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

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Speaker 1: Daybak You a podcast available every morning on Apple, Spotify

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Speaker 1: or wherever you listen. It's Thursday, the twelfth of September

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Speaker 1: in London. I'm Caroline Hepga. Coming up today the core issue.

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Speaker 1: Traders and economists scrap expectations of a half point rate

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Speaker 1: cup from the FED after core US inflation ticks up

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Speaker 1: round two in doubt. Donald Trump insists that he won

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Speaker 1: his debate with Kamala Harris, but says he's unsure about

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Speaker 1: a rematch, and China crackdown. Investment bankers are in the

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Speaker 1: site of Beijing. Staff at state owned brokerages are told

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Speaker 1: to hand over their passports. Let's start with a roundup

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Speaker 1: of our top stories. Swaps traders are fully pricing in

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Speaker 1: a twenty five basis point FED cut for next week's meeting.

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Speaker 1: The market moves come as August core inflation in the

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Speaker 1: US came in hotter than expected, with the GAUGEO point

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Speaker 1: three percent higher than in July. JP Morgan Asset Management's

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Speaker 1: chief Global strategist, David Kelly says it shows there's no

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Speaker 1: need for drastic action.

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Speaker 2: I think the FED must be aware that if they

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Speaker 2: go aggressive here, they're in danger of undermining consumer confidence

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Speaker 2: and honesty. The economy is doing exactly what they wanted

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Speaker 2: to do. It is settling into a software expansion, a

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Speaker 2: soler expansion. That's what they want, so they only have

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Speaker 2: to gradually return to normal and interest rates.

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Speaker 1: Kelly and other market analysts are calling an end to

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Speaker 1: weeks of speculation about a larger reduction being on the cards.

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Speaker 1: City economists scrap their forecast for an outsized US rate reduction,

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Speaker 1: though Goldman's David Solomon said that there's still a case

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Speaker 1: for a larger cut. Meanwhile, the ECB will probably cut

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Speaker 1: its key rate by twenty five basis points to three

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Speaker 1: and a half percent at its meeting later today. That's

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Speaker 1: according to all sixty eight economists surveyed by Bloomberg on

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Speaker 1: the decision. Bloomberg Economic says that members may all also

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Speaker 1: revised down their GDP and inflation forecasts for Europe. Markets

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Speaker 1: are betting that there will be at least two moves

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Speaker 1: this year, especially with the Federal Reserve poised to begin

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Speaker 1: loosening US monetary policy next week. Donald Trump says that

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Speaker 1: he's not inclined to debate Democratic rival Kamala Harris again

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Speaker 1: following Tuesday evening's contests. The Republican nominee, who initially suggested

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Speaker 1: several additional matchups with the Vice president, said that he

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Speaker 1: won the debate quote by a lot, but speaking after

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Speaker 1: his performance, the former president left the door open for

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Speaker 1: future events.

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Speaker 3: When a fighter is a band fight, gets knocked out

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Speaker 3: or loses to fight the first thing, he says this,

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Speaker 3: we want to rematch. When a fighter is a band fight,

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Speaker 3: gets knocked out or loses to fight the first thing,

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Speaker 3: he says this, we want to rematch.

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Speaker 1: Donald Trump. There a month ago, Trump floated three debates

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Speaker 1: with Harris, which included the one already held with ABC

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Speaker 1: News and further debates to be hosted by Fox News

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Speaker 1: and NBC News Now. Immediately following that event, the Harris

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Speaker 1: campaign said that the vice president was ready for a

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Speaker 1: second debate to China and a widening crackdown. At least

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Speaker 1: three top investment bankers from different securities firms have been

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Speaker 1: detained by Chinese authorities since August. Now, Bloomberg understands that

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Speaker 1: several state back brokerages are asking their employees to hand

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Speaker 1: in their passports and seek permission for travel following private

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Speaker 1: guidance from Chinese regulators. Are Chief North Asia correspondent Stephen

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Speaker 1: Engel says the incidents are just the latest under present

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Speaker 1: Shijingping's long running common prosperity campaign.

