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Speaker 1: Good morning. It's Monday, the thirty first of July in London.

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Speaker 1: This is the Blueberg Daybreak You podcast.

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Speaker 2: I'm Caroline Hepka.

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Speaker 3: And I'm Stephen Carroll. Coming up today, the Bank of

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Speaker 3: Japan steps into the bond markets unexpectedly, testing out its

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Speaker 3: new rules for controlling yields.

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Speaker 1: The latest Chinese economic data shows an economy under pressure

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Speaker 1: that Beijing stops short of direct help for consumers.

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Speaker 3: And the bleak economic picture facing Britain's twenty somethings. They've

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Speaker 3: got higher housing costs, weakening job prospects and even bigger

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Speaker 3: student debt.

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Speaker 4: Let's start with a roundup of our top stories.

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Speaker 1: The Bank of Japan has stepped into the bond markets

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Speaker 1: with unscheduled purchases to bring down yields, which hit their

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Speaker 1: highest level in nine years. The central bank bought bonds

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Speaker 1: worth two point one billion dollars off the ten year

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Speaker 1: yield rows above zero point six percent. It comes after

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Speaker 1: the BOJ adjusted its policy on Friday to allow the

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Speaker 1: benchmark rate to climb as high as one percent. Master

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Speaker 1: Cards Asia Pacific chief economist David Mann sees it as

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Speaker 1: a slow move to leave yield curve control.

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Speaker 5: As we saw from the moves today that they're looking

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Speaker 5: to try and control the ascent of JGB yields because

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Speaker 5: they know that the market clearing rate, knowing where inflation

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Speaker 5: is it's above us inflation now would be much higher.

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Speaker 5: The challenges on exiting these sorts of policies in a

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Speaker 5: relatively orderly.

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Speaker 1: Fashion master cards David Mann, adding that if the Bank

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Speaker 1: of Japan succeeds, it will have a big pay off

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Speaker 1: for the yen's stability.

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Speaker 3: The latest economic data from China shows further weakness and

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Speaker 3: manufacturing and a slow down in service as activity, but

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Speaker 3: investors are paying little heeds. Bloomberg's Brian Curtis reports from Hong.

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Speaker 6: Kong, China's manufacturing shrank for a fourth month in July,

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Speaker 6: suggesting the recovery is weakening. Non manufacturing activity expanded more

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Speaker 6: slowly than expected, the official PMI coming in at forty

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Speaker 6: nine point three. That was up from June and in

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Speaker 6: line with estimates. Many of the sub indexes contracted now.

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Speaker 6: The non manufacturing gage slipped to fifty one point five

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Speaker 6: from fifty three point two in June. Despite the weakness,

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Speaker 6: stocks rallied as investors essentially front run more stimulus in

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Speaker 6: Hong Kong Brian Curtis, Bloomberg Daybreak.

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Speaker 1: Europe now Versus are preparing for further volatility in the

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Speaker 1: week ahead, with rate decisions to come from Australia and

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Speaker 1: the UK. With global central banks shifting to data dependent

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Speaker 1: rate pods, the central bank, with one of the most

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Speaker 1: unenviable tasks remains the Bank of England. Thursday's decision remains

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Speaker 1: on a knife edge, with money markets pricing and economists

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Speaker 1: surveys are tilting towards a quarter point rate hike, but

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Speaker 1: not ruling out a surprise larger interest rate hike.

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Speaker 3: Minneapolis ED president Near Kashkari says the US inflation outlook

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Speaker 3: is quite positive, though rate hikes will probably result in

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Speaker 3: job losses and slower growth. Speaking to CBS cash carries,

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Speaker 3: the base case is that the US avoids a recession.

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Speaker 4: But employment may quote tick up to as high as

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Speaker 4: four percent.

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Speaker 7: Overall, I think that the inflation outlook is quite positive,

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Speaker 7: that it should be slowly diminishing from here. But again

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Speaker 7: we've just continued to be surprised. But the dynamics of

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Speaker 7: this reopening economy and so we can't prejudge it. We

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Speaker 7: have to let the data actually guide.

