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Speaker 1: This is Bloomberg daybak you up for this Wednesday, the

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Speaker 1: twenty first of June in London.

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Speaker 2: Coming up today.

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Speaker 3: Feeling the heat, pressure grows on the Bank of England

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Speaker 3: ahead of today's inflation print.

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Speaker 2: Reinflating tensions.

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Speaker 1: Biden likens she to a dictator, kept in the dark

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Speaker 1: about the alleged Chinese spy balloon.

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Speaker 3: Lacking oversight. The head of the New York Fed says

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Speaker 3: company directors need to take responsibility.

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Speaker 4: Britain's mortgage bomb and two stigma. Those of the stories

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Speaker 4: we're looking at in today's papers. I'm James Walcock.

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Speaker 2: Plus.

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Speaker 1: With less than thirty hours of air remaining, noises have

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Speaker 1: been detected in the search for the missing Titanic sub

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Speaker 1: We have the latest.

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Speaker 5: That's all straight ahead on Bloomberg Daybreak Europe. The business

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Speaker 5: news you need to start your day in just one

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Speaker 5: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App

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Speaker 5: and everywhere you get your podcasts.

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Speaker 3: Good morning. I'm Stephen Carroll and.

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Speaker 1: I'm Caroline Hetger. Here are the stories that we're following today.

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Speaker 3: Britain is bracing for key economic data today, with inflation

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Speaker 3: numbers for the month of May due to be published

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Speaker 3: Bloomberg's UW and Parks has more.

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Speaker 6: Last month's UK inflation reading shocked the forecasters, coming in

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Speaker 6: a whole half a percent higher than expected, so data

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Speaker 6: today will be closely watched by investors, the government and

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Speaker 6: the Bank of England. It's expected to show a moderation

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Speaker 6: in price pressures with inflation in the year to make

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Speaker 6: forecaster come in at eight point four percent, but that's

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Speaker 6: not expected to be enough to stop the BOE from

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Speaker 6: hiking rates again. We'll get that decision at midday tomorrow

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Speaker 6: in London. I'm you in parts Bloomberg day Break.

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Speaker 1: Europe, the head of the Bank of France says that

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Speaker 1: the European Central Bank has completed most of its interest

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Speaker 1: rate increases. In an interview for the French newspaper Lizzik Cool,

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Speaker 1: Francois Vilwu de Gallo said, quote, our rates are now

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Speaker 1: tending towards their asimp tote, and any additional increases will

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Speaker 1: depend on the inflation data. The policymakers common add caution

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Speaker 1: to a heated debate at the ECB over the outlook

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Speaker 1: for interest rates ahead of their next meeting in July.

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Speaker 3: US President Joe Biden says as Chinese counterbart Xijingping, was

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Speaker 3: unaware that the alleged spy balloon had floated over the

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Speaker 3: continental United States until it became an international incident. Speaking

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Speaker 3: to donors, Biden compared the Chinese leader to an embarrassed

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Speaker 3: dictator kept in the dark. The comments come after the

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Speaker 3: US Secretary of State Anthony Blincoln used a visit to

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Speaker 3: Beijing to try and ease the fractured diplomatic relationship.

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Speaker 7: The relationship and the communication between of the two leaders

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Speaker 7: between President Biden president Chi is most important of all.

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Speaker 7: That's why they've had a number of communications and meetings

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Speaker 7: to date, and that's why I expect you'll see more

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Speaker 7: of that.

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Speaker 3: Lincoln met on Monday with Chijingping, who said he welcomed

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Speaker 3: the steadying of bilateral ties.

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Speaker 1: Well, saying with the growing divisions between China and the West,

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Speaker 1: the EU has set out plans to align itself more

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Speaker 1: closely with USB policy. The bloc's new economic security strategy

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Speaker 1: includes export controls and increasing oversight of critical technologies. The

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Speaker 1: European Commission president as the Fondlione, says that it is

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Speaker 1: a bold plan.

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Speaker 8: Europe becomes the first major economy to set out a

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Speaker 8: strategy on economic security. It builds on three policy strand

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Speaker 8: we want to promote, we want to protect, and we

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Speaker 8: want to partner.

