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

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Speaker 1: Day ba Q podcast. Good Morning's Wednesday, the sixteenth of

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Speaker 1: July in London. I'm Caroline Hepka and.

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Speaker 2: I'm Stephen Caroline Brussels. Coming up today, Francis Prime Minister

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Speaker 2: warns of mortal danger as he sets out plans to

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Speaker 2: cut almost forty four billion euros in public spending.

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Speaker 1: The UK Chance Levow's to overhaul bank ring fencing rules

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Speaker 1: in a meaningful way as part of her Mansion House

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Speaker 1: speech to the City.

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Speaker 2: Plus the prime membership every bank wants. Wall Street's one

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Speaker 2: trillion dollar prime brokerage boom lures in European rivals including

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Speaker 2: BNP UBS and Barclay's.

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

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Speaker 2: Francis Prime Minister Fransberu has proposed scrapping two public holidays

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Speaker 2: in a bid to repair the public finances. The plans

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Speaker 2: are part of an array of measures totally almost forty

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Speaker 2: four billion euros designed to pare back France's deficit, which

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Speaker 2: is the largest in the euro area. Announcing his proposals,

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Speaker 2: the Prime Minister set out the scale of the problem.

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Speaker 1: Du Vois.

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Speaker 3: We now have a duty to take responsibility. I believe

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Speaker 3: that this is the last stop before the cliff edge

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Speaker 3: and being crushed by debt. It's important to say it clearly.

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Speaker 3: It is a mortal danger for a country.

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Speaker 2: Fassobaeru added that France's debt increases by five thousand euros

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Speaker 2: every second. The government is aiming to narrow the budget

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Speaker 2: deaficit to four point six percent of economic output next

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Speaker 2: year from a forecast of five point four percent this year,

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Speaker 2: before bringing it within the European Union's limit of three

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Speaker 2: percent by twenty twenty nine. But with no majority in Parliament,

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Speaker 2: Prime Minister Biru may not be able to push through

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Speaker 2: his plans and runs the risk of being forced out

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Speaker 2: through a no confidence vote.

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Speaker 1: In the UK, the chance of Rachel Reeve says that

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Speaker 1: she will reform ring fencing rules for bang So as

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Speaker 1: the government looks to encourage informed risk taking and boost

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Speaker 1: economic growth. Reeves announced a range of measures to cut

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Speaker 1: red tape and scale back post two thousand and eight rules.

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Speaker 1: In her annual address to the financial sector. She urged

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Speaker 1: regulators across the economy to be less cautious.

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Speaker 4: In too many areas, regulation still acts as a boot

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Speaker 4: on the neck of businesses, choking off the enterprise and

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Speaker 4: innovation that is the lifeblood of economic growth. Regulators in

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Speaker 4: other sectors must take up the call that I make

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Speaker 4: this evening not to bend to the temptation of excessive caution,

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Speaker 4: but to boldly regulate for growth in the service of

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Speaker 4: prosperity for our whole country.

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Speaker 1: Among Reeves's changes are cut to bank capital and reporting requirements,

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Speaker 1: pairing back rules on the conduct of senior bankers, and

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Speaker 1: a rethink of the UK's financial Ombardsman Service. The chance

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Speaker 1: that also use her speech to acknowledge the recent turbulence

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Speaker 1: in government after a U turn on welfare reforms and

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Speaker 1: her tearful appearance in Parliament that triggered a brief sell

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Speaker 1: off in guilts. In a separate decision, the UK government

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Speaker 1: also dropped plans to set up a classification for what

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Speaker 1: it terms a green investment after months of lobbying from

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Speaker 1: hedge funds.

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Speaker 2: The UK Tax Authority cannot identify how much tax the

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Speaker 2: country's billionaires pay on their wealth, according to a cross

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Speaker 2: party group of MPs. The Public Accounts Committee expressed disappointment

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Speaker 2: that HMRC lacked the data to properly assess the country's wealthiest,

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Speaker 2: though the body says it does not have a mandate

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Speaker 2: to collect data on individual's overall wealth. The committee's report

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Speaker 2: further underscore is the lack of timely and available data

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Speaker 2: on some of the UK's wealthiest residents and the impact

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Speaker 2: of recent tax changes on departures from the country.

