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

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Speaker 1: Daybreak You Up podcast, available every morning on Apples, Spotify

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Speaker 1: or wherever you listen. It's Thursday, the twenty eighth of

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Speaker 1: March here in London. I'm Caroline Hepkea and I'm Lizzie Burden.

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Speaker 2: Coming up today.

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Speaker 3: The Fed's Waller repeats the phrase no rush four times

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Speaker 3: as he urges caution on rate cuts.

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Speaker 1: JP Morgan warns an out of the blue shock could

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Speaker 1: bring an end to the current market.

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Speaker 3: Rally plus Watch Out for the Big Nasties MPs identified

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Speaker 3: the major spending challenges facing the next UK government.

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

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Speaker 3: The Federal Reserve Governor Christopher Waller says policymakers should hold

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Speaker 3: fire on cutting rates in the face of new economic data.

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Speaker 3: Waller cited recent inflation figures, which he said were disappointing,

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Speaker 3: pointing to a strong economy and robust hiring as evidence

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Speaker 3: that the FED has room to wait.

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Speaker 4: In my view, it is appropriate to reduce the overall

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Speaker 4: number of rate cuts or push them further into the

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Speaker 4: future into response to the recent data. I see no

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Speaker 4: rush in taking the step of beginning to ease monetary policy.

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Speaker 3: Christopher Waller, speaking there, Treasury slipped in Asian trading and

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Speaker 3: response to the comments, and that sentiment chimes with that

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Speaker 3: of Jonathan Haskell, an external member of the Bank of

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Speaker 3: England's Monetary Policy Committee, who told The Financial Times that

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Speaker 3: Bank of England rate cuts should be a long way

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Speaker 3: off now.

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Speaker 1: The S and P five hundred index is on track

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Speaker 1: for a roughly ten percent return this quarter, but a

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Speaker 1: JP Morgan stratust says that the market might not see

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Speaker 1: an end to the historic five month US equity rally coming.

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Speaker 1: Bloomberg's Tiba Adabaya has the details.

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Speaker 5: Questions about when the fortunes of US equities will change

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Speaker 5: have been swirling the market for months, According to one observer,

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Speaker 5: though that shift will come when investors least expect it.

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Speaker 5: JP Morgan's chief global equity strategist, is warning clients to

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Speaker 5: diversify their portfolios if they want to avoid being stuck

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Speaker 5: on the wrong side of the momentum trade. A flash crash,

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Speaker 5: as he calls it, is not impossible thanks to risks

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Speaker 5: hovering in the background. Looking at recent history, the rush

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Speaker 5: into popular momentum stocks like the magnificance seven is typically

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Speaker 5: followed by a correction. It's happened three times since the

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Speaker 5: global financial crisis in London. He were at a bio

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Speaker 5: Bloomberg radio.

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Speaker 3: A Zenpic, a drug for which Novaunaudisk charges almost one

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Speaker 3: thousand dollars in the US, could be profitably produced for

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Speaker 3: less than five dollars a month. That's according to a

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Speaker 3: study by Yale University, King's College Hospital and Doctors without Borders,

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Speaker 3: who say the blockbuster drug could be manufactured for eighty

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Speaker 3: nine cents to four dollars seventy three for a month's supply,

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Speaker 3: and that includes a profit margin. The drug industry often

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Speaker 3: depends on such high prices by saying that they defend

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Speaker 3: such high prices by saying they make possible the research

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Speaker 3: and development that leads to breakthroughs. Novo declined to provide

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Speaker 3: production costs for a zempick, but told Bloomberg that seventy

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Speaker 3: five percent of its gross earnings goes back to rebates

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Speaker 3: and discounts to ensure that patients have access to products now.

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Speaker 1: Janet Yellen says that she expects insurers to help cover

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Speaker 1: the cost of rebuilding the Baltimore Bridge. The US Treasury

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Speaker 1: Secretaries comments come after Joe Biden called on Congress to

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Speaker 1: approve funds for the Port of Baltimore's reconstruction. The Transport

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Speaker 1: Secretary Pete Boutagich told Bloomberg this isn't a political issue.

