WEBVTT - Blinken In China & 'Massive Downsizing' At Credit Suisse

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<v Speaker 1>This is Bloomberg Daymaker for this Monday, the nineteenth of

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<v Speaker 1>June in London.

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<v Speaker 2>Coming up today, the best of Frenemies. Blencoln becomes the

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<v Speaker 2>most senior US official to visit China in five years.

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<v Speaker 1>Restoring order, the FCA is said to restrict od asset

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<v Speaker 1>management transactions.

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<v Speaker 2>Get ready to feel the squeeze. Bets on UK rates

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<v Speaker 2>edge towards six percent.

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<v Speaker 3>AstraZeneca's China spin off and BT cuts its pension investments

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<v Speaker 3>in the UK. Those are the stories we're looking at

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<v Speaker 3>in today's papers. And I'm Leanne Gerren's.

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<v Speaker 1>Plus swinging the acts. The UBS CEO hints at a

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<v Speaker 1>massive downsizing of Credit Suee's investment banking business.

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<v Speaker 4>That's all straight ahead on Bloomberg Daybreak Europe. The business

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<v Speaker 4>news you need to start your day in just one

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<v Speaker 4>fifteen minute podcast on Apple, Spotify, the Bloomberg Business App

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<v Speaker 4>and everywhere you get your podcasts.

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<v Speaker 2>Good morning, I'm Stephen.

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<v Speaker 1>Carroll and I'm Caroline Hecker. Here are the stories that

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<v Speaker 1>we're following today.

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<v Speaker 2>US Secretary of State Anthony Blincoln is matt China's top

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<v Speaker 2>foreign policy official in Beijing, in a positive start to

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<v Speaker 2>his two day trip He's the most senior US official

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<v Speaker 2>to visit the country in five years. Nason Maboobi, at

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<v Speaker 2>China specialist at the University of Pennsylvania, says, the trip

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<v Speaker 2>seems to be going well.

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<v Speaker 5>The meeting, you know, lasted much longer than I think

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<v Speaker 5>people thought. I think both of the readouts had very

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<v Speaker 5>positive language. Some of the follow on things that are

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<v Speaker 5>happening today and perhaps even a meeting with President Jujuiping

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<v Speaker 5>all seemed to be on track in a very nice way.

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<v Speaker 5>And the language and each of the readouts had lots

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<v Speaker 5>of phrases, you know on the Chinese side, stable, constructive,

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<v Speaker 5>predictable relationship that signal that this was quite a productive meeting,

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<v Speaker 5>again against the backdrop of terrible relations of late and

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<v Speaker 5>very low expectations for what the meeting could have accomplished

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<v Speaker 5>going into it.

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<v Speaker 2>That's Nason Mabooby speaking too. Is Blncoln's previous attempt to

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<v Speaker 2>visit China in February was scrapped when the US revealed

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<v Speaker 2>and alleged Chinese spy balloon was floating over the United States.

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<v Speaker 1>Goldman Sachs is the latest bank, though, to cut its

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<v Speaker 1>forecasts for Chinese economic growth this year Bloomberg's Brian Curtis

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<v Speaker 1>has more From Hong Kong.

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<v Speaker 6>Goldman lowered its estimates for GDP from six percent down

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<v Speaker 6>to five point four percent, and perhaps to make matters worse,

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<v Speaker 6>it sees limited options to boost stimulus. It says any

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<v Speaker 6>easing is unlikely to exceed those in previous downturns like

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<v Speaker 6>twenty twenty. A report says property and infrastructure stimulus will

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<v Speaker 6>probably be targeted and moderate, and that going down the

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<v Speaker 6>same world road is not consistent with the high quality

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<v Speaker 6>growth the leadership wants. Why not do more will? Goldman

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<v Speaker 6>sees some options constrained by economic and political considerations in

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<v Speaker 6>Hong Kong. Brian Curtis, Bloomberg Daybreak.

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<v Speaker 2>Europe, the UK's financial conduct authorities are reported to have

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<v Speaker 2>imposed restrictions on the movement of cash and assets by

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<v Speaker 2>od Asset Management. Bloomberg's Ewan Pots has more on the

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<v Speaker 2>recent turmoil.

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<v Speaker 7>Od Asset Management plunged into turmoil early this month after

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<v Speaker 7>allegations of sexual harassment by founder Crispin Odi, which he denies.

