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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: Bloomberg Day BAQ podcast, available every morning on Apple, Spotify

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Speaker 3: or whatever you listen. It's Tuesday, the sixth of Main London.

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Speaker 3: I'm Caroline Hepke.

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Speaker 1: And I'm Stephen Carroll.

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Speaker 4: Coming up today, Friedrich Martz gets set to become Germany's

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Speaker 4: new chancellor this morning as HEBA is to hit the

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Speaker 4: ground running.

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Speaker 3: Forecasters say us Taris will force the Bank of England

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Speaker 3: to ramp up rate reductions.

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Speaker 4: Plus going going gone, evidence shows the UK's move to

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Speaker 4: abolish non dom status may cost more than it raises.

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

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Speaker 4: Germany's parliament is set to elect Fredrick Mertz as the

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Speaker 4: country's next chancellor in the coming hours. The Conservative leader

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Speaker 4: will head a coalition alongside the Social Democrats at a

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Speaker 4: critical moment for Europe's largest economy. Our Germany Bureau chief

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Speaker 4: Christopher all World says Martz will be looking to follow

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Speaker 4: through on his to enhance his country's role in European security.

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Speaker 5: Pushing through economic reforms will will definitely be on top

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Speaker 5: of his list and also will be particularly in focus

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Speaker 5: in coming days. Will be his efforts to liaise with

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Speaker 5: other European leaders like French President in Manuel Macron. All

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Speaker 5: the Polish president to join has been notably passive under

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Speaker 5: outgoing chance all of shots, and Mattz really has pledged

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Speaker 5: and maybe one of his top priorities to change that

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Speaker 5: and play also like a more active role on the

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Speaker 5: European stage.

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Speaker 1: Again Christopher Farrewell speaking there.

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Speaker 4: Once sworn in, Martz will preside over his first cabinet meeting.

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Speaker 4: Germany's economy is stagnating after two years of recession. Russia's

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Speaker 4: war in Ukraine is still raging to the east, and

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Speaker 4: support for the far right alternative for Germany is strengthening,

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Speaker 4: especially in former communists eastern regions of the country.

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Speaker 3: China's services activity fell to its lowest level in seven months,

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Speaker 3: according to a private survey. The Kaishin PMI or Purchasing

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Speaker 3: Managers Index fell to fifty point seven in April. That

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Speaker 3: is below the median forecast of fifty one point eight,

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Speaker 3: and it suggests a reduction in staff and new business orders.

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Speaker 3: And Liz poll by Bloomberg forecast China's second quarter GDP

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Speaker 3: growth could slow to four point two percent, below the

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Speaker 3: finance Ministry's five percent target.

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Speaker 4: All thirty two economists in Bloomberg's survey believe the Bank

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Speaker 4: of England will cut interest rates this week. A quarter

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Speaker 4: point cut is baked in for the meeting this Thursday,

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Speaker 4: the fourth rate reduction from last year's peak of five

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Speaker 4: hunder quarter percent. Most economists expect the Center Bank to

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Speaker 4: switch to a dovish stance, judging that Donald Trump's tariffs

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Speaker 4: and uncertainty about his future plans will weigh on growth

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Speaker 4: and temper inflation. If the Bank of England cuts again

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Speaker 4: in June, it will be the first time borrowing costs

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Speaker 4: are lowered at successive meetings since early two thousand and

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Speaker 4: nine during the financial crisis.

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Speaker 3: Now, the UK's new taxes on non domiciled residents will

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Speaker 3: start costing more than they raise if one in four

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Speaker 3: of those affected leaves. That's according to the Center for

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Speaker 3: Economics and Business Research, which argues that the official forecast

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Speaker 3: has underestimated the risks. The Independent think Tanks managing economist

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Speaker 3: Sam Miley says that it's a risk to the public finances.

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Speaker 2: Ultimately, the policy is being made and supported by by

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Speaker 2: figures that are inherently uncertain, so it suggests that there

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Speaker 2: is a significant risk to fiscal matters based off what

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Speaker 2: is an entirely uncertain variable.

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Speaker 3: Miley's report comes as some of Britain's richest investors have

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Speaker 3: already said that they are leaving, including Gold and Sax's

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Speaker 3: Richard Noddy, a spokesperson for the Treasury, said that it

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Speaker 3: did not recognize the cebr's figures and that the Independent

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Speaker 3: Office for Budget Responsibility sees the changes raising thirty three

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Speaker 3: point eight billion pounds over the next five years.

