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Speaker 1: This is Bloomberg daybak here for this Tuesday, the twenty

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Speaker 1: third of May in London coming up today.

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Speaker 2: How high is too high? Jamie Diamond. Warren's rates could

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Speaker 2: hit seven percent as fed hawks say more hikes are needed.

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Speaker 1: Optimism without end Biden and McCarthy sayer default is off

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Speaker 1: the table but failed to agree a deal.

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Speaker 2: Trading down. JP Morgan expects Investment Banking and Marcus revenue

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Speaker 2: to drop by fifteen percent.

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Speaker 3: The one point seven trillion pound UK market politicians want

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Speaker 3: to talk about and jet set No, those are the

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Speaker 3: stories we're looking at in today's papers. I'm James Worcock.

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Speaker 1: Plus the hunter becomes the hunted. Carl i Can speaks

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Speaker 1: to Bloomberg after Hindenburg research report leaves him fifteen billion

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Speaker 1: dollars poorer.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Europe. The business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast on Apple, Spotify, the Bloomberg and everywhere

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Speaker 4: you get your podcasts.

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Speaker 2: Good morning. I'm Stephen Carroll and.

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

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Speaker 2: JP Morgan's CEO, Jamie Diamond, says investors should prepare themselves

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Speaker 2: for two full percentage points of additional hikes. He told

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Speaker 2: the bank's Investor Day in New York that people need

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Speaker 2: to brace for much higher rates.

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Speaker 5: I think everyone should be prepared for rage going higher

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Speaker 5: from here. You know that if that five.

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Speaker 4: Percent nine off and FED funds, if I, and I've

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Speaker 4: been advising this to clients and banks, you should be

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Speaker 4: prepared for six seven.

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Speaker 2: Jamie Diamonds, a view contrasts with market expectations the FED

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Speaker 2: will pause at its current level of five to five

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Speaker 2: and a quarter percent. The CEO of America's biggest bank

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Speaker 2: also warned investors there's still too much liquidity in the

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Speaker 2: system and that there will be a credit cycle well.

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Speaker 1: Diamond's comments come as two of the fed's most hawkish

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Speaker 1: members called for high rates. The Saint Louis FED president

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Speaker 1: James Bullet says that he is backing more hikes this

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Speaker 1: year to quell inflation.

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Speaker 6: I'm thinking, you know, two more moves this year. Now,

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Speaker 6: exactly where those would be this year, I don't know,

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Speaker 6: but I've often advocated sooner rather than later. You want

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Speaker 6: to get the downward pressure on inflation while you can.

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Speaker 6: And also, you know you want to find inflation while

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Speaker 6: the labor market's really strong, well.

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Speaker 1: It's cool for more tightening, is echoed by fellow policymaker

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Speaker 1: Neil Kashkai. The Minneapolis Fed president, says that if the

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Speaker 1: Central Bank does pause, it should not be taken as

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Speaker 1: a sign that tightening is over. Just days ago, the

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Speaker 1: chaired Your Own Power signaled a pause at the Fed's

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Speaker 1: next meeting in June.

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Speaker 2: Staying in the US, High Speaker Kevin McCarthy and President

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Speaker 2: Joe Biden say talks have been productive, but they haven't

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Speaker 2: yet reached a deal to averse a default. The two

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Speaker 2: mess at the White House for more than an hour

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Speaker 2: on Monday. McCarthy says he's hopeful of an agreement.

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Speaker 7: I felt we had a productive discussion. We don't have

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Speaker 7: an agreement yet, but I did feel the discussion was

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Speaker 7: productive and air areas that we have differences of opinion.

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Speaker 7: We're going to have the staffs continue to get back

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Speaker 7: together and work on base some of the things that we.

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Speaker 5: Had talked about.

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Speaker 2: McCarthy's upbeat tone comes as Treasury Secretary Janet Yellen warned

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Speaker 2: it's now highly likely her department will run out of

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Speaker 2: cash early next month, with default coming as soon as

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Speaker 2: the first of June.

