. HE SAID THE U.S.-U.K. RELATIONSHIP NEEDS STRENGTHENING ON A POLITICAL LEVEL, BUT NOT ON AN INSTITUTIONAL LEVEL. ON CHINA, HE SAID WE SHOULD NOT BE DECOUPLING, THAT IT SHOULDN'T BE TREATED LIKE THE SOVIET UNION BECAUSE IT ISN'T, BUT THAT THE U.K. DOES NEED TO STAND UP TO CHINA
WHERE NECESSARY. TAKE A LISTEN. >> CHINA IS A REASONABLE CIVILIZATION. IT'S POPULATION, TECHNOLOGY, AND ECONOMY, IT WILL BE A BIG WORLD POWER. THE QUESTION IS HOW WE LIVE WITH THAT IN CHANGING GEOPOLITICAL 21ST CENTURY. MY VIEW, PEOPLE SHOULD BE STRONG ENOUGH TO DEAL WITH WHATEVER COMES OUT OF CHINA, BUT STAY ENGAGED WITH CHINA, SO I DO NOT AGREE WITH DECOUPLING AND I DO NOT AGREE WITH THE NOTION YOU TREAT CHINA LIKE THE SOVIET UNION BECAUSE IT IS NOT. LIZZY: THE FORMER U.K. PRIME MINISTER, TONY BLAIR.
FRANCINE: THANK YOU SO MUCH. LIZZY BURDEN WITH A GREAT INTERVIEW OF TONY BLAIR. BLOOMBERG HAS ALSO LEARNED ITALY HAS TOLD THE U.S. IT INTENDS TO PULL OUT OF CHINA PAST BELT AND WROTE INITIATIVE BEFORE THE END OF THE YEAR.
THE COUNTRY SIGNED UP TO THE INFRASTRUCTURE PACKED IN 2019, THE ONLY G7 NATION TO DO SO. FOR MORE, LET'S GET TO BLOOMBERG'S BUREAU CHIEF. THIS IS A GREAT BLOOMBERG SCOOP. WHY WOULD ITALY MAKE SUCH A MOVE? >> THERE HAVE BEEN A FEW -- SPEAKER MCCARTHY AND GIORGIA MELONI HAD SOME TALKS.
THE MOST DEVISED WHERE IT COMES SIGNAL THAT THEY WILL EVENTUALLY PULL OUT OF THESE PACKAGES BY THE END OF THE YEAR. ITALY IS THE ONLY G7 COUNTRY AT THIS TIME TO BUY INTO CHINA'S BELT AND WROTE INITIATIVE. IT IS SOMETHING THE U.S. IS LOOKING VERY CLOSELY AT. ALSO WE DID NOT GET MUCH OF
THIS EXCEPT FOR THE EMBARRASSMENT WITH -- OF ITS PEERS. FRANCINE: I THINK WE ARE HAVING A LITTLE BIT OF TECHNICAL DIFFICULTY, NOT 100% HEARING YOU, SO WE HAVE THIS HAPPENING SOMETIMES. WE WILL BE BACK WITH YOU AND IT HAS IMPLICATIONS FOR MORE AND BEYOND. WE WILL GET BACK TO U.S. SOON AS WE CAN. THE OTHER NEWS WE ARE LOOKING AT, SBP PRAISING GAINS AS MUCH AS FIVE POINT 6% AFTER THE CHIEF FINANCIAL OFFICER HAS SOLD SOME OF THE SHARES, SO WE WILL GET MORE ON THAT SHORTLY. THE STOCKS TO WATCH, AND THE CFO HAS SOLVED SOME 3.6 MILLION
SWEDISH KRONA OF SHARES. THEY HELD AROUND 0.9 MILLION SHARES. THERE IS QUITE A LOT GOING ON WITH SVB. NOT KNOW IF WE HAVE THE SHARE PRICE. WE WILL GET THE SHARE PRICE UP
AND SHOW YOU WHAT IS GOING ON. COMING UP, TURKIYE IS HOLDING ITS GENERAL ELECTION THIS SUNDAY. WHAT IS AT STAKE FOR THE BALLOT BOX.
WE ARE LIVE IN ISTANBUL NEXT. THIS IS BLOOMBERG. YOUSEF: AGAINST THE BACKDROP OF A TROUBLED ECONOMY, TURKS WILL EITHER EXTEND PRESIDENT RECEP TAYYIP ERDOGAN'S RULE INTO A THIRD DECADE OR OFFER HIS MAIN CHALLENGER THE CHANCE TO STEER TURKIYE TOWARDS A RESET. THE COUNTRY HAS BEEN IN THE MIDST OF A COST-OF-LIVING CRISIS, AND MANY BLAME THE PRESIDENT'S UNORTHODOX ECONOMIC POLICIES AS INFLATION PEAKED ABOVE 85% LAST YEAR. THE TURKISH CENTRAL BANK STILL CUT INTEREST RATES UNDER ERDOGAN'S ORDERS. THE TURKISH LIRA HAS CRATERED
BY 75% AGAINST THE DOLLAR SINCE THE LAST ELECTION. MANY FOREIGN INVESTORS HAVE LEFT. SIX OPPOSITION PARTIES ARE BANDING BEHIND KEMAL KILICDAROGLU, THE LEFT CENTER CAREER CIVIL SERVANT WHO PROMISES TO BRING A FRESH START THE ECONOMY. MOST OF HIS CAREER, KILICDAROGLU'S PARTY HAS FAILED TO WIN AT THE POLLS, BUT IN 2019, HIS PARTY UNSEATED INCUMBENT MAYORS IN LARGE CITIES INCLUDING IN THE CAPITAL ANKARA AND ISTANBUL. TODAY, THEY ARE NATIONAL FIGURES CAMPAIGNING ON KILICDAROGLU'S BEHALF.
PRESIDENT ERDOGAN, MEANWHILE, WILL LOOK TO THE HEARTLAND ONCE AGAIN WHERE HE IS VIEWED AS THE STRONG LEADER THAT THE COUNTRY NEEDS TO GUIDE THEM OUT OF HARD TIMES. COMPETING PLATFORMS COULD NOT BE MORE DIFFERENT. ON MAY 14, THE VOTERS WILL DECIDE. FRANCINE:
THAT WAS BLOOMBERG'S YOUSEF GAMAL EL-DIN REPORTING ON TURKIYE. WE HAVE PLENTY MORE ON THE ELECTIONS AND THOSE HAVE WIDE-RANGING IMPLICATIONS FOR EUROPE DID -- EUROPE. LET'S GET MORE WITH OUR TURKIYE BUREAU CHIEF. WHAT ARE THE DOMESTIC FOREIGN POLICIES IF THERE IS A CHANGE IN LEADERSHIP AFTER THE ELECTION? >> A LOT DEPENDS ON THE OUTCOME OF SUNDAY'S ELECTIONS. ON THE FOREIGN POLICY FRONT, WE KNOW ERDOGAN HAS PURSUED AN ASSERTIVE AND INCREASINGLY INDEPENDENT FOREIGN POLICY, ESPECIALLY IN THE SECOND HALF OF THESE TWO DECADES IN POWER. SHOULD HE GET REELECTED, WE EXPECT TO SEE MORE OF THE SAME, BUT IN THE CASE OF AN OPPOSITION WIN, WE EXPECT TO SEE A RESET IN TIES ESPECIALLY WITH THE U.S.
AND THE REST OF THE EUROPEAN UNION. IT HAS CLASHED WITH THE EUROPEAN UNION AND THE U.S. OVER THE PAST FEW YEARS ON REGIONAL ISSUES. SO IF THE OPPOSITION GETS REELECTED, WE EXPECT A RESET IN THE RELATIONSHIP WITH NATO AND THE U.S.