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<v Speaker 7>Now the Ft reports that the UK's financial regulator is

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<v Speaker 7>attempting to restore order after the departure of ODI by

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<v Speaker 7>imposing restrictions on the movements of cash and assets. The

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<v Speaker 7>paper says OD Wealth Management and associate firmas also agreed

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<v Speaker 7>to the guidelines, which could be published later today. Among

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<v Speaker 7>the restrictions, the FCA will require pre approval for transactions

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<v Speaker 7>above a certain level in London Immune parts Bloomberg Day

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<v Speaker 7>Break Europe.

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<v Speaker 1>Politically, here in the UK, the House of Commons will

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<v Speaker 1>vote today on a report which found Boris Johnson, the

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<v Speaker 1>former Prime Minister, lied to MPs over party Gate. The

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<v Speaker 1>vote threatens to fuel divisions within the Conservative Party in

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

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<v Speaker 1>On Thursday. The Bank of England is also set to

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<v Speaker 1>heap further pain on borrowers by raising interest rates again.

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<v Speaker 1>The Bank's former deputy governor, Charlie Bean says that they

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<v Speaker 1>will need to head higher.

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<v Speaker 8>I think rates will certainly go higher from where they are,

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<v Speaker 8>reflecting these bad inflation and pay and like market numbers

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<v Speaker 8>that we've had over the past month. How much high

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<v Speaker 8>they have to go is open. Obviously, the markets are

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<v Speaker 8>expecting significantly higher rates.

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<v Speaker 1>The Bank of England's former deputy governor there speaking as

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<v Speaker 1>markets are pricing in a peak rate for the UK

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<v Speaker 1>of over five point seventy five percent next year. That

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<v Speaker 1>would be a level not seen in sixteen years.

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<v Speaker 2>Credit Suite may be due for a quote massive downsizing

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<v Speaker 2>of its investment banking business after its takeover by UBS.

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<v Speaker 2>UBS CEO Sergio or Maati has been hinting at massive

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<v Speaker 2>cuts to Credit Suite, and an opinion piece published on

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<v Speaker 2>Saturday in a Swiss newspaper, he also said that UBS

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<v Speaker 2>has simplified its structure and that a prudent corporate culture

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<v Speaker 2>is at the core of everything they do. The fusion

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<v Speaker 2>of the two financial giants is underway after the takeover

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<v Speaker 2>was formally closed last week.

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<v Speaker 1>Okay, those are a few of our top stories for

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<v Speaker 1>you this morning. Worth reflecting though, on what a very

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<v Speaker 1>difficult week. This may well be politically economically for the UK.

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<v Speaker 1>So the Bank of England is expected to lift interest

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<v Speaker 1>rates from four and a half percent to four point

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<v Speaker 1>seventy five percent doesn't entirely rule out the possibility even

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<v Speaker 1>of a fifty basis point rate rise. It would certainly

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<v Speaker 1>be the thirteenth rate increase in Britain in a row.

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<v Speaker 1>We've also got the UK CPI data, but politically, the

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<v Speaker 1>prime Minister is absolutely you know, wedged into this problem

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<v Speaker 1>where you have alarm bells ringing Stephen about the housing market,

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<v Speaker 1>about borers and mortgages, and yet also you have the

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<v Speaker 1>former Prime Minister Boris Johnson and what he did during

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<v Speaker 1>the pandemic and the lockdown parties that were held really

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<v Speaker 1>looming large over the Conservatives.

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<v Speaker 2>Yeah, I mean, look, the inflation figure is expected to

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<v Speaker 2>show a slowdown, but nowhere near where any Prime minister

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<v Speaker 2>would want to be seeing inflation at this stay, considering

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<v Speaker 2>how high it's been for now so long. And the

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<v Speaker 2>question in an electoral cycle sense is when people are

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<v Speaker 2>going to feel the pain of those interest rate increases

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<v Speaker 2>the most, because people coming off fixed rate mortgages in

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<v Speaker 2>the next year, if they're paying significantly more now, are

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<v Speaker 2>they going to be blaming the government for that, especially

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<v Speaker 2>if inflation is still so high On the housing market.