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Speaker 6: This isn't going to happen overnight. The original bridge took

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Speaker 6: about five years to put up, and this isn't going

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Speaker 6: to be cheap either. But we do have emergency relief

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Speaker 6: funds to help in these kinds of situations. We really

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Speaker 6: cannot yet say what the total price tag will be.

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Speaker 1: Although Boutagig couldn't give an exact number, the cost is

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Speaker 1: expected to run into the billions of dollars. A lengthy

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Speaker 1: shutdown will also cause chaos for commuters and for trade.

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Speaker 1: The port is one of the top ports in the

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Speaker 1: US in terms of volume and value of cargoes.

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Speaker 3: A watchdog has laid out the scale of spending challenges

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Speaker 3: facing Britain. The Public Accounts Committee identified nearly twenty areas

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Speaker 3: in need of billions of pounds of government funding. Chris

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Speaker 3: Pitt has more.

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Speaker 2: Hospital buildings, defense equipment, affordable housing, school maintenance just some

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Speaker 2: of what the Public Accounts Committee report calls big nasties

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Speaker 2: nineteen problems. They say essential spending can no longer be

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Speaker 2: pot off for after years of neglect. The committee of

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Speaker 2: MPs from different parties thinks each one of these will

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Speaker 2: cost the government billions. This as Britain is in the

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Speaker 2: grip of a fiscal squeeze, with the debt to GDP

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Speaker 2: ratio now close to one hundred percent in London Chris Pitt,

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Speaker 2: Bloomberg Radio.

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Speaker 1: Now, the French Prime Minister, Gabrielle Lttal, has pledged more

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Speaker 1: unemployment welfare cuts as he aims to press on with

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Speaker 1: President Macron's economic reform agenda. The changes which ATAEL expects

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Speaker 1: to implement in the autumn include minimizing the maximum duration

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Speaker 1: of welfare and cutting payments over time. Maco's leadership was

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Speaker 1: centered on economic policies designed to overcome decades of weak

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Speaker 1: economic growth, but with a European slow down, unemployment is

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Speaker 1: rising and the budget deficit in France has widened beyond

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Speaker 1: the government's targets. The objective is to reach full employment

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Speaker 1: at tail, has said on Wednesday, but modifications pose a

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Speaker 1: risk of a backlash ahead of the European elections in June.

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Speaker 3: Those are your top stories on the markets. THEMSCIS pacificate

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Speaker 3: next is lower two tenths of a percent, Eurostock's fifty

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Speaker 3: futures a higher three tenths of eight percent, and the

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Speaker 3: ten year treasury yield is higher two basis points at

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Speaker 3: four point two one percent.

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Speaker 1: In just the moment, we're going to dive into the markets.

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Speaker 1: Of course, a lot of major global markets are going

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Speaker 1: to be closed tomorrow, but then we get the Fed's

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Speaker 1: preferred inflation gage. We've also had the comments from Christopher Wallace,

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Speaker 1: so we'll unpack those, put reader and weep Lizzie on

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Speaker 1: the Bloomberg terminal this morning. A classic medium sized Chanel handbag,

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Speaker 1: you know, the one with the flap and the nice

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Speaker 1: little gold bit on the front. Ten thousand euros. That's

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Speaker 1: for the first time. The prices have gone up in Paris.

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Speaker 1: They reviewed actually the prices for these handbags around the

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Speaker 1: world a little bit earlier this year. But yeah, ten

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Speaker 1: thousand years, it's more than ten thousand, eight hundred dollars.

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Speaker 3: Well, Look, Carolina is a recent entrance to the world

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Speaker 3: of luxury handbags. I've been studying this in great detail. Look,

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Speaker 3: experts say that Chanelle isn't perhaps as worthy of the

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Speaker 3: price tagers eh Mez. And if you're going to make

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Speaker 3: an investment on this scale, and let's face it, you're

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Speaker 3: not going to live in it, You're not going to

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Speaker 3: travel around in it. You want to know that it's

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Speaker 3: going to hold its value. And once upon a time

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Speaker 3: I was a model and I got to see first hand,

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Speaker 3: behind the scenes, the craftsmanship of every little stitch, every fastening,

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Speaker 3: the lengths that they go to to source the best

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Speaker 3: possible materials. For either point is not all handbags are

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Speaker 3: ink call so better than others.

