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

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

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Speaker 1: you listen. It's Friday, the twenty fifth of October in London.

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Speaker 1: I'm Caroline Hepca and.

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Speaker 2: I'm Stephen Carroll. Coming up today, Harassment in the City.

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Speaker 2: A regulator's survey finds a seventy two percent surge in

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Speaker 2: misconduct claims in three years.

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Speaker 1: Tax rise signals kiss Darma says people who get their

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Speaker 1: income from stocks are not working people.

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Speaker 2: Plus China in a bullshop, the financial elite, poor cold

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Speaker 2: water on Beijing's stimulus plans at the IMF Sanuel gathering.

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

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Speaker 2: Harassment claims that city firms have soared, according to a

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Speaker 2: new survey from the Financial Conduct Authority. Bloomberg E Chames

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Speaker 2: Wilcock has the story.

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Speaker 3: It's the biggest review of discrimination and bullying claims in

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Speaker 3: the square mile ever conducted by the city regulator. Businesses

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Speaker 3: report today seventy two percent surge in non financial misconduct

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Speaker 3: claims over the last three years, with bullying and harassment

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Speaker 3: the most reported internal complaints. The survey of more than

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Speaker 3: a thousand firms. Comes after a string of high profile scandals,

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Speaker 3: including sexual harassment allegations leveled at Hedge fund chief at

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Speaker 3: Crispin Odi, who has now rejoined his hedge fund following

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Speaker 3: the claims. The watchdog stops short of announcing new requirements.

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Speaker 3: In London, James Wilcock Bloomberg Radio, UK.

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Speaker 1: Prime Minister Kirs Starmer says that those who make money

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Speaker 1: from their assets don't count as working people. The comments

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Speaker 1: come ahead of the government's budget next week, where taxes

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Speaker 1: are widely expected to increase. The Prime Minister is asked

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Speaker 1: who would be protected or I.

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Speaker 4: Have in my mind's eye when I make decisions as

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Speaker 4: Prime Minister are the sorts of working people who go out,

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Speaker 4: work hard and maybe save a bit of money, but

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Speaker 4: don't have the wherewithal to write a check to get

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Speaker 4: out of difficulties if they're in their family got into difficulties.

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Speaker 1: So that was Kirs Starmer speaking there ahead of the budget.

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Speaker 1: UK consumer confidence has fallen to minus twenty one in

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Speaker 1: October as households have turned more downbeat about the broader

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Speaker 1: economic outlook. The spread between UK and German government bonds

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Speaker 1: has risen to the highest in a year on an

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Speaker 1: announcement by the Chancellor yesterday that she would boost her

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Speaker 1: boring headroom by fifty billion pounds.

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Speaker 2: China's recent stimulus measures fall short of what's needed. That's

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Speaker 2: according to central bank governors and finance ministers at the

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Speaker 2: IMF's annual meeting. Critics argue that the stimulus fails to

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Speaker 2: address key issues such as over capacity and weak domestic demand,

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Speaker 2: and lacks a clear plan to boost consumer spending. Bloomberg's

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Speaker 2: Rebecca Jong Wilkins says many analysts thinks the country is

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Speaker 2: opting to wait and see.

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Speaker 5: As we see this risk of a looming trade war,

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Speaker 5: potential full blown trade war with the EU, as well

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Speaker 5: as a potential chaotic Trump presidency. China's really trying to

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Speaker 5: sort of hedge its bets and play nice with a

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Speaker 5: series of key countries.

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Speaker 2: Winberg's Asia Government of Politics correspondent Back to John Wilkins. There,

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Speaker 2: although senior Chinese Central bank figures we're at the IMF meetings,

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Speaker 2: none of those in Beijing's stimulus rollouts involved in beijing

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Speaker 2: stemulus rollouts give any public comments.

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Speaker 1: Some of Europe's central bankers are starting to openly discuss

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Speaker 1: cutting rates by fifty basis points in December. They're more hawkish.

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Speaker 1: Colleagues say that that's far too hasty. Belgium's Pierre Vunch

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Speaker 1: is one of them.