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Speaker 3: Us no Kashkarri speaking there to CBS. Meanwhile, Vanguard's tief

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Speaker 3: economist Joe Davis isn't buying talk of a soft landing,

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Speaker 3: saying inflation will remain above two percent for some time.

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Speaker 1: The ECB president Christine the Guard says that European policy

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Speaker 1: makers could hike interest rates again even after a pause.

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Speaker 1: Legarde told La Figaro newspaper that at the next meeting

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Speaker 1: in September quote, there could be a further hike of

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Speaker 1: the policy rate, or perhaps a pause. She went on

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Speaker 1: to say a pause whenever it occurs in September or

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Speaker 1: later would not necessarily be definitive. The ECB president went

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Speaker 1: on to insist the bank would be data dependent the

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Speaker 1: July inflation figures for the Euro Area later, which are

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Speaker 1: expected to show a slowdown and a continued slow down

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Speaker 1: in the pace of price rises.

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Speaker 3: Here in the UK, ANDPS have concerned about the government's

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Speaker 3: plan to finance DFS two nuclear reactors at Sizewell and Suffolk.

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Speaker 3: Blooms Bloomberg's U and Parts reports it's.

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Speaker 8: The UK's first new nuclear power station in more than

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Speaker 8: thirty years, but MPs on the Common Science, Innovation and

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Speaker 8: Technology Committee say, the financing model for the size world

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Speaker 8: sea plants in Suffolk could expose taxpayers to cost over

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Speaker 8: ons and delays. The government's trying to attract private investors

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Speaker 8: through a mechanism that shares the risk of construction costs

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Speaker 8: with the public, but the report says that lead consumers

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Speaker 8: unfairly exposed the project by France's EDF who's already over

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Speaker 8: budget and taking longer than planned. The UK has a

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Speaker 8: target of building twenty four gigawatts of nuclear capacity by

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Speaker 8: twenty fifty, a huge ambition that is already being met

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Speaker 8: with skepticism in London. I'm une Pots Bloomberg day Break Europe.

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Speaker 1: Those are a few of today's top stories. En for you.

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Speaker 1: I must say, I don't envy twenty something is coming

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Speaker 1: into the jobs market right now. Certainly not if you

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Speaker 1: read the latest piece on the bloom Big Terminal about

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Speaker 1: just the bleak economic outlook for people coming into the

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Speaker 1: jobs market after the pandemic.

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Speaker 3: Yeah, difficult on a whole number of fronts. So first

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Speaker 3: of all, you've got, of course, the job market are

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Speaker 3: now starting to tighten, so we're seeing vacancies fall in

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Speaker 3: many areas as well, but just as average salary growth

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Speaker 3: is now slumping as price rise is picked up, so

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Speaker 3: real term pay cuts. Fiscal drag means people are paying

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Speaker 3: more tax because those thresholds aren't moving. And it also

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Speaker 3: of course is having an impact on those who are

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Speaker 3: now paying more for their education. The average forecast of

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Speaker 3: death for students in England who start their course started

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Speaker 3: their course last year is over forty five pounds, compared

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Speaker 3: that to fifteen thousand for those who started their course

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Speaker 3: in two thousand and six.

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Speaker 1: Yeah, I think that's pretty staggery. And we have covered

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Speaker 1: a number of times, of course, the difficulty of people

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Speaker 1: getting onto the property ladder. I mean the ratio for

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Speaker 1: earnings to a property value in London it's close to

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Speaker 1: nine times. It's pretty unbelievable. So yeah, I think I

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Speaker 1: just wonder when does this become a real political force.

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Speaker 1: You know, we understand that this is these are the

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Speaker 1: issues facing younger people. I don't know whether the next

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Speaker 1: election will be that moment or not.

