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Speaker 1: This is Bloomberg Daymaker for this Monday, the nineteenth of

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Speaker 1: June in London.

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Speaker 2: Coming up today, the best of Frenemies. Blencoln becomes the

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Speaker 2: most senior US official to visit China in five years.

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Speaker 1: Restoring order, the FCA is said to restrict od asset

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Speaker 1: management transactions.

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Speaker 2: Get ready to feel the squeeze. Bets on UK rates

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Speaker 2: edge towards six percent.

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Speaker 3: AstraZeneca's China spin off and BT cuts its pension investments

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Speaker 3: in the UK. Those are the stories we're looking at

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Speaker 3: in today's papers. And I'm Leanne Gerren's.

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Speaker 1: Plus swinging the acts. The UBS CEO hints at a

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Speaker 1: massive downsizing of Credit Suee's investment banking business.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Europe. The business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App

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Speaker 4: and everywhere you get your podcasts.

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Speaker 2: Good morning, I'm Stephen.

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Speaker 1: Carroll and I'm Caroline Hecker. Here are the stories that

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Speaker 1: we're following today.

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Speaker 2: US Secretary of State Anthony Blincoln is matt China's top

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Speaker 2: foreign policy official in Beijing, in a positive start to

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Speaker 2: his two day trip He's the most senior US official

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Speaker 2: to visit the country in five years. Nason Maboobi, at

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Speaker 2: China specialist at the University of Pennsylvania, says, the trip

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Speaker 2: seems to be going well.

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Speaker 5: The meeting, you know, lasted much longer than I think

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Speaker 5: people thought. I think both of the readouts had very

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Speaker 5: positive language. Some of the follow on things that are

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Speaker 5: happening today and perhaps even a meeting with President Jujuiping

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Speaker 5: all seemed to be on track in a very nice way.

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Speaker 5: And the language and each of the readouts had lots

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Speaker 5: of phrases, you know on the Chinese side, stable, constructive,

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Speaker 5: predictable relationship that signal that this was quite a productive meeting,

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Speaker 5: again against the backdrop of terrible relations of late and

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Speaker 5: very low expectations for what the meeting could have accomplished

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Speaker 5: going into it.

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Speaker 2: That's Nason Mabooby speaking too. Is Blncoln's previous attempt to

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Speaker 2: visit China in February was scrapped when the US revealed

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Speaker 2: and alleged Chinese spy balloon was floating over the United States.

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Speaker 1: Goldman Sachs is the latest bank, though, to cut its

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Speaker 1: forecasts for Chinese economic growth this year Bloomberg's Brian Curtis

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Speaker 1: has more From Hong Kong.

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Speaker 6: Goldman lowered its estimates for GDP from six percent down

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Speaker 6: to five point four percent, and perhaps to make matters worse,

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Speaker 6: it sees limited options to boost stimulus. It says any

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Speaker 6: easing is unlikely to exceed those in previous downturns like

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Speaker 6: twenty twenty. A report says property and infrastructure stimulus will

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Speaker 6: probably be targeted and moderate, and that going down the

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Speaker 6: same world road is not consistent with the high quality

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Speaker 6: growth the leadership wants. Why not do more will? Goldman

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Speaker 6: sees some options constrained by economic and political considerations in

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Speaker 6: Hong Kong. Brian Curtis, Bloomberg Daybreak.

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Speaker 2: Europe, the UK's financial conduct authorities are reported to have

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Speaker 2: imposed restrictions on the movement of cash and assets by

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Speaker 2: od Asset Management. Bloomberg's Ewan Pots has more on the

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Speaker 2: recent turmoil.

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Speaker 7: Od Asset Management plunged into turmoil early this month after

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Speaker 7: allegations of sexual harassment by founder Crispin Odi, which he denies.

