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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the.

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Speaker 3: Bloombag Day Baker podcast. Good morning, It's Monday, the eighth

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Speaker 3: of September. I'm Caroline Hepga in London and.

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Speaker 2: I'm steping Caroline Paris, where the French Prime Minister looks

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Speaker 2: likely to lose his job and collapse the government in

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Speaker 2: a crunch confidence vote with major political and economic repercussions.

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Speaker 3: And in other news, the yen drops as Japan's Ishaba

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Speaker 3: announces he will step down, paving the way for a

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Speaker 3: new leader. Plus, HSBC's biggest shakeup in a decade has

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Speaker 3: raised the stakes for CEO George L. Henri. Reassess how

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Speaker 3: he's doing one year into the top job at Europe's

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Speaker 3: biggest bank. Let's start with a roundup of our top stories.

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Speaker 3: France's government is expected to collapse today, with Prime Minister

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Speaker 3: France Fois Bayu expected to lose a confidence vote in parliament.

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Speaker 3: Beau called the votes in a bid to pressure lawmakers

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Speaker 3: into backing his budget plan, which includes spending carts and

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Speaker 3: tax hikes aimed at bringing the country's ballooning debt under control.

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Speaker 3: France's fiscal deficit is already the widest in the euro

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Speaker 3: Area and is on calls to grow further, with the

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Speaker 3: cost of servicing it set to hit seventy five billion

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Speaker 3: euros next year. Now here's what Prime Minister fast Wid

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Speaker 3: Bayou said on French TV Danteur Luviv.

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Speaker 4: We are experiencing a situation that threatens the very future

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Speaker 4: of the country, and everyone is whistling as if it

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Speaker 4: doesn't exist. Everyone is looking the other way. Everyone is

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Speaker 4: using the answers we could have provided to gain electoral advantage.

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Speaker 3: Franst wi Beaerus speaking there now. President Emmanuel Macon faces

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Speaker 3: limited options if his government falls. He could name a

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Speaker 3: new prime minister or call fresh elections for the National Assembly,

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Speaker 3: but neither of is likely to improve the country's fiscal

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Speaker 3: outlook in the near future, and further political turmoil will

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Speaker 3: put increased pressure on French government bond yields. Now Ishiba

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Speaker 3: has announced that he plans to step down as Japan's

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Speaker 3: Prime minister. The move follows calls for his resignation after

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Speaker 3: back to back election losses that cost his LDP party

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Speaker 3: its parliamentary majority. Japan's currency has already slid half of

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Speaker 3: one percent against the US dollar on concerns political instability

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Speaker 3: will reduce the prospect of the Bank of Japan raising

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Speaker 3: interest rates. Prime Minister Shigeo Ishuba announced his decision at

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Speaker 3: a news conference on Sunday.

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Speaker 5: I have been considering that it is this administration's task

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Speaker 5: to set a course for negotiation with the United States

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Speaker 5: regarding the terrorfs, which one can refer to as a

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Speaker 5: national crisis. Last Friday, the Memorandum of Understanding on investments

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Speaker 5: was signed and the US President's executive order was issued.

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Speaker 5: With the other day's report from Minister Akasawa, I felt

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Speaker 5: I have reached a milestone.

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Speaker 3: Prime Minister Ishiba says that he will stay on as

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Speaker 3: Prime Minister until his success is named. However, with no

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Speaker 3: clear options, his departure is likely to fuel uncertainty among

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Speaker 3: investors over the coming weeks until a new leader is chosen.

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Speaker 3: An immigration raid on an electric vehicle battery plant in

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Speaker 3: Georgia in the United States run by two South Korean

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Speaker 3: companies has rattled officials in Seoul. It comes less than

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Speaker 3: two weeks after South Korean President Lee J Mung met

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Speaker 3: with President Donald Trump in the White House and Korean

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Speaker 3: firms pledged to invest hundreds of billions of dollars in

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Speaker 3: the US. Korean officials worked over the weekend to secure

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Speaker 3: the release of three hundred of its citizens detained by

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Speaker 3: US Immigration and Customs in enforcement at a construction site

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Speaker 3: for Hyundai Motor and LG Energy Solutions, their joint venture.

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Speaker 3: President Trump spoke to reporters about the incident outside Air

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Speaker 3: Force One.

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Speaker 6: We heard about it yesterday and the same thing in time.