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Speaker 1: Fonderlon says that the EU is looking at a limit

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Speaker 1: access to some cutting edge technologies to avoid it being

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Speaker 1: used by quote countries of concern. The proposal will now

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Speaker 1: need to be approved by EU member countries.

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Speaker 3: The president of the New York Fed says boards of

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Speaker 3: directors needs to ensure management are doing their jobs. Speaking

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Speaker 3: at a panel on Governments and Culture Reform conference, John

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Speaker 3: Williams said, it's an issue that needs to be looked

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Speaker 3: at more closely.

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Speaker 9: You need to be forward looking, need to think outside

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Speaker 9: the box, if you will, if you're claiming a strategy.

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Speaker 9: I also think the boards. You know, the board of

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Speaker 9: directors plays a very important role of all this. We

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Speaker 9: tend not to talk about them as much as I

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Speaker 9: think we should. They do have an important role to

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Speaker 9: make sure that senior management is actually not only doing

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Speaker 9: their job every day, but also doing that kind of

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Speaker 9: thinking and bringing that you know into the room.

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Speaker 3: John Williams also tell the audience that he believes the

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Speaker 3: companies need to be more transparent regarding board of directors' roles.

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Speaker 3: His comments come after a string of US bank failures

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Speaker 3: raised questions about the leadership at some lenders.

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Speaker 1: Finally, underwater noises have been detected in the search for

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Speaker 1: the sub that was headed to the wreck of the Titanic.

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Speaker 1: The US Coast Guard says that a Canadian plane with

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Speaker 1: sonar capabilities detected sounds and attempts are being made to

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Speaker 1: explore their origin. Speaking earlier, US Coastguard Captain Jamie Frederick

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Speaker 1: said that efforts to locate the vessel face a number

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Speaker 1: of challenges.

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Speaker 10: This is a very complex search and the unified teams

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Speaker 10: working around the clock to bring all available assets and

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Speaker 10: expertise used to bear as quickly as possible in an

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Speaker 10: effort to solve this very complex problem. To day, those

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Speaker 10: search efforts have not yielded any results.

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Speaker 1: The US Coast Guard says that the diving vessel has

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Speaker 1: five people on board and is estimated to have less

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Speaker 1: than thirty hours of oxygen remaining. The five crew members

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Speaker 1: include the UK billionaire chairman of Action Aviation, hey Mish Harding.

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Speaker 3: So as our top stories on the program this morning,

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Speaker 3: other news that caught my eye this morning about an

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Speaker 3: iconic brand going under hunter as wellies.

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Speaker 1: Yeah, I mean Hunter Wellington Boots of course absolutely quintessentially British,

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Speaker 1: but supply chain problems breaks it, inflation and warm Weather

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Speaker 1: has apparently done for this brand. It's gone into administration.

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Speaker 1: Alex Partner says that the company faces significant challenges and

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Speaker 1: has done since twenty nineteen. So it's a business that

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Speaker 1: dates back to eighteen fifty seven and as I say,

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Speaker 1: it's absolutely iconic in the UK.

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Speaker 3: So I was quite surprised the brand may revive be

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Speaker 3: refined after it though, because as part of the restructuring process,

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Speaker 3: the IP has been sold to Authentic Brands Group recently

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Speaker 3: bought Ted Baker Chance that perhaps we may, but it's.

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Speaker 1: A lot of those UK high street names that have

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Speaker 1: run into a great deal of difficulty in recent years.

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Speaker 2: Another one of those.

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Speaker 1: And also on a lighter note, I feel we've got

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Speaker 1: a lot of serious news today. I wanted to point

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Speaker 1: to well an icon in London, which of course is

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Speaker 1: the National Portrait Gallery. There is a beautiful piece on

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Speaker 1: the terminal today that's been written by our colleague James

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Speaker 1: Tarmy has lovely photographs about this more than forty million

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Speaker 1: pound construction project that's lasted three years, that has seen

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Speaker 1: the National Portrait Gallery largely closed that is reopening in

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Speaker 1: kind of technicolor glory. The galleries look amazing, so have

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Speaker 1: a look at the pictures on the time.

