Speaker 1: This is Bloomberg Daybreak Europe for this Tuesday, the twenty
Speaker 1: seventh of June in London. Coming up today a winter
Speaker 1: in retreat.
Speaker 2: Bloomberg Economics says that Bank of England rate rises will
Speaker 2: push the UK into recession by the end of the year.
Speaker 1: Talking taft, pudin labels, Wagner, mercenary, commanders, traitors, as progosion, denies,
Speaker 1: coop attempt.
Speaker 2: Investors take flight, Odasset Management suspended its flagship hedge fund
Speaker 2: on surging redemption requests.
Speaker 3: And these new toys and putting the I in IMF.
Speaker 3: Those are the stories we're looking at today's papers.
Speaker 1: I'm James Orcock Plus retail therapy are decline in UK
Speaker 1: sharp price inflation offers a glimmer of hope for the
Speaker 1: Bank of England.
Speaker 4: That's all straight ahead on Bloomberg Daybreak Europe. The business
Speaker 4: news you need to start your day in just one
Speaker 4: fifteen minute podcast on Apple, Spotify, the Bloomberg Business app
Speaker 4: and everywhere you get your podcasts.
Speaker 1: Good morning, I'm Stephen Carroll.
Speaker 2: And I'm Caroline Hepger. Here are the stories that we're
Speaker 2: following today. Bank of England rate hikes will push the
Speaker 2: UK into recession by the end of the year. According
Speaker 2: to Bloomberg Economics, our economists expect a peak Bank of
Speaker 2: England rate of five point seventy five percent, leading to
Speaker 2: a year long recession and a one percent drop in
Speaker 2: GDP in twenty twenty four, but money markets are almost
Speaker 2: fully pricing in a six point two five percent by
Speaker 2: December for the Bank of England, raising the possibility of
Speaker 2: a far worse slump. Alan Higgins, chief investment officer of
Speaker 2: Coots and Company, though, sounded a note of caution on
Speaker 2: a UK recession.
Speaker 5: Definition's going to be an impact. That looks like quite
Speaker 5: a pessimistic forecast though, and what we've seen before from
Speaker 5: pessimistic forecast is that they just haven't come through that.
Speaker 5: On an underlying basis, the UK economy has performed a
Speaker 5: little bit better, so i'd push back a little bit
Speaker 5: against that and also turn it into more of a
Speaker 5: global concern rather than a UK concern.
Speaker 2: Alan Higgins. A slightly more UPBEATA assessment is backed by
Speaker 2: new data showing that UK food price inflation is beginning
Speaker 2: to ease somewhat. The British Retail Consortium says that price
Speaker 2: rises may have peaked with food inflation and wider shot
Speaker 2: price inflation cooling for a second month in a row.
Speaker 1: As central bankers gather in the That will bring you
Speaker 1: more details on that central bank meeting also from CenTra,
Speaker 1: where we have central bankers from across Europe and indeed
Speaker 1: from also the Federal Reserve in the Bank of Japan
Speaker 1: gathering in Portugal today for that forum. Bloomberg's editor at
Speaker 1: large Francy Lackware reports a lot.
Speaker 6: Of debate on officials about what to do with three rises,
Speaker 6: and they'll get vital FaceTime here in Central Portugal to
Speaker 6: iron out their differences. The question is whether a pause
Speaker 6: is warranted to appraise is still unfolding effects of policy
Speaker 6: tightening to date, or whether more action is required after
Speaker 6: the summer break to attack called stubborn underlying price gains
Speaker 6: from Central Portugal. Franc In Lakwel Bloomberg Radio Now.
Speaker 2: Russia's President Vladimir Putin has condemned the leaders of the
Speaker 2: Wagner Mercenary Group as traitors. In his first public comments
Speaker 2: since the weekend's revolt, the Russian leader said the attempted
Speaker 2: mutiny had failed to divide the country.
Speaker 7: Dear friends, today I address once again all Russian citizens,
Speaker 7: I thank you for your endurance, solidarity and patriotism. Civil
Speaker 7: solidarity showed that any ransom, any attempts to organize internal
Speaker 7: unrest are doomed to fail.