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Speaker 1: Thousands of Afghans and their families are being relocated to

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Speaker 1: the UK after their personal information was revealed twenty twenty

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Speaker 1: two data breach. More than four thousand have already been

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Speaker 1: relocated under the scheme, with a further three thousand people

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Speaker 1: expected to come to the UK at a cost of

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Speaker 1: eight hundred and fifty million pounds. Defense Secretary John Healey

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Speaker 1: explained why the secret program was set up.

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Speaker 5: Six months after the fall of Kabul, a Defense official

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Speaker 5: emailed an ARAP caseworking file outside of authorized government systems. ARAP,

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Speaker 5: as the House knows, is the resettlement scheme that this

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Speaker 5: country established for Afghan citizens who worked who worked for

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Speaker 5: or with our UK armed forces over the combat years

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Speaker 5: of Afghanistan.

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Speaker 1: John Healey spoke to Parliament after a court super injunction

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Speaker 1: blocking the publication both of the scheme and of the

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Speaker 1: data breach was lifted on Tuesday.

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Speaker 2: US President Donald Trump says he's likely to announce tariff's

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Speaker 2: on pharmaceuticals as soon as the end of the month,

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Speaker 2: but he didn't specify a rate. Any levy would likely

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Speaker 2: impact the likes of Eli, Lilly, Mark, and Pfizer, who

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Speaker 2: will produce drugs overseas. Trump spoke to reporters at Joint

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Speaker 2: Base Andrews.

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Speaker 6: Farmer tunicles will be tariff probably at the end of the.

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Speaker 4: Month, and we're going to start off with the low

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Speaker 4: tarraff and give the pharmaceutical companies a year or so

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Speaker 4: to bill.

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Speaker 6: And then we're going to make it a very high

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Speaker 6: terraff because.

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Speaker 2: We got a move of the Trump also predicted that

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Speaker 2: he could strike two or three trade deals before his

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Speaker 2: self imposed August first deadline. Representatives from the European Union,

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Speaker 2: which faces a thirty percent tariff, our meeting with US

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Speaker 2: negotiators this week.

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Speaker 1: Wall Street banks are setting records by trading on Trump

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Speaker 1: tariff volatility. JP Morgan's stock traders scored their second best

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Speaker 1: quarter ever, delivering five point six nine billion dollars in revenue,

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Speaker 1: while City Groups saw its best result in five years.

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Speaker 1: Jared Cassidy, head of US bank equity strategy and large

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Speaker 1: bank analyst at RBC Capital Markets says that the period

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Speaker 1: has produced opportunities for the sector.

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Speaker 7: It's not only the results that are driving these stocks

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Speaker 7: hire It's really about the deregulation opportunities for the banks,

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Speaker 7: and that's a big support for the bank valuations and

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Speaker 7: these prices.

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Speaker 1: RBC's Jared Cassidy speaking there elsewhere, volatility didn't translate into

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Speaker 1: the same gains, though. At Wells Fargo, investment banking fees

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Speaker 1: and trading revenue fell short of forecasts. The firm CFO

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Speaker 1: said that volatility made clients cautious on boring and making investments.

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Speaker 2: Kevin Hasset, director of the white House National Economic Council,

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Speaker 2: is the early frontronno to replace Jerome Powell as Federal

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Speaker 2: Reserve chief next year. The reporting comes as Treasury Secretary

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Speaker 2: Scott Bessant told Bloburg that the former process to find

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Speaker 2: a successor to Powell has already begun. Speaking earlier, Besant

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Speaker 2: suggested that Powell should also not remain on the Fed's

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Speaker 2: Board of Governors after his term as chair ends.

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Speaker 8: We're not going to rush just because of some market deadline. Now,

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Speaker 8: I think what the market's seeing is market's willing to

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Speaker 8: look forward three, six, twelve months, and this is going

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Speaker 8: to be good for the US, is going to be

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Speaker 8: good for the global economy.

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Speaker 2: Scott Besson says he's part of the decision making process,

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Speaker 2: but the decision will come from President Trump at his speed.

