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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Daba podcast, available every morning on Apple, Spotify or wherever

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Speaker 1: you listen. It's Friday, the nineteenth of April here in London.

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Speaker 1: I'm Caroline Hepka.

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Speaker 2: And I'm Tom McKenzie. Coming up today targeting Iran. US

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Speaker 2: officials tel Bloomberg. Israel has struck the country less than

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Speaker 2: a week after Tehran's rocket and drone barrage.

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Speaker 1: Socks slump and haven assets surge. Markets react to fears

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Speaker 1: of growing escalation in the Middle East, but Iran appears

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Speaker 1: to downplay the developments.

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Speaker 2: Plus Project Timber, a potential nationalization of Thames Water could

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Speaker 2: mean some creditors facing losses of up to forty percent.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: Israel has launched a missile strunk on Iran. That is

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Speaker 2: according to US officials speaking to Bloomberg, but Iran appears

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Speaker 2: to be downplaying the developments. One Eraian news agency says

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Speaker 2: an explosion was heard in the city of Isfahan, while

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Speaker 2: the state broadcaster says they've received no reports of damage

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Speaker 2: after air defense systems reactivated. It follows Tehran's drone and

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Speaker 2: missile attack on Israel over the weekend, which in turn

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Speaker 2: was retaliation for the bombing of an Iranian consulate in

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Speaker 2: Damascus at the beginning of April. Bloomberg's EMIR News director

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Speaker 2: Ross Madison says there are a number of targets Israel

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Speaker 2: may have been targeting in the region.

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Speaker 3: That's the city that houses a number of military bases,

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Speaker 3: but also some key parts of around nuclear facilities, and

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Speaker 3: we know that there's been some sizeable blasts that have

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Speaker 3: happened there.

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Speaker 2: Rosa Madison reporting there. As we continue, of course to

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Speaker 2: follow developments on this story. Bloomberg understands that Israeli officials

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Speaker 2: notified the US yesterday that they planned to retaliate in

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Speaker 2: the next twenty four to forty eight hours. World leaders

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Speaker 2: have been exerting heavy diplomatic pressure on Israeli Prime Minister

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Speaker 2: Benjamin at Niahu to show restraints in his response. However,

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Speaker 2: Etniahu and his political allies had made clear that they

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Speaker 2: would take action.

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Speaker 1: Global markets have been reacting to fears of escalating tensions

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Speaker 1: in the Middle East. Oil prices hit more than ninety

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Speaker 1: dollars a bout on breakthrough futures before pulling back slightly.

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Speaker 1: Traders had been anticipating a response from Israel to last

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Speaker 1: weekend's attack. Nathan Sheets, global chief economists that City Group, says,

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Speaker 1: so far things are contained.

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Speaker 4: I think at the moment, the market's telling us that

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Speaker 4: the balance of risks here looks to be reasonably favorable

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Speaker 4: and the response in the oil market has been contained.

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Speaker 4: And if that's the correct assessment, then I think the

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Speaker 4: broader implications of this are it doesn't escalate and we're

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Speaker 4: able to continue on more or less in the status quo.

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Speaker 1: So that was the global Chief Economists at City Group,

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Speaker 1: Nathan Sheet, speaking to us just earlier on Bloomberg Radio.

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Speaker 1: The news did also spark flight to haven assets. The

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Speaker 1: dollar and yen rallied along with US treasuries, whilst equities

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Speaker 1: in Asia sold off. Gold also surged close to a

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Speaker 1: record high before pairing some of the gains.

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Speaker 2: Now, the International Atomic Energy Agency he says there was

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Speaker 2: no damage to Iran's nuclear sites. The confirmation comes just

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Speaker 2: hours after a top Iranian general said his country may

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Speaker 2: reconsider its nuclear policies if Israel threatens to attack its

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Speaker 2: atomic sites. Meanwhile, the UK and US issued new sanctions

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Speaker 2: on Iran, targeting organizations and leaders, including the chief of

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Speaker 2: its army. British Foreign Secretary David Cameron says it's about

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Speaker 2: sending a message.

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Speaker 5: Given Iran's behavior in backing the who is backing hez Bala,

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Speaker 5: backing Hamas, and of course the appalling state on state

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Speaker 5: attack on Israel, it's quite right that with partners we

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Speaker 5: take further action on sanctions.