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Speaker 4: There's been multiple stresses, but this is the latest. We're

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Speaker 4: hearing from sources that investment bankers essentially in the crosshairs

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Speaker 4: right now. At least three top investment bankers from different

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Speaker 4: securities firms have been detained by authorities. It's one of them,

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Speaker 4: I used to oversee deal making at Hiitong Securities, allegedly

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Speaker 4: fled the country about two weeks ago. Has since been

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Speaker 4: arrested and repatriated.

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Speaker 1: Bloomberg Stephen Engel, speaking there so, also say some employees

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Speaker 1: were told that regulators are scrutinizing initial public offerings and

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Speaker 1: other capital raising activities. China's one point seven trillion dollar

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Speaker 1: brokerage industry and domestic capital markets activities have already slowed sharply,

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Speaker 1: while the broader economy has sputted. Commertz Bank is preparing

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Speaker 1: its defense for a possible UniCredit takeover. The German bank,

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Speaker 1: which was recently surprised by unicredits disclosure of a nine

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Speaker 1: percent stake is expected to try and build political backing

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Speaker 1: for a rejection of the approach. UniCredit CEO Andrea Orsel

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Speaker 1: has been eyeing Commertz Bank as a potential target. He's

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Speaker 1: spent three years looking for a transformative deal for Italy's UniCredit.

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Speaker 1: All of this based on Bloomberg interviews with seven people

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Speaker 1: familiar with the process. Now, if the merger is successful,

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Speaker 1: or Sell will oversee the biggest bank by revenue in Germany.

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Speaker 1: And Vidia's Jensen Wong says that his customers are more

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Speaker 1: frustrated than they used to be. The boss of the

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Speaker 1: AI megacap told a tech conference that the limited supply

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Speaker 1: of Vidia's latest chips was causing tensions.

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Speaker 5: Delivery of our components and our technology and our infrastructure

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Speaker 5: and software is really emotional for people because it directly

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Speaker 5: effects their revenues, It directly effects their competitiveness, and so

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Speaker 5: we probably have more emotional customers today and deserve itly

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Speaker 5: so and if we could fulfill everybody's need, then the

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Speaker 5: emotion would go away. But it's very emotional. It's really tense.

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Speaker 5: We've got a lot of responsibility on our shoulder and

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Speaker 5: we're trying to do the best we can.

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Speaker 1: Jenson Wang Well, When the Nvidia CEO is asked if

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Speaker 1: the massive spends on AI were proving and providing a return,

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Speaker 1: he said that companies have no choice other than embrace

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Speaker 1: accelerated computing. The chipmaker's shares have more than doubled this year,

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Speaker 1: following a two hundred and thirty nine percent run up

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Speaker 1: in twenty twenty three. In a moment, we're going to

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Speaker 1: discuss that ECB rate decision after the US inflation data

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Speaker 1: that we got out yesterday that shifted the FED rate

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Speaker 1: cup bets in the market. Plus also a special report

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Speaker 1: on UK prisons that I want to bring to you.

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Speaker 1: But first, let's talk about one hundred hour work weeks.

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Speaker 1: Bank of America and JP Morgan Chase are rolling out

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Speaker 1: measures that may ease junior bankers workloads amid complaints across

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Speaker 1: the industry that weekly hours are increasingly creeping up past

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Speaker 1: that hundred hour number. JP Morgan, according to Wall Street Journal,

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Speaker 1: is going to try to limit the work week to

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Speaker 1: eighty hours. Bank of America also has a new tool

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Speaker 1: to try to track junior bankers that kind of diary

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Speaker 1: about how they spend their time exactly on the Bloomberg

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Speaker 1: tem You can read much more about it if it

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Speaker 1: sounds familiar. While it is, I mean, Bloomberg wrote a

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Speaker 1: story on this in June about the stress mounting for

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Speaker 1: junior bankers and also staffers, which is the kind of

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Speaker 1: wrung just above the junior bankers at that time. That

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Speaker 1: was because banks were coming out of a deal slump.

