Speaker 1: This is Bloomberg Daymaker for this Monday, the nineteenth of
Speaker 1: June in London.
Speaker 2: Coming up today, the best of Frenemies. Blencoln becomes the
Speaker 2: most senior US official to visit China in five years.
Speaker 1: Restoring order, the FCA is said to restrict od asset
Speaker 1: management transactions.
Speaker 2: Get ready to feel the squeeze. Bets on UK rates
Speaker 2: edge towards six percent.
Speaker 3: AstraZeneca's China spin off and BT cuts its pension investments
Speaker 3: in the UK. Those are the stories we're looking at
Speaker 3: in today's papers. And I'm Leanne Gerren's.
Speaker 1: Plus swinging the acts. The UBS CEO hints at a
Speaker 1: massive downsizing of Credit Suee's investment banking business.
Speaker 4: That's all straight ahead on Bloomberg Daybreak Europe. The business
Speaker 4: news you need to start your day in just one
Speaker 4: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App
Speaker 4: and everywhere you get your podcasts.
Speaker 2: Good morning, I'm Stephen.
Speaker 1: Carroll and I'm Caroline Hecker. Here are the stories that
Speaker 1: we're following today.
Speaker 2: US Secretary of State Anthony Blincoln is matt China's top
Speaker 2: foreign policy official in Beijing, in a positive start to
Speaker 2: his two day trip He's the most senior US official
Speaker 2: to visit the country in five years. Nason Maboobi, at
Speaker 2: China specialist at the University of Pennsylvania, says, the trip
Speaker 2: seems to be going well.
Speaker 5: The meeting, you know, lasted much longer than I think
Speaker 5: people thought. I think both of the readouts had very
Speaker 5: positive language. Some of the follow on things that are
Speaker 5: happening today and perhaps even a meeting with President Jujuiping
Speaker 5: all seemed to be on track in a very nice way.
Speaker 5: And the language and each of the readouts had lots
Speaker 5: of phrases, you know on the Chinese side, stable, constructive,
Speaker 5: predictable relationship that signal that this was quite a productive meeting,
Speaker 5: again against the backdrop of terrible relations of late and
Speaker 5: very low expectations for what the meeting could have accomplished
Speaker 5: going into it.
Speaker 2: That's Nason Mabooby speaking too. Is Blncoln's previous attempt to
Speaker 2: visit China in February was scrapped when the US revealed
Speaker 2: and alleged Chinese spy balloon was floating over the United States.
Speaker 1: Goldman Sachs is the latest bank, though, to cut its
Speaker 1: forecasts for Chinese economic growth this year Bloomberg's Brian Curtis
Speaker 1: has more From Hong Kong.
Speaker 6: Goldman lowered its estimates for GDP from six percent down
Speaker 6: to five point four percent, and perhaps to make matters worse,
Speaker 6: it sees limited options to boost stimulus. It says any
Speaker 6: easing is unlikely to exceed those in previous downturns like
Speaker 6: twenty twenty. A report says property and infrastructure stimulus will
Speaker 6: probably be targeted and moderate, and that going down the
Speaker 6: same world road is not consistent with the high quality
Speaker 6: growth the leadership wants. Why not do more will? Goldman
Speaker 6: sees some options constrained by economic and political considerations in
Speaker 6: Hong Kong. Brian Curtis, Bloomberg Daybreak.
Speaker 2: Europe, the UK's financial conduct authorities are reported to have
Speaker 2: imposed restrictions on the movement of cash and assets by
Speaker 2: od Asset Management. Bloomberg's Ewan Pots has more on the
Speaker 2: recent turmoil.
Speaker 7: Od Asset Management plunged into turmoil early this month after
Speaker 7: allegations of sexual harassment by founder Crispin Odi, which he denies.
Speaker 7: Now the Ft reports that the UK's financial regulator is
Speaker 7: attempting to restore order after the departure of ODI by
Speaker 7: imposing restrictions on the movements of cash and assets. The
Speaker 7: paper says OD Wealth Management and associate firmas also agreed
Speaker 7: to the guidelines, which could be published later today. Among
Speaker 7: the restrictions, the FCA will require pre approval for transactions
Speaker 7: above a certain level in London Immune parts Bloomberg Day
Speaker 7: Break Europe.
Speaker 1: Politically, here in the UK, the House of Commons will
Speaker 1: vote today on a report which found Boris Johnson, the
Speaker 1: former Prime Minister, lied to MPs over party Gate. The
Speaker 1: vote threatens to fuel divisions within the Conservative Party in
Speaker 1: what's likely to be an uncomfortable week for the Prime Minister.
Speaker 1: On Thursday. The Bank of England is also set to
Speaker 1: heap further pain on borrowers by raising interest rates again.
Speaker 1: The Bank's former deputy governor, Charlie Bean says that they
Speaker 1: will need to head higher.