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<v Speaker 2>We've new figured some right Move today showing that house

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<v Speaker 2>prices in London are sliding at the largest amount per

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<v Speaker 2>region in the UK, so down one point six percent

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<v Speaker 2>month on month according to right Move, and nationally price

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<v Speaker 2>is broadly unchanged, but the big drops in housing prices

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<v Speaker 2>in London, including in places like Canden and Westminster, where

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<v Speaker 2>you know, some of the most depensive places in London

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<v Speaker 2>to live.

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<v Speaker 1>Yeah. Absolutely, any seasonal rebound could well be pretty short

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<v Speaker 1>lived if rates continue to rise in the way that

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<v Speaker 1>we were talking about, right, So that's the sort of

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<v Speaker 1>big thought if it were for the UK, I think

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<v Speaker 1>at the start of this week. But then we also

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<v Speaker 1>have to look at the markets right now. Chinese stocks

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<v Speaker 1>sliding this morning after the State Council fell short of

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<v Speaker 1>announcing further policy measures to support the economy. This is

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<v Speaker 1>Golvin Sachs cut its growth forecast for the Chinese economy

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<v Speaker 1>to five point six percent this year. You hearing that

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<v Speaker 1>just earlier in our round up of top stories. Joining

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<v Speaker 1>us now is Blueberg's Markets were bought a value title

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<v Speaker 1>to discuss high follow a good morning took us through

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<v Speaker 1>then what is driving the sell off in China? Because

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<v Speaker 1>stocks were actually doing pretty well. They had last week.

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<v Speaker 9>Yeah, they had a actually fantastic week just on these

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<v Speaker 9>expectations of some sort of stimulus to come from China.

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<v Speaker 9>But all the marketers reading this morning is just disappointment.

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<v Speaker 9>There was really a lack of concrete details from that

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<v Speaker 9>State Council meeting that you mentioned just on what policy

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<v Speaker 9>support exactly is in the pipeline. It's leaving the market

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<v Speaker 9>with a big question market the moment. They did call

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<v Speaker 9>for more forceful policies to support the economy, but they

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<v Speaker 9>didn't tell us the timeline. They didn't give us any details.

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<v Speaker 9>They just said the new studies or the new measures

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<v Speaker 9>are being studied and they will adopted in a timely manner.

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<v Speaker 9>But all the markets are reading from that is we

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<v Speaker 9>just got our hopes up so big last week. We're

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<v Speaker 9>just disappointed. The equity market has were traced nearly one percent,

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<v Speaker 9>the yuan continues to weaken, and then if we look

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<v Speaker 9>at the oil markets, the crude markets are falling out

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<v Speaker 9>of bed. This morning, Brent is down one point four percent.

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<v Speaker 9>All of this back to this story of just what

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<v Speaker 9>is this China policy support going to look like? And

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<v Speaker 9>isn't going to meet our expectations.

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<v Speaker 2>And in the midst of all this, we've had GLBIN

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<v Speaker 2>soachs Tech this may have to cut its growth forecast

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<v Speaker 2>for China. How significant is that.

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<v Speaker 9>It's a big cut five point four percent from six percent,

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<v Speaker 9>and they're not the only bank out on the street

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<v Speaker 9>to do so. They are cutting it based on limited

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<v Speaker 9>options to boost stimulus. So they're essentially saying that this

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<v Speaker 9>isn't going to be some fiscal bonanza we're going to

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<v Speaker 9>get from China. They're not going to support the property

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

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<v Speaker 9>targeted and moderate in size. That's not really what the

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<v Speaker 9>what the market at the moment wants. But all of

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<v Speaker 9>this going back to the fact that the hopes of

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<v Speaker 9>this China reopening, this stimulus boost is possible, even global

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<v Speaker 9>boost to growth from the China reopening has fizzled so quickly,

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<v Speaker 9>and now we are sitting and waiting for more easing

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<v Speaker 9>to come out of China.

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

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<v Speaker 1>understand your perspective on central banks this week. Of course

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<v Speaker 1>we've got Jeron Powell testify. But then I mentioned the

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<v Speaker 1>Bank of England right decision on Thursday. Great day to

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<v Speaker 1>focus on that.

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<v Speaker 9>Hair huge focus on the Bank of England, especially as

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<v Speaker 9>we get the CPI report the day before. And if

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<v Speaker 9>I look at what the markets are pricing for Thursday's

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<v Speaker 9>Bank of England decision, it's over twenty five basis points

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<v Speaker 9>right now. The markets are pricing in thirty basis points.