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Speaker 1: They've got lower head count, but still a lot of

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Speaker 1: ambitions to try to kind of get new deals in

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Speaker 1: the door. And there had been, of course, really tragically

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Speaker 1: two junior bankers who died in May, and so a

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Speaker 1: big debate across the industry about whether workloads are just

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Speaker 1: too often too unhealthy for people. So really interesting that

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Speaker 1: two banks on Wall Street coming out with these new

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Speaker 1: measures now in September to try to control these have

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Speaker 1: better oversight of the hours of junior bankers. Anyway, you

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Speaker 1: can read that story on the terminal this morning. Now,

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Speaker 1: the bond market has ended its flirtation with the idea

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Speaker 1: that the Federal Reserve would cut interest rates by half

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Speaker 1: point this month. Core US inflation increased by zero point

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Speaker 1: three percent in August from the prior month, and the

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Speaker 1: three month annualized rate we learned did also hot up

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Speaker 1: two to two point one percent. All of this ahead

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Speaker 1: of the ECB meeting today. Let's bring in Bloomberg opinion

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Speaker 1: columnist Daniel Moss for more on this story. Good morning, Dan,

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Speaker 1: great to speak to you. And markets have been grappling

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Speaker 1: with the size of the Fed's potential rate cut really

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Speaker 1: for months. What is the thinking now that we have

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Speaker 1: that CPI inflation report out and the Fed path ahead.

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Speaker 6: Markets are indicating there is a significantly diminished prospect of

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Speaker 6: a half point cut next week. There'll still be a cut,

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Speaker 6: but traders reckon it will be just a quarter point.

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Speaker 6: I was never really convinced of the case for a

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Speaker 6: half point historically absent a crisis. There's no crisis here.

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Speaker 6: The Fed has a tendency to begin in modest increments,

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Speaker 6: see how things go, and then they can accelerate from here.

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Speaker 6: So I always took that with a bit at the

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Speaker 6: half point narrative, with a little dose of salt.

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Speaker 7: Yeah.

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Speaker 1: Absolutely, And also in terms of the ECB, though they've

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Speaker 1: already cut cut in June, another cut today is being

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Speaker 1: priced in. I mean there was no talk of fifty

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Speaker 1: for Europe. Really. What happens after that, though, is a

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Speaker 1: lot less clear what's your view on that.

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Speaker 6: Well, it may be clearer today than it was in June. Now,

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Speaker 6: Christine Legarde has emphasized at a number of press conferences

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Speaker 6: over the past twelve months that she's not really in

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Speaker 6: the forward guidance business anymore. And you sort of got

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Speaker 6: the impression after the June cut that they'd convinced themselves

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Speaker 6: they had to do it, so they did it, but

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Speaker 6: maybe they wished they hadn't been, you know, quite so soon.

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Speaker 6: Now a cut from the ECB is more in the

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Speaker 6: mainstream of where central banks are going and have indicated

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Speaker 6: they will go. She may feel a bit more confident

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Speaker 6: now in projecting additional reductions. Of course, there'll be the

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Speaker 6: usual thing, like you know, where sovereign and you know,

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Speaker 6: we don't just follow the FED and all.

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Speaker 7: The rest of it.

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Speaker 6: But the reality is the trend is the same. So

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Speaker 6: let's see, we may get a bit more from her

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Speaker 6: today on what the future looks like than was the

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Speaker 6: case in June.

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Speaker 1: Now, you've written many pieces there about how you know

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Speaker 1: we're all on planet Federal Reserve, and indeed you wrote

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Speaker 1: a piece about the dollar that I think is also

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Speaker 1: quite relevant today. Very skeptical about you on bulls that,

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Speaker 1: you know, the strength of the dollar really remains, even

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Speaker 1: though there has been a big play into Asian FX markets.

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Speaker 6: Okay, So when I wrote that piece last week, what

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Speaker 6: I was wrestling with was, look, China's currency, which had

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Speaker 6: been fairly beaten up, had erased its losses for the

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Speaker 6: entire previous twelve months. Okay, But at the same time,

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Speaker 6: the news on China's economy has gotten progressively worse. And

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Speaker 6: no one's talking about the People's Bank of China hiking

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Speaker 6: interest rates. They've been talking for some time about the opposite,

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Speaker 6: And indeed, the PBOC has trimmed its main rate cautiously

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Speaker 6: in tiny increments over the past twelve to eighteen months.

