Speaker 1: Good morning. It's Thursday, the fourteenth of December here in London.
Speaker 1: This is the Bloomberg Daybreak you at podcast. I'm Caroline
Speaker 1: Hipki and.
Speaker 2: I'm Stephen Carroll. Coming up today.
Speaker 3: The Fed holds rate steady and gives the clearest signal
Speaker 3: yet that the next move will be lower.
Speaker 1: The focus shifts to the Bank of England and the
Speaker 1: ECB to see if they will follow Powell's pivot.
Speaker 3: Plus the cat clawback UBS steps up efforts to recoup
Speaker 3: bonuses from credit sueee to factors.
Speaker 1: Let's start with a round up of our top stories.
Speaker 3: Federal Reserve policymakers expect seventy five basis points of rate
Speaker 3: cuts next year, according to their latest dot plot forecast.
Speaker 3: The pivot comes as the Central Bank opted to hold
Speaker 3: rates steady at Wednesday's meeting at a range of five
Speaker 3: and a quarter to five and a half percent Federal
Speaker 3: Reserve charge your own. Powell and says tightening remains an
Speaker 3: option if price pressures return, but says the FOMC has
Speaker 3: also begun discussing when to ease.
Speaker 4: The question of when will it become appropriate to begin
Speaker 4: dialing back the amount of policy restraint in place that
Speaker 4: begins to come into view and is clearly a topic
Speaker 4: of discussion now in the world and also a discussion
Speaker 4: for US at our meeting today.
Speaker 3: Powell used his press conference to emphasize the rate cut
Speaker 3: projections are not a pre set plan, and one inflation
Speaker 3: has come down, it's still too high. The prospect of
Speaker 3: easing policy drove an extended overnight rally and treasuries with
Speaker 3: ten year yields by falling below four percent for the
Speaker 3: first time since August.
Speaker 1: The Fed's rhetorical pivot has led to a surge in stocks, bonds,
Speaker 1: and currencies and one of the biggest post meeting rallies
Speaker 1: in recent memory. Virtually no corner of financial markets has
Speaker 1: been left out of the cross asset advance. Global shares
Speaker 1: have spiked hard, front end treasuries have posted their biggest
Speaker 1: day since March, and currencies of surge against the dollar.
Speaker 1: Jeff Rosenberg, black Rock Systemic Multi Strategy fund portfolio manager
Speaker 1: says that he expects that to continue.
Speaker 5: There are some vulnerabilities, but the message and the concern.
Speaker 5: No one's looking at the vulnerabilities. They're looking at the validation,
Speaker 5: and so with that validation, this Polish sentiment can go
Speaker 5: on for a while until we get a new round
Speaker 5: of economic data, and until then, I think the message
Speaker 5: is pretty clear that the FED is more than willing
Speaker 5: to see an easy in financial conditions won't step in
Speaker 5: the way of that.
Speaker 1: As Blackrocks Jeff Rosenberg hinted, there there is no guarantee
Speaker 1: that the rally will last, but markets have piled into
Speaker 1: rate cut wages numerous times over the past two years,
Speaker 1: only then to be caught flat footed when the Fed
Speaker 1: didn't change tack.
Speaker 3: Turning to the Bank of England, markets have fully priced
Speaker 3: in one hundred basis points of rate cuts from the
Speaker 3: MPC next year. Soft GDP data drove those bats higher.
Speaker 3: Bloomberg's senior UK economist Dan Hansen says UK growth in
Speaker 3: October was weaker than all the analysts had expected.
Speaker 6: It sort of be all economist expectations in terms of
Speaker 6: how negative it was.
Speaker 2: I mean, I think the thing that struck me.
Speaker 6: Though, when I opened the release, was how broad based
Speaker 6: the weakness was.
Speaker 2: The broad picture.
Speaker 6: The broad takeaway is that services, manufacturing, and construction all
Speaker 6: fell and you've got weakness across the board.
Speaker 3: Blombergs down Hanson, adding as while the economic weakness is
Speaker 3: extremely unlikely to affect the rate decision itself, it may
Speaker 3: lead to a more dovish split among policy makers well.
Speaker 1: Today's European Central Bank decision is also being watched for
Speaker 1: how forcefully policymakers push back against bets on interest rate cuts.
Speaker 1: The former ECB president Jean Claude Triche thinks that Christine
Speaker 1: Legarde and others could cut rates before the FED in.