Speaker 8: I think rates will certainly go higher from where they are,
Speaker 8: reflecting these bad inflation and pay and like market numbers
Speaker 8: that we've had over the past month. How much high
Speaker 8: they have to go is open. Obviously, the markets are
Speaker 8: expecting significantly higher rates.
Speaker 1: The Bank of England's former deputy governor there speaking as
Speaker 1: markets are pricing in a peak rate for the UK
Speaker 1: of over five point seventy five percent next year. That
Speaker 1: would be a level not seen in sixteen years.
Speaker 2: Credit Suite may be due for a quote massive downsizing
Speaker 2: of its investment banking business after its takeover by UBS.
Speaker 2: UBS CEO Sergio or Maati has been hinting at massive
Speaker 2: cuts to Credit Suite, and an opinion piece published on
Speaker 2: Saturday in a Swiss newspaper, he also said that UBS
Speaker 2: has simplified its structure and that a prudent corporate culture
Speaker 2: is at the core of everything they do. The fusion
Speaker 2: of the two financial giants is underway after the takeover
Speaker 2: was formally closed last week.
Speaker 1: Okay, those are a few of our top stories for
Speaker 1: you this morning. Worth reflecting though, on what a very
Speaker 1: difficult week. This may well be politically economically for the UK.
Speaker 1: So the Bank of England is expected to lift interest
Speaker 1: rates from four and a half percent to four point
Speaker 1: seventy five percent doesn't entirely rule out the possibility even
Speaker 1: of a fifty basis point rate rise. It would certainly
Speaker 1: be the thirteenth rate increase in Britain in a row.
Speaker 1: We've also got the UK CPI data, but politically, the
Speaker 1: prime Minister is absolutely you know, wedged into this problem
Speaker 1: where you have alarm bells ringing Stephen about the housing market,
Speaker 1: about borers and mortgages, and yet also you have the
Speaker 1: former Prime Minister Boris Johnson and what he did during
Speaker 1: the pandemic and the lockdown parties that were held really
Speaker 1: looming large over the Conservatives.
Speaker 2: Yeah, I mean, look, the inflation figure is expected to
Speaker 2: show a slowdown, but nowhere near where any Prime minister
Speaker 2: would want to be seeing inflation at this stay, considering
Speaker 2: how high it's been for now so long. And the
Speaker 2: question in an electoral cycle sense is when people are
Speaker 2: going to feel the pain of those interest rate increases
Speaker 2: the most, because people coming off fixed rate mortgages in
Speaker 2: the next year, if they're paying significantly more now, are
Speaker 2: they going to be blaming the government for that, especially
Speaker 2: if inflation is still so high On the housing market.
Speaker 2: We've new figured some right Move today showing that house
Speaker 2: prices in London are sliding at the largest amount per
Speaker 2: region in the UK, so down one point six percent
Speaker 2: month on month according to right Move, and nationally price
Speaker 2: is broadly unchanged, but the big drops in housing prices
Speaker 2: in London, including in places like Canden and Westminster, where
Speaker 2: you know, some of the most depensive places in London
Speaker 2: to live.
Speaker 1: Yeah. Absolutely, any seasonal rebound could well be pretty short
Speaker 1: lived if rates continue to rise in the way that
Speaker 1: we were talking about, right, So that's the sort of
Speaker 1: big thought if it were for the UK, I think
Speaker 1: at the start of this week. But then we also
Speaker 1: have to look at the markets right now. Chinese stocks
Speaker 1: sliding this morning after the State Council fell short of
Speaker 1: announcing further policy measures to support the economy. This is
Speaker 1: Golvin Sachs cut its growth forecast for the Chinese economy
Speaker 1: to five point six percent this year. You hearing that
Speaker 1: just earlier in our round up of top stories. Joining
Speaker 1: us now is Blueberg's Markets were bought a value title
Speaker 1: to discuss high follow a good morning took us through
Speaker 1: then what is driving the sell off in China? Because
Speaker 1: stocks were actually doing pretty well. They had last week.
Speaker 9: Yeah, they had a actually fantastic week just on these
Speaker 9: expectations of some sort of stimulus to come from China.
Speaker 9: But all the marketers reading this morning is just disappointment.
Speaker 9: There was really a lack of concrete details from that
Speaker 9: State Council meeting that you mentioned just on what policy
Speaker 9: support exactly is in the pipeline. It's leaving the market
Speaker 9: with a big question market the moment. They did call
Speaker 9: for more forceful policies to support the economy, but they
Speaker 9: didn't tell us the timeline. They didn't give us any details.
Speaker 9: They just said the new studies or the new measures
Speaker 9: are being studied and they will adopted in a timely manner.