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Speaker 4: UBS has agreed to pay five hundred and eleven million

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Speaker 4: dollars to settle a US investigation into how Credit Suisse

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Speaker 4: helped rich Americans to evade taxes, even after pledging to

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Speaker 4: stop the practice a decade ago. The resolution ends a

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Speaker 4: long running scandal involving the Lander, which was acquired by

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Speaker 4: UBS two years ago. UBS said in its first quarter

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Speaker 4: report that had had a provision for potential costs tied

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Speaker 4: to the case, but didn't disclose an amount.

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Speaker 3: Ford suspending its full year guidance, saying that it expects

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Speaker 3: a one and a half billion dollar hit to profits

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Speaker 3: due to President Trump's tariffs. The news comes despite the

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Speaker 3: carmaker reporting first quarter profit that beat expectations. Speaking to analyst,

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Speaker 3: CEO Jim Farley said, the firm is still unsure of

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Speaker 3: the full impact of levies.

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Speaker 6: It's still too early to fully understand our competitors' responses

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Speaker 6: to these tariffs. It's also early to gauge the related

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Speaker 6: market dynamics, including the potential industry wide supply chain disruptions

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Speaker 6: and the impact of Ford's domestic manufacturing advantages. As a result,

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Speaker 6: we decided to suspend our guidance.

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Speaker 3: Ford's Jim Farley speaking there despite the negative impact of

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Speaker 3: the automaker's bottom line, and Farley went on to voice

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Speaker 3: support for the Trump administration's efforts to bring auto manufacturing

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Speaker 3: back to the United States. Ford's shares fell two point

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Speaker 3: four percent in after hours training on Monday.

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Speaker 4: The clash between President Trump's administration and Harvard is continuing

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Speaker 4: as the White House blocks new funding for the university.

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Speaker 4: It comes after accusations of ideological bias at the institution

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Speaker 4: by the US government and its conservative allies. Bloomberg's tiwa

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Speaker 4: Adebayo has more.

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Speaker 7: Harvard University has been declared ineligible for new research grants

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Speaker 7: from the federal government. That's after Education Secretary Linda McMahon

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Speaker 7: sent a letter to the Ivy League school warning access

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Speaker 7: to financial support would be withheld until they could demonstrate

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Speaker 7: what she calls responsible management. Bloomberg understands that to reverse

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Speaker 7: the dictat Harvard will need to end negotiation with the administration.

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Speaker 7: Sources close to the matter say the change could affect

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Speaker 7: over one billion dollars annually for the university, although the

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Speaker 7: administration did not immediately detail the figure. In response, a

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Speaker 7: Harvard spokesperson said the latest demands amount to improper control

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Speaker 7: of the institution with chilling implications for higher education in London.

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Speaker 7: To you at a Baio Bloomberg Radio.

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Speaker 3: And those are some of your top stories. Now let's

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Speaker 3: get to the markets this morning. On the Bloomberg Dollar

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Speaker 3: Spot Index, the dollar is up a tenth of one

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Speaker 3: percent Taiwan as dollar appreciation is stabilizing this morning, Asian

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Speaker 3: efcts setting really after a couple of days of gains.

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Speaker 3: You've also got US DOT futures in the red. So

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Speaker 3: then as that features down by almost half of one

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Speaker 3: percent of this morning this as we're looking at European

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Speaker 3: stocks also down just a fraction, although actually Germany did

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Speaker 3: reasonably well yesterday. You did see the xetradacs, gaining about

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Speaker 3: just over one percent of the close yesterday, so just

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Speaker 3: shy of record highs Ford stock, though, fell two and

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Speaker 3: a half percent and extended trading Palanted, big tech firm,

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Speaker 3: also fell over nine percent in after hours. US treasuries

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Speaker 3: had a week session yesterday, tenure yields. This morning, we'll

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Speaker 3: begin trading at four thirty four. This is gold takes

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Speaker 3: its two day rally now to more than four percent.

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Speaker 3: So gold continuing to rally. We up eight tenths of

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Speaker 3: one percent this morning. That is a look at the markets.

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Speaker 4: In a moment, we'll bring you more on the challenges

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Speaker 4: facing Germany's new chancellor, plus why the much heralded end

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Speaker 4: of the non done tax status in the UK might

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Speaker 4: not be as good for the public finance as as

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Speaker 4: the government has hoped. But another story that's caught ry

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Speaker 4: this morning, or I should say series of award winning stories,

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Speaker 4: because a Bloomberg News's City Lab has won a Pulitzer

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Speaker 4: Prize for Criticism for a collection of essays from our

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Speaker 4: colleague Alexandra Lang.

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Speaker 1: This is a fascinating series.