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Speaker 6: So all of a sudden, why is the one looking

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Speaker 6: relatively you know, perkish. The answer is, it's nothing to

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Speaker 6: do with China. It's to do with the FED. And

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Speaker 6: if you look at the big moves in the Chinese

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Speaker 6: yuan towards strengthening, they basically followed the July FOMC press

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Speaker 6: conference and the Jackson Hole speech by J.

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Speaker 8: Powell.

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Speaker 6: Now you can say to yourself, well, sure, that just

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Speaker 6: puts China's currency in the pack with everyone else except

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Speaker 6: the dollar is the currency of China's number one strategic competitor.

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Speaker 6: So all the stuff we've had rammed down our throats

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Speaker 6: in the past three decades about China's rise and d

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Speaker 6: da da da da, Well, something as core and as

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Speaker 6: precious as your currency policy is to an unhealthy degree

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Speaker 6: dictated by your rival. We hope doesn't one day become

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Speaker 6: an open enemy. But you see where I'm going with this.

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Speaker 6: There's a contradiction there. How can China really be comfortable

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Speaker 6: with that?

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Speaker 1: Yeah? And so in terms of the thinking, then if

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Speaker 1: we flow from the yuan and the kind of issue

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Speaker 1: with China into the yen that also has been making

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Speaker 1: big moves more recently in the last couple of days.

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Speaker 6: Yes, it's very interesting. Now the en is having an

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Speaker 6: epic rally this quarter. It's on course for its biggest

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Speaker 6: three month gain in years now. If I'm reading the

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Speaker 6: data correctly, I'll just hedge myself. If I'm reading it correctly,

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Speaker 6: it could be the biggest quarterly gain in more than

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Speaker 6: a decade. So something profound is going on here. It's

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Speaker 6: not just the FED. This is what's interesting. It's not

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Speaker 6: just the FED. The FED is a big player in

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Speaker 6: this move. But just as j Powell has been talking

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Speaker 6: more dubbishly, Kazuo Waider, his counterpart of the Bank of Japan,

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Speaker 6: has been talking more hawkishly. So the gap in interest

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Speaker 6: rates between the two of them is coming under pressure

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Speaker 6: from both ends. And I would also add, Carolyn, there's

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Speaker 6: a bit of an unsung almost hero in this, and

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Speaker 6: that is the Ministry of Finance and its approach to

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Speaker 6: currency intervention. Now, it would not have generated a rally,

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Speaker 6: if anything like the degree we've seen without Power and

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Speaker 6: without Waiter, but they've picked strategic moments to intervene. They've

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Speaker 6: put a floor under the currency at pretty sensitive moments.

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Speaker 6: And you know the lesson here is, you know, governments

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Speaker 6: still do matter. So in the early two thousand's, you know,

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Speaker 6: I was working where you are in London running the

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Speaker 6: currency desk, and everyone said intervention doesn't work, it's destined

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Speaker 6: to fail. Well, maybe there are instances where it can

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Speaker 6: be an ingredient in a successful story.

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Speaker 1: Okay, Dan, thank you so much for being with me

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Speaker 1: this morning. Bloomberg Opinion coluist Daniel Moss. Always great to

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Speaker 1: speak to you now too. One of our big news

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Speaker 1: stories on the terminal this morning, the UK's overcrowded prisons

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Speaker 1: have forced the government into an early release scheme which

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Speaker 1: has been in the news. On Tuesday one, seven hundred

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Speaker 1: prisoners were free to reduce pressure on the system in

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Speaker 1: a huge gamble by Keir Starmer's new government. Join us

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Speaker 1: now to discuss this. It is Blomberg's UK Economy reported

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Speaker 1: Tom Reese, who's been investigating this. Tom. This story has

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Speaker 1: been a huge news story in the UK for weeks.

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Speaker 1: But I want you just to rewind and explain why

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Speaker 1: UK prisons are actually so full.