Speaker 9: But all the markets are reading from that is we
Speaker 9: just got our hopes up so big last week. We're
Speaker 9: just disappointed. The equity market has were traced nearly one percent,
Speaker 9: the yuan continues to weaken, and then if we look
Speaker 9: at the oil markets, the crude markets are falling out
Speaker 9: of bed. This morning, Brent is down one point four percent.
Speaker 9: All of this back to this story of just what
Speaker 9: is this China policy support going to look like? And
Speaker 9: isn't going to meet our expectations.
Speaker 2: And in the midst of all this, we've had GLBIN
Speaker 2: soachs Tech this may have to cut its growth forecast
Speaker 2: for China. How significant is that.
Speaker 9: It's a big cut five point four percent from six percent,
Speaker 9: and they're not the only bank out on the street
Speaker 9: to do so. They are cutting it based on limited
Speaker 9: options to boost stimulus. So they're essentially saying that this
Speaker 9: isn't going to be some fiscal bonanza we're going to
Speaker 9: get from China. They're not going to support the property
Speaker 9: market like they did previously. Instead, it's going to be
Speaker 9: targeted and moderate in size. That's not really what the
Speaker 9: what the market at the moment wants. But all of
Speaker 9: this going back to the fact that the hopes of
Speaker 9: this China reopening, this stimulus boost is possible, even global
Speaker 9: boost to growth from the China reopening has fizzled so quickly,
Speaker 9: and now we are sitting and waiting for more easing
Speaker 9: to come out of China.
Speaker 1: Okay, so that on China also value. I'm interested to
Speaker 1: understand your perspective on central banks this week. Of course
Speaker 1: we've got Jeron Powell testify. But then I mentioned the
Speaker 1: Bank of England right decision on Thursday. Great day to
Speaker 1: focus on that.
Speaker 9: Hair huge focus on the Bank of England, especially as
Speaker 9: we get the CPI report the day before. And if
Speaker 9: I look at what the markets are pricing for Thursday's
Speaker 9: Bank of England decision, it's over twenty five basis points
Speaker 9: right now. The markets are pricing in thirty basis points.
Speaker 9: The risk at the moment is we get a hot
Speaker 9: CPI print, especially in the core CPI, which we know
Speaker 9: in the UK has yet to peak, and it's really
Speaker 9: one of the only major economies who have really not
Speaker 9: seen inflation tick down in this state key components. Yet
Speaker 9: if we get a hot CPI print, the risk is
Speaker 9: that the Bank of England could have to do fifty
Speaker 9: basis points on Thursday. The markets are not yet pricing that,
Speaker 9: but what we could shift to that if this CPI
Speaker 9: print does disappoint on the hot side.
Speaker 2: What about Jerome Powell and his testimony he sets to
Speaker 2: deliver to Congress this week. What are the key questions
Speaker 2: he'll be facing.
Speaker 9: The key thing for this this is the Humphrey Hopkins testimony.
Speaker 9: He does this twice in front of Congress every year.
Speaker 9: He'll release a statement before his initial initial before he
Speaker 9: initially testifies in front of the House on Wednesday, and
Speaker 9: normally he uses that statement to finesse a message to
Speaker 9: the market. So we'll be laser focused on what that
Speaker 9: statement is and when it's released as he sits down
Speaker 9: in front of the House at three pm UK time
Speaker 9: on Wednesday. A lot of questions were raised last week
Speaker 9: based on this communication at the last meeting, where they
Speaker 9: told us they were in a hiking bias. They communicated
Speaker 9: that by saying we intend to hike twice more this year,
Speaker 9: but they didn't necessarily follow it up with any hawkish language,
Speaker 9: leaving the market a bit confused on what to think. Here.
Speaker 9: We are pricing in one more hike from the Fed
Speaker 9: to get us to five and a half, but the
Speaker 9: market isn't necessarily reading that we'd get to five and
Speaker 9: three quarters FED funds by the end of the year.
Speaker 9: Perhaps a hawker's message from Powell on Wednesday could get
Speaker 9: the market.
Speaker 4: To do that.
Speaker 1: Okay, value, very interesting. Thank you so much for being
Speaker 1: with us. Boomberg's Markets Report Valuie title up.
Speaker 2: Next to Astrosenica's China spinoff and BT cuts its pension
Speaker 2: investments in the UK.
Speaker 4: Now the paper review on blue Bird Daybreak Europe, the
Speaker 4: news you need to know from today's papers and.
Speaker 2: Boombergs Leyann Goerens is with us this morning to take
Speaker 2: us through those stories in the newspapers. Morning to you, Leanne.
Speaker 2: Let's start in the Financial Times, its headline Astrosenica drafts
Speaker 2: plan to spin off China business and attentions.
Speaker 3: Yes, Stephen, good morning to so exactly what you've basically said,
Speaker 3: The pharmaceutical giant Astrosenica has drawn up these plans to
Speaker 3: spin off its business in China and possibly list.