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Speaker 1: So those are some of our top stories this morning.

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Speaker 1: Looking at the markets, Asian equities are lower. Looking at

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Speaker 1: stock futures for the US also down. USOX fifty futures

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Speaker 1: lower by about a quarter of one percent. The inflation

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Speaker 1: data out of the US has started to show tariff

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Speaker 1: passed through that wall was what emerge from the data yesterday.

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Speaker 1: So you had treasuries thirty year yields topping five percent

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Speaker 1: yesterday and we stand there still looks like bond vigilantes

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Speaker 1: are really stirring. Also in Japan on the long end

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Speaker 1: of the JGB curve, a big warning it would seem

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Speaker 1: to other markets like the US the UK. We get

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Speaker 1: UK inflation data out at seven am London time this morning.

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Speaker 1: Bloomberg Dollar spot indexes down a tenth of one percent,

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Speaker 1: Gold is up so to is Bitcoin gaining more than

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Speaker 1: one percent this morning. One hundred and seventeen thousand dollars.

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Speaker 1: You've also got oil on the rise and the eurotraining

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Speaker 1: at one sixteen seventeen this morning. Those are the markets.

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Speaker 2: In a moment, we'll look at why France is proposing

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Speaker 2: acting two public holidays to tackle the country's deaficeits plus

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Speaker 2: why everyone from Berkleys to BMP Pariba wants a slice

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Speaker 2: of the prime brokerage pie. But another story that we've

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Speaker 2: been reading this morning, it's been one hundred years since

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Speaker 2: art Deco was formally introduced to the world. It was

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Speaker 2: at the International Expo in Paris in nineteen twenty five.

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Speaker 2: But it's a style that's living on and showing up

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Speaker 2: most recently in judery.

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Speaker 9: Yeah.

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Speaker 1: Absolutely, and Kristin Shirley has two beautiful a pair of

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Speaker 1: beautiful stories on Art Deco jewelry in Bloomberg Business Week,

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Speaker 1: basically why collectors are spending astronomic sums to own original

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Speaker 1: Art Deco jewelry. And then also she's looking at the

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Speaker 1: new designers who are being inspired by this start. Obviously

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Speaker 1: it's not just jewelry. The kind of geometric shapes, the colors,

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Speaker 1: that industrial inspiration. It's seen in buildings and in other

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Speaker 1: forms of design. I mean the period only lasted about

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Speaker 1: twenty years, and yet it has enduring kind of beauty

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Speaker 1: and appeal to so many people.

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Speaker 2: Yeah, and I mean look at some of the kind

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Speaker 2: of iconic buildings that we know, the Chrysler building in

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Speaker 2: New York as well, the Palid Tokyo and Paris and more,

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Speaker 2: and that legacy lives on, which you know, might help

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Speaker 2: to see sort of resurgences of the trend over the years.

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Speaker 8: Yeah.

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Speaker 1: There's a wonderful Art deco building really close to where

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Speaker 1: I live, the Carrera cigarette factory, and it's got these

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Speaker 1: amazing egyptianate cat two black cats. They're enormous, probably twice

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Speaker 1: the size of a person outside, which is kind of

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Speaker 1: another style influence of that period. Absolutely starting, I just.

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Speaker 2: What your walk home is like. Now there's the cats.

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Speaker 2: I'm nearly home.

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Speaker 1: It's really a great building. But I just love Kristen's

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Speaker 1: piece as well. And there are lots of exhibitions coming

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Speaker 1: because of that anniversary. One at the VNA, I know

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Speaker 1: there's one in Paris. So yeah, maybe you'll you'll hear

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Speaker 1: and learn more about our deco this year.

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Speaker 2: Yeah, we'll put a link to that piece in our

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Speaker 2: show notes for you. Well, let's bring you more now

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Speaker 2: and the budget plans laid out by French Prime minister yesterday,

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Speaker 2: including the forty four billion euros and spending cuts and

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Speaker 2: plans to act two public holidays, this as he attempts

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Speaker 2: to bring France's public finances under control. Our reporter Julian

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Speaker 2: Pontous joins us from Paris now for more. Julian, good morning.

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Speaker 2: What were then the key measures that France Boiberro announced.