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Speaker 1: JP Morgan says that it expects second quarter revenue from investment,

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Speaker 1: banking and trading to drop by fifteen percent year on year.

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Speaker 1: But it's not all bad news for the Wall Street giants.

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Speaker 1: CFO Jeremy Barnum says that the bank will gain an

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Speaker 1: even bigger benefit from rising interest rates because of its

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Speaker 1: purchase of First Republic.

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Speaker 8: Turning to the impact of the First Republic transaction, we

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Speaker 8: are expecting a four year ANDII contribution of approximately three

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Speaker 8: billion dollars and as a result, we are updating the

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Speaker 8: twenty twenty three and IIx market's outlook to approximately eighty

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Speaker 8: four billion.

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Speaker 1: JP Morgan's CFO Jeremy and they're flagging that they've now

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Speaker 1: raised their guidance for net interest income for this year.

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Speaker 1: The bank bought First Republic earlier this month, after it

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Speaker 1: became the second largest bank failure in US history and

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Speaker 1: the fourth regional bank collapse this year.

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Speaker 2: Britain's double digit inflation rate is expected to follow the

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Speaker 2: sharpest pace in more than thirty years when April figures

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Speaker 2: are reported on Wednesday. At Bloomberg survey of economists forecast

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Speaker 2: that CPI will come in at eight point two percent,

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Speaker 2: down from ten point one percent in March. The drop

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Speaker 2: is expected to be driven by last year's surge and

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Speaker 2: energy prices falling out of the annual calculation. However, markets

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Speaker 2: are still leaning toward more BOE hikes and expect rates

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Speaker 2: to hit five percent by September, up from four and

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Speaker 2: a half percent currently.

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Speaker 1: The European Central Bank will reach at terminal rates before September.

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Speaker 1: That is the view of Governing Council member France wat

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Speaker 1: Viloy de Gallo. Here's what he told the National Association

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Speaker 1: of Busines this economics symposium in Paris.

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Speaker 9: I expect seen from today, said we will be a

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Speaker 9: determined rate, not later than by summer. As you know,

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Speaker 9: summer in Europe is a long and beautiful season which

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Speaker 9: starts in June and ends in September. In the meantime,

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Speaker 9: we have three possible governing councils either for hiking or pausing.

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Speaker 1: Somewhere in France sounding delightful, The Bank of France chief's

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Speaker 1: comments follow those of ECB President Christine Legard on Sunday.

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Speaker 1: She warned the fight to tame inflation isn't over and

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Speaker 1: more action is still needed.

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Speaker 2: Legendary Corporates writer Carl Khan says he didn't see the

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Speaker 2: Hindenburg report coming. In a nineteen minute interview with Bloomberg,

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Speaker 2: the billionaire declined to address the short seller's research directly,

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Speaker 2: who told us he's received an outpouring of support from

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Speaker 2: shareholders since Hindenburg's salva, but he did admit to making

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Speaker 2: one costly blunder He last nine billion dollars in recent

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Speaker 2: years by betting incorrectly that the financial markets would crash.

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Speaker 2: Shares in Ican enterprises ident forty three percent since the

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Speaker 2: first of May.

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Speaker 1: Okay, those are our top stories for you. What's caught

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Speaker 1: my eye today? Well, actually, it's European CEOs apparently increasingly

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Speaker 1: concerned about Europe's competitiveness. This is a really well regarded

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Speaker 1: survey is from the European Roundtable of Industrialists and also

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Speaker 1: the Conference Board. So apparently fifty seven percent of these

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Speaker 1: senior leaders European CEOs are planning to increase their presence

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Speaker 1: in North America, so in terms of investments or operations

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Speaker 1: or both, and that's in the next two years. They're

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Speaker 1: kind of reasonably optimistic about the picture in Europe at

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Speaker 1: the moment, and yet they are worried about, you know,

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Speaker 1: Europe losing competitiveness over the long term.