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Speaker 2: David Cameron spoke as he joined G seven foreign ministers

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Speaker 2: the summit in Italy to discuss the situation in the

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Speaker 2: Middle East.

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Speaker 1: US lawmakers in the House of Representatives are expected to

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Speaker 1: vote this weekend on long delayed military aid for Israel,

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Speaker 1: Ukraine and Taiwan. Bloomberg's Ed Baxter has the details.

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Speaker 6: House Speaker Mike Johnson says he expects to bring up

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Speaker 6: split Ukraine, Israel Taiwan aid bills tomorrow. The Chair of

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Speaker 6: the House Intelligence Committee, Mike Turner, on Bloomberg's balance of power,

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Speaker 6: says he thinks it is essential to get aid going

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Speaker 6: to Ukraine this week.

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Speaker 7: They're running out of ammunition. Russia is certainly surging and

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Speaker 7: putting additional pressure on the front line, and also the

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Speaker 7: lack of US support is impacting morale even in Ukraine.

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Speaker 6: House Minority leader Hakim Jeffrey says Democrats are going to

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Speaker 6: do what's necessary to get this across the finish line.

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Speaker 6: The Senate looks to move next week. Ed Baxter Bloomberg Radio.

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Speaker 2: Switching focus now and Netflix has reported its best start

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Speaker 2: to the year since twenty twenty. The streaming giant added

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Speaker 2: over nine million new customers in the first three months

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Speaker 2: of twenty twenty four, more than had been expected, but

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Speaker 2: shares fell in after hours training on a slightly weak

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Speaker 2: in then expected revenue forecast for the second quarter. Netflix

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Speaker 2: also announced it would stop sharing quarterly membership numbers. Coc

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Speaker 2: Ted Sarandos says they prefer to focus on other metrics.

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Speaker 7: So happy members watch more, they stick around longer.

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Speaker 8: They tell friends which all grows, engagement, revenue, and profit

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Speaker 8: are north stars, and we believe that those are the

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Speaker 8: measurements of success in streaming.

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Speaker 2: Netflix co CEO Ted Surroundels, speaking there, Netflix says about

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Speaker 2: forty percent of its new members are selecting its cheaper

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Speaker 2: advertising supported version, adding to earnings.

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Speaker 1: Lenders to Thames Water could face losses of as much

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Speaker 1: as forty percent if the company is nationalized. That's according

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Speaker 1: to a contingency plan dubbed Project Timber, drawn up by

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Speaker 1: government officials, which explores how nationalizing the high indebted utility

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Speaker 1: would work. Officials at the Department for Environment and Rural

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Speaker 1: Affairs declined to answer questions about the contingencies being drawn up.

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Speaker 1: Thames Water had postponed a required update to its business

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Speaker 1: plan due to be released today, according to people familiar

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Speaker 1: with the matter, A new proposal is now expected next week.

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Speaker 1: And those were a few of our top stories today.

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Speaker 2: Okay, let's get the latest then on the events in

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Speaker 2: the Middle East. After your US officials, of course told

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Speaker 2: Bloomberg that Israel had struck targets in Iran. There are

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Speaker 2: conflicting reports, as we said, from Iranian news agencies about

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Speaker 2: exactly what has happened. Dana Crash, our Middle East Breaking

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Speaker 2: news editor, joins us. Now, Dana, let's start there. Then,

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Speaker 2: what do we know at this point?

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Speaker 9: Good morning.

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Speaker 8: So initial reports from Iran suggest there was some sort

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Speaker 8: of an attack, as reports trickled in in the early

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Speaker 8: hours of the morning of a blast or Isfahan, where

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Speaker 8: we know there are military sites and nuclear infrastructure. So

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Speaker 8: the blasts are likely the result of what Iranian media

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Speaker 8: is saying is defense systems activated to intercept what has

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Speaker 8: now we know our drones. We also had a report

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Speaker 8: out that the nuclear site there is completely safe, and

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Speaker 8: that's of course reassuring, as Iran and Israel are art rivals,

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Speaker 8: but they also have nuclear programs. And some hours later

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Speaker 8: we saw the media there in Iran downplaying, with some

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Speaker 8: reporters even calling these flying objects miniature drones and I

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Speaker 8: quote but maybe wouldn't go that far because we know

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Speaker 8: you as officials told Bloomberg that Israel had launched a

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Speaker 8: retaliatory retaliatory air strike. And in Iran also we're seeing

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Speaker 8: live footage on state TV showing life is normal in Esfahan,

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Speaker 8: there are no strikes or the aftermath of a strike.