AND WE DO EXPECT TURKIYE TO PUT DISTANCE BETWEEN ITSELF AND RUSSIA AND POSSIBLY RETIRE SOME OF THE MORE RECENT RUSSIAN MILITARY HARDWARE THAT IT PURCHASED FROM MOSCOW. FRANCINE: WHAT WOULD BE THE IMPACT OF A CHANGE OF LEADERSHIP ON THE ECONOMY OF TURKEY AND THE INVESTMENT SENTIMENT? ONUR: THERE WILL BE AN ADJUSTMENT TO THEIR POLICY AFTER THE ELECTIONS NO MATTER WHO IS THE WINNER. WHO WINS WILL DETERMINE THE SCOPE AND PACE OF THAT ADJUSTMENT. ACCORDING TO BLOOMBERG ECONOMICS, IT WILL BE A SWIFT ADJUSTMENT ECONOMIC POLICY AND THE IMPLICATIONS WILL BE SIGNIFICANT FOR MARKETS IN THE CASE OF AN OPPOSITION WIN. EXPECT A RETURN OF THE ORTHODOX MONETARY POLICY, AND THAT WOULD BE COUPLED WITH UNTIMELY REGULATIONS THAT THE TURKISH CENTRAL BANK HAS BUILT AROUND ITS MARKETS OVER THE LAST FEW YEARS. IN THE CASE OF AN ERDOGAN WIN,
THEN THOSE CHANGES WILL STILL TAKE PLACE, BUT THE EXACT SHAPE OF IT AND THE SPEED OF IT WILL BE DETERMINED BY WHAT HAPPENS BETWEEN NOW AND AFTER THE ELECTIONS. FRANCINE: THANK YOU SO MUCH. BLOOMBERG'S ONUR ANT AS WE AWAIT THAT ELECTION IN TURKEY. LET'S GET STRAIGHT TO YOUR BLOOMBERG BUSINESS FLASH AND A LOT GOING ON IN U.S. POLITICS. START WITH ELON MUSK SAYING TWITTER HAS NOT SIGNED A DEAL OF ANY KIND WHATSOEVER WITH TUCKER CARLSON. THE OUSTED FOX NEWS HOST POSTED A VIDEO EARLIER SAYING HE IS STARTING A NEW SHOW ON THE SOCIAL NETWORK. HE WAS FIRED BY FOX LAST MONTH
AFTER A LAWSUIT UNCOVERED EVIDENCE HE HAD INSULTED MANAGEMENT, COLLEAGUES, AND GUESTS. MUSK TWEETED THAT CARLSON WOULD BE SUBJECTED TO THE SAME RULES OF ALL CONTENT CREATORS ON THE PLATFORM. BOEING SAYS IS OPTIMISTIC IT WILL SOON RESTART EXPORTS ON ITS 737 MAX JETS TO CHINA. THE CHIEF EXECUTIVE DAVE CALHOUN SAYS AIR TRAVEL IS SURGING AND BEIJING NEEDS MORE PLANES NOW THAT IT HAS ENDED PANDEMIC MEASURES. EARLIER, THE U.S. JET MAKER ANNOUNCED AN ORDER FROM IRELAND'S RYANAIR FOR AS MANY AS 300 OF ITS LARGEST 737 MODELS.
SHARES OF AIRBNB DROPPED SHARPLY IN EXTENDED TRADING AFTER IT GAVE A CAUTIOUS REVENUE FORECAST. THE VACATION HOME RENTAL COMPANY SAYS REVENUE COULD GROW 12-16% IN THE CURRENT QUARTER, ITS SLOWEST PACE OF GROWTH ON RECORD. IT IS WARNING THE NUMBER OF NIGHTS BOOKED WILL LOOK UNFAVORABLE COMPARED WITH A YEAR AGO WHEN THERE WAS A SURGE IN POST-COVID DEMAND. WE WILL HAVE PLENTY MORE ON BUSINESS AND ON MARKETS. PROTEST IN PARIS HAVE NO MATERIAL IMPACT ON THE CITY'S ABILITY TO BE A FINANCIAL CENTER FOR EUROPE, ACCORDING TO ONE ECONOMIC OFFICIAL. HE SPOKE EXCLUSIVELY TO
BLOOMBERG. >> IN THE WORLD OF YESTERDAY, LONDON WAS THE LARGEST FINANCIAL CENTER OF THE EUROPEAN UNION. THIS TIME, IT IS OVER FOREVER, AND EUROPE, THE SINGLE MARKET, HAD TO DIVVY OUT A SORT OF INTEGRATED NETWORK OF CONNECTED FINANCIAL CENTERS. AND PARIS IS ONE OF THOSE. PARIS IS A STRONG FINANCIAL CENTER, BUT IT IS ABOVE ALL, LIKE AMSTERDAM AND MILAN A GATEWAY TO THE SINGLE MARKET.
>> FRANCE IN PARTICULAR HAS BEEN HAVING A LOT OF PROTESTS IN PARIS. DOES THAT TAKE THE SHINE OFF OF THIS? >> I DO NOT THINK IT HAS MATERIAL IMPACT. ALL THE EUROPEAN COUNTRIES HAD TO REFORM THE WELFARE STATE, EDUCATION, PUBLIC SERVICES, AND PENSION, AND HAVE DONE THAT OVER THE PAST YEARS. THROUGH VARIOUS CHANNELS AND IN VARIOUS FORMATS. FRANCE IS A VIBRANT AND
SOMETIMES VOCAL DEMOCRACY WHERE THESE TYPES OF THINGS HAPPEN WHERE THERE IS A FUNDAMENTAL CHANGE IN RESOURCE ALLOCATION, SO I DO NOT THINK IT MATERIALLY CHANGES THE FUNDAMENTAL ASSETS OF PARIS, AMSTERDAM, MILAN, DUBLIN, BECAUSE WHAT REALLY MATTERS IS THE DEPTH OF THE TALENT POOL, THE STRENGTH AND DIVERSITY OF THE ECOSYSTEM, THE FACT THAT YOU HAVE A VERY UNIQUE CONCENTRATION OF LARGE-CAP COMPANIES IN THE SAME LOCATION. THESE ARE ALWAYS FUNDAMENTAL TO ASSETS, THESE FUNDAMENTAL FEATURES TO PARIS, MAKE IT RELEVANT IN RESPECT OF SURFACE NOISE TO REFORMS THAT HAVE HAPPENED EVERYWHERE IN EUROPE. FRANCINE: THAT WAS THE EURO NEXT CHIEF EXECUTIVE OFFICER SPEAKING EXCLUSIVELY TO BLOOMBERG AT THE FUTURE OF FINANCE SUMMIT IN PARIS. COMING UP, WE HAVE MORE ON THE DEBT CEILING. SOME OF WALL STREET'S TRADERS ONE OF UNTHINKABLE CONSEQUENCES FROM A DEFAULT AND WARNED THAT THE DEBT LIMIT MAY NEED TO BE PERMANENTLY REPEALED. WE WILL HAVE MORE ON THAT
SHORTLY AND THIS IS BLOOMBERG. ♪ >> I HAVE SAID ALL ALONG, LET'S DISCUSS WHAT WE NEED TO CUT, WHAT WE NEED TO PROTECT, DO WHATEVER WE CAN DO TO RAISE AND HOW TO LOWER THE DEFICIT TO PUT IT LOWER. WHAT IN THE MEANTIME, -- BUT IN THE MEANTIME, WE NEED TO TAKE THE THREAT OF DEFAULT OFF THE TABLE. FRANCINE: THAT WAS U.S. PRESIDENT BIDEN AFTER MEETING WITH CONGRESSIONAL LEADERS OVER THE U.S. DEBT LIMIT. HOW ARE AMERICANS REACTING TO THE TENSION? LET'S BRING IN KRISTINE AQUINO.
