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Speaker 1: Good morning. It's Tuesday, the eleventh of July here in London.

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Speaker 1: This is the Boomberg Daybreak You podcast. I'm Karlin Hebke.

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Speaker 2: And I'm Lizzie Birden. Coming up today. UK pension funds

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Speaker 2: agree to pump billions into British startups, as the Bank

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Speaker 2: of England's Andrew Bailey raises hopes that the country's inflation

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Speaker 2: problem is about to.

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Speaker 1: Ease, and Turkey does a one eighty to back Sweden's

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Speaker 1: bid to join NATO in a big boost for the Alliance.

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Speaker 2: Plus some big news for passive investors, the NASDAQ plans

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Speaker 2: to rebalance the index away from an overconcentration in megacap tech.

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Speaker 2: Let's start with a roundup of our top stories. Nine

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Speaker 2: of the UK's biggest pension funds have agreed to invest

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Speaker 2: five percent of assets in their default funds into startups

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Speaker 2: by twenty thirty. Aviva Legal and General MG and Phoenix

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Speaker 2: have all committed to the move, which could unlock fifty

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Speaker 2: billion pounds for unlisted firms if the rest of the

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Speaker 2: industry follows suit. The Chancellor, Jeremy Hunt insists that the

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Speaker 2: plan isn't mandatory.

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Speaker 3: We're not forcing anyone to invest anywhere they don't want

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Speaker 3: to invest, but we want to remove the barriers so

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Speaker 3: that they can have a more balanced portfolio and therefore

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Speaker 3: increase the returns to their own pension fundholders.

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Speaker 2: In addition to the pensions deal, the Chancellor also announced

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Speaker 2: plans to roll back parts of European Union legislation that

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Speaker 2: forces financial firms to separate the cost of investment research

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Speaker 2: from trading expenses.

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Speaker 1: Well, the Chancellor wasn't the only one making news at

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Speaker 1: the Mansion House dinner. The Bank of England Governor Andrew

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Speaker 1: Bailey used his speech to signal an expectation that inflation

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Speaker 1: will continue to fall this year. Here's what he told

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Speaker 1: the Events.

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Speaker 4: Looking Ahead UK headline inforation is set to fall markedly

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Speaker 4: over the remainder of the year. This largely owes to

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Speaker 4: lower energy prices as last year's substantial increases drop out

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Speaker 4: of the annual calculation, but food prices should fall too

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Speaker 4: as lower commodity prices feed through to prices in the shops.

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Speaker 1: Andrew Bailey's comments CARMA's data from the British Retail Consortium

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Speaker 1: show like for like food sales jumped by nine point

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Speaker 1: eight percent in the second quarter. UK inflation has proved

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Speaker 1: more persistent than in other major economies, with the eight

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Speaker 1: point seven percent headline rate more than four times the

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Speaker 1: Bank of England's two percent target.

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Speaker 2: Turkey has agreed to support Sweden's bid to join NATO,

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Speaker 2: in a major breakthrough which could change the face of

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Speaker 2: Europe's security. Turkey has been delaying its admission since last year.

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Speaker 2: NATO Secretary General Jen Stoltenberg hailed it as a key

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Speaker 2: step forward for the military block.

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Speaker 4: Completing Sweden's accession to NATO is an historic step that

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Speaker 4: benefits the security of all NATO allahs at this critical time.

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Speaker 5: It makes us all stronger and safer.

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Speaker 2: That was Jen Stoltenberg, who added that he expects Hungary,

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Speaker 2: the only other NATO member yet to approve Sweden's bid,

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Speaker 2: will follow suit.

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Speaker 1: Now, the NASDAK is expected to do something unprecedented and

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Speaker 1: manually rebalance it's it's index. Bloomberg's James Wilcock reports.