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Speaker 4: I love City Lab because I love thinking about the

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Speaker 4: cities that we live in and how we can basically

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Speaker 4: change them for the better. And Alexandra has written a

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Speaker 4: series of pieces about the use of public spaces and

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Speaker 4: how they can be better for families. And they're not

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Speaker 4: just fascinating to read. There's some really interesting ideas in

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Speaker 4: there as well, the idea of making public spaces you know, better,

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Speaker 4: easier for families to be able to live and to

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Speaker 4: be able to also keep families in city centers.

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Speaker 3: Yes, she writes about how design promotes better mental health

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Speaker 3: for children. She's written about how burnt out parents need

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Speaker 3: better public spaces, about how the physical design of sort

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Speaker 3: of housing and transportation of public spaces. Yes, it's the

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Speaker 3: range about which she writes is so interesting. And also

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Speaker 3: as a parent, it really brought this to mind that

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Speaker 3: people often don't understand how fundamental certain play equipment is.

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Speaker 3: Why do you always see, you know, the swing or

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Speaker 3: the monkey bars in children's playgrounds. It's hugely important for

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Speaker 3: child development. Basically, things like writing monkey bars are massively

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Speaker 3: important for that people don't often understand and why those

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Speaker 3: things exist. And she really brought all of that stuff

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Speaker 3: about focus.

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Speaker 4: It's not just about not using screens. Essentially, there's a

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Speaker 4: lot more to us. But look as action of our stories,

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Speaker 4: we'll put a link in our show notes for the

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Speaker 4: Bloomberg Daybreag Europe podcast to some of those award winning pieces.

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Speaker 4: And congratulations to Alexandra Lang.

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Speaker 3: Now, more than two months after Germany's federal election, Fredrich

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Speaker 3: Mertz finally becomes chancellor today. He's coming to power at

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Speaker 3: a critical time for Europe's largest economy. Our EMEA News

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Speaker 3: director Rossy Matheson joins us now for more Good Morning Roz.

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Speaker 3: What's at stake then, do you think for Germany under

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Speaker 3: Mertz's leadership?

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Speaker 8: Now, they're important changes he's already been trying to bring in,

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Speaker 8: as we know, trying to get the deckcap change and

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Speaker 8: also you know, in a big increase in infrastructure and

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Speaker 8: defense spending for Germany at a time that the economy

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Speaker 8: has really been stagnating, and fundamental questions about how do

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Speaker 8: you take an economy that's very much based around manufacturing

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Speaker 8: and how do you adjust that for a modern world

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Speaker 8: and make it competitive And so, like a lot of countries,

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Speaker 8: there are questions about what are the new big things

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Speaker 8: that are going to propel the German economy and how

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Speaker 8: do you shift its manufacturing base again to something else?

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Speaker 8: And so there's a lot of expectations there for him,

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Speaker 8: obviously for Germany, but also for Europe as a whole,

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Speaker 8: because the backdrop, of course is the trade tensions with

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Speaker 8: the US, the Trump administration questioning Europe's ability to take

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Speaker 8: care of itself and defend itself, the need to find

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Speaker 8: a solution to Russia's war to Ukraine. So there's an

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Speaker 8: awful lot on his plate, and the question is what

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Speaker 8: is he going to do that his predecessors.

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Speaker 1: Did not ras.

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Speaker 4: Of course, even before Kredich Wertz became chancellor, he's already

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Speaker 4: managed to get this package through the bonder Stag, which

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Speaker 4: has gone see a massive increase to defense and infrastructure

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Speaker 4: spending and changes to the rules around spending on defense

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Speaker 4: in general. How quickly will he be able to start

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Speaker 4: spending that money?

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Speaker 8: Pushing to start pretty quickly, and that's mostly on the

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Speaker 8: infrastructure side, so you could see increases in spending around railways, bridges,

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Speaker 8: highways fairly quickly out of this, although again these things

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Speaker 8: don't get built in a day, but they will lay

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Speaker 8: the bones of a broader revamp of the economy over time.

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Speaker 8: The question is we know that, in fact, there's already

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Speaker 8: some money in the mix in Germany, but it's been

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Speaker 8: unable to be spent because of a lot of rules

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Speaker 8: around the way that bureaucracy works and so on, and

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Speaker 8: getting permissions and plannings, and so it's not just about

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Speaker 8: getting the money there to spend it, it's also about

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Speaker 8: making it easier for it to be spent and to

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Speaker 8: cut red tape. And that's something that we're not necessarily

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Speaker 8: hearing a lot of clarity on as yet from.

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Speaker 1: This incoming administration.