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Speaker 2: Yeah, I do wonder how much of this is a

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Speaker 2: Porsche or a pull. Is it a fact that things

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Speaker 2: like the Inflation Reduction Actor are t acting some of

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Speaker 2: this investment to the United States, And perhaps it's it's

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Speaker 2: that that's driving rather than people fleeing Europe. It's more

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Speaker 2: the fact that they've been attracted by the many dollars

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Speaker 2: that are bring off for the United States. Yes, in

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Speaker 2: certain key industries.

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Speaker 1: Yeah. Meanwhile, PwC has a nice survey out today the

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Speaker 1: best place to live and work in the UK. Well,

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Speaker 1: it's not London. Yeah, so it is though, Oxford, Swindon, Exetra,

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Speaker 1: Bristol and Southampton. I think Bristol gets a big cheer

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Speaker 1: from me, of course, it's the home of my old

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Speaker 1: alma mater.

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Speaker 2: I think we have an we have an Exeterra I

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Speaker 2: think graduates from the studio as well, so you get

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Speaker 2: some optimism from there as well. Swindon expected addition to

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Speaker 2: that list.

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Speaker 1: Yes, that is unusual, but I think it also This

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Speaker 1: survey highlights again that it's cities in the south of

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Speaker 1: England that get much better ratings. Basically than cities in

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Speaker 1: the North. It's kind of the leveling up issue.

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Speaker 2: And yeah, and look, it's also the issue of things

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Speaker 2: people looking at quality of life, the time it takes

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Speaker 2: them to get to work, how well they can the

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Speaker 2: quality of high street shops. Interesting matchic I wasn't expected

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Speaker 2: to be including there. So obviously people you know, making

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Speaker 2: sure they want to have their local business choices as well,

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Speaker 2: and things like startups going into that PwC survey as well.

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Speaker 1: Now let's get the latest then on the debt seiling talk?

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Speaker 1: Shall we in Washington? As the date for the US

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Speaker 1: Treasury to run out of money looms ever closer. Bloomberg's

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Speaker 1: John Harney is in Washington for US this morning. John,

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Speaker 1: thank you so much for staying up late. What progress

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Speaker 1: was made at the meeting between Joe Biden and Kevin McCarthy.

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Speaker 5: Well, certainly the tone was a much more upbeat, if

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Speaker 5: not optimistic. Both speaking McCarthy and President Biden indicate that

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Speaker 5: progress had been made, that the talks were predentiboose were productive. However,

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Speaker 5: no deal has been forged as of yet, and the

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Speaker 5: deadline for default is coming is coming ever closer. In

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Speaker 5: Treasury Secretary Jannet Yellen said on Monday that, you know,

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Speaker 5: the United States government will run out of money by

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Speaker 5: perhaps as early as June first.

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Speaker 2: John, when we had this optimistic and hopeful tone from

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Speaker 2: the High Speaker and the President after they met yesterday.

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Speaker 2: But where do we know are the stumbling blocks now

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Speaker 2: in these negotiations.

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Speaker 5: Well, they didn't. They didn't get into specifics in their

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Speaker 5: relative you know, their in Biden's case of statement and

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Speaker 5: McCarthy's case, uh a press conference outside the White House.

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Speaker 5: You know, it's it's you know, the Republicans want to

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Speaker 5: substantially not spending the Democrats obviously they do not want

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Speaker 5: to do that. There's also Republican demand that defense spending

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Speaker 5: the increased at the expense of other programs, which of

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Speaker 5: course are very important to democratic many democratic constituencies. So

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Speaker 5: we'll see in the days ahead just how far apart, uh,

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Speaker 5: the two sides are in these issues, and and if

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Speaker 5: they deal can be put together this week before the

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Speaker 5: American Memorial Day holiday.

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Speaker 1: Yeah, I mean the timetable in the next few days

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Speaker 1: is really difficult, isn't it. I Mean we're less than

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Speaker 1: a fortnight away from first of Jane.