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Speaker 6: When is too big not a good thing? Well, when

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Speaker 6: you're one of the US's largest six tech companies, they

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Speaker 6: fit a combined market cap of ten trillion dollars for

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Speaker 6: the NASDAK, that's more than half the index, which breaks

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Speaker 6: regulator rules. And the Exchange is planning an intervention in

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Speaker 6: two weeks time. It intends to pare back the waiting

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Speaker 6: of its largest stocks. The heavyweights dropped on the news,

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Speaker 6: reversing some of their gains from this year's AI boom

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Speaker 6: in London. James Wilcock Bloomberg day Break Europe.

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Speaker 2: And three Federal Reserve officials have come out in favor

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Speaker 2: of more rate rises this year, although the Central Bank

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Speaker 2: skipped its last chance to hike. San Francisco FED President

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Speaker 2: Mary Daily was one of those, saying the risks of

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Speaker 2: doing too little outweigh those of doing too much.

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Speaker 6: We're likely to need a couple more rate hikes over

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Speaker 6: the course of this year to really bring inflation back

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Speaker 6: into a path that's a longer sustainable two percent path.

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Speaker 2: Daily they're speaking in Washington. Meanwhile, Atlanta FED President Raphael

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Speaker 2: Bostik has been an outlier, saying that the Fed can

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Speaker 2: be patient and hold well into twenty twenty four. New

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Speaker 2: inflation data out tomorrow may weigh on policymakers head of

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Speaker 2: the next rate meeting in two weeks time.

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Speaker 1: Now. When it comes to Wall Street banks, they face

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Speaker 1: one of the biggest regulatory overhauls since the financial crisis,

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Speaker 1: the Federal Reserve's top banking regulator, Michael Barr, is proposing

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Speaker 1: lowering the threshold for new capital requirements to one hundred

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Speaker 1: billion dollars in assets from seven hundred billion dollars.

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Speaker 5: These changes would raise market risk capital requirements by correcting

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Speaker 5: for gaps in the current rules. For instance, the proposal

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Speaker 5: would require banks to model market risk at the level

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Speaker 5: of individual trading desks, which will better reflect the observation

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Speaker 5: that correlation across risk can change dramatically in times of stress.

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Speaker 5: The proposal would require banks to use a standardized approach

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Speaker 5: for hard to model risk, which is appropriate in light

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Speaker 5: of the weaknesses that were exposed in the two one

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Speaker 5: thousand and eight financial crisis, when many firms did not

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Speaker 5: have acceptable models for their risks.

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Speaker 1: The fed's top regulator also argues that banks must set

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Speaker 1: aside more of a cash cushion after recent failures. Now, JP,

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Speaker 1: Morgan City, and Wells Fargo all report earnings on Friday.

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Speaker 1: Those were a few of our top stories this morning.

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Speaker 2: The big question really is, Caroline, are you on threads yet?

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Speaker 1: I'm not. Actually, I am not on Instagram. Uh, and

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Speaker 1: so I have not joined threads. Having said that I

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Speaker 1: realized I'd better come on with it and do it today,

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Speaker 1: because of course they've topped one hundred million users. There's

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Speaker 1: a nice piece on the terminal though, about how they're

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Speaker 1: not expected to beat LinkedIn, or at least not for

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Speaker 1: now when it comes to job hunting.

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Speaker 2: Who expected them to beat LinkedIn? I think LinkedIn is

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Speaker 2: very professional. Instagram is very personal, and that's kind of

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Speaker 2: the problem with Threads. I just wish that you could

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Speaker 2: port your Twitter followers over to Threads. If someone could

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Speaker 2: create an app that would let you hack that, that

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Speaker 2: would be perfect.

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Speaker 4: Well.

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Speaker 1: I mean that's also what a lot of the career

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Speaker 1: advisors do seem to be saying, Actually create a separate

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Speaker 1: Threads profile so that it's unique versus your Instagram followers,

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Speaker 1: because otherwise it's not really going to work. And yet,

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Speaker 1: of course Threads apparently, according to everyone who is looking

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Speaker 1: at it in more depth, it's more it's sort of

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Speaker 1: both informational and also entertaining. I think that's immensely difficult

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Speaker 1: to pull off for most people, isn't it.