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Speaker 1: Okay, I'm going to pull cold water on this whole idea,

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Speaker 1: but you can comfort yourself with that story if you wish. Anyway,

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Speaker 1: it's on the Bloomberg Talent. Yeah, to have a read

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Speaker 1: Luxury of Goods. Baker's something we always keep track of, of

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Speaker 1: course here on Bloomberg.

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Speaker 3: Right.

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Speaker 1: Let's turn our attention then to the market story this morning.

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Speaker 1: So the Federal Reserve Governor Christopher Waller says that there's

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Speaker 1: no rush to lower interest rates, adding that recent economic

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Speaker 1: data warrants delaying or reducing the number of cuts this year.

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Speaker 1: This head of the fourth quarter US GDP data today

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Speaker 1: and on Friday, the PCE personal income and spending data

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Speaker 1: out of the US, joining US now to two over

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Speaker 1: market red meat Bloomberg anchor Critty, Good morning, Critty, thanks

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Speaker 1: for being with us. And first off, where does Waller

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Speaker 1: usually sit then in terms of this spectrum of hawks

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Speaker 1: and doves on the FRMC, how do you rate his comments?

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Speaker 7: Yeah, so Waller're back in November had actually kind of

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Speaker 7: backed himself into a little bit of a corner, and

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Speaker 7: arguably so from his critics and basically said and that

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Speaker 7: when you look at the inflation story and you look

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Speaker 7: at the kind of cuts you need to see, you

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Speaker 7: need to see three, four or five good prints of data.

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Speaker 7: So he's kind of sticking with that narrative here in

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Speaker 7: saying that, oh, we just got two hot data prints.

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Speaker 7: That's giving him some reason for pause as well. So

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Speaker 7: therefore kind of pushing back his cut idea. He's still saying, look,

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Speaker 7: we're gonna need it at some point this year, but

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Speaker 7: maybe not as early as thought, because we still need

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Speaker 7: those several good data points or at least something that

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Speaker 7: shows that that deceleration inflation is going in the right direction.

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Speaker 3: So four times he said there was no rush. It

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Speaker 3: was kind of feeling like the fair Den markets were

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Speaker 3: on the same page. Does this throw that out of alignment, Yes.

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Speaker 7: Sah no. So I can argue it both ways here,

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Speaker 7: as any good journalist does. The way that it falls

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Speaker 7: into alignment here is that you have seen this kind

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Speaker 7: of volatility in terms of FED swaps tricing. So I

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Speaker 7: think at the start of the year, for example, we

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Speaker 7: had six or seven cuts priced in the market. That

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Speaker 7: has not decelerated too, I think two in the back

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Speaker 7: half of the year, but that first one is still

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Speaker 7: placed for the summer still and June slash July despite

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Speaker 7: what's happening. So in theory, the markets are listening to

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Speaker 7: the FED and the FED speakers and saying, look, this

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Speaker 7: needs to get pushed out further and further. But where

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Speaker 7: they are not aligned is going to be in terms

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Speaker 7: of what that inflationary output kind of actually looks like

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Speaker 7: and what the employment numbers look like. That's where you're

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Speaker 7: starting to see some resistance in the market here, because

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Speaker 7: you aren't seeing that momentum into the bond market that

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Speaker 7: you traditionally would if the FED says things are going

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Speaker 7: in the right direction, We're still hot, the consumer is

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Speaker 7: still doing well, the economy is still doing great. Well,

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Speaker 7: tell that to the bond market that's still betting on

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Speaker 7: higher inflation in an uptick in inflation exactly, which is

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Speaker 7: why you're seeing ten year yields still I think at

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Speaker 7: about four to twenty nine last time I checked.

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Speaker 1: Yeah. Absolutely, And then of course we're going to get

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Speaker 1: some important data out on Friday when most major markets,

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Speaker 1: including all the US markets are closed. This is the

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Speaker 1: Personal Consumption Expenditures price Index, and you're expected its expences

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Speaker 1: to be super hot, but it's still not right.