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Speaker 5: Mm hmm. That's right, yes. And and also, uh the speaker,

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Speaker 5: Speaker McCarthy, you know to you know, he he always,

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Speaker 5: you know, every every House speaker says that they're going

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Speaker 5: to do things more, be more, uh be nicer to

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Speaker 5: their their their people, their their representatives. And so he

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Speaker 5: promised a seventy two hour time period in which they could,

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Speaker 5: you know, they can look at bills and certain legislation

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Speaker 5: wouldn't like an avalanche of pages, wouldn't be of legislation,

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Speaker 5: wouldn't be forced on them, and then they'd have to

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Speaker 5: vote right away. Well, seventy two hours that puts sets

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Speaker 5: you know, if he gives the House three days to

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Speaker 5: look at whatever this is before they vote, that gets

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Speaker 5: us right up to the edge.

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Speaker 2: Okay, John, thank you so much for bringing us up

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Speaker 2: to the date on that story, which we are marketing

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Speaker 2: very closely. That's Spoomberg's John Harney reporting for US from Washington.

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Speaker 2: Up next, Savings Game and jet Set No.

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Speaker 4: Now, the paper review on Bluebird Daybreak Europe. The news

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Speaker 4: you need to know from today's papers.

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Speaker 1: Blooms James will Cook joins us now for a look

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Speaker 1: through the morning's newspapers. James, you're always on the hunt

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Speaker 1: for an interesting financial story. So there's quite a bit

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Speaker 1: going on around pensions.

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Speaker 3: There is Caralin. It is everywhere right now. You are

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Speaker 3: seeing proposed from Jeremy huntnessing proposals and shadow chance for

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Speaker 3: Rachel Reeves. Even Legalan General's Nigel Wilson has talking about

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Speaker 3: pensions and it all follows from the LDI meltdown after

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Speaker 3: the mini budget last year, and so I wanted to

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Speaker 3: take a bit of a step back and explain quite

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Speaker 3: what was going on here. So the long story short

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Speaker 3: is pension funds are increasingly investing lot less in UK

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Speaker 3: equities and if you look at say defined benefits like

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Speaker 3: we'll come back to it later, pension funds, that has

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Speaker 3: gone down from say fifty percent in UK equities in

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Speaker 3: the nineteen nineties to two percent just last year, and

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Speaker 3: that means that there is less capital. And when we

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Speaker 3: talk about things like Ar'm not listing in London backing

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Speaker 3: British business as startups, that sort of missing capital is

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Speaker 3: being pointed to is a key reason. This is why

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Speaker 3: it's become such a big hot topic. So how this

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Speaker 3: actually happened then is here we have to talk a

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Speaker 3: bit about defined contribution, which is now most modern pension

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Speaker 3: schemes which the amount you get out of the end

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Speaker 3: is defined by how much you contribute during your hat

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Speaker 3: on the scheme versus defined benefit which back in the

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Speaker 3: ninth nineties and a lot of public sceptor pensions is

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Speaker 3: he's defined by how long you've worked for the company.

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Speaker 3: Is how much you're getting out. Sort of midway through there, now, those.

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Speaker 2: To find benefits schames are the ones that basically you

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Speaker 2: can't get on anymore. The ones that were places most

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Speaker 2: of us are undefined contribution schemes exactly.

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Speaker 3: And then so but the reason why you can't get

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Speaker 3: them on the eighty more is so fascinating. So it

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Speaker 3: all comes back to Robert Maxwell nineteen ninety one. Maxwell

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Speaker 3: had done passed away, fell out over at a yacht,

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Speaker 3: and it turned out he'd been using the Mirror's pension

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Speaker 3: funds to back up his own investments, and that brought

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Speaker 3: in a lot more regulation about how these assets were tracked.