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Speaker 3: It's also going to be a big change to that

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Speaker 3: part of London because I feel like the hoarding has

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Speaker 3: been up for so long outside the Portrait Gallery that

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Speaker 3: that's all we're used to seeing around.

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Speaker 1: And the entrance is actually going to be in a

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Speaker 1: different spot for anybody who actually goes to the gallery,

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Speaker 1: you're gonna have to go around the other side of

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Speaker 1: the building. But it is it does look really wonderful.

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Speaker 1: Apparently there's going to be a lot more photography or

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Speaker 1: so on display. Anyway, icons of British culture and clothing

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Speaker 1: that for you beautifully.

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Speaker 3: Okay, well let's turn to a different icon now. FED

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Speaker 3: Chairman Jerome Powell gives his semi annual monetary policy reports

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Speaker 3: the House Financial Services Committee. Later on joining us now

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Speaker 3: to help us preview that at is Boomberg's market support

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Speaker 3: of Valerie title good morning to you, Valerie. So market

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Speaker 3: seemed to be expecting hawkish testimony from Powell today.

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Speaker 11: Yeah, so, essentially because the take from the press conference

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Speaker 11: and the rate decision last week was that he was

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Speaker 11: moderately dubvish in his language in the press conference, but

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Speaker 11: again rose those dots to show two more hikes to go.

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Speaker 11: He might try to finesse that message a bit more,

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Speaker 11: maybe try to sound a bit more hawkish, because in

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Speaker 11: some way the market remains a bit unconvinced that the

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Speaker 11: FED will hike twice more, as indicated in that dot plot,

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Speaker 11: so he might push back against such views. The other

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Speaker 11: thing he's gonna get asked, probably multiple times, is to

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Speaker 11: explain why he paused in June but still planning on

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Speaker 11: hiking later in the year. He was asked this question

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Speaker 11: many times in the press conference after the rate decision

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Speaker 11: as well, but I expect lawmakers to ask him this repeatedly.

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Speaker 11: He'll probably stress words like the FED needs flexibility as

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Speaker 11: we near peak rates, and that pace isn't as important

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Speaker 11: to him anymore. It's raising rates to the right level

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Speaker 11: and he needs time to do that in the best manner.

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Speaker 1: Okay, So that on join power. There's also been though,

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Speaker 1: some quite interesting data housing styles in the US, in

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Speaker 1: particular a huge beat massive home building.

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Speaker 2: What's going on?

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Speaker 11: Massive beat? Just almost three standard deviations of a beat

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Speaker 11: on housing starts in yesterday's data. Now this means that

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Speaker 11: housing could probably contribute positively to GDP in the second

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Speaker 11: quarter for the US. But the big thing here is

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Speaker 11: that if we take a step back and look at

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Speaker 11: why why the Bank of Canada did that surprise hike,

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Speaker 11: why the RBA did that surprise hike, both of those

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Speaker 11: countries had the reason that housing rebounded strongly. So perhaps

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Speaker 11: this is the first hint that housing is due for

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Speaker 11: a big rebound, and does that complicate the Fed's playbook

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Speaker 11: if growth does keep surprising on the upside? It was

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Speaker 11: just one data point. I want to stress we get

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Speaker 11: more housing data later in the year, with it later

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Speaker 11: in the week with existing home sales, but this was

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Speaker 11: such a big beat we have to start wondering what's

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Speaker 11: going on in the US housing market now.

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Speaker 3: Yeah, certainly a very interesting one to be watching. I'm

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Speaker 3: wondering as well. We've also seen some movements in the

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Speaker 3: Chinese y Wan this morning. What's driving this?

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Speaker 11: Again, just a lack of words from the PBOC from

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Speaker 11: China in any further stimulus. But it's breaked, It's broke

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Speaker 11: through a key level versus the US dollar, that's seven

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Speaker 11: point two. Remember it was a big deal when it

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Speaker 11: broke seven just a month ago, and the PBOC really

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Speaker 11: hasn't done a lot with its overnight fixings to try

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Speaker 11: to stem the weakness of the yuan. And this is

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Speaker 11: now another key level that it's broken seven point two,

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Speaker 11: which raises the bar now more speculation that the PBOC

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Speaker 11: is going to let it weaken further.