WHEN YOU LOOK AT THE MARKET, THEY SEEM RANGE BOUND PARTLY BECAUSE OF CPI, THEY ARE WAITING FOR THAT, BUT WHAT THE FED'S MESSAGING HAS BEEN SO FAR, WHAT DO THEY FREAK OUT ABOUT THE DEBT CEILING? KRISTINE: AS WE HAVE SEEN IN PREVIOUS EPISODES OF THE DEBT CEILING DRAMA, MARKETS DO NOT FREAK OUT UNTIL IT IS THE ABSOLUTE LAST MOMENT FOR THEM TO GET A CHANCE TO FREAK OUT. WE KNOW THEY ARE NOTORIOUSLY BAD AT PRICING POLITICAL RISK, WHICH THIS IS LARGELY BEING TREATED AS SUCH AT THE MOMENT. BUT WE ARE HEARING FROM PROMINENT MARKET FIGURES LIKE BILL TALKING ABOUT THE ISSUE. AT THE VERY LEAST, WE ARE TALKING ABOUT THE SORT OF TRADES YOU WOULD MAKE IN THIS SORT OF SITUATION. BILL GROSS HIMSELF CLAIMS THAT HE IS NOT PARTICULARLY WORRIED ABOUT THE ISSUE AND BECAUSE IT'S RIDICULOUS. HE SAYS IT COULD GO INTO SHORTER DURATION ASSETS, YOUR TREASURY BILLS, KIND OF GIVING YOU THAT TREASURY ADVANTAGE WITHOUT EXPOSING TO LONGER-TERM RISK.
WE ALSO HAVE WALL STREET BANKS LIKE GOLDMAN SACHS RAISING THE ALARM, WRITING A LETTER TO TREASURY SECRETARY JANET YELLEN EMPHASIZING THE U.S. CANNOT DEFAULT ON ITS DEBT. SO WE ARE HEARING SOUNDINGS OF IT NOW, AND ONCE MARKETS GET THE CRITICAL MASK, ONCE IT AGAINST -- CRITICAL MASS, ONCE IT GETS TO THAT BREAKING POINT, WE WILL SEE ACTION. FRANCINE: HOW MUCH VOLATILITY ARE YOU EXPECTING IN GENERAL THE NEXT COUPLE OF WEEKS? WE HAD SOME DISCOURAGING OR WORRYING FIGURES OUT OF CHINA EARLIER THIS WEEK. WHAT ARE THEY GOING TO FOCUS ON NEXT, IF NOT THE DEBT CEILING? KRISTINE: OF COURSE AS YOU MENTIONED, THE U.S. CPI REPORT TODAY VERY IMPORTANT.
I KNOW THAT TRADERS ARE GOING TO BE LOOKING OUT FOR THE KEY COMPONENTS. WE ARE EXPECTING INCREASES IN THINGS LIKE USED CAR PRICES AND GASOLINE. THOSE WILL BE IMPORTANT INDICATORS ESPECIALLY BECAUSE WE WILL BE HITTING THE U.S. SUMMER DRIVING SEASON, SO THAT
WILL BE A GOOD INDICATOR IN TERMS OF HOW CONSUMERS WILL WHETHER THESE HIGHER PRICES. AND OF COURSE THE HOUSING COMPONENTS AS WELL. INVESTORS ARE KEEPING AN EYE ON WHERE IT GOES FROM HERE IN TERMS OF THE FED'S RESPONSE BECAUSE WE HAVE SEEN STILL WHILE INFLATION AND THE RATE HAS COME DOWN ON THE CORE AND HEADLINE, IT HAS STAYED STICKY AT 5.7%.
THIS AGAIN REALLY DRIVES HOME THE POINT THAT THE FIRST PART OF THE FED'S JOB, THE EASY PART IS DONE. IT IS GETTING THAT CORE INFLATION AND HEADLINE INFLATION BACK TO THE 2% TARGET THAT WILL BE TOUGH. SO FAR WE HAVE NOT SEEN MUCH PROGRESS IN THAT FRONT. FRANCINE: THANK YOU SO MUCH FOR THE INSIGHT. BLOOMBERG MARKETS EDITOR KRISTINE AQUINO.
LOOKING AT STOCKS IN EUROPE, THEY ARE SEEING SOME PRESSURE, EDGING LOWER AHEAD OF THE U.S. CPI DATA. JP MORGAN HOLDS THEIR ANNUAL GLOBAL MARKETS CONFERENCE RIGHT HERE IN PARIS AND TOMORROW, WE WILL SIT DOWN FOR AN EXCLUSIVE INTERVIEW WITH THEIR CHIEF EXECUTIVE OFFICER, JAMIE DIMON. WE WILL TALK BANKS, INFLATION, ABOUT THE DEBT CEILING, AND EVERYTHING IN BETWEEN. THIS IS BLOOMBERG. ♪ >> THE UNITED STATES IS NOT GOING TO DEFAULT.
IT NEVER HAS AND IT NEVER WILL. >> EVEN IT FULLY ULTIMATELY AVOID A CRISIS THERE WILL BE SOME BRINKSMANSHIP AND THAT WILL LEAD TO VOLATILITY. >> IT MATTERS TO FORWARD-LOOKING EXPECTATIONS OF GROWTH IN TERMS OF WHAT IS CUT. >> LET'S DISCUSS WHAT WE NEED TO CUT, WHAT WE NEED TO PROTECT, WHAT NEW REVENUE WE CAN RAISE.
IN THE MEANTIME WE NEED TO TAKE THE THREAT OF DEFAULT OFF THE TABLE. >> THIS IS BLOOMBERG SURVEILLANCE EARLY EDITION WITH ANNA EDWARDS AND KRITI GUPTA. ANNA: STRUGGLING TO AVOID A FIRST EVER U.S. DEFAULT RESIDENT BIDEN AND HOUSE SPEAKER KEVIN MCCARTHY DO NOT RESOLVE THE IMPASSE OVER THE DEBT LIMIT BUT SAY THEY WILL MEET AGAIN ON FRIDAY. A NEW U.S.
INFLATION FIGURE MAY GIVE INSIGHT INTO WHAT THE FED WILL DO WITH INTEREST RATES. THE DATA IS OUT AT 8:30. SHARES OF A FRENCH BANK ARE SEARCHING. -- ARE SURGING. I AM ANNA EDWARDS IN LONDON WITH KRITI GUPTA IN NEW YORK. WE HAVE HAD EARNINGS FROM THE BANKING SECTOR AND THE AUTO SUPPLIERS. THAT IS NOT ENOUGH TO HOLD UP
SENTIMENT WHICH DOES SEEM TO BE INCREASINGLY DAMAGED BY THE DEBT CEILING IN THE U.S.. KRITI: IT DOES. WE HAVE A STALEMATE IN MARKETS. IF WE LOOK AT WHAT FUTURES ARE DUE EIGHT, IT IS A WHOLE LOT OF NOTHING. DOES THAT CHANGE AS WE START TO GET MORE HEADLINES COMING OUT OF WASHINGTON. PRESIDENT BIDEN ED SPEAKER MCCARTHY DID SPEAK YESTERDAY TO NO AVAIL THAT IS HAVING AN IMPACT ON THE TREASURY MARKET. THE TWO YEAR YIELD STARTED TO TAKE HIGHER AND HIGHER.