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Speaker 3: Gordon Brown followed that up in two thousand with a

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Speaker 3: standard called FRS seventeen, which made companies track their pensions

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Speaker 3: in terms of liabilities, and his companies sent all these

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Speaker 3: massive equities on their balance sheets and moved away to

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Speaker 3: liability driven investments, which came back in the mini budget

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Speaker 3: to haunt them. They moved out of equities and into

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Speaker 3: stuff like bonds and so what are we going to

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Speaker 3: do about that now?

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Speaker 5: So here's where we.

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Speaker 3: Get into sort of what the papers are saying today.

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Speaker 3: So the Ft have got an interview with Rachel Reasar,

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Speaker 3: Shadow Chancellor. She wants to create a mandatory fifty billion

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Speaker 3: pounds business bank that pension funds would put the money into.

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Speaker 3: She also wants to consolidate a lot of the smaller

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Speaker 3: pension funds that are twenty eight thousand of them. She

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Speaker 3: must have been listening to youre Inty with the City

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Speaker 3: of London Mayor Caroline so exactly it was his idea

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Speaker 3: and she's.

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Speaker 1: Yes, we talked about exactly the same figure, fifty billion.

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Speaker 3: And then in Cityam. It's fascinating how much the political

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Speaker 3: agreement is here. The City Minister Andrew Griffith, he wants

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Speaker 3: to make equity sexy again, so he's all about freeing

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Speaker 3: up individual stakeholders to put their money into the pension

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Speaker 3: side of things as well. And the telegraphing into with

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Speaker 3: the Head of Legal and General Nigel Wilson, he's talking

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Speaker 3: about the similar thing. He wants to deregulate the city

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Speaker 3: to free up the money here. So that's what the

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Speaker 3: major players are saying, but there was an argument against

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Speaker 3: us as well. I was fascinated to read some research

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Speaker 3: from strode as head strategic research, dounk Lamont, and he says, actually,

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Speaker 3: in reality, the UKs dot market was heavily everweighted and

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Speaker 3: pensroon funds were right, So diversify away from it, and

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Speaker 3: in some ways they're just the whipping boys for political

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Speaker 3: people who are looking for a piggyback to try and

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Speaker 3: fund their own ambitions. The other big problem here is

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Speaker 3: he notes that if we now we've changed to contributions

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Speaker 3: rather than benefits, it is the worker who bears the risk.

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Speaker 1: And that is exactly the point that I was going

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Speaker 1: to make. I think the other major issue that has

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Speaker 1: been lost for many is that the risk and the

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Speaker 1: responsibility is now on the individual rather than on the

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Speaker 1: company to sort out pensions. And yes, also there's a

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Speaker 1: massive difference between whether that money is going towards listed

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Speaker 1: assets or whether it's going towards you know, startups or

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Speaker 1: unlisted businesses, and that again is a whole conversation about

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Speaker 1: where that pension money actually gets.

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Speaker 2: So one I'm being had in many newspapers this morning, James.

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Speaker 2: Another story that that's caught your eye. The Times a

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Speaker 2: piece on how hindsight is twenty twenty for Specsavers.

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Speaker 3: I mean, I couldn't let one go, Stephen. Last year

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Speaker 3: roughly ninety thousand private jets departed from the UK coorint

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Speaker 3: to Greenpeace, and a quiet piece of government research done

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Speaker 3: by consultancy Phrase and Now found that if you were

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Speaker 3: half the number of private jets you would immediately meet

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Speaker 3: all the net zero plane targets for the UK. And

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Speaker 3: it also The Times also found out the Specsavers of

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Speaker 3: many companies using private jets, but SPECSI in particular took

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Speaker 3: an average of twenty two private jets fights a week

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Speaker 3: a week, Caroline.

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Speaker 1: Wow, and if and if private jet use is a

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Speaker 1: huge issue, I'm amazed that it could make such a

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Speaker 1: difference to this.

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Speaker 3: It's all about the fuel use, unless, of.

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Speaker 1: Course, not what they're doing on the ground. Thank you

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Speaker 1: so much, James Walcock for a look through the newspapers.

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Speaker 2: This is Bloomberg Daybreak Europe. You're morning brief on the

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