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Speaker 6: ICE was doing right because they were here illegally. But

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Speaker 6: we do have to work something out where we bring

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Speaker 6: in experts so that.

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Speaker 7: Our people can be trained so that they can do

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Speaker 7: it themselves.

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Speaker 6: Does that make sense right, Because it's really the relationship

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Speaker 6: with Korea RA. We have a great relationship with South Korea.

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Speaker 3: President Trump speaking there as the raid has put South

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Speaker 3: Korean President Lee's government under pressure at home and threatens

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Speaker 3: to become a major diplomatic issue with one of Washington's

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Speaker 3: closest allies. APEC Plus has backed a further rise in

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Speaker 3: supply quotas were starting one hundred and thirty seven thousand

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Speaker 3: bars a day of output from October and defying Warner

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Speaker 3: traders had initially expected the organization to pause production after

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Speaker 3: firms including JP Morgan and Goldman Sachs advice that continuing

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Speaker 3: with supply increases risks deepening a slump in prices. Binberg's

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Speaker 3: Asia Energy team leader Stephen Stepchinsky says the move does

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Speaker 3: exhibit still a degree of caution.

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Speaker 8: There was a surprise aspect of it, but there was

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Speaker 8: no awe. There was not an expectation that they would

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Speaker 8: add the supply. Yes, the market was hedging their bets

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Speaker 8: with the prices falling last week, and you did see that.

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Speaker 8: But I think in the previous increases that they've had

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Speaker 8: where they surprised the market, there was that are there

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Speaker 8: was more supply that they were adding. They're just adding

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Speaker 8: about one hundred and thirty thousand barrels a day, and

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Speaker 8: that's compared to it was about half of what we

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Speaker 8: were seeing in the previous months when they're adding that.

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Speaker 3: Trane Blomberg, Stephen Stepchinski speaking their bent Koud futures already

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Speaker 3: fell three point nine percent last week, amin signs that

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Speaker 3: an increase was coming, something that made limit price downside.

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Speaker 3: According to traders who spoke to Bloomberg, pay for new

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Speaker 3: workers is growing at its lowest pace since the pandemic.

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Speaker 3: According to new data here in the UK. The poll

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Speaker 3: by the Recruitment and Employment Confederation and KPMG found that

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Speaker 3: starting pay growth for August calls to levels last scene

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Speaker 3: in early twenty twenty one. The numbers will make uncomfortable

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Speaker 3: reading for the Prime Minister Kiss Starmer. He spent his

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Speaker 3: weekend completing a wide ranging government reshuffle after his deputy leader,

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Speaker 3: Angela Rayner resigned over her mishandling of her tax affairs defense.

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Speaker 3: Actually John Healey, whose position remains unchanged, says that the

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Speaker 3: new cabinet will now focus on delivery.

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Speaker 1: What Kiss Starmer has done has put a new team

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Speaker 1: in place and said to us, all you've got to

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Speaker 1: go up a gear and you've got to go up

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Speaker 1: a gear to demonstrate the government can deliver for people.

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Speaker 1: And what that means is that we've got to start

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Speaker 1: to show that we can help change people's lives.

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Speaker 3: John Healey, speaking there as the Labour Party continues to

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Speaker 3: languish in the pole, with the anti Immigration Reform UK Party,

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Speaker 3: which won just five seats in last year's general election

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Speaker 3: to Labour's four hundred and eleven, consistently topping national surveys

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Speaker 3: since April, and a major strike has begun on the

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Speaker 3: London Underground. It will force several of the main lines

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Speaker 3: on the network to shut down until the end of

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Speaker 3: the working week. Members of the RMT union are striking

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Speaker 3: overpay and pushing for a four day work week, a

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Speaker 3: demand which the Transport for London authorities say it cannot

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Speaker 3: afford to meet. The Center for Economics and Business Research

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Speaker 3: estimates that the walkouts could cost the UK economy about

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Speaker 3: two hundred and thirty million pounds. So those are a

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Speaker 3: few of our top stories this morning. I'm sure that

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Speaker 3: people in London will be noting the five days effectively

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Speaker 3: of London Underground travel, stress and chaos. Yes, took me

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Speaker 3: about that thirty two hour working week that the union

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Speaker 3: would like to see. Of course, they also want a

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Speaker 3: three point four percent pay increase, so that's going to

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Speaker 3: affect everybody this morning on their commute in the capital.