Speaker 7: The US for many reasons. We have still a level
Speaker 7: of core inflation, for instance, that is now significantly superior
Speaker 7: to gore inflation in Europe four point two instead of
Speaker 7: three point six. It's not absurd to think that the
Speaker 7: first decrees of rates could be in Europe instead of
Speaker 7: in the US.
Speaker 1: Charc Claude Triche, adding that markets who are still overdoing
Speaker 1: bits that the ECB will reduce rates as early as March.
Speaker 3: China's economy also seems to be losing momentum. High frequency
Speaker 3: data suggests industrial output figures due will be worse than
Speaker 3: pre COVID levels, and the economic weakness will trigger calls
Speaker 3: for stimulus to meet President She's five percent growth goal
Speaker 3: for next year.
Speaker 1: Now, to some politics, a drive to impeach the US
Speaker 1: president is now formally authorized. In a vote on Wednesday,
Speaker 1: Republicans in the US House elected to escalate a probe
Speaker 1: into Joe Biden that has been underway for several months.
Speaker 1: Speaking on the House floor yesterday, the Minority Leader Hakim
Speaker 1: Jeffries pointed to former President Donald Trump as a key
Speaker 1: influence on proceedings.
Speaker 8: We are here today on the House floor wasting time
Speaker 8: and taxpayer dollars on an illegitimate impeachment inquiry because Donald Trump,
Speaker 8: the puppet master, has directed extreme maga Republicans to launch
Speaker 8: a political hit job.
Speaker 1: New York Democrat Hakim Jeffries also questioned the legitimacy of
Speaker 1: the inquiry. The investigation focuses on the finances of the
Speaker 1: first family, particularly the present sun hunter. Biden himself denounced
Speaker 1: the inquiry as quote a baseless attack.
Speaker 3: UBS has stepped up an effort to recoup hundreds of
Speaker 3: millions of dollars in cash bonuses that credit sweee paid
Speaker 3: to retain deal makers before the Landers collapse, the story
Speaker 3: from Bloomberg's Charlie Pallace.
Speaker 9: According to those sources and documents seen by Bloomberg, UBS
Speaker 9: has contacted hundreds of bankers and offered some multi year
Speaker 9: payment plans amid efforts to clawback a chunk of the
Speaker 9: one point two billion Swiss franks in restricted cash bonuses
Speaker 9: known internally as upfront cash awards. The document show the
Speaker 9: bank's outside law firms are reaching out to staffers who
Speaker 9: voluntarily left the firm and threatening legal action if the
Speaker 9: required amounts are not delivered. In New York Charlie Pellette
Speaker 9: Bloomberg Radio.
Speaker 3: In a moment, we'll get more in today's Central Bank decisions,
Speaker 3: but first, as we're thinking about the Bank of England's
Speaker 3: decision today, interesting to see the latest data on the
Speaker 3: UK property markets. Property surveyors the most optimistic they've been
Speaker 3: on future house sales in almost two years. This is
Speaker 3: mortgage rates have just come off their peak. Now haven't
Speaker 3: dropped dramatically, but certainly have come down from the high levels.
Speaker 3: The average five year mortgage rate now down closer to
Speaker 3: five percent from a peak of six point one percent
Speaker 3: in July. So it does look like this slow puncture
Speaker 3: is still happening in the market, but perhaps we're turning
Speaker 3: to more of a stabilization than perhaps the bigger falls
Speaker 3: we had been expecting.
Speaker 1: Yeah, it's hard, isn't it? To come out with new
Speaker 1: superlatives all the time. But this is quite extraordinary in
Speaker 1: terms of the whiplash in financial markets. You know, there
Speaker 1: were some even you thought there were going to be
Speaker 1: there was going to be a big crash and the
Speaker 1: housing market at the start of the year. I mean
Speaker 1: it was an outlie of you. But now much more
Speaker 1: stabilization as we come to the end of the year
Speaker 1: than many had thought.
Speaker 2: Yeah.
Speaker 3: Indeed these the lates sigures in the Royal Institution of
Speaker 3: Chartered Surveyors. But I would also note our colleagues reporting
Speaker 3: on the high end country home market fast becoming part
Speaker 3: of the nation's property slumper home and luxury country destinations
Speaker 3: less likely to sell above a tasking price than a
Speaker 3: home in London's most affluent discus districts. And that's the
Speaker 3: first time that's happened since twenty fifteen. Okay, case Caroline,
Speaker 3: you were thinking about investing in a country place.