Speaker 2: Putin's pre recorded address to the nation, spoken there through
Speaker 2: a translator, came hours after Wagner leader yevguiny Plagosan insisted
Speaker 2: that he hadn't been attempting a coup. The Mercenary chief
Speaker 2: said that the march on Moscow by Wagner troops had
Speaker 2: been a protest about injustices and mistakes made during Russia's
Speaker 2: invasion of Ukraine.
Speaker 1: Oh The asset management has suspended two more funds, including
Speaker 1: its flagship, after being hit by redemption requests from investors.
Speaker 1: Investors have been fleeing the firm after fresh sexual assault
Speaker 1: to allegations against founder crisp and Odi, which he denies.
Speaker 1: The firm received with droll requests amounting to about nineteen
Speaker 1: percent of the flagship ODI European Hedge Fund and thirty
Speaker 1: five percent of the OEI MAC Fund for the next
Speaker 1: dealing day on July third.
Speaker 2: Us Chajuy Secretary Jianna Yellen plans to visit China in
Speaker 2: early July. In a further sign of cooling tensions between
Speaker 2: Washington and Beijing. Bloomberg's Washington correspondent Marie Haudn broke that news.
Speaker 2: She points out that Yellen would be the second US
Speaker 2: Cabinet official to travel to the country in recent months.
Speaker 8: She has continuously said, even an interview with me at
Speaker 8: the G seven Finance ministers meeting in Japan, that when
Speaker 8: their time was appropriate, she had all plans to go,
Speaker 8: and then of course we're on the heels a surgery
Speaker 8: state Anthony Blincoln's trip, he just wrapped that up, so
Speaker 8: that really opened the door to have more of these
Speaker 8: principle to principal meetings between Beijing and Washington.
Speaker 2: And Marie Houdan, she says that the trip will include
Speaker 2: high level economic talks with Yellen's new Chinese counterpart. The
Speaker 2: visit comes as but the Biden administration continues to work
Speaker 2: on an executive order that would regulate and potentially cut
Speaker 2: off certain US investments in China.
Speaker 9: Well.
Speaker 1: That news comes as Chinese premier spoke out about what
Speaker 1: he called de globalization trends in the West. Speaking at
Speaker 1: the World Economic Forum in Tianjin, Li Kiang said the
Speaker 1: economic issues should not be brought into the political sphere.
Speaker 4: Some in the.
Speaker 9: West are hyping up the so called phraseologies of reducing
Speaker 9: dependencies and de risking. These two concepts, I would say,
Speaker 9: are forced propositions. Governments and relevant organizations should not overreach themselves.
Speaker 9: Still less, overstretch the concept of risk or turn it
Speaker 9: into an ideological tool.
Speaker 1: Speaking through a translator of Chinese, Premier Are also told
Speaker 1: the audience in the northern Chinese city that the world's
Speaker 1: second largest economy is still on track to hit its
Speaker 1: annual growth target of around five percent.
Speaker 2: Credit Sweee has agreed to pay nine hundred thousand dollars
Speaker 2: in fines over allegations that it reported trades late and
Speaker 2: misapplied key indicators to hundreds of thousands of transactions. The
Speaker 2: US Financial Industry Regulatory Authority said that the bank's brokerage
Speaker 2: reported about nine thousand trades late between November twenty fifteen
Speaker 2: and March this year. The transactions involved securitized products, corporate debt,
Speaker 2: and agency debt securities. According to FINRA, The news comes
Speaker 2: after UBS closed its deal to purchase Credit Suite earlier
Speaker 2: this month.
