Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Blueberg
Speaker 1: Day BAC podcast, available every morning on Apple, Spotify or
Speaker 1: wherever you listen. It's Thursday, the nineteenth of September in London.
Speaker 2: I'm Caroline HEPK and.
Speaker 3: I'm Stephen Carroll. Coming up today is the first cut,
Speaker 3: the deepest. The Fed ops for fifty as it delivers
Speaker 3: its first rate reduction in more than four years.
Speaker 1: Israel diverts troops to its border with Lebanon as a
Speaker 1: second wave of communication devices explodes.
Speaker 3: Plus, we have exclusive reporting on the global shadow network
Speaker 3: transporting sanctioned Russian gas.
Speaker 2: Let's start with a roundup of our top stories.
Speaker 3: The Federal Reserve has cut its benchmark lending rate for
Speaker 3: the first time in four years. Policymakers voted to lower
Speaker 3: the rate by fifty basis points as they shift focus
Speaker 3: to concerns over the strength of the US economy and
Speaker 3: jobs market. Speaking after the announcement, Federal Reserve Charger Own
Speaker 3: Powell used his press conference to push back against the
Speaker 3: notion that the oversized cut was to make up for
Speaker 3: lost time.
Speaker 4: A broad set of indicators suggests that conditions in the
Speaker 4: labor market are now less tight than just before the
Speaker 4: pandemic in twenty nineteen. The labor market is not a
Speaker 4: source of elevated inflationary pressures. I do not think that
Speaker 4: anyone should look at this and say, oh, this is
Speaker 4: the new pace. You know, you have to have to
Speaker 4: think about it in terms of the base case. Of course,
Speaker 4: what happens will happen. If the labor market were to
Speaker 4: slow unexpectedly, then we have the ability to react to that.
Speaker 4: We have greater confidence now that inflation is moving down
Speaker 4: to two percent, But at the same time, our plan
Speaker 4: is that we will be at two percent.
Speaker 3: Despite Pile's positive spin at multiple moments during his press conference,
Speaker 3: the half point cut was not a unanimous decision. Michelle
Speaker 3: Bowman cost a vote in favor of a smaller quarter
Speaker 3: point cut, the first descent by a fat governor since
Speaker 3: two thousand and five.
Speaker 1: The decision to opt for a half point cut led
Speaker 1: traders to rampop bets on the pace of US ray reductions.
Speaker 1: The market is now pricing in around sixty five basis
Speaker 1: points of easing at the fed's two remaining meetings this year.
Speaker 1: That's despite officials forecasting just fifty points of further cuts
Speaker 1: in twenty twenty four, Bloomberg Intelligence is Chief Interest Rates
Speaker 1: trash is are a Jersey says he expects the Fed
Speaker 1: to stick to that pace, but it's what happens after
Speaker 1: that which is more significant.
Speaker 5: When you think about November and December's meeting, you know,
Speaker 5: they made it pretty clear that unless something significantly changes
Speaker 5: with the trends in the economy and inflation, that you're
Speaker 5: likely to see, you know, modest cuts going forward, so
Speaker 5: you know, twenty five basis points over the next couple
Speaker 5: of meetings. But I think that's less important to me.
Speaker 5: What I was focused on was what they said they were,
Speaker 5: where they said they were going to ultimately, and where
Speaker 5: they think they're going to even with the economy not
Speaker 5: hitting into a recession, is all the way down to
Speaker 5: under three percent on the FED funds.
Speaker 1: Rate Bloomberg Intelligence Chief Interest Rates trashes are a Jersey,
Speaker 1: referring there to the fomc's median forecast for the end
Speaker 1: of twenty twenty six for rates to be just below
Speaker 1: two point nine percent. The move caps months of uncertainty
Speaker 1: over the timing and scale of the Fed's first rate cut.
Speaker 1: Now the focus shifts to the pace of reductions ahead well,
Speaker 1: the Bank.
Speaker 3: Of England doesn't focused today as it announces its decision
Speaker 3: on rate. It's thought of the patient approach to reversing
Speaker 3: the most aggressive policy tightening in decades will be maintained.
Speaker 3: Our UK correspondent Lizzie Burden has more.
Speaker 6: It's decision day on thread Needle Street, but economists and
Speaker 6: investors are expecting policymakers to stick to the status quo,
Speaker 6: holding the benchmark rate at five percent. However, wages are
Speaker 6: increasing on a faster Bank of England cutting cycle ahead
Speaker 6: after invation readings came in lower than Central Bank forecasts.