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Speaker 3: Yeah, And will will people turn out to vote on

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Speaker 3: these issues as well or will they just think that

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Speaker 3: this is the situation that is, you know, beyond help

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Speaker 3: from political leaders as well. I mean the question of

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Speaker 3: engagement is going to be key coming into that next

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Speaker 3: election as well, and something you can be sure that

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Speaker 3: both parties, both main parties will be watching very closely too,

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Speaker 3: to see if they can reflect those concerns that young

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Speaker 3: people are facing.

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Speaker 1: Yeah, no, absolutely, I do think it'll be one to

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Speaker 1: think about that story on the Blueberg terminal this morning.

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Speaker 1: Let's also turn our attention though to what's been happening

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Speaker 1: in markets. Of course, the Bank of Japan waded in

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Speaker 1: this Monday morning announcing unscheduled bombuying as a ten year

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Speaker 1: yield climb to a nine year high near zero point

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Speaker 1: six percent. Traders face another important macro because of course,

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Speaker 1: after the FED and the ECB and those BOJ decisions

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Speaker 1: last week, we get the Bank of England and the

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Speaker 1: RBA to come. So joining us now has Bienberg's executive

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Speaker 1: editor for Asian Markets, Paul Dobson. Great to have you

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Speaker 1: back with us, Paul. How significant is it then, the

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Speaker 1: BOJ intervention today after only announcing that tweak to yield

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Speaker 1: curve control last week.

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Speaker 9: Yeah, hi there, Caroline, and so yeah, as you say,

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Speaker 9: the BOJ not giving us much time to absorb or

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Speaker 9: digest their new policy before they're already sort of acting

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Speaker 9: on it. What they'd said is that they're prepared to

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Speaker 9: tolerate yields as high as point one percent, but that

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Speaker 9: would be the new hard kind of line for the

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Speaker 9: ten year yield, whereas previously it had been zero point

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Speaker 9: five percent. So on Friday already that saw those ten

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Speaker 9: year yields rise above the previous kind of harder cap,

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Speaker 9: and they carried on going this morning until we had

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Speaker 9: this announcement from the BOJ of the unscre schedule purchases

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Speaker 9: that just around the point six point six one percent

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Speaker 9: level around there. And so you know, kind of like

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Speaker 9: that tells us something pretty striking, which is at the BOJ,

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Speaker 9: while it may be willing to tolerate yields's highest point

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Speaker 9: one percent over time, is not in any hurry to

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Speaker 9: get there, and certainly doesn't want to see the market

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Speaker 9: get there too quickly either. It wants to avoid any

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Speaker 9: sort of disruptive moves in the in the bond market,

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Speaker 9: and hence doing these purchases to kind of smooth that trajectory.

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Speaker 9: If anything, I think the market also, if you will

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Speaker 9: use fair value somewhere below point one percent in any case,

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Speaker 9: so the BJ is probably hoping it's ultimate yel cap

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Speaker 9: doesn't get tested anytime soon. But on the other hand,

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Speaker 9: you know, there's plenty of bears out there willing to

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Speaker 9: bet that you're are going to go higher from here

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Speaker 9: in Japan. So to bring it all back together to

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Speaker 9: answer your question, pretty significant in the messaging that it gives,

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Speaker 9: even if you know, and in the timing of the

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Speaker 9: announcement so swiftly after that first decision, and so quite

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Speaker 9: a lot of information in there from the boj WET.

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Speaker 3: Of course, we're looking ahead to more central bank decisions

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Speaker 3: later this week. We've got the RBA and the Bank

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Speaker 3: of England to come. We had this peak and FX

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Speaker 3: volatility last week as well. Should we be watching out for?

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Speaker 3: What should we be watching out for in the days

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Speaker 3: to come?