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Speaker 2: It's making my head spin all the many number of

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Speaker 2: profiles that we're meant to have. But I think the

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Speaker 2: real question is at what point are we going to

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Speaker 2: draw a line in the sand and work out who's

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Speaker 2: winning this race? I think it's too early to say

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Speaker 2: that who's catching up whom?

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Speaker 4: Yeah?

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Speaker 1: No, absolutely, Look, I'm sure that somebody's got to some

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Speaker 1: social media platform has got to die in order to

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Speaker 1: make room. I mean, I've said it's too many inputs

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Speaker 1: for one person to really keep track of properly. I mean,

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Speaker 1: how many social media threads do you really want?

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Speaker 6: Two?

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Speaker 1: Three max?

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Speaker 2: It's just not good for your mental health. But also,

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Speaker 2: are you going to measure its success into terms of

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Speaker 2: a number of followers? Is it going to be in

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Speaker 2: terms of revenue? Is it which Spider Man character looks

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Speaker 2: more powerful when they're tweeting them threading them out? What

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Speaker 2: the burb of threads? Anyway?

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Speaker 1: Yes, still hunting for that one right. So an interesting

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Speaker 1: point for discussion, But we should look ahead to the

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Speaker 1: batch of UK jobs data that's coming out later on

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Speaker 1: this morning. It will be crucial in determining the Bank

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Speaker 1: of England's next policy decision in August. And so joining

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Speaker 1: us now is Jamie Rushblinberg Economics is chief European economist. Jamie.

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Speaker 1: Good to have you with us. So yesterday we were

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Speaker 1: talking about the Recruitment and Employment Confederation's report with KPMG

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Speaker 1: that the hot labor market in the UK is starting

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Speaker 1: to call Do you think that that's going to be

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Speaker 1: reflected in the official numbers that we get out today.

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Speaker 7: Well, I think it's quite encouraging that that report is

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Speaker 7: showing it cooling and it has been ongoing for quite

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Speaker 7: a while now, and even in the official data when

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Speaker 7: you look at vacancy ratios you can see that that's

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Speaker 7: been cooling off for quite a few months now. So

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Speaker 7: I think the labor market has turned. It's going to

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Speaker 7: take some time to be reflected in the measures that

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Speaker 7: Andrew Bailey in and it's colleagues on the Managed Policy

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Speaker 7: Committee care about most, which is core inflation and wage growth.

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Speaker 7: So I don't think we're going to see too much

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Speaker 7: sign yet of that in today's official numbers for wages.

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Speaker 7: But as I say, I do think it's encouraging that

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Speaker 7: those reports which refer to people who are switching jobs,

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Speaker 7: which is one of the leading indicators to the labor market,

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Speaker 7: are starting to cool off for relatively substantially.

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Speaker 2: Because we had positive optimistic words from the Bank of

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Speaker 2: England Governor Andrew Bailey last night. But then we actually

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Speaker 2: had the British Retail Consortium figures on Shot price inflation

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Speaker 2: as well overnight moving in the wrong direction, especially for

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Speaker 2: food price inflation. So what does this mean for the

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Speaker 2: Bank of England's meeting in org. Do you reckon it's

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Speaker 2: going to be a quarter point hiker, half point hike,

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Speaker 2: no hike at all.

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Speaker 7: So I think for a half point hike that have

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Speaker 7: to be seeing things continue to move in the wrong direction,

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Speaker 7: because if you think like fifty basis points at this

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Speaker 7: stage of the hiking cycle, it's kind of it's a

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Speaker 7: bit of a panicked move. It's something that they did

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Speaker 7: because wage growth, corporation things are moving.

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Speaker 8: Up not down.

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Speaker 7: Excuse me, and I think that we're could be wrong,

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Speaker 7: of course, but I think that's relatively unlikely to happen.