Speaker 6: In July and August, Attential will be focused on Governor
Speaker 6: Andrew Bailey for hints that borrowing costs could be lowered
Speaker 6: again in November after committee members voted narrowly to end
Speaker 6: their sixteen year high last month. Traders are also awaiting
Speaker 6: news on the speed of quantitative tightening, a decision which
Speaker 6: could prove pivotal for new Chancellor Rachel Reeves's October budget.
Speaker 6: Will have full coverage of the announcement to do at
Speaker 6: twelve pm London time on Bloomberg in London, Lizziebird and
Speaker 6: Bloomberg Radio.
Speaker 1: Now to other news Israel has declared a new phase
Speaker 1: in its regional war with Islamist groups. The country's defense minister,
Speaker 1: you Have Gallant, also said that troops would be diverted
Speaker 1: to the Lebanese board up, where Israel has been exchanging
Speaker 1: rocket far with HESB militants. His comments come after exploding
Speaker 1: telecommunications devices in Lebanon killed twenty six people over two
Speaker 1: days and wounded more than three thousand, according to Lebanon's
Speaker 1: Health ministry. Lebanon's government has blamed Israel for the attack.
Speaker 1: The U S Secretary of State Anthony Blincoln says that
Speaker 1: the US had nothing to do with the assault.
Speaker 7: The United States did not know about, nor was it
Speaker 7: involved in these incidents, and we're still gathering the infram
Speaker 7: and gathering the facts. Broadly speaking, we've been very clear
Speaker 7: and we remain very clear about the importance of all
Speaker 7: parties avoiding any steps that could further escalate the conflict.
Speaker 1: Anthony Blincoln, US Secty of State speaking, The shift in
Speaker 1: Israeli military operations to the north of the country has
Speaker 1: spoked fears of a wider war. As the US tries
Speaker 1: to calm the situation.
Speaker 3: European car sales dropped by sixteen and a half percent
Speaker 3: last month, with over seven hundred and fifty seven hundred
Speaker 3: and fifty five thousand sales. Total deliveries were dragged down
Speaker 3: by Germany and France as sales of electric vehicles cratered.
Speaker 3: EV sales dropped by sixty nine percent in August to
Speaker 3: just over twenty seven thousand. The UK was the only
Speaker 3: major market where EV sales rose, gaining ten point eight percent.
Speaker 3: The data comes from the European Automobile Manufacturers Association, the
Speaker 3: Industry Group, which is now calling for urgent action from
Speaker 3: the US European Commission ahead of twenty twenty five emissions
Speaker 3: targets that could potentially cast billions of euros and fines.
Speaker 1: Leading think tanks are calling for more ambitious reforms from
Speaker 1: the UK government. The Resolution Foundation says that Prime Minister
Speaker 1: Kirstarma is only halfway towards his target of making Britain
Speaker 1: the fastest growing economy in the G seven.
Speaker 2: Bloomberg's James Orcock has more.
Speaker 8: Slow growth, mysteriously poor productivity, and a contagion of worklessness.
Speaker 8: The problems of the British economy have been well charted,
Speaker 8: but now there's a flurry of policy solutions which think
Speaker 8: tanks and lobbyists are trying to get the new government
Speaker 8: to look at the Resolution Foundations say, on top of
Speaker 8: everything Labour has done so far, it needs to get
Speaker 8: its workers' reforms right, create better trade relations with the EU,
Speaker 8: and step up investment if it wants to achieve its
Speaker 8: growth pledges. On the investment side, the left leaning think
Speaker 8: tank has an unlikely ally in the City of London
Speaker 8: thinks the UK could attract as much as seven point
Speaker 8: seven billion pounds more investment by twenty thirty if it
Speaker 8: did a better job of attracting foreign sovereign wealth in London.
Speaker 8: James Wilcock Bloomberg Radier.
Speaker 3: Turning next to the United States and the chair of
Speaker 3: the Security and Exchange Commission, says the way markets are
Speaker 3: using AI risks heartbreak. Gary Gensler is warning that too
Speaker 3: many traders are relying on the same models, potentially causing
Speaker 3: a next future market meltdown. He compared it to the movie.
Speaker 9: Her Like Scarlett Johansson, was that romantic interest in her
Speaker 9: and then when she went offline, all eighty three hundred
Speaker 9: and sixteen of her romantic partners were heartbroken. I don't
Speaker 9: want that to happen in the financial sector.