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Speaker 1: Okay, So that's what's been happening in Iran. What have

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Speaker 1: been these statements and the signals out of Israel.

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Speaker 8: So in Israel has not said or taken responsibility for

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Speaker 8: this attack, and usually they don't do that for any

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Speaker 8: thing or any operations they're suspected of doing abroad. But

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Speaker 8: it seems maybe that Nataniello had heeded those calls from

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Speaker 8: the US and its allies in the West asking it

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Speaker 8: not to respond in a way that would drag the

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Speaker 8: entire region into a full blown war, because it feels

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Speaker 8: really with every strike, with every retaliatory attack, we are

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Speaker 8: on the edge.

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Speaker 6: Here.

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Speaker 8: The most recent comment that we had is from the

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Speaker 8: National Security Minister on Twitter with just a simple word,

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Speaker 8: calling these attacks week. So here, again, Nataniejo is in

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Speaker 8: a dilemma between it's his allies in the West and

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Speaker 8: the US telling them not to respond to harshly, and

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Speaker 8: you have the hardliners asking him to do it, and

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Speaker 8: they are now perhaps criticizing that exact response.

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Speaker 2: Okay, so that's the debate that continues within Israel, as

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Speaker 2: you say, retaliation for retaliation for retaliation. Meanwhile, in Iran,

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Speaker 2: what are officials they're saying. We had some very strong

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Speaker 2: words coming out from one of the officials in the

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Speaker 2: UN yesterday before of course, this attack, at least according

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Speaker 2: to US officials, What are the Irain officials saying.

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Speaker 8: Now, So the most recent thing we have is on

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Speaker 8: the terminal, of course, it's Iran's army chief saying Israel

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Speaker 8: has already seen our reaction. This may be a good

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Speaker 8: indication that Iran might not retaliate, and them downplaying this

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Speaker 8: on state right and media means that there is no

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Speaker 8: reason for Iran to retaliate. Now that's also a good sign,

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Speaker 8: but of course it remains to be seen along the

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Speaker 8: day what really happened inside Iran.

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Speaker 1: Yeah, and so in terms of putting it into perspective, Dana,

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Speaker 1: in terms of an escalation, is it being seen as

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Speaker 1: an escalation so far? Another tip for how are people

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Speaker 1: thinking about this?

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Speaker 8: I mean with every attack, I think it is an

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Speaker 8: escalation because you always run the risk of someone overplaying

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Speaker 8: their hand or making a mistake in an attack that

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Speaker 8: would just infuriate the other party. So, like I said before,

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Speaker 8: in the region, we're really on the edge here with

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Speaker 8: every single attack as we try to anticipate what the

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Speaker 8: response would be. So, yes, there still is an escalation,

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Speaker 8: although this time around Iran might not want to respond back.

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Speaker 1: Okay, Donna Crage, thank you so much for your time

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Speaker 1: this morning and for your reporting. That is our Bloomberg

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Speaker 1: Midle East News editor, Donna Create again.

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Speaker 2: Treasuries of course rallying yields lower, but giving up some

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Speaker 2: of those gains. It was really pronounced straight after the

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Speaker 2: news of this attack. Now yields are up just between

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Speaker 2: three to five basis points across the treasury curve. The

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Speaker 2: dollar remains bid, but again the moves into the dollar

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Speaker 2: have eased as well. If you look at the Bloomberg

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Speaker 2: Dollar Index for the context, then on the market moves

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Speaker 2: around this crucial geopolitical story. Let's bring in our managing

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Speaker 2: editor for FX and Rates, Rachel Evans. Rachel talked to

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Speaker 2: us about what you've been seeing in the FX and

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Speaker 2: bond markets and the reaction.