THAT IS COMPLEX IN AN ARENA WHERE THE FEDERAL RESERVE IS LOOKING TO POTENTIALLY HAVE ITS LAST HIKE. LET'S SEE IF IT STAYS THERE AS WE GET THE DEVELOPMENTS OUT OF WASHINGTON. AS THE YIELD STILL HIGHER THE DOLLAR DOES TOO, ONLY MARGINALLY.
NOT MUCH MORE THAN 1/10 OF 1% MOVE. INTEREST RATE DIFFERENTIALS KICKING IN AS WE HAVE THE ECB RELATIVELY HAWKISH TO THE FEDERAL RESERVE AS WELL AS OTHER EMERGING BANKS. THERE IS A BUILD IT BEAR CASE FOR THE DOLLAR UNLESS YOU ARE WORRIED ABOUT THE DEBT CEILING LIMIT GETTING TRIGGERED IN WHICH CASE THE DOLLAR SEEMS LIKE A GOOD BET. THE BEARS EDIBLES PULLING IN EITHER DIRECTION. CRUDE IS ON RECESSIONARY WATCH. 72 HANDLE ON NYMEX CRUDE. NO RED FLAGS YET BUT WHO KNOWS
WHAT IS TO COME. ANNA: I'VE HAD DIFFERENT VIEWS ON THE DOLLAR AND THE DEBT CEILING. COULD IT BE ANYTHING LIKE A HAVEN IF THE SOURCE IS AROUND THE UNITED STATES? LET'S LOOK AT EUROPE. THE NEGATIVE PICTURE FOR
EUROPEAN STOCKS. STOCKS UNDER PRESSURE ON ALL OF THE MAJOR MARKETS IN EUROPE. THE FTSE DOWN, THE DAX DOWN, AND THE CAC 40 ALL DOWN ABOUT .2%.
WE HAVE HAD SOME STORIES THAT LIFTED SENTIMENT BUT NOT EVERYWHERE. WHERE DISAPPOINTING NUMBERS OUT OF AN ONLINE RETAILER IN THE CLOTHING SPACE. OTHER RETAILERS ARE PICKING UP ON THE NEGATIVE VIBE.
ONE OF THE WORST PERFORMING SECTORS IN EUROPE. CREDIT AGRICOLE UP 5.4%. TRADING UP 42% IN THE FIRST QUARTER.
STANDOUT PERFORMANCE FROM THEM. WE WILL GET FURTHER ANALYSIS FROM THEM PLAYED OR. APPARENTLY THERE WAS NOT MUCH DRINKING GOING ON AROUND THE CEREMONY OF THE KING'S CORONATION BUT YOU MIGHT NOTICE WE HAVE HAD A LOT OF PUBLIC HOLIDAYS IN THE U.K. LATELY AND THEY HAVE ALL DONE WELL ON DRAWING PEOPLE TO THE PUB. TO WHAT IS GOING ON WITH EURO-DOLLAR, 1.0 953.
WE HAD THE BUNDESBANK, NOT KNOWN TO BE ANYTHING ON THE DOVISH SIDE, AND HE WAS SAYING WE MIGHT BE NEARING THE END WHEN IT COMES TO RATE HIKES WHICH TIES IN WITH MARKET THINKING WITH RATE HIKES FROM THE ECB EVEN IF THE FED HAS CAUSED. INTERESTING TO SEE HIP GIVING THAT ANALYSIS. KRITI: IT LOOKS LIKE MARKETS AND THE ECB OFFICIALS ARE ON THE SAME PAGE. THAT IS NOT SOMETHING YOU COULD SAY IS ON THE SAME STATESIDE. THE SPLIT IN WASHINGTON IT WOULD PRESIDENT BIDEN AND CONGRESSIONAL REPUBLICANS VACATE LITTLE PROGRESS TO AVOID A U.S. DEFAULT. THEY DID AGREE TO ANOTHER MEETING FRIDAY AT WHICH AGAIN WILL INCLUDE HOUSE SPEAKER KEVIN MCCARTHY. MCCARTHY SPOKE AFTER THE
MEETING. >> EVERYONE REITERATED THE POSITIONS THEY WERE AT. I DID NOT SEE ANY NEW MOVEMENT. THE PRESIDENT SAID THE STAFF
SHOULD GET BACK TOGETHER. I WAS CLEAR WITH THE PRESIDENT. WE HAVE TWO WEEKS TO GO. WE WILL GET BACK TOGETHER ON FRIDAY. KRITI: BLOOMBERG GOVERNMENT REPORTER
JOINS US FROM WASHINGTON WITH MORE. KEVIN MCCARTHY SAYING THE CLOCK IS TICKING. HOW MUCH PROGRESS COULD BE MADE ON THIS FRIDAY MEETING? JACK: THEY CAN MAKE PROGRESS AND THEY SAID STAFF WILL BE MEETING LAST NIGHT OR TODAY. THERE IS A DISAGREEMENT AS TO WHETHER THEY ARE TALKING ABOUT THE DEBT LIMIT, WHICH SHOWS YOU HOW FAR APART BESIDES OUR. REPUBLICANS SAID WE ARE GOING
TO BEAT FRIDAY. DEMOCRATS SAID YES BUT WE SHOULD BE HAVING THESE CONVERSATIONS ABOUT SPENDING THROUGH THE NORMAL BUDGET PROCESS. WE WILL HAVE THE CONVERSATION ABOUT WHERE WE MIGHT AGREE OR DISAGREE ON SPENDING, NOT NECESSARILY AGREEING THIS IS ABOUT TIME THAT INTO THE DEBT LIMIT. THERE IS STILL A LOT OF WORK TO DO TO PERSUADE PRESIDENT BIDEN THAT HE NEEDS TO GIVE SOME CONCESSIONS AND HE IS NOT GOING TO GET A CLEAN DEBT CEILING INCREASE. THEY CAN TALK ABOUT THE DETAILS OF THE CONGRESSIONAL BUDGET PROCESS BUT THE FUNDAMENTAL FIRST STEP OF AGREEING THEY NEED TO MEET IN THE MIDDLE ON A DEBT CEILING BILL HAS NOT FULLY BEEN REACHED. UNTIL THEY GET THAT AGREEMENT
TO NEGOTIATE THEY ARE IN A TOUGH SPOT. ANNA: HOW DO YOU TIE-IN THE COMMENTS WE HEAR FROM SENIOR REPUBLICANS UNDERLINING THE U.S. HAS NEVER DEFAULTED ON ITS DEBT, AND IN THE WORDS OF SOME, WILL NEVER DEFAULT. HOW DO YOU TIE THAT INTO THE STANDOFF WE ARE SEEING? THE MARKET SEEMS NERVOUS WE COULD GO IN THAT DIRECTION? JACK: YOU GENERALLY HEAR THAT FROM MEMBERS, EVEN AT THE HEIGHT OF THE DEBT LIMIT FIGHT, THAT THERE IS NOT GOING TO BE A DEFAULT, THEY WILL STRIKE A DEAL. THEY DO NOT WANT TO INDUCE PANIC IN THE MARKETS EVEN THOUGH SOME LEVEL OF NERVOUSNESS MIGHT GIVE WASHINGTON THE PRESSURE IT NEEDS TO SINCERELY START NEGOTIATING. THERE WAS A BIT OF A DIFFERENCE BETWEEN THE TONE THAT CAME FROM SENATOR MCCONNELL AND SPEAKER MCCARTHY. SENATOR MCCONNELL SAID WE ARE
NOT GOING TO DEFAULT. MCCARTHY DID NOT SAY WE ARE GOING TO DEFAULT BUT ATTEMPTED TO LAY THE BLAME OF THIS STANDOFF ON THE PRESIDENT AND SAY HE HAS DONE EVERYTHING HE CAN AS HOUSE SPEAKER AND HE IS NOT IN CHARGE OF THE SENATE OR THE PRESIDENCY. YOU'RE GOING TO HEAR LEADERS SAY THERE IS NOT GOING TO BE A DEFAULT BUT THERE'S ALSO SIMULTANEOUSLY A FIGHT TO CAST BLAME IF THERE WERE TO BE A DEFAULT WHERE THERE WERE TO BE SOME PANICKED IN THE MARKETS AS THEY GET CLOSER TO THE DEADLINE. KRITI: A LOT GOING ON IN WASHINGTON FOR SURE.