Speaker 3: Gensler added that he thought automation was still a good
Speaker 3: thing overall. The SEC made a proposal last year to
Speaker 3: require brokers and investment advisors to mitigate conflicts of interest
Speaker 3: in their use of AI tools that might put their
Speaker 3: interests before clients at a moment. Will bring you more
Speaker 3: on the FED decision plus are exclusive reporting on the
Speaker 3: Shadow fleet of ships exporting Russian gas. But first, another
Speaker 3: story that caught our eye this morning, how AI is
Speaker 3: bringing back dead celebrities and they're making millions from it.
Speaker 3: This is our colleague Mea Dowkins has been writing about
Speaker 3: how the estates of the likes of James Dean, Judy Garland,
Speaker 3: and Burt Reynolds, among others, have signed up to an
Speaker 3: AI voice cloning startup called eleven Labs, which can use
Speaker 3: their iconic tones to narrate books or other materials.
Speaker 1: Yeah, I think this is I mean, we've seen some
Speaker 1: of this, haven't we, especially in London.
Speaker 2: Abb of Voyage.
Speaker 1: I went to see that, of course, which is kind
Speaker 1: of a hologram image.
Speaker 3: As an eldest version to cod Yes.
Speaker 2: Exactly, that's coming soon.
Speaker 1: So me did a really nice piece of kind of
Speaker 1: deep dive into this about the financial implications, it's quite complicated, actually.
Speaker 3: It's kind of and look, there are some in the
Speaker 3: industry who say it's a great thing and points to
Speaker 3: the que amounds money can Others aren't so convinced, and
Speaker 3: she's spoken to both sides on this as well. She
Speaker 3: spoke to one industry player who talked about this being
Speaker 3: a trend a kin to the nft fad as well
Speaker 3: as somebody to think about that. Of course, there are
Speaker 3: ethical concerns involved her as well, and you mentioned Abba Voyage.
Speaker 3: She spoke to the co producer of that show as well,
Speaker 3: saying that AI can't replace the emotional connection that people
Speaker 3: have to arts. There are limits to this as well,
Speaker 3: but it's a fascinating read on Bloomberg dot com and
Speaker 3: on the terminal.
Speaker 2: Okay, good stuff.
Speaker 1: Let's think about then, the Fed's decision, now, shall we
Speaker 1: to cut interest rates by fifty basis points? Will change
Speaker 1: your own Pal says that future moves will be based
Speaker 1: on how the US economy performs in the months ahead.
Speaker 1: And let's bring in bloom Big Opinion columist Daniel Moss,
Speaker 1: who joins us now for more on this Good morning.
Speaker 2: Daniel in the end.
Speaker 1: What message you think Powell actually sent with this cut
Speaker 1: and then the press conference afterwards, this jumbo cut in
Speaker 1: the end.
Speaker 10: Well, I'm not so sure we should call it jumbo.
Speaker 10: Don't forget when the head was was hiking, it did
Speaker 10: a couple of seventy five basis point moves in the
Speaker 10: other direction. That was jumbo. I think the message that
Speaker 10: were sent today was if we were perceived to be
Speaker 10: late as inflation was climbing, we're not going to be
Speaker 10: lacking for forcefulness as unemployment begins to rise. Now, you know,
Speaker 10: it's all very well for j. Powell to say it
Speaker 10: is press conference, Oh, don't take this as a future sign.
Speaker 10: Don't take this as like meaning that we're going to
Speaker 10: do fifty to fifty to fifty to fifty. That's fine,
Speaker 10: But he would know that by starting with fifty, which
Speaker 10: the Fed rarely does absent a crisis, and this is
Speaker 10: not a crisis, he is laying down a marker for expectations.
Speaker 10: Does really a sense he's trying to have.
Speaker 11: It both ways?
Speaker 3: Well, I mean, what do you make of how the
Speaker 3: markets are interpreting that? Than the pricing in about sixty
Speaker 3: five basis points are further easing this year. What does
Speaker 3: it tad That's about why the fad goes for the
Speaker 3: rest of the air.
Speaker 10: It tells you that there's a couple more cuts coming.