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Speaker 6: I know some of my colleagues are already discussing cutting

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Speaker 6: fifty basis points in December. We'll have two more readings

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Speaker 6: of inflation before we have a few projections. My take

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Speaker 6: on it is, of course, the European economy is weaker

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Speaker 6: than we thought, and we had an inflation surprise on

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Speaker 6: the downside in September. But I don't see why we

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Speaker 6: should today have a discussion on a fifty basis point

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Speaker 6: cut in December. I think really it's prematural.

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Speaker 1: So premature. ECB Governor Council member Pierre Vunch was responding

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Speaker 1: on Bloomberg to comments from Portugal's Mario Sentinel and Latvia's

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Speaker 1: Martin's Kazakhs, who say that the ECB should make major

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Speaker 1: cuts to support the economy. Watching the policymakers are the

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Speaker 1: money markets. They now almost are evenly split between positioning

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Speaker 1: for twenty five or fifty basis point rate reduction in December.

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Speaker 2: Andrew Bailey says clearing houses pose a risk to the

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Speaker 2: financial system if not properly operated the banking. The governor

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Speaker 2: made the comments on the sidelines of the IMF annual

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Speaker 2: meetings in Washington, arguing that central counterparties should be able

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Speaker 2: to manage the shock of a bank failure by mitigating

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Speaker 2: credit risk. However, Bailey also noted the risks of unsafe clearing,

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Speaker 2: added that it would be worse than no clearing. The

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Speaker 2: practice became a political flashpoint post Brexit as the UK

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Speaker 2: battle to retain EU clearing activity. A deal earlier this

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Speaker 2: year ensured much of that business will remain in London.

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Speaker 1: UBS a CEO, says that fragmentation in Europe's banking markets

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Speaker 1: is increasing borrowing costs and suppressing shareholder returns. Speaking to Bloomberg,

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Speaker 1: Amoti says the economy is losing out as a result.

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Speaker 7: At the end of the day, the cost is paid

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Speaker 7: by the economy by clients. I think, of course shareholders

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Speaker 7: are suffering, but eventually cost of borrowing and the facility

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Speaker 7: and the easiness of accessing credits is impaired, so allowing

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Speaker 7: capital to freely move across jurisdictions creates less cost for

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Speaker 7: the economy.

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Speaker 1: UBS CEO Sergiomotti, speaking there to Bloomberg, television. Banking supervision

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Speaker 1: and regulation across the EU's largest firms was harmonized following

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Speaker 1: the financial crisis, but the region has still failed to

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Speaker 1: create one single banking market. In a moment, we'll bring

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Speaker 1: you more on the hints about next week's upcoming UK budget,

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Speaker 1: plus how China's efforts to simulate its economy on not

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Speaker 1: impressing global financial leaders. But first, a word on another

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Speaker 1: story that we've been reading about this morning. It's about

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Speaker 1: Macquarie and a new building, a new HQ they have.

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Speaker 2: I thought that London excelled nicknames for new buildings, you know,

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Speaker 2: the Gurkhan, the cheese Greater, the walkie talkie, but that

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Speaker 2: has a competitor now in Sydney. Obviously, the sense of

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Speaker 2: humor translates well underground, because mcquarie's new headquarters has been

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Speaker 2: nicknamed the Minion because it's rounded at the top, a

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Speaker 2: sort of a circular building. It's got Macquarie's circular logo

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Speaker 2: on it as well, but it is making a reference

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Speaker 2: to locals anyway. People are looking at it like the

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Speaker 2: cartoon characters and the Despicable Meat movie franchise.

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Speaker 1: Yeah. Absolutely, I'm not sure whether this will be entirely welcomed.

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Speaker 1: I mean, I've also heard it references the Death Star

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Speaker 1: was a darlic so the Minion is past version of it.

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Speaker 1: But look, the forty story building was meant to be

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Speaker 1: much more low key, right.

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Speaker 2: Yeah, well, I mean, look, this is at a time

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Speaker 2: when the debate isn't going in Australia as it is

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Speaker 2: here in London too, about how much office space these

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Speaker 2: businesses need. As well, Macquarie doesn't have a firm wide

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Speaker 2: policy about office attendance for its more than twenty thousand

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Speaker 2: employees worldwide. There are nine thousands of them expected to

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Speaker 2: be based in this new office in Sydney as well.