Speaker 1: And there was a moment in the pandemic, there really was,
Speaker 1: But no, that moment has passed. I suspect. Right, Let's
Speaker 1: talk about the FED. The pivot is real from the
Speaker 1: steepest rate increases in decades to contain surging inflation to
Speaker 1: your own power and his colleagues issued for Coast showing
Speaker 1: a series of cuts would be likely next year. Joining
Speaker 1: us now to discuss Sploomberg opinion columnist Daniel Moss. Daniel,
Speaker 1: great to have you with us on the program this morning.
Speaker 1: So the Fed pivots at the door. Seventy five basis
Speaker 1: points potentially of cards, no US recession. This is surely
Speaker 1: an early Christmas presence for the markets.
Speaker 10: Well, the Christmas present actually began before one of the
Speaker 10: clips you played earlier. His comment about having discussed how
Speaker 10: they might begin to cut came in response to a question.
Speaker 10: There was a real tell though, in his introductory statement
Speaker 10: when Powell said, for the first time, or rather he
Speaker 10: characterized the current level of interest rates for the first
Speaker 10: time certainly that I've heard as been quote well into
Speaker 10: restrictive territory. Now what's the significance of the Well, it
Speaker 10: means they can kind of have it both ways. They
Speaker 10: can cut and still say they're in restrictive territory. If
Speaker 10: at current levels they are well into restrictive terrors and
Speaker 10: things flowed from there once the Q and A began.
Speaker 10: But yes, your remark about no recession. Now he was
Speaker 10: at Paines Jay Poweller. So he wasn't declaring victory, but gosh,
Speaker 10: some of the way he framed the economics of twenty
Speaker 10: twenty three, sure sounded like he was feeling pretty satisfied.
Speaker 10: So it's all but a declaration of victory. He noted
Speaker 10: how much inflation had come down. He didn't think the
Speaker 10: US is in recession now. He also observed that around
Speaker 10: about a year ago, many people forecast there would be
Speaker 10: one no sign of it yet, according to him, so
Speaker 10: you know, it's not mission accomplished, but it's I could
Speaker 10: have had a worse holiday.
Speaker 3: Maybe it's slight bit of I told you so as well,
Speaker 3: coming from Jerome Powell.
Speaker 2: If we look at the market reaction.
Speaker 3: Daniel two, we're looking at the ten year yields below
Speaker 3: four percent for the first time since August.
Speaker 2: Should we be thinking about this for next year?
Speaker 3: Jeffrey Gundlax call for tenure yields and the low three
Speaker 3: percent range by next year.
Speaker 10: Well, I would say, what is most important is the direction.
Speaker 10: So remember last year in twenty twenty two, I believe
Speaker 10: it was when the ten year yield breached four percent,
Speaker 10: and the other direction was like, oh my god, the
Speaker 10: world's going to hell. Well, okay, now we've just breached
Speaker 10: four percent a little bit on the other side, and
Speaker 10: it's happy days of here again. So you know, context
Speaker 10: can sometimes be missing in very exciting moments like this.
Speaker 2: You know.
Speaker 10: J Powell also flagged you know what's going to be
Speaker 10: one of the real debates as we get into twenty four,
Speaker 10: which is really, you know, how much has changed. He
Speaker 10: was asked whether the neutral rate of interest, after everything
Speaker 10: we've been through in the past couple of years, has
Speaker 10: changed very much. He sort of almost sounded like some
Speaker 10: of his academic predecessors Janet Ylen or Ben Bernanky rather
Speaker 10: than a private equity guy and a lawyer that he is.
Speaker 10: He said, well, it's one of the great fascinating historical
Speaker 10: questions we're going to be debating that this year, which
Speaker 10: left you know something in my mind along the lines
Speaker 10: of what maybe we should be doing a column like,
Speaker 10: maybe not much has really changed at all. Low interest
Speaker 10: rates could be back, transitory might even be resurrected.
Speaker 1: Oh wow, that would be extraordinary.
Speaker 10: You know, back back from Elba.
Speaker 1: In terms of Pal's commentary in and of itself, do
Speaker 1: you think that that effectively is acting as a rate
Speaker 1: cut in markets. I mean again, is this You know
Speaker 1: we had the conversation going in the other direction too
Speaker 1: on this one.