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Speaker 3: Let's think about markets though, so a lot of political

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Speaker 3: turmoil in Japan in France expected today. Japanese yen is

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Speaker 3: week a half of one percent this morning. Bloembog dollar

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Speaker 3: spot index is stronger right now looking at futures then

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Speaker 3: for the start of European trading, actually reasonably positive. We're

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Speaker 3: up by four tenths of one percent s and P

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Speaker 3: five hundred emailis gaining barely a tenth four point one

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Speaker 3: percent for US ten year yields. Friendshields, of course, will

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Speaker 3: begin trading at three P forty four on that ten

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Speaker 3: year yield. Oil prices actually surging despite the moves by

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Speaker 3: OPEC plus over the weekend. Breakthrough futures up by one

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Speaker 3: point two percent this morning. So those are the markets.

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Speaker 3: In a moment, we're going to bring you more on

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Speaker 3: the countdown to that crunch confidence vote in France with

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Speaker 3: our own Stephen Cowell Plus will assess how HSBC's CEO

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Speaker 3: is doing a year into the job. But before that,

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Speaker 3: a story that Komi this morning, that's just such a

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Speaker 3: beautiful read. What is in a scent? A lot? If

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Speaker 3: you read Madison Derbyshire's beautiful essay, It begins with the

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Speaker 3: disappointment about her washing up liquid, changing formula, changing changing scent,

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Speaker 3: and it weaves its way to explaining why our sense

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Speaker 3: of smell is thought to be the very first sense

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Speaker 3: that we developed. And she explains, which I think is

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Speaker 3: so interesting, why it raises memories and emotions so swiftly

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Speaker 3: when you smell something is because it grew. Our sense

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Speaker 3: of smell grew from apparently the same brain tissue that

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Speaker 3: grew when we emerge from the primordial ooze. So she

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Speaker 3: talks about the business of fragrances and flavors, and apparently, yes,

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Speaker 3: fragrances are getting stronger, particularly in the US but everywhere.

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Speaker 3: It's a really lovely piece. I'll put a link to

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Speaker 3: it in our show notes from Bloomberg's Madison Derbyshire. Now

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Speaker 3: let's get to Paris. St. Stephen cal is there for

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Speaker 3: us this morning, live in Paris, as we are counting

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Speaker 3: down to this confidence vote later today which looks likely

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Speaker 3: to see the French government collapse. Good morning, Stephen, and

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Speaker 3: really lovely to have you in Paris. Of course you're

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Speaker 3: usually in Brussels, but there for this important moment. Is

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Speaker 3: there any hope that Frost weare Bayru's government is actually

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Speaker 3: going to win this vote?

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Speaker 2: If there is, it's pretty hard to find that the

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Speaker 2: papers today are already writing the end of the Bayru premiership.

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Speaker 2: And it's really been clear since this vote was called

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Speaker 2: two weeks ago that there really was no hope for

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Speaker 2: Francois Bieru to be able to win this confidence vote

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Speaker 2: because the opposition parties from the far left of the

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Speaker 2: fire right said almost immediately that they would vote against

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Speaker 2: the government.

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Speaker 7: This is a simple majority vote.

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Speaker 2: Substensions don't really help that much, and looking at the

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Speaker 2: parliamentary math, you have a National Assembly divided roughly in

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Speaker 2: three between the left wing, the ste interest on the

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Speaker 2: right wing blocks. It's very difficult to see how Bairu

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Speaker 2: could survive, and impossible if you listen to what the

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Speaker 2: party leaders have said about how they're going to vote.

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Speaker 2: No sense he called this vote Frontalberro has met all

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Speaker 2: the political parties.

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Speaker 7: He's been on.

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Speaker 2: Every possible TV, radio and online media in the past

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Speaker 2: fortnight trying to make his case for his budget, because

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Speaker 2: this all comes down to He announced his budget plan

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Speaker 2: back in July of this year, and he's been talking

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Speaker 2: about the scale of the country's death problem, the need

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Speaker 2: to bring down the deficit, and the urgency with which

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Speaker 2: that needs to be done. The efforts don't seem to

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Speaker 2: really have done anything to win him new supporters. He

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Speaker 2: will have a last chance to appeal to lawmakers when

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Speaker 2: he begins the debate in the National Assembly later, but

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Speaker 2: it looks like France is already heading for its fifth

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Speaker 2: prime minister in just over three years.

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Speaker 3: And this is perhaps a common problem, isn't it, For

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Speaker 3: when debted develops economies, nobody wants to make painful cuts

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Speaker 3: or see difficult tax increases. But what happens if this

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Speaker 3: French government fullpen.