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Speaker 7: Not great. It's also coming at the same time to

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Speaker 7: hear comments from Chair Powell, so you'll get the data

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Speaker 7: and then you'll get comments immediately after. What's tricky here is,

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Speaker 7: to your point, all the markets are going to be

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Speaker 7: closed globally, and then of course on Monday, Europe is

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Speaker 7: going to be closed, the United States will be open,

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Speaker 7: So there's going to be a little bit of a

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Speaker 7: delay in terms of what it actually means not to

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Speaker 7: mention some of the kind of developments over the weekend.

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Speaker 7: What that means going into it from a market positioning

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Speaker 7: standpoint is simply that it feels like there might be

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Speaker 7: kind of a risk off idea as well. Because traditionally,

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Speaker 7: when you've looked at the way the markets have treated

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Speaker 7: each data point, the CPI numbers, the PPI numbers. The

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Speaker 7: last time we got the PC numbers, and the deflator

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Speaker 7: as well, the markets have shrugged off as simply one

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Speaker 7: data point. So there kind of seemed to be on

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Speaker 7: a little bit of a hot string in terms of

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Speaker 7: their narrative. This one data point may not make that

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Speaker 7: much of a difference.

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Speaker 1: Yeah, absolutely so. Of course, although it is a holiday

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Speaker 1: on Friday, I just want to point out that Bloomberg

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Speaker 1: Radio will be live with programming around the PC inflation

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Speaker 1: data and those remarks. As you point out from j Powell,

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Speaker 1: Nathan Hager is going to be anchoring live coverage on

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Speaker 1: both He'll be joined Bubbly Banks Michael mckeeth. So don't

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Speaker 1: forget that the PC data is out at eight thirty

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Speaker 1: am Eastern time, and then it's eleven thirty am Eastern time.

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Speaker 1: Those remarks from Jaypowe's absolutely vital to know that you

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Speaker 1: can't go away. You won't miss a thing if you're

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Speaker 1: listening to us. Thank you so much. A critty though

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Speaker 1: for that look through the market, it's Boomberg anchor Pritty Gupta.

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Speaker 3: Now a little closer to home, Britain needs to upgrade

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Speaker 3: everything from schools to hospitals, and a long list of

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Speaker 3: spending awaiting the next government. Meg Hilly, a chair of

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Speaker 3: the cross party Public Accounts Committee, said on Thursday, whoever

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Speaker 3: wins the general election, we'll confront a long list of

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Speaker 3: big nasties joining us now is Bloomberg's little nasty? Are

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Speaker 3: UK Politics reporter James Walcark not so nasty about a

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Speaker 3: big nasty James, Just because.

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Speaker 8: I'm five ' six, Lizzie doesn't engender that kind of abuse. Well, look,

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Speaker 8: we hear this term in politic is like kicking the

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Speaker 8: can down the road. A big nafty, Helia would say,

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Speaker 8: is when we reached the end of the road and

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Speaker 8: there is no room left run politically. There are nineteen commitments,

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Speaker 8: she says, of things that need urgent essential spending. You're

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Speaker 8: talking things like hospital maintenance, defense spending, affordable housing, legacy it,

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Speaker 8: all of which now need billions. I mean, look at

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Speaker 8: defense for example, she says, just to hit our own

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Speaker 8: twenty twenty to twenty thirty targets at we need a

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Speaker 8: minimum of seventeen billion pounds extra if we want an

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Speaker 8: upgrade to the way the defense industry and defense sort

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Speaker 8: of military of the UK sees us in twenty thirty

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Speaker 8: sixty five billion pounds. That's just defense. Take hospitals. Hospital

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Speaker 8: maintenance has doubled from twenty to fifteen to today in

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Speaker 8: terms of just the building and building infrastructure to ten billion.

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Speaker 8: You then look at waiting this which are for four

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Speaker 8: years having to hit their target for can for that

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Speaker 8: six years, the entire host budget is one hundred and

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Speaker 8: eighty billion pounds. You know that will need to increase.