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Speaker 9: One of the key measures is a freeze on central

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Speaker 9: central state spending. It will also be a mandatory for

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Speaker 9: local authorities to to curb spending. But it's it's a

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Speaker 9: very comprehensive plan.

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Speaker 10: So of course this is the two public holidays you

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Speaker 10: were talking about, because it's also quite a lot of

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Speaker 10: measures to curb healthcare spending, social benefits.

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Speaker 9: There's really merge a lot of state agencies to reduce

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Speaker 9: their head counts. There are a lot of things, you know,

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Speaker 9: lower that are being set in plan. It's it's a

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Speaker 9: very comprehensive plan. As you said, it's about worth about

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Speaker 9: forty four billion euros, so it's it's it's substantial, but.

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Speaker 1: I mean mortal danger. That's a stark warning, isn't it.

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Speaker 1: The problem is Baby doesn't have a georgy in parliament.

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Speaker 1: So big, big cuts, big plans, but how realistic is

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Speaker 1: it that they're going to pass.

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Speaker 9: Well, some critics will say, actually that the plan isn't

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Speaker 9: really like a big structural plan with structural measures like

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Speaker 9: really acting into spending. It's like freezing the spend. It's

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Speaker 9: a soft version some set of IMF plan. It is

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Speaker 9: really not like what Greece went through. It's not you

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Speaker 9: know what Milae has done in Argentina. When you think

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Speaker 9: about it, it is something that can be done. And

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Speaker 9: what Baillo said also is like, you know, if we

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Speaker 9: France does nothing, it will have to pay one hundred

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Speaker 9: billion euros by twenty twenty nine in interests to the creditors.

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Speaker 9: So maybe mortal danger is too much. But you know,

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Speaker 9: you could say it's getting so to a slow death

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Speaker 9: of the French economy if nothing is done. But you're right,

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Speaker 9: there's no majority in parliament to do it, so there's

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Speaker 9: going to be a lot of negotiations going through. When doctor,

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Speaker 9: for instance, of the two public holidays, a lot of

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Speaker 9: people are saying, well, already, well two days in France,

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Speaker 9: that's fourteen hours. Why not spread fourteen hours through the

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Speaker 9: year and say, you know, work ten minutes more per

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Speaker 9: week or things like that. There's a lot of negotiations

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Speaker 9: that you can do, so you know, the jury so

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Speaker 9: as whether he can really pull it through.

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Speaker 2: Of course, this is the dilema that shared by many

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Speaker 2: European countries. High public spending, high debt, high deficits. How

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Speaker 2: worried are the markets about France.

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Speaker 9: At the moment? Not that much like that that spread,

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Speaker 9: the difference between German bonds and French bonds was went

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Speaker 9: down just with one beep. So I think they will

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Speaker 9: succeed succeeded in a way by reassuring markets like you say, like, Okay,

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Speaker 9: the deficit is not we're serious about tackling it. We're

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Speaker 9: we're seriously going to do something about it. But you know,

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Speaker 9: I think the real worry will come this fall, when

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Speaker 9: you know it will be there will probably there will

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Speaker 9: be no confinance vote for sure, and you know that

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Speaker 9: will be a high stake moment for France because you

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Speaker 9: know where we would get new elections, there's always the

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Speaker 9: chance of having a far right government, which the markets

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Speaker 9: won't like. It's I think, really it's going to become

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Speaker 9: a key moment for France after the summer holidays.

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

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Speaker 1: us this morning. That is Juliane Porthos the Live from Paris.

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Speaker 2: The European banks have been pouring money into prime brokerage

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Speaker 2: in an effort to capture the record revenue that Wall

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Speaker 2: Street lenders have been earning. In this area, the business

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Speaker 2: of lending hedge funds, cash and securities to help execute

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Speaker 2: their trades has seen explosive growth in recent years. I

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Speaker 2: Finance reporter Will Shaw joins us now for more. Will,

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Speaker 2: Good morning. Why has prime brokerage been growing so fast

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Speaker 2: and what's the backdrop to all of this?