Speaker 10: But you know, look, this can oscillate based on data
Speaker 10: and based on commentary. Don't forget It's like, only five
Speaker 10: business days ago the consensus was that fifty would be
Speaker 10: a stretch. Yet by the time that press release came
Speaker 10: at two o'clock yesterday afternoon, people had coalesced around fifty,
Speaker 10: So things can changed, and emphasized his data dependent on
Speaker 10: all the rest of it. But look, there's a marker
Speaker 10: being laid down here. We're going to respond forcefully to
Speaker 10: signs of emerging softness in the labor market. And by
Speaker 10: the way, inflation heading toward two percent gives us the
Speaker 10: flexibility to do so. It was interesting, he added, just
Speaker 10: by way almost of clearing his throat at the end
Speaker 10: of his sense. Of course, you know we still think
Speaker 10: we'll get to two.
Speaker 1: Yes, which is interesting of itself, where the new normal
Speaker 1: post pandemic actually is. What did you make of a
Speaker 1: descending vote from Michelle Bowman?
Speaker 2: Is that significant?
Speaker 10: Well, you know, when I first saw it, Central banking
Speaker 10: geeks like me. You know, I got pretty surprised about
Speaker 10: that because I'm always asking people when was the last
Speaker 10: time a FED governor dissented, and prior to yesterday, the answer,
Speaker 10: of course was two thousand and five John Olsen in
Speaker 10: the aftermath of Hurricane Katrina. So this was interesting from
Speaker 10: a geeky perspective. Then again, when you look at it closely,
Speaker 10: it's not like Michelle Bowman favored no cut at all.
Speaker 10: She was dessenting on the size of the cut, not
Speaker 10: the cut per se. The other thing I would say
Speaker 10: is when it comes to monetary policy, she's not particularly influential.
Speaker 10: I believe her background is as a community banker. Community
Speaker 10: bankers have a lot of clout in DC. Congress always
Speaker 10: likes to see a community banker on the foe. See.
Speaker 10: I think the vote that Paw really wanted for fifty
Speaker 10: and that he got was Chris Wall.
Speaker 3: What about looking ahead? We've got a decision from the
Speaker 3: Bank of England today, We've got the Bank of Japan tomorrow.
Speaker 3: How much will policymakers in London and in Tokyo be
Speaker 3: eyeing the fad decision?
Speaker 10: Well, again, we're at that point. Everyone will say, well,
Speaker 10: you know, we don't just follow the FED. You know,
Speaker 10: we act in our own domestic situation. Da da da
Speaker 10: da da da da. But they're all responding to the
Speaker 10: same trends. And I would put the Bank of England
Speaker 10: in that category. I mean, the Bank of Japan is
Speaker 10: the outlier in this whole conversation. What's going to be
Speaker 10: very interesting is whether the Governor Kazuo Waider can back
Speaker 10: the hawkishness that he exhibited back in August with language
Speaker 10: like this on Friday, or does he you know, is
Speaker 10: he perceived to be walking away? You know, my colleague
Speaker 10: garaud Ready and I have written that one of his
Speaker 10: weaknesses is as a longtime academic figure, we'll answer questions
Speaker 10: on their merits, and sometimes it seems like he's given
Speaker 10: giving secondary thought to the message he seeks to convey. Well,
Speaker 10: that's a very interesting point. No, no, no, it's not
Speaker 10: necessarily a signal. But this is the danger for Wader.
Speaker 10: He was forceful with hawkishness in August. You know which
Speaker 10: Wader shows up Friday.
Speaker 1: Okay, we shall wait that interesting question. Daniel, thank you
Speaker 1: so much for your time this morning. A big opinion
Speaker 1: that columnist Daniel Moss. Then, as we think about that
Speaker 1: fifty basis point rate card. So we had the vote.
Speaker 1: It was eleven to one, of course, to reduce the
Speaker 1: rates to arrange now of four point seventy five to
Speaker 1: five percent after the FED of course held for.
Speaker 2: More than a year.
Speaker 1: And in terms of the projections, you've got ten out
Speaker 1: of nineteen officials favoring lowering rates by at least an
Speaker 1: additional half point over the next two meetings.
Speaker 2: So that's ahead.
Speaker 3: Yeah, of course, plenty to read more from Daniel and
Speaker 3: as colleagues are Bloomberg dot Com, Forward, Slash Opinion. I
Speaker 3: would also point and John Othis's referenced and his piece
Speaker 3: just out this morning as well as Bimberg Opinion has
Speaker 3: a FED day soundtrack and there's a Spotify playlist that
Speaker 3: you can click through on his piece. The first song
Speaker 3: on the list, the first cut, is the deepest. Let's
Speaker 3: go to a different story now. This morning some exclusive
Speaker 3: Bloomberg reporting on how Russia's weaving a global web of
Speaker 3: shell companies to create a shadow fleet to export liquefied
Speaker 3: natural gas. This is an effort to circumvent US energy
Speaker 3: sanctions over the Russian invasion of Ukraine. We've got Bloomberg
Speaker 3: Stephens Staptinski with us for more. It leads our team
Speaker 3: of energy reporters in Agist even great to have you on.