WE ARE GETTING INFLATION DATA COMING OUT IN THREE HOURS. 8:30 NEW YORK TIME. WHAT IS THAT THEY COULD GET WASHINGTON AROUND THE INFLATIONARY STORY AS WASHINGTON STARTS -- AS WALL STREET'S STARTS THINKING ABOUT THE RECESSIONARY STORY. JACK: WASHINGTON CAN ONLY ACCOMPLISH SO MUCH ON A DIVIDED GOVERNMENT. A LOT OF THE CONVERSATION IS THROUGH THE LENS OF THE DEBT LIMIT FIGHT AND GOVERNMENT SPENDING AND WHAT THEY CAN DO WITH THE CONGRESSIONAL BUDGET PROCESS, EVEN THOUGH THAT IS A SMALL PART OF FEDERAL SPENDING OUTSIDE SOCIAL SECURITY AND MEDICARE. THEY ARE NOT TALKING ABOUT MAJOR LEGISLATIVE PUSHES IN THE VEIN OF WHAT DEMOCRATS TRIED TO DO ON THE SUPPLY SIDE WITH THE CHIPS BILL. IT HAS FUNNELED ITS WAY INTO A
FIGHT OVER HOW MUCH TO REDUCE DISCRETIONARY FEDERAL SPENDING, WHICH MAY NOT BE THE ABSOLUTE CRUX OF THE INFLATION ISSUE, BUT CERTAINLY TIES INTO IT. THERE ARE LIMITED OPPORTUNITIES FOR LAWMAKERS TO RESPOND AND ENGAGE TO THE NUMBERS THAT COME OUT AND IT HAS TURNED INTO A POLITICAL FIGHT THAT FULL'S INTO THIS DEBT LIMIT FIGHT AND GOVERNMENT SPENDING. ANNA: THANKS SO MUCH. JACK FITZPATRICK UP EARLY FROM BLOOMBERG GOVERNMENT TO TAKE US THROUGH THE DEBT CEILING. BACK TO THE U.K. STORY. WAGES ARE RISING FAST AND FINALLY CATCHING UP TO INFLATION.
PAY ROSE 10% IN THE PAST YEAR. U.K. ECONOMICS REPORTER LUCY WHITE JOINS US WITH ANALYSIS. THIS IS SPECIFICALLY AROUND THOSE WHO ARE CHANGING JOBS. WHAT DOES THIS MEAN FOR THE BANK OF ENGLAND AS IT ATTEMPTS TO GET INFLATION UNDER CONTROL? LUCY: IT IS A PRETTY HUGE NUMBER , MUCH BIGGER THAN THE 6.3% RISE
IN MEDIAN PAY WE HAVE SEEN ACROSS THE WHOLE ECONOMY AND IT SUGGESTS FOR THOSE WHO ARE TAKING NEW JOBS MANY ARE SEEING WAGE RISES THAT ARE IN LINE WITH INFLATION. MANY PERHAPS SEEING WAGE RISES ABOVE INFLATION. AS THE BANK OF ENGLAND, AS WE GO INTO THE NEXT POLICY MEETING TOMORROW, AS THE BANK OF ENGLAND TRIES TO GET INFLATION UNDER CONTROL WITH THE STRING OF RATE HIKES, IT PERHAPS MAKES THE CASE FOR MORE RATE HIKES. KRITI: LET'S CONNECT THE ECONOMICS WITH THE POLITICS. WHAT DOES THIS TRANSLATE TO WHEN IT COMES TO THE CONSERVATIVE LEVELING UP PLAN? LUCY: SOME OF THE REGIONS WHERE THE PAY IS HIGHEST ARE THE BIG CITIES.
LONDON, MANCHESTER, CAMBRIDGE, REAL BIOTECH HOTSPOT. THERE IS A FAIR BIT OF REBALANCING TO BE DONE IF YOU WANT TO SEE REAL PAY GROWTH OUTSIDE OF THOSE REGIONS. THERE ARE EARLY SIGNS THAT IS HAPPENING IN AREAS SUCH AS BLACKPOOL, BIRKENHEAD, SOME OF THESE LESSER-KNOWN TOWNS THAT HAVE NOT SEEN AS MUCH TENSION OVER LAST FEW YEARS THAT ARE SEEING PAY RISE AT SOME OF THE FASTEST PACES. PART OF IT IS A FACTOR OF THE SHORTAGES WE HAVE BEEN SEEING IN THE ECONOMY IN SECTORS SUCH AS EDUCATION, MEDICINE, SOCIAL CARE , AND IT IS DRIVING PAY IN IN THESE AREAS.
AS JAMES READ POINTED OUT TO ME, IF WE WANT TO FUTURE PROOF THE ECONOMY WE NEED TO BE INVESTING IN THE TECH JOBS, TECH EDUCATION AND SOME OF THE MORE DEPRIVED AREAS OF THE U.K. THAT ARE GOING TO PUSH US FORWARD. ANNA: LUCY, THANKS VERY MUCH. LUCY WHITE WITH THE DETAILS OF THE BLOOMBERG U.K. JOBS REPORT. BACK TO THE CORPORATE EARNINGS STORIES AND CREDIT AGRICOLE'S INVESTMENT BANK POSTED -- BEATING LAST YEAR'S RIVALS. IT POWER TO SEARCH IT REVENUE. I SPOKE WITH THE DEPUTY CEO EARLIER.
JEROME: CAPTURE A LOT OF CUSTOMER OPPORTUNITIES. WE HAVE NOT BEEN TAKING ADDITIONAL RISK. THE VALUE OF RISK HAS BEEN DECREASING COMPARED TO THE PREVIOUS QUARTER. DEFINITELY OUR TEAMS ARE ABLE TO SEIZE OPPORTUNITIES AND TO BE RELEVANT IN THEIR COMMERCIAL PROPOSAL THEY ARE ABLE TO MAKE TO THE CLIENTS. DEFINITELY THIS PROVES WE ARE ABLE TO BE HERE FOR OUR CUSTOMER ED TO PROPOSE THEIR RELATIVE SOLUTION. ANNA: JOINING US IS BLOOMBERG FINANCE
REPORTER. WHAT DROVE THIS STRONG PERFORMANCE AT CREDIT AGRICOLE AND WE WERE TRYING TO GET THERE IN ARE QUESTIONING WHETHER THIS IS SUSTAINABLE? >> THE BANK BENEFITED FROM A RECOVERY IN PRIMARY DEBT MARKETS EARLY IN THE CORNER AND THEN IN THE VOLATILITY AROUND UNCERTAINTY AROUND THE TRAJECTORY OF INTEREST RATES THROUGHOUT THE QUARTER. CLIENTS NEED TO HEDGE THAT RISK AND TURN TO CREDIT AGRICOLE FOR THAT. IT IS GOOD FOR INVESTORS.