Speaker 1: So as our top stories on the program this morning,
Speaker 1: big focus for markets today is the ECB's Policymaking Forum
Speaker 1: in CenTra in Portugal. We're bringing you Christine Laguard's opening
Speaker 1: address from that event in just under an hour's time
Speaker 1: here on Bloomberg Radio. But we're also today focusing on
Speaker 1: a new forecast from Bloomberg Economics that continued rises by
Speaker 1: the Bank of England will push the UK into recession
Speaker 1: by the end of this year. That's the research from
Speaker 1: Bloomberg Economics, Dan Hansen and Anna Andrada looking at a
Speaker 1: year long recession knocking one percent off GDP for rights
Speaker 1: get to five point seven five percent. We've got David Powell,
Speaker 1: his senior Euro Area economists for Bloomberg Economics, with us
Speaker 1: this morning. Good morning to you, David. Can you take
Speaker 1: us through some of the headlines of this new forecast
Speaker 1: from your colleagues.
Speaker 10: Basically, inflation is proving much stickier in the UK than
Speaker 10: they originally thought it would be, and of course that's
Speaker 10: not unique to the UK. There's a similar story in
Speaker 10: the Euro Area and also in the US. But the
Speaker 10: UK really has the worst inflation problem. If we actually
Speaker 10: just look at current inflation rates in the G seven,
Speaker 10: it's the highest, so higher than the or the US
Speaker 10: but it has the energy shock that Europe had to
Speaker 10: deal with and also a very tight labor market that
Speaker 10: the US had to deal with. But Europe didn't have
Speaker 10: the really tight labor market and the US didn't have
Speaker 10: the energy shock. So the UK is these kind of
Speaker 10: two big shocks pushing up inflation, and of course the
Speaker 10: the the Bank of England is having to tackle that problem.
Speaker 10: That's worse than anywhere else, and it's probably going to
Speaker 10: require more tightening than we originally thought, than the markets
Speaker 10: originally thought, and then indeed the Bank of England originally thought,
Speaker 10: and of course that's going to have a negative impact
Speaker 10: on the economy. I think don't think we should kind
Speaker 10: of exaggerate it though. It's not going to be a long, long,
Speaker 10: deep recession or anything like that if you compare it
Speaker 10: to past recessions in the eighties and nineties, and the
Speaker 10: global financial crisis is a very shallow downturn compared to that.
Speaker 2: Okay, what would you respond to people like Alan Higgins,
Speaker 2: a cio ats, who says, look that even that is
Speaker 2: too pessimistic. Last ye we were very pessimistic about the
Speaker 2: potential for a session in a downtown It didn't really
Speaker 2: happen in the UK at the start of this year.
Speaker 2: What would you say to people who might say that's
Speaker 2: too negative.
Speaker 10: Well, actually, this forecast shows a downturn that is less
Speaker 10: shallow than the economic models would suggest to me if
Speaker 10: we've pushed up the numbers a bit to adjust for that,
Speaker 10: the fact that the economy has turned out to perform
Speaker 10: better than expected all along and has not had a
Speaker 10: reaction as strong as originative expected to the tightening of
Speaker 10: monetary policy.
Speaker 1: Okay, so I mean it's an interesting dilemma that Andrew
Speaker 1: Bailey is facing. Of course, he's joining his colleagues at
Speaker 1: the ECB's Central Banking Forum in CenTra. Where where are
Speaker 1: we expecting then peak rates for the Bank of England
Speaker 1: to land given the kind of gloomy outlook, Yeah.
Speaker 10: We look for a peak at five point seventy five,
Speaker 10: so another seventy five basis points of tightening from where
Speaker 10: we are right now. We probably won't get an update
Speaker 10: on that from Andrew Belly at Centre. It's probably not
Speaker 10: the forum he would try to try to he would
Speaker 10: use to signal any policy changes, but of course the
Speaker 10: ECB may signals signal something about its future. There we've
Speaker 10: already had confirmation from the President of the VCB, Christine Legard,
Speaker 10: at the last meeting that essentially the great hike at
Speaker 10: the next meeting in July is deal. So we know
Speaker 10: that and that will bring interest rates so the deposit
Speaker 10: rate to three point seventy five. But the big debate
Speaker 10: now is September. Christine Laguard said basically nothing about September.