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Speaker 9: Yeah, I think both of them are quite interesting central

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Speaker 9: bank meetings as well. Right the RBA has got a

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Speaker 9: little bit of a split there where the market is

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Speaker 9: not pricing in a hike anymore after some weaker economic

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Speaker 9: data recently, but economists who've been surveyed are still looking

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Speaker 9: for the r baa to do another hike this week

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Speaker 9: and maybe another one after that as well. As we're

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Speaker 9: coming to the end of the covent current governor's term,

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Speaker 9: you know, make sure that that inflation demon is well

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Speaker 9: and truly vanquished so that the new governor can come

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Speaker 9: in with a clean slate. So that could be an

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Speaker 9: interesting one. If they do hike, it could be bullish

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Speaker 9: for the Australian dollars still if they if they, if

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Speaker 9: they refrained them, there may be not so much. And

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Speaker 9: then of course the BOE everybody expects to hike. It's

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Speaker 9: more a question of how hard they're going to go,

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Speaker 9: and again that could determine the sort of moves that

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Speaker 9: we see in the pound later on this week.

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Speaker 1: Okay, a last thought, it's a bit technical, but I

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Speaker 1: do want your view on global yield curves steepening last week.

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Speaker 1: Does it basically mean that bond markets think the central

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Speaker 1: banks are near the end of their interest rate hikes?

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Speaker 1: Is that the translation?

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Speaker 9: I'd say that's a fair interpretation of it, yes, or

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Speaker 9: if not, that you know, maybe also looking for rates

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Speaker 9: to stay higher for longer. So what we saw is

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Speaker 9: as a pickup really in the longer term yields, while

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Speaker 9: short term yields remained pretty flat there and so you know,

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Speaker 9: rather than a big dip in the shorter term yields

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Speaker 9: that would suggest that we're getting ready for the central

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Speaker 9: banks to start cutting again immediately. But remember, you know,

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Speaker 9: especially in the US, the Yeld curve is still very

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Speaker 9: deeply inverted. And when you really want to be worried,

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Speaker 9: based on history at least about the possibility of a

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Speaker 9: recession becoming more imminent, is when we really get a

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Speaker 9: reinversion of the Yelk curve, so when the tenure yield

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Speaker 9: rises back above the two years, so that if we

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Speaker 9: start to accelerate and move into that sort of a scenarigo,

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Speaker 9: then that becomes a whole different environment and a much

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Speaker 9: more worrisome one as well.

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Speaker 4: Okay, Paul, thanks so much.

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Speaker 3: Paul Dobs and our executive editor for Asian Markets joining

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Speaker 3: us there. Up next is Greener Dream and Trump's legal Machine.

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Speaker 8: Now the paper review on blue Bird Daybreak Europe, The

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Speaker 8: news you need to know from today's.

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Speaker 1: Papers and Garrein Jones Sin Studio to look through the

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Speaker 1: newspaper headlines, and let's start with the Fteago Morning lea

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Speaker 1: UK government cuts cost of polluting in latest anti green move.

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Speaker 2: Caroline, Yes, indeed, and this is the FT's front page

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Speaker 2: story today really outlining what it says is the latest

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Speaker 2: signs that the Conservative Party is backsliding on its climate

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Speaker 2: agenda and says the government is making it cheaper for

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Speaker 2: industry to pollute by watering down reforms, and they said

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Speaker 2: this is in comparison to the European Union. They point

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Speaker 2: to a quiet announcement that was actually made last week

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Speaker 2: by the government to change the carbon trading scheme which

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Speaker 2: now offers more allowances than expected to polluting industries. So

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Speaker 2: what this means is it basically is watering down in

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Speaker 2: centers for the industry to reduce emissions. According to the newspaper,

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Speaker 2: now the move is pushing carbon prices to trade at

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Speaker 2: a steep discount compared with those in Europe, and this

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Speaker 2: is really sparking warnings that this will undermine green investment

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Speaker 2: and also increase the use of fossil fuels. So this

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Speaker 2: is something that the FTR leaning to. Meanwhile, Wishi Sunak

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Speaker 2: is actually off to Scotland today and it's all about energy,

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Speaker 2: to The Times, reporting out the Prime Minister will use

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Speaker 2: the trip to announce the government will issue one hundred

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Speaker 2: licenses for companies that want to extract oil and gas

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Speaker 2: from the North Sea, but Labour's point of view is

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Speaker 2: put across in the Guardian newspaper. Labor is hoping to

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Speaker 2: win seats up in Scotland at the next general election,

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Speaker 2: tip to be next year, and is pledging to ban

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Speaker 2: drilling for new oil and gas projects in the North Sea.