IT IS NOT GOING TO BE SUSTAINABLE. EXECUTIVES HAS SAID THEY DO NOT EXPECT THIS TO BE REPEATED IN THE SECOND QUARTER BECAUSE VOLATILITY HAS EASED AND CLIENTS NEED FOR HEDGING HAVE DECREASED. THEY DID SAY THE PERFORMANCE OF THE FIXED INCOME TRADING UNITS THEY EXPECT TO BE QUITE GOOD IN LINE WITH THEIR BUDGETS AND PROVISIONS FOR THE YEAR. KRITI: NET INCOME MORE THAN DOUBLING FROM A YEAR AGO. IS THIS A FUNCTION OF HIGHER
RATES? HOW DO YOU GO ABOUT EXPLAINING THAT? ALEXANDRE: IT IS A MIX OF DIFFERENT FACTORS. THE FIRST IS PROVISIONS FELL NEARLY 50% FROM LAST YEAR. LAST YEAR THEY WERE INFLATED BECAUSE OF RUSSIA-RELATED CHARGES. IT IS GOOD NEWS. THERE WAS A HIGH EFFECT ON LAST YEAR.
INTEREST RATES, THE BANK HAS NOT DATE SO MUCH ON INTEREST RATES BECAUSE FRENCH RETAIL BANKING IS NOT GETTING THE FULL BENEFIT OF HIGHER INTEREST RATES BECAUSE OF THE HIGH COST OF FUNDING LATE TO REGULATED SAVINGS. WHAT YOU LOOK AT THE BANK UNITS ABROAD AND THE NATIONAL RETAIL UNITS, REVENUE HAS BEEN RISING 23%. THAT SHOWS HOW BENEFICIAL IT CAN BE FOR BANKS TO HAVE HIGHER INTEREST RATES. ANNA: THANKS VERY MUCH FOR THE UPDATE. COMING UP, SYLVIA ARE DANYA JOINS US, BARCLAYS CHIEF EUROPEAN ECONOMIST. WE WILL WORK OUR WAY TOWARDS THE DATA
IN THE UNITED STATES AND THE BANK OF ENGLAND RATE DECISION. AND TOMORROW WE WILL HAVE AN EXCLUSIVE INTERVIEW WITH JP MORGAN CEO JAMIE DIMON. LIVE FROM THE GLOBAL MARKETS CONFERENCE IN PARIS. LOOK FOR THAT INTERVIEW AT 8:50 NEW YORK TIME. THIS IS BLOOMBERG. KRITI: I AM KRITI GUPTA IN NEW YORK WITH ANNA EDWARDS IN LONDON. ALL OF THE TALK THIS WEEK WILL LIKELY BE AROUND THE DEBT CEILING DEBATE.
ANOTHER MEETING ON FRIDAY. FOR THE MACRO FRONT THE MARKETS LOOK LIKE THEY ARE IN A STALEMATE JUST THE WAY WASHINGTON IS. THERE IS MOVEMENT IN CERTAIN SECURITIES AT THIS BRINGS ME TO THE CHART THIS MORNING. FOR OUR RADIO AUDIENCE, WE ARE LOOKING AT A CHART THAT GOES BACK TO 2012. ONE MONTH T-BILL YIELDS. AS WE WERE TALKING ABOUT THE SECURITY CONSIDERED TO BE ONE OF THE MOST RISK-FREE SECURITIES BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES GOVERNMENT, PEOPLE ARE DUMPING THEM. INVESTORS ARE GETTING OUT OF IT
BECAUSE OF THE PURE STARTING TO RAMP UP AS WE GET CLOSER TO THE EARLY JUNE DEADLINE. DOUBT IS TO THE POINT THAT THOSE YIELDS ARE SKYROCKETING GOING ALL THE WAY BACK TO 2000 AND 2007 GLOBAL FINANCIAL CRISIS WHERE YOU SKYROCKETED TO 5.24%. NOW THEY ARE CROSSING THAT AND IT SPEAKS TO THE WORRY YOU ARE SEEING IN THE MARKET AND A LITTLE BIT OF HEDGING AS PEOPLE MEASURE THEIR EXPOSURE TO THE DEBT CEILING DEBATE. JODY YES FOR MORE PERSPECTIVE IS BLOOMBERG -- JOINING US FOR MORE PERSPECTIVE IS BLOOMBERG MANAGING EDITOR FOR CREDIT. WALK US THROUGH HOW SUSTAINABLE
THIS TRADE IS. HOW MUCH IS THE MARKET OVERREACTING? >> I THINK THEY WERE VOICES OVER THE LAST WEEK THAT BASICALLY SAID THIS MIGHT BE ONE OF THE BEST BUYING OPPORTUNITIES FOR ANYONE WHO HAS A MORE SOBERING VIEW OF WHETHER OR NOT THE U.S. WILL DEFAULT. QUITE A FEW PEOPLE HAVE SAID THEY THINK THE PROSPECT OF A DEFAULT IS VERY SLIM. WHAT WE ARE LOOKING AT IS THIS OPPORTUNITY TO MAKE A TON OF MONEY ON THIS TRADE, NOT JUST THOSE SECURITIES BUT YOU'RE ALSO LOOKING AT THE CDS MARKET THAT HAS BLOWN OUT. THERE IS A DISLOCATION.
THIS IS NOT THE FIRST TIME WE HAVE BEEN HERE. WE HAVE BEEN VERY CLOSE TO A DEADLINE BUT SOMEHOW THEY COME TO AN AGREEMENT AND EVERYTHING CALMS DOWN AGAIN. ANNA: IT SEEMS LIKE WE'VE BEEN HERE BEFORE AGAIN AND AGAIN.
WE HAVE SEEN THE MOVIE A FEW TIMES. YOU MENTIONED THE CDS MARKET. SOME PEOPLE SAY THERE IS NOT MUCH LIQUIDITY IN THIS MARKET AND POINT TO THE FACT THAT EVEN IF YOU SEE THESE RATES GO A LOT HIGHER THEY ARE STILL RELATIVELY LOW. MAYBE THE LATTER OF THOSE IN QUESTION BECAUSE IN SOME AREAS WE ARE SEEING U.S. CDS PRICED ABOVE SOME EMERGING MARKETS WAS HIS INCREDIBLE WHEN YOU THINK THIS IS SUPPOSED TO BE THE DEFINITION OF A RISK-FREE RATE. DAN: THAT IS WHY FOR SOME PEOPLE THIS IS AN AMAZING BUYING OPPORTUNITY. WHEN WAS LAST TIME YOU SAW U.S.
CDS THIS HIGH. AT 180 OR WHATEVER IT IS CONTRACTS ARE TRADING AT RIGHT NOW, THAT IS AN AMAZING PRICE FOR A COUNTRY LIKE THE U.S.. AT THE END OF THE DAY THERE IS A MASSIVE CHANCE THEY WILL COME TO AN AGREEMENT. THOSE CONTRACTS WILL BECOME A LOT MORE PALATABLE.
PEOPLE WILL MAKE A TON OF MONEY. BY THE FIRST FEW DAYS OF JUNE THE STORY WILL DIE DOWN AND WE WILL MOVE ON. ANNA: WE SPOKE TO SOME GUESTS YESTERDAY WHO HAD HIGH PERCENTAGE CHANGES ATTACHED TO THE THREAT OF DEFAULT.