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<v Speaker 9>The risk at the moment is we get a hot

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<v Speaker 9>CPI print, especially in the core CPI, which we know

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<v Speaker 9>in the UK has yet to peak, and it's really

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<v Speaker 9>one of the only major economies who have really not

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<v Speaker 9>seen inflation tick down in this state key components. Yet

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<v Speaker 9>if we get a hot CPI print, the risk is

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<v Speaker 9>that the Bank of England could have to do fifty

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<v Speaker 9>basis points on Thursday. The markets are not yet pricing that,

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<v Speaker 9>but what we could shift to that if this CPI

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<v Speaker 9>print does disappoint on the hot side.

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<v Speaker 2>What about Jerome Powell and his testimony he sets to

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<v Speaker 2>deliver to Congress this week. What are the key questions

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<v Speaker 2>he'll be facing.

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<v Speaker 9>The key thing for this this is the Humphrey Hopkins testimony.

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<v Speaker 9>He does this twice in front of Congress every year.

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<v Speaker 9>He'll release a statement before his initial initial before he

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<v Speaker 9>initially testifies in front of the House on Wednesday, and

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<v Speaker 9>normally he uses that statement to finesse a message to

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<v Speaker 9>the market. So we'll be laser focused on what that

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<v Speaker 9>statement is and when it's released as he sits down

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<v Speaker 9>in front of the House at three pm UK time

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<v Speaker 9>on Wednesday. A lot of questions were raised last week

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<v Speaker 9>based on this communication at the last meeting, where they

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<v Speaker 9>told us they were in a hiking bias. They communicated

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<v Speaker 9>that by saying we intend to hike twice more this year,

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

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<v Speaker 9>leaving the market a bit confused on what to think. Here.

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<v Speaker 9>We are pricing in one more hike from the Fed

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<v Speaker 9>to get us to five and a half, but the

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<v Speaker 9>market isn't necessarily reading that we'd get to five and

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<v Speaker 9>three quarters FED funds by the end of the year.

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<v Speaker 9>Perhaps a hawker's message from Powell on Wednesday could get

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<v Speaker 9>the market.

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<v Speaker 4>To do that.

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<v Speaker 1>Okay, value, very interesting. Thank you so much for being

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<v Speaker 1>with us. Boomberg's Markets Report Valuie title up.

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<v Speaker 2>Next to Astrosenica's China spinoff and BT cuts its pension

0:11:37.000 --> 0:11:38.160
<v Speaker 2>investments in the UK.

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<v Speaker 4>Now the paper review on blue Bird Daybreak Europe, the

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<v Speaker 4>news you need to know from today's papers and.

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<v Speaker 2>Boombergs Leyann Goerens is with us this morning to take

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<v Speaker 2>us through those stories in the newspapers. Morning to you, Leanne.

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<v Speaker 2>Let's start in the Financial Times, its headline Astrosenica drafts

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<v Speaker 2>plan to spin off China business and attentions.

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

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<v Speaker 3>The pharmaceutical giant Astrosenica has drawn up these plans to

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<v Speaker 3>spin off its business in China and possibly list.

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<v Speaker 8>In Hong Kong.

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<v Speaker 3>And this is all according to the Financial Times, and

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<v Speaker 3>listing is separate unit in either Hong Kong or Shanghai.

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<v Speaker 3>What the plan is is it could insulate the company

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<v Speaker 3>politically from moves by China to really crack down on

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<v Speaker 3>foreign companies, which we have seen and which is raising

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<v Speaker 3>concerns not just with Astrosenica but with other companies invested

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<v Speaker 3>in China. Now, the drug maker began these discussions on

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<v Speaker 3>the idea with bankers several months ago, and this is

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<v Speaker 3>according to the FT. Really as those geopolitical tensions grown,

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

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<v Speaker 3>At the moment. Astrosenica is the largest overseas pharmaceutical company

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<v Speaker 3>in China by sales. We must remember this, generating one

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<v Speaker 3>point six billion dollars in the country in the first quarter.

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<v Speaker 3>So splitting things may be difficult or spinning things off.

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<v Speaker 3>So what they've said is this separation might not ultimately

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<v Speaker 3>take place, and this is what people are cautioning because

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<v Speaker 3>there's big money in pharmaceuticals in China. Definitely with an

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<v Speaker 3>aging population.