Speaker 10: You know, when we were previewing this meeting, I suggested
Speaker 10: that he would probably lean against rate cut speculation because
Speaker 10: the speculation is already there and he doesn't want markets
Speaker 10: to be seen to be getting carried away. Well, you
Speaker 10: know I was off the mark on that one. He
Speaker 10: just leaned right into it. The clip you played earlier.
Speaker 10: Initially the question was what makes him so convinced that
Speaker 10: their hiking work is done? He explained that they thought
Speaker 10: it basically was, and then he leant right in without
Speaker 10: a follow up question, saying, well, then once you can
Speaker 10: see that, then the next point is, you know when
Speaker 10: you start thinking about cuts. I'm like, well, okay, all right,
Speaker 10: he's just leant into it. No point in hiding from it.
Speaker 10: Pretty impressive actually.
Speaker 3: Okay, remember opinion colonomist Daniel Mass, thank you so much
Speaker 3: for joining us with your thoughts on yesterday's Federal Reserve decision.
Speaker 1: Well from the Fed to a pack day to day
Speaker 1: for central bank decisions in Europe, all of them now
Speaker 1: with the pressure to pivot themselves towards rate cuts too.
Speaker 1: Let's bring in Blomberg's chief europe economist Jamie Rush the ECB. First,
Speaker 1: what can we expect from this final meeting of the year.
Speaker 11: Well, I think we're where they're going to be responding
Speaker 11: to the way the FED has described the outlook, and
Speaker 11: so I mean the last thing we heard from Leguard
Speaker 11: was that we wouldn't see any rate cuts for a
Speaker 11: couple of quarters. Well, Powell said similar things even in
Speaker 11: the run up to the latest FMC meeting and subsequently
Speaker 11: changed his view. So I think it's quite possible that
Speaker 11: we will see a shift in the restoric at the ECB,
Speaker 11: but I don't think it will be quite as they'll
Speaker 11: be quite as willing to fully embrace market pricing for
Speaker 11: rate cuts early in the years as the FED has been,
Speaker 11: So I think there'll be a little bit more inertia,
Speaker 11: but I think that pivot is coming and so we
Speaker 11: will be probably seeing rate cuts in the first half
Speaker 11: the year.
Speaker 3: We also got new forecast Jamie from the ECB as well.
Speaker 3: What will you be looking at for.
Speaker 11: Well, I think we'll get long term inflation forecasts. They
Speaker 11: roll forward a year, so that will give us a
Speaker 11: sense of whether they feel confident that they've the policies,
Speaker 11: the streets of enough. I mean, they certainly almost will
Speaker 11: show the inflation is close to two percent at the
Speaker 11: end of the forecast period, so from their perspective, it
Speaker 11: will be job done on rate hikes. But again it's
Speaker 11: that question about when is the rate first rate coming
Speaker 11: and then and then how fast will it be? I
Speaker 11: think that's the next that's the next bone of contention
Speaker 11: with markets is not just when it will happen, but
Speaker 11: whether we're looking at one rate cut quarter or whether
Speaker 11: we're looking at one rate cutter meeting.
Speaker 1: In terms of the Bank of England, a huge challenge,
Speaker 1: high inflation, a stagnant economy, and now one hundred basis
Speaker 1: points of cuts priced in for the UK next year. Yeah.
Speaker 11: So I mean the UK is in a slightly different
Speaker 11: position for everyone because we seems to have the worst
Speaker 11: of both worlds in the sense that we had that
Speaker 11: huge supply shop which pushed inflation up, and then we
Speaker 11: had that interacting with a very tight labor market the
Speaker 11: same wage growth above eight percent. So I think it's
Speaker 11: we're looking at a slightly stickier outlook for the UK.
Speaker 11: At the same time, if the global mood music is
Speaker 11: changing the Bank of Ving is not going to be
Speaker 11: a me to that, so I think we again we'll
Speaker 11: be seeing some discussion of the possibility that raycards are coming,
Speaker 11: and maybe a little bit less of this table mountain
Speaker 11: nonsense that we've been hearing about for so long.
Speaker 2: What about the splitsbeen policymakers, Jamie, Yes.
Speaker 11: They'll probably still be slightly divided, and there has been that.
Speaker 11: There hasn't been unanimity at the banking for a while,
Speaker 11: so I'll expect that to continue.
Speaker 3: This is Bloomberg Daybreak Europe, your morning brief on the
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Speaker 2: I'm Caroline Hepka and I'm Stephen Carroll.
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