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Speaker 8: And she says, look, that's just today aging population that's

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Speaker 8: going to get worse. I could go on for quite

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Speaker 8: some time going through all these nineteen points. They are

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Speaker 8: things we've all covered on say the UK Politics podcast

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Speaker 8: and on Bloomberg Radio before. I think the thing that

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Speaker 8: this committee report makes so stark and nasty is having

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Speaker 8: it all laid out in sort of the clear light

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Speaker 8: of day. It is pretty difficult to sort of reading.

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Speaker 1: Yes, immensely difficult reading, although not a shock I think

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Speaker 1: to anybody who's in the UK and who've used its

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Speaker 1: frankly hospitals, roads or schools. But how political do you

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Speaker 1: think this is? Given that Meg Hilliy is a labor

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Speaker 1: and p obviously she's chair of a cross party parliamentary committee,

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Speaker 1: but she is nonetheless a labor. Is this a political message?

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Speaker 8: I mean, it's hard to argue anything politics is an

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Speaker 8: a political message, Caroline. The reason why this inquiry how

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Speaker 8: so much teeth as it comes from the Public Accounts Committee.

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Speaker 8: It is known for somempartiality, It is known for its

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Speaker 8: independent analysis. This is why governments take it seriously. Having

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Speaker 8: said that, I mean, in an election it is worth

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Speaker 8: pointing out. Saying how badly the state is failing is

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Speaker 8: going to be a political message. But arguably this causes

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Speaker 8: massive issues for labor too. I mean, look at the

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Speaker 8: trouble Liboran into just in trying to promise a twenty

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Speaker 8: eight billion pound green upgrade. Like I said that defense number,

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Speaker 8: I pulled out sixty five billion a dwarfs that housing

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Speaker 8: affordable housing. Twenty billions are the cost on Here it

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Speaker 8: basically lays out, I think for the entire state, no

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Speaker 8: matter which government or any political striper is in charge

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Speaker 8: of it, a unwillingness to take decisions, Hillier says. And

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Speaker 8: the that unwillingness you see it in an unwilling to

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Speaker 8: take long term decisions and will to take difficult decisions.

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Speaker 8: What are we going to cut down on?

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Speaker 3: Well, Jeremy Hunt, the Chancellor would say that they are

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Speaker 3: making difficult decisions. They're making efficiency savings in different places

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Speaker 3: so that you don't have to spend as much. So

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Speaker 3: it comes down to who is this report most dangerous for?

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Speaker 8: On that Hunt policy, it's faccinting though. You look at

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Speaker 8: HMRC who recently said they're going to wind down their

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Speaker 8: call center for the first six months of the year,

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Speaker 8: only for the government to row back on it and say, actually,

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Speaker 8: know that would be politically unpopular, let's keep doing it

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Speaker 8: here you would say, well, the dangers is to everyone, frankly,

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Speaker 8: because if you don't address these decisions.

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Speaker 2: The buildings go and collapse.

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Speaker 8: Look at the RAC the sort of areas concrete scandal

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Speaker 8: from last year where school buildings start collapsing. The point

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Speaker 8: that Hiley is making is there are serious trade offs here.

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Speaker 8: You make them these decisions now or in the next government,

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Speaker 8: and you either have to radically increase spending on a

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Speaker 8: few of these issues or cut the departments. That is

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Speaker 8: the kind of very very very stark decisions she's setting out,

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Speaker 8: and I think The thing that this report ties together

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Speaker 8: is there is no sector of public life in the

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Speaker 8: UK that is going to be untouched by this, because

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Speaker 8: so many decisions have been kicked down the road.

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Speaker 3: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 3: stories making news from London to Wall Street and beyond.

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Speaker 1: Look for us on your podcast speed Ee Morning, on Apple,

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Speaker 1: Spotify and anywhere else you get your podcasts.

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Speaker 3: You can also listen live each morning on London Dab Radio,

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Speaker 3: the Bloomberg Business App and Bloomberg Dot Lightship New.

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Speaker 1: York Station is also available on your Amazon Alexa devices.

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Speaker 1: Just say Alexa play Bloomberg eleven thirty. I'm Caroline Hepka.

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Speaker 3: And I'm Lizzie Burden. Join us again tomorrow morning for

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Speaker 3: all the news you need to start your day right

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Speaker 3: here on Bloomberg Daybreak Europe.