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Speaker 7: So I actually think they'll go for twenty five basis points,

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Speaker 7: not fifty. I say, yeah, Shot price inflation moving the

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Speaker 7: wrong direction as well. I think the Bank of England

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Speaker 7: has some confidence though that food price inflation is going

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Speaker 7: to be dropping in the coming months.

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Speaker 1: Okay, what do you make of this point around Jeremy

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Speaker 1: Hunt that he should consider income and wealth taxes. This

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Speaker 1: from another voice that we hear quite regularly on Bloomberg,

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Speaker 1: Sarah Hewin, that this would support the central banks. Blunt

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Speaker 1: All puts it of raising interest rates. And she's not

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Speaker 1: the only one. She's not the only one, Jamie.

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Speaker 2: We've been talking about it on the UK Politics podcast

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Speaker 2: for weeks now. In fact, Caroline's been teasing me that

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Speaker 2: it's my hobby horse, what do you reckon?

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Speaker 7: So I think it's I think it's right. I mean,

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Speaker 7: I think fundamentally fiscal policy has probably been a bit

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Speaker 7: too supportive. But the problem is that it might be right,

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Speaker 7: but it's not going to happen because we have an

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Speaker 7: election coming and no chancellor would raise taxes just ahead

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Speaker 7: of an election. So I think it's a worthy cause.

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Speaker 7: I think you're right to beat the drum, but I

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Speaker 7: think actually it's unlikely. I mean, one other thing is

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Speaker 7: just that fiscal policy monetary policy, the always tends to

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Speaker 7: be really badly coordinated, so that by the time you've

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Speaker 7: actually got fiscal policy working in the direction that you

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Speaker 7: want it to work, it's too late. And I actually

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Speaker 7: think we're probably already it's already too late for fiscal

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Speaker 7: policy to have a meaningful impact. Interest rates to extremely high.

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Speaker 7: They are going to be squeezing the economy, and by

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Speaker 7: the time fiscal policies starts to bite, you're actually going

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Speaker 7: to be depressing the economy, probably not helping the situation.

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Speaker 7: It could actually be counter six s pro difficult. So yeah,

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Speaker 7: we'll see, but I'm not hopeful that it's going to

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Speaker 7: be effective this time out.

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Speaker 2: Jamie. One last very quick question, which number are you

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Speaker 2: watching most closely in the jobs data this morning?

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Speaker 7: Big private sector wage growth is the one that they'll

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Speaker 7: be most focused on, So we're hoping that'll tick down

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Speaker 7: a touch.

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Speaker 1: Jamie Marsh, thank you so much for being with us.

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Speaker 1: Bloomberg's chief European economists, thank you so much for your time.

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Speaker 2: To geopolitics, Turkey has agreed to support Sweden's NATO bid

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Speaker 2: after months of arduous negotiations. It comes on the eve

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Speaker 2: of a critical two day NATO summit. Joining us from

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Speaker 2: there is Bloomberg's europe correspondent Maria Today. Oh, Maria, tell

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Speaker 2: us how this deal came about after this year of

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Speaker 2: contentious rhetoric.

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Speaker 9: Yeah, and yesterday the day did not start well. Just

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Speaker 9: to go back to yesterday morning, I know twenty four

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Speaker 9: hours in geopologics is a long time, but it does marriage.