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Speaker 2: So if Beheru loses this vote this afternoon or this evening,

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Speaker 2: the government will resign immediately. It'll actually be the first

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Speaker 2: time in modern French history that a government will have

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Speaker 2: fallen on a confidence vote as opposed to a no

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Speaker 2: confidence vote which is what happened last December for Michelle Baugnier.

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Speaker 7: And it then goes back to President Macron again.

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Speaker 2: He has a choice to appoint a new prime minister

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Speaker 2: to try again where both Michelle Baugnier and france Hi

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Speaker 2: Beriou failed with this current parliamentary configuration. Or he has

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Speaker 2: the option to call fresh elections to the National Assembly.

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Speaker 2: That's something he couldn't do the last time around when

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Speaker 2: the government fell in December.

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Speaker 7: Now he said he won't do that.

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Speaker 2: So the speculation here in Paris is very much focused

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Speaker 2: on who he might choose to take over from Francois Birou.

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Speaker 7: He could pick another name from.

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Speaker 2: His own circle the Justice Minister General Doloman now as

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Speaker 2: one of the names being circulated who could fit that profile,

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Speaker 2: or if he wants to try and change the parliamentary match.

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Speaker 2: The center left Socialist Party, who are not part of

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Speaker 2: the current centre's coalition, have said they'd be willing to

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Speaker 2: lead a government if they could advance their own budget plan,

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Speaker 2: which involves less in terms of cuts, although still a

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Speaker 2: reduction of public spending, and it does include measures like

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Speaker 2: a wealth tax on fortunes of over one hundred million euros. Essentially,

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Speaker 2: the choice is Emmanuel Maccon's if this vote doesn't go

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Speaker 2: in favor of the government later he's already meeting the

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Speaker 2: President of the National Assembly this morning. He's been known

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Speaker 2: to surprise us in the past, so I wouldn't put

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Speaker 2: it pass and doing something a bit unexpected.

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Speaker 3: Okay, what does it mean then for the French economy,

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Speaker 3: for the budget y challenges?

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Speaker 2: Look, this is the crux of the matter. The French

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Speaker 2: state is spending too much versus what it's taking in.

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Speaker 7: It's piling up debt.

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Speaker 2: As Fanso Bayou, who's reminded us many times over the

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Speaker 2: past few weeks, at a rate of five thousand euros

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Speaker 2: per second. The budget plan that Baeru put forward, which

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Speaker 2: has been rejected by all the opposition parties, propose as

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Speaker 2: cuts of forty four billion euros to the deficit to

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Speaker 2: bring it down from the current five point four percent

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Speaker 2: to four point six percent next year. It's already the

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Speaker 2: widest in the Euro Area. Markets have essentially already priced

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Speaker 2: in the Bayu government falling. We've seen the spread between

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Speaker 2: French and German borrowing cars swidening to around eighty basis

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Speaker 2: points since the vote was called. France's thirty year bond

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Speaker 2: yield head of HIA since twenty eleven last week, the

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Speaker 2: Kakaran's been under performing, pressure on banks, homebuilders, domestically focused stocks.

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Speaker 2: The longer the uncertainty goes on, the worse this situation

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Speaker 2: is likely to get.

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Speaker 7: There are a few very imminent deadlines.

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Speaker 2: You've got ratings reviews in the coming week, including from

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Speaker 2: Fitch this Friday. Could they move to downgrade French government

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Speaker 2: debt That could make the situation worse, And the budget

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Speaker 2: process has to proceed no matter what. France has to

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Speaker 2: submit a budget to the European Commission by mid October,

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Speaker 2: which will give whoever will be prime minister about a month,

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Speaker 2: perhaps less than to formulate a plan.

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Speaker 3: Well, it's all very nail biting.

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Speaker 4: Stephen.

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Speaker 3: Thank you so much for being with us then and

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Speaker 3: talking us through the stresses for France and this government

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Speaker 3: a vote of course later today, Thank you so much.

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Speaker 3: You're going to be with us throughout the day, of course,

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Speaker 3: taking us through everything that's happening in the politics in France.