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Speaker 3: Yeah. Interesting, we've had that kind of confirmation to the

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Speaker 3: government now that time story about hundreds of new oil

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Speaker 3: and gas licenses to be granted in the UK. According

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Speaker 3: to a government statement, Northeast Scotland and the Humber picked

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Speaker 3: US locations for two new carbon capture usage and storage clusters,

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Speaker 3: something that government says could create optics.

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Speaker 4: Have we thousand jobs?

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Speaker 2: Yes, exactly, Stephen. But we also have to remember that

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Speaker 2: extinction rebellion have been a very big presence, haven't they

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Speaker 2: of late going to sporting events, and they're saying that

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Speaker 2: this move is just greenwashing aby by the government. So

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Speaker 2: there's a lot of pressure from each side happening at

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Speaker 2: the moment.

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Speaker 3: Okay, let's go to the Wall Street Journal nextly, and

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Speaker 3: Trump political committee spending more than forty million dollars on legal.

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Speaker 2: Not cheap, is it?

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Speaker 8: So?

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Speaker 2: Trump's Save America political Action Committee has reportedly spent this

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Speaker 2: amount of money in legal fees this year alone forty

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Speaker 2: million dollars and spent protecting the former president, his friends,

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Speaker 2: his allies from multiple investigations he currently faces. So the

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Speaker 2: former president has been indicted in New York in a

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Speaker 2: hush money case and in Florida for allegedly mishandling classified documents.

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Speaker 2: He's expected to face further charges related to the twenty

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Speaker 2: twenty two election and that will be both in Georgia

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Speaker 2: and in Washington. And as a Republican front runner, he

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Speaker 2: is vowing to stay in the race even if he

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Speaker 2: is convicted. Rival Republican candidates have actually hit out at

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Speaker 2: Donald Trump's legal spending, with the campaign of his main challenger,

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Speaker 2: Ron Desantas saying that, you know, the forty million legal

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Speaker 2: fees is more money than tranks than Trump's campaign has

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Speaker 2: she raised, which has been thirty six million dollars. So

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Speaker 2: here we are, This is where we are with Donald

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Speaker 2: Trump's investigations that he is facing and how much it's

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Speaker 2: really costing him at the moment.

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Speaker 6: Yeah.

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Speaker 1: Absolutely so that on a film, President Donald Trump, what

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Speaker 1: about the telegraph? Just to end the newspaper segment, the

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Speaker 1: raw mail is morning that old stamps must be posted

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Speaker 1: by the last collection on deadline day to avoid charges.

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Speaker 1: Is anyone still posting a lot of these days?

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Speaker 2: You know what I did say earlier? I got a

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Speaker 2: postcard and it was so lovely that I think I

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Speaker 2: might send out some Christmas cards one day. So today's

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Speaker 2: the last day to use stamps which only show the

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Speaker 2: Queen's head and don't have a barcode, so they won't

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Speaker 2: be recognized from tomorrow, Caroline. So if you post, if

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Speaker 2: you get a letter through the post tomorrow with the

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Speaker 2: Queen's head on it, you might have to go to

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Speaker 2: the post office and actually pay for your mail, which

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Speaker 2: is never which is never too inspiring.

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Speaker 4: No, so do you think about that?

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Speaker 2: Otherwise, if you're like myself and you don't post, let's

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Speaker 2: but you bought Christmas stamps, you know, all those months ago?

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Speaker 2: You can still use those.

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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 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 com.

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Speaker 1: Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: I'm Caroline Hepka and.

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Speaker 4: I'm Stephen Carroll.

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Speaker 3: Join us again tomorrow morning for all the news you

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Speaker 3: need to start your day right here on Bloomberg Daybreak

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Speaker 3: Europe