Speaker 10: We've had various members of the Governing Council come out
Speaker 10: in favor of this or that. Primarily it's been the
Speaker 10: hawks speaking, and unsurprisingly they want another twenty five basis
Speaker 10: point increase in September, and we think that we think
Speaker 10: it's going to go that way. In our forecast, we
Speaker 10: have rates peaking at four percent in the Euro Area
Speaker 10: in September, largely because core inflation like the UK, even
Speaker 10: though it's lower than the UK, it is proving to
Speaker 10: be sticky and is likely to remain elevated throughout the
Speaker 10: course of the summer before it shows a more obvious
Speaker 10: decline in the autumn.
Speaker 2: The ECP, though, is still a long way from where
Speaker 2: the FED and where the UK Bank of England is.
Speaker 2: How much pressure do you think there will be versus
Speaker 2: of course, the beaten data that we've had out, for
Speaker 2: example from Germany, which has showed a mark slowdown in
Speaker 2: Germany already.
Speaker 10: Yeah, I think the the well. Obviously, the CB's interest
Speaker 10: rate is lower we just said in the UK it's
Speaker 10: at five percent and we're talking a peak of four
Speaker 10: percent in the euro Zone. But of course different economies
Speaker 10: have different natural rates of interest which there are a
Speaker 10: lot of things that go into calculating that, and probably
Speaker 10: growth is a bit lower on a structural basis in
Speaker 10: the your area than the UK, and therefore the peak
Speaker 10: is likely to be lower in the area than in
Speaker 10: the UK as well as in the US.
Speaker 1: Okay, Devid Hell, thank you so much for joining us
Speaker 1: the details of both that latest forecast for the UK economy,
Speaker 1: but the picture also facing those Eurozone policymakers as they
Speaker 1: gather in Portugal. That's our senior Euro Area Economistrom Bloomberg
Speaker 1: Economics David Powell there.
Speaker 2: Coming up next, putting the I in IMF and Andy's new.
Speaker 4: Toys Now the paper review on blue Bird Daybreak Europe,
Speaker 4: the news you need to know from today's papers, and.
Speaker 1: Bloomberg stays walk up joins usn't udio with a look
Speaker 1: at what's in the papers. James let starts with the Telegraph.
Speaker 1: They've got research from the IMF pointing the finger at
Speaker 1: corporate greed.
Speaker 3: Yes, and this all comes out from CenTra. The ECB
Speaker 3: conference in Portugal, the im presented the sort of lasist
Speaker 3: research looking at inflation there and the big thing is
Speaker 3: in the Eurozone. They say that companies pursuing profits is
Speaker 3: a bigger factor than energy prices were in spiking up
Speaker 3: costs and the rising inflation. And that is fascinating because
Speaker 3: the narrative has long been that the Ukraine War has
Speaker 3: caused large rises and prices, and the IMF don't dispute that,
Speaker 3: but they say it is now a larger factor that
Speaker 3: companies pursuing profit margins. This is the greedflation phenomenon have
Speaker 3: pushed prices higher.
Speaker 4: Now.
Speaker 3: The danger here is not that companies seek profit, this
Speaker 3: isn't what the imfor they are a very capless organization,
Speaker 3: but that now workers will push back for wages in turn.
Speaker 3: And it's fascinating that this in some ways echoes what
Speaker 3: Andrew Bailey has got in such trouble for saying, except
Speaker 3: because the IMF saying, well, companies shouldn't be pursuing profits
Speaker 3: in this way because now the dangers that workers will
Speaker 3: pursue wages and they fear that if in the Eurozone
Speaker 3: pay were to be increase by the five point five
Speaker 3: percent rated needed to get wages back to their pre
Speaker 3: pandemic level by the end of next year, companies share
Speaker 3: of the profits would need to drop to their lowest
Speaker 3: level since the mid nineteen nineties for inflation to return
Speaker 3: to target. So it comes back to someone needs to
Speaker 3: feel the pain. Companies have pushed profits up to the
Speaker 3: telegraph the joins the dots and says there are some
Speaker 3: sales that are up by sixteen percent in some companies
Speaker 3: in the UK. And if they're willing to have these
Speaker 3: exorbitant profits with no sort of risk or no sort
Speaker 3: of losses, say, then it's going to be consumers filling
Speaker 3: the pinch or prolonging inflationory cycles.