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Speaker 7: Now the Ft reports that the UK's financial regulator is

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Speaker 7: attempting to restore order after the departure of ODI by

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Speaker 7: imposing restrictions on the movements of cash and assets. The

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Speaker 7: paper says OD Wealth Management and associate firmas also agreed

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Speaker 7: to the guidelines, which could be published later today. Among

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Speaker 7: the restrictions, the FCA will require pre approval for transactions

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Speaker 7: above a certain level in London Immune parts Bloomberg Day

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Speaker 7: Break Europe.

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Speaker 1: Politically, here in the UK, the House of Commons will

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Speaker 1: vote today on a report which found Boris Johnson, the

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Speaker 1: former Prime Minister, lied to MPs over party Gate. The

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Speaker 1: vote threatens to fuel divisions within the Conservative Party in

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Speaker 1: what's likely to be an uncomfortable week for the Prime Minister.

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Speaker 1: On Thursday. The Bank of England is also set to

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Speaker 1: heap further pain on borrowers by raising interest rates again.

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Speaker 1: The Bank's former deputy governor, Charlie Bean says that they

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Speaker 1: will need to head higher.

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Speaker 8: I think rates will certainly go higher from where they are,

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Speaker 8: reflecting these bad inflation and pay and like market numbers

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Speaker 8: that we've had over the past month. How much high

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Speaker 8: they have to go is open. Obviously, the markets are

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Speaker 8: expecting significantly higher rates.

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Speaker 1: The Bank of England's former deputy governor there speaking as

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Speaker 1: markets are pricing in a peak rate for the UK

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Speaker 1: of over five point seventy five percent next year. That

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Speaker 1: would be a level not seen in sixteen years.

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Speaker 2: Credit Suite may be due for a quote massive downsizing

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Speaker 2: of its investment banking business after its takeover by UBS.

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Speaker 2: UBS CEO Sergio or Maati has been hinting at massive

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Speaker 2: cuts to Credit Suite, and an opinion piece published on

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Speaker 2: Saturday in a Swiss newspaper, he also said that UBS

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Speaker 2: has simplified its structure and that a prudent corporate culture

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Speaker 2: is at the core of everything they do. The fusion

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Speaker 2: of the two financial giants is underway after the takeover

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Speaker 2: was formally closed last week.

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Speaker 1: Okay, those are a few of our top stories for

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Speaker 1: you this morning. Worth reflecting though, on what a very

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Speaker 1: difficult week. This may well be politically economically for the UK.

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Speaker 1: So the Bank of England is expected to lift interest

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Speaker 1: rates from four and a half percent to four point

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Speaker 1: seventy five percent doesn't entirely rule out the possibility even

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Speaker 1: of a fifty basis point rate rise. It would certainly

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Speaker 1: be the thirteenth rate increase in Britain in a row.

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Speaker 1: We've also got the UK CPI data, but politically, the

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Speaker 1: prime Minister is absolutely you know, wedged into this problem

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Speaker 1: where you have alarm bells ringing Stephen about the housing market,

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Speaker 1: about borers and mortgages, and yet also you have the

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Speaker 1: former Prime Minister Boris Johnson and what he did during

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Speaker 1: the pandemic and the lockdown parties that were held really

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Speaker 1: looming large over the Conservatives.

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Speaker 2: Yeah, I mean, look, the inflation figure is expected to

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Speaker 2: show a slowdown, but nowhere near where any Prime minister

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Speaker 2: would want to be seeing inflation at this stay, considering

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Speaker 2: how high it's been for now so long. And the

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Speaker 2: question in an electoral cycle sense is when people are

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Speaker 2: going to feel the pain of those interest rate increases

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Speaker 2: the most, because people coming off fixed rate mortgages in

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Speaker 2: the next year, if they're paying significantly more now, are

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Speaker 2: they going to be blaming the government for that, especially

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Speaker 2: if inflation is still so high On the housing market.

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Speaker 2: We've new figured some right Move today showing that house

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Speaker 2: prices in London are sliding at the largest amount per

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Speaker 2: region in the UK, so down one point six percent

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Speaker 2: month on month according to right Move, and nationally price

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Speaker 2: is broadly unchanged, but the big drops in housing prices

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Speaker 2: in London, including in places like Canden and Westminster, where

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Speaker 2: you know, some of the most depensive places in London

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Speaker 2: to live.