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Speaker 8: So it really all dates back to the ninety nighties

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Speaker 8: when the Tory Home Secretary at the time, Michael Howard,

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Speaker 8: made this famous speech where he declares prison works, and

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Speaker 8: that turns out to be a turning point for policy

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Speaker 8: in the UK under governments of all stripes. You know.

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Speaker 8: Since since then, you know, the UK has seen the

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Speaker 8: biggest increase in its incarceration rate in Western Europe. So

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Speaker 8: we've seen sentences, you know, custodial sentences double in the

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Speaker 8: last twenty years. So that's just ramped up the prison population,

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Speaker 8: you know, even though it's not that more crime is

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Speaker 8: being committed, it's just we're sending people to prison for longer,

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Speaker 8: and then that's Clyde restraints and the whole judicial system

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Speaker 8: from COVID and austerity. So the numbers in prison on

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Speaker 8: remand so those waiting for the trial has skyrocketed because

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Speaker 8: of the court batlogs. So when you put it all together,

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Speaker 8: it's just led to the actual numbers of people in

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Speaker 8: prison doubling since the nineties. And we have a very

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Speaker 8: old and you know, outdated prisoner state here which is

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Speaker 8: can cope.

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Speaker 1: Yeah, absolutely, we're heading towards one hundred thousand prisoners. There

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Speaker 1: has been a clear change though from this new government

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Speaker 1: when it comes to law and order issues as a result,

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Speaker 1: I mean, for one, the riots this summer, but also

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Speaker 1: because of their philosophy on rehabilitation. Releasing prisoners though is

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Speaker 1: obviously politically dangerous for Kirs Starmer explain how though.

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Speaker 8: So the labor governor are in a real barand on

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Speaker 8: this the simplest and most cost effective way of solving

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Speaker 8: this problem is by releasing prisoners early and reducing the

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Speaker 8: length of casodial censuses. Now, guess what they probably don't

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Speaker 8: like that Rolling suggests that the vast majority of the

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Speaker 8: probably actually think the prison censors despite doubling in the

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Speaker 8: last twenty years are not harsh enough. So the government

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Speaker 8: is building more prison places. You know, the last government

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Speaker 8: had a plan for another twenty thousand prison places, but

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Speaker 8: that works laid and MOJA projections expect, you know, the

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Speaker 8: prison population to soar even higher. So it's quite hard

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Speaker 8: to see the kind of politically a shoote way of

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Speaker 8: getting out of this.

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Speaker 2: Yeah.

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Speaker 1: Absolutely, And especially when you know you listen to commentations

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Speaker 1: or form of prison governors for example, who say, look

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Speaker 1: that the reoffending rate of people who leave prison is

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Speaker 1: twenty five to thirty percent in the UK, So you know,

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Speaker 1: if you release them a few months earlier or later,

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Speaker 1: that that reoffending rate sort of stands. Then the solution

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Speaker 1: for this, can this be solved by more money? And

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Speaker 1: there's also a staffing crisis in prisons for example. Is

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Speaker 1: there going to be more money in the budget for this?

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Speaker 3: Yeah.

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Speaker 8: So the trigger thing is is that Chance of Regilieves

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Speaker 8: is very much preparing a belt tightening budget for October

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Speaker 8: thirtieth and has been actually asking departments to find savings

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Speaker 8: so she may spare the moj some of the pain.

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Speaker 8: But you know this, this is a department that you

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Speaker 8: know in the past was very hit hard by in

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Speaker 8: the austerity era. It's not one of these protected departments

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Speaker 8: like you know, the NHS or education, which is usually

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Speaker 8: you know spared real terms spending cuts. Yeah, so the

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Speaker 8: MJA already has quite a lot of catching up to do.

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Speaker 8: And you know, given the backlash to some of these

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Speaker 8: early savings that Reeves has found, like you know, the

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Speaker 8: winter fuel all ounce, which has been absolute a car

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Speaker 8: crash for her, it's going to be really tricky to

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Speaker 8: find the money for prisons. But you know, as we

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Speaker 8: see that the crisis my necessitated.

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