Speaker 4: Yeah.
Speaker 2: On the other hand, it's the thing that has driven
Speaker 2: stock markets in Europe, of course, the strength of earnings.
Speaker 2: So yeah, that's tricky if you end up with an
Speaker 2: earnings recession. Andy Heldon has written in an editorial in
Speaker 2: The Financial Times about the industrial revolution the current one.
Speaker 3: So, Karen, what we've got to remember here is everything
Speaker 3: isn't so bad. There's a big, bright future ahead of us.
Speaker 3: And Andy Haldane sees it. He's been writing for years
Speaker 3: about seclis stagnation, this idea that Western economies are in
Speaker 3: this sort of permanent funk where they cannot find investment,
Speaker 3: R and D productive, you cannot get better, and he
Speaker 3: sees real promise in this current new industrial revolution, as
Speaker 3: he terms it, of you are seeing near suring, you
Speaker 3: are seeing military re militarization, you are seeing green technologies.
Speaker 3: And these three races, as he terms them, our driving investment,
Speaker 3: are driving manufacturing, and are driving a reverse of some
Speaker 3: of the trends that he's been worried about for years.
Speaker 3: And he says, you know, he calls it a global
Speaker 3: arms race, but unlike some arms race, is one that
Speaker 3: is actually bringing serious, beneficient benefits to the Western world.
Speaker 2: Yeah, although I mean rearmament, perhaps the one that might
Speaker 2: be seen is quite questionable. I mean green technology is great.
Speaker 2: I mean rearmament a little bit more fraught and perilous.
Speaker 2: But no, what does Haldane doesn't talk about the UK specifically, does.
Speaker 3: He Well, no, so he looks framesus in terms of
Speaker 3: the Western world and the Eastern world and sort of
Speaker 3: the industrial changes that are happening there. And I think
Speaker 3: you point out quite a good thing and that interesting
Speaker 3: thing in that column, and that he frames these races
Speaker 3: reshaping the world economy. He had no point mentions if
Speaker 3: how well the UK is doing in any of those races,
Speaker 3: we could be first place or we could be last place.
Speaker 3: How Dane, as a former central banker's very good at
Speaker 3: keeping his mouth tightly appursed on that one.
Speaker 10: Like interesting.
Speaker 1: Indeed, let's go to the Wall Street Journal next change
Speaker 1: writing about salaries.
Speaker 3: Well, I mean normally people say, if you want to
Speaker 3: be happier, paid more. But the fascetting story in the
Speaker 3: survey that Wall Street Journals written up is that the
Speaker 3: majority of workers feel they're fairly paid, but the top
Speaker 3: of the satisfaction list across all industries are independent workers,
Speaker 3: according to a survey of twenty five hundred American workers.
Speaker 3: So the find suggests that a while getting paid more
Speaker 3: and knowing what your work is important, that sort of
Speaker 3: authority and responsibility and knowing that you're your own boss
Speaker 3: brings up LEVELSS satisfaction that money might not be able
Speaker 3: to buy.
Speaker 2: That's it. So it's not somebody on zero l's contracts.
Speaker 3: Then on aggregate, Yes, although it is important to separate.
Speaker 3: Like you raised the point quite fairly that those on
Speaker 3: PEP companies like Uber, Instacart, door offer poor work editions,
Speaker 3: low pay for their gig workers, and one in five
Speaker 3: gig workers often couldn't afford enough food to eat, the
Speaker 3: same survey found. But that makes it all the more
Speaker 3: fascinating that on aggregate, those independent workers still top the survey.
Speaker 1: This is Bloomberg Daybreak Europe. You're a morning brief on
Speaker 1: the stories making news from London to Wall Streets and beyond.
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Speaker 1: I'm Caroline Hepka and I'm Stephen Carroll. Join us again
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Speaker 1: your day right here on Bloomberg day Break Europe.
Speaker 9: M m
Speaker 8: Mm hmm