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Speaker 8: Is you've got the money, but how do you make

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Speaker 8: sure it goes where it needs to go? And it

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Speaker 8: sounds like they are keen to start spending it quickly,

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Speaker 8: but there are a lot of issues around how they

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Speaker 8: get that money where it needs to be and to

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Speaker 8: do so quickly.

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Speaker 3: Mattz has also made big promises to curb illegal migration.

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Speaker 3: I mean, this is a lot of countries in Europe

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Speaker 3: are talking about now. It could also create problems with

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Speaker 3: Germany's neighbors, well.

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Speaker 1: It could.

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Speaker 8: It could create problems both at home and with its neighbors.

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Speaker 8: As you say, I mean, they're grappling with the rise

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Speaker 8: of the anti immigrant party, the AfD, which has only

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Speaker 8: just been formerly classified recently as a right winging extremist group.

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Speaker 8: So that's very much back in the news and in

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Speaker 8: the conversation in Germany, so pushing those to take a

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Speaker 8: harder line on migration. And the question is what does

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Speaker 8: that look like and what is the impact on the region,

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Speaker 8: Because as we know, migration questions in Europe aren't just

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Speaker 8: confined to one country. So if one country shots its

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Speaker 8: borders or says it's taking fewer migrants, where do those

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Speaker 8: migrants go? Is there a knock on effect on other

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Speaker 8: countries which then have to grapple with those people diverting

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Speaker 8: And so you get a lot of questions from neighbors

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Speaker 8: about what does this mean for them? If these people

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Speaker 8: come towards Germany get turned away, where.

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Speaker 1: Else do they go?

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Speaker 8: Because Germany's really under Angla Mercle, particularly when she was Chancellor,

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Speaker 8: really sort of became known as a place that was

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Speaker 8: willing to take migrants, especially during some of the waves

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Speaker 8: that we saw because of conflict in the Middle East

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Speaker 8: and people coming from North Africa. So if that changes

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Speaker 8: and these people get sent somewhere else, that's going to

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Speaker 8: raise tensions inevitably with other countries in Europe.

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Speaker 4: What about Fromerts himself. Even since the elections, he's been

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Speaker 4: under pressure and the polls.

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Speaker 8: Well, it's funny because normally leaders come in with the

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Speaker 8: honeymoon period, you know, but also high expectations, and so

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Speaker 8: if they don't deliver quickly, there's a crashing sense of disappointment.

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Speaker 8: Moses arguably already done some extraordinary significant things before he's

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Speaker 8: even in the chair as chancellor. But equally, his popularity

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Speaker 8: ratings are relatively low and have tended to be consistently

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Speaker 8: over years. So only at eighteen percent in one poll

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Speaker 8: said that they believed he do a better job of

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Speaker 8: running the country than Merkele, and almost half said they

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Speaker 8: expect him to be worse. So perhaps the benefit of

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Speaker 8: low expectations is that Merz actually only has upside from

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Speaker 8: here to deliver and doesn't collide with the idea that

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Speaker 8: he has to be doing a lot quickly. But that said,

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Speaker 8: it does point to the challenges he faces about selling

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Speaker 8: his agenda to the German people, selling himself to the public,

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Speaker 8: and we've seen that over and over again. So the

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Speaker 8: question is he's got a lot he wants to do,

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Speaker 8: can he find a way to sell it to the

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Speaker 8: German people?

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Speaker 3: Okay, rolls, thank you so much for being with us

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Speaker 3: o AREMA News director Rosson Matheson.

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Speaker 4: The Britain's labor government has talked a lot about ending

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Speaker 4: the so called non dom tax stile last October's budget,

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Speaker 4: saying it would help to boost the tax take. But

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Speaker 4: after changing the rules, a new report from the Center

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Speaker 4: for Economics and Business rese it suggests the tax change

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Speaker 4: will end up costing more than it raises if the

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Speaker 4: wealthy people who held the status leave the country. Are

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Speaker 4: UK Parltic supporter of James Welcock joins US Now for

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Speaker 4: more on this story. James, what does this new report

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Speaker 4: say and why does it make difficult reading for the government.

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Speaker 1: Well, the tax was supposed to.