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Speaker 3: Stephen Cowe their live in Paris, stay with us. More

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Speaker 3: from Bloomberg Daybaquobe coming up after this. Now, let's go

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Speaker 3: to one of our deep dive stories this morning. HSBC

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Speaker 3: CEO George L. Hendrie has spent his first year at

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Speaker 3: the bank in a massive shakeup. Thanks share price has surged,

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Speaker 3: but expenses have also soared and now there are some

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Speaker 3: doubts emerging. Joining us now to discuss this is Boomberg,

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Speaker 3: Senior Asia Finance correspondent and Brien Chowdry And Brian, thank

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Speaker 3: you so much. You've done this long story in depth

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Speaker 3: with a number of colleagues about George L.

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Speaker 7: Hendrie.

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Speaker 3: I mean, he's just about a year into this job.

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Speaker 3: What has l Hendri done in terms of shrinking refocusing

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Speaker 3: the business. The overhaul was quite unexpected.

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Speaker 9: Yes, good morning.

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Speaker 7: That's right.

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Speaker 9: It's been around a year since he took over as CEO,

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Speaker 9: and you know, to a huge extent, many people viewed

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Speaker 9: him as the continuity chief because he's been at the

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Speaker 9: bank for over the twenty years and all these have

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Speaker 9: taken investors by surprise. So essentially, over the past twelve months,

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Speaker 9: like a man on a mission, the new CEO is

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Speaker 9: embarked in the biggest overhauled bank has seen in at

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Speaker 9: least a decade. So he's ripped up much of his

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Speaker 9: his inheritance. He first of all, reorganized the bank into

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Speaker 9: four new divisions. He shot some businesses his predecessors once

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Speaker 9: considered key to the lenders future, and essentially he stripped

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Speaker 9: out layers of middle management to streamline decision making. And

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Speaker 9: in that process he's cut hundreds of jobs, made a

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Speaker 9: lot of people unhappy. And then, most importantly, in January,

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Speaker 9: he basically upended life for the firm's investment bankers by

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Speaker 9: gutting the majority of the investment banking business in Europe

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Speaker 9: and the Americas, which again has caused a lot of

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Speaker 9: issues with morale amongst staff at the bank over the

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Speaker 9: past year.

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Speaker 3: But then the share but I seem to welcome all

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Speaker 3: of this chair. There are some doubts emerging about the

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Speaker 3: future though, why that's right.

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Speaker 9: So the shares have ridden a wave of investor confidence

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Speaker 9: in UK lenders, surging around forty four percent to record

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Speaker 9: since he became CEO in early September. However that rally

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Speaker 9: is you know, slowly losing momentum. Investors, professional sorry analysts,

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Speaker 9: they're sarring on HSBC stock, most betting they will barely

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Speaker 9: budge this year. So they've got a lot of challenges ahead.

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Speaker 9: One is, you know, there's quite a few. So first

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Speaker 9: of all, we reported last month that HSBC's cutting ties

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Speaker 9: with more than one thousand wealthy Middle East clients and

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Speaker 9: that's linked to its private bank amid a Swiss probe

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Speaker 9: into suspected money laundering. Then, as you say, they've got

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Speaker 9: rising expenses and that's linked to restructuring that was quite

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Speaker 9: large in the most recent results. And also it's got

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Speaker 9: this background in its markets of Hong Kong and mainland

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Speaker 9: China where it's battling a commercial real estate downturn in

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Speaker 9: the property and of course they've got you know, the

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Speaker 9: ongoing geopolitical uncertainty which is keeping the Bank on edge

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Speaker 9: of the posture.

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Speaker 3: Absolutely, I'm in the ongoing US China trade war.

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Speaker 7: Just briefly.

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Speaker 3: The next big test replacing the chairman, Mark Tucker, Yes,

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Speaker 3: that is right.

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Speaker 9: Is due to leave in the next few weeks, and

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Speaker 9: so far, you know, we've not least seen any sort

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Speaker 9: of public statement on who they're appointing, permanent or interim.

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Speaker 9: It's one of the reasons, maybe because you know, finding

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Speaker 9: a replacement for Mark Tucker may be difficult to find.

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Speaker 9: He actually oversaw four CEOs during his tenure at the bank,

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Speaker 9: including three appointed, and he's wielded the type of hands

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Speaker 9: on control that most non executive chairmans rarely assert. So investors,

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Speaker 9: I guess, are waiting with the interest's interest on who

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Speaker 9: the next person may be.

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Speaker 2: Internal awards to This is Bloomberg Daybreak Europe, your morning

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Speaker 2: Street and beyond.

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Speaker 3: I'm Caroline Hepka, and.

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