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Speaker 1: Yeah. Absolutely, any seasonal rebound could well be pretty short

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Speaker 1: lived if rates continue to rise in the way that

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Speaker 1: we were talking about, right, So that's the sort of

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Speaker 1: big thought if it were for the UK, I think

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Speaker 1: at the start of this week. But then we also

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Speaker 1: have to look at the markets right now. Chinese stocks

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Speaker 1: sliding this morning after the State Council fell short of

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Speaker 1: announcing further policy measures to support the economy. This is

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Speaker 1: Golvin Sachs cut its growth forecast for the Chinese economy

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Speaker 1: to five point six percent this year. You hearing that

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Speaker 1: just earlier in our round up of top stories. Joining

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Speaker 1: us now is Blueberg's Markets were bought a value title

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Speaker 1: to discuss high follow a good morning took us through

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Speaker 1: then what is driving the sell off in China? Because

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Speaker 1: stocks were actually doing pretty well. They had last week.

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Speaker 9: Yeah, they had a actually fantastic week just on these

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Speaker 9: expectations of some sort of stimulus to come from China.

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Speaker 9: But all the marketers reading this morning is just disappointment.

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Speaker 9: There was really a lack of concrete details from that

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Speaker 9: State Council meeting that you mentioned just on what policy

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Speaker 9: support exactly is in the pipeline. It's leaving the market

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Speaker 9: with a big question market the moment. They did call

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Speaker 9: for more forceful policies to support the economy, but they

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Speaker 9: didn't tell us the timeline. They didn't give us any details.

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Speaker 9: They just said the new studies or the new measures

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Speaker 9: are being studied and they will adopted in a timely manner.

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Speaker 9: But all the markets are reading from that is we

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Speaker 9: just got our hopes up so big last week. We're

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Speaker 9: just disappointed. The equity market has were traced nearly one percent,

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Speaker 9: the yuan continues to weaken, and then if we look

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Speaker 9: at the oil markets, the crude markets are falling out

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Speaker 9: of bed. This morning, Brent is down one point four percent.

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Speaker 9: All of this back to this story of just what

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Speaker 9: is this China policy support going to look like? And

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Speaker 9: isn't going to meet our expectations.

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Speaker 2: And in the midst of all this, we've had GLBIN

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Speaker 2: soachs Tech this may have to cut its growth forecast

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Speaker 2: for China. How significant is that.

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Speaker 9: It's a big cut five point four percent from six percent,

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Speaker 9: and they're not the only bank out on the street

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Speaker 9: to do so. They are cutting it based on limited

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Speaker 9: options to boost stimulus. So they're essentially saying that this

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Speaker 9: isn't going to be some fiscal bonanza we're going to

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Speaker 9: get from China. They're not going to support the property

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Speaker 9: market like they did previously. Instead, it's going to be

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Speaker 9: targeted and moderate in size. That's not really what the

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Speaker 9: what the market at the moment wants. But all of

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Speaker 9: this going back to the fact that the hopes of

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Speaker 9: this China reopening, this stimulus boost is possible, even global

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Speaker 9: boost to growth from the China reopening has fizzled so quickly,

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Speaker 9: and now we are sitting and waiting for more easing

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Speaker 9: to come out of China.

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Speaker 1: Okay, so that on China also value. I'm interested to

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Speaker 1: understand your perspective on central banks this week. Of course

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Speaker 1: we've got Jeron Powell testify. But then I mentioned the

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Speaker 1: Bank of England right decision on Thursday. Great day to

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Speaker 1: focus on that.

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Speaker 9: Hair huge focus on the Bank of England, especially as

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Speaker 9: we get the CPI report the day before. And if

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Speaker 9: I look at what the markets are pricing for Thursday's

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Speaker 9: Bank of England decision, it's over twenty five basis points

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Speaker 9: right now. The markets are pricing in thirty basis points.