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Speaker 2: But it is an issue actually in the market there

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Speaker 2: where premium office space has quite a high vacancy rate

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Speaker 2: nearly eleven percent, and in the center of Sydney, and

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Speaker 2: this is an issue in the market too.

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Speaker 1: Yeah. Absolutely. Michael Silman, Mcquarie's head of corporate real Estate,

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Speaker 1: set in an inertew that the firm wanted something that

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Speaker 1: was not ostentatious or allowed. I'm not sure that was

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Speaker 1: the result, but anyway, there we are one fun interesting

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Speaker 1: story on the Bloomberg terminal.

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Speaker 2: We're going to come back to the City of London next,

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Speaker 2: and this new survey by the UK's Financial Conduct Authority

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Speaker 2: looking at non financial misconduct at firms here in London

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Speaker 2: are reported to you at a BAYO has been looking

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Speaker 2: through the details of at TIWA. Can you break down

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Speaker 2: for us the details of this survey what kind of

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Speaker 2: behavior was being tracked and watch the results show.

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Speaker 8: Well, it's the biggest review of discrimination and bullying claims

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Speaker 8: in the City of London that's ever been conducted by

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Speaker 8: the Financial Conduct Authority, so it's really looking at those

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Speaker 8: non financial misconduct complaints. It's very significant actually because it's

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Speaker 8: one of the first surveys which actually supports the sort

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Speaker 8: of widely held concerns that not very much has changed

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Speaker 8: since the Me Too movement in terms of workplace culture

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Speaker 8: in the City of London. So just looking into the data,

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Speaker 8: the kind of big headline figure really is that city

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Speaker 8: firms reported as seventy two percent surge in non financial

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Speaker 8: misconduct complaints over the last three years. In terms of

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Speaker 8: those complaints, bullying and harassment are the most reported. Looking

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Speaker 8: at the sectors that they surveyed, banks had the highest

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Speaker 8: number of total incidents and they also fared the worst

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Speaker 8: as a proportion of total staff members. The FCA has however,

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Speaker 8: issued a caveat and said that the uptick could be

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Speaker 8: as a result of people becoming more comfortable with reporting

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Speaker 8: these issues, and also it said that they could have

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Speaker 8: been slightly skewed by the pandemic too. But just looking

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Speaker 8: further into the data in terms of the firms, they

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Speaker 8: surveyed more than one thousand brokerages, corporate investment banks, and

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Speaker 8: insurance related firms, and actually a Bloomberg Freedom of information

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Speaker 8: requests interestingly shows that more than a quarter of those

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Speaker 8: firms missed the initial deadline to respond to this survey.

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Speaker 8: So some interesting figures revealed today.

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Speaker 1: What prompted the regulators to carry out the survey to

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Speaker 1: ask these questions.

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Speaker 8: Well, Caroline, it comes off the back of a string

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Speaker 8: of high profile scandals last year. For example, there were

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Speaker 8: several claims of sexual misconduct and toxic culture at the CBI.

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Speaker 8: There were also high profile cases including the allegations of

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Speaker 8: sexual harassment leveled at hedge fund bus Crispin Odi, which

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Speaker 8: he denied. Just yesterday it was announced that he's returned

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Speaker 8: to his role at what remains of his hedge fund.

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Speaker 8: But also earlier this year, there was a report by

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Speaker 8: the Treasury Committee into sexism in the city and that

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Speaker 8: found that efforts to tackle sexism are moving at what

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Speaker 8: it said a snail's pace, and it called for the

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Speaker 8: end to this era of impunity, as it describes it.

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Speaker 8: So there were several catalysts for this big survey.

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Speaker 2: What's the FAA planning to do about this problem? What's

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Speaker 2: it's said about the results.

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Speaker 8: Well, it's worth mentioning here that the FAA is much

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Speaker 8: more accustomed to taking down, say, rogue traders and dealing

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Speaker 8: with financial wrongdoing, so not perhaps a problem that there

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Speaker 8: is much precedent for the regulator to deal with, but

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Speaker 8: they are trying to grapple with the scale of the problem.