THANK YOU VERY MUCH FOR JOINING US. FOR MORE MARKET ANALYSIS, CHECK KRITI: THIS IS BLOOMBERG SURVEILLANCE: EARLY EDITION. KEEP YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD HERE IS THE FIRST WORD. A SURPRISE MOVE IN CHINA. A LITTLE-KNOWN LOCAL GOVERNMENT OFFICIAL HAS BEEN NAMED THE TOP REGULATOR OF RECEIVING FINANCIAL SECTOR. HE WILL BE PARTY SECTOR OF THE NEWLY FORMED NATIONAL FINANCIAL SUPERVISION AND MANAGEMENT BUREAU. THE AGENCY REGULATES THOUSANDS
OF BANKS. BLOOMBERG HAS LEARNED NEW YORK REPUBLICAN CONGRESSMAN GEORGE SANTOS HAS BEEN INDICTED ON CHARGES. HE HAD BEEN UNDER INVESTIGATION ON CAMPAIGN FINANCE CHARGES. HE WAS ELECTED DESPITE FABRICATING MUCH OF WHAT HE CLAIMED ABOUT HIS CAREER. PRESIDENT TRUMP FOR PLANS TO APPEAL AFTER HE WAS FOUND GUILTY BY A CIVIL COURT -- THE JURY ALSO ORDERED THE THE FORMER PRESIDENT TO PAY $5 MILLION IN DAMAGES WILL JURORS STOPPED SHORT AT FINDING HIM LIABLE FOR RATE. IT VIDEO POSTED ON TWITTER
TOGGLE CARL SAID THAT HE WILL BE OUT WITH THE NEW VERSION OF THE SHOW HE HAD DONE ON FOX STARTING SOON. HE WAS FIRED LAST BY THE AFTER FOX LOST A DEFAMATION SUIT TO THE BILLIARD -- SETTLED A DEFAMATION SUIT. FRANCINE: -- ANNA: KRITI: THIS IS BLOOMBERG SURVEILLANCE: EARLY EDITION. STRUGGLING TO AVOID A FIRST EVER U.S. DEFAULT PRESIDENT BIDEN AND
KEVIN MCCARTHY DO NOT RESOLVE THE IMPASSE OVER THE DEBT LIMIT. THEY SAY THEY WILL MEET AGAIN ON FRIDAY. THE NEW INFLATION FIGURE THEY GIVE INSIGHT -- THE FIGURES OUT OF 8:30 NEW YORK TIME. SHARES OF FRENCH BANK CREDIT AGRICOLE ARE SURGING AS THE BANK POSTED RECORD PERFORMANCE IN THE FIRST QUARTER. I AM KRITI GUPTA IN NEW YORK WITH ANNA EDWARDS IN LONDON. WE ARE TALKING ABOUT ALL OF MACRO STORIES. OFF TO THE MARKET FORGETS THAT
UNDERNEATH THE HOOD RECORD PERFORMANCE FROM COMPANIES ON BOTH SIDES OF THE ATLANTIC ARE STILL IN PLAY. ANNA: WE HAVE SEE DECENT PERFORMANCE FROM THE BANKING SECTOR IN EUROPE. OVERALL EUROPEAN EQUITY MARKETS ARE UNDER PRESSURE. WE ARE DOWN BY .2% AS WE WAIT FOR THE CPI DATA FROM THE U.S.. CREDIT AGRICOLE IS ONE OF THOSE BUSINESSES WHERE WE SEE THE NUMBERS DELIGHTING INVESTORS. DIFFICULT FOR ANALYSTS TO COMPARE WITH LAST TIME DUE TO CHANGES IN ACCOUNTING RULES. A 42% INCREASE IN REVENUE FOR
THAT PART OF THEIR BUSINESS GOING DOWN WELL WITH THE INVESTMENT COMMUNITY. JD WEATHERS FOOD A PUB BUSINESS IS UP 4.9%. THEY HAVE TALKED POSITIVELY ABOUT THE DEGREE TO WHICH THE BRITS ARE MAKING THE MOST OF ALL THE PUBLIC HOLIDAYS IN BAY -- THE EURO IS AT 1.0 955. INTERESTING TO THINK WE HEARD TODAY WITH THE SORT OF PARTYLINE THAT THERE IS STILL MORE HIKING TO COME.
THAT IS WHAT WE HEARD FROM THE ECB. WE ARE STILL EXPECTING CHRISTINE LAGARDE REITERATING THAT. HE DID SUGGEST BABY WE ARE GETTING CLOSER TO WHERE THEY NEED TO BE IN TERMS OF RESTRICTIVE TERRITORY SUGGESTING THERE IS NOT MUCH FURTHER FOR THE ECB TO GO. ANNA: IT IS SOMETHING -- KRITI: IT IS SOMETHING THE MARKET IS PRICING IN, YOU ARE NOT SEEING THE SAME DIVIDE YOU ARE SEEING STATESIDE, ESPECIALLY WITH READ THROUGH WITH YIELDS. THE TWO YEAR YIELD ABOVE THE 4% LEVEL.
IS NOT JUST THE DEBT CEILING DEBATE, IT IS ABOUT THE FEDERAL RESERVE. A DYNAMIC THAT IS AFFECTING THE DOLLAR. EURO-DOLLAR STAY STAGNANT. UNCHANGED ON THE BLOOMBERG DOLLAR INDEX AND UNCHANGED IN A RANGE. THOSE ARE THE TERMS I WOULD USE TO DESCRIBE THE S&P 500. FUTURES ONLY DOWN .1%.
EVEN AS WE ARE ON INFLATIONARY WATCH THE CPI NUMBERS COMING OUT IN ABOUT THREE HOURS AND RECESSIONARY WATCH. NYMEX CRUDE -- ON THE MACRO FRONT IT DOES SEEM FROZEN IN TIME. THERE IS MOVEMENT UNDERNEATH THE HOOD ESPECIALLY WHEN IT COMES TO THE DEBT CEILING TOPS.
THIS IS A BIG PART OF THE STORY ABOUT HOW MARKET PARTICIPANTS ARE POSITIONING FOR THAT. HERE IS A CHART I WILL SHOW YOU. WE ARE LOOKING GET CREDIT DEFAULT SWAP PRICES. WE ARE GOING TO A CHART BACK TO 2008.
WE HAVE SEVERAL REITERATIONS OF THE DEBT CEILING DEBATE AND SEVERAL SPIKES IN THOSE COST TO INSURERS. ON THE SURFACE, IT LOOKS LIKE THIS IS A MASSIVE MOVE. THE ONE-YEAR MARKET FOR THE U.S. DEBT IS NOT AS LIQUID AND NOT
AS BIG AS IT USED TO BE IN THE PREVIOUS ITERATIONS. IT LOOKS LIKE A MAGNIFIED MOVE. ANNA: THE DEBT CEILING DOES DOMINATE THE CONVERSATION AS INVESTORS AWAIT A U.S. INFLATION REPORT FOR INSIGHTS ON THE PATH OF THE FEDERAL RESERVE'S RATE HIKES. JOINING US IS SILVIA ARDAGNA, BARCLAYS CHIEF ECONOMIST. WE WILL GET TO THE BANK OF ENGLAND WHICH IS DUE TO GIVE ITS RATE DECISION SHORTLY.