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Speaker 9: Going back to the morning where President Irdawan really took

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Speaker 9: everyone by surprise, almost signorant that his yes to Sweden

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Speaker 9: and NATO was conditioned talks about the European Union and Turkey,

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Speaker 9: obviously a very difficult at times debate. This took a

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Speaker 9: lot of people by surprise. I spoke with the President

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Speaker 9: of Lithuania who told me quote, this is the first

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Speaker 9: time I hear about this. This was a real, real,

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Speaker 9: real shocker in the morning. So it's not clear it

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Speaker 9: was not a given in any way that this ratification

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Speaker 9: that this go ahead would come from President Irduwan. But

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Speaker 9: of course then you go into the close meetings behind

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Speaker 9: closed doors. Is the magic of diplomacy. And now that

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Speaker 9: you have this deal mediated between the Swedish and the

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Speaker 9: Church by the Native Secretary General. So now that President

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Speaker 9: order one has dropped the veto, it is almost understood

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Speaker 9: that the Turkish parliament will quickly identify this bit and

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Speaker 9: that will be followed by Hungary. Remember the too have

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Speaker 9: to ratify this bid still and then thanks will move

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Speaker 9: very very fast. When I spoke to the Swedish foreig

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Speaker 9: Minister lest week he said, as soon as we get

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Speaker 9: the go ahead from both the partniaments, where will deposit

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Speaker 9: our documents and then it's up to go. We want

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Speaker 9: to see our flag at the NATA headquarters by the

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Speaker 9: end of the month. So this is a timeline today.

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Speaker 9: Obviously yesterday you should have seen the smile on the

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Speaker 9: Swedish Prime minister his face. A lot of reliefs, certainly

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Speaker 9: for this country. There really felt there was the risk

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Speaker 9: of being stuck in no man's lands. But obviously we

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Speaker 9: know now that is not the case.

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Speaker 1: Yeah, absolutely, Look, this re draws the NATO map though,

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Speaker 1: what would it mean.

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Speaker 8: Yeah, enormous. It's a really huge change beyond me to

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Speaker 8: just look at Sweden and even Finland. This is a

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Speaker 8: tetonic shift in their decision when it comes to Russia

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Speaker 8: and any potential military alliance. Remember there were non aligned

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Speaker 8: countries for a very long time. It really changes thing

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Speaker 8: for the Nordics, the Nordic security, the Baltics too. They

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Speaker 8: always said it is crucial as imperative that we have

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Speaker 8: a full NATO block in the area. Obviously it also

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Speaker 8: burns about more spending into the alliance.

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Speaker 9: We know that there is now also a commitment from

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Speaker 9: both countries and new members Finland and Sweden to spend more.

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Speaker 9: They obviously have very modern armies and these are countries

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Speaker 9: that are very connected to Russia im geographically. For NATO,

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Speaker 9: you could argue, well, at this point it's a real

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Speaker 9: winner for the Alliance and Mario.

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Speaker 2: We've had the US President Joe Biden here in London yesterday.

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Speaker 2: How much would his pressure have contributed to this change.

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Speaker 9: Well, I think there's a number of elopments here. Obviously

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Speaker 9: the United States plays a huge role because they are

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Speaker 9: the biggest country, and NATO will also know there's ongoing

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Speaker 9: talks over the sixteens, the fighter jets that Turkey wants

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Speaker 9: from the United States. There was also pressure politically. But

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Speaker 9: even when you look at person nerdo one yesterday, he

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Speaker 9: was the start.

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Speaker 8: Of the show.

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Speaker 9: You should have seen people acting for pictures, self handshakes,

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Speaker 9: and again it goes back to this idea perhaps that Turkey,

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Speaker 9: now after a very difficult economic period, wants to have

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Speaker 9: a more normal relationship, perhaps with allies for president every one.

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Speaker 9: It also changes the narrative around him. He's gone from

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Speaker 9: almost not going to win the election to a very

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Speaker 9: difficult election campaign to winning and then becoming yesterday almost

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Speaker 9: the hero of the day. It was all about President

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Speaker 9: earn One here. So for Turkey you could look at this. Yes,

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Speaker 9: there are obviously tacit agreements that have been agreed with

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Speaker 9: the Swedish and potentially even the sale and the six scenes,

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Speaker 9: but there's obviously also the political narrative that feeds into it,

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Speaker 9: or one of this idea perhaps, But the country now,

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Speaker 9: for the sake of the economy, wants to have more

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Speaker 9: normal ties.

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