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Speaker 8: In terms of their response to the results, they've stopped

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Speaker 8: short of announcing new requirements. They're actually suggesting that companies

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Speaker 8: use these results as a catalyst to see how they

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Speaker 8: compare with peers. They've also said that they're going to

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Speaker 8: follow up with those that reported no incidents of bullying

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Speaker 8: and harassment or non financial misconduct complaints in those three years.

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Speaker 8: But it really is consistent with what we've seen from

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Speaker 8: the FAA in terms of diversity so far. After that

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Speaker 8: March twenty twenty four report on sexism in the City.

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Speaker 8: It was actually recommended that they drop the FAA drop

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Speaker 8: the requirements that they had proposed for firms to disclose

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Speaker 8: data on diversity for fear of it becoming a sort

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Speaker 8: of tick box exercise. And they responded to that by saying,

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Speaker 8: you know, they really want to have flexibility at the

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Speaker 8: heart of any diversity requirements that they put onto firms,

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Speaker 8: and this response kind of leaving it up to firms

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Speaker 8: to adjust their conduct and how they manage things is

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Speaker 8: difficult from the FCA.

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Speaker 1: Okay, interesting, Tima, thank you so much for being with

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Speaker 1: us this morning. That is our reporter team at a Bio.

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Speaker 1: Then on the FCA, the City Watchdogs investigation and survey

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Speaker 1: into discrimination, bullying and city firms.

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Speaker 2: Well, let's stay in the UK and bring up to

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Speaker 2: day on the latest news. On the bodget the Prime

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Speaker 2: Minister has hinted at tax rises for investors while the

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Speaker 2: UK's borrowing costs rose yesterday after the Chance announcwered changes

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Speaker 2: to the fiscal rules. Our UK correspondent Lizzie Burden joins us.

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Speaker 1: Now for more.

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Speaker 2: Lizzie, let's start with what we've been hearing from Keir Starmer.

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Speaker 2: What's he said about taxes?

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Speaker 9: Well, you remember that the government's promised not to raise

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Speaker 9: taxes on working people, but controversially, and I wonder how

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Speaker 9: many of our listeners agree with this. He says that

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Speaker 9: doesn't include people who derive their income primarily from assets.

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Speaker 9: Now there is widespread expectation that employers are going to

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Speaker 9: pay more national insurance and that capital gains and inheritance

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Speaker 9: taxes will go up. And if you have an increase

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Speaker 9: in capital gains tax, that's likely to impact people selling

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Speaker 9: property as well as shares. So I would actually really

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Speaker 9: recommend the latest episode of the Bloomberg UK Politics podcast.

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Speaker 9: We broke all of this down with the UK chief,

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Speaker 9: the chief UK economist here at Bloomberg Economics, Dan Hansen,

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Speaker 9: and he tells you how much it'll adds to Rachel

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Speaker 9: Reeves's war chest.

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Speaker 1: Yeah. Absolutely, we did a great episode, did we, Lizzie.

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Speaker 1: It was a quick far round of which taxes Dan

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Speaker 1: Hansen expects things may go up, plus all of his

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Speaker 1: deep analysis in terms of Rachel Reeves. The announced changes

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Speaker 1: also to the fiscal rules to allow more borrowing for investment.

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Speaker 1: Another major question around the budget what has been the

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Speaker 1: reaction to this announcement.

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Speaker 9: Yeah, she's confirmed that she will change how debt is

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Speaker 9: measured so that she can maintain this golden rule of

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Speaker 9: funding day to day spending with tax revenues but borrow

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Speaker 9: more to invest. So she's towing this line between maintaining

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Speaker 9: fiscal credibility, finding space to avoid raising time on working people,

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Speaker 9: and not returning to austerity. So it's a really tight

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Speaker 9: set of limitations Labour set themselves.

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Speaker 3: In order to get elected.

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Speaker 1: And it is absolutely crucial.