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Speaker 6: Yes, so basically, just to explain the growth, First of all,

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Speaker 6: revenue from prime has grown faster than any other product

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Speaker 6: within actually's trading in the past five years. Last year

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Speaker 6: income hit a record twenty seven point seven billion, according

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Speaker 6: to data from Chryslor Coalition Greenwich, and they're expecting it

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Speaker 6: even higher in twenty twenty five, potentially breaching thirty billion dollars.

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Speaker 6: And so that essentially comes amid a rapid growth in

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Speaker 6: multi strat hedge funds the like of Millennium and Citadel

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Speaker 6: around the world which need more resources in order to trade,

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Speaker 6: and banks like it because it's a gateway to selling

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Speaker 6: a broader range of services to hedge funds. If you

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Speaker 6: can get them with prime, it's possible you'll get like

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Speaker 6: be able to sell them a much wider product suite

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Speaker 6: as well on top of that.

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Speaker 1: Okay, so then who are the biggest players and you've

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Speaker 1: talked about some and what are the individual banks doing

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Speaker 1: to try to make the most of all of this.

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Speaker 6: So the really big ones like you'd expect Morgan, Stanley,

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Speaker 6: Golden Sacks and JP Morgan, which have all got prime

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Speaker 6: balances of over a trillion dollars to give you a

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Speaker 6: size of the scale of the industry, But smaller banks

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Speaker 6: are working hard to catch up. So the French film

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Speaker 6: BMP Parabath, for example, brought in more than one point

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Speaker 6: five billion in revenue last year from its prime business.

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Speaker 6: That was up forty percent from the year before, and

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Speaker 6: that was it gained a bigger market share than any

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Speaker 6: of its rivals. So they, for example, have got about

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Speaker 6: five hundred coders all working to try and make the

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Speaker 6: business as efficient as possible. Bank of America is trying

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Speaker 6: to break into the top three by expanding its offering

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Speaker 6: and JP Morgan one of the big ones. They made

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Speaker 6: more than four billion last year. They're now pushing into

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Speaker 6: Asia Pacific, looking at opportunities in Vietnam and Saudi for example,

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Speaker 6: building out infrastructure in India and China.

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Speaker 2: So what do regulators make about all of this then,

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Speaker 2: particularly given the collapse of our key gas that only

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Speaker 2: happened a few years ago.

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Speaker 6: Yeah, so nearly four years ago our Chagos capital management collapse,

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Speaker 6: inflicting devastating damage on its prime brokers, ultimately paving the

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Speaker 6: way for the collapse of credits suite. So regulators, as

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Speaker 6: you would expect, to looking at the quite closely. In Europe,

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Speaker 6: the European Securities and Markets Authority is warned that hedge

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Speaker 6: funds active there are running bets with eighteen times leverage

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Speaker 6: and saying there's a risk of disproportionate reaction to unexpected events.

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Speaker 6: I should say though, that the regulators are vigilant and

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Speaker 6: keeping an eye on this situation. There's no suggestion that

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Speaker 6: they're panicking or that they expect any kind of catastrophe

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Speaker 6: in the immediate term.

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Speaker 1: So then who are the ideal prime customers?

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Speaker 8: Then?

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Speaker 1: From the banks point of view. Who are they focusing on.

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Speaker 6: So the banks, I think because of the risks that

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Speaker 6: emerged around Archagos, they want to narrow down the hedge

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Speaker 6: funds to a small pool that a have a lot

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Speaker 6: of money and b are obviously quite stable. So they

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Speaker 6: really like the big hedge funds like the ones I

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Speaker 6: mentioned earlier, and they're focusing a lot of resources on them.

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Speaker 6: That's made it harder for smaller hedge funds to establish

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Speaker 6: relationships with prime brokers. There's also a risk that you

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Speaker 6: can you can get a prime broker as a hedge fund.

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Speaker 6: Within two years, they're not, You're not making enough money

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Speaker 6: for your bank, and you find yourself unceremoniously ditched. So

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Speaker 6: there's a series of smaller prime brokers like clear Street,

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Speaker 6: Jones trading firms like that that are that are popping

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Speaker 6: up to take advantage of this and start servicing smaller firms.

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Speaker 6: So there's a sort of secondary industry booming around prime.

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

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