Speaker 8: In Hong Kong.
Speaker 3: And this is all according to the Financial Times, and
Speaker 3: listing is separate unit in either Hong Kong or Shanghai.
Speaker 3: What the plan is is it could insulate the company
Speaker 3: politically from moves by China to really crack down on
Speaker 3: foreign companies, which we have seen and which is raising
Speaker 3: concerns not just with Astrosenica but with other companies invested
Speaker 3: in China. Now, the drug maker began these discussions on
Speaker 3: the idea with bankers several months ago, and this is
Speaker 3: according to the FT. Really as those geopolitical tensions grown,
Speaker 3: as you mentioned earlier, we've got US and Chinese ambassador's meeting.
Speaker 3: At the moment. Astrosenica is the largest overseas pharmaceutical company
Speaker 3: in China by sales. We must remember this, generating one
Speaker 3: point six billion dollars in the country in the first quarter.
Speaker 3: So splitting things may be difficult or spinning things off.
Speaker 3: So what they've said is this separation might not ultimately
Speaker 3: take place, and this is what people are cautioning because
Speaker 3: there's big money in pharmaceuticals in China. Definitely with an
Speaker 3: aging population.
Speaker 1: Yeah, absolutely, you know, would it be a listing in
Speaker 1: Hong Kong or Shanghai. Yeah, lots of question marks about that,
Speaker 1: but very interesting story. The Telegraph now leanne BT's thirty
Speaker 1: nine billion pound pension fund cuts UK investments in blow
Speaker 1: to Hunt's big bang two point zero ambitions. A lot
Speaker 1: packed into that headline.
Speaker 3: There's a lot packed into that headline, Caroline, and we're
Speaker 3: just going to try to dissect it now. But you're
Speaker 3: speaking earlier about, you know, really what the government's facing
Speaker 3: at the moment, the Tory government. Things are not easy.
Speaker 3: But now we're hearing that BT's position is a later
Speaker 3: setback for Jeremy Hunt's plans to unlock a new wave
Speaker 3: of growth in British stocks. The company's thirty nine billion
Speaker 3: pound pension fund has cut back its exposure of London
Speaker 3: listed stocks to just one hundred million pounds and this
Speaker 3: is all according to new figures, so a significant drop now.
Speaker 3: A spokesman said the BT pension scheme was reducing its
Speaker 3: exposure to equities and this is really all part of
Speaker 3: a d risking strategy for the company. And BT's overseas
Speaker 3: equities have also suffered massive losses, according to this writeup
Speaker 3: in The Telegraph, tumbling seventy five percent, So things difficult.
Speaker 3: BT's pension funds suffered an estimated eleven billion pounds drop
Speaker 3: and value of its assets, and the newspaper says this
Speaker 3: was as a result of liz Trust's mini budget, which
Speaker 3: really triggered margin calls on products called LDI. Do remember
Speaker 3: how many we spoke about liability driven investments at the
Speaker 3: time when that mini budget happened, which are popular with
Speaker 3: pension funds. So there we are the struggle for BT,
Speaker 3: but also the struggle for British stocks.
Speaker 2: Okay, yeah, really interesting stories follow given everything we were
Speaker 2: hearing about that story over the past couple of weeks, Leanne,
Speaker 2: let's go to the Times next. We're just talking about
Speaker 2: UK plans for regulating AI being best in class according
Speaker 2: to the Bass of Google.
Speaker 3: Some good news to end on here. Yes, So, in
Speaker 3: a boost for Britain's international reputation, the new managing director
Speaker 3: of Google in the UK and also Ireland has called
Speaker 3: the government's approach the best in class to AI and
Speaker 3: putting guardrails in haven't we been talking about this non
Speaker 3: stop over the last few months now. In her first
Speaker 3: interview since taking the job, which was in March, Debbie
Speaker 3: Weinstein said that the AI white papers at the UK
Speaker 3: government have published so far we're quote a great global
Speaker 3: standard for an approach that we can think will really work.
Speaker 3: Remember it was London Tech Week last week. Rishie Soue,
Speaker 3: you know, he said Britain could be the global home
Speaker 3: of AI regulation, really setting them up for that. Google
Speaker 3: has also this massive footprint in the UK with almost
Speaker 3: seven thousand employees. But remember legislators are going to have
Speaker 3: to move fast because the European Union is moving closer
Speaker 3: to passing one of the world's first laws, which is
Speaker 3: regulating AI. So there we are, but really positive news
Speaker 3: actually coming out of the AI world. If we listen
Speaker 3: to Debbie Weinstein.
Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the
Speaker 2: stories making news from London to Wall Street and beyond.
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Speaker 2: And I'm Stephen Carroll us again tomorrow morning for all
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Speaker 2: on Boomberg Daybreak Europe