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Speaker 9: That she can convince markets that this borrowing is going

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Speaker 9: to stimulate growth. Hence, while she's doing all the pitt

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Speaker 9: rolling at the IMF in the Guardian, in the FT

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Speaker 9: opinion piece, she did as well. And yet you saw

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Speaker 9: the market wobble yesterday, the yield on tenure guilts falling,

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Speaker 9: the spread between guilt and bunt yields widening, and that's

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Speaker 9: because of the prospect of increase borrowing, leading markets to

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Speaker 9: pair their bets on the scope for BOE rate cuts

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Speaker 9: next year. And that at first seemed at odds with

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Speaker 9: Andrew Bailey kind of saying that disinflation's happening. He'd said

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Speaker 9: that that was a condition for more aggressive cuts. And

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Speaker 9: now with a bit of hindsight, you can see that

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Speaker 9: this was more of a fiscal story than directly on

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Speaker 9: a true one.

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Speaker 6: Yeah.

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Speaker 2: I mean, looking across the closing market figures yesterday, the

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Speaker 2: contrast quite stark in European bonds that guilt yields were

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Speaker 2: rising when they were falling across their of the European bonds. Lizzie,

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Speaker 2: let's talk about kind of the significance of this event

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Speaker 2: for this government, their first big test.

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Speaker 9: Yeah, and this is an enormous historic moment. It's Labour's

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Speaker 9: first budget in fourteen years, it's going to change how

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Speaker 9: the economies run potentially, and it's the first ever by

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Speaker 9: a female chancellor. When you think about it, as I say,

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Speaker 9: they've made this task impossibly hard for themselves, and it

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Speaker 9: seems like they will raise lots of taxes, just not

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Speaker 9: the three main leavers of income tax, vat, national insurance

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Speaker 9: on employees or income tax. They're going to change the

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Speaker 9: fiscal rules and yet hope to maintain credibility in markets.

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Speaker 9: And we're just going to have to see whether they

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Speaker 9: commit to enough spending that it doesn't feel like a

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Speaker 9: return to austeritys Yes.

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Speaker 1: Very difficult task ahead. We will have full coverage, of

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Speaker 1: course for you of the budget on Bloomberg Radio and

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Speaker 1: television next week. Thank you our UK correspondent Lizzie b Right.

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Speaker 1: Let's turn our attention to focus on China next and

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Speaker 1: the country's recently announced plans to stimulate this economy, which

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Speaker 1: have failed to impress global financial leaders gathering in Washington

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Speaker 1: for the IMF and World Bank meetings. This is new

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Speaker 1: figures show defaults in one part of China's local government

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Speaker 1: debt market have surged to a record high. Our news

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Speaker 1: desk editor Jill Desis joins us now from Hong Kong

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Speaker 1: for more on this. Jill, good morning. Let's start with

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Speaker 1: the story around debt. What sorts of products are we

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Speaker 1: talking about? How significant are these defaults?

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Speaker 10: Yeah, good morning Caroline. So this is really opaque corner

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Speaker 10: of the local debt market in China that we're looking

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Speaker 10: at here. So these are failures of what are called

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Speaker 10: non standard products that are surging to record levels. And

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Speaker 10: it's really difficult to keep track of exactly the size

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Speaker 10: of this market because these are fixed income investments that

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Speaker 10: aren't publicly traded, So a lot of what we rely

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Speaker 10: on to actually get a sense of how much has

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Speaker 10: actually defaulted comes from analysts that are estimating the amount

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Speaker 10: at about eight hundred billion dollars the equivalent of eight

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Speaker 10: hundred billion US dollars, So, you know, not absolutely tremendously massive,

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Speaker 10: but still obviously pretty incredibly high here. And what we're

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Speaker 10: also seeing there, just according to some data providers that

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Speaker 10: we've spoken with, is that through the first nine months

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Speaker 10: of this year, you're seeing about a twenty percent increase

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Speaker 10: of defaults of these types of non standard products sixty

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Speaker 10: tied to local government financing vehicles that have either defaulted

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Speaker 10: or warned of repayment risks. So there's a lot of

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Speaker 10: concern here just in terms of the size of the

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Speaker 10: defaults that we're actually seeing, and then how ultimately that

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Speaker 10: really sort of spreads back into the economy, into these

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Speaker 10: concerns about local debt risks in China, which as we know,

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Speaker 10: are quite significant and pretty prolonged.