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Speaker 2: Raise revenue, Stephen, by changing how people who are not

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Speaker 2: tax resident in the UK, but often quite wealthy and

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Speaker 2: live in the UK pay it. They would now all

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Speaker 2: be paying their tax on foreign earnings. But this report

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Speaker 2: says firstly, the OBR is overestimating how much the tax

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Speaker 2: will raise by taking the wealthiest people when it made

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Speaker 2: the estimates, and itutates the taxi seeds to find out

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Speaker 2: the obr's estimating the new tax will bring in four

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Speaker 2: million pounds per person, and they're like, it's probably closer

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Speaker 2: to six hundred thousand pounds per person. And secondly, they're

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Speaker 2: saying there are some wild ranges in the estimates of

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Speaker 2: how many people will leave in response to this tax.

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Speaker 2: The OBI say it's twelve percent, Oxford economics say it's

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Speaker 2: thirty two percent. And then there are surveys of some

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Speaker 2: sort of non doms, some sort of wealthy private tax

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Speaker 2: lawyers who coul put the number higher, closed to even

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Speaker 2: sixty percent. They then don't take of you on how

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Speaker 2: many people are leaving, but they say if more than

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Speaker 2: one in four do leave, that's the point in their

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Speaker 2: analysis where the treasury starts losing money. And this is

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Speaker 2: very difficult for the government because they have said this

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Speaker 2: is an ideological commitment. It's in Labor's manifesto, but it's

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Speaker 2: framed as making people money. The government say this is

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Speaker 2: supposed to make thirty three billion over five years. And

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Speaker 2: this report, which I note although it is independent, is

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Speaker 2: commissioned by think tank link to Onward, a conservative think tank,

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Speaker 2: as saying it's actually quite a gamble and at the

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Speaker 2: twenty five percent mark, you'll start becoming a fiscal risk.

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Speaker 3: Yeah, And The issue is that there are only tens

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Speaker 3: of thousands of these extremely wealthy individuals, and so actually

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Speaker 3: it only depends on a relatively small number of people

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Speaker 3: changing their behavior. How likely is it then that the

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Speaker 3: ultra wealthy will go I mean, Bloomberg, we've already reported

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Speaker 3: a lot of individuals and what their movements.

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Speaker 2: Are I mean, as you say, it's a really difficult question.

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Speaker 2: So seventy four thousand ish they'reabouts in the UK right now.

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Speaker 2: Because you have to self declare to the HMRC that

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Speaker 2: you're doing this, the data is a two year time lag,

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Speaker 2: so we won't know for sure for two years. All

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Speaker 2: I have for you, Caroline are estimates, anecdotes and precedent estimates.

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Speaker 2: We've gone through between about twelve percent to upp as

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Speaker 2: high sixty.

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Speaker 1: Then anecdotes.

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Speaker 2: We're hearing Goldman's Richard Noddy is already left for Milan.

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Speaker 2: The real estate magnates Ina Richard Livingston, they've left for Monaco.

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Speaker 1: So we are.

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Speaker 2: Seeing certain reports that some individuals are leaving, but some

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Speaker 2: doesn't equate to any kind of number and precedent. When

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Speaker 2: Switzerland put in a players attacks on it's wealthy in

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Speaker 2: the long run, thirty percent left. So at the very

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Speaker 2: least the obr's estimate we can comfortably say is at

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Speaker 2: the lower bound of where this is. But as to

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Speaker 2: where it will end up, it's hard to tell. London

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Speaker 2: has a lot going for it. It has all these amenities.

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Speaker 2: It has a very nice place to live, I mean,

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Speaker 2: apart from the back holiday, you could say it has

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Speaker 2: nice weather as well. The danger, though, is that there

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Speaker 2: is a risk of what's called a wealth fleeing spiral,

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Speaker 2: where if all your friends are going, if you will

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Speaker 2: also could go. If there's a lot of tax advisors

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Speaker 2: offering you a way out, it might be time to leave.

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Speaker 1: Well, if they do leave, where are they're likely to go?

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Speaker 3: Well?

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Speaker 2: I mean you have the greatest hits Stephen of tax havens, Switzerland, Monaco,

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Speaker 2: the Bahamas, but increasingly with seeing new countries, especially in Europe,

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Speaker 2: who are trying to lure in some of these kind

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Speaker 2: of very wealthy, mobile, sort of high capital individuals. Italy

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Speaker 2: you have a flat tax currently of one hundred thousand euros,

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Speaker 2: and then after that you can have any sort of

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Speaker 2: foreign games you want. That's rising to two hundred thousand euros.

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Speaker 2: So getting quick Greece if you invest half a million euros.

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Speaker 2: You can then play a fat tax, a flat tax

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Speaker 2: of one hundred thousand for fifteen years, or you go

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Speaker 2: to Dubai where they don't levy any income or wealth

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Speaker 2: tax whatsoever.

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Speaker 4: This is Bloomberg Daybreak Europe, your morning brief on the

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