THAT COMES ON THURSDAY. LET ME START WITH THE U.S. CPI PICTURE BECAUSE GLOBAL FIGHTS TO GET THIS INFLATION IS VERY TOPICAL AT THE U.S. DATA IS DUE OUT TODAY. WHAT WILL MATTER TO YOU WHEN YOU WATCH THIS CRUCIAL DATA DROP? SILVIA: GOOD MORNING. THREE THINGS, THREE PARTS OF THE REPORT WILL MATTER TO US. WE HAVE THE HEADLINE NUMBERS AND WE EXPECTED INCREASE ON MONTH-TO-MONTH BY 0.38 WHICH LEAVES THE ANNUAL LEVEL OF
INFLATION AT 5%. IT IS THE CORE PRINT WHICH WE THINK WILL BE A TOUCHDOWN RELATIVE TO WHAT IT WAS A MONTH BEFORE. WE EXPECT ON THE MONTHLY INCREASE, 0.34 IT WITH A 5.5% YEAR ON YEAR RATE. MOST IMPORTANTLY IT IS THE COMPOSITION BEHIND THE PORTRAYED.
HERE WHAT WE EXPECT IS WE WILL SEE SLOWING IN THE SERVICE COSTS BUT THAT WILL BE OFFSET BY HIGHER GOODS PRICES. HIGHER GOODS PRICES IS PARTICULARLY RELATED TO THE PRICE OF USED CARS. WHAT IS IMPORTANT TO SEE IS EVIDENCE OF SUB DECELERATION IN INFLATION IN THE SERVICE COMPONENTS AND WE ACCEPT THAT TO HAPPEN IN MANY DIFFERENT CATEGORIES FROM TRANSPORT SERVICES, AND THE SHELTER COMPONENT WILL BE IMPORTANT. KRITI: I AM GLAD YOU MENTIONED THE SHELTER PART. I WANT TO ASK YOU ABOUT HOW QUICKLY THAT DECELERATION WILL CATCH UP TO START OFF THE COMMODITIES DRIVEN INFLATION -- WHY SHELTER TAKING SO LONG TO DECELERATE? SILVIA: THAT IS A GOOD QUESTION. WE SEE SOME EVIDENCE IN THE PRIVATE DATA WHERE WE SEE, IN BRENT WE START SEEING SUB DECELERATION WITH DATA THAT LOOKS AT THE AVERAGE, NOT JUST THE NEW RENTS.
WE EXPECT SOME OF THAT BEGINNING TO APPEAR THIS MONTH OR THE NEXT COUPLE OF MONTHS. THEN WE EXPECT FASTER DECELERATION. IT HAS A LOT TO DO WITH DEMAND AND THE FACT THAT THE U.S. ECONOMY IS SLOWING BUT IS REMAINING QUITE RESILIENT.
WE HAVE SEE THE STRONG GDP. IN TERMS OF DOMESTIC DEMAND COMPONENTS. THE LABOR MARKET REMAINS STRONG. THE ECONOMY IS DOING QUITE WELL. THAT GIVES PRICING POWER TO FIRMS, TO HOUSEHOLDS, AND SO ON. ANNA:
I WANT TO GET YOUR THOUGHTS ON THE BANK OF ENGLAND. LET'S LISTEN TO IT EARLIER CONVERSATION WHERE WE SPOKE TO -- HE ADVISES THE CURRENT CHANCELLOR. LET'S LISTEN TO HOW HE IS APPROACHING TOMORROW'S DECISION. >> YOU DO NOT WANT HEADLINE INFLATION TO BECOME ENTRENCHED IN EXPECTATIONS. THAT EXPLAINS WHY THE BANK OF ENGLAND HAS BEEN TIGHTENING MEANINGFULLY. WE ARE NOW AGAIN AT A TRICKY POINT IN THE INTEREST RATE TIGHTENING CYCLE BECAUSE WE ALSO WISH TO AVOID OVER TIGHTENING. THE CONSENSUS EXPECTS A 25
POINT HIKE THIS WEEK. THAT SEEMS ABOUT RIGHT. FROM HERE ON THEY NEED TO TREAD CAREFULLY. ANNA: HE SAYS FROM HERE ON AFTER THE 25 THEY NEED TO TREAD CAREFULLY. WHAT DOES TREADING CAREFULLY LOOK LIKE FOR THE BANK OF ENGLAND? SILVIA: WE ALSO HAVE AN ADDITIONAL 25 BASIS POINT HIKE AFTER THIS ONE. WE THINK THE BAG GREAT TERMINAL WILL BE 75. WE THINK IN TERMS OF COMMUNICATIONS THE BANK WILL
KEEP ITS OPTIONS OPEN WHICH MEANS THEY WILL NOT COMMITMENT TO AN ADDITIONAL HIKE. THERE IS THE RISK THEY COULD SKIP THE JUNE MEETING. MY INTERPRETATION IS A SIGNIFICANT AMOUNT OF TIGHTENING HAS BEEN DONE AS THE CYCLE BEGAN. THE REAL EFFECT OF THESE HIKES IS STILL TO COME. FOR THIS REASON THE BANK OF ENGLAND WILL REMAIN QUITE OPEN-MINDED AND WE HAVE TRIED TO TRADE-OFF THE RISK THAT WAS BASICALLY SAID, THAT THE INCREASE IN PRICES TO BE ENTRENCHED IN EXPECTATIONS VERSUS THE RISK OF OTHER TITANATE AND GENERATING TO EXPRESSIVE -- EXCESSIVE SLOW IN ECONOMIC ACTIVITY IT INFLATION BELOW TARGETS AT THE RELATIVE POLICY RISES. KRITI:
SQUARE THAT WITH WHAT WE HEARING OUT OF THE ECB AND THE FEDERAL RESERVE. AS THE FEDERAL RESERVE TALKS ABOUT NOT HIKING AT ALL OR HI KATE MOORE OVER THE SUMMER, THE ECB MAKING IT QUITE CLEAR THAT THERE LAST HIKES MIGHT HAPPEN OVER THE SUMMER. WILL THE BOE CONTINUE TO HIKE UNTIL THE END OF THE YEAR? IS THAT IDEA OF COMING TO THE END OF THE RATE TIGHTENING CYCLE LIMITED TO THE U.S. ALONE?
SILVIA: IN OUR BASELINE, WE HAVE COME TO THE END OF THE TIGHTENING CYCLE. WE HAVE THE LAST RATE HIKE HAPPENING IN JUNE. WE SEE THE RISK OF THAT BEING POSTPONED TO AUGUST. THE IDEA
THAT THERE COULD BE A HIKE WHEN THE BANK RELEASES THE MONETARY POLICY REPORT IS SOMETHING WE DO NOT RULE OUT. WE DO THINK THE BANK OF ENGLAND WILL JOIN THE FED AND THE ECB AND THE TIGHTENING CYCLE BY THE SUMMER. ANNA: THANK YOU VERY MUCH. THANKS FOR JOINING US. SILVIA ARDAGNA OF BARCLAYS. COMING UP, BACK TO EARNINGS STORIES. DISNEY IS OUT WITH RESULTS AFTER THE BELL TODAY.
KRITI: COMING UP LATER TODAY, AN INTERVIEW WITH AIRBNB CEO BRIAN CHESKY. THIS IS BLOOMBERG. THIS IS BLOOMBERG SURVEILLANCE EARLY EDITION. I AM KRITI GUPTA IN NEW YORK WITH ANNA EDWARDS IN LONDON. A CRITICAL EARNINGS REPORT FOR DISNEY CEO BOB IGER, THE FIRST FULL QUARTER SINCE HIS RETURN IN NOVEMBER. CHARTING IS -- JOINING US IS BLOOMBERG MEDIA ANALYST WHO WAS KIND ENOUGH TO WAKE UP EARLY ON WHAT WILL BE AN IMPORTANT DAY FOR YOU AND DISNEY. WALK US THROUGH THE
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2023-05-13