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Speaker 2: Yeah. Absolutely, just a last thought.

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Speaker 1: Also, it's not happening in the US, but for other countries,

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Speaker 1: rate cut bets are mounting in developed markets like Australia,

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Speaker 1: like you know, New Zealand, Norway, also Sweden, and you've

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Speaker 1: been looking at Sweden today.

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Speaker 11: Well, so I think the nature of the other markets

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Speaker 11: pricing and rate cuts is just because we've had this

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Speaker 11: big hawkish wave. We've had more rate hikes priced in immediately,

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Speaker 11: and we know that the farther we go into restrictive territory,

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Speaker 11: the more the market's going to assume that you have

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Speaker 11: to cut quickly because something is going to break or

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Speaker 11: there's going to be a real hit to growth. So

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Speaker 11: that's just a nature I think of this big hawkish

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Speaker 11: wave that we've had in the last two weeks from

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Speaker 11: Central Banks and then Sweden that's a very interesting one.

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Speaker 11: Their currency dropped to a record low versus the Euro yesterday.

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Speaker 11: And this is all down to the fact that when

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Speaker 11: markets look at Sweden, they think that they're not going

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Speaker 11: to be able to keep up with that hawkish wave

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Speaker 11: because they have already started to see very big problems

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Speaker 11: in their housing market. I learned this yesterday. Some of

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Speaker 11: their mortgages in Sweden are only fixed for six months.

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Speaker 11: Well yeah, so you think the UK is quite sensitive.

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Speaker 11: You know, Sweden's got a different problem. So there's limited

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Speaker 11: headroom for the ricks bank to keep hiking rates to

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Speaker 11: keep up with everybody else, and it's leading to a

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Speaker 11: depreciation of their currency.

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Speaker 3: Okay, Valeria, our market supporter. Even imagine spring in the

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Speaker 3: world's eldest central bank. Thank you very much for that.

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Speaker 3: Up next Britain's mortgage bomb and two Stigma.

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Speaker 5: Now the paper review on blue Bird Daybreak Europe. The

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Speaker 5: news you need to know from today's papers.

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Speaker 1: Bluebog same so Coach Jones is now for Hey, look

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Speaker 1: what is in the newspapers this morning? Starting with a

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Speaker 1: Wall Street Journal, they have a long bread on a

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Speaker 1: feud in hedge funds.

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Speaker 4: Well, Collen and Stephen, what is the worst argument the

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Speaker 4: two of you have ever had.

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Speaker 2: We are too young in our friendship to have ever fought.

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Speaker 1: There you go until now tell us about the hedge

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Speaker 1: funds well sued, then.

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Speaker 4: So it's a sixty billion dollar feud in terms of

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Speaker 4: two Sigma are a very well established hedge fund. They've

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Speaker 4: been going for twenty two years. And between the two founders,

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Speaker 4: John Overdek and David Siegel that it's written into the

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Speaker 4: firm's founding text that they have to agree on most

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Speaker 4: decisions a coin of people familiar. Now where this becomes

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Speaker 4: really problematic is in the company's latest filings it is

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Speaker 4: listed as a material risk that they can't agree anymore

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Speaker 4: and the relationship has deteriorated to the point where it

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Speaker 4: has been disclosed in the firing. And that is also

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Speaker 4: saying they are having difficulty of taking key decisions at

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Speaker 4: disclosure that lawyers and investors says virtually impressed, entered that

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Speaker 4: it has had to get to that kind of state.

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Speaker 1: Well, although having said that, it's one of the big

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Speaker 1: causes of small business failures is the fact that you know,

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Speaker 1: the founders and the partners sort of yeah, then disagree

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Speaker 1: at some point, but no, this is big bucks.

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Speaker 4: Though, yeah, this is a lot, a lot of money.