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Speaker 2: Yeah, indeed, and you know, we focus on this story

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Speaker 2: because we know that it's been one of those kind

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Speaker 2: of risk areas in the Chinese economy as well. How

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Speaker 2: does it feed into the broader picture of what's going

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Speaker 2: on in China?

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Speaker 10: So this all really kind of goes back to the

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Speaker 10: fact that these types of products are tied to investments

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Speaker 10: made through local government financing vehicles or lgfvs. Municipalities around

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Speaker 10: China have traditionally used these types of financing vehicles to

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Speaker 10: fund everything from you know, major infrastructure projects including roads

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Speaker 10: and ports and all that kind of stuff. These have

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Speaker 10: actually been over the last several years a pretty significant

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Speaker 10: part of what China is actually done to continue encouraging

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Speaker 10: economic growth. I mean, you know, investment, investment in infrastructure

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Speaker 10: in particular. You know that that's classic China playbook of

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Speaker 10: how do we actually get you know, growth stimulated in

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Speaker 10: the economy again. And so, you know, a big concern

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Speaker 10: over the last couple of years has just been how

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Speaker 10: much these lgfvs are kind of you know, getting away

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Speaker 10: with this runaway debt that's not actually being you know,

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Speaker 10: properly calculated. So if this issue continues to be a

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Speaker 10: problem or they're not able to address some of these

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Speaker 10: debt risks, then you kind of risk a lot of

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Speaker 10: this impacting these local municipalities that may not then have

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Speaker 10: access to finance to actually finish some of these projects

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Speaker 10: that they've started.

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Speaker 1: Now at the IMF meetings in Washington. There's also been

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Speaker 1: much discussion about China's efforts to stimulate the economy. I mean,

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Speaker 1: there's been both open criticism from the likes of the

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Speaker 1: US Treasury Secretary and the IMF has concerns and they're also,

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Speaker 1: according to Bloomberg reports, been in a lot of conversations

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Speaker 1: behind closed doors as well. What have they been saying.

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Speaker 1: What is the feeling that has emerged from those meetings

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Speaker 1: in the US.

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Speaker 10: Yes, well, it sounds like, you know, from what's been

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Speaker 10: happening in the US, you know, at this IMF meeting

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Speaker 10: in d C, is that a lot of these concerns

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Speaker 10: are actually very similar to white investors, traders, economists, analysts

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Speaker 10: have been expressing over the last several weeks, which is

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Speaker 10: that you know, there's, you know, been this effort by

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Speaker 10: China to introduce a lot of monetary policy to help

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Speaker 10: stimulate the economy and effect growth, but there hasn't really

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Speaker 10: been a whole lot of concrete actions taken on the

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Speaker 10: fiscal side of the equation. And that's been something that's

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Speaker 10: you know, really really why investors in particular over the

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Speaker 10: last several weeks, you know, we saw a big spike.

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Speaker 10: You know, a lot of run up in china stock

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Speaker 10: market after the monetary policy stuff was announced, but there

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Speaker 10: hasn't really been that follow through, and so what you're

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Speaker 10: hearing from people like Janet Yell and the Treasury Secretary,

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Speaker 10: the US Treasury Secretary, for example, is that you know,

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Speaker 10: there hasn't been a whole lot in this stimulus package

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Speaker 10: that actually tackles a lot of longer term problems for

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Speaker 10: the Chinese economy, like overcapacity has been a big thing

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Speaker 10: that the US has really been nailing China on. And

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Speaker 10: she's also saying that there's a lot of concerns over

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Speaker 10: the fact that this doesn't really do a whole lot

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Speaker 10: to address weak domestic demand in China. Ultimately, this kind

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Speaker 10: of come down to this idea that China has so

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Speaker 10: far introduced enough stimulus to maybe get them over the

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Speaker 10: line of a five percent growth target for the year,

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Speaker 10: but there's a lot of concerns about whether they can

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Speaker 10: actually push that forward into twenty twenty five and actually

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Speaker 10: address some of these underlying systemic issues.

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Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the

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