Speaker 3: We've reported previously on the shadow fleet of ships carrying
Speaker 3: Russian oil. This investigation looked at the way Russia's exporting
Speaker 3: LNG from its Arctic terminal that only opened last December.
Speaker 3: How are they doing it?
Speaker 11: Yeah, I mean the LNG dark fleet is much smaller
Speaker 11: than Russian the Russian one which is so far when
Speaker 11: you some calculations show that they've a met hundreds of
Speaker 11: billions of dollars with that trade for liquefied natural gas,
Speaker 11: it's a little bit more challenging. Unlike the oil industry,
Speaker 11: where there are thousands over seven thousand vessels available, so
Speaker 11: it's easier to hide your movement and buy old and
Speaker 11: smaller ships. The LNG industry liquified natural gas is much smaller.
Speaker 11: It has only seven over a little bit over seven
Speaker 11: hundred ships, and it's a very specialized trade, so you
Speaker 11: can't just bring it to any old port. You have
Speaker 11: to bring it to a specialized LNG export terminal or
Speaker 11: import terminal. So through our reporting we discovered that a
Speaker 11: company in Dubai we're not exactly shared the relation with Russia.
Speaker 11: But this company started amassing vessels in March twenty twenty
Speaker 11: four to help Russia essentially export the fuel. The fuel
Speaker 11: was finally exported with one of these ships in August.
Speaker 11: A picture satellite pictures confirmed it was the first of August.
Speaker 11: The vessel called Pie was faking its AIS location, so
Speaker 11: that ship tracking data showed that it was in the barns.
Speaker 8: See.
Speaker 1: Okay, so who's buying this leng what are the known
Speaker 1: risks about this?
Speaker 11: So through our investigation we found that the Russian government
Speaker 11: has been putting pressure on Arctic Energy two to get
Speaker 11: exports out of the facility. Because of the sanctions from
Speaker 11: the United States last year, they weren't able to get
Speaker 11: their icebreaker ships and they were also struggling to find
Speaker 11: buyers and to this day they still do struggle to
Speaker 11: find buyers. So because of that, they were looking at
Speaker 11: waves to get the fuel out. That's why the dark
Speaker 11: Fleet was developed. And I think it's important for Putin
Speaker 11: as well. He's looked at this project, which has been
Speaker 11: hit by sanctions, as a sort of prestige project. If
Speaker 11: they're able to get these exports out of the facility,
Speaker 11: then it shows that Western sanction aren't effective against Moscow's
Speaker 11: trade of fossil fuels. So this has gotten Putin's personal
Speaker 11: stamp of approval to get it through and through our
Speaker 11: According to people with knowledge of the strategy, there is
Speaker 11: pressure from Russian officials to get the shipments out.
Speaker 3: What about the counter efforts to is this? Surely the
Speaker 3: US must be looking at the circumvention and thinking about
Speaker 3: how to combats.
Speaker 11: Precisely so, the shadow fleet of vessels were accumulated over
Speaker 11: the last few months, and the first shipment was in
Speaker 11: early August. In quick succession, there were three more shipments.
Speaker 11: All three of the vessels were faking their location when
Speaker 11: they picked up the energy from the Arctic Energy to facility,
Speaker 11: but later in August the US slap sanctions on all
Speaker 11: three of the ships. There was another instance where one
Speaker 11: of the sanctioned vessel transferred the energy through a ship
Speaker 11: to ship transfer onto a vessel that hadn't been sanctioned yet. Basically,
Speaker 11: less than two weeks later, do you sanction that ship
Speaker 11: as well? So US is taking unprecedently fast steps to
Speaker 11: make sure that any way they can put pressure on
Speaker 11: the development or further development of the Dark fleet, and
Speaker 11: so they're throwing sanctions on very quickly. By doing so,
Speaker 11: you're also deterring potential buyers, because if you're a company
Speaker 11: somewhere looking to potentially purchase the fuel, would you risk
Speaker 11: counter sanctions from the United States if they see that
Speaker 11: you're involved in this trade.
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Speaker 6: Mm hmm