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Speaker 4: I mean, two Sigma specializes in the kind of it's

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Speaker 4: like nerds nerds company. Yeah, they bring in the PhDs,

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Speaker 4: they digest kind of torrents information and then write sort

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Speaker 4: of big trading algorithms based on that. But to give

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Speaker 4: you an ideas that these very smart men and the

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Speaker 4: way that how trivial this has gotten to. In a

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Speaker 4: two twenty fifteen profile of two Sigma, fours described Overdeck

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Speaker 4: as the master chef of two Sigma and Siegel as

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Speaker 4: the firm's manager. Soon after, Overdeck brought a chef's hat

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Speaker 4: into a meeting with Siegel, accorinted people familiar. So it's

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Speaker 4: this level, it's reached this level now, I mean Bloomberg's

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Speaker 4: Mat Lavine I always go to for a smart take

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Speaker 4: on this stuff, and he says, what is fascinating here

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Speaker 4: is that there has been no material impact on the

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Speaker 4: firm's bottom line from this disclosure. So his view, which

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Speaker 4: I quite enjoy, is that maybe it has allowed the

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Speaker 4: computers to make the investment decisions, which frees up the

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Speaker 4: employee to engage in a lot of bizarre into personal drama,

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Speaker 4: which in turn means the computer left alone to make

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Speaker 4: all the smart choices.

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Speaker 3: Okay, right, let's turn into something different now. Then, we've

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Speaker 3: been covering here in Bloomberg for a long time, the

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Speaker 3: finantal Times reporting on Treasury insiders talking about a mortgage barm.

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Speaker 4: Yes, I mean, we've been talking about the big issues

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Speaker 4: in terms of CPI is pushing up interest rates, and

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Speaker 4: interest rates in turn are causing massive problems for the

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Speaker 4: mortgage markets and the ft. I'm saying the chancefer is

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Speaker 4: planned to call in big lenders on Friday to assess

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Speaker 4: the state of the mortgage market and see what additional

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Speaker 4: help they can give people. Now, I hesitate to be

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Speaker 4: labeled Gloomberg and talk about all the bad news that

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Speaker 4: is coming. But this is a feature, not a bug.

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Speaker 4: When you raise interest rates this high, this is going

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Speaker 4: to cause distress, and for an extent that is kind

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Speaker 4: of the point there. This is part of the problem,

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Speaker 4: and so any tax break or support will be both

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Speaker 4: by its nature inflationary and a strain on the public service,

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Speaker 4: which is why Joe Hadners also ruled them out. He

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Speaker 4: did so just yeah in the ft, so, I mean

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Speaker 4: one executive quote in the ft of a bank said

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Speaker 4: it's nothing more than the chance of playing to the crowd.

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Speaker 4: It will just allow them to show to show the

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Speaker 4: public that he's doing something. Yeah.

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Speaker 1: Look, absolutely the bill for a decade long of borrowing.

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Speaker 1: The binge in borrowing that you know, we've all taken

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Speaker 1: advantage of businesses and households is coming due. I think

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Speaker 1: the most fascinating bit is this idea though that the

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Speaker 1: penny is dropping, that five or six percent above six

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Speaker 1: percent mortgage rates is just as painful as thirteen percent

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Speaker 1: mortgage rates were back in the late nineteen eighties. Why

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Speaker 1: because households are borrowed so much more so the pain

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Speaker 1: on your you know, take the take home paid disposal

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Speaker 1: income that you have is enormous.

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Speaker 4: And that has been longer. Sort of refrain of sort

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Speaker 4: of politicians on air saying, oh, it's not as bad

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Speaker 4: as the nineteen seventies, but that sort of leverage is

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Speaker 4: becoming a big issue, is what'th saying? On a positive note,

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Speaker 4: government did take action Back in December twenty twenty two,

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Speaker 4: Andrew Griffith, City of London Minister says lenders are being

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Speaker 4: encouraged offer mortgage to extensions, switch to industry and repayment holidays,

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Speaker 4: so the thing that they could have done they did

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Speaker 4: actually months ago and will take effect that banks are

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Speaker 4: trying to avoid defaults where possible.

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Speaker 3: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 3: stories making news from London to Wall Street and beyond.

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Speaker 1: I'm Caroline Hepka.

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