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Speaker 9: The risk at the moment is we get a hot

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Speaker 9: CPI print, especially in the core CPI, which we know

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Speaker 9: in the UK has yet to peak, and it's really

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Speaker 9: one of the only major economies who have really not

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Speaker 9: seen inflation tick down in this state key components. Yet

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Speaker 9: if we get a hot CPI print, the risk is

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Speaker 9: that the Bank of England could have to do fifty

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Speaker 9: basis points on Thursday. The markets are not yet pricing that,

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Speaker 9: but what we could shift to that if this CPI

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Speaker 9: print does disappoint on the hot side.

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Speaker 2: What about Jerome Powell and his testimony he sets to

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Speaker 2: deliver to Congress this week. What are the key questions

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Speaker 2: he'll be facing.

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Speaker 9: The key thing for this this is the Humphrey Hopkins testimony.

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Speaker 9: He does this twice in front of Congress every year.

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Speaker 9: He'll release a statement before his initial initial before he

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Speaker 9: initially testifies in front of the House on Wednesday, and

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Speaker 9: normally he uses that statement to finesse a message to

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Speaker 9: the market. So we'll be laser focused on what that

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Speaker 9: statement is and when it's released as he sits down

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Speaker 9: in front of the House at three pm UK time

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Speaker 9: on Wednesday. A lot of questions were raised last week

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Speaker 9: based on this communication at the last meeting, where they

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Speaker 9: told us they were in a hiking bias. They communicated

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Speaker 9: that by saying we intend to hike twice more this year,

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Speaker 9: but they didn't necessarily follow it up with any hawkish language,

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Speaker 9: leaving the market a bit confused on what to think. Here.

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Speaker 9: We are pricing in one more hike from the Fed

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Speaker 9: to get us to five and a half, but the

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Speaker 9: market isn't necessarily reading that we'd get to five and

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Speaker 9: three quarters FED funds by the end of the year.

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Speaker 9: Perhaps a hawker's message from Powell on Wednesday could get

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Speaker 9: the market.

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Speaker 4: To do that.

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Speaker 1: Okay, value, very interesting. Thank you so much for being

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Speaker 1: with us. Boomberg's Markets Report Valuie title up.

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Speaker 2: Next to Astrosenica's China spinoff and BT cuts its pension

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Speaker 2: investments in the UK.

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Speaker 4: Now the paper review on blue Bird Daybreak Europe, the

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Speaker 4: news you need to know from today's papers and.

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Speaker 2: Boombergs Leyann Goerens is with us this morning to take

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Speaker 2: us through those stories in the newspapers. Morning to you, Leanne.

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Speaker 2: Let's start in the Financial Times, its headline Astrosenica drafts

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Speaker 2: plan to spin off China business and attentions.

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Speaker 3: Yes, Stephen, good morning to so exactly what you've basically said,

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Speaker 3: The pharmaceutical giant Astrosenica has drawn up these plans to

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Speaker 3: spin off its business in China and possibly list.

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Speaker 8: In Hong Kong.

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Speaker 3: And this is all according to the Financial Times, and

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Speaker 3: listing is separate unit in either Hong Kong or Shanghai.

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Speaker 3: What the plan is is it could insulate the company

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Speaker 3: politically from moves by China to really crack down on

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Speaker 3: foreign companies, which we have seen and which is raising

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Speaker 3: concerns not just with Astrosenica but with other companies invested

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Speaker 3: in China. Now, the drug maker began these discussions on

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Speaker 3: the idea with bankers several months ago, and this is

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Speaker 3: according to the FT. Really as those geopolitical tensions grown,

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Speaker 3: as you mentioned earlier, we've got US and Chinese ambassador's meeting.

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Speaker 3: At the moment. Astrosenica is the largest overseas pharmaceutical company

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Speaker 3: in China by sales. We must remember this, generating one

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Speaker 3: point six billion dollars in the country in the first quarter.

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Speaker 3: So splitting things may be difficult or spinning things off.