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Speaker 9: Yeah, I mean, I think we've had a very classic

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Speaker 9: reaction that we would normally fight into teer political risks

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Speaker 9: this morning. You know, you typically see sort of treasuries,

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Speaker 9: you're really kind of rallying into geopolitical risk. You see

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Speaker 9: the dollar rally, We've seen gold up, oil up. I mean,

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Speaker 9: this is really kind of a very textbook example. I

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Speaker 9: think one of the things that I'm kind of keen

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Speaker 9: to see how it plays out over the next few

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Speaker 9: days is the degree to which sort of tensions in

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Speaker 9: the Middle East can keep that haven bid for assets

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Speaker 9: like treasuries going. We've definitely seen your upward pressure on

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Speaker 9: yields being kind of the theme of the moment, all

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Speaker 9: the talk about inflation, how much the Fed can cut

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Speaker 9: this year, So whether the geopolitical risk, can I guess

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Speaker 9: stir a kind of longer, longer lasting bid for treasuries

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Speaker 9: than perhaps just one day. I think kind of remains

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Speaker 9: to be seen that alongside carry trades, which I think

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Speaker 9: I've been getting really badly hit, I think it's going

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Speaker 9: to be really interesting to see whether we see some

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Speaker 9: of those unwind as some of the traditional funders of

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Speaker 9: carry trades, the Swiss Frank and the En and have

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Speaker 9: a haven bid on this news.

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Speaker 1: Yeah, absolutely, I mean, and talk us through some of

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Speaker 1: the more preferred haven bids that we saw this morning,

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Speaker 1: and there were quite a lot actually that saw significant moves.

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Speaker 9: Yeah, I mean. On the currency side, Swiss Frank has

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Speaker 9: really been kind of the standout performer of the day,

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Speaker 9: you know, obviously that's a classic sort of a haven bid.

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Speaker 9: And the Yen as well, you know, getting a bit

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Speaker 9: of strength, which I'm sure is definitely something that the

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Speaker 9: Japanese authorities are happy to see, just given that the

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Speaker 9: yen has very much been under pressure recently. So you know,

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Speaker 9: obviously these currencies, because they have been weak in recent months,

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Speaker 9: have been used as kind of the funding lego of

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Speaker 9: the carry trade to buy higher yielding currencies like the

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Speaker 9: Mexican pace, So and we saw some of those unwinding

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Speaker 9: earlier today, the Pacer in particular getting absolutely hammered. You know,

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Speaker 9: it's a very kind of risk on currency. So when

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Speaker 9: we do see risk off sort of sentiment, that does

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Speaker 9: tend to kind of pair. So over the next few days,

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Speaker 9: like if we do see a kind of like a

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Speaker 9: bigger kind of pick up in some of those rallies

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Speaker 9: and Swiss frank and Yen, we could see some quite

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Speaker 9: painful and windings of some of those carry trades around

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Speaker 9: the world.

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Speaker 2: Yeah, the Mexican pestor move was interesting, wasn't it. And

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Speaker 2: as you said, the carry trades are borrowing in y

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Speaker 2: end buying buying in the high yielding Mexican currency. When

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Speaker 2: it comes to clearly the Middle East is the top

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Speaker 2: story right now for US and for the market, but

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Speaker 2: this week as well, the key theme prior to this

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Speaker 2: was the adjustment to a more hawkish fed. How are

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Speaker 2: the markets? How does that tie into what you've been watching?

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Speaker 9: Yeah, well, whenever you see geopolitical turmoil, there's that question

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Speaker 9: about you know, whether we're going to see sort of

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Speaker 9: a hot war and how that then ties into oil prices.

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Speaker 9: Your oil prices going up. It's, you know, all else

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Speaker 9: being equal, an inflationary effect, given that you already have

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Speaker 9: central bankers thinking about sticky inflation and the degree to

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Speaker 9: which they can sort of cut rates, well, inflation stays

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Speaker 9: pretty hot. If you have inflationary pressures coming in through

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Speaker 9: from oil as well, that just adds another kind of

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Speaker 9: tricky sort of calculation for central bankers to be weighing in. So,

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Speaker 9: if anything, kind of the geopolitical situation just really makes

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Speaker 9: that the job for central bank is harder as they

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Speaker 9: think about their own economies and whether they can actually

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Speaker 9: cut rights this year.

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