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<v Speaker 1>Yeah, absolutely, you know, would it be a listing in

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<v Speaker 1>Hong Kong or Shanghai. Yeah, lots of question marks about that,

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<v Speaker 1>but very interesting story. The Telegraph now leanne BT's thirty

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<v Speaker 1>nine billion pound pension fund cuts UK investments in blow

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<v Speaker 1>to Hunt's big bang two point zero ambitions. A lot

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<v Speaker 1>packed into that headline.

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

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<v Speaker 3>just going to try to dissect it now. But you're

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<v Speaker 3>speaking earlier about, you know, really what the government's facing

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<v Speaker 3>at the moment, the Tory government. Things are not easy.

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<v Speaker 3>But now we're hearing that BT's position is a later

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<v Speaker 3>setback for Jeremy Hunt's plans to unlock a new wave

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<v Speaker 3>of growth in British stocks. The company's thirty nine billion

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<v Speaker 3>pound pension fund has cut back its exposure of London

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<v Speaker 3>listed stocks to just one hundred million pounds and this

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<v Speaker 3>is all according to new figures, so a significant drop now.

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<v Speaker 3>A spokesman said the BT pension scheme was reducing its

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<v Speaker 3>exposure to equities and this is really all part of

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<v Speaker 3>a d risking strategy for the company. And BT's overseas

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<v Speaker 3>equities have also suffered massive losses, according to this writeup

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<v Speaker 3>in The Telegraph, tumbling seventy five percent, So things difficult.

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<v Speaker 3>BT's pension funds suffered an estimated eleven billion pounds drop

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<v Speaker 3>and value of its assets, and the newspaper says this

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<v Speaker 3>was as a result of liz Trust's mini budget, which

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<v Speaker 3>really triggered margin calls on products called LDI. Do remember

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<v Speaker 3>how many we spoke about liability driven investments at the

0:14:59.400 --> 0:15:03.240
<v Speaker 3>time when that mini budget happened, which are popular with

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<v Speaker 3>pension funds. So there we are the struggle for BT,

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<v Speaker 3>but also the struggle for British stocks.

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<v Speaker 2>Okay, yeah, really interesting stories follow given everything we were

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<v Speaker 2>hearing about that story over the past couple of weeks, Leanne,

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

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<v Speaker 2>UK plans for regulating AI being best in class according

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<v Speaker 2>to the Bass of Google.

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<v Speaker 3>Some good news to end on here. Yes, So, in

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<v Speaker 3>a boost for Britain's international reputation, the new managing director

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<v Speaker 3>of Google in the UK and also Ireland has called

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<v Speaker 3>the government's approach the best in class to AI and

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<v Speaker 3>putting guardrails in haven't we been talking about this non

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<v Speaker 3>stop over the last few months now. In her first

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<v Speaker 3>interview since taking the job, which was in March, Debbie

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<v Speaker 3>Weinstein said that the AI white papers at the UK

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<v Speaker 3>government have published so far we're quote a great global

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<v Speaker 3>standard for an approach that we can think will really work.

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<v Speaker 3>Remember it was London Tech Week last week. Rishie Soue,

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<v Speaker 3>you know, he said Britain could be the global home

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<v Speaker 3>of AI regulation, really setting them up for that. Google

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<v Speaker 3>has also this massive footprint in the UK with almost

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<v Speaker 3>seven thousand employees. But remember legislators are going to have

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<v Speaker 3>to move fast because the European Union is moving closer

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<v Speaker 3>to passing one of the world's first laws, which is

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<v Speaker 3>regulating AI. So there we are, but really positive news

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<v Speaker 3>actually coming out of the AI world. If we listen

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<v Speaker 3>to Debbie Weinstein.

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<v Speaker 2>This is Bloomberg Daybreak Europe, your morning brief on the

0:16:34.680 --> 0:16:37.720
<v Speaker 2>stories making news from London to Wall Street and beyond.

0:16:38.000 --> 0:16:41.200
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<v Speaker 1>I'm Caroline Hepka

0:16:58.760 --> 0:17:01.520
<v Speaker 2>And I'm Stephen Carroll us again tomorrow morning for all

0:17:01.560 --> 0:17:04.000
<v Speaker 2>the news you need to start your day right here

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<v Speaker 2>on Boomberg Daybreak Europe