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Speaker 3: So what they've said is this separation might not ultimately

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Speaker 3: take place, and this is what people are cautioning because

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Speaker 3: there's big money in pharmaceuticals in China. Definitely with an

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Speaker 3: aging population.

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Speaker 1: Yeah, absolutely, you know, would it be a listing in

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Speaker 1: Hong Kong or Shanghai. Yeah, lots of question marks about that,

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Speaker 1: but very interesting story. The Telegraph now leanne BT's thirty

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Speaker 1: nine billion pound pension fund cuts UK investments in blow

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Speaker 1: to Hunt's big bang two point zero ambitions. A lot

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Speaker 1: packed into that headline.

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Speaker 3: There's a lot packed into that headline, Caroline, and we're

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Speaker 3: just going to try to dissect it now. But you're

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Speaker 3: speaking earlier about, you know, really what the government's facing

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Speaker 3: at the moment, the Tory government. Things are not easy.

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Speaker 3: But now we're hearing that BT's position is a later

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Speaker 3: setback for Jeremy Hunt's plans to unlock a new wave

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Speaker 3: of growth in British stocks. The company's thirty nine billion

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Speaker 3: pound pension fund has cut back its exposure of London

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Speaker 3: listed stocks to just one hundred million pounds and this

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Speaker 3: is all according to new figures, so a significant drop now.

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Speaker 3: A spokesman said the BT pension scheme was reducing its

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Speaker 3: exposure to equities and this is really all part of

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Speaker 3: a d risking strategy for the company. And BT's overseas

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Speaker 3: equities have also suffered massive losses, according to this writeup

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Speaker 3: in The Telegraph, tumbling seventy five percent, So things difficult.

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Speaker 3: BT's pension funds suffered an estimated eleven billion pounds drop

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Speaker 3: and value of its assets, and the newspaper says this

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Speaker 3: was as a result of liz Trust's mini budget, which

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Speaker 3: really triggered margin calls on products called LDI. Do remember

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Speaker 3: how many we spoke about liability driven investments at the

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Speaker 3: time when that mini budget happened, which are popular with

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Speaker 3: pension funds. So there we are the struggle for BT,

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Speaker 3: but also the struggle for British stocks.

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Speaker 2: Okay, yeah, really interesting stories follow given everything we were

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Speaker 2: hearing about that story over the past couple of weeks, Leanne,

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Speaker 2: let's go to the Times next. We're just talking about

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Speaker 2: UK plans for regulating AI being best in class according

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Speaker 2: to the Bass of Google.

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Speaker 3: Some good news to end on here. Yes, So, in

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Speaker 3: a boost for Britain's international reputation, the new managing director

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Speaker 3: of Google in the UK and also Ireland has called

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Speaker 3: the government's approach the best in class to AI and

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Speaker 3: putting guardrails in haven't we been talking about this non

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Speaker 3: stop over the last few months now. In her first

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Speaker 3: interview since taking the job, which was in March, Debbie

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Speaker 3: Weinstein said that the AI white papers at the UK

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Speaker 3: government have published so far we're quote a great global

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Speaker 3: standard for an approach that we can think will really work.

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Speaker 3: Remember it was London Tech Week last week. Rishie Soue,

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Speaker 3: you know, he said Britain could be the global home

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Speaker 3: of AI regulation, really setting them up for that. Google

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Speaker 3: has also this massive footprint in the UK with almost

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Speaker 3: seven thousand employees. But remember legislators are going to have

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Speaker 3: to move fast because the European Union is moving closer

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Speaker 3: to passing one of the world's first laws, which is

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Speaker 3: regulating AI. So there we are, but really positive news

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Speaker 3: actually coming out of the AI world. If we listen

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Speaker 3: to Debbie Weinstein.

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

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Speaker 2: stories making news from London to Wall Street and beyond.

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Speaker 1: I'm Caroline Hepka

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Speaker 2: And I'm Stephen Carroll us again tomorrow morning for all

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Speaker 2: the news you need to start your day right here

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Speaker 2: on Boomberg Daybreak Europe